"Economics and Ideology: Aspects of the Post-Ricardian Literature"
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*39 and related researches.
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 only rationale 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.*40 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.
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."*41 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).*42 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).*43 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.
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,*44 was that the Ricardian system is underdetermined, 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."*45 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,"*46 and one, we may add, still prevalent a century later.*47
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.*48 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.
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 prior to 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."*49 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."*50 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."*51 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.*52
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.*53
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 a formal 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.*54
I conclude that Sraffian theory stands apart from the Ricardian tradition.
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.*55 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.*56 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.*57 In his famous critique Samuel Bailey made the outrageous charge that Ricardo failed to appreciate the relativity dimension of exchange value.*58 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.*59 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?*60 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."*61 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.*62 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."*63 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?*64 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."*65 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.
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.*66 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.*67 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.*68
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.*69 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."*70 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."*71
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.*72
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.*73
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.*74 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."*75 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"*76—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.*77 These conceptions, when found in the dissenting literature, are often seen as indicating, in some sense, an apologetic justification of free-enterprise capitalism.
Notes for this chapter
S. Hollander, The Economics of David Ricardo.
On this matter see John Hicks and S. Hollander, "Mr. Ricardo and the Moderns," Quarterly Journal of Economics 91 (August 1977):351-69.
Ricardo, Works and Correspondence, I, p.118 (Sraffa ed.).
Ricardo, Works, II, p. 179 (Sraffa ed.). See also I, p. 388, p. 392, and Ricardo's letter to Malthus of 11 October 1816 (Sraffa ed.) VII, 78: "... it is probable"—not certain—"that with facility of production, or cheap food and necessaries, profits would rise."
Ricardo, Works, I, p. 343. (Sraffa ed.) See also pp. 305-6: "the money wages of labour sometimes do not rise at all, and never rise in proportion to the rise in the money price of corn, which though an important part, is only a part of the consumption of the labourer."
See Section I and note 18 above.
A. Marshall, Principles of Economics, pp. 818-9. According to Jevons, "Cost determines supply; Supply determines final degree of utility; Final degree of utility determines value." Theory of Political Economy, p. 165.
Marshall, Principles, p. 821n. See also Marshall, p. xxxiii regarding Ricardo's doctrine which ("though obscurely expressed") "anticipated more of the modern doctrine of the relations between cost, utility and value, than has been recognized by Jevons and some other critics." See too Marshall, p. 101n. regarding Walras: "His success was aided even by his faults. For under the honest belief that Ricardo and his followers had rendered their account of the causes that determine value hopelessly wrong by omitting to lay stress on the law of satiable wants, he led many to think he was correcting great errors; whereas he was really only adding very important explanations."
But see H.M. Robertson, "The Ricardo Problem," South African Journal of Economics 25 (September 1957): esp. pp. 179f.
Cf. also a similar conclusion by Mark Blaug, "Kuhn Versus Lakatos, or Paradigms versus Research Programmes in the History of Economics," History of Political Economy 7 (Winter 1975):416-7.
Marx, Capital, III, p. 797.
A felicitous term by Thomas Sowell, "Marx's Capital After One Hundred Years" Canadian Journal of Economics and Political Science 33 (February 1967):71.
Marx, Capital, III, p. 178. Cf. also Capital, p. 191: "... it requires an insight into the over-all structure of the capitalist production process for an understanding of the supply and demand created among themselves by producers as such."
Marx, Capital, pp. 184-5.
Sraffa, Production of Commodities, p. 33.
Ricardo, Works and Correspondence, I, p. 226 [Sraffa's ed., (my emphasis)].
See my article, S. Hollander, "The Reception of Ricardian Economics," Oxford Economic Papers 20 (July 1977):221-57.
See, for this terminological usage, George J. Stigler, "The Successes and Failures of Professor Smith," Journal of Political Economy 84 (November 1976):1199-1213. It should be emphasized that we have been concerned with "success" insofar as concerns "professionals" in economics rather than simply "educated gentlemen." For evidence that M.P.s frequently rejected the idea of a necessary opposition between wages and profits see Barry Gordon, Political Economy in Parliament, 1819-1823. There is a further problem here that the inverse wage-profit relationship as interpreted by Ricardo does not represent a necessary opposition between labor and capital; allowance must be made for misinterpretation.
Malthus, Principles of Political Economy, 1st ed. (1820), 2nd ed. (1836); on Longfield, see his Lectures on Political Economy (1834) in The Economic Writings of Mountifort Longfield (New York, 1971).
S. Bailey, A Critical Dissertation on the Nature, Measure and Causes of Value (London, 1825).
Nassau W. Senior, "Report on the State of Agriculture," Quarterly Review 25, no. 50 (July 1821); T. Perronet Thompson, The True Theory of Rent in Opposition to Mr. Ricardo and Others (London, 1826), 9th edition (1832).
W.F. Lloyd, A Lecture on the Notion of Value (London, 1834).
M. Bowley, "The Predecessors of Jevons: The Revolution that Wasn't," The Manchester School 40 (March 1972):27.
M. Longfield, Lectures on Political Economy, p. 247.
M. Longfield, Lecture on the Notion of Value, p. 28.
G. Poulett Scrope, "The Political Economists," Quarterly Review 44, No. 87 (Jan. 1831); and Principles of Political Economy derived from the Natural Laws of Social Welfare (London, 1833). Samuel Read, Political Economy: An Inquiry into the Natural Grounds of a Right to Vendible Property or Wealth (Edinburgh, 1829); Nassau Senior, An Outline of the Science of Political Economy (London, 1836).
Marx, Capital, I, p. 596n.
Cf. the evidence presented by Professor P.H. Douglas which demonstrates that the impetus to early nineteenth-century British socialism deriving from the conception of profits and rent as "deductions from the whole produce of labour" came from the writings of Adam Smith rather than those of Ricardo. "Smith's Theory of Value and Distribution," in J.M. Clark, Adam Smith, 1776-1926, p. 95f.
A similar account is given by Mark Blaug, Ricardian Economics, p. 148; but see Blaug, p. 143. "Unlike Gray and Thompson, who show no signs of having read Ricardo, Hodgskin derived his exploitation theory of profit directly from Ricardo's version of the profit labour theory of value."
In her well-known monograph on the subject Esther Lowenthal questioned the legitimacy of the designation "Ricardian" socialism: "although... the socialist use of the labour theory followed hard on the publication of Ricardo's Principles, there is no evidence that the socialists were particularly impressed by his teachings. They, all of them, quote Adam Smith as their authority for the labor theory of value... and only Hodgskin betrays an intimate knowledge of [Ricardo's] work." (The Ricardian Socialists, p. 103). But Ms. Lowenthal also asserts that Hodgskin attacks the claims of capital on the basis of the labor theory of value and "bases very explicitly on Ricardo's system of economics" his position that "since labour produces all value, labour should obtain all value." (Lowenthal, pp. 73, 74-5).
See also Schumpeter, History of Economic Analysis, p. 479, regarding the notion that labor is the only factor of production: "Though this proposition harks back to Locke and Smith and not to Ricardo, it is likely that the Ricardian theory of value did encourage these socialist writers and also offered suggestions to them."
For a position close to my own see T.W. Hutchison, On Revolution and Progress in Economic Knowledge, p. 240f. While Professor E.K. Hunt has recently demonstrated Hodgskin's reaction against Ricardian value theory, he nonetheless accepts Meek's general position regarding the motive for the bourgeois reaction on the grounds that "most of Hodgskin's contemporaries... were quick to recognize that Ricardo's labour theory of value led quite naturally to Hodgskin's theory of capital. And this undoubtedly contributed to the conservative reaction of the 1820's against Ricardo's value theory." See E.K. Hunt, "Value Theory in the Writings of the Classical Economists, Thomas Hodgskin, and Karl Marx," History of Political Ecoiomy 9 (Fall 1977):345.
Thomas De Quincey, The Logic of Political Economy (1844) in David Masson ed. Political Economy and Politics, pp. 250-1. J.S. Mill, in his review (Collected Works of J.S. Mill, IV, pp. 403-4) complained of De Quincey's "ultra-Tory prejudices which deformed his work, and which were particularly regretable since he was so sound on economic theory." Mill had in mind largely De Quincey's support for the corn laws.
By contrast "the practical outcome of Hodgskin's inquiry seems tame, and, as often happens with anarchist essays hardly in keeping with the pretensions of the critical part of the work." Foxwell, in his "Introduction" to Anton Menger, The Right to the Whole Produce of Labour, p. lxiv. On the nature of Hodgskin's own reform program—more precisely its absence—see also Halévy, Thomas Hodgskin, pp. 125-6.
Meek, Economics and Ideology, p. 71. See also Mark Blaug, Ricardian Economics, p. 149; L.S. Moss, "Isaac Butt and The Early Development of the Marginal Utility Theory of Imputation," History of Political Economy 5 (Fall 1973):325; and M. Dobb, Theories of Value and Distribution Since Adam Smith, p. 110.
The economists sometimes had to prove their moral and religious bona fides and reconcile economics with Christianity to gain entry into the universities. See L.S. Moss, Mountifort Longfield: Ireland's First Professor of Political Economy, pp. 14-5. Also see S.G. Checkland, "The Advent of Academic Economics in England," The Manchester School of Economic and Social Studies (January 1951):52. But, it should be noted that the labor writers expressed themselves in much the same language. Rejecting the Malthusian principle, Hodgskin proclaimed that "moral feelings and scientific truth must always be in harmony with each other," Popular Political Economy, (London, 1827), pp. xxi-xxii. Hodgskin's book ends on the same theme: "... the science of Political Economy" will be found when perfectly known to "Justify the ways of God to man."
James Mill's Letter of 25 October, 1831 cited by Graham Wallas, The Life of Francis Place, p. 274n.
James Mill's Letter of September 3, 1832, also in Wallas.
William Thompson, Distribution of Wealth, pp. 71-3.
Thompson, p. 45
Thompson, p. 15.
Hodgskin, The Economist 12 (18 November 1854):1270.
End of Notes
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