Psychology Dictionary of ArgumentsHome
| |||
|
| |||
| Economic growth: Economic growth is the increase in the production of goods and services in an economy over a period of time. It is typically measured as a percentage change in real gross domestic product (GDP), which is the total value of all goods and services produced in a country in a given year, adjusted for inflation. See also Economy, Economic development._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
David Ricardo on Economic Growth - Dictionary of Arguments
Kurz I 249 Economic growth/Ricardo/Kurz: [By what] Ricardo called the 'natural' course of the economy (…) he meant an economic system in which capital accumulates, the population grows, but there is no technical progress. Hence the argument is based on the (implicit) assumption that the set of (constant returns to scale) methods of production from which cost-minimising producers can choose is given and constant. Assuming the real wage rate of workers to be given and constant, the rate of profits is bound to fall. Due to extensive and intensive diminishing returns on land, 'with every increased portion of capital employed on it, there will be a decreased rate of production' (Ricardo [1817] 1951:98)(1). Profits are viewed as a residual income based on the surplus product left after the used up means of production and the wage goods in the support of workers have been deducted from the social product (net of rents). The 'decreased rate of production' thus involves a decrease in profitability. On the premise that there are only negligible savings out of wages and rents, a falling rate of profits involves a falling rate of capital accumulation. Hence, as regards the dynamism of the economy, attention should focus on profitability. Assuming that the marginal propensity to accumulate out of profits, s, is given and constant, a 'classical' accumulation function can be formulated Kurz I 250 where r min >= 20 is the minimum level of profitability which, if reached, will arrest accumulation (ibid: 120)(1). Ricardo's 'natural' course will necessarily end up in a stationary state. Clearly, in Ricardo the rate of accumulation is endogenously determined. The demand for labour is governed by the pace at which capital accumulates, whereas the long-term supply of labour is regulated by some 'Malthusian Law of Population'. Kurz I 251 Labor power: In this bold simplification the required size of the work force is considered as essentially generated by the accumulation process itself. In other words, labour power is treated as a kind of producible commodity. It differs from the other commodity, corn, in that it is not produced in a capitalistic way by a special industry on a par with the corn-growing sector, but is the result of the interplay between the generative behaviour of the working population and socio-economic conditions. In the most simple conceptualisation possible, labour power is seen to be in elastic supply at a given real (that is, corn) wage rate. Commodity: Increasing the amount of corn available in the support of workers involves a proportional increase of the work force. Labor: In this view the rate of growth of labour supply adjusts to any given rate of growth of labour demand without necessitating a variation in the real wage rate. Labour can thus Place no limit on growth because it is 'generated' within the growth process itself. The only limit to growth can come from other non-accumulable factors of production. As Ricardo and others made clear, these factors are natural resources in general and land in particular. Endogenous growth: In other words, there is only endogenous growth in the classical economists. This growth is bound to lose momentum as the searcity of natural resources makes itself felt in terms of extensive and intensive diminishing returns. Technology:(Technical change is of course seen to counteract these tendencies). Wages: The assumption of a given and constant real wage rate which is independent of the rate of growth of the demand for 'hands' can, of course, only be justified as a first step in terms of its simplicity. Malthus/Ricardo: In fact, in some of his discussions with Thomas Robert Malthus, Ricardo appears to have adopted this assumption precisely for the sake of convenience. There is clear evidence that he did not consider it a stylised historical fact of long-term economic development. Reading his works, one gets the impression that the relationship between the expansion of the economic system as a whole and the wage and population dynamics is far from simple, and actually differs both between different countries in the same period and between different periods of the same country, depending on a variety of historical, cultural and institutional factors. Kurz I 252 Wages: (…) higher rates of capital accumulation, which presuppose higher rates of growth of the workforce, correspond to higher levels of the real wage rate. We shall see that the basic logic of the argument which we have illustrated by means of the assumption of a fixed real wage rate remains essentially untouched: in normal conditions the pace at which capital accumulates regulates the pace at which labour grows. 1. Ricardo, D. (1951—72) The Works and Correspondence of David Ricardo, edited by Piero Sraffa with the collaboration of M. H. Dobb, vols 1, 11, VI and VIII, Cambridge: Cambridge University Press Kurz, Heinz D. and Salvadori, Neri. „Endogenous growth in a stylised 'classical' model“.In: Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge. - - - Mause I 41 Growth/Ricardo: Ricardo developed a growth model which - on the basis of labour value theory - explains relative prices and the amount, development and distribution of GDP solely by supply conditions (i.e. neglecting demand).(1) 1. Ricardo, David, On the principles of political economy and taxation. London 1817._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconRic I David Ricardo On the principles of political economy and taxation Indianapolis 2004 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 Mause I Karsten Mause Christian Müller Klaus Schubert, Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018 |
||
> Counter arguments against Ricardo
> Counter arguments in relation to Economic Growth
