Income distribution in a monetary economy

Abstract

In a monetary economy capital is a fund. This idea is captured by the circuit of capital. We define a circuit for fixed capital and argue that it is closed when the fund that initiates it is recovered in a present value sense. The circuit of newly invested fixed capital must be equivalent to the comparable direct circuit of money. This is the condition for monetary equilibrium in the sense of Keynes. From this equivalence it is possible to determine what the imputation for fixed capital must be, implying a definitive income distribution. The solution implies that capital assets that last longerthan the period of the circuit earn pure rent.

Keywords

• Economics
• Macroeconomics
• Post-Keynesian Economics