Land Quality, Trade Policy, Wages & Unemployment: Ricardo to Keynes

Ricardo — Land Quality, Rent, and Profit

1. Best land is used first. High-productivity land is cultivated before lower-quality land.
2. More land → lower yields per unit of labor/capital. As extra land is brought into use, yield per unit of labor and capital declines; output costs increase as worse land is used.
3. Surplus on the best land becomes rent. The best land generates a surplus relative to the worst-used land; that surplus is captured as rent by landowners.
4. Lower productivity raises food prices. Reduced average productivity leads to higher food prices; workers need higher wages to maintain subsistence.
5. Higher wages squeeze capitalist profits. Rising wages reduce capitalist profits; profits are squeezed as both rent and wages increase.
6. Capital accumulation slows. Profit decline slows capital accumulation and the economy moves toward a stationary state.

Summary Chain: Lower-quality land → decreased productivity → increased food prices → higher wages → lower profits → higher rent.

Marshall — Why Demand Matters Short Term, Supply Long Term

1. Short run: supply is relatively fixed. Factories and other productive resources cannot expand quickly, so when demand rises or falls, prices shift sharply because supply cannot respond immediately.
2. Demand-led pricing in the short run. Short-run prices largely reflect demand pressure; production costs matter less in the immediate term.
3. Long run: firms can adjust capacity. Over time, firms build capacity, hire labor, and adopt technology; supply becomes more elastic (responsive).
4. Supply-led pricing in the long run. In the long run, market price gravitates toward the cost of production as supply expands to meet demand changes.

Ricardo — Free Trade and the Corn Laws

1. Supported free trade via comparative advantage. Countries specialize and trade, increasing global wealth.
2. Corn Laws raised grain prices. The Corn Laws imposed tariffs on imported grain to keep domestic grain prices high for landowners.
3. High food prices raised wages and lowered profits. Expensive food forced workers to demand higher wages, reducing capitalist profits and slowing growth.
4. Distributional effects favored landowners. Landowners benefited through higher rent; capitalists and workers were disadvantaged by lower profits and higher living costs.
5. Repeal of the Corn Laws promoted growth. Cheaper food reduced wage demands, increased profits, and encouraged investment and economic growth.

Bottom line: The Corn Laws helped landlords but hurt industrial growth; free trade was better for overall economic expansion.

Conclusion: Rather than England specializing in manufactured goods as it should, the Corn Laws prevented full specialization in manufacturing and forced some manufacturing resources toward agriculture, where they were less efficient.

Keynes & Marx — Causes of Unemployment Compared

Short answer: No — they do not identify the same single reason, though both reject Say's Law (the view that supply automatically creates its own demand and therefore assures full employment).

Say's Law: Supply creates its own demand → full employment. Both Keynes and Marx reject this simple conclusion.

Keynes

1. Unemployment results from weak effective demand. Low consumption (C) and investment (I) produce insufficient aggregate demand.
2. Low marginal propensity to consume in developed countries. This reduces the multiplier and weakens demand.
3. Policy remedy: Fiscal policy—government spending—can raise aggregate demand and move the economy toward full employment.

Marx

1. Capitalists maximize surplus value. To increase surplus value (profit), capitalists seek to reduce wages.
2. Automation increases the Reserve Army of Labor (RAL). The substitution of machines raises the RAL, putting downward pressure on wages and raising profits.
3. Cyclical crises and structural unemployment. Investment booms and busts create cycles: investment rises → RAL falls → wages rise → surplus falls → capitalists automate → RAL rises → wages fall.
4. RAL is a persistent feature of capitalism. For Marx, the Reserve Army of Labor is structural and enduring, not merely temporary.

Key difference: For Keynes, unemployment is often temporary and fixable through demand management; for Marx, unemployment is structural and inherent to capitalist production relations.