Ricardo's Static Equilibrium.

This article attempts to present a formal outline of the production aspect of the two-commodity model of the Principles from David Ricardo. Ricardo's Principles model involves two home-produced commodities only, the composite commodities "corn" and "manufactures." Production requires the use of land and the application of labour and capital. Ricardo fused the two into a single variable by employing the concept of "a dose of capital and labour," the consumption of which is assumed to be invariant with respect to the scale of production and the particular industry. Furthermore, output is an increasing function of input, which, with a given technology, increases at a constant rate. In terms of the classical terminology, this is the "law of constant returns" which was said to apply to manufacturing industry. In Ricardo's view, long-run equilibrium prices is determined by conditions of production. Relative production costs depend on the marginal product of inputs in the two industries. In Ricardo's production model, the resources restriction indicates the all-prevailing restriction which is at the root of the economic problem. In addition to this, the notion of the qualitative relationships between inputs and outputs. The postulate of the relevance of material incentives, the significance of the objective conditions, and the concept of optimisation latent in the notion of the margin, all feature in Ricardo's model. The author concludes by saying that the powerful intellectual attraction of the Ricardian system is presumably due to the universal traits of the model.