Land, Technical Progress and the Falling Rate of Profit
AbstractThe paper sets out a one sector growth model with a neoclassical production function in land and a capital-labour aggregate. Capital accumulates through capitalist saving, the labour supply is infinitely elastic at a subsistence wage and all factors may experience factor augmenting technical progress. The main result is that, if the elasticity of substitution between land and the capital-labour aggregate is less than one and if the rate of caital augmenting technical progress is strictly positive, then the rate of profit will fall to zero. The surprise is that this result holds regardless of the rate of land augmenting technical progress; that is, no amount of technical advance in agriculture can stop the fall in the rate of profit. The paper also discusses the relation of this result to the classical and Marxist literature and sets out the path of the relative price of land.
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Bibliographic InfoPaper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 667.06.
Date of creation: 01 Sep 2006
Date of revision:
Marx; classical economics; falling rate of profit;
Find related papers by JEL classification:
- B24 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Socialist; Marxist; Scraffian
- E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Institutional; Evolutionary
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-AGR-2006-08-05 (Agricultural Economics)
- NEP-ALL-2006-08-05 (All new papers)
- NEP-HPE-2006-08-05 (History & Philosophy of Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Howard Petith, 2002. "A Foundation Model for Marxian Breakdown Theories Based on a New Falling Rate of Profit Mechanism," UFAE and IAE Working Papers 516.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Foley, Duncan K., 2003. "Endogenous technical change with externalities in a classical growth model," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 167-189, October.
- Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation for Research in Economics, Yale University.
- Dumenil, Gerard & Levy, Dominique, 2003. "Technology and distribution: historical trajectories a la Marx," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 201-233, October.
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