“THE MERCHANTS OF CADIZ AND LISBON”: PARSIMONY, THE RATE OF PROFIT, AND ACCUMULATION IN WEALTH OF NATIONS

A.M.C. Waterman

Journal of the History of Economic Thought, 2013, vol. 35, issue 1, 63-76

Abstract: In Wealth of Nations, a high rate of profit is associated with sluggish or even negative growth, and vice versa. This is because capital accumulation (and therefore population growth) is driven by parsimony of the masters; and the incentive to self-denial is eroded by a high income too easily obtained. The causal relation between parsimony, the rate of profit, and accumulation is explicated in this article; Adam Smith’s observations concerning “the merchants of Cadiz and Lisbon” examined critically; and some conjectures offered as to why Smith’s successors should have rejected parsimony as a useful concept.

Date: 2013
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