Iron Law of Wages Posits Term Paper

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The ramifications for this in the economy would be that in order to maintain profits, prices would need to increase in order to match the rise in wages that stemmed from sustained constraints on the labor supply.

The Corn Laws were introduced in 1815 as import tariffs, designed to protect corn prices in Great Britain from lower-priced imports. Ricardo naturally opposed the Corn Laws, as he believed in free trade as espoused in his theory of comparative advantage. Ricardo viewed the corn tariffs as unnecessary -- if other nations can product corn better, labor would need to be repositioned in Britain to other activities in order to trade with those grain-producing nations.

The Corn Laws also had an adverse impact on wealth distribution. At the time, unemployment was high in Great Britain so it was more likely that usual that the iron law of wages would hold, given the surplus of labor.

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The Corn Laws essentially locked in prices for grain for local producers, meaning that land owners would see increased profits, precisely at a time when workers were seeing real wages decline.

Ricardo understood that the Corn Laws would produce unequal distribution of wealth. He saw that if protections of domestic grain markets were removed, labor would be redeployed to other areas of the economy. Real wages in the agricultural sector would increase and the workers' share of wealth would increase as a result. The nation would also benefit as the price of corn and grain would decrease due to foreign trade. Redeployed workers would be able to help other areas of the economy grow, in particular those free from tariff burdens, again achieving a greater distribution of wealth than occurred under the Corn Laws......

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