TAILIEUCHUNG - History of Economic Analysis part 67

History of Economic Analysis part 67. At the time of his death in 1950, Joseph Schumpeter-one of the major figures in economics during the first half of the 20th century-was working on his monumental History of Economic Analysis. A complete history of humankind's theoretical efforts to understand economic phenomena from ancient Greece to the present, this book is an important contribution to the history of ideas as well as to economics. | History of economic analysis 622 ing as reflected in his profit-and-loss account income statement his profit is what is left the item that balances his account. Since on the rentless margin of production the whole of the net product measured in labor embodied is divided between labor and capital both shares also measured in labor embodied 19 and since labor s share is explained separately we easily get the two propositions which are when this point has been reached really not more than The one is that profits depend upon wages what else could they depend upon in this schema The other is that under the influence of increase in population and of the law of decreasing returns on land more and more labor has to be embodied in each additional unit of food and that the value of labor s share must rise though the per capita amount of wage goods need not rise or may even decrease somewhat leaving less and less value for capital. This and nothing else as West and after him Ricardo laboriously explained accounts for the phenomenon that we are supposed to observe in the guise of the falling rate of interest. But there was no need for elaboration. For according to this wonderful theory it is logically 19 Observe how neatly this fits the Marxist schema all that we need to obtain the latter is to measure in addition to labor s share also labor itself the labor power that is in labor embodied. There is in fact no incompatibility between what we call Ricardo s first and second theories of interest in both the amount and rate of profit are determined by the real value of wages. This follows from the set-up discussed above after elimination of total output and of rent. The notion of exploitation no matter whether we call it so or not simply adds a particular interpretation. But this seems no longer to be so if we attribute to Ricardo an abstinence theory the same would hold for a productivity theory which we do not attribute to him however . In order not to have to return

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