Now then, you will agree that all costs of production of the single firm before paying out dividends are payments of wages to workers and payments of goods and services (including rents) to other firms. If we merge all of the firms’ balance sheets in an economy, it is immediately obvious that the payments between firms cancel out, meaning that payments between firms simply cover the costs of workers in those firms. You will now immediately see that all costs in an economy are made up of wages for workers. Keeping this in mind, which of the following statements do you favour?

• Macroeconomically, total sales minus total costs of production equal total profits. Therefore, macroeconomic profits can exist only when total sales exceed total costs in an economy
• Macroeconomically, total sales minus total costs of production equal total profits. Profits therefore cannot exist. The profits of some firms cancel out the losses incurred by others