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Increasing Employment, Diminishing Returns, Relative Shares and Ricardo

In: Inflation, Open Economies and Resources

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  • Paul Davidson

Abstract

In their note, ‘Increasing Employment, Diminishing Returns, and Relative Shares,’1 Messrs Horlacher and Smolensky accept my conclusion that changes in the rent share in the Ricardian system depend on a comparison of the rate of change of the marginal product in relation to the rate of change of the average product of labour. They then proceed to suggest some perverse total product functions which are characterized as having, within a given range of inputs, rising M/A ratios with diminishing returns. They indicate, therefore, that the fate of the rent share is even less determinate than I suggested in my previous note.2 Their comments, while having mathematical validity, are, I believe, not applicable to either the Ricardian system or the real world.

Suggested Citation

  • Paul Davidson, 1991. "Increasing Employment, Diminishing Returns, Relative Shares and Ricardo," Palgrave Macmillan Books, in: Louise Davidson (ed.), Inflation, Open Economies and Resources, chapter 2, pages 11-13, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-11516-7_2
    DOI: 10.1007/978-1-349-11516-7_2
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