Ricardo Introduction to Ricardo - The New View (1995) Notes References

It's An Ill Wind Afterword: A Memoir Continued


[i].    For this purpose the 'exclusion' of rent from marginal costs by the differential-rent theory applied to land was crucial, a procedure that would be questionable in the case of multi-use land though, I believe, otherwise justifiable (see Chapter 12). In several of my papers, I have maintained that Ricardo appreciated the distinction (see Chapters 9, 10). I now think this goes too far; he on occasion extended the principle to the multi-use case (see 1951, I, 250; II, 70-1).

[ii].    See R.D.C. Black (1984). This paper is a model of fair-minded criticism.

[iii].   I myself once taught the 'old view'. Sir John Hicks was seduced away from the fix-wage interpretations (see the exchange between J.H. and S.H. prefacing Hicks and Hollander 1977). And the reviewer of Classical Economics for History of Political Economy recounts his personal odyssey (Young 1991).

[iv].    My list would include inter alia Carlo Casarosa, David Levy, Pier Luigi Porta, S.C. Rankin, Lord Robbins, P.A. Samuelson, G.L.S. Tucker, and Jacob Viner. And, of course, there is Alfred Marshall. I also might remind readers of at least two other commentators who have stated the so-called 'continuity thesis' much more strongly than I have done: 'economics has never had a major revolution: its basic maximizing model has never been replaced. Whether this is good or bad (and the fact is the despair of some), it is, I think, remarkable when compared to the physical sciences that an economist's fundamental way of viewing the world has remained unchanged since the eighteenth century' (Gordon 1965, 124); 'economics may be regarded as more "uniformitarian" than the natural sciences, for despite persistent and often penetrating criticism by a stream of heterodox writers ... it has been dominated throughout its history by a single paradigm - the theory of economic equilibrium via the market mechanism' (Coats 1969, 292).

[v].    The presence in Malthus's writings of both concepts repeats the confused picture of 1776 with the major difference that the notion of agricultural surplus contributed towards Malthus's support for agricultural protection - as it had led the French to recommend free trade in agricultural products when France was a net corn exporter - whereas Smith never went that far.

[vi].    A third instance of 'misrepresentation' that sorely troubled Ricardo relates to his chapter 'On Gross and Net Revenue'. Malthus read this chapter as arguing that a national advantage resulted from obtaining a given net income with a lower work force notwithstanding a massive loss of employment. Ricardo protested that his sole objective was to argue that no national advantage flowed from generating a given net revenue by means of seven rather than five million men, having in mind specifically the magnitude of net revenue with an eye to national 'power': 'The employing a greater number of men would enable us neither to add a man to our army and navy, nor to contribute one guinea more in taxes' (1951, II, 381). He had no intention of recommending a policy involving actual creation of massive unemployment.

[vii].   Comparing James Mill's Elements with Ricardo's Principles, McCulloch rightly pointed out that what is valid procedure in the one case may be invalid in the other:

This work, by the distinguished author of the History of British India is a résumé of the doctrines of Smith and of Ricardo with respect to the production and distribution of wealth, and of those of Malthus with respect to population. But it is of too abstract a character to be either popular or of much utility. Those secondary principles and modifying circumstances, which exert so powerful an influence over general principles, are wholly, or almost wholly, overlooked by Mill. But though their consideration might be omitted in an original work like that of Ricardo, it is not so easily excused in an elementary treatise (1845, 17).

[viii].  Blaug cites these words with utter rapture (1993, 2). But I do not take this commendation from the author of Economic Theory in Retrospect seriously. Almost at random I pick out from that work the following interpretation of Smith's Book 1, Chapter vii on price formation:

It will be noticed that Smith thinks of demand and supply as referring to people's willingness to buy or sell at a particular price rather than at all possible prices; the former is expressed in actual amounts desired or offered, the latter in a schedule of amounts, each corresponding to a different price. Still, the whole of the passage given above has no real meaning unless demand at any rate is interpreted in the sense of a schedule, and a negatively inclined schedule at that. Here and elsewhere Smith intuitively gropes his way toward the right answer (1985, 43).

[ix].    If one wishes to call this 'Whig history' (Samuelson 1988, 1991) there is no harm, since Whig history - if done responsibly - does not read into the record what is not there, but seeks to provide criteria for evaluation. But the Whig historian can go too far. For example, Samuelson: 'If land is unaugmentable and permanent, and labor supply is procurable at a subsistence wage, then there is a genuine sense in which Quesnay's Produit Net (and Ricardo's Neat Product) is equal to Georgian land rent: the rest of national Gross Product is the wage fodder of labor' (1988, 164). This is a valid insight as a positive statement regarding analysis; but it is not Quesnay. I touch on the contrast between 'rational' and 'historical' reconstruction.

[x].    See Schumpeter on Turgot's Reflections as 'first of all the treatises on Value and Distribution that were to become so popular in the later decades of the nineteenth century' (1954, 249). This opinion is confirmed by Groenewegen (1970) with parallels drawn between Turgot's reasoning and that of Walras and Wicksell in the development of exchange models. Groenewegen is apparently ashamed of the sins of his youth. For he makes no mention of this paper in his contribution to the New Palgrave, where he rejects Schumpeter's view that Turgot anticipated much of what became important after the 'marginal revolution', claiming to the contrary that Turgot is 'firmly in the classical tradition rehabilitated by Sraffa' (1987, 711). This is questionable, considering Turgot's explicit account of the principle of competition assuring that market prices tend to cost prices via the adjustments of supplies (Reflections, Section LXXXVIII). Smithian and Ricardian, yes; Sraffian, no. Groenewegen himself points out that Turgot's value theory 'rested on a relationship between current (market) price and fundamental value dependent on competition and resource mobility', which relationship is characteristically non- or anti-Sraffa.

[xi].    I am delighted that Paul Samuelson comes to the defence of my position, which 'has been lampooned rather than praised for seeing supply and demand mechanisms everywhere in the classical writers. Even Mark Blaug ... writes of Hollander as making Smith into more of a Léon Walras than a Ricardo, which I deem not to be a reductio ad absurdam, but rather a merited compliment for Smith' (1992, 5). I note the unfortunate implication here that Ricardo, for Samuelson, is not in the Smithian tradition with respect to general equilibrium; but there is also his compensatory observation that '[e]ven before the 1951 and 1960 eruption into print of Sraffa, my reading of every one of the classical masters found in them an earlier and more primitive version of the Walras-Marshall-Wicksell system' (5-6; emphasis added).

Powerful new evidence for Adam Smith as anticipator of general-equilibrium modelling will be found in West, 1994.

[xii].   Some commentators have just given up and concluded that Ricardo is so riddled with 'startling inconsistencies' that he is not susceptible to coherent formulation on value or distribution (Peach 1993, xii).