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When Ricardo saw profit, he called it rent: on the vice of parochial realism

By Egmont Kakarot-Handtke

Abstract

According to Ricardo the principal problem in Political Economy is to determine the laws which regulate the distribution of profits, rents, and wages. Ricardo determined the respective shares in real terms and to this end invented an engine of analysis that became paradigmatic. The present paper applies a consistent real and monetary analysis, which is based on a set of objective structural axioms, and contrasts the results with Ricardo’s approach. The general result is that real analysis misses economic reality. The specific result is that rent is a misnomer for the distributed profit of the land owning firm.

Topics: B12 - Classical (includes Adam Smith), E25 - Aggregate Factor Income Distribution
Year: 2011
DOI identifier: 10.2139/ssrn.1932119
OAI identifier: oai:mpra.ub.uni-muenchen.de:33850

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