Back to the Surplus: An Unorthodox Neoclassical Model of Growth, Distribution and Unemployment with Technical Change

Abstract

The article examines how institutions, automation, unemployment and income distribution interact in the context of a neoclassical growth model where profits are interpreted as a surplus over costs of production. Adjusting the model to the experience of the US economy, I show that joint variations in labor institutions and technology are required to provide reasonable explanations for the behavior of income shares, capital returns, unemployment, and the big ratios in macroeconomics. The model offers new perspectives on recent trends by showing that they can be analyzed by the interrelation between the profit-making capacity of capitalist economies and the political environment determining labor institutions.