Economics and Ideology: Aspects of the Post‐Ricardian Literature
“The fact is that the Ricardians…anticipated much of the substantive argument of the “critics.”
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 thesimultaneous 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. Inconsumption, 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 truetradition. 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 thecontent 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 therate 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 thelabor 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 isunderdetermined, 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—subtitledPrelude 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’sPrinciples, 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 iseverything. 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 apologeticand 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.
IV.: Ricardo as a General‐Equilibrium Economist
I turn in the rest of my essay to matters of criticism. In the first place I wish to argue that we need to abandon the entire concept of a “dual development” of economic theory. I base the following summary statement on my forthcoming study of the Economics of David Ricardo and related researches.
Ricardo and Demand‐Supply Analysis
The notion that Ricardo did not possess a demand theory, or at best only a rudimentary one, is a preposterous but all too common belief; and it is a contention central to the approach that attempts to distinguish his economics from the general‐equilibrium tradition. It is not difficult to demonstrate Ricardo’s sophisticated appreciation of demand‐supply technique and its use (together with the principle of profit‐rate equalization) in the analysis of a variety of disturbances, such as subsidies, taxes, wage variations, and so forth. This method of analysis lent itself to a sharp distinction between the allocative consequences of changes that affect all sectors of an economy equally and those changes that affect each sector with a differential impact. This method—fully consistent with that of Alfred Marshall—was in fact the only one required by Ricardo in the derivation of the inverse profit‐wage relationship. That Ricardo did not formally use it for this purpose is not in question; he chose rather to base himself upon the construction of the measure‐of‐value device.
To understand why Ricardo proceeded in this way, it is necessary to make conjectures. It is possible—I would say probable—that Ricardo was eager to make his case in terms of the ideal measure because the dependence of the return on capital upon the proportionate shares strikes the eye particularly clearly in terms of this formulation. But, whatever the reason, the onlyrationale for the inverse profit‐wage relation when we focus upon the process of industry adjustments to disturbances (a rationale which Ricardo himself provides, although not in this context) is that involving the market mechanism. And we must firmly emphasize that in this context there is no sense to the notion that the matter of distribution is somehow solved prior to pricing.
Ricardo himself may be partly responsible for the erroneous notion to the contrary. He was prone, especially in the first chapter of his Principles, to assume a (lower) profit rate corresponding to a (higher) wage rate by use of the measure‐of‐value mechanism; next, he was prone to apply this profit rate to determine the new equilibrium cost prices that emerge following the disturbance. But Ricardo designed this procedure as a predictive device rather than as an account of process analysis. In the latter context the new equilibrium profit rate emerges along with, and not prior to, the new equilibrium price structure.
Earlier in this essay we approached the general issue of the relation between distribution and pricing from the persepctive of the consequences of a change in the wage rate. We now approach the matter from the reverse perspective, that of the consequence upon distribution of a change in the pattern of demand for final goods.
Insofar as concerns distribution itself, it is clear that wages are treated as a (variable) price determined by demand‐supply relations; Ricardian theory is not of the fixed‐wage variety. Here we must emphasize that the analysis proceeds at the aggregate level, labor demand being represented by part of the capital supply, and labor supply by the work force; it is the average wage that is at stake not the wage rate paid to particular categories of workers. Now, we need to stress that Ricardo’s analysis of the allocative effects of changes in the pattern of demand is limited in exactly the same way as in Adam Smith’s formal statement in the Wealth of Nations. There—because of Smith’s assumption of identical capital‐labor ratios everywhere—such changes affect (temporarily) the factor returns in the particular industries involved, but not the general return and thus not the average wage. But Ricardo took an important analytical step forward in his chapter “On Machinery.” Here he introduces variations in the circulating‐fixed capital division and traces out the implications for labor demand and the wage rate. If we extend generally the principles developed in this discussion, we can in no way avoid the conclusion that changes in the pattern of final demand may affect the demand for labor and thus the general wage rate) by altering the overall circulating fixed capital rate. There are no “paradigmatic” differences between Ricardian and neo‐classical theory insofar as concerns the effects upon distribution of a change in the pattern of final demand. The notion of a sharp divorce between distribution and pricing does not stand up to close examination.
Ricardo, Marshallian Economics, and Resource Allocation
But what justification is there in arguing that the differences between Ricardian and Marshallian economics do not involve matters of principle but only matters of detail? Or further, to argue that this allows a transfer from one to the other by way of minor revisions (suggested indeed by Ricardo himself)? It is clear that this constitutes a very tricky problem. For it is one of the characteristics of economic theory that different analytical models may be described in terms of one another. Thus, there is admittedly great difficulty in identifying those differences that constitute alternative simplifying assumptions (including different values accorded to the key variables) from those which constitute matters of principle. Were the assumptions of uniform factor ratios and constant commodity wages used by Ricardo over and over again without significant exception, the obvious implication would necessarily be that they represent features of his “basic model.” In that case it would be unconvincing to argue that Ricardo “could” easily have opened his model in these respects. The objection would be compounded if the techniques of resource allocation were as scarce in his work as is commonly believed.
My position, however, is based upon a two‐fold demonstration: first, that Ricardo, on matters of fundamental import and not merely casually, himself released the two simplifying assumptions; and second, that he himself applied the principles of allocation—demand-supply analysis, profit rate equalization—to a wide variety of issues in a sophisticated way. Needless to say, he did not consider all the possible situations where a relaxation of the two key assumptions has profound consequences, or all those that require treatment in terms of allocation theory. But, to relax the assumptions and to apply the theory of resource allocation to a broader range of issues is to follow along a route laid out by Ricardo himself, using tools of analysis provided by Ricardo. It does not imply illegitimate transfer from one general model to another; nor, to be more specific, does it require our reading into Ricardo of a body of Marshallian theory that in reality is not there.
A further vital outcome of my analysis is that the profit rate in agriculture does not play the strategic role in the system envisaged in the various mathematical formulations of the Ricardian system outlined above. A number of illustrations reveal this key fact: technological improvement in the agricultural sector releases labor and capital for employment in other sectors, which are reabsorbed elsewhere with no alteration in their respective returns; the price of corn falls to the lower cost level and the return in agriculture (temporarily raised) comes back into line with the given general rate. Thus, despite a change in the “margin of cultivation,” the profit rate remains constant. Similarly, freer corn importation leaves the general profit rate unchanged despite a contraction of the domestic margin. The process involves a fall in the price of corn and the transfer of resources to the manufacturing sector with no effect on the general profit rate. Precisely the same argument holds for the case of a corn‐export subsidy; indeed, much of this analysis proceeded (for simplicity) on the assumption that agriculture is a constant cost industry, so that after expansion the corn price falls to the original cost level.
Now Ricardo certainly insisted that if the price of luxury goods (silks, velvets, etc.) rose there would be no effect on profits “for nothing can affect profits but a rise in wages; silks and velvets are not consumed by the labourer, and therefore cannot raise wages.” But this is a quite separate analytical issue. Ricardo himself tried hard to keep the issues separate. Thus, he recognized the possibility that technical change might reduce the cost and price of corn and yet leave “money” wages unaffected—in which case the profit rate remains unchanged (although the commodity wage rises). Similarly, an increase in the price of corn might leave the money wage unchanged with laborers reducing their consumption of other goods (in which case the profit rate is again unaffected). With such a wide variety of possibilities it is quite essential not to confuse the effects on the profit rate induced by a change in the margin of agriculture itself—and I argue there are none—and the effects of a change in the price of corn working upon the general profit rate by way of money wages. It is only the attribution to Ricardo of a fixed (real) wage assumption that precludes this essential distinction.
Ricardo vs. Walras’s Critique
We are also in a position to examine the validity of Léon Walras’s criticism of Ricardian procedure. Walras’s complaint, it will be recalled, was that the Ricardian system isunderdetermined, even if rents are excluded from selling prices and wage costs are assumed given. The equation relating selling price to the sum of wage and interest charges cannot determine price unless interest charges are known, while interest charges are themselves determined by the difference between the unknown selling price and wage costs. Dmitriev’s defense of Ricardo turned precisely upon the property that I have excluded, namely, that the general profit rate is yielded by that cost equation pertinent to the wage‐goods sector, independently of all the other equations (provided the real wage is given the system is a determinate one).
My defense of Ricardo against Walras’s charge runs along completely different lines. The simple point is that Walras failed to recognize the key role played by demand in the Ricardian system. Marshall was well aware of this characteristic and went out of his way to make the point in his defense of Ricardo against the strictures of Walras, W.S. Jevons, Carl Menger and others. Marshall, in fact, found Ricardo’s formulation preferable to that of Jevons, who “substitutes a catena of causes for mutual causation.” Ricardo’s doctrine “though unsystematic and open to many objections, seems to be more philosophic in principle and closer to the actual facts of life.” Unfortunately, “Jevons’s criticisms of Ricardo achieved some apparently unfair dialectical triumphs, by assuming that Ricardo thought of value as governed by cost of production without reference to demand”—a “misconception of Ricardo … doing great harm in 1872,” and one, we may add, still prevalent a century later.
In the light of these and related considerations it would appear that the contrasts between Ricardian and neo‐classical procedures are not such as to justify the notion of a “dual development” or two separate streams of nineteenth‐century thought. To say this is not, however, to suggest an identity of procedure and certainly not an identity of preoccupation. It is to suggest rather the sharing of a common heritage or “central core,” which amounts largely to allocation theory and mechanisms of demand‐supply analysis.
V.: Marx and Ricardo
I turn next to Marx. As noted above, the conception of a solution to distribution prior to pricing characterizes much of the literature relating to Marx. I believe that the same kind of argument that I have made against this interpretation in Ricardo’s case applies here also: the relationship between distribution and pricing that Marx had in mind was precisely that which characterizes standard Ricardian theory. And in Marx’s case too the erroneous interpretation flows both from the attribution to him of a fixed‐wage assumption and from a methodological complexity that almost precisely parallels that discussed above regarding Ricardian procedure.
The problem flows from the organization of Capital in terms of a sequence of volumes, the first based on the labor theory and the third based on prices of production—the famous “transformation” procedure—that suggests a solution to distribution in the “value” scheme priorto pricing. But Marx was concerned here, I would argue, with the “interpretation” of the source and nature of nonwage income and not with process analysis. The causal linkages of his system, particularly the distribution‐pricing nexus, turn out to be identical with those of Ricardo’s system. Specifically, the rate of surplus value or “exploitation” (which implies the wage rate) and the profit rate are both treated by Marx as variables (not as data in the analysis of pricing), whose levels are yielded as part of a general‐equilibrium solution. There is no way of ruling out the potential effect of changes in the pattern of demand for final goods upon the rate of surplus value and thus upon profits.
The rationale for Marx’s precise procedural exposition in Capital is of particular interest. In general terms, Marx operated on the methodological rule that “all science would be superfluous if the outward appearance and the essence of things directly coincided.” To have outlined orthodox analysis first would have been handing. hostage to fortune; the ground had to be safely prepared to assure that readers would not draw “erroneous” conclusions from observation of the characteristics of the competitive general‐equilibrium system. Marx had in mind primarily the source of profits. He isolated this source in surplus labor time—by which he implied that the capitalist had a “personally functionless role.” My main point is, however, that Marx in no way intended a causal dependency of the price scheme upon values.
There is indeed much in Capital regarding the potential consequences of changes in the pattern of final demands. But it would be unjustified to play down Marx’s profound conviction that:
‘the social demand,’ i.e., the factor which regulates the principle of demand, is essentially subject to the mutual relationship of the different classes and their respective economic position, notably therefore to, firstly, the ratio of total surplus‐value to wages, and secondly, to the relation of the various parts into which the surplus‐value is split up (profit, interest, ground‐rent, taxes, etc.)
That demand patterns were seen to be essentially governed by income distribution, Marx concluded, meant that “absolutely nothing can be explained by the relation of supply to demand before ascertaining the basis on which this relation rests.” The fact, however, that the primary determinants of tastes must be sought in the sphere of income distribution—which, in turn, is subject to constraints imposed by the social, political, and legal environment—in no way removes the necessity of appreciating how the capitalist system accommodates itself to disturbances, should they occur, in commodity or labor markets. To assume otherwise is to imply a totally sterile model. Marx never imposed upon himself so limited a frame of reference, for he did deal explicitly both with the effects of a change in the pattern of final demands (albeit in an incomplete analysis), and with those of a change in the wage rate. The following passage provides further evidence of a far greater degree of flexibility in Marx’s vision than is so often attributed to him:
It would seem, then, that there is on the side of demand a certain magnitude of definite social wants which require for their satisfaction a definite quantity of a commodity on the market. But quantitatively, the definite social wants are very elastic and changing. Their fixedness is only apparent. If the means of subsistence were cheaper, or money‐wages higher the labourers would buy more of them, and a greater social need would arise for them, leaving aside the paupers, etc., whose ‘demand’ is even below the narrowest limits of their physical wants … The limits within which the need for commodities in the market, the demand, differs quantitatively from the actual social need, naturally vary considerably for different commodities; what I mean is the difference between the demanded quantity of commodities and the quantity which would have been in demand at other money‐prices or other money or living conditions of the buyers.
VI.: Sraffa and Ricardo
Marx, on my reading, is a “Ricardian” theorist. By contrast, Sraffa is not. In Ricardo’s scheme, re‐establishment of an equilibrium system of relative prices following (for example) a variation in wages occurs by way of changes in output (allowing for the condition of equality between quantities demanded and supplied in commodity markets). In Sraffa’s model, by contrast, there is no process analysis: re‐establishment of equilibrium following a disturbance requires that the condition of profit‐rate equality be satisfied, but nothing is said about the mechanism of adjustment; indeed, marginal adjustments are positively ruled out. The condition is, as it were, simply a mathematical prerequisite. Sraffa, unlike Ricardo, thus turned his back on Smithian process analysis. According to process analysis, re‐establishment of equilibrium entails reactions by capitalists to profit‐rate differentials, and they are manifested in expansions or contractions of the various industries.
We come now to a further fundamental difference between the two structures. Sraffa does not provide a theory of distribution; one of the distributive variables must be given exogenously. However, a brief hint of great interest is given as to the most promising mode of procedure:
The choice of the wage as the independent variable in the preliminary stages [of Sraffa’s work] was due to its being there regarded as consisting of specified necessaries determined by the physiological or social conditions which are independent of prices or the rate of profits. But as soon as the possibility of variations in the division of the product is admitted, this consideration loses much of its force. And when the wage is to be regarded as ‘given’ in terms of a more or less abstract standard, and does not acquire a definite meaning until the prices of commodities are determined, the position is reversed. The rate of profits, as a ratio, has a significance which is independent of any prices, and can well be ‘given’ before the prices are fixed. It is accordingly susceptible of being determined from outside the system of production, in particular by the level of the money rates of interest.
Now, this whole problem does not arise in Ricardo’s theory for neither the profit rate nor the wage rate appear as data of his analysis. The wage rate is a variable determined by the general system of demand and supply relationships in the labor market, while the profit rate is merely aformal residual, since there exists a mutual dependency of the one upon the other. In short, Ricardo’s model involves the use of something akin to the equilibrium conception of marginalist theory in the context of distribution. This is clearly implied in Ricardo’s following statement:
I should think it of little importance whether the profits of stock or the wages of labour, were taxed. By taxing the profits of stock, you would probably alter the rate at which the funds for the maintenance of labour increase, and wages would be disproportioned to the state of that fund, by being too high. By taxing wages, the reward paid to the labourer would also be disproportioned to the state of that fund, by being too low. In the one case, by a fall, and in the other by a rise of money wages, the natural equilibrium between profits and wages would be restored.
I conclude that Sraffian theory stands apart from the Ricardian tradition.
VII.: The Longevity of Ricardianism
A careful study of the reception of Ricardo’s theorem on distribution shows that a firm and positive impression was left on the work of a number of authors normally regarded as “dissenters”par excellence—including T.R. Malthus, Samuel Bailey, Robert Torrens and Mountifort Longfield. This was the case despite their frequent formal criticisms of Ricardo and his followers and their declared objective to break new ground, or at least to refute the merit of Ricardo’s divergencies from the Wealth of Nations. It is also clear that the current practice of minimizing the adherence of J.R. McCulloch, J.S. Mill and Thomas De Quincey to Ricardianism—placing them in Smith’s camp as far as concerns the theory of value and distribution—is unjustified.
On the whole, the quality of the dissenting literature is disappointing. Much of the work reflects nothing but an unwillingness or inability torecognize different possible meanings of a word when used by different writers, or by the same writer in different contexts. The literature is also replete with sham controversy regarding the “cause” of various phenomena such as rent and values. This reflects, in turn, a failure to distinguish between the data and the variables of a model, and between interdependent, atemporal and nonsequential models and temporal, sequential models.
If substantive matters relating to the fundamental theorem on distribution and its foundation in value theory are isolated, it then becomes clear that there was no rapid decline in Ricardo’s authority. His revisions of Smithian theory constituted by and large a “success” in terms of acceptance by his immediate successors. These conclusions regarding the longevity of the basic Ricardian theory will appear less surprising than on a first view if we bear in mind that the relativity dimension of value—reflecting the mechanisms of allocative adjustment—played a key role in Ricardian procedure. Ricardo was attempting to correct Smith on the latter’s home ground.
My investigation of the reception of Ricardian theory also suggests that many of the contributions of the dissenters would not have been considered objectionable by Ricardo. In many important instances the post‐Ricardian critics simply misinterpreted Ricardo. Malthus believed, quite erroneously, that Ricardo maintained his cost theory of exchange value as an alternative to demand‐supply theory, and that he had rejected Smith’s demand‐supply treatment of the labor market. Both Malthus and Longfield asserted, without justification, that in Ricardo’s system rising capital with population unchanged leaves the profit rate unaffected—that the only cause of falling profits was resort to inferior land. In his famous critique Samuel Bailey made the outrageous charge that Ricardo failed to appreciate the relativity dimension of exchange value. Nassau Senior’s objection to Ricardo (adopted also by Bailey and T.P. Thompson)—that to say “it is the price of[the] last portion of corn, which governs that of the remainder, is to mistake the effect for the cause”—and his adoption, as an alternative, of a demand‐supply or “monopoly” explanation, fall into the same category. The fact is that the Ricardians—and to a considerable degree Ricardo himself confirms the point—anticipated much of the substantive argument of the “critics.”
That the Ricardians—even Ricardo himself in the earlier cases—were able to see eye to eye with much of the apparently critical work on value by “dissenters” can be easily accounted for. Ricardo did not envisage his cost of production theory as an alternative to supply‐demand analysis. On the other hand, the majority of “dissenters” continued to emphasize the cost determination of price. This is true of Bailey and Longfield, both of whom spoke of production costs as the main consideration in price determination. Longfield’s analysis of changes in relative prices emphasized, as did Ricardo, variations of the labor input; and here too was seen to lie the justification of a labor measure.
What, however, of W.F. Lloyd’s famous contribution to marginal utility? In this context the recent researches of Dr. Marian Bowley are particularly pertinent. As she puts the matter, “no revolutionary significance” was attached to discussions of the law of diminishing marginal utility and related conceptions. Moreover, “these contributions did not affect the main classical conclusions as to the nature of market and natural prices and their determination.” This is quite convincing. While Ricardo’s main interests lay in long‐run price determination, his economics hinged upon the operation of the competitive mechanism involving demand‐supply analysis. His rejection of demand‐supply theory did not apply to the particular version elaborated by Longfield, and Longfield himself appreciated Ricardo’s objections to the “indefinite” and “vague” expression “proportion between the demand and supply” as unhelpful in the prediction of market price. Furthermore, Lloyd’s analysis of marginal utility is not inconsistent with a cost or even a labor theory, and was not so envisaged by Lloyd himself: “if labour becomes more effective, so that commodities of all kinds shall be produced in a degree of abundance greater in proportion to the wants of mankind, all sorts of commodities, though exchangeable in the same proportions as before for each other, could be said to have become less valuable.” This statement is quite consistent with a cost or labor theory of exchange value.
To what extent may the conception of interest as a return to “abstinence” developed by G.P. Scrope, Samuel Read and Nassau Senior be interpreted as a sharp break with Ricardian procedures? To what extent would Ricardo have objected to an analysis of the precise nature of the savings supply function? The conception in Ricardo’s work of profits as residual is, I believe, little more than a formal consequence of the implicit presumption that the only contractual payment is that made to labor. There can be no doubt that Ricardo recognized the necessity of interest in the limiting case. More importantly, he took into account the effect of a declining profit rate on accumulation. It is true that he gave no name to the effect, but it is by no means certain that he would have objected to the investigation of the time preference notion that the so‐called “dissenters” insisted upon. John Stuart Mill found no difficulty in subscribing at one and the same time to the inverse wage‐profit relationship and to the abstinence conception.
It is true that as one illustration of what he called Mill’s “eclectic syncretism” Marx referred to the fact that Mill “accepts on the one hand Ricardo’s theory of profit, and annexes on the other Senior’s ‘remuneration of abstinence.’ He is as much at home in absurd contraditions as he feels at sea in the Hegelian contradiction, the source of all dialectic.” But there does not appear to be good reason in logic to avoid the simultaneous adoption of a concept of profit envisaged as a formal residual arising from surplus labor time, and the abstinence theory; the one is the basis for investment demand, while the other relates to capital‐supply conditions and contributes therefore to the actual determination of surplus labor time. Marx did not succeed in his fundamental objective to demonstrate, by his preliminary formulation in Capital of a value structure, that the capitalist has a personally functionless role.
What, finally, of the widespread application of market demand‐supply analysis to long‐run wage determination, as for example by Malthus, Longfield, Torrens, Read, Scrope and Senior? Here, too, there occurred no break‐away. The story would be a different one were it the case, as is apparently quite generally believed, that the subsistence wage played a key role in Ricardo’s work, not only in the context of his growth model but also in basic applications such as wage taxation. But this is far from an accurate perspective. Ricardo’s model was a growth model in the true sense—with wages and profits above their respective minima, which become relevant only in the stationary state.
VIII.: The Marxian Interpretation of the Dissension: A Critical View
It was Marx’s position, as we have mentioned, that while the labor writers of the 1820s drew upon Ricardo’s value theory to reach their conclusion regarding labor’s right to the whole produce, they rejected these elements of the Ricardian structure that allowed a positive role to capital. Now, the record suggests that the first part of the argument—at least as far as concerns the works of Piercy Ravenstone, William Thompson and Thomas Hodgskin (the best known of the labor writers of the decade in question)—cannot be substantiated at all: they made no use whatever of Ricardo’s labor theory. Hodgskin (unlike the others) did, however, use other aspects of the doctrine—the inverse profit‐wage relation, the subsistence wage and the differential rent conception. But his usage, it can be shown, was an ironical one; he himself was unconvinced by their merit. There is more to the second strand to Marx’s case—the socialist critique of the positive role attributed to capital by Ricardo. Yet Marx understates the strength of the “socialist” objections. The fact is that it is difficult to imagine a stronger critic of Ricardianism than Hodgskin. He condemned it as an apologia for the institutional status quo—a defense of the capitalist as well as landlord. He read it as a justification for the contemporary distribution of income; and on his reading, it failed to bring to light class conflicts. Last, he rejected its pessimistic underpinnings even as characteristic of contemporary society. Hodgskin’s opposition is quite evident despite the formal use that he made on occasion of aspects of Ricardian theory.
The vehement anti‐Ricardianism of the labor writers—particularly Hodgskin—makes it very difficult to believe that the dissenters could have reacted against a dangerous use of the orthodox doctrine for socialistic ends. We must not, of course, entirely rely upon circumstantial evidence, particularly in the light of passages that, taken in isolation, indicate a dependence on certain Ricardian conceptions (though positively not Ricardian value theory). It is always possible that the dissenters failed to recognize the hostility towards Ricardian doctrine on the part of the labor writers. I can, however, find no evidence that any link was defined such as that specified by the Marxian historians. The position that labor is responsible for all wealth was attributed by Samuel Read to Ricardo, Smith and Hodgskin. But, while Smith was treated less harshly than either Hodgskin or Ricardo, no relationship whatsoever is drawn between the latter two, who are treated apart. G. Poullet Scrope included Malthus in his list of culprits as well as Smith, Ricardo, and Hodgskin. Richard Whately directed his critical attention at McCulloch and James Mill for their reduction of capital to accumulated labor and their opinion that “time is a mere word,” but neither he nor Scrope linked the socialists with Ricardian theory. Mountifort Longfield, who also alluded to Hodgskin, also does not suggest any such connection. To the extent that the dissenters believed that Ricardo’s analysis of value (particularly as interpreted by McCulloch and James Mill) justified the notion of interest as an “exploitation” income, their objections did not follow from any dangerous use that they believed the socialists were making of the theory.
The notion of class hostility providing a handle for the anarchists, supposedly engendered by Ricardo’s theory, was, however, a central complaint of one of the most faithful of Ricardo’s followers—Thomas De Quincey. Writing in the Logic of Political Economy, not of value theory or the inverse wage‐profit theorem, but of Ricardo’s minimization of technological progress and the consequent emphasis upon continuously rising rent, De Quincey complained:
And it happens (though certainly not with any intentional sanction from so upright a man as David Ricardo) that in no instance has the policy of gloomy disorganising Jacobinism, fitfully reviving from age to age, received any essential aid from science, excepting in this one painful corollary from Ricardo’s triad of chapters on Rent, Profit and Wages … . The class of landlords, they urge, is the merest realisation of a scriptural idea—unjust men reaping where they have not sown. They prosper … by the ruin of the fraternal classes associated with themselves on the land … . The noblest order of men amongst us, our landed aristocracy, is treated as the essential scourge of all orders beside.
The supposed connection did not lead De Quincey to seek for an alternative structure.
I come now to a feature of the record that on first sight may seem an extraordinary paradox. Scrope—the first of the abstinence writers—was fundamentally opposed to Ricardianism because that doctrine, he believed, lent itself to social apologetics and this, in part, because of its neglect of the implications of income distribution for social welfare. (The same can be said of Read.) Scrope, in short, was a reformer who saw in orthodox doctrine a rock upon which proposals for social improvement must inevitably be destroyed. The parallels between Scrope and William Thompson, in their attitudes to Ricardo, are quite remarkable. Longfield, too, adopted for his time an exceptionally progressive position. To this extent Marx’s interpretation seems to be the exact reverse of the actual course of events.
My reading also has clear implications for an interpretation of the bourgeois dissent that is subtly different from that which turned on the use made of Ricardo’s theory by the labor writers. It is the argument, sometimes offered as an alternative and sometimes as an additional consideration, that the bourgeois economists found the Ricardian doctrine unable to serve as a convincing reply to the labor writers. As Meek formulated the proposition: Scrope, Read and Longfield “tended towards the idea that if a doctrine ‘inculcated pernicious principles,’ if it denied that wealth under free competition was consigned to its ‘proper’ owners, or if it could be so interpreted as to impugn the motives or capacity of the Almighty, then that doctrine must necessarily be false.” Now, in considering this matter we must ask to what end did the dissenters seek to reply to the labor writers? It was positively not to the end of justifying contemporary capitalism, as is implied by the hypothesis. Provided that this fundamental correction of the record is recognized, we may allow that several major dissenters expressed their dissatisfaction with specific aspects of Ricardianism, in particular, with its supposed implications regarding class conflict and its supposed “pessimism.”
The record is a complex one indeed. We must make allowance for the fact that Longfield cannot be classified as a thoroughgoing opponent of Ricardo. He retained enough of the Ricardian framework for it to be more accurate to say that he actually used the orthodox doctrine in making his reply to the radicals; and this he did partly by interpreting it in a manner that avoided the criticism that it portrayed a picture of class warfare, and partly by his analytical innovations.
James Mill should also be kept in mind. His loyalty to Ricardo has never been questioned, but his hysterical response to Hodgskin was sharper than that of any of the dissenters. Mill evidently did not believe that the standard Ricardian position failed to provide an adequate response to the radical challenge; and he saw nothing in that position—even in the labor theory as interpreted by himself—that served the purposes of the socialists. The episode in question commences with Mill’s complaint to Francis Place about a working‐class deputation to the editor of the Morning Chronicle:
Their notions about property look ugly; they not only desire that it should have nothing to do with representation, which is true, though not a truth for the present time, as they ought to see, but they seem to think that it should not exist, and that the existence of it is an evil to them. Rascals, I have no doubt, are at work among them … . The fools, not to see that what they madly desire would be such a calamity to them as no hands but their own could bring upon them.
It was Hodgskin’s Labour Defended, Place explained to Mill, which the laborers were preaching. In the following year Mill informed Brougham:
The nonsense to which your Lordship alludes about the rights of the labourer to the whole produce of the country, wages, profits and rent, all included, is the mad nonsense of our friend Hodgskin which he has published as a system, and propagates with the zeal of perfect fanaticism … . These opinions, if they were to spread, would be the subversion of civilized society; worse than the revolutionary deluge of Huns and Tartars.
Clearly there is no self‐evident relationship between a body of economic theory and the social attitudes of the economist subscribing to it. All the evidence so far presented points to this conclusion. I close my argument by observing that the existence of positive contributions to theory on the part of some of the labor writers carries the same implication. This is very apparent in Thompson’s case. His discussion of value involves an impressive number of “non‐Ricardian” features. For example, the conceptions of differential land use, alternative cost, and scarcity value are discussed. He defines and uses the principle of diminishing marginal utility together with the principle of increasing marginal disutility of effort, in an attempt to define an equilibrium wage rate. It is also used in calculating the efforts of income redistribution. The significance of free exchange is clearly expressed in utility terms: “All voluntary exchanges of the articles of wealth, implying a preference, on both sides, of the things received to the thing given, tend to increase the happiness from wealth, and thence to increase the motives to its production.” While labor is said to be the sole measure of value, it is not an accurate measure in the light of changes in preference patterns over time. This leads Thompson to conclude that to seek an accurate measure of wealth is “to hunt after a shadow”—as clear‐cut a criticism as any by Bailey. In Hodgskin’s case, what stands out is his emphasis upon synchronized activity. In an Economist review of 1854, this is elaborated in terms of the mutual exchange of valuable services. These conceptions, when found in the dissenting literature, are often seen as indicating, in some sense, an apologetic justification of free‐enterprise capitalism.