Skip to content

Essays On Ricardian Literature



David Ricardo (1772-1823), author of the influential Principles of Political Economy and Taxation (1817), belongs to that more or less cohesive "school" of political economy for which Karl Marx coined the label "classical economics." As a "comprehensive liberal philosophy" classical economics transcended narrow positivist economic science and attracted public attention, especially during the nineteenth century, by urging public policy reforms along a broad front of political, social, and economic issues. Armed with the analytical tools of political economy, the classical economists attacked the thorny contemporary problems of inflation, commercial and agricultural policy, as well as economic growth and the possible limits of the burgeoning population of the Industrial Revolution. Chief among the Scottish and English "classical" economists during the 150 years from the birth of its mentor Adam Smith to the death of John Stuart Mill, the eloquent voice of liberalism in transition, were: Adam Smith (1723-1790), Jeremy Bentham (1748-1832), Thomas Robert Malthus (1766-1834), David Ricardo (1772-1823), James Mill (1773-1836), Robert Torrens (1780-1864), John Ramsay McCulloch (1789-1864), Nassau William Senior (1790-1864), and John Stuart Mill (1806-1873).


Controversy and partisan ideology becloud scholarly interpretations of Ricardo's and "Ricardian" economics. Ricardo and the other classical economists looked to Adam Smith's Wealth of Nations (1776) for their inspiration and analytic paradigm of how to do political economy in a comprehensive sense. However, the pressures of the Industrial Revolution, the inflationary storms arising from the Napoleonic Wars, and exploding technology, population, and social unrest taxed the classical economists to extend the scope and methodology of Adam Smith to deal with nineteenth-century issues. Opinions vary on how closely Ricardo himself hewed to the Smithian paradigm. In his own opinion, Ricardo in the Preface to his Principles believed that he was walking in Smith's footsteps (and those of his Continental followers) and merely dealing with a new set of problems left unsolved by his predecessors:

To determine the laws which regulate this distribution is the principal problem in Political Economy: much as the science has been improved by the writings of Turgot, Stuart, Smith, Say, Sismondi, and others, they afford very little satisfactory information respecting the natural course of rent, profit, and wages.


Later economists disagreed on the impact and meaning of Ricardo's and the "Ricardians' " contributions to economics and whether Ricardian economics represented a "detour" from Smithian analysis. Begrudgingly and waspishly, John Maynard Keynes declared that Ricardian economics "conquered England as completely as the Holy Inquisition conquered Spain." J.R. McCulloch, Ricardo's fellow "classical" economist, saw Ricardo's Principles as beginning "a new era in the history of the science." Marx, however, judged 1830 as the end of Ricardian economics. Finally, Schumpeter's influential opinion held that the "Ricardians were always a minority in England." More extravagantly the "Ricardian" man of letters, Thomas De Quincey wrote of his mentor's advancement of economic learning:

All other writers had been crushed and overlaid by the enormous weight of facts and documents; Mr. Ricardo alone had deduced, a priori, from the understanding itself, laws which first gave a ray of light into the unwieldy chaos of materials, and had constructed what had been but a collection of tentative discussions into a science of regular proportions now first standing on an eternal basis.


Amid such dissent over Ricardo's place in the development of nineteenth-century economics, it is necessary to determine whether Ricardo's economic analysis and Ricardian procedure represented a genuine contribution or was an unfortunate "detour" from the emerging general-equilibrium procedure and analysis.



This essay examines two themes central to the literature on nineteenth-century "classical" economics. The first is that of an alleged dual development of economic theory—a development that contrasts "Ricardian" procedure on the one hand with embryonic general-equilibrium, or "neo-classical," procedure on the other. My second theme concerns the motives for the so-called "bourgeois dissension" from Ricardian theory following David Ricardo's death in 1823. Past writers have regarded this dissent as a reaction against the ideological use made of Ricardian theory by the "labor writers," and particularly against Marx's interpretation of Ricardo. In Sections I to III, I sketch the received doctrine on these matters. In the remainder of the essay I shall argue that the nineteenth-century record actually portrays a common theoretical heritage shared by most economic writers regardless of ideology: allocation via the price mechanism. This rules out any dualistic categorization of economic developments into "Ricardian" as opposed to general-equilibrium streams. I shall also argue that we cannot usefully interpret in ideological terms the "bourgeois dissension" (a subject easy to exaggerate).

I. The Concept of a "Dual Development" of Economic Theory


Economists from diverse ideological backgrounds share the notion of a "dual development" of economic theory. Such a "dual development" theory is common both to J.A. Schumpeter's History of Economic Analysis (probably the best known history of economics ever written) and to a variety of interpretations in the Marxian tradition (for example, Maurice Dobb's Theories of Value and Distribution Since Adam Smith). Those who endorse this "dual development" approach largely agree in terms of this theory's substantive content. Differences among these economists lie in their evaluations of the evidence; these evaluative differences flow from the perspective of the particular "ideal type" of analysis which each economist uses to evaluate the early literature.

General Equilibrium Development


Thus, Schumpeter's economic vantage point is the (Walrasian) general equilibrium analysis of productive organization. The characteristic feature of this "ideal type" of economic analysis is the simultaneous determination of the prices of outputs and productive services (land, labor, capital) by the market demand-supply mechanism. The simultaneity of the economic process is seen in the demand prices of productive services in each use. These prices derived through the "imputation" among them of the value of the final output, utilizing the principle of substitution at the margin in both production and consumption. Simultaneity also appears in the role played by the returns to productive services in the determination of product prices.


In production, this principle states that each productive service ought to be employed so that the ratios of the marginal products of all productive services are equal to the ratios of their prices. In consumption, it states that consumers ought to allocate their consumption so that the ratios of the marginal utilities of all goods consumed are equal to the ratios of their prices. Any departure from the requisite ratio equality in the case of either a particular productive service or a particular consumption good will lead to substitutions. Such substitutions occur either (a) in the use of productive services or (b) in the consumption of commodities so as to reestablish all desired ratio equalities. Simultaneous determination occurs since it is possible for each decision to be made without others having to precede it temporally. All relations in the economic analysis are represented by an interrelated system of mathematical equations. Consequently, several determinations are made simultaneously: the determination of the product prices, the determination of the demand prices, of productive services, the determination of the desired mix of productive services in production, and the determination of the desired mix of output produced. Each decision necessarily reflects and requires the other through the market demand-supply mechanism. The simultaneous determination of all required economic magnitudes constitues the general equilibrium


Within this general-equilibrium model, the problem of distribution—envisaged as the pricing of productive services—is simply one aspect of the analysis of productive organization. In this analysis, given resources are allocated between different uses and within each use by means of price competition.

Alleged "Ricardian" Development According to Schumpeter


Ricardian economic procedures, according to the Schumpeter-Knight historiography, are diametrically opposed to the spirit of general equilibrium. Above all, they are opposed to its conception that the returns to factor services are competitively determined prices: "The problem of distribution, the sharing of a joint product among an indefinite number of agencies (owners) cooperating in its creation, not merely was not seen as a problem of imputation, but was not approached as a problem of valuation at all." The Ricardian approach was to consider the problem of distribution in terms of these aggregate class shares. Ricardo employed a model that accounted for rent as a differential surplus, wages by the subsistence theory, and profits as a simple residual.


In dealing with the determination of the laws regulating distribution—his fundamental problem—Ricardo is said to have arbitrarily reduced the number of variables in his model until he was left with but one variable, namely profits. These profits were determined as a form of residual (the difference between the marginal product of labor and the subsistence wage rate), by the one equation of the system. This particular approach was dictated, so runs Schumpeter's argument, by Ricardo's "inability to deal with systems of simultaneous equations," and his failure to appreciate the notion of incremental variation, that is, of factor and product substitution. Schumpeter's argument further contends that Ricardo had no conception of the demand-supply apparatus—that he was "completely blind" to its nature and logical place in economic theory. Ricardo restricted demand-supply analysis to the short-run case of given supplies and monopoly. Further, Ricardo envisioned the labor theory (which he applied to long-run exchange values), as "distinct from and opposed to" demand-supply theory. Schumpeter further argued that the specific engine of analysis which Ricardo devised, constituted a "detour" in the development of economic analysis. For, had not A.R.J. Turgot, Adam Smith (in significant chapters of the Wealth of Nations) and in particular J.B. Say, Lord Lauderdale and T.R. Malthus previously achieved a considerable insight into the "correct" approach towards productive organization? This earlier approach viewed distribution as the pricing of requisite and scarce services.


Despite these earlier efforts and the work of "the men who wrote above their time" (the "dissenters") during the post-Ricardian period (especially Mountifort Longfield), it was only during the last three decades of the nineteenth century "that the conception of an economic cosmos that consists of a system of interdependent quantities was fully worked out with all its problems, if not quite satisfactorily solved, at least clearly arrayed and with the idea of a general equilibrium between these quantities clearly established in the center of pure theory."

Dobb's Version of a "Dual Development" of Economics


An exact "mirror image" of Schumpeter's "dual development" reading of the evidence appears in Maurice Dobb's Marxian study. Dobb discerns two streams of thought—two classical traditions—relating to exchange and income distribution. Both streams flow (albeit in very different ways) from Adam Smith as fountainhead.


The first classical tradition originated in Smith's cost of production theory (the "adding-up-components" version). For Smith competition, through the operation of supply and demand, assures that market prices gravitate towards "natural" prices. These "natural" prices are defined as the sum of the unit wage, unit profit and unit rent costs when the factors of production are paid at their "natural" rates. These "natural" or necessary factor payments are in turn determined by the general conditions of supply and demand for labor, capital and land. This approach "etched in lightly and suggestively by Smith" was developed by the Longfield-Senior group, by John Stuart Mill, and subsequently by W.S. Jevons and Alfred Marshall. Full fruition was reached with the Austrian school and the Lausanne school. In the economic theories of these schools (according to Dobb) "product prices and income-distribution [are] assimilated into one system of mutual and simultaneous determination of product-prices and factor-prices in interaction."


The second classical tradition—far from constituting a "detour" was, Dobb believed, the true tradition. It flowed from Smith in the sense of being a reaction against his system. Ricardo replaced Smith's "peculiar" value theory "to make conditions of production, and in particular quantities of labor expended in production, the basic determinant [of value] alike in capitalist and pre-capitalist society." The Ricardian system placed distribution in center stage. Dobb contrasts Ricardo with Smith in the following passage:

Whatever his reason may have been for regarding distribution as the central problem, his instinct in doing so was undoubtedly right, and his mode of treating distribution was crucial. He saw that this had to be explained in terms peculiar to itself and not as an outcome of general supply-demand exchange relations, as Smith had treated it... Moreover for Ricardo an answer to the question about distribution was a necessary and prior condition for calculating the effect of a change in wages on prices (both general and individual prices): in other words for calculating the 'modifications' of relative prices introduced by differences in technical coefficients of production, affecting particularly the use of fixed capital..


In brief, distribution had logical priority over prices or exchange values. Dobb's Marxian view of the Ricardian tradition divorces distribution from the general pricing process. The wage rate is determined "exogenously," that is, outside of the exchange system, and profits are a residual.


The formal identity between the interpretations of Schumpeter and Dobb, insofar as concerns the content of Ricardian theory, will now be apparent. Both emphasize Ricardo's alleged divorce of distribution and exchange; both note that the absence of a notion of distribution is a problem in factor pricing. Both lay great stress on the conception of an exogenously determined wage rate. They also share the notion of a "dual development" of economic theory. But the difference between them is also clear: Schumpeter treats the Ricardian characteristics in question as an inexcusable lapse, a failure to appreciate the nature of economic analysis. They lead to a result that lacks sense. By contrast, Dobb views the same characteristics as a matter of deliberate choice reflecting a full appreciation of the nature of scientific economics.

Dobb's View of Ricardo and the "Cambridge" School


Dobb's position may be placed in broader perspective. The modern "Cambridge" school of economists finds little merit in general equilibrium procedure in principle. It champions, rather, an approach involving the treatment of prices, production levels, and distribution by means of separate models, with an eye upon the isolation of "one-way-direction" relationships or the "causal ordering" of variables. This is a method attributed to Piero Sraffa, as well as to Marx, as we shall see. Because the function of the economist is believed to consist in the specification of "causal" relations where appropriate, "Cambridge" economists attach great merit to the specification of the real wage in cultural or institutional terms and the treatment of profits as residual.

1. The Sraffa "Corn Profit" Model of Ricardo


The "Cambridge" economists reflect a number of specific interpretations of Ricardian theory. I have in mind, first, Piero Sraffa's interpretation of Ricardo's Essay on the Influence of a Low Price of Corn on the Profits of Stock based upon the assumption that in the agricultural sector both output and input consist of a single homogeneous commodity ("corn" or grain), so that the rate of profits may be determined in terms of physical product independently of consumer valuation.


How is this profit rate determined concretely in this framework? This profit rate is set at the margin of cultivation; that is, by farmers cultivating land that is the least fertile or farthest from market centers. This comes about as follows: as the cultivation of land expands in response to the growth of population, farmers have to bring less-productive land under cultivation. On that land a given amount of the farmer's labor and capital produces a smaller output than on more fertile or better located land. In this view, the exchange value of output depends on the units of labor and capital used to produce it. Accordingly, the exchange value of output produced on less fertile (or more poorly situated) land is held to exceed that of output produced on better land. It is this exchange value that will constitute the general market price. (In this theory the difference between the market price so determined and the value of output produced on better land is, of course, rent).


On all land under cultivation, there can be only one rate of wages and one rate of profits. The wage rate in real terms is set by the ratio of the "wage fund" (assumed to be a definite share or portion of real consumer goods) to the labor pool and tends towards subsistence. The rate of profit is set equal in all employments by the mobility of capital. But, as cultivation extends to less-productive lands and market prices of farm produce rise, the nominal (or money) value of the wage fund rises. The exchange value of output will not change unless the amount of labor content changes. Hence, a rise in the level of nominal wages (due to the results of the extension of cultivation) must be accompanied by a fall in the level of profits. Consequently, the rate of profits is set by the margin of cultivation.


Given the profit rate in agriculture as determined by this margin of cultivation—the wage basket consisting of a fixed quantity of grain or "corn"—a specific ratio of the price of manufactures to that of corn is implied, namely that which brings the profit rate in the manufacturing sector into line.

2. Pasinetti's Version of Ricardo


Luigi Pasinetti's algebraic formulation of Ricardo's system (attributed to the "mature" Ricardo of the Principles) is one which, in contrast to Sraffa's corn-profit representation, formally adopts the labor theory of exchange value. The Ricardian system is represented by a two-commodity model involving a wage-good (corn) and a luxury-good, the latter identified with the standard of value ("gold"). The monetary unit is taken to be the constant gold output of one worker for one year: "gold" represents in this model an invariable measure of value. Corn is also produced in a one-year process. In both sectors, wage-goods or circulating capital alone is required, and the capital stock at the beginning of the year is presumed to be a given, as is the corn wage. Given the land area and the state of technology, Pasinetti's (fourteen) equations describing the system yield unique and economically meaningful solutions for the (fourteen) variables of the system, including the rate of profit. What we must emphasize for our purposes here is the independence of the general profit rate from conditions in the luxury-good sector. The profit rate is dependent solely upon the marginal product of labor in agriculture and the given corn wage, which is precisely the result of the dual sector "corn profit model".

3. Dmitriev's Equational Version of Ricardo


A labor theory of value is not, however, required to hold that the wage-goods determine general profit. I refer to the brilliant interpretation of Ricardo by V.K. Dmitriev (1904) whose recent rediscovery has excited much interest. Dmitriev's analysis defends Ricardo against Léon Walras's criticism—quite ruinous if justified—to the effect that the Ricardian system is underdetermined, containing too few equations to determine the unknowns. But according to Dmitriev's defense there is one equation in Ricardo's system of production cost equations that yields a solution for the profit rate independently of the others. This magnitude can then be used to solve for exchange values. The unique production-cost equation is that relating to the wage-goods sector. The profit rate depends, therefore, upon the (given) "conditions of production"—the labor inputs, both direct and indirect, and their investment periods—in the wage-goods (corn) industry and the (given) corn wage.


The three foregoing representations of the "Ricardian" system—the Sraffa "corn-profit" model, the Pasinetti version of a dual-sector system based upon the labor theory, and Dmitriev's equational system—share in common the dependence of the general profit rate solely upon the conditions of production in the wage-goods sector and the (given) real wage. This result turns upon a rigid distinction between wage- and luxury-goods; it follows from the fact that wage-goods enter into the production of every product in the system while luxury-goods do not. This implies a very different conceptualization of the economic process from that of the general-equilibrium economists, for whom distribution and pricing are inextricably intertwined.

Marx and Sraffa as Purported "Ricardians"


The Ricardian line, on some readings, includes the economics of Karl Marx and the economics of Piero Sraffa in his famous Production of Commodities by Means of Commodities—subtitled Prelude to a Critique of Economic Theory. To these extensions I now turn.


Alfredo Medio's influential account of Marxian theory claims that given the profit rate, we can derive prices of production. But the general profit rate itself is "a function of two basic overall features of the economy, namely a social factor, the rate of exploitation, and a technical factor, the methods of production." The wage rate is a given or datum of the analysis, and it is the conditions of production of "basics" that are relevant for the general profit rate and not those relating to "non-basics" (commodities which are neither means of production nor wage-goods). Maurice Dobb has made the general point this way: "It will be clear... that the nature of [Marx's] approach required him to start from the postulation of a certain rate of exploitation or of surplus-value (or profit-wage ratio in Ricardo's terms); since this was prior to the formation of exchange-values or prices and was not derived from them. In other words, this needed to be expressed in terms of production, before bringing in circulation or exchange."


Much the same case has been made with regard to Sraffa's masterpiece. Roncaglia's recent study of Sraffa's work envisages it as an investigation of prices of production which are defined as "those prices consistent with a uniform rate of profit for all industries for given levels of output." Sraffa's work appears concerned primarily with "the influence of the distributive variables (the rate of profit and the wage) on these prices." Sraffa's achievement, Roncaglia contends, lies in his demonstration "that it is possible to determine relative prices without any reference to 'marginal' changes, i.e., with given levels of activity and given 'proportions of factors of production'... as a function of one distributive variable (the wage rate or the rate of profits)..."


The import of this purported influence of the distributive variables on prices, lies in the implied break-away from marginalist or general-equilibrium procedure. Prices of production are analyzed without reference to changes in the levels of output of the various commodities in the system and without reference to demand. As Roncaglia phrases it:

In the absence of any considerations whatsoever of the factors that determine the quantity supplied or the quantity demanded of the various commodities, there is no reason to suppose that prices of production should equate the quantity demanded with the quantity supplied for any commodity in the long period or that market prices should fulfill this function in the short or very short period. In addition, in the absence of any explicit analysis of effective (market) prices the relation between market prices and prices of production must remain undetermined.

Similarly, "the emphasis that Sraffa places on the absence of change in the levels of production in his analysis represents an implicit rejection of the marginalist attempt to determine the equilibrium price and the equilibrium levels of output simultaneously." The obverse side of the coin is that by breaking the link between price formation, the determination of the level of production and the realization of sales, Sraffa's work is brought into line with the classical economists (with some qualifications) and with Marx.

II. On the "Decline" in Ricardian Theory


My investigation of both the content and the origins of Ricardo's Principles—particularly the process whereby Ricardo, early in 1813, began to discern what he considered to be a number of logical errors in the Smithian position—confirms the following: what is characteristically "Ricardian" is the use of a special theory of value involving an absolute standard in deriving the inverse relationship between wages and profits—the fundamental theorem on distribution. In terms of the special measure, a rise of "money wages" implies a rise in the proportionate share of wages and a corresponding fall in the profit rate.


Schumpeter contended that Ricardianism was a flash-in-the-pan. The Ricardian system not only "failed from the start to gain the assent of the majority of English economists," but by the early 1830s "Ricardianism was no longer a living force." In making his assertion, Professor Schumpeter apparently had in mind the key role played by the so-called "absolute standard of value" in the derivation of the proposition that "profits depend upon wages." The "absolute standard of value" was a commodity produced by a constant quantity of labor, while the particular dependence of profits upon wages was that profits vary inversely with wages. Both profits and wages were conceived as proportionate shares in an output of constant value.


Recent historiography centrally posits a "decline" in Ricardo's authority in matters relating to the fundamental theorem of distribution and its derivation in terms of the invariable yardstick even in the work of the "Ricardians." In his study of the "Ricardian" classical economist J.R. McCulloch, Professor O'Brien has added his authority to the view that the central Ricardian model suffered a serious decline soon after Ricardo's death in 1823. In fact, it is Professor O'Brien's general theme that while McCulloch "did much to popularize economics... it was not Ricardo's economics that he was popularizing..." McCulloch, runs the argument, must be considered as squarely in the Smithian tradition. A similar revisionist interpretation has recently been put forward regarding the "Ricardian" Thomas DeQuincey. That John Stuart Mill must also be excluded from the group constituting Ricardo's "school" has also been strongly urged: "From Marshall's Principles, Ricardianism can be removed without being missed at all. From Mill's Principles, it could be dropped without being missed very greatly." Schumpeter dismisses Mill's formal ascription to Ricardianism as merely "filial piety."


This evaluation is also characteristic of Marxian interpreters. Marx himself spoke of Mill's work as an example of the "eclectic, syncretistic compendia" which characterized the period after the collapse of "scientific" political economy in 1830. Along similar lines Maurice Dobb has observed of Mill: "when looking back on him from a distance one can see quite clearly that in major respects his own work was much nearer to Marshall than it was to Ricardo; and that so far as his theory of value was concerned, on the contrary to continuing and improving on Ricardo, in essentials he took his stand on the position of Smith where Ricardo had been opposing him." But to make it comprehensible, we need to place the Marxian reading in broader perspective. I turn next to the issue of economics and ideology.

III. On the Motives for Dissension: The Marxian View


An important theme in Marxian historiography is that the roots of early British socialism can be traced to Ricardo. The writings of Piercy Ravenstone and Thomas Hodgskin—among other ideological opponents of "bourgeois" political economy—were said by Marx to "derive from the Ricardian form;" and Marx refers to "the proletarian opposition based on Ricardo." The derivation in question was a complex one, entailing adoption and development of Ricardian value theory, rid, however, of any allowances for the independent productivity of capital. In Marx's analysis the champions of the proletariat...

seize[d] on this contradiction, for which they found the theoretical ground already prepared. Labour is the sole source of exchange value and the only active creator of use-value. This is what you say. On the other hand you say the capital is everything, and the worker is nothing or a mere production cost of capital. You have refuted yourselves. Capital is nothing but defrauding of the worker. Labour is everything. This, in fact, is the ultimate meaning of all the writings which defend the interests of the proletariat from the Ricardian standpoint basing themselves on his assumptions.


As one exmple: Thomas Hodgskin's insistence upon the nonproductivity of capital was the "inevitable consequence of Ricardo's presentation." What was involved, according to Marx, is a kind of inversion of the Ricardian analysis.


There is a second closely related feature of Marx's reading of the record. The "bourgeois" reaction against Ricardo—the so-called "dissenting" literature of the 1830s and 1840s—must be understood, runs Marx's argument, as a reaction to the use made of Ricardian doctrine by the labor writers. What is referred to as "vulgar" political economy:

only becomes widespread when political economy itself has, as a result of its analysis, undermined and impaired its own premises and consequently the opposition to political economy has come into being in more or less economic, utopian, critical and revolutionary forms... Ricardo and the further advance of political economy caused by him provide new nourishment for the vulgar economist...: the more economic theory is perfected, that is, the deeper it penetrates its subject-matter and the more it develops as a contradictory system, the more is it confronted by its own, increasingly independent, vulgar element, enriched with material which it dresses up in its own way until finally it finds its most apt expression in academically syncretic and unprincipled eclectic compilations.


Marx further argued that vulgar political economy "deliberately becomes increasingly apologetic and makes strenuous attempts to talk out of existence the ideas which contain the contradictions" —contradictions that were "in the process of being worked out in socialism and the struggles of the time." It is precisely this reading of the record that reappears in the famous Afterword to the second German edition of Capital. Here Marx portrays Ricardo as the "last great representative of political economy," and the year 1830 as the watershed between "scientific" and "apologetic" or ideological, class-centered economics:

In France and in England the bourgeoisie had conquered political power. Thenceforth, the class-struggle, practically as theoretically, took on more and more out, spoken and threatening forms. It sounded the knell of scientific bourgeois economy. It was thenceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested inquiries, there were hired prizefighters; in place of genuine scientific research, the bad conscience and evil intent of apologetic.


Marx's reading of the motivation behind the dissenting literature was accepted by Professor Meek in his well-known analysis of "the decline of Ricardian economics in England." To explain "the strength, vigour and virtual universality of the early reaction against Ricardo" economists had to resort "above all... to the fact that a number of elements in his system seemed to set limits to the prospects of uninterrupted and harmonious progress under capitalism. In particular, the work of the Ricardian socialists revealed certain disharmonies and pessimistic implications of Ricardo's system so forcibly that the economists of the day could hardly avoid being influenced by them in the course of their evaluation of Ricardo." Similarly, the majority of economists were very much aware of the "dangerous use to which a number of radical writers were putting certain Ricardian concepts." Meek contends that as far as concerns the theoretical core of Ricardianism, the

concepts of value as embodied labour and profit as a kind of surplus value, which had proved so useful to the radicals, were among the first to be amended or rejected: value began to be conceived in terms of utility or cost of production, or sometimes (as with [Samuel] Bailey) as little more than a mere relation, and profit came to be explained not as the result of something which the labourer did but as the result of and reward for something which either the capitalist or his capital did.


J.A. Schumpeter, History of Economic Analysis. Schumpeter's position is much the same, in its essentials, as that of F.H. Knight, On the History and Method of Economics, pp. 37-88.


Knight, History and Method of Economics, p. 41. Cf. Schumpeter, History of Economic Analysis, p. 568: while "Professor Knight went perhaps too far if he accused Ricardo of not having seen the problem of distribution as a problem of valuation at all... it is true that Ricardo failed to see the explanatory principle offered by the valuation aspect." Cf. p. 543n.: "The full implications of the fact that capitalist distribution is a value phenomenon are not clearly seen even by Ricardo."


Schumpeter, History of Economic Analysis, p. 569.


Schumpeter, History, p. 680n., pp. 589-90, p. 568. See also Schumpeter, Economic Doctrine and Method, pp. 196-7; and Knight, p. 40.


Schumpeter, History of Economic Analysis, pp. 600-1. See also p. 592.


Schumpeter, History, p. 474; cf. p. 568, p. 673n. See also p. 560: the rejection of the labor-quantity theory by the non-Ricardians and anti-Ricardians of the 1830s, Schumpeter contends, "shows again that the Ricardian teaching was really in the nature of a detour." Keynes too implied that Ricardianism constituted a "detour" (although his position is limited to the issue of aggregative demand and falls therefore into an entirely separate category): "One cannot rise from a perusal of [the Malthus-Ricardo] correspondence without a feeling that the almost total obliteration of Malthus' line of approach and the complete domination of Ricardo's for a period of a hundred years has been a disaster to the progress of economics." Essays in Biography, pp. 140-1.


Schumpeter, History of Economic Analysis, p. 465.


Schumpeter, History, p. 918.


Maurice Dobb, Theories of Value and Distribution Since Adam Smith, 44f., p. 112f. Cf., R.L. Meek, "Value in the History of Economic Thought," History of Political Economy 6 (Fall 1974): pp. 250-1.


Dobb, Theories of Value, p. 115; cf. Meek, "Value in the History of Economic Thought," p. 250.


Dobb, Theories, pp. 115-6.


Cf. Dobb, Theories, p. 35: "income-distribution (e.g. the profit-wage rate) was a pre-condition of the formation of relative prices." See also p. 169, p. 261, p. 266.


Luigi L. Pasinetti, Growth and Income Distribution: Essays in Economic Theory, pp. 43-4. See also Alessandro Roncaglia, Sraffa and the Theory of Prices, p. 119f; Dobb, Theories of Value, p. 261.


Editor's Introduction, Works and Correspondence of David Ricardo, ed. Piero Sraffa (Cambridge, 1951-1973), I, xxxi. Recall that "corn" refers to what we today call "grain."


Luigi L. Pasinetti, Growth and Income Distribution, p. 2.


The profit rate (r)= f' (&Ncirc;I) – 1; where &xbar; is the given corn wage and f' (&Ncirc;I) the marginal product of labor in corn production. Obviously, as the marginal product of labor rises or falls, the profit rate (r) rises or falls because the corn wage is assumed to be fixed.


See the Biographical Note by D.M. Nuti in V.K. Dinitriev, Economic Essays on Value, Competition and Utility, pp. 29-32.


Cf. Léon Walras, Elements of Pure Economics, pp. 424-51: "It is clear... that the English economists are completely baffled by the problem of price determination; for it is impossible for [interest charges] to determine [price] at the same time that [price] determines [interest charges]. In the language of mathematics one equation cannot be used to determine two unknowns."


Alfredo Medio, "Profits and Surplus-Value: Appearance and Reality in Capitalist Production," in E.K. Hunt and J.G. Schwartz, A Critique of Economic Theory, pp. 330-1.


Dobb, Theories of Value, p. 148. There is some ambiguity attached to this kind of conception for it is not always clear whether temporal priority or causal priority or both are intended by the "prior" solution to distribution. But in at least one important formulation temporal as well as causal priority is explicity attributed both to Ricardo and Marx. Cf. R. V. Eagly, The Structure of Classical Economic Theory.


Roncaglia, Sraffa and the Theory of Prices, p. xvii, p. 117, p. 98.


Roncaglia, pp. 16-7, p. 98, p. 32.


Schumpeter, History of Economic Analysis, p. 478.


See also F.W. Fetter, "The Rise and Decline of Ricardian Economics," History of Political Economy 1 (Spring 1969). As explained above, Schumpeter considers this procedure to be in conflict with "general equilibrium" analysis; I do not.


D.P. O'Brien, J.R. McCulloch: A Study in Classical Economics, pp. 402-3. The treatment of the invariable measure of value, which is said to be "central to Ricardo's system," we are told "never interested McCulloch at all." (O'Brien, p. 146).


P.W. Groenewegen, Economic Journal 83 (March 1973): 193.


Schumpeter, History of Economic Analysis, p. 529.


Grundrisse: Foundations of the Critique of Political Economy (1857), p. 883.


Dobb, Theories of Value, p. 122. But see the position of Pedro Schwartz, The New Political Economy of John Stuart Mill, pp. 16-7 which places Mill more firmly in the Ricardian tradition at least as far as concerns analysis.


Marx, Theories of Surplus Value, III, p. 238.


Marx, Theories, p. 260.


Marx, Theories, p. 266. That the roots of British socialism are to be traced to Ricardo's economics was later urged in Anton Menger's The Right to the Whole Produce of Labour and by H.S. Foxwell in his Introduction to that work: "Whatever qualifications Ricardo may have made in his own mind, ninety-nine readers out of a hundred took him literally, and the main impression left by his book was that while wealth was almost exclusively due to labour, it was mainly absorbed by rent and other payments to the unproductive classes." (H.S. Foxwell, "Introduction" to Anton Menger, The Right to the Whole Produce of Labour, pp. xl-xlii).


There is an extensive literature adopting this perspective. Élie Halévy, Thomas Hodgskin, pp. 180-1 emphasizes the opposition of the socialists to the Ricardians but at the same time insists upon their dependency on Ricardo's value theory: "the democratic opponents of James Mill and McCulloch, the first working-class theorists, instead of attacking the Ricardian theory of value seized upon its principles to draw from it new conclusions and to refute, by a form of reductio ad absurdam, Ricardo's political economy." See also Halévy, The Growth of Philosophic Radicalism, pp. 223-4: William Thompson (and Hodgskin) "draw inspiration" from Ricardo.

Similarly, G.D.H. Cole refers to Hodgskin's work as the "working-class answer" to Malthus and Ricardo, and to his "critique of the orthodox economics of Ricardo and his school." (See Cole's Introduction to Thomas Hodgskin, Labour Defended Against the Claims of Capital, pp. 10-11.) But he also writes, regarding both Hodgskin and Thompson, of their "deductions from Ricardian assumptions" and their "inversion of the Ricardian economic system... [in] essence, their deductions from Ricardian assumptions are the same." As Hodgskin argues in his book, "if it is admitted—and Ricardo admits it—that labour is the source of all value, then clearly all value belongs to the labourer, who should receive the whole product of his work." (Cole, p. 12). See also Cole, A History of Socialist Thought, I, p. 106.

Max Beer, A History of British Socialism, I, p. 154, draws the relationship in these terms: "But at the same time the socialists appeared and began to make use of the Ricardian theory of value as a weapon against the middle classes and to teach Labour that not the Tory landowner but the Liberal capitalist was their real enemy. Ricardo made labour the corner-stone of his system and yet he permitted the capitalist to appropriate accumulated labour and to decide the fate of the working classes."


Marx, Theories of Surplus Value, III, p. 501.


Afterword to the second German edition (1873) of Marx's Capital, vol. I, p. 15.


Meek considers Ricardian theory narrowly defined in terms of the labor theory of value and the related conception that profits depend upon "the proportion of the annual labour of the country... devoted to the support of the labourers," or upon the quantity of labor allocated to the wage-goods sector relative to the labor force as a whole; and also other supposed standard doctrines involving future prospects and class relationships. Cf. R.L. Meek, Economics and Ideology, pp. 62, 67, 72-3.


Meek, Economics and Ideology, pp. 68-9, 70, 72. For much the same general approach see also Meek, "Marginalism and Marxism," History of Political Economy 4 (Fall 1972):500-1, and Meek, Studies in the Labour Theory of Value, pp. 124-5 where "the persistent rejection or dilution of the labor theory by so many economists during the late 1820s and the 1830s," is attributed to the "use (or misuse) of classical value theory by the British radical writers."

End of Notes

Return to top

History of Political Economy 32.2 (2000) 401-402

[Access article in PDF]

Book Review

The Literature of Political Economy:
Collected Essays II

The Literature of Political Economy: Collected Essays II. By Samuel Hollander. London and New York: Routledge, 1995. xv; 410 pp.

The second volume of Hollander's selected essays ranges more widely than its predecessor, Ricardo: The New View (1995), which was reviewed by Martin Bronfenbrenner in this journal (29.1:161-63) and which contained twenty replies to various critics of his views on classical economics in general and Ricardo in particular. Further examples of Hollander's replies to his critics can be found here too, although they compose a much smaller share of the total.

There are six parts. "Biographical Perspectives" includes an autobiographical essay, a well-argued case for the teaching of the history of economic thought, and a memorial tribute to William Jaffé. Part 2 contains three early papers: "The Representative Firm and Imperfect Competition"; "On The Interpretation of the Just Price"; and "The Classical Economists' View of the Role of the State in Vocational Training: And A Reply to E. G. West." Two articles on Adam Smith ("The Historical Dimension of the Wealth of Nations" and "Adam Smith and the Self-Interest Axiom") constitute the third part. Part 4, "Nineteenth-Century Literature," includes the following essays: "The Post-Ricardian Dissension"; "On Mirowski's 'Physics and the Marginalist Revolution'"; "A. Arnon's Thomas Tooke: Pioneer of Monetary Theory"; and an essay on the corn-law pamphlet literature of 1815.

There are eight pieces on Malthus in part 5, including two reviews of recent editions of Malthus's Works, one on facsimile reprints of the Essay on Population, and four items on the Physiocratic elements in Malthus's work and his treatment of agricultural protection. The final part comprises fifteen short reviews, two-thirds of which examine books dealing with classical economics (broadly interpreted), while the remaining reviews treat much earlier or much later topics. The items in this section are urbane, appreciative, scholarly, and a pleasure to read.

No doubt many, and perhaps most, readers of this journal will already be familiar with Hollander's distinctive style of dedicated, intensive, and at times relentlessly controversial scholarship. Even so, they can hardly fail to gain new insights [End Page 401] from the fascinating, revealing, and enjoyable autobiographical essay that opens part 1. Unfortunately, however, in a new, hitherto unpublished addendum Hollander ends on a bitter note, charging some of his critics with "intellectual fascism," albeit acknowledging that "my inveterate habit of responding to critics" may not have been "to good purpose" (25).

A. W. Bob Coats
University of Nottingham