CHAPTER 25
CONSUMPTION OF PROFITS

So far we have abstracted from consumption out of profits and the existence of rentier income. This exclusion was made purely for the sake of exposition. Having established the main lines of the analysis without rentiers, we must now introduce them into the model. The political and social importance of consumption out of incomes derived from property is very far reaching, but so far as the analysis of accumulation is concerned we shall find that it complicates the argument without requiring any substantial change.


RENTIER INCOME AND EXPENDITURE

We use the term rentier in an extended sense, to represent capitalists in their aspect as owners of wealth, as opposed to their aspect as entrepreneurs. We include in the incomes of rentiers dividends as well as payments of interest and we include the sums handed over to their households by entrepreneurs who own their own businesses.

The distinctions between interest, dividends and personal profits are important in some contexts, but, if we adhere to our conception of the entrepreneur who identifies himself with his business as a thing in itself rather than as a means to acquire wealth and enjoy consumption, the differences appear less in real content than they are in legal form. Dividends and personal profits are an out-payment from the firm, similar to interest. An obligation to pay interest is a contractual agreement, while the amount of dividends and personal profits paid out is at the discretion of the entrepreneur; but neither the obligation nor the discretion is absolute in practice. When profits are so low that the payment of interest would lead to bankruptcy, creditors

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