Economics Dictionary of ArgumentsHome
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| Wages: Wages in economics refer to the monetary compensation paid to workers for their labor or services. Determined by factors like skill, demand, supply, and market conditions, wages are a key component of income and influence workers' purchasing power and living standards._____________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. | |||
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David Ricardo on Wages - Dictionary of Arguments
Kurz I 26 Wages/Ricardo/Kurz: Ricardo’s labour-based share concept(1) was subsequently adopted by Marx in terms of a given ‘rate of surplus value’, S/V [German Mehrwert], that is, the ratio between the portion of the net (labour) value added that goes to capital owners, or surplus value, S, and the portion that goes to workers, or variable capital, V. (…) Ricardo’s argument was not meant to be limited to the case of a given economy at a given time but was designed to cover in at least one important respect also the development of the economy over time. More specifically, Ricardo’s demonstration of the inverse relationship between the rate of profits and wages was seen to encompass the case in which the productivity of labour changes. It was on the basis of the new wage concept (and on the premise that the social capital consisted only of, or could be reduced to, wages) that Ricardo had felt he could assert what may be called his ‘fundamental proposition on distribution’: that the rate of profits depends on proportional wages, and on nothing else (see Kurz, 2006)(2). SraffaVsRicardo: While Ricardo (and Marx) had consistently assumed wages to be paid ante factum, that is, at the beginning of the (uniform) production period, and thus as belonging to the capital advanced in each industry, Sraffa, after some deliberation, decided to treat wages as paid post factum, that is, at the end of the production period and thus out of the product. He admitted that this was a hard choice because of the undeniable ever-present element of subsistence in wages, but compared with the alternatives at hand it was the least unsatisfactory one.(3) >Wages/Sraffa. 1. Ricardo, D. (1951–1973) The Works and Correspondence of David Ricardo, 11 volumes, edited by Piero Sraffa with the collaboration of M.H. Dobb (Cambridge: Cambridge University Press). (In the text referred to as Works, volume number.) 2. Kurz, H.D. (2006) The agents of production are the commodities themselves. On the classical theory of production, distribution and value, Structural Change and Economic Dynamics, 17, pp. 1–26. 2. Taken from the work Sraffa carried out in the period 1927–1931 (unpublished papers). Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge. - - - Rothbard II 83 Wages/Ricardo/Rothbard: (…) Ricardo took from Mill the hard-core, or ultra-Malthusian, view that ‘wages’ – all wages – are always and everywhere pressing on the food supply to such an extent that they are always set, and determined, precisely at the level of the cost of subsistence. Labour is assumed to be homogeneous and of equal quality, so that all wages can be assumed to be at subsistence cost. While briefly and dimly acknowledging that labour can have different qualities or grades, Ricardo, like Marx after him, drastically assumed away the problem by blithely postulating that they can all be incorporated into a weighted quantity of ‘labour hours’. As a result, Ricardo could maintain that wage rates were uniform throughout the economy. In the meanwhile, as we have seen, food, or subsistence generally, was assumed to be incorporated into one commodity, ‘corn’, so that the price of corn can serve as a surrogate for subsistence cost in general. Rothbard: Given these heroic and fallacious assumptions, then, ‘the’ wage rate is determined instantly and totally by the price of corn, since the wage rate can neither rise above the subsistence level (as determined by the price of corn) nor sink below it. The price of corn, in its turn, is determined according to Ricardo's famous theory of rent. >Rent/Ricardo, >Marginal costs/Ricardo. Rothbard II 107 (…) Ricardo himself had pointed the way to abandoning his own crucial permanent subsistence theory of wages (which the German socialist Ferdinand Lassalle was later to call ‘the Iron Law of Wages’). Ricardo had adopted the subsistence wage theory, taken from the hard-core Malthusian first edition of Malthus's Essay on Population (1798)(1). But many of his statements apart from this rigid formal model were really adopted from the much weaker, indeed contradictory, second edition of the Essay (1803). These were qualifications which Marx would correctly note amounted to a desertion of the ‘iron law’. Criticism of Malthusian doctrine prevailed in the journals by the late 1820s. >Wages/Marx. Rothbard II 132 In addition to the labour theory of value, another vital cornerstone of the Ricardian system – the alleged inverse relation of wages and profits – was also riddled quickly by British economists. Even more than the explicit rejection of Malthusianism, the periodicals vehemently attacked the Ricardian view that wages and profits move inversely to each other. The British Critic denounced this thesis as early as October 1817, and two years later another writer zeroed in on the methodology of what would later be called the ‘Ricardian Vice’ with proper scorn: „taking for granted, as usual, that money never changes in value and the proportion between the supply and demand of any given commodity never alters (which is as if the astronomer were to assume as the basis of his calculations, that all the planets stand still and that they all stand still to all eternity), he assigns a specific sum to be divided between the master and the workman, as the unalterable price of the goods which they produce; from which adaptation of hypothetical conditions, it naturally follows, that, if the workmen get more, the master-manufacturer must receive less, there being only a certain sum to divide between them.“(2) 1. Malthus, Th. R. 1798. An Essay on the Principle of Population, as it affects the future Improvement of Society, with Remarks on the Speculations of Mr. Godwin, M. Condorcet, and Other Writers. London: J. Johnson. 1st edition. 2. Barry Gordon, Barry. 1969. ‘Criticism of Ricardian Views on Value and Distribution in the British Periodicals, 1820–1850’, History of Political Economy, 1 (Autumn 1969). note 11, p. 384._____________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 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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