In Chapters 5 and 6 we considered a simple two-sector model and developed an account of circulation based on the specializations of the sectors, and their interdependence. This must now be generalized. The model concerns manufacturing; we take it for granted that a primary sector supplies raw materials – and earns differential rents. A tertiary sector supplies services to both households and buinesses; its circulation was examined in Chapter 5. Neither will be considered in this chapter. First, we need to explain the conception of the wage and of labor here, then we must develop a general account of the relationships between the Golden Rule, the wage-bill/capital requirements condition, and the wageprofit trade-off, and finally we must extend these results to fixed capital and relate the analysis to macroeconomics.

This will not be an easy project, and, paradoxically, familiarity with the subject may make it even more difficult. The problem is not analytical – neither the model nor its mathematics is especially complex. The issues are conceptual. In particular, while the analysis put forward here looks very similar to many recent Classical studies, it differs from most in at least the following respects: