Time, Inventories, Profits and Pricing

Abstract

We shall not present a model in this chapter. Instead the chapter will be entirely devoted to the measurement of profits, costs and inventories, together with an analysis of the way in which firms’ pricing decisions distribute the national income. The subject matter is intricate and potentially controversial because there are so many ways in which accounts are kept. Our guiding light will be that the concepts and definitions will always meet the consistency requirements of the double entry matrices which underlie all our work. In particular, the definition of profits and the way in which appropriations are recorded must fit into a transactions matrix describing a whole economy so that all rows and all columns sum to zero. This will guarantee that our concepts are sufficiently good even if they are occasionally controversial since we shall ensure that the sum of all inflows will always be equal to the sum of all outflows.