Economic essays

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Monograph

Identifikator:: 1753623200

URN:: urn:nbn:de:zbw-retromon-136107

Document type:: Monograph

Title:: Economic essays

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1927

Scope:: viii, 368 S.; Ill., graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Elasticity of supply as a determinant of distribution / Paul H. Douglas

Collection:: Economics Books

78 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK The long-time theory of distribution which was held by the classical school from Ricardo on was also fundamentally based on a concept of supply curves. Thus if wages rose above the minimum, which furnished at any one time the basis of subsist- ence or the standard of living but which was for long periods constant, then this would call into being the forces of Malthu- sianism. Births would increase, deaths would decrease, popula- tion and ultimately the number of workers, would expand and this would cause wages to fall back to their former level. This tendency was supposed to be reinforced by the change in the supply of capital. If without any change in the total product, wages increased at the expense of the rate of interest, this would cause a decrease in the rate and would lead to a curtailment in saving. This fear was particularly marked in the orthodox fol-' lowers of Ricardo who felt that the rate of profits was already within a hand’s breadth of the minimum, and that if they were to fall much lower, virtually all of the capital would cease to be saved. This great decrease in the supply of capital would of course mean an equal contraction in the fund from which wages were paid and consequently would cause the rate of wages to fall greatly. Thus behind the writings of Senior, Mill, and Cairnes there is the belief in the almost infinite elasticity of the supply of labor, and of at least an equal shrinkability in the supply of capital. Similarly, those who like Sidney and Beatrice Webb believe that it is relative bargaining strength alone, or force and craft, vhich determines what each factor shall receive, tend either explicitly or implicitly to assume that the supplies of the factors are almost completely inelastic and will be the same irrespective of the price which they receive. Thus the Webbs reason that if through trade-union organization wages should increase and the rate of interest fall, the supply of capital would not decrease. To support this contention, they accept for certain classes the doctrine advanced by Sargent * that a fall in the rate of interest would cause an increase in the amount saved. Sargent had argued that the lower the rate the more men must save in order to secure the same annuity, and the Webbs declared that this would offset the tendency of other classes, such as the wealthy, to save less. But the Webbs held that not only would there probably be no diminution in the amount of capital but that there t W. L. Sargent, Recent Political Economy.

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