determination of the value of a commodity (Smith, 1776, pp. 131 136). He further contended that it was the relative expenditure of labor that mattered. Smith also contended, however, that the factors of supply and demand also affected the actual price levels of commodities in the market place.
Within the framework described in the preceding paragraph, Smith thought that the size of an economy's output should be limited only by the size of markets or demand. The key element in the process, in Smith's perception, was the accumulation of capital. Smith thought that the accumulation of capital permitted (1) the creation of plant and equipment to assist human labor, and (2) the full employment of labor. Smith also thought that free competition was essential for the development of an efficient economy. Adam Smith considered that the factors of supply and demand were the major determinants of commodity prices (although the value of labor consumed in their production provided a basis for the determination of value).
David Ricardo built upon the work of Adam Smith. Ricardo's early writings were primarily concerned with money and banking. In 1815, however, he published his Essay on the Influence of the Low Price of Corn on the Profits of Stock. It was in this essay that Ricardo first delineated his concept of profit in print. The essay was the prototype for his most important work, The Principles of Political Economy and Taxation, which was published in 1817. In Principles, Ricardo refined his profit concept, and delineated other economic theories which were to dominate classical economic in England for the next 50 years. In Principles, Ricardo was primarily concerned with the formulation of laws which regulate the distribution of economic product within an economy (Ekelund and Hebert, 1983, pp. 130 137). To accomplish this purpose, he developed a model based on the predominantly agricultural economy of his day.
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