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“THE MERCHANTS OF CADIZ AND LISBON”: PARSIMONY, THE RATE OF PROFIT, AND ACCUMULATION IN WEALTH OF NATIONS

Published online by Cambridge University Press:  21 January 2013

A.M.C. WATERMAN
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Abstract

In Wealth of Nations, a high rate of profit is associated with sluggish or even negative growth, and vice versa. This is because capital accumulation (and therefore population growth) is driven by parsimony of the masters; and the incentive to self-denial is eroded by a high income too easily obtained. The causal relation between parsimony, the rate of profit, and accumulation is explicated in this article; Adam Smith’s observations concerning “the merchants of Cadiz and Lisbon” examined critically; and some conjectures offered as to why Smith’s successors should have rejected parsimony as a useful concept.

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Articles
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Journal of the History of Economic Thought , Volume 35 , Issue 1 , March 2013 , pp. 63 - 76
Copyright
Copyright © The History of Economics Society 2013

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References

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