Popular understandings of the financial crisis tend to focus on the
rents extracted by elite personnel in the financial sector. Professional
discussions, however, have addressed the faulty assumptions underlying
theory and practice – in particular, the assumption that returns to
financial assets follow the Gaussian distribution, in the face of much
empirical evidence that these have power law distributions with far higher
kurtosis. It turns out that the power law tails of returns to financial
assets are also a feature of the distribution of company rates of profit, a
discovery that stems from proposals to ‘dissolve’ the traditional
transformation problem by abandoning the condition of a uniform rate
of profit and instead considering its distribution.
Marx himself was aware of the importance of considering the distributional
properties of economic variables, based on his reading of
Quetelet. In fact, heavy-tailed distributions characterise a wide range of