Ricardo Was Right!

Abstract

Ricardo added a chapter On Machinery to the third and last edition of his Principles. In it, he contended that invention of machinery could reduce (i) the demand for labor, (ii) wages, and (iii) national income. This paper is devoted to the analytical questions of whether Ricardo was right that viable invention can reduce the total of real output after all competitive prices adjust to clear all markets, and why so many mainstream economists doubt Ricardo. After a defense of Ricardo's analysis, the political and ideological aspects of the historical discussions are evaluated. Mathematical proofs are provided in an Appendix.

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