| Sumario: | The writer rebuts the classical fallacy held by economists—including David Ricardo, Karl Marx, and Adam Smith—that said that “fixed capitals” are prejudicial to wages and the demand for labor, whereas “circulating capitals” are allegedly favorable to the real wage rate and to the demand for labor. According to heterodox economists and the lay public in general, a technological change that made machinery newly viable was supposedly the type of invention that could put people out of work temporarily, decrease market-clearing wage rates, and in long-run equilibrium at an unchanged subsistence wage rate call for a significantly decreased population. By contrast, a new invention that displaced machinery in favor of various raw materials as inputs, would supposedly increase the short-run real wage and increase the demand for labor. Ricardo believed that every viable invention can be expected to increase every factor's return. The problems with this view are discussed, and evidence to rebut this fallacy is presented.
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