The Profit in Planned Prices Should Be Formulated in Accordance with a Composite Profit Index

Abstract

Issue no. 4 of Economic Research (1979) published our article Some Problems in the Formation of Socialist Planned Prices, in which we expressed the view that there were advantages but also disadvantages to formulating the planned price according to the average wage profit rate, the average cost profit rate, and the average capital profit rate of the entire society, and that it is inappropriate to take any of these factors as the sole criterion for determining prices. There we advocated using the average cost profit rate of the various sectors as the primary criterion in determining the profit rate in the planned price, while giving full consideration to the overall average capital profit rate of the society and the average wage profit of the sectors so as to take care of their different economic interests. The central theme of the proposition was to take all three profit rates into consideration and set the price according to a composite rate of profit. After two years of further discussion, we still ma...