Elementary Economic Theory & National Income Accounting Criticism of Ricardian Theory

(1) Fertility is not Original and indestructible:

David Ricardo contends that fertility is original and indestructible power of the soil. This is dubious and absurd. Fertility is not a gift of God. Any human efforts using manure and irrigation and other technical measures will definitely increase the fertility of soil. Fertility gradually diminishes with repeated cultivation.

(2) Order of cultivation is wrong:

Ricardo holds that the new settlers started cultivating lands in order of fertility. The most fertile lands were taken to cultivation first. But the modern economists were in view that they do not cultivate on the basis of fertility but on the basis certain locational advantage. Further being new to the island how could they know which grade of land is the most fertile and which one is inferior.

(3) Wrong assumption of No-rent Land:

No-rent land is non-existent. The price of the produce is equal to the cost of cultivation. Thus no surplus arises. If a piece of land provides no rent it will not be cultivated at all. As it is difficult to find a laborer without wage and an entrepreneur without profit, so also it is difficult to find out a land without rent.

(4) Rent enters into price:

According to Ricardo price is determined by the cost of production of marginal land. Rent is not a part of the cost of production of marginal land. Marginal land is no rent land. So rent does not enter into price. By the modern economists holds the opinion that rent being a part of the cost of production enters into price.

(5) Differential rent objected:

According to David Ricardo rent arises because of difference in fertility. Superior grade land yields rent over inferior- grade of land. But rent arises not due to the difference in fertility but due to the scarcity of superior grade of land in relation to the inferior grade of land. Thus superior grade of land being scarce yields rent.