ABSTRACT
David Ricardo argues that the value of the produce of the marginal land is divided only between the labourer and the capitalist and thus the rate of profits must fall if the value of real wages rises. If the misallocation of labour and capital is between manufacturing and agriculture in aggregate, then the problem will have to be faced. Rent accrues only to the intra-marginal land whose fertility is higher than that of the marginal land. Thus, contrary to Smith's position, there is no rate of wages above the subsistence wage which could be characterised as the long-term 'equilibrium' or 'centre of gravitation' wage. Ricardo recognises that differences in the time-structures of capitals along with the condition of equal rate of profits on capital investments vitiate or deviate the relative values of commodities from their respective labour-embodied ratios.
