Adam Smith on the Falling Rate of Profit: A Reappraisal

Francisco Verdera

Scottish Journal of Political Economy, 1992, vol. 39, issue 1, 100-110

Abstract: This article questions David Ricardo's interpretation of the causes for the rate of profit to fall in Adam Smith's Wealth of Nations and tries to show that the tendency for the rate of profit to fall does not result from competition but from an increase in the stock (or capital) in all the society. The argument goes as follows. The increased use of fixed capital raises its own maintenance (depreciation) and the cost of circulating capital. Thus, capital costs become a larger proportion of the total value produced and the amount of profits over the total capital decreases. Copyright 1992 by Scottish Economic Society.

Date: 1992
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Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

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