Compare and contrast the views of Smith and Ricardo on the Essay

Compare and contrast the views of Smith and Ricardo on the determination and possible evolution over time of the natural rates of wages, profit and rent - Essay Example It is worth mentioning that the â€Å"natural prices† of the aforementioned criteria, i.e. profits, wages and rents are further examined to fluctuate in accordance with the varied circumstances in the job market scenario. According to the viewpoints of various economists, it has been noted that the â€Å"natural rates† of rent, profit and wages are likely to be continuously changing due to the presence of a huge number of buyers as well as sellers and also because of the increasing market competition. Subsequently, various theories have been developed in order to examine the determinants of production function in an economy which is further believed to steer the overall growth rate in that particular nation1. Among the commonly applied theories, the most influential and certainly the most debated theories have been the growth theory of Adam Smith and David Ricardo. In this paper, the views of two economists i.e. Adam Smith and David Ricardo upon the subject matter of the determination as well as the possible evolution over time of the â€Å"natural rates† of rents, wages and profits will be analysed and compared. Adam Smith, the world renowned economist and philosophist of the 1770s, stated that the conception of â€Å"natural rate† is principally described as the price which is offered to any particular commodity in order to yield a significant portion of revenue. As per the growth theory of Adam Smith, governments play an imperative role in the determination as well the possible evolution of the â€Å"natural rates† of wages, profit and rent over time. In this similar context, Smith strongly believed that the government of any particular nation must enforce effective contracts and simultaneously grant copyrights as well as patents for the purpose of promoting new inventions and innovative ideas which can assist in greater capital accumulation within the nation, resulting in the increased wealth of the economy and therefore influencing the