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The Decline of Ricardian Economics in England

Author(s): Ronald L. Meek
Reviewed work(s):
Source: Economica, New Series, Vol. 17, No. 65 (Feb., 1950), pp. 43-62
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19501
The Decline of
Ricardian Economics in England
By
RONALD L. MEEK
Much damage has been done to the study of the history
of economic thought in this country by the general adoption
of what may be called a teleological approach to the work
of the Classical economists. Modern historians too often
tend to be. interested not so much in investigating the
particular problems which their predecessors believed to
be important and the reasons which motivated them in
their choice of weapons to attack these problems, as in
tracing the genealogies of modern theories and supplying
them with respectable pedigrees. We seem to find it extra-
ordinarily difficult to escape for a moment from contem-
porary prepossessions and problems and to imagine an age
in which a number of the basic questions at
issue,
and even
the " economic problem. " itself, were different from those
of our own time. We sometimes tend to suggest, for example,
that the absence from the Classical system of some particular
doctrine which we to-day regard as vitally important must
necessarily have hindered that system from performing
the tasks which it set out to perform; and even more often
we imply that if such a doctrine does appear in the Classical
system it must necessarily have assumned the same degree of
importance in that context as it does in its present one.
We visualise economic
theory,
in other words, as evolving
almost purposively towards its present state. This article,
which criticises certain modern accounts of the development
of " Ricardian " doctrines in England, is intended priinarily
as a criticism of the teleological approach which lies behind
these accounts.
Most historians of economic thought have laid considerable
stress on the tlheoretical innovations of the 1870s Os marking
the real dividing line between Classical political economy
and modern economics, and have tended to treat the pioneer
work of the amazing decade following Ricardo's death as
little more than a flash in the pan. Even Professor Seligman
43
44 ECONOMICA [FEBRUARY
seems to have believed that this work had very little influence
upon the intellectual climate of the time1; and Miss Bowley,
who has recently called so emphatically for a revision of the
traditional interpretation of the period, still appears to
maintain that an " orthodox Ricardian
"
school flourished
in England from the death of Ricardo to the time of J. S.
Mill's recantation of the wages-fund doctrine-even if another
more heterodox line of economists was at the same time
engaged in research in different directions.2 Even when it
is not suggested that
"
Ricardianism
"
was successful in
conquering the whole of the
territory,
it is usually implied
that its victory was complete in those areas where it did
conquer. It is agreed that certain " modern
"
concepts were
formulated by a few economists before the I870s, but it is
generally denied that they exercised any significant influence
on the pure
"
Ricardian" strain until the time of the
Mengerian revolution.
Since the publication of the General Theory, with its
suggestive redefinition of "Classical"
economics,
a new
basis for the interpretation of the post-Ricardian period
has been discovered. Early in the General Theory, it will
be remembered, Keynes comments upon the disappearance
of the "
great puzzle of Effective Demand " from economic
literature after Ricardo's time.
" The completeness of the
Ricardian victory", Keynes writes, "is something of a
curiosity and a mystery ". The well-known remarks which
follow this statement were presumably intended to refer
specifically to Say's Law rather than to the Ricardian
system as a whole, but there is no doubt that Keynes regarded
Say's Law as
"
fundamental to the Ricardian economics ",
as the very essence and basis of the Ricardian system.3 From
Keynes's point of view, the great
divide between Classical
and contemporary economics occurred not in the
1870s,
but in I936.
This identification of Ricardian economics with
Say's
Law was a useful and striking pedagogical
device. It was
designed to emphasise the most significant
feature of
Keynes's
own contribution, and it succeeded admirably
in its
purpose.
But to use it, as Mr. Checkland has
recently done,4
as the
basis for a re-interpretation of the
early post-Ricardian
I
"On Some Neglected British Economists ", Economic Journal, 1903, pp.
534-535.
2
Nassau Senior and Classical Economics,
1937,
passim.
3 General Theory, Ppp 32-33 and footnote to p. 3.
4
" The Propagation of Ricardian Economics in England ", Economnica, February 1949.
1950] THE DECLINE OF RICARDIAN ECONOMICS 45
period, is surely an example of the teleological approach
at its most extreme. Mr. Checkland assumes without
question that Say's Law was in fact " the basic premise of
the New School " and proceeds to discuss the propagation
and ultimate victory of the doctrines of the school in terms
of the tactical and strategic advantages enjoyed by those
who believed in the truth of Say's Law. If Mr. Checkland
had been concerned only to account for the early victory
of Say's Law over Malthus's underconsumptionist doctrine
there might have been much less to complain of in his article,
but it is fairly clear from his language that he is in fact trying
to account for the victory of the " Ricardian " system as a
whole.
Was Say's Law actually the basic premise of the Ricardian
school ? There is, of course, no doubt that the new school
regarded Say's Law as extremely important. Ricardo
selected Say's chapter " Des Debouches " for special com-
mendatory mention in a footnote to the preface of his
Principles,1 and McCulloch described the doctrine of the
dependence of effective demand upon production as Say's
"principal merit in a scientific point of view ".2 But to
show-what indeed is obvious-that Ricardo and his
disciples regarded Say's Law as a very important principle
is not to show that it was the " basic premise " of the school
or to justify the identification of which I am complaining.
The first part of what follows is designed to throw doubt
on the assumption that we can say anything really useful
about the development of Ricardo's system as a whole
after 1823 merely by accounting for the survival of this
one particular doctrine. The second part outlines a different
approach to the problem.
Ricardo's attention had been drawn to the
significance
of what he then called " Mr. Mill's principle " at least as
early as
I84
when, in the formative period of his mature
thought, he was arguing with Malthus over the effect upon
profits of restrictions on the import of corn. Maltbus appears
to have affirmed early in the
debate, as against
the "com-
mercial "3 viewpoint which Ricardo was
defending,
that
I
Works (McCulloch's edition), p. 6.
2
The Literature of Political Economy, p. zi.
3
Cannan : Theories of Production and Distribution, p. 164.
46 ECONOMICA [FEBRUARY
restrictions on import would not lower the rate of profit
" if the consequence of such restriction be a great reduction
of capital ".1 Ricardo, arguing from different political pre-
mises and not easily overawed by the authority of Adam
Smith,
replied that the effect upon the rate of profit of restrictions
on import must be considered independently of the effect
of a reduction of capital, since
"
there is no necessary
connection between these two operating causes, as they may
at the same time be acting together or entirely in opposite
directions ".2 So far as the second cause was concerned,
Ricardo agreed with Malthus that " when capital is scanty
compared with the means of employing
it,
from whatever
cause arising, profits will be high
l"3
but the two men were
not agreed on the reason fcor this inverse relationship between
capital accumulation and the rate of profit. It wvas out
of their controversy around this problem that the new
Ricardian system eventually emerged.
Malthus suggested that if restrictions on import brought
about a considerable diminution of capital, the effect of
this diminution upon profits would probably be sufficient
to neutralise the opposite effect of any rise in wages which
might result from the restrictions. The " proportion of
demand to supply" might continue to increase, so that
profits would not necessarily fall. Ricardo admitted that
"capital and produce may diminish faster than demand"
in the short period, but contended that in the long run
"effective demand cannot augment or continue stationary
with a diminishing capital .4 Some time early in
September,
I8I4, Malthus appears to have shifted the argument on to a
more general plane, probably relating
the issue directly
to
the version of Say's Law put forward by James
Mill in his
Commerce Defended. On September i6th Ricardo wrote as
follows:
", If you think that, with an increase of capital,
men will become indifferent both to consumption
and
accumulation, then you are correct in
opposing
Mr. Mill's
idea, that in reference to a nation supply
can never exceed
demand ". But, Ricardo argued,
there was
actually
no
reason why effective demand should not increase
part passu
with capital, since the wants and tastes of mankind were
unlimited. "We all wish to add to our
enjoyments
or to
1
Letters of Ricardo to Malthus,
pp.
35-36 (letter
of
25.7.14).
2
Ibid.,
p.
36.
3
Ibid., p. 43 (letter of I6.9.I4).
4
Ibid., p. 39 (letter of I1I.8.14).
1950] THE DECLINE OF RICARDIAN ECONOMICS 47
our power. Consumption adds to our enjoyments, accumula-
tion to our power, and they equally promote demand."'
Malthus, however, continued to contend that accumulation
might influence profits more directly than Ricardo supposed
by increasing the supply of commodities to such an extent
that the effective demand was insufficient to absorb the
whole supply.
Ricardo recognised that the problem was a crucial one.
It is very important
",
he wrote,
"
to ascertain what the
causes are which make capital scanty compared with the
means of employing it.... It is in this inquiry that I am led
to believe that the state of the cultivation of the land is
almost the only great permanent cause."2 The state of the
cultivation of the land, he argued, is " almost the sole cause
which regulates the profit of stock and the means of advan-
tageously employing capital ".3 And by December, 1814,
the place of accumulation in the new Ricardian system
had been made quite clear:
"Accumulation of capital has a tendency to lower
profits. Why ? because every accumulation is attended
with increased difficulty in obtaining food, unless it is
accompanied with improvemnents in agriculture; in which
case it has no tendency to diminish profits. If there were
no increased difficulty, profits would never fall, because
there are no other limits to the profitable production of
manufactures but the rise of wages. If with every accumu-
lation of capital we could tack a piece of fresh fertile land
to our
Island,
profits would never fall."4
Here the skeleton of the system of the Principles is
clearly displayed. Flesh and spirit are still wanting, but
by the time of the publication of Ricardo's essay on the
profits of stock both had been supplied. The flesh consisted
of the new theory of
rent,
towards which Ricardo himself
had obviously been groping during the later months of 1814.
The spirit-the central principle
of the whole system-was
the labour theory of value, to w-hich Ricardo was coming to
attach ever-increasing importance.
It appears from this correspondence that the inain role
of
"
Mr. Mill's principle
" in the early formulations of
I
Ibid.,
pp.
43-45. Cf. p-
49-
2
Ibid., p- 43-
3
Ibid., p. 46 (letter of
23.IO.14).
4
Ibid., p. 53 (letter of i8.IZ.14).
48 ECONOMICA [FEBRUARY
Ricardo's system was to confirm the theory that "the
increased difficulty of obtaining food " was the only permanent
cause of a fall in profits. Accumulation certainly influenced
profits-but only per medium of a rise in wages. Malthus,
on the other hand, was concerned to prove that accumula-
tion might also react upon profits directly per medium
of a failure of effective demand. Ricardo defended Say's
Law primarily because it provided corroborative evidence
in favour of his own view. In his essay on the profits of
stock he felt sufficiently sure of himself to put forward his
own doctrine quite dogmatically, without specifically adduc-
ing Say's Law in his defence or noticing Malthus's objections.
And even in the Principles, where Ricardo discusses Say's
Law at some length in relation to Smith's theory of profit,
its subordinate place in the basic theoretical structure is
made fairly clear. " From the account which has been
given of the profits of stock
",
Ricardo writes at the beginning
of the chapter entitled " Effects of Accumulation on Profits
and Interest
",
" it will appear that no accumulation of
capital will permanently lower profits, unless there be some
permanent cause for the rise of wages ". Ricardo clearly
believed that Smith and Malthus had already been refuted
by the theory of profit outlined in the preceding chapters,
where Say's Law had not been mentioned. But Say's Law
was such a convenient weapon (and, as will be seen later,
had such useful political connotationis) that Ricardo could
not resist using it as a reply to Smith. "Adam Smith ", he
says,
". . . uniformly ascribes the fall of profits to the
accumulation of capital, and to the competition which
will result from it, without ever adverting to the increasing
difficulty of providing food for the additional number
of labourers which the additional capital will employ. ...
M. Say has, however,
most satisfactorily shown that there
is no amount of capital which may not be employed in a
country, because demand is only limited by production.
*
. . There cannot, then, be accumulated in a country
any amount of capital which cannot be employed pro-
ductively, until wages rise so high in consequence of the
rise of necessaries,
and so little consequently remains
for the profits of stock, that the motive for accumulation
ceases?'1l
I
Works, pp. 174-175.
I950] THE DECLINE OF RICARDIAN ECONOMICS 49
As his system developed, and particularly as his theory
of value began to assume its central position, Ricardo became
more and more convinced of the importance of insisting
that a rise in wages was the sole cause of a fall in profits.
This view was intimately bound up with his belief that
value relations in the market ultimately reflected the social
relations between man and man in the productive
process,
and with his conviction that the productive process could
be adequately described in terms of human labour without
postulating any other " factor of production ". As Mr. Dobb
has pointed out, the statement " when wages
rise,
profits
fall" appears on the surface to be nothing more than a
tautology. But as employed in Ricardo's system it implied
that " profit is uniquely determined by the ratio of the
value of labour-power to the value of commodities in general "
-a ratio which is approximately equivalent to " the pro-
portion of the labour-force of society which requires to be
devoted to the production of the labourers' subsistence ".1
It follows from this that nothing can permanently lower
the rate of profit which does not increase the quantity of
social labour which it is necessary to allocate to the wage-
goods industries relatively to the quantity allocated to the
non-wage-goods industries. Obviously the accumulation
of capital -will not affect this ratio unless it is associated
with increased difficulty in obtaining food-which Ricardo
believed would normally be the case. In defending his new
theory of profit against Malthus's critique, Ricardo was
defending a view of the nature of the economic problem
which was of vital importance in his theoretical structure.
It is true, of course, that Ricardo's theory of profit was
directly based on his theory of value, and that the latter
rested upon the assumption that demand could be con-
sidered as a dependent variable in a first approximation to
reality. If we take
"
Say's Law " to be virtually equivalent
to this
assumption,
then we must admit that "
Say's Law
"
in this sense was fundamental to the Ricardian system.
But it seems fairly clear that the new school regarded Say's
Law as possessing a significance much beyond this. The
proposition that demand can safely be treated as a dependent
variable in the basic theoretical framework is by no means
the same as the proposition that demand in the real world
is so closely linked with production that there cannot possibly
1
M. H. Dobb: Political Economy and Capitalism,
p.
46.
r)
50 ECONOMICA [FEBRUARY
be a general glut of commodities. It is perhaps significant
in this respect that James Mill, in his reply to Spence, should
have demonstrated in one place that the part of income
destined to be used as capital " is just as completely consumed,
as that which is destined for immediate gratification ",1
and then, a few pages further on, introduced the idea that
" the production of commodities creates . . . a market for
the commodities produced "2 as if this were something
quite unrelated to his previous argument. The real impor-
tance of Say's Law to Ricardo, as to Mill, lay in the fact
that it provided a plausible answer to the contention that
"
there is only a market for a given quantity of commodities,
and if you increase the supply beyond that quantity you
will be unable to dispose of the surplus ".3 Looked at in this
way Say's Law appears more as something superimposed
upon the Ricardian framework than as its " basic premise ".
It is quite understandable that Ricardo should have
seized upon Say's Law for assistance in the defence of his
theory of profit and in the counter-attack on Malthus's
theory of the general glut, when so much was obviously
at stake. Once admit that profits could be affected by any
factor other than a variation in wages and Ricardo's whole
theoretical structure came tumbling to the ground. And
once admit that profits might be lowered as a result of
accumulation, and the way was immediately laid open for
serious criticism of the economic system. Ricardo was
never particularly concerned to defend the interests of any
single social class except in so far as the interests of that
class happened to be bound up with an increase in production,4
but it would hardly have been possible for his attitude
towards the economic system itself not to have been to some
extent apologetic. Although the institutional foundations
of the system had not yet been seriously called into question
in Britain, a tendency was already apparent
to
explain
certain manifest defects in the working
of the system in
terms of the operation of factors external to it. The appalling
1
Commerce Defended,
pp.
71-72. Mill was here answering Spence's contention that national
prosperity depended upon the maintenance and increase of the landlords' demand for luxury
goods. The traditional ex post concept which Mill put forward in reply was, of course, sub-
sequently reformulated in ex ante terms and used (quite unjustifiably) as evidence in favour of
Say's Law
(e.g.,
by Ricardo, Works, p. 175). It is not true, however, that the concept itself
necessarily involved Say's Law, any more than the Keynesian equality between savings and
investment involves it to-day.
2 Ibid., p. 8I.
3
Ibid., p. 8o.
Cf. Marx, Theorien (French Edition), Vol. 4,
p. I1.
1950] THE DECLINE OF RICARDIAN ECONOMICS 51
poverty among the lower orders, for
example,
was explained
by means of the Malthusian theory of population. A more
difficult problem was set by the mysterious " tendency
of the rate of profit to fall". If the rate of profit tended
naturally to fall as society progressed, and if capital accumula-
tion depended (within certain limits) on the rate of
profit,
then a boundary seemed to be set to the expansion of social
welfare. If accumulation was necessarily attended by the
destruction of the motive to accumulate, how could this
state of affairs be explained without impugning the system
itself ?1 Ricardo might insist that the stationary state was
not a state of stagnation,2 and that in any event it would
not be reached for a very long time, but the doubt remained.
Here again an external factor-in this case Nature-was
brought in by way of explanation. Not even the best of all
possible economic systems could overcome the obstacle of
diminishing returns. To economists thinking almost instinc-
tively in such terms, Malthus's suggestion that the system
itself was internally defective-if only in the sense that its
continued progress required the existence of a vast horde of
idlers-must have come as something of a shock,3 and it is
hardly surprising that all the available weapons,
including
Say's Law,
should have been employed against such a major
heresy.
What requires explanation is not so much Ricardo's
enthusiastic support for Say's Law as his insistence that it
was fully operative even in the short period. Little damage
would have been done to Ricardo's system by a recognition
of the fact that over-accumulation might occasionally cause
a temporary fall in profit-provided, of
course,
that the
existence of effective long-run corrective tendencies was
also recognised. Ricardo's advocacy of a rigid version of
Say's Law seems to have been associated with his desire to
defend certain political conclusions suggested by his theory.
In his I 8 I 5 essay he had argued that there were two important
counteracting factors which might hinder the long-run
tendency of the rate of profit to fall-agricultural improve-
ments and a fall in the price of imported corn.4 But both
' Cf. M. H. Dobb: op. cit., pp. 82-83.
2
Letters to Malthus, p. I89 (letter of 2I.7.2I).
3
Ricardo several times complains that Malthus sees " great evils in great powers of produc-
ti9)n" (e.g., Letters to Malthus, p. I88). Ricardo's tone in some of these passages shows how
seriously his moral conscience was shocked by Malthus's critique.
V Works, p. 379. Cf. M. H. Dobb: op. cit., p. 87.
52 ECONOMICA [FEBRUARY
improvements (at least in the short run) and an abolition
of restrictions upon importation were against the interests
of the landlords, since they each led directly to a fall in
rents. Thus the theory that profits depended solely upon
the value of food implied that " the interest of the landlord
is always opposed to the interest of every other class of
the community ", since the interests of the other classes
obviously lay in checking the " natural
"
fall in profits as
far as this was possible. There is little doubt that Malthus's
desire to find an alternative theory of profit which did not
involve this unfortunate political conclusion was at least
partly responsible for his contention that profits might fall,
even though improvements were encouraged and the Corn
Laws repealed, if production outstripped consumption. The
important point seems to be that Ricardo believed Malthus
to have asserted, not only that this might happen, but also
that it latterly had happened.1 The question at
issue,
then,
was not only an academic one: it was related
directly
to
the thorny problem of the cause of the present distresses.
If Ricardo were correct, it followed that the actions of those
of his contemporaries who were at that time fighting in various
ways to weaken the influence of the land-owning interests
were supported by the new science of political economy.
If Malthus were correct, on the other hand, it followed that
they were simply wasting their time. Indeed, their actions
might be positively harmful, since if the existence of a class
of unproductive consumers was a permanent institutional
necessity, then so far from the interests of the landlord
being always opposed to those of the rest of the community,
the economic health of the rest of the community actually
depended upon the wealth and idleness of the landlord.
Ricardo and his disciples tended to insist that Say's Law was
operative in the short run because in the long run the
participants in the contemporary political struggle would
all be dead.
It is true, then, that Say's Law was of great importance
to Ricardo and his followers. But it was hardly the
"
basic
premise
"
of the new school, and an approach which seeks
to interpret the history of economic thought in the post-
Ricardian period in terms of the victory of Say's Law alone
is not likely to prove very fruitful. Obviously some of
Ricardo's doctrines survived for many years after his death
I
Cf. Letters to Malthus, p. i86 (letter of 9.7.21).
1950] THE DECLINE OF RICARDIAN ECONOMICS 53
whereas others virtually perished with him, and any inter-
pretation of the work of his successors, if it is to be
meaningful,
must account for the defeats as well as for the viCtories.
We have to ascertain not only why Say's Law
succeeded,
but also why, for example, the labour theory of value (at
least as Ricardo formulated it) did not
II
In Ricardo's own mind there was little doubt as to what
constituted the
"
basic premise " of his system.
"
I confess
it fills me with astonishment ", he wrote to Malthus in
i8i8,
" to find that you think . . . that natural price, as well as
market price, is determined by the demand and supply. . . .
In saying this do you mean to deny that facility of production
will lower natural
price,
and difficulty of production raise
it ? . . . If indeed this fundamental doctrine of mine
were proved false I admit that my whole theory falls with
it."l By this time Ricardo was fully aware of the crucial
position a theory of value must hold in any coherent theoretical
system, and had seized upon human labour as the substance,
and the only possible
measure,
of that
"
facility of produc-
tion
"
which determined natural price. It was by no means
an easy task for an economist at this time to emancipate
his thought from the traditional notion that labour con-
tributed value to its product only per medium of the wages
paid to it; and Ricardo was virtually the first to fashion
anything like a consistent theory of value from the notion
that it was not the capitalist's expenditure on subsistence
goods for his workmen but the expenditure of energy by
the workmen themselves which conferred value on com-
modities.
Behind this fundamental principle there lay a profound
sociological assumption.
If we have decided to treat demand
as a dependent variable and to think of exchange value in
terms of cost, there are certain striking aspects of the relation-
ship between modern man and his environment which are
likely to induce us to select the expenditure of labour power
as the primary and most essential form of cost. fn a pre-
dominantly agricultural economy there may well be a
tendency for both labour and land to be conceived as equally
6
active 9 factors in the productive process-labour because
1
Letters to Maltbus,
pp.
148-149 (letter of 30. i I8).
54 ECONOMICA [FEBRUARY
it appears to be the indispensable initiator of that process
and land because of the " activity" displayed by the re-
generative powers of the soil. But in an industrial economy,
where by the aid of
"
ingenious labour " man is able to
produce an abundance of material wealth undreamed of in
former times, nature begins to be conceived, not as an active
co-partner in the business of getting a living, but as little
more than a passive sleeping partner.' In manufacture it is
immediately obvious that man is the dominant partner,
but in agriculture nature does not yield her former authority
without a struggle. The continued existence of rent seems
to prove that nature still " labours along with man " in the
fields and pastures. But when it is demonstrated that the
existence of rent is due not to nature's beneficence but to her
niggardliness, that such assistance as she does give is given
in all occupations and not in agriculture alone,
and that in
any event it is given
freely,
without any cost to man-then
the expenditure of human labour is revealed as the only
fundamental form of cost or sacrifice common to all branches
of production. Human labour begins to appear as the basic,
universal and active cost element, always to be found in
operation when productive activity results in a value
difference between input and output. It seemed to Ricardo
that the whole process of production could and should be
explained in terms of the disposition and expenditure of the
labour power of society. The stock of land was given and
unalterable: its existence had cost society nothing. The
cost of capital goods could be reduced to the quantity of
labour expended upon their production in the past. The
expenditure of human labour power remained as the basic
social cost. The value of the gross national
product,
then,
could be measured by the quantity of living and dead labour
embodied in it. To replace this expended labour cost society
the amount of labour which it was necessary to devote to
the production of subsistence goods for the labourers.2
The difference between these two quantities of labour measured
the net social gain-the surplus or net revenue-resulting
from productive activity.
The most significant feature of the decade immediately
following the death of Ricardo is the extraordinary speed
1
Petty's aphorism-" Labour is the Father and active principle of Wealth, as Lands are the
Mother "-was probably intended to cxpress this meaning.
2 The earlier Classical economists tended to ignore the complication afforded by the deprecia.
tion of fixed capital,
I950] THE DECLINE OF RICARDIAN ECONOMICS 55
with which these fundamental concepts were removed from
the agenda of economic discussion. The years from 1823
to I833 saw the popularisation (and vulgarisation) of
Ricardo's teachings by people like James Mill and
McCulloch;
they saw the use of Ricardian concepts by radicals and
social critics; and they saw the attacks on Ricardo made
by a number of those " neglected economists " of whom.
Professor Seligman reminded us in I903. By the later
'twenties the most important question was not so much
whether Ricardo or Malthus was to prevail on the glut
question, as whether Ricardo's system as a whole was to
be completely abandoned to the radicals or inoculated against
misuse by these individuals by the injection of certain
suitable amendments. After a series of energetic contro-
versies " Ricardianism " emerged as the victor over miost
of the field-but it was hardly the Ricardianism of Ricardo.
The basic premise of the system had been thrown overboard.
As early as I829 Samuel Read could refer to
"
the almost
universal rejection of labour as the standard
"31;
and in i83I
Cotterill stated that he felt himself obliged to repeat the
usual arguments against the labour theory only because he
suspected that
"
there are some Ricardians still remaining ",2
Ricardo, as Read acutely observed,
had believed that
"
the
idea of value in commodities cannot even be conzceived without
being mingled with the idea of their relation to mankind and
to human labour, of which some portion must always be
employed in procuring them originally ".3 It was this vital
concept which virtually vanished from English political
economy after Ricardo's death. McCulloch was almost the
only economist to continue to defend Ricardo's theory of
value after i 826, and his defence contained a number of
bizarre elements which afforded an easy target for critics.4
Interesting evidence of the rapid decline of certain basic
Ricardian doctrines is to be found in the proceedings of
the Political Economy Club. If, as Mr. Checkland suggests,
the founding of the Club was an act by which the " excellent
I
Samuel Read:
An
Inquiry into the Natural Grounds of Right, etc., p. 203.
2 C. F. Cotterill: An Examination of the Doctrine of Value, etc., p. 8.
3
Read: Inquiry, p. viii, footnote (Read's italics).
4
In much of his work on value and profit theory McCulloch seems to haarc been relatively
unaffected by the contemporary drift towards apologetics. But in his attitude towards a
number of other matters which Ricardo considered of
great
importance he definitely
deserted the Ricardian camp--e.g., the machinery question, the distinction between pro-
ductive and unproductive labour, and the question of the conflict of class interests.
Cf. Letters to McCulloch, p. 136; and see also the Centenary Volume of the Political
Economy
Club
(Vol. VI, 192I),
p.
Z54.
56 ECONOMICA [FEBRUARY
tacticians
"
of the new school sought " to consolidate their
advantage ", one can only say that they were not very
diligent in following up this " political act ". Early in
183i, Torrens put forward the following question for dis-
cussion: "What improvements have been effected in the
science of Political Economy since the publication of Mr.
Ricardo's great work; and are any of the principles first
advanced in that work now acknowledged to be correct ? "
The question was debated on January i3th and April
i5th,
I83I, and Mallet has left us an account of the discussions.
Torrens apparently held at the first meeting " that all the
great principles of Ricardo's work had been successively
abandoned, and that his theories of Value, Rent and Profits
were now generally acknowledged to have been erroneous ".
Bailey had settled the question of value and Thompson
that of rent; and Ricardo's omission to take account of
the replacement of fixed capital " was decisive of the un-
soundness of his views " on profit. McCulloch agreed that
Ricardo's theory of profit was defective,
but energetically
defended his theories of value and rent. Tooke supported
Ricardo only on the question of rent. At the adjourned
meeting it seems to have been generally admitted that
Ricardo's theories of value, rent and
profit,
although incorrect
" according to the very terms of his propositions
",
were
"
right in principle ". There foHows in Mallet's account
an important catalogue of Ricardo's errors:
"
He is one of the first who has treated the subject
of Taxation, and he always reasons out his propositions,
whether true or false, with great logical precision and
to their utmost consequences ; but without sufficient
regard to the many modifications which are invariably
found to arise in the progress of Society. One of the
errors of Ricardo seems to have been to have followed
up Malthus' principles of population to unwarrantable
conclusions. For, in the first place it is clear from the
progress of social improvement and the bettering of the
condition of the people in the greater part of the civilised
world, that Capital, or the means of Employment-the
fund for labour-increases in a greater ratio than popula-
tion; that men generally reproduce more than they
consume, and the interest of the capital besides, which
surplus goes to increase the fund for labour. Then he
1950] THE DECTINE OF RICARDIAN ECONOMICS 57
looks forward from the gradual demand for food and
the use of land, to the gradual lowering of wages and
profits till nothing remains but rent to the Landlords.
But long before
that,
modification would take place in
the state of society which would make such colnclusions
all wrong. First of all, it is contended that the interest
of the Landlords does in fact coincide with those of the
other classes ; and then we see that in Ireland, where
rent is absorbing everything, in consequence of the immense
competition for land, a system of Poor Laws is likely soon
to equalise the division."'
What was the reason for the rapid decline of these funda-
mental Ricardian concepts-a decline suggested not only
in this debate, but also in the mass of economic literature
which flooded the market at this time ? The early reaction
against Ricardo, I think, was in large measure due to a
widespread feeling that important elements of his system
set limits to the prospects of human progress under
capitalism, and therefore could not possibly be true. In
particular the work of the " Ricardian socialists " revealed
certain disharmonious and pessimistic implications of
Ricardo's system so forcibly that the economists of the
day could hardly avoid being influenced by it in the course
of their revaluations of Ricardo.
A significant number of economists was at this time
becoming conscious of the fact that the labouring classes
were beginning to think for themselves and to
question
the ethical validity of the foundations of the social structure.
In his Elements of Political Science, published in I814, John
Craig could remark that " the fear of levelling is altogether
chimerical ".2 In the first edition of Mrs. Marcet's Con-
versations (I8i6) we find Mrs. B. denying that she would
teach political economy to the labouring classes.3 Yet
only ten or twelve years later Mrs. Marcet is to be found
vying with Harriet Martineau in the composition of economic
fairy tales of a wholesome moral character for the enlighten-
ment of the proletariat. It would appear that it was not
Mrs. Marcet who changed in the intervening years, but
rather the labouring classes themselves. So long as the
I
Centenary Volume of the Political Economy Club, pp. 35, 36 and 223-225. 1 am indebted
to Professor Hayek for drawing my attention to these passages.
2
John Craig, Elements of Political Science, Vol. II, p. 230.
3
Conversations on Political Economy, p.
I58.
[FEBRUARY
labouring
classes are
passive
and
ignorant
their views on
political economy
can be
ignored.
But when it becomes
no
longer possible
to
prevent
them from
listening
to Mr.
Hodgskin
at a Mechanics' Institute the situation has
radically
changed.
The fear of
levelling
is no
longer
chimerical.
Evidence that the seriousness and
importance
of this
change
were
widely appreciated
is to be found in the works of
many
economists of the
period,
but
by
no one were the facts more
cogently
stated,
and the new tasks
facing political economy
more
admirably
summarised,
than
by
Mountifort
Longfield
in
1833
"It is
daily becoming
more
important,
that the notions
which are
generally
entertained should be
correct,
since
they
now lead so
directly
to action. . . . No
person
can
now remain
altogether
neutral,
and avoid such
topics.
He
must, according
to the
degree
of
pains
he has taken
with the
subject,
be a teacher of useful
truth,
or a dis-
seminator of mischievous falsehood.
Opinions
. . .
exercise immense influence on a class of
people formerly
removed
beyond
the reach of such discussions ....
I allude to the
labouring
orders,
both
agricultural
and
manufactural. It is no
longer
a
question,
whether these
men shall think or
not,
or what
degree
of influence their
opinions ought
to exert over their
conduct; they
will
follow the
path
where
they
conceive their interests to
point,
and it
only
remains to be
considered,
in what manner a
true sense of their real interests
may
be most
effectually
brought
home to them. The
change
has taken
place,
whether for the better or the worse it is useless now
to
enquire,
since the
steps
which have led to it can never
be retraced. The
people
will no
longer
be
guided by
the
authority
of others.. It
depends
in some
degree
upon every person present,
whether the labourer is
taught
that his interest will be best
promoted by prudence
and
industry,
or
by
a violent demolition of the
capital
destined
for his
support."'
It is
evident, too,
that the
majority
of economists were
very
much aware of the
dangerous
use to which a number
of radical writers were
putting
certain orthodox economic
concepts.
To the extent that the
arguments
of the radicals
were taken
up by
the
working-class
movement and used as
1
Longfield:
Lectures on Political
Economy, pp. I6-I8.
ECONOMICA
1950] THE DECLINE OF RICARDIAN ECONOMICS 59
weapons in its day-to-day struggles, the claim to the whole
produce of labour-or even to a greater proportion of the
produce of labour-appeared as a monstrous assault on
the very foundations of civilised society. The work of
men like Charles Hall and Piercy Ravenstone might be
safely ignored; but Hodgskin's Labour Defended, born as
it was of the working-class activity which followed the repeal
of the Combination Laws, could not be so easily passed
over.1 In a number of cases Hodgskin was attacked directly.
The American economist Thomas Cooper wrote in r830:
" The modern notions of Political Economy among the
operatives or mechanics are stated, but not very distinctly,
by Thomas Hodgskin in his treatise on Popular Political
Economy .... If these be the proposals that the
mechanics combine to carry into effect, it is high tiine for
those who have property to lose, and families to protect,
to combine in self-defence."2
Charles Knight's edifying work, The Rights of Industry,
published in I83I under the superintendence of the Society
for the Diffusion of Useful
Knowledge,
seems to have been
aimed directly at Hodgskin and had a very wide influence.
Samuel Read obviously considers Hodgskin and others like
him who flatter and persuade the workers
"
that they produce
all " as the main enemies against whom his reasoning is
directed3; and Scrope finds "truly unaccountable" the
blindness of Hodgskin
and all others who " declaim against
capital as the poison of society, and the taking of interest
on capital by its
owners,
as an abuse, an injustice, a robbery
of the class of labourers ! "14
It is hardly too much to say that every new development
in economic thought in England about this time had the
objective effect of cutting the ground from under the feet
of writers like Hodgskin and William Thompson. And at
least in some cases there can be little doubt that the critics
of Ricardo knew exactly what they were doing and why
they were doing it. Scrope, for
example,
was disarmingly
frank about the motives which originally led him to the
1
Francis Place drew attention to the interesting fact that Hodgskin's ideas attracted large
numbers of disillusioned Owenites. B.M., Place Add. Mss., 27,791, f. 263.?
2
Thomas Cooper: Lectures on Political Economy, 2nd edition,
pp.
350-353.
3
Read: Inquiry, pp. 125-132, xxix, etc.
4
G. P. Scrope : Principles of Political Econony (1833), pp.
150-151.
See also the amusing
passage in a review of some of Senior's lectures in the Edinburgh Review, Vol. 48, September
1 8Z8, p. I70 et seq.
6o ECONOMICA [FEBRUARY
study of political economy. " At the time of the passing
of the first Reform Bill
",
he wrote in I873,
"
it became
evident that the power of directing the Legislation of Britain
was about to pass . . . from the hands of the few into those
of the many ". Wishing to estimate the probable results
of this change upon " the social destinies of the country ",
Scrope endeavoured to ascertain " what were the notions
likely to prevail among the
masses,
when they became the
repositories of supreme power, with regard to the principal
institutions of modern society ' What lessons in this respect,
he asked himself,
were they likely to imbibe from the current doctrines
of Political Economy ? Were these lessons fitted to
reconcile them to the hardships of a condition of almost
ceaseless toil for, in many
cases,
but a meagre subsistence
and this in a country overflowing with wealth enjoyed
in idleness by some at the expense (as it might at first
sight appear to them) of the labour of others ? On examina-
tion of the works of the most noted Economists of that
day, Messrs. Ricardo, Jas. Mill, Maculloch, Malthus,
Chalmers, and
Whateley,
I could not discover in them
any answer likely to satisfy the mind of a half-educated
man of plain commonsense and honesty who should seek
there some justification for the immense disparity of
fortunes and circumstances that strike the eye on every
side. On the
contrary,
these works appeared to me to
contain many obvious inconsistencies and
errors,
to
inculcate many false and pernicious principles, and certainly
to be little adapted to the purpose which I looked for in
them."'
Approaching political economy
in this
spirit,
it is hardly
surprising that Scrope should have been the first British
economist to propound
a consistent version of the abstinence
theory.2 Samuel Read was another who understood perfectly
well that Ricardian political economy led logically to radical-
ism. His refutation of the " mischievous and fundamental
error
" of the
"
Ricardo economists
"
(i.e.,
their doctrine
that "labour is the only source of wealth ") consists largely
of an endeavour to put forward as many apologetic
theories
of profit as possible, regardless
of consistency.3
And Long-
1
Political Economy for Plain People, Preface.
2
Quarterly Review, Jaiiuary I831, Vol. XLIV, p. I8.
3
Inquiry,
p. xxix and passim.
1950] THE DECLINE OF RICARDIAN ECONOMICS 6i
field, finally, was surely quite as fully aware of the political
and ethical implications of his theory of distribution as was
J. B. Clark of his some sixty years later. It seems not unfair
to say that economists like Scrope, Read and
Longfield,
in
varying degrees, tended towards the view 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. Their fundamental approach, in other
words, was determined by a belief that what was socially
dangerous could not possibly be true.
To say that the work of Hodgskin and his fellows had
more to do with the innovations of the period than it is at
present fashionable to admit is neither to deny thi-e great
originality and importance of some of the new contributions
nor to assert that the
majority
of their authors were consciousil
indulging in apologetics. The writings of Bailey, West,
Lloyd and Longfield possess an interest and significance
which are not purely historical, and remain as important
landmarks in a period of great anticipations. But surely
something more than mere intellectual curiosity must be
postulated to account for the iconoclastic attitude adopted
towards Ricardo's system by so many of thle innovators.
As I have suggested above, this attitude would seem to have
been largely due to a feeling that any theory which suggested
that the possibilities of progress under capitalism were
limited could not be true. Hodgskin frankly admitted that
he disapproved of certain of Ricardo's doctrines because
they seemed "to set bounds to our hopes for the future
progress of mankind in a more definite manner even than
the opinions of Mr. Malthus
"
1; and J. S. Reynolds wrote
in i822 that
" it would not be difficult to trace Mr. Ricardo's
theory to consequences inconsistent with the goodness of
Providence, and to the scheme of Divine government ".2
An optimistic era in which prosperity appears to be increasing
-and in which basic social institutions are coming under
fire-has no use for theories which encourage criticism by
setting limits. Such theories seem not only to be d'angerous,
but also to contradict the actual living experience of the
age.
1 Letter to Place of May z8th, i8zo. B.M., Place Add. Mss., 35,I53.
2
J. S. Reynolds: Practical Observations on Mr. Ricardo's Principles, p.
15
62 ECONOMICA [FEBRUARY
It did not take long for most of the pessimistic theories
to fall into disuse. In I835 Mallet reports that " the whole
artillery of the Club
"
was directed against Malthus's principle
of population.' As early as I83I, as we have seen, the Club
seems to have agreed that the interest of the landlord was
not in fact in conflict with the interests of the other social
classes, and also that the doctrine of the stationary state
required radical amendment. In the early 'thirties it was
widely suggested that industrial experience had proved
Ricardo's theory of the inverse relationship between wages
and profits to be false, since wages and profits might and
often did increase together. The Ricardian concepts of
value as embodied labour and profit as a surplus value,
which had proved so useful to the radicals, were among
the first to be rejected: value began to be conceived in
terms of utility or cost of production or sometimes (as with
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. John Stuart
Mill, growing up in this new atmosphere, found no difficulty
in incorporating Senior's abstinence concept into his system
and substituting a rather superficial cost of production
theory of value for Ricardo's labour theory. Ricardo's
system, in
short,
was purged of most of its more obviously
disharmonious elements, particularly those which might
hlave been used to suggest that there was a real conflict of
economic interest between social classes under capitalism
or that progress under capitalism might be limited for some
other reason. Ricardo's disciples, like the later followers
of Quesnay, threw overboard their master's most essential
principles while still claiming to speak in his name. Say's
Law, with its optimistic implications, was one of the doctrines
which survived the purge, and it was no doubt largely as a
result of these implications that it achieved an importance
in the neo-Classical system far beyond that which it possessed
in Ricardo's theory.
Glasgow University.
1
The difference between the motives which led to the wide acceptance of the Malthusian
theory and those which led to its eventual rejection
is very striking.