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This study empirically reveals a direct link between profitability and stability. To make the demonstration, we develop and then estimate a short-run dynamic disequilibrium model of a capitalist economy, with money, in which agents react to the observation of disequilibria. The condition for the stability of the general level of activity is expressed as a function of the reactions of economic agents. An increased reaction by quantities to disequilibria between supply and demand, on the part of firms, jeopardizes stability. It is demonstrated empirically that the variations of the profit rate influence this degree of reaction and, therefore, impact on stability.

This paper attempts to show that inadequate levels of profitability played an important role in the onset of the Great Depression. Three popular alternative views of the crash are first criticized: the Monopoly View, the Underconsumption Theory, and the Monetarist Explanation. In our opinion, the underlying cause of the crash was the instability at the end of the decade of the 1920s which resulted from an earlier decline in the rate of profit.