{"id":3827,"date":"2018-04-11T09:25:34","date_gmt":"2018-04-11T16:25:34","guid":{"rendered":"http:\/\/blogs.pugetsound.edu\/econ\/?p=3827"},"modified":"2018-04-11T09:25:34","modified_gmt":"2018-04-11T16:25:34","slug":"millian-vs-ricardian-stationary-state","status":"publish","type":"post","link":"https:\/\/blogs.pugetsound.edu\/econ\/2018\/04\/11\/millian-vs-ricardian-stationary-state\/","title":{"rendered":"Millian vs. Ricardian Stationary State"},"content":{"rendered":"

Economists David Ricardo and John Stuart Mill dedicated their lives to economic writing that analyzed the dynamics of capitalist economies. Specifically, they investigated sources of economic growth and development. Principles of Political Economy and Taxation was David Ricardo\u2019s contribution to this economic growth and development literature. Within this economic literature, Ricardo built a complex model through the theory of value and rent that attempted to thoroughly address topics of rent, profit, and wages. \u201cTo Ricardo, the economic world was constantly tending to expand.\u201d[1]<\/a> To Ricardo, continuous expansion by capitalist would cause a chain reaction that would affect prices of commodities, wages and eventually lead to a long run tendency for the rate of profit to fall until the economy would reach a station state(economic growth is neither positive or negative). Follower of David Ricardo work, John Stuart Mill, agreed with the basic Ricardian model of falling rates of profit and the stationary state. However, Mill\u2019s opinion about the meaning of the stationary state was not the dismal one Ricardo pictured. This paper will compare and contrast Ricardo\u2019s and John Stuart Mill\u2019s view of the stationary state:<\/p>\n

 <\/p>\n

The Driving Mechanism<\/strong><\/p>\n

In the Principled of Political Economy and Taxation, Davis Ricardo created a model that essentially grew into a large chain reaction of different variables that would lead an economy to a stationary state. Ricardo\u2019s chain reaction visually:<\/p>\n

 <\/p>\n

Positive profit \u00de investment in stock \u00de demand for labor \u00dd \u00de wage > subsistence wage \u00de population \u00dd \u00de demand for food \u00dd \u00de move to less fertile land (causing more labor in each unit of land) \u00de price in food \u00dd \u00de rent \u00dd \u00de subsistence wages \u00dd \u00de profits\u00df<\/p>\n

 <\/p>\n

Starting with positive profit from capitalists, investment in stock would increase the demand for labor. Although positive profit appears to be a good thing because it creates more work, Ricardo argues that, \u201cwith the progress of society the natural price of labour has always a tendency to rise, because one of the principal commodities by which its natural price is regulated has a tendency to become dearer from the greater difficulty of producing it.\u201d[2]<\/a> With an increase in the demand for labor and therefore new employment, prices of commodities begin to fall because of the societal progress. As workers become better off, their purchasing power increases and they demand more enjoyments in life along with a healthy and numerous family. Here, Ricardo is arguing that the increase in labor, essentially increases the population because people can afford to have larger families. To him, this increase in population consequently would lead to an increase in the demand for food. He continues to argue that even if \u201c the power of production is still greater than that of population, it will not long continue so; for the land being limited in quantity, and differing in quality, with every increased portion of capital employed on it there will be a decreased rate of production, whilst the power of population continues always the same.\u201d[3]<\/a>\u00a0 In other words, stated in the diagram, the population would have to expand to less fertile land in order to continue to feed the growing population. With the increase in the price of food is triggered not only by the increase n population but also the wage of the worker. As the movement to more fertile land, aggregate rents increase. Note that the workers are not better off because of the subsistence wage, but landlords get richer because the rent is increasing. Profit begins to fall until ultimately the stationary state has been reached. This theory was accepted by many economists who came after Ricardo, including John Stuart Mill.<\/p>\n

 <\/p>\n

Postponing the Stationary State<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>Postponing the stationary state at this time was ideal to Ricardo. To postpone the falling rate of profit that led to the stationary state, the main causality of the diagram above would need to be disrupted or changed. For Ricardo, that main causality was the increase in the demand of labor. He argues, in order to stop the natural tendency of falling rates a profit, society would have to cut back on the number of people contributing to the labor force.\u00ad\u00ad\u00ad \u201cThis tendency, this gravitation as it was of profits, is happily checked at repeated intervals by the improvements in machinery connected with the production of necessaries, as well as by discoveries in the science of agriculture, which enables us to relinquish a portion of labour before required, and therefore to lower the price of the prime necessary of the labourer.\u201d[1]<\/a> In other words, to decrease the demand for labor, society needs to replace laborers with machinery. Advances in technological change would produce inverse effects, therefore the stationary state would not be reached.<\/p>\n

John Stuart Mill completely agreed with Ricardo\u2019s idea that technological change would help prevent the falling rate of profit. However, he was able to visualize three other preventative measures of the falling rate of profit. \u00a0The first was the idea to import food. He argued, \u201cas long as food can continue to be imported for an increasing population without any diminution of cheapness, so long declension of profits through the increase of population and capital is arrested, and accumulation may go on without making the rate of profit draw nearer to the minimum.\u201d[2]<\/a> The second idea was to export capital (aka outsourcing to save capitalism). This idea emerged from Mills own interpretation of the Ricardian model he followed. Instead of the increased demand for labor becoming the lead cause of the falling rate of profits, Mill believed that the economic annual savings were the main cause of the falling rate of profit. Therefore, \u201cthis is, the perpetual over-flow of capital into colonies or foreign countries, to seek higher profits that can be attained at home.\u201d[3]<\/a> To Mill outsourcing or investments in new land could get rid of capital would prevent the falling rate, and benefit the country in other ways. The third idea was to purposely cause a depress\/recession in the economy. The perverse effects would cause a decrease in the demand for labor, which would postpone the continuation of the chain reaction in the diagram above.<\/p>\n

 <\/p>\n

Desirability <\/strong><\/p>\n

In the 19th<\/sup> century, the idea of a stationary state was considered as undesirable as a modern-day declining state. \u201cGrowth was thought to benefit all three great classes of society: capitalists, landlords, and workers.\u201d[4]<\/a> Ricardo envisioned a dismal stationary state, that essentially would ultimately lead to the end capitalism. Therefore, the stationary state of Ricardo was highly undesirable and should be avoided at all costs.<\/p>\n

John Stuart Mill, \u201cin contrast to nearly all orthodox economists up to the present, Mill was not certain whether a nation with a growing economy, such as England of his times, was a desirable place in which to live.\u201d[5]<\/a> Mill, unlike Ricardo, was not fixed on the idea that material goods made people happier. He states, \u201cI confess I am not charmed with the idea of life being held out by those who think that the normal state of human beings is that of struggling to get on; that the trampling, crushing, elbowing, and treading on each other’s heels, which form the existing type of social life are the most desirable lot of humankind or anything but the disagreeable symptoms of one of the phases of industrial progress.\u201d[6]<\/a> Therefore, the idea of a stationary state was good because it would reduce the population (aligning with Ricardo\u2019s ideals), and decrease the pace of economic activity in order to focus on the well-being of individuals (strayed away from Ricardo).<\/p>\n

Conclusion<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>Although Mill followed Ricardo\u2019s work closely, Mill\u2019s changed interpretation of Ricardo\u2019s model and the difference in political stance led to a dissimilar consensus of the desirability of the stationary state. Ricardo wanted to avoid the stationary state because his view of a progressive society was materialistic. A productive society was the only way to make all three classes better off, but was flawed and only benefitted landlords. Through Mill\u2019s different interpretation of the actual problem, he deduced that a stationary state could actually benefit society. He sought to fix the problem of the falling rate of profits addressed by Ricardo but ultimately created more advanced solutions because he altered the leading cause of what makes profits fall.<\/p>\n

 <\/p>\n

[1]<\/a> Ricardo_Principles ofpolitcal economy 71<\/p>\n

[2]<\/a> Mill Principles of the economy 100-101<\/p>\n

[3]<\/a> Mill Principles of the economy 103<\/p>\n

[4]<\/a> http:\/\/www.encyclopedia.com\/social-sciences\/applied-and-social-sciences-magazines\/stationary-state<\/p>\n

[5]<\/a> http:\/\/www.economictheories.org\/2008\/07\/stuart-mill-different-stationary-state.html<\/p>\n

[6]<\/a> Mill Principles of the economy 113<\/p>\n

[1]<\/a> The worldy philsophers 96<\/p>\n

[2]<\/a> Ricardo_Principles ofpolitcal economy 53<\/p>\n

[3]<\/a> Ricardo_Principles ofpolitcal economy 56<\/p>\n","protected":false},"excerpt":{"rendered":"

Economists David Ricardo and John Stuart Mill dedicated their lives to economic writing that analyzed the dynamics of capitalist economies. Specifically, they investigated sources of economic growth and development. Principles of Political Economy and Taxation was David Ricardo\u2019s contribution to this economic growth and development literature. Within this economic literature, Ricardo built a complex model through the theory of value and rent that attempted to thoroughly address topics of rent, profit, and wages. \u201cTo Ricardo, the economic world was constantly tending to expand.\u201d[1] To Ricardo, continuous expansion by capitalist would cause a chain reaction that would affect prices of commodities, Continue reading Millian vs. Ricardian Stationary State<\/span>→<\/span><\/a><\/p>\n","protected":false},"author":530,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-3827","post","type-post","status-publish","format-standard","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/3827","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/users\/530"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/comments?post=3827"}],"version-history":[{"count":1,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/3827\/revisions"}],"predecessor-version":[{"id":3828,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/3827\/revisions\/3828"}],"wp:attachment":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/media?parent=3827"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/categories?post=3827"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/tags?post=3827"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}