Adam Smith’s Macrodynamic Conception of the Natural Wage¹

Adam Smith and Malthus on high wages

“…[See Waterman (2009), which provides a complete account of the mathematical properties of this model; which analyses the effects of all parametric changes; which generalizes it to include fixed capital; and which relates it to previous Smithian growth models of Barkai (1969), Eltis (2000), Hollander (1984), Negishi (1989) and Samuelson (1977Samuelson ( , 1978.] Equations (4) and (5) constitute a common model that sets out the analytical framework within which both Smith and Malthus conceived the relation between accumulation and wages, and which enables us to identify differences in their interpretation of that model in terms of the variously assumed ranges and possible shifts of its parameters a, p, s, and m.…”

“…In what follows I shall first outline a simple common model of accumulation and wage determination, previously developed in full in another paper (Waterman 2009), and use it to explicate Smith's well-known doctrine of the 'natural wage'. The two following sections deploy the model to analyse Malthus's qualifications and some of the implications of these.…”

Moral Philosophy or Economic Analysis?The Oxford Handbook of Adam Smith

“…His conception of the natural price of labour (and of capital) postulated steady-state equilibrium of a macrodynamic model of accumulation, production and population. To any steady-state growth rate there corresponds a determinate wage rate (Waterman 2009). Samuelson, assuming as against Hollander that land scarcity and diminishing returns are indeed to be found in WN, was able to identify a unique steadystate-that of stationarity-and thus to agree with Ricardo that the natural wage is the 'subsistence' (or zero-population-growth) wage.…”

Is There Another, Quite Different, “Adam Smith Problem”?

“…Provided it is not invoked to explain the natural wage-for which we should have to assume not only no division of labor but also free land, zero technical progress, and constant capital intensity (Waterman 2009 )-it remains intact. Provided it is not invoked to explain the natural wage-for which we should have to assume not only no division of labor but also free land, zero technical progress, and constant capital intensity (Waterman 2009 )-it remains intact.…”

“…Let that fraction be defi ned as the degree of parsimony , π where 0 ≤ π ≤ 1, as used in previous modeling of Smith's growth theory (Waterman 2009(Waterman , 2012(Waterman , 2013 ; see also Eltis 2000 , p. 94, equation 3.9). Let that fraction be defi ned as the degree of parsimony , π where 0 ≤ π ≤ 1, as used in previous modeling of Smith's growth theory (Waterman 2009(Waterman , 2012(Waterman , 2013 ; see also Eltis 2000 , p. 94, equation 3.9).…”