Mathematical Vindication of Ricardo on Machinery

Paul A Samuelson

Journal of Political Economy, 1988, vol. 96, issue 2, 274-82

Abstract: Ricardo is shown to be right that machinery can hurt wages and reduce output. A dramatic robot example reveals Knut Wicksell's erro r in believing that Pareto optimality calls for no drop in total outp ut from a viable invention. Under Ricardo's axiom that labor supply a djusts to keep wages at the subsistence level, he can correctly deduc e on a market-clearing basis a rise in his net product (rent plus int erest), while the greater drop in population and total wages results in a reduction in his gross product (rent plus interest plus wages). Copyright 1988 by University of Chicago Press.

Date: 1988
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