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The Ricardo Effect: Its Meaning and Validity
Author(s) -
Gehrke Christian
Publication year - 2003
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.t01-1-00275
Subject(s) - substitution (logic) , meaning (existential) , economics , wage rate , argument (complex analysis) , capital (architecture) , production (economics) , wage , mathematical economics , set (abstract data type) , neoclassical economics , positive economics , microeconomics , philosophy , epistemology , labour economics , computer science , linguistics , biochemistry , chemistry , archaeology , history , programming language
This paper is concerned with the meaning and validity of the ‘Ricardo effect’. It is shown that the machinery substitution effect contemplated by David Ricardo (a) is not caused by a rise in the real wage rate, (b) is independent of the so‐called ‘price effect’, and (c) presupposes very special assumptions about the available set of production methods. The paper also investigates whether Ricardo's machinery substitution argument anticipates the principle of factor substitution with regard to capital and labour in marginalist theory.