A Theory of Value, Profits and Economic Crises

Abstract

This article starts with definitions of value and profit and constructs a new interpretation of the economic crisis. Exchange of goods stems from different people's different judgments on the value of goods, and twice exchanges of goods lead to commercial profits. Production profit is essentially the same as commercial profit. It also requires twice exchanges. The capitalists buy labors from the workers and sell the products to the workers. The difference in the prices of the labors and products constitutes the profit. The capitalists get the profit but the workers do not share the profit. Such profit distribution leads to the fact that the new products sale cannot be sustained within a closed economy, resulting in an economic crisis, manifested as a relative surplus of product. This article focuses on the field of circulation and exposes the exploitation of workers by the two exchanges, providing a theoretical approach to understand the rich-poor divergence.