Wage-profit relationship
Dmitriev next turned to the analysis of the general rate of profits and of natural prices. He praised Ricardo for having clearly specified the factors which determine the general rate of profits, that is, the real wage rate and the technical conditions of production in the industries producing wage goods or means of production used (directly or indirectly) in the production of wage goods: “Ricardo’s immortal contribution was his brilliant solution of this seemingly insoluble problem” (1974: 58, first published in 1898).
Dmitriev suggested that Ricardo had accomplished the solution of this problem because he recognized “that there is one production equation by means of which we may determine the magnitude of r directly (that is, without having recourse for assistance to the other equations)” (ibid.: 59, original emphasis). In Dmitriev’s reading, Ricardo had adopted the simplifying assumption that the real wage basket consists only of corn, that is:
with c as the amount and pc as the price of corn, respectively. In this case the rate of profits is determined from the price equation of the corn industry alone, without recourse to the price system, since:
or
so that, with
Dmitriev then general
ized this model by considering the case of many wage goods and vindicated Ricardo’s proposition - which had been disputed by Marx - that the general rate of profits is not affected by changes in the conditions of production of the “non-basic” industries, that is, industries which produce neither wage goods nor means of production used directly or indirectly in the wage goods industries.
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