ABSTRACT
In the Ricardian growth model, which utilises the axiom of diminishing agricultural returns, the real wage rate tends downwards, the profit rate falling notwithstanding this decline. The ‘subsistence’ wage rules in the stationary state alone and is reached simultaneously with that rate of profit corresponding to zero net capital accumulation (Hicks and Hollander 1977; Samuelson 1978; Hollander 1983a). There are differences of detail between these versions: For Samuelson the downward wage path is a ‘dynamic equilibrium’ path (the rates of growth of capital and labour proceeding in line) assuming regular positive relationships between growth of capital and population and their respective returns. (The subsistence wage path is a limiting theoretical case though consistent with balanced factor growth.) In the Hicks-Hollander version the system moves with wages declining on the average to the subsistence level, the wage movement resulting from deviations between the growth rates of capital and labour. The HicksHollander version captures one aspect of Ricardo, but a case can also be made for the stronger (dynamic equilibrium) version considering Ricardo’s subscription to Malthus’ analysis and the basic Smithian growth principle discussed in the following paragraphs.
