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The competition-of-capitals doctrine and the wage-profit relationship

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  • Meacci, Ferdinando

Abstract

The wage-profit relationship is usually linked up with Ricardo and his notion of “proportional wages” (Principles, Chapters I, VI and passim). This relationship is based on Ricardo’s theory of value and supports his diminishing-returns-to-agriculture theory of the falling rate of profit. A wage-profit relationship, however, exists also in the Wealth of Nations (Book I, Chapter IX and passim). Here it is related to the alternative competition-of-capitals theory of the falling rate of profit which in turn is based on Smith’s different theory of value. The purpose of this chapter is to reconstruct Smith's competition-of-capitals doctrine. This reconstruction, however, is not intended to provide a faithful assembly of what Smith actually wrote or a 'rational' view of what he must have thought in this connection. Rather, it is to extract from his faulty exposition and with the benefit of hindsight what is necessary to make Smith's doctrine consistent with his system of thought and vision of the future in order to determine whether, or to what extent,Ricardo's dissatisfaction is justified. This reconstruction will be based on the fragmentary statements by which the doctrine is presented in the Wealth of Nations and will try to highlight not only some of the ambiguities incorporated in these statements but also the links between these statements and other crucial parts of Smith's system of thought. This purpose will be achieved by considering the Malthus-Ricardo disputes on the falling rate of profit as well as their relevance for understanding the impact of growth on wages and profits in past and modern economies.

Suggested Citation

  • Meacci, Ferdinando, 2004. "The competition-of-capitals doctrine and the wage-profit relationship," MPRA Paper 20118, University Library of Munich, Germany, revised 2006.
  • Handle: RePEc:pra:mprapa:20118
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    References listed on IDEAS

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    1. Jevons, William Stanley, 1866. "Brief Account of a General Mathematical Theory of Political Economy," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 29, pages 282-287.
    2. Peach,Terry, 1993. "Interpreting Ricardo," Cambridge Books, Cambridge University Press, number 9780521260862, April.
    3. Jevons, William Stanley, 1871. "The Theory of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number jevons1871.
    4. Garegnani, Pierangelo, 1984. "Piero Sraffa," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 1-2, March.
    5. Garegnani, P, 1982. "On Hollander's Interpretation of Ricardo's Early Theory of Profits," Cambridge Journal of Economics, Oxford University Press, vol. 6(1), pages 65-77, March.
    6. Garegnani, Pierangelo, 1983. "The Classical Theory of Wages and the Role of Demand Schedules in the Determination of Relative Prices," American Economic Review, American Economic Association, vol. 73(2), pages 309-313, May.
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    Cited by:

    1. Meacci, Ferdinando, 2013. "Say's Law," MPRA Paper 55495, University Library of Munich, Germany, revised Mar 2014.
    2. Ferdinando Meacci, 2009. "Different employment of capitals in vertically integrated sectors: Smith after the Austrians," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 22(4), pages 333-348, December.
    3. Meacci, Ferdinando, 2011. "From bounties on exportation to the natural and market price of labour: Smith versus Ricardo," MPRA Paper 31153, University Library of Munich, Germany.
    4. Meacci, Ferdinando, 2010. "On Smith's ambiguities on value and wealth," MPRA Paper 28866, University Library of Munich, Germany.

    More about this item

    Keywords

    Competition of capitals; wage-profit relationship; Smith and Ricardo;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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