that yields beyond the value of sustenance for workers is sought out and the return on those pieces of land suffers and lower rent. This is the basis for what Ricardo believed about the saving-investment identity. He agreed with Smith that parsimony and saving was a virtue, and that saving and investment were equal, but he introduced the notion that returns diminish as population decreases. The diminished rate of return results in something Ricardo calls the stationary state, which is when eventually a minimum profit rate is reached at which new investment (i.e., additional capital accumulation) ceases. As long as profits are positive, the capital stock is increasing, and the increased demand for labor will temporarily increase the average wage rate. But when wage rates rise above subsistence population increases. A larger population requires a greater food supply, so that, barring imports, cultivation must be extended to inferior lands (lower rent). As this occurs, rents increase and profits fall, until ultimately the stationary state is reached. References National accounts