ABSTRACT
This paper sets out to show that wages fund notions were not part of Ricardo’s wage theory, and that he did not envisage the inverse relation between the real wage rate and the employment level implied by the wage fund doctrine. While it is generally agreed that the latter was formulated in a clear, definite form only after Ricardo’s death by economists such as McCulloch, J.S.Mill and Senior, the theory of wages of their predecessors (Ricardo included) has also traditionally been interpreted as being based on wage fund notions and ‘Malthusian’ population theory. In simple terms, according to this common interpretation of classical wage theory, the wage rate is determined, at a given time, by the ratio of the given wage fund to the fully employed working population. Variations of the latter in response to differences between the current wage rate and its natural subsistence level make the wage rate tend to subsistence. Following this view both the ‘market’ and the ‘natural’ wage are actually determined according to the wage fund theory, although the latter is regulated, through population changes, by the ‘subsistence’ of the workers. The contention of this paper is that neither market nor natural wage are thus determined in Ricardo.
