Title: A Smithian-growth model and Malthus's optimal propensity to save
Abstract: We demonstrated elsewhere that the natural rate of profit falls as the rate of growth is increased by a higher rate of saving in our Smithian growth model. This confirms Smith's theory of the falling rate of profit, which was criticized by Ricardo but defended by Malthus's regulating principle of profit. Malthus went further, however, to argue that the saving, if it is pushed to excess, implies the discouragement to an increase of wealth in his theory of the optimal rate of saving. To deal with this problem, with which Malthus distinguished himself from Smith, we have to modify our Smithian growth model so as to consider the effects of the motives to produce, which Malthus considered to be a function of the rate of profit. The aggregate level of production is considered to be an increasing function of the rate of profit through its effects on labour productivity, while aggregate saving, which is for Malthus identical to investment, is shown to be independent of the rate of profit.
Publication Year: 1993
Publication Date: 1993-09-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 10
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot