Abstract

The author analyses Ricardo’s proposition that for a one-commodity economy (a com producing economy) in the presence of a growing population and decreasing returns in agriculture there would be a tendency for the rate of profits to fall. After showing that for a one commodity economy Ricardo’s proposition and the demonstration he provided for his proposition are both correct, the author analyses what would happen in a two sector economy, that is, an economy with a stagnant agriculture and an indus-trial (or, perhaps, a commercial) sector subject to technological progress. With the aid of a Sraffa type of model it is shown that Ricardo’s proposition is correct even in this case, that is, in a closed economy where agriculture is not subject to technological progress, even if the economy has other sectors where there are gains in productivity, a growing population leads to a fall in the rate of profits and eventually to stagnation in the economy.