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## be entirely overcome. Inevitably wages and rents (or at any

That the transformation of circulating into fixed capital, i.e. the change from short-term to long-term capital investments, may frequently injure labour is beyond doubt. But Ricardo was mistaken in his belief that this consequence was due to the fact that the gross product is simultaneously reduced. This is, as may easily be proved, theoretically inconceivable. The gross product under free competition (where such is at all possible)

but often serves for many, sometimes for a long succession of years-so that the productive forces embodied in that good only come into employment successively. What exactly is consumed in each particular year cannot, as a rule, be determined. But even in this case, the law of marginal productivity must be fully satisfied in equilibrium, for otherwise it would undoubtedly be profitable, at some point in production, to transfer resources, either by simultaneously decreasing-or increasing-the factors employed at some other point in the period of production, or by increasing or diminishing the value of the capital-good. For example, suppose that a machine has been constructed in the course of three years and is afterwards used for twelve years before it becomes necessary to scrap it. If, in the construction of the machine, an additional quantity of labour, say one day’s labour, had been added in the first year of production, then the utility of the machine might possibly have been increased by, let us say, the value of three consecutive days’ work during the last year of its use. This day’s labour would yield an interest of about 8 per cent; for (1.08)14 = 3 approximately.