David Ricardo – First Principle

Ensuring optimal developments of both investment and consumption in case of scarce labour

The thesis On Absolute Value and the Value in Exchange of Commodities shifts the focus from production in case of abundantly available labour to production in a time when labour is scarce. While in the first period investments largely determine the pace at which labour is incorporated into production processes, in the second period they reach an optimal size. Depending on technical development, tension may arise where the optimal development of investments must come at the expense of the optimal development of consumption or vice versa. The technical development may induce that more direct and indirect labour is needed to produce the required investment commodities.

From the thesis Draft of Equilibrium we know that efficient production of commodities is independent of wages and prices: it is determined only by the technical production possibilities. This suggests that the optimal size of investment is also independent of wages and prices.

The article Ensuring optimal developments of both investment and consumption in case of scarce labour starts with showing how to determine the optimal size of investment by referring to an unpublished article written in 1976. But this article seems untimely, it should first have confronted the question of whether the 1960s and 1970s were indeed characterized by efficient production and scarce labour. We will then see how your writer by looking more closely at the facts discovered the importance of oligopolistic competition, describing a period that precedes the period that your writer had earlier in mind.

This does not alter the fact that the main part of the article addresses the question of how the optimal investment size can be determined in a way in which the total of consumption, including the restrictions that must be observed from a sustainability point of view, year after year with a minimum of labour can be achieved.

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