Do you think that overproduction or declining profit rates have contributed to the present subprime loan crisis?

BY Paul Solman  March 4, 2008 at 11:29 AM EST

Question/Comment: Karl Marx, in his work “Capital,” alluded to the idea that overproduction contributed to a general historical tendency of capitalism to be undermined by declining returns on capital. Do you think that overproduction or declining profit rates have contributed to the present subprime loan crisis?

Paul Solman: Nope. Declining regulation on lending, declining housing prices and rising interest rates are the culprits. See my attempt at an explanation, featuring the terrific economics explainer (and real estate guru) Karl “Chip” Case, a professor at Wellesley.