Question

Review and assess Ricardo’s theory of economic progress, including the tendency toward the stationary state.

Answer 1

Ricardo's theory of economic progress

Classical economists provide an account of the mechanisms underlying the growth process, and, broad forces that influence economic growth. Productive investment, and, accumulation is the main driving force. It is a form of social surplus in the form of profits. Changes in the rate of profit is a decisive reference point in the analysis of the long-term evolution of the economy. It was worked out by Ricardo. The analysis indicates that in a closed economy there is an inevitable tendency for the rate of profit to fall.

Long run equilibrium of the stationary state in the classical model of Ricardo.

• The process of economic growth under the conditions they identified raises obstacles in its own path, is ultimately retarded, ending in a state of stagnation, termed as the stationary state
• The stationary state is the ultimate end of the process of economic growth
• It was a prediction of the actual course of economic development in the 19th-century England
• Analysis of the process of economic growth as a central feature of the work of David Ricardo, Adam Smith, and, Malthus. These are regarded as precursors of modern growth theory