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Land, Technical Progress and the Falling Rate of Profit

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  • Howard Petith

Abstract

The paper sets out a one sector growth model with a neoclassical production function in land and a capital-labour aggregate. Capital accumulates through capitalist saving, the labour supply is infinitely elastic at a subsistence wage and all factors may experience factor augmenting technical progress. The main result is that, if the elasticity of substitution between land and the capital-labour aggregate is less than one and if the rate of caital augmenting technical progress is strictly positive, then the rate of profit will fall to zero. The surprise is that this result holds regardless of the rate of land augmenting technical progress; that is, no amount of technical advance in agriculture can stop the fall in the rate of profit. The paper also discusses the relation of this result to the classical and Marxist literature and sets out the path of the relative price of land.

Suggested Citation

  • Howard Petith, 2006. "Land, Technical Progress and the Falling Rate of Profit," UFAE and IAE Working Papers 667.06, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:667.06
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    References listed on IDEAS

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    1. Gilbert L. Skillman, 1997. "Technical Change and the Equilibrium Profit Rate in a Market with Sequential Bargaining," Metroeconomica, Wiley Blackwell, vol. 48(3), pages 238-261, October.
    2. Thomas R. Michl, 1994. "Three Models of the Falling Rate of Profit," Review of Radical Political Economics, Union for Radical Political Economics, vol. 26(4), pages 55-75, December.
    3. Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation for Research in Economics, Yale University.
    4. Howard Petith, 2002. "A foundation Model for Marxian Breakdown Theories Based on a New Falling Rate of Profit Mechanism (Long Version)," UFAE and IAE Working Papers 524.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    5. Dumenil, Gerard & Levy, Dominique, 2003. "Technology and distribution: historical trajectories a la Marx," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 201-233, October.
    6. F. H. Hahn, 1966. "Equilibrium Dynamics with Heterogeneous Capital Goods," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(4), pages 633-646.
    7. Karl Shell & Joseph E. Stiglitz, 1967. "The Allocation of Investment in a Dynamic Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 81(4), pages 592-609.
    8. Howard Petith, 2002. "A Foundation Model for Marxian Breakdown Theories Based on a New Falling Rate of Profit Mechanism," UFAE and IAE Working Papers 516.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    9. Foley, Duncan K., 2003. "Endogenous technical change with externalities in a classical growth model," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 167-189, October.
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    More about this item

    Keywords

    Marx; classical economics; falling rate of profit;
    All these keywords.

    JEL classification:

    • B24 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Socialist; Marxist; Scraffian
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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