TAILIEUCHUNG - History of Economic Analysis part 69

History of Economic Analysis part 69. 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 642 The diminishing-return theory or as we could also call it the differential-cost theory as everybody knows is associated with the name of Ricardo who made such a success of it that it survived into the twentieth century. It was part of the great Ricardian detour70 for it was essential to Ricardo s analytic pattern as a device for eliminating the land factor from the value problem see above sec. 2 .71 Actually of course rent enters or else does not enter into prices in exactly the same sense in which the one proposition or the other is true of Nevertheless Ricardo achieved his purpose of excluding rent from the price value problem in this way. In practice firms operate under different cost conditions an observation which then as now was part of the economics of the man in the street there are low-cost and high-cost firms. We may of course array them in ascending order of costs and we further observe without difficulty that in a state of perfect equilibrium and perfect competition price cannot be lower and is not likely to be much higher than the average costs of the highest-cost firm. This is what Ricardo meant when he said sometimes for example in Chapter 27 of the Principles that the real value of a commodity is regulated. .by the real difficulties encountered by that producer who is least favoured. 73 Referring to this espe- a type who could not be left out of any sociology of nineteenth-century England. The memoir by 1869 though not a great performance is worth reading. 70 The detour character of Ricardo s work shows in this instance with particular clarity. For he actually did begin with the price which is paid. .for the use of the .powers of the soil a definition that contains all that is needed for a satisfactory theory of rent and then before our eyes turns away from the open road and embarks upon his detour. 71 and Marx also wished to eliminate the land factor from the value problem. But while .

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