The Idea of Diminishing Marginal Productivity - Assignment Example

Macro and Microeconomics The paper requires a detailed explanation of how David Ricardo used the idea of diminishing marginal productivity in to economics through the theory of rent to show that the increasing rents that are caused by renewing the Corn Laws must come at the expense of decreasing profit. According to Ricardo, in a situation whereby land of the second degree is in terms of fertility is cultivated, the rent on the first quality immediately commences. The amount of that land normally depends on the difference of qualities between the two portions of land. In a situation whereby a third quality land is cultivated, the rent commences on the second land quality with an immediate effect. However, the rent can be regulated by the difference in their productive powers as the rent of the first quality land increases since it must always be slightly above the second class. Naturally, the aspect of rising rents would directly take more of the national income (page 91) The paper also reflects on the T. Malthus` objections to Ricardo`s attack on the Corn Laws 1895 and how he responded to these objections in his principle of political economy and taxation. In addition to that, it also discusses how his response strengthened his conclusions about the Corn Laws in 1985. Malthus was a personal friend to Ricardo as well as his opponent on the matters to do with rent whereby Ricardo went on to write a letter to Malthus suggesting that every person to retain his own opinion without terminating the friendship (page 92). According to Ricardo, he referred to the economic rent as a surplus of the personal paper profit over the social gain whereby its value is in control over the resources instead of being directly to the resources. Moreover, there is no representation of gain but a transfer of wealth that was unearned. On the other hand, Malthus objected this opinion by stating that a material gain is stated when the rent is re-invested though the gain is in excess of the social unity. According to John Stuart Mill, the nature of the laws that regulates how we produce products is different from the laws that regulate how we distribute the fruits of that production. Therefore, details on specific examples from the 19th century English labor movement of how the laws of distribution were undergoing change, is also provided in this paper. The existing differences between the laws of regulation in production and distribution come in to nature because both of them undergoes through different processes. However, countries that export products on a large quantity ought to trade perfectly well on a special way, without restrictions for them to gain great advantages. In the context of the quote from Marx`s capital, an explanation of how labor is so important to Marx`s understanding of human self-realization has also been reflected upon. Moreover, a discussion of the role of history among the German philosophical ideas in shaping the Marks idea of human-self realization through labor has also been reflected upon in the discussion. According to Mark, alienation reaches at the peak when labor changes to become wage labor. Out of labor, capitalists are able to higher workers so as to convert the capital goods to final goods. Labor enables the workers to obtain wages that re later used to sustain their families. The more the workers are specialized in their specific areas of labor provision the more alienated they become in reference to the production of products. The employees tend to become more dependent on the production of products as well as the employee when they have set their goals. However the presence of Marx`s differences between the value of labor power also emerged. A provision of detailed explanation on the origin of profits according to Marx is also in this paper. The explanation begins with a discussion of how value is transformed in the production process including the relationship that has been discussed by Marx in the quote. Moreover, it is explained in to details as to why the rate of profit must fall inevitably according to the Marx`s theory. During Ricardo`s time the beneficiary of the system were the landowners whose monopoly of natural soil properties allowed them to gain at every person`s expense (page 91). The different labor powers could show up in many forms such as; the employment status whereby a worker could be in full employment, casual basis or part time. In this type of labor power, the part time self employment could combine with the part time wage labor. Another type of labor power was the civil status in which the worker could be a free citizen, a subject of the forced labor or an indentured labor. In Britain, several female and male children between seven to fourteen years were compelled to work daily from dawn to dust (page94). To reflect on the origin of profits, the international trade market developed a sense of attraction from burgeoning economic times. Between the year 1500 and 1750 most economists advocated mercantilism that led to the proposal of a decrease in imports and increase in exports so as to accumulate metals that were precious. This intern increased the profits realized since the plenty of money metals made the country very rich as the trade also intensified. The production of wine and clothe was done out of less amount of labor thus increasing the profit. However, according to Ricardo, trade between Portugal and England could still be faced with disadvantages because he believed that the direction of trade is determined by the labor input ratio that is necessary to produce the products. However, the act of replacing the labor by the production of machine recast the whole industry structure (page 113) Finally, an explanation of ideas such as employments of capital (Smith), composition of capital (Ricardo), abstinence theory of profit (Mill) and the relations of production (Marx) has been discussed and their significance to the development of the economic thought been described. The employment of capital by Smith points out that in order for the production value theory to hold, the production ought to be made up of wages. The advantage is that the production can as well be made up of machinery and capital. However, laborers failed to gain benefits that were envisioned by Smith since the presence of monopoly capital that meant a lot of wealth were being controlled by one person (pg113). The composition of capital by Ricardo adds the riches thus lowering the products of commodities to be traded. The abstinence theory of profit by Mill states that an increase in the real wages leads to a decrease in the real profits since the revenue from the manufactured goods that are sold splits between the wages and profit. The relations of products by Marx illustrates that countries with absolute advantages in product exportation need to carry out trade on a special way. Work cited Canterberry Ray. A Brief History of Economics. World Scientific Publishing Co. 2011. Print. Read More