Kindle Book by George Reisman

George Reisman has just published a Kindle book called Warren Buffett, Class Warfare and the Exploitation Theory. It is only 59 pages long and consists of two parts: first, his Open Letter to Warren Buffett, and second, an excerpt from Capitalism: A Treatise on Economics, dealing with the same subject. Especially for those unfamiliar with George Reisman’s theories, this is an excellent introduction. (Those familiar with his theories may enjoy it, too.)

Reisman’s identification of the “primacy of profits” principle is certainly one of the most important discoveries in the history of economic thought. At least since the days of Adam Smith it has been taken for granted that the original income was wages and that profits are a deduction from wages. Reisman shows that the exact opposite is true. In the “early and rude state”, as Adam Smith calls it, no wages were paid at all, and all income was profits; the rate of profit was 100%. It was only with the advent of the first capitalists – people who hired workers to help them and invested in buying tools from others rather than making their own tools – that wages (and other money outlays) came into existence. Since that time the rate of profit has steadily been lowered and is today, in our fairly advanced capitalist society, only a few percent. And this is what, over the centuries, has improved our standard of living to unprecedented heights.

Also, this is a truly original discovery – at least, I have not seen it anywhere in the writings of other economists (and I only read good economists). It is a pity that too few, so far, have paid attention to this principle.

Much of what Reisman writes can be found, explicitly or implicitly, in Mises and his other predecessors. But this principle, along with his “net consumption/net investment theory”, is a new insight.

(For Scandinavian speaking readers, I have tried to present the “primacy of profits” principle in an essay called George Reisman: Why Do We Need Him? – George Reisman, of course, has not read this essay, so any mistakes are my own responsibility. But I don’t think I have made any mistakes.)

Update August 10: Now also on Amazon. (Also read Wladimir Kraus’ Amazon review.)

George Reisman himself mails me:

I was especially gratified that you stressed the primacy-of-profits doctrine. I consider it extremely important and also relatively simple, but almost everyone seems to ignore it or just not get it. So I’m extra glad that you both get it and stress it.

Yes, I think this principle is simple, once one has grasped it. But someone has to be the first to grasp it, and this someone was George Reisman. I would not have been able to arrive at it on my own.

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