Capital Theory

The chapter tries to explain why neoclassical economics replaced classical political economy as the new paradigm in the nineteenth century. The author considers the distributional issues debated during the Industrial Revolution as crucial. In particular, Marx's critique of the capitalist economy raised questions about the nature of capital and why the ownership and accumulation of capital could lead to extreme wealth. In the past, great fortunes were made primarily by landowners. Now, however, there are a growing number of wealthy entrepreneurs and merchants. How is it possible that profits (interest) became a permanent income?