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FINES will be charged if book is returned after the date stamped below. ~~ . l 1’ ,.£c"}.(;7§é 4%“ \‘ ‘1 _u 2-; 5*:?;§ A THE TRANSFORMATION OF RICARDO'S PRINCIPLES THROUGH THE ADDITION OF THE "ON MACHINERY" CHAPTER BY John Bryan Davis A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Economics 1985 l l l ABSTRACT THE TRANSFORMATION OF RICARDO'S PRINCIPLES THROUGH THE ADDITION OE“— THE "ON MACHINERY" CHAPTER By John Bryan Davis It is generally believed that the addition of the “On Machinery" chapter to Ricardo's third edition of the Principles 2; Political Economy and Taxation little alter- ed the analysis of the original first two editions. It is argued here that Ricardo's distributional argument was seriously modified by the assumptions made in the added chapter. Distributional conflict between capital and land is replaced by distributional conflict between capital and labor. The initial chapter elaborates the changes the added chapter imposes on the traditional con- ception of the Principles. The succeeding chapter inves- tigates Ricardo's profit analysis in the original and new contexts. An appendix traces possible sources of Ricardo's Philosophical views in the thinking of the British En- lightenment. TABLE OF CONTENTS INTRODUCTION CHAPTER I RICARDO'S MACHINERY CHAPTER CHAPTER II RICARDO'S THEORY OF PROFIT CONCLUSION APPENDIX BIBLIOGRAPHY 12 83 149 155 198 INTRODUCTION It has generally been believed that the addition of the "On Machinery" chapter to the third and last edition of David Ricardo's On the Principles 2: Political Economy and Taxation little changed the work's basic analysis Of the accumulation process in early nineteenth century Eng- land. However, Ricardo's admission - and reversal of his former position - that a relatively permanent technologi- cal unemployment might well occur with the introduction of labor-displacing machinery does in fact alter the re- lationship between landlords, capitalists, and laborers, as well as change the prospects and opportunities for cap- ital accumulation. This study, then, investigates the im- pact of the added machinery chapter on original distribu- tional conception of the Principles, and argues that this conception indeed was transformed by the added chapter. Part of the stimulus for this study derives from a critical appraisal of many commentators' methodology of interpretation Of the Principles. Recognizing that this work not only went through development in its successive editions, but also itself developed Ricardo’s understand- ing of distribution first put forward in his An Essav 9n l the Influence gf_a Low Price 3f Corn 9n the Profits pf Stock, showing the inexpediency pf restrictions 2p impgg— tation, it seems generally assumed that Ricardo's thought evolved smoothly, in the sense that none of the conclu- sions reached late in his career undermined or were in- compatible with ones reached earlier. This sort Of path of non-contradictory development, however, must be estab- lished through an investigation of possible problems gen- erated in this fashion; it cannot be presupposed, as many commentators on Ricardo's thought seem to have believed. This study pursues one such potential contradiction between different stages of conception in Ricardo's 233p: ciples. It specifically asks whether the third edition's "On Machinery" chapter, in which Ricardo explicitly re- pudiates elements of his earlier thinking, in fact over- turns more of his original distributional analysis than he appeared to have thought. The focus here, it should be emphasized, is upon Ricardo's well-known distributional argument. Little attention is devoted to other major con- cerns in the Principles, for example, the theory of value, the theory of comparative advantage, the theory of money, et0., each of which this study assumes are relatively in- dependent of the changes investigated in this distribu- tional argument. There are two parts to the investigation that follows. _ Ill the first chapter, the impact Of the added machinery cliapter is examined at length. Given the conclusion of tiiis analysis, that Ricardo's distributional conception is indeed transformed in a fundamental manner through the addition of the machinery chapter, it is appropriate to mirsue the consequences of the implicit changes in this distributional view. This is done in the second chapter in which Ricardo's theory of profit is considered, first, with respect to the original Principles' conception of distribution and class opposition, and then secondly, with respect to the new conception of distribution which emerges with the added machinery chapter. That the third edition changes in the Principles per- mit a second analysis of Ricardo's theory of profit, in the context of the second set of class relationships pro- duced by the changed assumptions of the "On Machinery" chagrter, is of great advantage in contributing to an un- derstanding of this theory of profit. In an effort to faithfully reconstruct the logic of Ricardo's residual analysis of profit in the altered framework of the added chapter, this logic is generalized over both the set of class relationships appropriate to the original Principles conception and that second set of relationships appro- Priate to the third edition view. That is, the same for- mal residual analysis is applied in each context, so as tca demonstrate the differences in substance derived from t}1e social relationships. At the same time, the procedure of this part of the jzrvestigation casts greater emphasis upon the character mf the formal residual analysis common to both contexts. Clearly, those studies of Ricardo's theory of profit not forced from the immediate terrain of the original distri- butional conception of the Principles lack the Opportunity to assess the more abstract character of Ricardo's argu— ment, since they are immersed in the mix of concreteness and abstraction of an argument that has yet to be general- ized, Accordingly, besides the contributions of the first duapter below in terms of scholarly appraisal of the addi- thon.of the "On Machinery" chapter, this study hopes to corrtribute to the understanding of Ricardo's specifically (Emissical conception of the determination of profit. The framework of this treatment of profit can briefly be introduced as follows. Ricardo's theory of profit de- pends upon a comparison of sectors of production that are distinguished from one another according to whether all in- puts to production of the final output are commodities or not. Capitalists, producing in sectors of production that use only commodities as inputs, that is, outputs of other production processes whose values have been established in the market, exchange their outputs with sectors of pro- duction that use both commodities with market-established values and goods or services that are not commodities in this sense in producing their outputs. Profit accrues to capitalists as a result of this exchange, when there is a decrease in the extent of the market or exchange with the sector using some non-commodity inputs in production. In the framework of the first two editions of Ricardo's Principles, the sector using some non-commodity inputs is agriculture or corn production. The input to this produc- tion lacking a well-established market value is land, and capitalists in sectors of production using only commodities as inputs successfully increase their residual when the ex- tent of the trade with agriculture is reduced. The prima facie motivation for this analysis is, first, Ricardo's recognition that profits rise when rents fall, and second- ly, the claim that land in the early nineteenth century, because of traditional seignorial land tenure, did not possess a well-established market value as a commodity. In the context of the third edition of the Principles, the sector using non-commodity inputs is that of labor pro- duction, that is, the traditional sites of labor supply of the family and supporting community. The input to this production without a market-determined value is that en- tire set of services carried on in the household and la- boring community that are responsible in part for enabling 4,4_ .4. __ ,4 .___--—-—... _..—— laborers to exchange their commodity of labor services with those with a demand for labor. The incentives for this analysis are similar to those in the previous case. First, Ricardo's treatment of technological unemployment readily permits the inference that profits rise at the expense of labor's standard of living, when unemployment rises, or the extent Of the exchange between laborers and capitalists decreases. Secondly, it is easy to iden- tify a variety of inputs to the production of labor that are not purchased as commodities, in contrast to those inputs that indeed are so acquired. Generally, then, profit as a residual results from the interaction of those sectors of production that are fully a part of the market and those sectors which are ' . 1 only incompletely a part of it. Aside from the conclu— i ‘ sion that profit increases when agricultural or labor pro- duction rents are decrease — that is the latter are trans- l lated into the former, this treatment of profit is note- i worthy for the fact that this process occurs when the ex- } tent of exchange between the two kinds of sectors is re- duced. Let us, then, turn to the introduction of the "On Machinery" chapter in the third edition of the Principles. In order to understand the changes that this chapter im- poses on the original argument of the Principles, it will ; be helpful to briefly survey the conception of the economy .Ricardo elaborates in his first two editions. Our focus is the growth of production over time in a society of three classes, landlords, capitalists, and laborers. Agricultur- al land is limited in extent and quality, while population grows at a constant rate. Since technical progress is in- significant in agriculture in the argument of the first two editions, we will assume that all capital accumulation pro— ceeds through savings Of capitalists, and extends produc- tion upon the existing ratio of fixed to circulating capi- tal. Rent is received by landlords and explained by Ricardo :as the surplus produce Of infra-marginal land, or as the :surplus produce resulting from the infra-marginal applica- ‘tions of labor plus implements to land already under cul- 'tivation. As the population increases, agricultural pro- duction is extended to lesser lands or proceeds more inten- sively on already cultivated land. The extension of pro- durrtion exhibits diminishing returns, such that formerly mazmginal agricultural production becomes infra-marginal, and thus earns a rent. Wages earned by laborers are equal to the commodity cost of reproducing laborers' subsistence. Ricardo allows that the standard of subsistence is historically establish- ed and may vary from one country to the next and over time. The principal component of subsistence is the corn or the wheat grown on domestic land. Ricardo treats profits as a residual form of income. Capitalists receive the difference between the value of their product and their costs, the chief part of the latter being wages paid to laborers. The rate of profit is deter- mined as the ratio Of labor in production beyond that nec- essary for laborers' subsistence to the labor necessary for production of that subsistence. A uniform rate of pro- fit is established by the free flow of capital between sec- tors of production. The uniform rate of profit, however, does not remain constant as population increases in the presence of a fix- ed supply Of agricultural land. As labor productivity de— clines in agriculture, subsistence become more expensive in terms Of the labor time quantity Of direct labor and implements required for production of a given quantity of corn, wages rise, and profits are reduced. Rising rents accordingly come to occupy an increasingly larger share of surplus product at the expense of the profit share. In the long run, should this process continue uninterrupt- ed, the profit rate falls until accumulation is halted. This destination, nonetheless, was not an inevitable one in Ricardo's view. His analysis permitted identifica- tion of the Obstacles to continued accumulation in a manner O J that left little doubt about how they might be overcome. Thus, Profits of stock fall only, because land equal- ly well adapted to produce food cannot be pro- cured .... If, therefore, in the progress of countries in wealth and population, new portions of fertile land could be added to such countries, with every increase of capital, profits would never fall, nor rents rise. Of course "new portions of fertile land" would need to be added from beyond English borders, since England possessed a limited quantity of agricultural land. The system of im- port duties, then, was a key obstacle to continued capital accumulation, together with landlord intransigence to their reduction. Technical progress might also permit continued accum- ulation of capital, since it would enable postponement of the diminishing returns in agriculture. In the Pgsay 2n Profits Ricardo had suggested this when he rhetorically challenged landlords' resistance to reduced import duties by likening their tariff position to an opposition to ag- ricultural improvements.2 Despite this early recognition of the dual character of the constraint on capital accum— ulation, however, it cannot be said that the technical im- provements anticipated played the same role in the first two editions of the Principles as did reduction of import duties. Ricardo not only devotes comparatively more dis- cussion to the reduction of import duties, but, also, he —_—-——-——-* ozily'initiates a careful investigation of technical improve- Kugzlts in the added ”On Machinery" chapter. In addition, as wjgll be seen, Ricardo's famous pessimism concerning the pznaspects for continued accumulation is absent in the add- ed. Chapter, suggesting that technical improvements ultimate- ly‘ in his view possessed a special role in the accumulation prmpcess distinct from that of duty reductions. Let us, then, tuITl to the analysis of the added machinery chapter. FOOTNOTES 1. The Works and Correspondence 2: David Ricardo, edited by Elf—Sraffa with the collaboration of M. H. Dobb, 11 Volumes, (Cambridge: Cambridge University Press, 1951- 1973), Vol. Iv, p. 18. 2. Ibid., p. 41. 11 CHAPTER I RICARDO'S MACHINERY CHAPTER The Editions of the Principles When a work appears in more than one edition, with each new issue adding modifications and refinements to the work's original argument, the opportunities for its critical evaluation are enhanced. The examination of changes made as a consequence of the author's perception of readers' reac- tions suggests weaknesses detected in the original argument from both the author's and readers' points of view. Later editions are accordingly the occasion for clarification and sharpening of the argument on the one hand, but on the other hand as often the occasion for its redirection and adjust- ment in ways that often compromise the author's original in- tent and conception. Thus, should the initial reasoning of a work be flawed, or should events and historical develop- ments undermine that reasoning, the author decided upon its re-issue may find certain discussions and positions in need OflrefOrmulation or indeed minimization, should adequate treatment go beyond the framework of the existing arguments and categories of the work. That much of this re-assessment 12 15 believed necessary may be only imperfectly grasped in all its ramifications by the author complicates the critical evaluation of the work issued in multiple editions. In the case of the three editions of Ricardo's Paig- ci les, the opportunities for evaluation of the basic dis- tributional argument rest upon a comparison of the first two editions with the third, since little changes between the first two editions, either with respect to this argu- ment or in connection with related positions, While con- siderable change occurs with the appearance of the third. In sending the revision of edition one to his publisher, Ricardo had asserted that it contained "a very few trifling alterations," and in writing to Say he had said that in the second edition there was "nothing new."1 Sraffa states that the only change of note in the second edition was "the subdivision of the chapter On value into sections each carrying its own heading," and that "it is surpris- ing how little rearrangement was made."2 By contrast, the third edition reflected clarification or modification and some significant redirection of the Principles of the first two editions. The former was pursued with respect to the difficult first chapter on the nature of commodity value. Ricardo had written Malthus in September 1820, more than eight months prior to the May 1821 release of the third edition, ~_.,—' 14 I have been looking over my first chapter, with a view to make a few alterations in it before the work goes to another edition. I find my task very difficult, but I hope I shall make my opinions more clear and intelligible. These changes principally concerned the characterization of an invariable measure of value, whose function was to per- mit a determination of social product invariant to changes in the division of that product.4 Ricardo thus expected to be able to maintain his distributional analysis intact, es- sentially as it was originally developed in the Essa , and sought to refine the first chapter treatment of value, so that the application of this analysis to the multi-commodity context would be without question. In correspondence to Trower and McCulloch, Ricardo accordingly stated that he believed the Principles little altered with these reformu- lations.5 Clarification was also pursued in the third edition of the Principles in light of Ricardo's study of Malthus' ngpr ciples 2; Political Economy which had appeared in 1820 after Ricardo's second edition. In the process of writing his "Notes on Malthus' Principles 2; Political Economy" (which he left unpublished), Ricardo made a variety of minor alter- ations for the third edition, in order to forestall both eXplicit and implicit criticisms advanced by Malthus. For exanufle, Ricardo now argued that technical improvements in agriculture would be "ultimately of immense advantage to landlords," though in the short run rents would still be _ _._.__-.__ 15 lowered.6 However, these alterations were not of any par- ticular importance for the basic distributional argument of the Principles. Significant redirection of the Principles, in contrast, occurred in connection with the introduction of an entirely new thirty-first chapter, "On Machinery," concerning the im- pact on the employment of labor from the substitution of ma- chinery for labor in production. In the first place, Ricardo is quite aware that the admission that he now makes, that ma- chinery introduction results in technological unemployment, is significant for the understanding of the laws which deter— mine distribution. As will be seen below, Ricardo's new pos- ition is based upon a recognition of differential changes in a society's net and gross income, the former being the source "from which landlords and capitalists derive their income," and the latter being "that upon which the labouring class mainly depend."7 In the second place, Ricardo's new position is explicitly presented as a retraction os his former view on the impact of machinery introduction upon the laboring class. "It is more incumbent upon me to declare my opinion on this question, because they have, on further reflection, Ixndergone a considerable change ...."8 Moreover, what Ric- ardo specifically comes to conclude in the added chapter is that the laborer's situation is worse with the introduc- tion of machinery. "I am convinced, that the substitution 16 of machinery for human labour, is Often very injurious to the class of labourers."9 This, then, clearly is of some significance for Ricardo's understanding of the laws which determine distribution, the extent of which requires fur- ther elaboration. Yet, as will be argued below, Ricardo himself apparent- ly did not fully grasp the degree to which his original dis- tributional conception was affected by the addition of the new chapter. This is perhaps not surprising given the com- plexity of the issues surrounding machinery introduction, combined with the fact that political economists in Ricardo's time had yet to devote much attention to the issue. What is surprising, however, is that most readers of Ricardo, though often much interested in the questions raised by the added chapter, have devoted so little attention and analysis to the impact of the chapter on the basic distributional argu- ment attributed to Ricardo. Few, that is, have even asked whether technological unemployment affected the class align- ments Ricardo projected. Let us briefly consider the his- tory of critical reflection on the insertion of this chap- ter in the Principles' third edition. Critical Evaluations of the New Chapter's Addition Those who have investigated the new thirty-first chap- ter of the third edition have for the most part not pursued 17 the question of the compatibility of the chapter's analysis with the distributional argument of the Principles. Yet this appears a quite natural matter to pursue, since the retraction of the chapter prima facie revises at least some elements of Ricardo's account of one of the three classes treated in his tightly integrated distributional concep- tion. Moreover, that the added chapter is placed in third part of the Principles after the chapters on taxation is itself important, since the chapters there amount to a num- ber of unconnected commentaries on existing doctrines in political economy, and were written by Ricardo after his completion of the first seven chapters which present the main distributional argument. Thus, Ricardo's decision to include his new treatment of machinery in this part of the Principles is indicative of his own view of its relation to the principle part of his work.10 Ricardo's immediate followers - James Mill, Robert Torrens, and John McCulloch - on the whole ignored the new chapter of the third edition or simply argued Ricardo's case to have been unrealistic. Mill seems never to have comment- ed upon it at all in print. Torrens thought the numerical example Ricardo developed did not reflect any actual Cir- cumstances: "The case supposed never yet occurred."11 McCulloch, who had earlier defended the possibility of technological unemployment of labor to Ricardo after re- 18 'viewing John Barton's Observations pp ppg Circumstances Vuhich Influence the Condition 2: the Labouring Classes 9: 51: Society of 1817, and who had subsequently been persuaded 11y Ricardo to deny that possibility, was unwilling to fol- Ilow the new analysis of the third edition of the Principles. "I will take my stand with the Mr. Burke of the American vuar not with the Mr. Burke of the French Revolution - with 'the Mr. Ricardo of the first not of the third edition."12 iIn McCulloch's own Principles 2: Political Economy of 1825, ESay's Law of Markets was applied to the labor market to (conclude that the impossibility of general over-production <3f commodities produced implied there could not be a gen- eeral over-supply of labor. In effect, a rigid association lsetween purchasing power and the quantity of output is as- erumed, as well as between that quantity of output and the quantity of employment . 1 3 Thus, when Ricardo himself proposed discussion of the nuachinery question in 1821 at the Political Economy Club, fish is not surprising that there was little enthusiasm for aui investigation of the question. Perhaps some of this reaction can be explained in connection with the fact that orily ten years later there was a general decline in sup- lflxrt for almost all of Ricardo's positions, as evidenced by a proposed discussion at the Political Economy Club on the question "whether any of the principles first advanc- L ed" in Ricardo's work were "now acknowledged to be cor— rect."14 While there is considerable debate over the ex- planation of the decline in status of Ricardian economics after Ricardo's death, it cannot be denied that the im- petus the Ppinciples' labor value analysis gave to the radical Ricardian socialists15 could easily have been sup- ported by the conclusions of the third edition machinery chapter, thus making the issue of technological unemploy- ment one to be studiously ignored or even suppressed by political economists anxious to dissociate themselves from anything connected to the Luddites or their causes. Perhaps symptomatic, then, of the lack of serious attention devoted to the issue by those more or less deservingly labeled Ricardians is John Stuart Mill's own ambivalent discussion. In his Principles pf Political Econom , Mill first asserts, All attempts to make out that the labouring classes as a collective body cannot suffer temporarily by the introductiEfi‘CT—machinery, or by the sinking of capital in permanent im- provementg, are, I conceive, necessarily fal- lacious. Yet: only a page later Mill discounts the empirical sig- nificance of this possibility by adding, Nevertheless, I do not believe that, as things are actually transacted, improvements in produc- tion are often, if ever, injurious, even tempor- arily, to the labouring classes in the aggregate.17 Thus, though analytically Ricardo's case is allowed, Mill, 20 rather than investigate its potential consequences for the understanding of distribution, simply sets it aside. The verdict of the last of the Ricardians, then, is in fact no verdict at all, and truly critical commentary on Ricardo's system comes only from those contemporaries of Ricardo that were not sympathetic to him. A number of these latter figures early on claimed that technical progress in agriculture reversed dimin- ishing returns, and so left Ricardo's distributional pro- jections without foundation. Thomas Buller's A Rgply pp p Pamphlet pyypgyig Ricardo, pp Protection pp Agriculture of 1822, Joseph Lowe's 222 Present §p§pp_p§ England of 1823, Thomas Perronnet Thompson's Catechism pp 322.9233 Laws; with a Pig: 2: Fallacies and Answers as well as his T§£.Tppg Theory p£_gppp, ip Opposition 33 My. Ricardo app Others both of 1826, Richard Jones' Pppgy pp’ppg Distri- 'bution p; Wealth of 1831, and George Porter's Progress 9: jggp Nation of 1836 each focused on Ricardo's conviction thsrt diminishing returns in agriculture presented the one exception to general gains from technical progress. Yet these critiques did little more than suggest where Ric- amio was mistaken, and they did little to replace the distributional conception of the Principles with anything different. Particularly, they also did not investigate the significance of machinery introduction in any broader 21 social framework. The one figure of the nineteenth century who was in- deed interested in the added machinery chapter of Ricardo's third edition was Karl Marx. Marx, outside of the English Classical tradition of political economy, was well aware that the new chapter transformed certain basic assumptions operating in Ricardo's thinking, which he had analyzed ex- tensively in his own Theories g; Surplus Value, Part II. In particular, Marx focused on the question of unemployment, arguing at length that the re-employment of those displaced from production by machinery could not be expected to come about in any systematic fashion, as suggested by McCulloch and others in what Marx called the theory of compensation. Thus, criticizing the optimism implicit in Ricardo's dis- cussion, Marx emphasizes the contingent character of the re-absorption of labor: b no means does a necessary connection exist etWEen the revenue—that has been set free—End the workers that'havefbeen set free of revenue.18 For? Marx, capitalist production involves a constant race betnveen the process of labor displacement through techno- logical unemployment and a relatively independent process 0f labor re-absorption through accumulation. Marx, thus, was sensitive to the need to formulate a population law distinct from the Malthusian principle which Ricardo had adopted, and did so in his own reserve army of labor 22 analysis. Indeed, it might be argued that much of Marx's own thinking in Capital stems from his investigation of questions only raised by Ricardo in this connection.19 For example, Marx's account of the falling rate of pro- fit is derived from an account of the continued replace- ment of labor by machinery (the rising organic composi- tion of capital). Accordingly, in turning below to the discussion of Ricardo's distributional conception, some attention will be given to the question of the Malthusian population law, as suggested by Marx. In the tradition of post-Ricardian marginalist econ- omics, Alfred Marshall made serious study of Ricardo's thinking, in the process defending it against those such as William Stanley Jevons who believed it entirely without merit.20 Marshall, however, was mostly interested in res- cuing Ricardo from total neglect, and consequently, he devoted most of his commentary to the argument that Ric- ardr>did.in fact operate from a supply and demand perspec- ‘ttve, investigating the cost of production supply side of the: economy at greater length only because it was less strxaightforward than the relatively simple utility demand skis. While Marshall also made a study of the relation- Ship between diminishing returns in agriculture and im- Provements as Ricardo characterized them,21 his interest here was not directed to how the Ricardian system itself 23 was affected, but rather to a careful statement of the relatioship between the diminishing marginal productiv- ity of a continuously variable factor and technical im- provement. Indeed, Marshall's perspective is characteristic of much of the treatment received by Ricardo from sub- sequent economists of the marginalist tradition. Their interest in Ricardo has generally been confined to the examination of his discussion of substitution, and then not from his own Classical orientation, but from that of Inodern general equilibrium theory. Three prominent fig- ‘ures in this respect are Knut Wicksell, Friedrich von ‘Heyek, and John Hicks. Wicksell22 recognized that the implicit wage fund theory of Ricardo's added chapter was not consistent xvith the account of substitution of fixed capital for circulating involved in machinery introduction. The de- Imxnd for labor depended upon the relative prices of la- lxxr and machinery in this analysis, but according to a wage fund theory it could only depend upon the amount 0f capital set aside for labor and raw materials. Thus, Wicksell pointed towards a complete marginal productivity analysis, in which productive factors were to be remuner- ated in terms of their marginal products. This implied fully flexible wages, which while acceptable within the 24 framework of marginalist thinking, were foreign to the Classical conception that tied wages to subsistence. Hayek, in his Profits, Interest, and Investment of 1939, described the substitution between machinery and labor in Ricardo's Principles as "the Ricardo effect," and went on to detail the changes in relative commodity prices associated with such substitution in terms of their capital-intensive or labor—intensive character. Here, however, his interest was in changes in the real wage of labor, whereas Ricardo sought to explain not a change in the level of subsistence, but rather a change in the money wage resulting from higher corn prices. Ac- cordingly, Hayek's famous use of the expression, "the Ricardo effect," really involves a non-Ricardian set of questions, and explains little about what concerned Ric- ardo in the added machinery chapter.23 Hicks, though still primarily interested in general equilibrium issues, has devoted some thought to an aspect of the machinery question that was central to Ricardo's own treatment, that is, technological unemployment. In his Theory of Economic History he constructs a Ricardian type model involving short run reductions in both output and employment.24 He allows, that is, that technological unemployment may well occur, and investigates the manner in which re-employment may come about. However, Hicks' 25 treatment is distinct from Ricardo's in that reduced em- ployment and output is explained by a period of machine construction that is labor-intensive, so drawing laborers from production of current goods. At a later point in time, output and employment return to or exceed previous levels. Ricardo's analysis, as will be seen below, in- volves an immediate fall in employment due to machinery introduction - not construction. More importantly, noth- ing in Hicks' analysis raises questions about Ricardo's original arguments, the intent being not to examine Ricardo, but rather to give one analysis of technolog- ical unemployment in an historical study granting its existence. In contrast to the marginalist tradition, the more recent Cambridge, England post-Keynesian or indeed per- haps more appropriately nee-Ricardian tradition devotes naturally more attention to Ricardo's own framework and positions. With respect to the machinery chapter, both Luigi Pasinetti and Piero Sraffa have made judgments a- bout the impact of the discussion on the Principles. Pasinetti focuses on the mathematical consistency 0f Ricardo's thinking in the original distributional ar- gument of the Principles, setting forth the first com- Plete model of its statics and dynamics. In Pasinetti's view, Ricardo's model is mathematically determinate as long as all sectors of production use fixed and circulat- ing capital of the same durability and in the same pro- portions.25 Yet this can no longer be the case in the context of the added chapter when substitution of fixed for circulating capital occurs at different rates from one sector to the next, and thus Pasinetti takes the chapter to represent Ricardo's frank acknowledgement of the math- ematical "limitations of his theory." He does not, how- ever, pursue the nature of these "limitations," nor be- gin to explain how Ricardo's thinking might be transform- ed either quantitatively or qualitatively. Sraffa, responsible for the scholarly preparation of Ricardo's works and thus one of the most knowledgeable of the commentators on Ricardo, asserts that the added chap- ter of the third edition of the Principles is the "most revolutionary change in edition 3," but does not explain why he believes this to be so. Some suggestion is made in this direction in a note claiming "a gradual shift of em- Phasis from the antithesis of rent and profits to that of wages and profits."26 Thus, though the significance of the chapter is allowed, little analysis of its specific impact is available, as from Pasinetti. Finally, the continued development in recent years Of the history of economic thought as an area of special- ization for scholars has produced a number of studies of 27 Ricardo's thought which go some distance towards evaluat- ing his work within its own framework. Three individuals are of particular importance in this respect: Joseph Schum- peter, Mark Blaug, and Samuel Hollander. Each has a care— fully constructed analysis of Ricardo's thinking that ad- dresses the issue of the addition of the machinery chapter to the third edition of the Principles. Schumpeter's treatment in his comprehensive History 2; Economic Analysis possesses two related dimensions. In the first place, he argues that Ricardo should be understood to have seen technological unemployment as temporary, since the re-employment of labor represents a second set of events that follow from labor's displacement, the forms of re-em- ployment representing "not exceptions to his argument but result logically from it, if it be continued beyond the jpoint reached in the numerical example."27 Consequently, in.contrast to Marx's view, for Schumpeter it is Ricardo, rather than McCulloch, James Mill, Torrens, Nassau Senior, or J} S. Mill, that is said to be the author of the theory of compensation. This interpretation, however, cannot be Corzrect, because Ricardo put forward his analysis specif— ica]_ly to explain labor redundancy, while McCulloch and the (others denied from the outset that labor could find itSe];f technologically unemployed for any period of time. Sdnnnpeter's view, then, mis-reads the immediate reaction ! 1 ) 28 to Ricardo's work among those termed Ricardian. Secondly, Schumpeter sees the entire dispute over labor redundancy to have issued from the inadequate wage fund method of analysis peculiar to the Classicals. In his view, the controversy "vanished from the scene as a better technique filtered into general use which left nothing to disagree about."28 That is, when the analyti- cal principle of substitution between factors of produc- tion became fully appreciated, it would be clear to all that technological unemployment could not persist — thus there would be "nothing to disagree about" - since rela— tive factor price movements would leave all factors ful- ly employed. This argument, recalling Wicksell, neglects aigain the fundamental differences that exist between the Classical and modern general equilibrium approaches. As \Nas pointed out some years ago, indeed before Schumpeter's History, the understanding of unemployment differs between the Classical and modern general equilibrium or neoclassi- cal approaches. Specifically, Ricardo's "long-run" equilibrium concept was different from the later, neo-classical one, denoting not equilibrium as worked out for a iven quantity of factors available, but rather e terminat- ing point of a process in which the rise or fall of the supply of labor and the changes in the current rate of capital accumulation adjusted both prices and factor remuneration to their "natural" level.29 Thus in Classical theory unemployment can exist when not all Of those displaced are able to find employment at the 29 "natural" wage. Whether wages are sufficiently flexible to permit marginal products and wages to equilibrate is consequently irrelevant, and therefore Schumpeter is in error in suggesting that the problem of technological un- employment vanishes with the appearance of a new technique of analysis. Indeed, this suggestion is at best a norma- tive one, since it implies that a state of affairs said to obtain in actuality by Ricardo ought not to obtain if conceived of differently, namely, in terms of considerable ease of substitution between factors of production on any occasion. Ricardo, however, was not interested in measur- ing reality by technique, but rather in understanding the reality of distribution by whatever technique was most ap- propriate. This is demonstrated in the added machinery chapter where Ricardo's earlier positions are candidly a- bandoned in the retractions expressed there. Mark Blaug is one of the few modern historians of econ- omic thought to assert that the addition of the machinery chapter to Ricardo's Principles seriously affected the ar- gument present in the first two editions. In his Rigardian Economics, he claims Ricardo never integrated his revised views on the machinery question with the rest of his analysis and it is difficult to decide what significance he ultimately attached to them.3 Blaug goes on to suggest that the machinery chapter "opens up a whole series of unanswered questions about Ricardo's system." Indeed he points out that increases in money wages that are accompanied by more than proportionate decreases in employment imply a falling relative share of the social product for labor. More generally, "the same factors which tend to raise labor's money share in the absence of technical change ... tend also to produce the kind of improvements which counteract this effect." Blaug thus begins to follow out the consequences of the addition of the machinery chapter to the Principles, and realizes that the conclusions of the chapter disrupt Ricardo's existing distributional conception. However, he does not carry this investigation beyond suggestions. Perhaps in his view so much of this conception would need to be abandoned that it would be unilluminating to carry through the analysis. Thus, about Ricardo, Blaug adds: It is not surprising that he failed to carry through with the analysis; for to have done so would have vitiated the simple model he had constructed to convey the undesirable conse- quences of the corn laws. It is true that much might need to be set aside, but it iS nonetheless important to discover how Ricardo's treat— ment of distribution would alter, since he investigated an actual system of distribution in an economy and soc- iety not entirely dissimilar from that currently exist- ing. Moreover, an understanding of the modern system of distribution depends in part on a comprehension of its genesis, and this may be better explained when a clear account of political economists' efforts at re-adjust- ment of their thinking in response to perceived changes in the world is accomplished. Hollander's main focus in his treatment of Ricardo on machinery introduction is the links and differences between Ricardo and John Barton, as well as the timing of Ricardo's change of position. While Ricardo can be shown to have accepted much of Barton's analysis in the original Principles, Hollander argues, his analysis of the sudden conversion of circulating capital to fixed is novel and distinguishes the third edition of the iPrinciples. Moreover, in Hollander's view, Barton had not considered this case, so that Ricardo's contribu- tion is an original one. Finally, Ricardo seems to have changed his position after writing his "Notes on Malthus," in contrast to Sraffa's view that there are hints of the new position in the "Notes.”2 The thrust of Hollander's discussion of the machinery chapter‘is to be found in his characterization of the case 0f sudden conversion of circulating capital to fixed as an exceptional one. The extended analysis of machinery in the Prin- ciples and its defence in the correspondence e ps us understand Ricardo's method of proce- dure. It suggests that in setting out the in- itial case in wage-fund terms the object was to devise the simplest conceivable arithmethical illustration for pedagogical purposes, to illus— trate a principle by means of a 'parable.‘ When obliged to spell out the precise operation of the economic process Ricardo recognized that the parable was an inadequate representation. The spelling—out of the economic process is charted by Hollander through Ricardo's correspondence with McCulloch subsequent to the publication of the third edition. Here Ricardo allows that the reduction in output and employ- ment resulting from machinery introduction is seen to oc- cur in wage goods sectors rather than those sectors in which new technology is actually introduced. The effects then are industry-wide in that the reduction in demand for labor in the sector with more machinery leads to a reduc- tion in laborers' demand for wage goods, which according- ly contracts. The simple "arithmetical illustration" em- ployed by Ricardo, however, short circuits this sort of interdependency, because of its reliance upon the notion of capital as a wage fund. In contrast, Hollander suggests, the more complicated understanding of the economic process Which is to be found in the correspondence indicates an intimation on Ricardo's part of a system of general equi- librium that transcends the wage fund notion. This approach follows the general presuppositions that Operate in Hollander's reading of Ricardo. In his "Intro- the reader that he rejects the view that nineteenth century 33 political economy reflects a "dual-development" that dis- tinguished general equilbrium analysis from a character- istically Classical approach relying on the dichotomiza- tion of distributional and commodity prices. For Hollan- der, however, these are "inextricably intertwined," and the alternative approach a mis-reading of Ricardo: "But in any event it is my belief, which I shall justify in the course of this work, that this corpus of interpreta- tion is unacceptable."34 In the context of machinery introduction, then, it is important to conceptualize the substitution of machin- ery for labor in the framework of a general equilibrium. Specifically, in a general equilibrium there can be no permanent unemployment, so that it is necessary to read Ricardo as emphasizing re-employment equally with the ex- pulsion of labor from production. In this respect, Hollan- der makes use of Ricardo's adherence to Say's Law of Mar- kets. Allowing that Ricardo relied on Say's Law for de- fense of his profit analysis to Malthus, Hollander adds, it also played a central part in the analysis of adjustment to change (such as technological progress that expels factors from particular sectors or legislative intervention that at- tracts factors into particular sectors) and is conspicuous in the structure of equation defin- ing general equilibrium.35 By Say's Law, that is, those displaced by technical pro- gress must find employment elsewhere. Indeed in his dis— 34 cussion of Say's Law later in The Economigs p; payig Rip- gggp, Hollander cites Ricardo's views expressed in Parlia- ment in 1819 on the nature of the post-war depression, and states: Given the presumed temporary nature of the disturbance and the processes of corrective resource allocation at work, Ricardo was pre- pared to assume a state of full employment in the course—bf’his policy pronouncements.3 Any unemployment resulting from machinery introduction, that is, must be conceived of as temporary or 'frictional' in the modern sense of the term. Yet, this interpretation does not stand up well upon a frank reading of the added machinery chapter. There, as ‘will be seen, Ricardo claims his former positions mistaken, and asserts that unemployment of labor is possible. Cer- tainly, it should be emphasized, if Hollander is correct, Ricardo must have allowed there to be temporary unemploy- ment prior to the retractions expressed about unemployment in the added chapter. Therefore, the position of the chap- ter must amount to something more than a characterization mf the 'frictional' sort. Indeed, nowhere in the chapter Woes one find any guarantee from Ricardo that all of those displaced will ultimately be returned to employment. Thus, the reference to views of 1819, two years before the publi- cation of the third edition, should not be taken too ser- iously in the evaluation of the added chapter. 35 Whether or not Ricardo's numerical example should be regarded as a special case, then, is not clear from Hollan- dezr's arguments. This would depend upon whether Ricardo cazl'be understood to have operated on all occasions from a general equilibrium, resource allocation perspective. YErt, irrespective of what might be concluded on this mat- ter, the general view that Ricardo possessed the same 1flleoretical conception throughout his work forestalls any iruvestigation of a disruptive impact that might be present 511 the third edition's added machinery chapter. Hollander, thert is, like many other commentators, assumes an absence of? conceptual development in Ricardo's thinking that may reflect contradictions rather than smooth progress. It is “fine former, however, which must be considered before the latter can be claimed. Moreover, it is the more awkward development of an individual's thought that displays best the; limitations and possibilities in a work passing through muJJtiple editions. Let us turn, then, to Ricardo's origi- nal system of understanding, in order to be able to deter- mine: whatever departures from it may appear in the added Chapter. Theoretical Foundations of Ricardo's Original View I Ricardo's original conception was outlined above. ”We are concerned with a model assuming land limited in quality L 36 and quantity, insignificant technical progress in agri- culture, and an absence of international trade in corn in virtue of corn duties. With the growth of population and attendent capital accumulation, according to the theory of differential rent, cultivation is extended to inferior lands, and increases the share of rent in the social pro- duct. Though real wages are essentially constant, money wages as well as the share of wages in the social product rise, reducing thereby the profit rate and the share of profits in the social product. As the rate of profit a— proaches zero, incentives to further investment are lost and the economy settles into the stationary state of no growth. This bare outline of Ricardo's distributional concep- tion, however, is incomplete without an examination of the philosophical and methodological bases upon which its com- POnents rely. Indeed, without closer consideration of Ricardo's theoretical presuppositions, it is not possible to fully evaluate the impact of the added machinery chap- ter on the Princ_iples. As will be argued, Ricardo's ina- bility to grasp the full significance of his admissions in the new chapter can be interpreted to derive in good Part from his inability to comprehend the role his theoret- ical presuppositions played in his original distributional 37 conception. What are these presuppositions then? Fundamental to Ricardo's thinking is his philosophical naturalism or the thesis that the laws of political economy are ultimately given by nature. Implicit in this view is a suppressed dichotomy between society and nature, since the reduction of ostensibly social phenomena to natural conditions requires that nature be regarded as independent of society. The dichotomy is concealed through the view that society is ultimately or essentially natural, so that any distinctively social features of the world are apparent- ly incapable of formulation apart from nature. Yet this view at the same time serves to identify distinctively soc- ial phenomena through contrast with the distinctively nat- ural, namely, that which is unchanging and not subject to human transformation. The distinctively social, then, is 'that which is susceptible to human transformation, partic- lilarly that recorded as fundamentally historical in char- acter. Ricardo, it must be emphasized, denied political econ- cnny possessed any fundamentally historical or distinctively snacial dimension, since he conceived of the laws of polit- ical.economy as unchanging and timeless or ahistorical. "Tflle real laws of political economy do not change."37 Thus the social world is ultimately governed by laws of nature, Vflrich once identified and described permit an analysis of the laws regulating distribution, and accordingly, not the historical, but rather "the natural course of rent, pro- fit, and wages."38 The Principles, then, formulates the long run tendencies of the economy, because it is only within this temporal framework that the laws of nature can clearly be exhibited, free of the short run or temporary disturbances, which, if misperceived, might seem to be counteracting. Ricardo emphasized this perspective in distinguishing natural and market prices: Having fully acknowledged the temporary effects which, in particular employments of capital, may be produced on the prices of commodities, as well as on the wages of labour, and the profits of stock, by accidental causes, without influencing the general price of commodities, wages, or pro- fits, since these effects are equally operative in all stages of society, we will leave them en- tirely out of our consideration, whilst we are treating of the laws which regulate natural prices, natural wages, and natural profits, ef- fects totally independent of these accidental causes. Iiere Ricardo dismisses "temporary effects" on the grounds 'that they "are equally operative in all stages of society." {That is, history does not reflect human transformation of ‘the laws of political economy, because the departures from Iuatural laws are in effect randomly common to all periods. IDndeed, the characterization itself of that domain not en- annpassed in the natural world as "accidental" reflects Ricardo's postulated naturalism. Quite simply, Ricardo most likely never imagined that the laws of political econ- _i_g.. M.9 1233.. 11333.. I229.” 933.. gig” mg” Ibid., 22m... 33351.. Mu mg” as... 2222-. Adam Smith, An In uir into the Nature and Causes egite 5y 31.—Skinner, (fifd’dIesex, 147 p. 24. PP. 30-43. Vol. VIII, p. 279. Vol. IV, p. 19. Vol. I, p. 93. p. 12. p. 21. P. 93. PP. 96-7. P. 77. P. 78. P. 67. Vol. IV, p. 18n. Vol. I, p. 70. p. 112. p. 110. Vol. IV, p. 17. Vol. VI, p. 104. Vol. I, p. xxxi. pp. 111-12. pp. 113-14. p. 125. p. 60. 148 41. For a discussion of this issue, see John P. Henderson, "Malthus and the Edinburgh Review," in Research in the History of Economic Thought and Methodology Vol. II edited y W. J. Samuels, (Greenwich, Connecticut: JAI Press: 1984). Pp. 107—124. 42. For example, should rent on a given piece of infra-marginal land have fallen to 8 hours of labor on corn production, yet the additional labor required on marginal land be 10 hours, then the tenant may pay 9 hours rent to the landlord, set the value of corn on marginal land so as to earn 9 hours of additional labor, and yet still sell corn from both pieces of land for a sum of 18 hours of labor. In this case corn is sold below its cost of production by 1 hour of labor. 43. WOI‘kS, V010 I, p. 5920 44. Ibid., Vol. IV, p. 11. 45 0 Ibid. ’ Vol. I, Pp. 105“6o CONCLUSION In the analysis and interpretation of Ricardo's theory of profit in the last chapter, it was found that two different logics of price determination functioned together to produce a coherent account of distribution in both the first two editions of the Principles and the third. In the first case, profits as a residual of comp modities resulted when the value of corn fell more than its cost of production. This was possible, in Ricardo's view, because rents were not paid on a cost of produc- tion basis. In the latter case, profits as a residual resulted from capitalists' purchase of labor at a value below its cost of production. This again was possible on the baSis of Ricardo's view, since his third edition account of wages opens up the possibility that labor will be rewarded with wages below its cost of production. In what follows, then, the nature of this sort of arrange- :ment, whereby an input to capitalist commodity production, 'will be examined more fully. The general theory of profit that appears in the two distribution accounts of the Principles can be summarized in its most basic terms by focusing on the difference be- tween a sector of production in which all inputs are paid 149 150 according to cost of production and one in which some in- puts are not so rewarded. In the former instance, name- ly, fully capitalist commodity production, all identifie able inputs necessary for the production of an output are purchased themselves as commodities. All inputs, then, have a cost of production in the sense of a labor value established objectively in the market by the "difficulty of production." Capitalists, accordingly, must recoup a determinate value in marketing their output, in order to remain competitive with other capitalists, given the free flow and mobility of capital. In the latter instance, by contrast, namely that of either agricultural production or labor production in the analysis of the last chapter, it is not the case that all inputs to production are pur- chased as commodities. Not all inputs, then, have a cost of production or a labor value established objectively in a competitive market. Consequently, those involved in this sort of production are neither obliged torrecoup a determinate total cost of production, nor necessarily a- ware that, from the point of view of capitalist commodity production, there exists a cost of production to the in- put they provide to the latter sector. Let us, then, distinguish these two sectors, respectively, the fully 'valorized and incompletely valorized sectors of produc- tion. 151 Profits for Ricardo, therefore, result from exchange between fully and incompletely valorized sectors of pro- duction. On average, capitalists can only trade when they restore their cost of production or earn positive profits. On the other hand, those in incompletely valor- ized sectors of production, because they possess inputs which need not be purchased, may continue to exchange with capitalists when the value of what they receive is less than the cost of production of what they provide. In- deed, those in this special position do draw down their stock of non-commodity inputs in some fashion. In Ric- ardo's theory, this is a matter of rent payments falling below the level at which they would be paid if profits were zero,wwhether we speak of traditional agricultural rents to landlords in the first two editions of the 2222f ciples, or of the social organizational rents associated with certain groups of laborers in the third edition. Presumably, then, at some point the persistence of pos- itive profits, with the concomitant transfer of rent to capitalists, has some impact upon those in the incomplete- ly valorized sector. Ricardo, however, does not begin this question, since his entire emphasis rests upon the fate of profits. We should also note that Ricardo does little more than consider the possibility that rents will fall and 152 so create profits. Though it was his intuition that there was something unique in, particularly, the trade between capitalists and landlords (via tenant farmers), he himself did little more than set out the boundaries of the interaction in the market between the capitalist sector of production in which no rent was paid and that capitalist but incompletely valorized sector in agricul- ture in which it was. That is, that the tenant paid a rent on a basis other than his cost of production meant that were it possible that rents fell faster than the increase incease of production through withdrawl of the margin, then profits would result when capitalists in fully valorized sectors, for example, manufacturing, ex- changed commodities with the incompletely valorized sec- tor. Empirically speaking, however, it seemed accepted in Ricardo's time by man that as stock accumulated and the population grew rents would swallow upcan increasing share Of national income. Conversely, then, were the margin of cultivation withdrawn by any means, profits could be expected to take an increasing share of nation- al income. Ricardo, thus, sought an explanation for these more than proportionate changes in distribution for given changes in the extent of trade, and came to focus on the distinct character of price determination in distribution. That rents, then, were not paid on a 153 cost of production basis meant that land was an input of special character in corn production, so that trade with this sector on the part of those sectors of production where no such input existed possessed unique opportunities for the creation of profits. Ricardo concluded, as rents fall, profits rise. In the third edition focus on the relationship between laborers and capitalists, Ricardo only began to grope to- ward the explanation of another source of profit. While again it was not entirely clear how the exchange of labor for subsistence commodities resulted in profit creation, nonetheless the admission of technological unemployment revealed new possibilities to Ricardo in the determination of wages. Thus, since the precedent for analysis of dis- tribution on an other than cost of production basis had been established in the initial formulations of the pro- fit theory of the first two editions, it is fair to com- plete the details of an exchange between a fully valorized capitalist sector and an incompletely valorized labor pro- duction sector, and to term the resulting account Ricardian. Specifically, the analysis of a social organizational rent, while not elaborated by Ricardo in any way whatsoever, still issues from the intuitionothat those earning rents might find themselves rewarded differently than those pro- viding inputs to production on a cost of production baSis. 154 That is, the very possibility that wages might be paid below the cost of production of labor was created when Ricardo glimpsed the fact that technological unemploy- ment placed the compensation of labor on a new footing than had been the case in the argument of the first two editions of the Principles. These conclusions, it should be recalled, derive from the differential reading of the Principles' distinct distributional accounts. At the same time, the distin~ guishing of the first two editions from the third was made possible by the analysis of the impact of the added machinery chapter on the original distributional concep- tion of the Principles. Thus, though Ricardo's theoret- ical development has been understood to have involved contradition and adjustment, nonetheless consistency has- been assumed across the three editions in terms of an iden- tical theory of profits as a residual. This single view of profit, seen in two distinct contexts, then, has per- mitted a deeper investigation of the nature of that ac- count through the analysis of completely and incompletely valorized sectors of production. APPENDIX- Ricardo and Locke, Sraffa and Wittgenstein iIn this'exploratory discussion of David Ricardo's thought, the historical and philosophical foundations of Ricardo's work will be investigated, in order to es- tablish the general character and significance it pos- sesses. This discussion will Operate on two different levels. In the first place, the origins of Ricardo's own efforts are explored in terms of the figures and traditions of the period that began in the latter half of the seventeenth century. In the second place, the contemporary Ricardian interpretation of Ricardo's work is briefly considered, through an evaluation of Piero Sraffa's role in re-establishing Ricardo to modern pol- itical economic study. The advantage of this double discussion, we will see, rests with the understanding it renders of the different principles of investiga- tion in the Principles. At the same time, approaching Ricardo in this way permits a distinct interpretation of the latter's work to emerge in all its consequences. In the succeeding chapters, the understanding produced here will be pursued first in terms of textual develop- ments 0f the Principles, and then in terms of the theory of profits Ricardo conceptualized. 155 156 Since David Ricardo's work is representative of Classical political economy, and since Classical polit- ical economy is a component of Classical Liberalism, it is important to briefly examine the proportions and dim- ensions of the latter, in order to place Ricardo's work in its original context. The significance of this work, that is, depends in part upon its conception in the mind of its author. While we cannot identify Ricardo's more philosophical intentions, we can describe the climate of thought of his time, which must in some degree have determined those intentions. Once, then, we have estab- lished the general character of Ricardo's program, we will be in a position to evaluate the extent to which he was able to fulfill this program. Classical liberalism, then, can basically be under- stood in terms of natural rights philosophy, individual- ism, and arguments for the limitation of the sovereign power of the state through constitutional government. In IBritain, Classical Liberalism developed in the revolution- ery period that culminated in the ascendancy of William and Mary to the British throne in 1688, and saw its per- Zhaps most original and fundamental expression in the ‘work of John Locke (1632-1704). Locke, particularly in his 232 Treatises 2; Government, probably written as early as 1681 but published in 1690, set out to defend 157 the revolution, in the process drawing upon a tradition of political thought that extended back through Thomas Hooker to Thomas Aquinas. He was the first to clearly state the ideals of the revolutionary period, including the specific civil liberties - freedom of thought, of expression, and of association — and the security of property, and was also the most direct in linking these to their means in constitutional government, that is, government that must work within limits set by law and a legislature established by an informed electorate. At the core of Locke's political thought was a fun- damental postulate about the general nature of social value, namely, that all value ultimately inheres in the satisfactions and realizations of the individual human personality. Put differently, all value ultimately is explained by the self-directed efforts of the individual, who is his own best judge of which efforts he ought to undertake. Thus, natural rights were inalienable for Ibcke, because the individual himself was sacrosanct in the social world. At the same time, a theory of im- prescriptable individual rights was necessarily intui- tional. That is, there is no way to defend such an ac- count except to affirm, as did Locke, that such rights ware self-evident or, more strongly, inherently natural. This position, it should be noted, well served the in- 158 terests of an emerging commercial and industrial middle class in its struggle against an established landed gen- try, since ideals promoted through this sort of rational- ist argument would not be subject to debate nor negotia- tion. Indeed, in the seventeenth century in Britain, the ideals of Classical Liberalism were perceived as rev- olutionary by the landed status quo. Classical political economy, however, did not pro- ceed immediately from this more general context. In fact it was nearly one hundred years before Classical Liberalism produced a theory of the economy, as well as a theory of jurisprudence. By this time, moreover, Lib- eralism was as a whole changed in character, while its currents had multiplied. The continued progress of the commercial and industrial middle class since 1688 had permitted differences to appear between different ele- 1ments of the middle class that had formerly been sub- sumed under common revolutionary purpose. Also, dif- .ferent issues were on the historical agenda by the end of the 17003 that reflected a century of increased pol- itical power and wealth. Thus, generally, the questions at hand no longer (concerned the formulation of a new program and concep- ‘tion of society, as had occupied Locke and others, but ‘rather the practical implementation of this program, or 159 its institutionalization in the expanding precincts of middle class power. Liberal reform accordingly replaced revolutionary Liberalism, and Liberalism came to be con- cerned with the modernizing of administration, the im- provement of legal procedure, the reorganization of the courts, the creation of sanitary codes and factory in- spection, etc. This, then, was all a matter of the ap- plication of general principles for a Liberal society to specific problems. It was no accident, therefore, that Adam Smith's (1723-1790) Wealth 9; Nations and Jeremy Bentham's (1748-1832) Fragment gp’Government both appeared at the end of the 17003, indeed both in 1776, the former pro- ducing a conception and guide to those policies that would enhance the operation of an expanding market econ- omy, and the latter providing the first explicit ex- pression of the utilitarians' greatest happiness prin- ciple that justified specific legal, political, and in- =stitutional reforms. The rationalism or intuitionism of the revolutionary period, thus, came to tempered and complemented by the more prosaic evaluation of practi- cal matters, and Classical Liberalism evolved into the Liberalism that would characterize the social reforms throughout the nineteenth century. We might summarize this transition by describing those intellectuals with (160 whom Ricardo associated, known as the Philosophical Rad- icals, as hardly the revolutionaries of one hundred years earlier, but rather as reformers bent upon strengthening the new status quo that was developing with middle class power. Given this, placing Ricardo's thinking in a more general framwork involves determining the specific way in which he inherited his share of the understanding and responsibilities of nineteenth century Liberalism. 0n the surface this has seemed unproblematic to many. Two sources of Ricardo's intellectual heritage are readily identifiable, and these might seem to exhaust the theo- retical foundations upon which Ricardo's political econ- omy was established. 0n the one hand, there is the in- itial wave of the Scottish Enlightenment of Glasgow and Edinburgh that arose in the late 1700s.1 Francis Hut- cheson (1694-1746), David Hume (1711-1776), and Adam Smith form a succession of reasoning that produced both the early roots of utilitarianism and Smith's fundamens tal rationale for free trade. Clearly this was communi- cated to Ricardo through James Mill (1773-1836), another Scot, and his most influential companion. 0n the other hand, Bentham, again largely through Mill, brought one strain of the eighteenth century English Enlightenment to Ricardo's attention. Figures such as David Hartley 161 (1705-1757), with his associational psychology, influ- enced himself by John Gay (1685-1732), Who early argued the connection of morality with private happiness, to- gether with the most significant sensationalist of the French Enlightenment, Claude-Adrien Helvetius (1715-1771), who sought a thorough-going account of the derivation of all ideas from sense experience, were all significant in the development of Bentham's commanding expression of a psychological utilitarianism that came to dominate the middle class reform movement in its seemingly non-norma- tive conception and practice. Indeed Mill, despite his Scottish origins, was more familiar with this latter tradition of the English Enlightenment, with its brief detour through Helvetius, than he was by Hume's empiri- cism, skepticism, and incipient utilitarianism.2 At the same time, Locke's rationalist formulation of the early foundations of Classical Liberalism was largely absent in these two traditions that came to op- erate on Ricardo. Hume only read Locke for his sensa- tionalism or empiricism, and discarded what Locke had himself inherited from Descartes in an.emphasis on the inner sense of reflection or intuition. Similarly, the other tradition of the English Enlightenment, distinct from but parallel in time to that which Bentham drew upon, namely, Cambridge Platonism, stemming from Ralph 162 Cudworth (1617-1688), master of Christ's College, Came bridge, and Locke himself, seemed altogether non-exis- tent in the intellectual concerns of the Philosophical Radicals of Ricardo's time. Locke, we might note, had early considered himself a Cartesian, and had actively participated in the ori- tique of Aristotelianism in British universities, which became pervasive in the 16605 with the study of Descartes' deductive Platonism in philosophy, geometry, and optics. When by the 1690s Descartes himself was replaced as a text at Cambridge by the works of Newton and Locke, the ideal of deductive science had become standard. Thus, as Locke turned to the study of society, he set out to find the first principles of the moral sciences, from which specific political and ethical propositions would derived in a manner as certain as that involved in the study of physics or mathematics. Accordingly, on one occasion he comments: I cannot but think morality as well as mathe- matics capable of demonstration if men would employ their understanding to think more about it and not give themselves up to the lazy trad- itional way of talking one after another.3 Similarly, in the well-known Egggy Concerning Hpggg’gggggr standing Locke asserts: I doubt not but from self-evident propositions, by necessary consequences, as incontestible as those in matematics, the measures of rights and 163 wrong might be made out, to any one that will apply himself with the same indifference and attention to the oge as he does to the other of these sciences. Indeed, thought Locke also gave rise to a tradition of empiricism and sensationalism, that is, in the other line of the English Enlightenment that led to Bentham, in soc- ial theory his reliance on those propositions the middle class regarded as indisputable and self-evident left this side of his thinking strictly rationalist. By contrast, Hume, the premier figure of the Scot- tish Enlightenment, accepted the Aristotelian dictum that reason was the slave of the passions. Following Hutcheson he asserted that, Morality is nothing in the abstract Nature of Things, but is entirely relative to the Senti- ment or mental Taste of each particular Being .... Moral Perceptions therefore, ought not to be classed with the Operations of the Under- standing, but with the Tastes or Sentiments.S Further, the moral sciences are primary among all the sciences in Hume's estimation. There is no question of importance, whose dec- ision is not comprised in the science of man: and there is none, which can be decided with any certainty, before we become acquainted with that science. In pretending therefore to ex- plain the principles of human nature, we in ef- fect propose a complete system of the sciences, built on a foundation almost entirely new, and the only one upon which they can stand with any security.6 Hume, of course, was not only the great empiricist of the 164 eighteenth century, but was also the most prominent skep- tic and philosophical critic. His principle of analysis of speculative ideas was to demand the sense impressions from which they must in his view be derived. In the case of moral sentiments, he demanded the passions from which they were derived. Smith and Bentham were both influenced by this form of reasoning, and through Mill they were the two major figures in Ricardo's intellectual environment. Smith followed both Hutcheson and Hume in developing a morality of the sentiments or passions. Human nature was a psychological mechanism divinely designed so as to be capable of producing human happiness by an excess of pleasure over pain, and through which, moreover, one could discover the source of any moral sentiment in the human passions. In the Theogy gf,Mgg§l Sentiments Smith set out to examine the particular qualities of the various moral sentiments, a task that Hume had foregone. He con- cluded that there was no specific moral sense - nothing approaching the notion of a moral conscience - but that a Divine Plan operated in the affairs of society that insured that human happiness would be maximized by the interplay of human passions. Indeed, the moral senti- ments that resulted, primarily, benificence, justice, and prudence, for Smith "have no tendency to produce any but the most agreeable effects"7.upon individuals in 165- their self—interested interaction with one another. More generally Smith asserts, Nature, when she formed man for society, en- dowed him with an original desire to please, and an original aversion to offend his breth- ren o In the Wealth gf Nations, then, this deistic conviction in the essential harmony of society was translated into the framework of the market. The unseen hand harmonized the disparate needs and goals of individual economic ac- tors and produced the greatest good possible as long as trade or exchange was unhindered. Bentham's adoption of the empiricist conception of human nature provided the foundation for his psychologis- tic calculus of pleasure and pain with which proposals for social reform might be judged. He also strongly op— posed, following Hume, any natural rights understanding of such programs, relying on what he believed to be a stronger standard, which was not laden with value assump- tions, and depended upon the self-interested individual's enlightened response to reward and punishment. Moreover, the greatest happiness for the greatest number was some- thing to be produced by legislation and reform, so that :it could not be the case that the natural order with any aystem of natural rights possessed an intrinsic social advantage. Let us now consider Ricardo's place in the intellec- 166 tual currents of this period. At the outset, however, we should note that while in fact Classical political economy was initially formulated by Smith in the context of much of the Liberalism we have just examined, it was not in its essential purpose - the defense of laissez faire - logically tied to any of these propositions. That is, though free trade might well be justified by the notion of an unseen hand in the market, the standard of the greatest good for the greatest number, etc., in fact these were only arguments that had been brought to bear in its defense. Thus, for an individual like Ricardo, who from his own practical experience must have long been convinced that commerce must be set free of protective tariffs, navigation laws, and various burdensome taxes, there was no necessity, upon turning to the elaboration of the principles of political economy, to put to use anything in particular in the immediate heritage of Lib- eralism. Moreover, for at least two reasons it can be argued that theoretical foundations other than those of Smith and Bentham were more appropriate to Ricardo's un- derstanding of the economy. First, Ricardo made very little use of either the notion of the unseen.hand or the greatest happiness prin- ciple. Indeed in the first case, Ricardo argued in a 1.67 distinctly less than optimistic vein that should trade restrictions in the form of grain duties not be removed, profits would fall until a point was reached at which accumulation would be halted. The suggestion of stag- nation, of course, hardly reflects Smith's promising forecast of harmony and prosperity. In the case of the utilitarian greatest happiness principle, moreover, al- though' the freeing of trade from restriction might well improve the happiness of the middle class, it might also reduce the happiness of the landed class. Accordingly, if Ricardo was confronted with the alternatives of stag- nation or free trade, use of either the unseen hand no- tion or the greatest happiness principle would be diffi- cult at best. His general neglect of these conceptions, then, does not appear accidental. Indeed, Ricardo's system is distinguished from that Of many others by his perception that the expansion of the economy through capital accumulation and population growth might place significant numbers in society at a Serious economic disadvantage. Should, for example. a fall in rents deprive landlords of much of their income, and also injure individuals dependent upon them, yet shO‘Uld such a development be in the interest of free trade, then social conflict would be intrinsic to the development of the economy. Similarly, if the introduc- 168 duction of labor-saving machinery is essential to the free development of trade, then again a defense of this involves a recognition that harmony does not always pre- vail in an unhindered market economy. We might speculate, then, that whereas Smith was initially convinced on philosophical grounds that har- mony between self-interested individuals trading in the market could be expected in a laissez faire regime, just as social peace could be found in all other spheres of human interaction, Ricardo, who approached political economy without being bound by a particular philosophi- cal training with a specific set of preconceptions, was relatively free to examine the workings of the economy as they had appeared to him in his own experience in the market activities of London. Accordingly, though well acquainted certainly with the views of the Philosophical Radicals, Ricardo only insisted on the first premise that free trade was desirable. Smith, by contrast, deduced this proposition from his philosophical postulates, and so was really unable to perceive the full range of soc- ial conflict that was possible in the developing econ- omy of the time. In addition, it cannot be denied that by the time Ricardo turned to the study of political economy, the general understanding of the market system and the accum- 169 ulation process was considerably advanced beyond where Smith had left it decades earlier. On the one hand, the economy had gone through substantial changes on account of incipient industrialization, war, and inflation. 0n the other hand, the theoretical debate over particular policies appropriate to the problems these changes had created had become far more incisive than in Smith's time. For example, the bullion controversy contributions, the level of analysis in the Edinbupgh Review, and the pro- liferation of studies of rent with the end of the Nap- oleonic wars all raised the standards of‘analysis above what they had been in Smith‘s heuristic Wealth 2; Nations. Altogether, then, political economists had to have been :more impressed with the sheer intransigence of the theo- :retical difficulties they encountered, so that little time and space could be devoted to elaborating Smithian rationales if concrete, practical results were to be 'produced. Indeed, it can be argued that, on an analytical level, Ricardo's real achievement in the original pub- lication of the Principles was the critique of Smith's 'adding-up' concept of a commodity's value, since it was the abandonment of this proposition that enabled political economists to investigate trade-offs in dis- tribution. At the same time, the 'adding-up' view fit '170 neatly with Smith's unseen hand assumption, so that in Ricardo's critique of this means of establishing the va- lue of a commodity simultaneously one finds the implicit rejection of the notion that the economy operated har- moniously. That this conclusion concerning commodities' values came to Ricardo as a result of reflection on the very practical problem of determining the impact of ris- ing corn prices on the prices of other commodities tes- tifies to the level of political economy requisite at the time in terms of analytical rigor. On the whole, then, Smith's general views about the market economy lacked a place in the political economy that Ricardo ad- dressed in the early 1800s. There is a second reason for separating Ricardo's work from the traditions and concerns of his contempor- aries. Though the principle that the greatest good for the greatest number could function as a justification for free trade, it could also function as a justifica- tion for the restraint of trade and for intervention in the economy. That is, the utilitarian principle was too pervasive in its potential application to require laissez faire alone, so that should one have made it a first premise of political economy, it would not be possible to guarantee what was in fact the first principle of po- litical economy in Ricardo's view, namely, that free 171 was desirable. That the utilitarian principle did re- ceive some support from political economists who gen- erally were interested in free trade alone can be ex- plained by the fact that free trade was for a time wide- ly believed to be in the general interest. However, as soon as the public perception shifted to the conclusion that the greatest number would be most benefited by a restraint of individuals' market activity, the free trade political economist found utilitarianism an un- welcome theoretical resource. Thus, by the time of the last edition of the Principles, it could no longer be denied that involuntary unemployment resulted from the introduction of labor-saving machinery. The only de- fense, accordingly, of unhindered expulsion of labor from production on this account was that the free oper- ation of the economy must be preserved at all costs. Bentham's own views on property are of no small sig- nificance in this connection. On the one hand, Bentham had thought security of property a major condition for achieving the greatest happiness. On this ground, the unhindered use of one‘s property in the market could be justified. On the other hand, Bentham also believed that the law should aim at a comparatively equal dis- tribution of property.9 This, however, suggests inter- ference in the ways in which individuals can employ their 172 property. On the whole, then, the utilitarian was in- volved in balancing the motives of security and equality in the estimation of the greatest good for the greatest number. From a laissez faire point of view, this could well produce conclusions that were unwanted. Therefore, Ricardo's single-minded devotion to laissez faire made this share of the intellectual heritage of the Philosoph- ical Radicals unwelcome as well. How, then, are we to understand the theoretical foun- dations of Ricardo's principles of political economy? If these foundations are to be tailored to the unhesitating defense of laissez faire, and more specifically an unequi- vocal defense of profits and the property producing them, then it seems that what Ricardo required was the simple insistence that free trade had a self-evident value. Yet this suggests the rationalist intuitionism of Classical Liberalism and, in particular, the theory of natural rights as formulated most clearly by Locke. For Locke, individuals possessed a natural right to property; it preceded the establishment of government, and was employ- ed as a principle by the middle class in the 1600s to disarm the landed class in its monopoly of political power. Ricardo, of course, was also highly concerned with the threat to profits and middle class property on the part of landlords who wished Britain's economy to 173 favor agriculture and rental income. In the Lockean tradition, then, he could find the elements of a defense of free trade that both avoided the theoretical traps of Philosophical Radicalism, and which provided a justifi- cation for laissez faire that was largely unshakable. While Ricardo himself does not testify to his de- pendence upon this particular tradition of English rea- soning, a case can be made that Lockean thought, which was certainly still part of the general Liberal under- standing of society, impressed itself upon Ricardo's thinking in his efforts to conceptualize the principles of political economy. In addition to the two points above, which suggest a need on Ricardo's part to look elsewhere than in Philosophical Radicalism for the fun- damental principles of system, two further features of his work indicate that this rationalist tradition was influential. First, there is Ricardo's deductive pres- entation of his thought. Secondly, there are the sim- ilarities between Locke's labor value view and Ricardo's theory. Let us consider the former briefly, and then proceed to the latter. Ricardo's work has often been noted for its pre- cise deductive presentation. Yet it should also be noted that this style of argument is not only distinct :from that of many of Ricardo's contemporaries, but is 174 also premised upon the view that political economy can be reduced to definite principles which, if carefully set forth, permit the derivation of determinate conclu- sions. That is, Ricardo possesses the certainty in his reasoning of the rationalist, who, in the words of Locke, can make "morality as well as mathematics capable of dem- onstration" if only "the lazy traditional way" of think- ing followed by most is given up. Ricardo, moreover, is not the Hume who saw all science ultimately dependent upon the record of sense impressions that particular, historical individuals experienced. Indeed for Ricardo, the principles of political economy have the status of natural laws which hold apart from individuals percep- tion or recognition of them. They are to be discovered, and then set forth in their order from the most basic to those that follow. In the Principles, the former are those that explain the value of commodities, while the latter concern distribution. Let us, then, examine the a theoretical basis for Ricardo's first principles in Incke's own labor value view, since should the Lockean tradition have impressed itself upon Ricardo, we should .find evidence of this in Locke's own formulations. The similarity between Locke and Ricardo on the la- bor theory arises principally in connection with their common willingness to extend labor value analysis into 175 that later stage of society when land has been appro- priated and stock accumulated. Smith, Ricardo's immed- iate predecessor in the labor value tradition argued that the theory was not applicable in later historical stages of society. He turned essentially to the 'add- ing-up' approach to commodity values, which was con- sonant with his philosophical outlook. Thus, that we find Ricardo, against Smith, extending the labor value analysis beyond the early state of society suggests that there were other sponsors of the view who not only maintained the theory appropriate to all times in history, but who also offered some additional rationale for doing so. Locke, it is here suggested, extended the labor value theory to all historical periods, be- cause he associated the labor value of commodities with property in those commodities. That property was a natural right for Locke thus meant that one would al- ways reason in terms of labor values. Further, that jproperty was a natural right also meant that its em, jployment was at the discretion of its owner, so that laissez faire received its foundation in individuals' :natural rights. What are the details of this theory? While Locke holds that "the great and chief 229 ... of’Mens uniting into Commonwealths, and putting theme selves under Government, is the Preservation 2;,their 176 Property,"10 he also holds that men have a natural right to property, or a right prior to and independent of the existence of civil society and government. In fact, the natural right to property is almost indistinguishable from the natural right to life itself for Locke. In The Second Treatise of Government it is asserted: By Property I must be understood here, as in other p aces, to mean that Property which Men have in their Persons as well as Goods.11 Thus, we can see that since in Locke's labor value analy- sis labor is the source of value in individuals' proper- ty, and since property is tied to one's very person, it would make little sense to restrict such an analysis to an early state of society. More generally, we can recall our original characterization of the theoretical core of Locke's thought and Classical Liberalism, namely, that in general all value ultimately inheres in the satisfac- tions and realizations of the individual human personal- ity. value, it can now be said, is not just a quality of the commodity, but is, more importantly, the embodi- ment of the single person, the individual human being, in the material world. To the extent, thus, that in- dividuals are taken as sacrosanct in the social world, so too must be their effects, property, and this can ac- cordingly be characterized in terms of the value they 'work into such property by their labor. 177 Thus in The Second Treatise Locke shows the natural right to property to be derived from the natural right to one's life and labor. Since all men are naturally equal in the sense that no one has a natural jurisdiction over another, every individual has a natural right to life, liberty, and possessions.12 At the same time, since the earth and its products were originally given to mankind in common, and since enjoyment of these requires their appropriation in a form conducive to their use, indiv- iduals have a natural right to property in what they re- move from the earth's common stock through their own 1a- boring activity. However, there are two limitations to this right of appropriation of property. First, an individual may only appropriate as much as leaves "enough and good" for others to appropriate.13 This limit, Locke argues, is required on the ground that each person has a right to self-pres- ervation and thus to the acquisition of the necessities of life. Most importantly, this limit applies to the rappropriation of land, since land enables individuals to support themselves from their labor. Secondly, an indiv- .1dual may only appropriate that which may be used with- out spoilage.14 In this case which applies more to the prnduce of the earth, since land itself does not spoil, barter of surpluses is allowed as long as goods do not 178 go to waste. The significance of these limitations for Locke rests with the conditions under which they may be tran- scended. Thus, as was surely evident, his theory of natural rights in life and property would have been of little plausibility if these limitations on property ac- quisition were absolute. On the other hand, to speak of the conditions under which these natural principles may be put aside is to make the right to actual property holding in the Classical Liberal conception a right that is dependent upon fulfilling specific conditions. Al— though in one breath Locke wants to make the right to property inalienable, in the next he wants require a specific use of property, as did the middle class which he represented. Accordingly, after asserting that by including vacant lands in America it could still be said tat the time of the writing of The Second Treatise that 'there is enough land in the world for everyone, Locke adds: But be this as it will, which I lay no stress on; This I dare boldly affirm, That the same Rule of Pro ert , (viz.) that every Man should Have 53 mucfi as he could make use of, would hold still in the World, without straitning any body, since there is Land enough in the World to suf- fice double the Inhabitants had not the Inven- tion of None , and the tacit Agreement of Man to put—a value on it, introduced (by Consent? larger possessions, and a Right to them .... 5 179 That is, the natural law rule on the limitations to the appropriation of property is“ overturned by the introduc- tion of money, by consent, in the interest of individuals in acquiring "larger possessions." In particular, where money is in use, unappropriated land no longer exists. What, then, is the explanation required of Locke on how the natural limitations to acquisition of property are transcended with the introduction of money? The limitation associated with spoilage is no longer in effect, Locke simply argues, because gold and silver, the forms in which the produce of the earth may be accum— ulated when money exists, are not perishable. An indiv- idual thus may acquire "larger possessions" in this con- nection without transgressing natural law. We must note, then, that the position of the middle class is generally stronger when money is introduced. No serious conditions tare placed on the acquisition of "larger possessions," :and the opportunity for these improves the power and wealth of the class. .The limitation associated with leaving "enough and 4good" for others, Locke then argues, can be put aside if the cultivation of lands that would have been unappro- Zpriated produces a sufficient source of support for that jpart of the population that would have depended upon “their appropriation for themselves. Thus: 180 he who appropriates land to himself by his labour, does not lessen but increase the com- mon stock of mankind. For the provisions serving to the support of humane life, pro- duced by one acre of inclosed and cultivated land, are (to speak much within compasse) ten times more, than those, which are yeilded by an acre of Land, of an equal richnesse, lye- ing wast in common.1 That is, since such land under cultivation produces a yield that can support those without land, they need not actually cultivate it themselves if they somehow receive the benefits from it. Presumably, work for wages trans- fers the land's produce to those without ownership of land. This condition, however, is clearly a more diffi- cult one to meet than the one associated with spoilage. Since land is taken by Locke to be the standard means of self-support for most individuals, landlords' acquisi- tion of large tracts of land places the burden upon them to see to the support of those without land or wealth of other kinds. Indeed, if wages are insufficient outside of agriculture, implicitly the responsibility lies with landlords rather than the employers of the middle class. That is, it is not the responsibility of the manufac- turer to pay a living wage, but simply a wage appropriate to his conditions of production. Locke's theory, thus, begins with a defense of prop- erty in labor value terms, and moves to an implicit cri- ‘tique of the landed gentry. While we do not see Ricardo‘s 181 particular analysis of rents and profits in this account, we do find, as in Ricardo, a labor value view, conflict between classes, contention over responsibility for sup- port of the laboring class, a critique of landlords, and most importantly a defense without reservation of proper- ty in accumulated stock. While Locke has often been char- acterized as a merchantilist on account of his emphasis on the accumulation of precious metals, at the same time it is possible to see a concern with the development of trade in some of his work. Thus, in gehe Considerations 2; The Consequences 22.322 Lowering eT_Interest ehe heTer The 3he_!eThe 23.!2221.°f 1691 Locke suggests that gold and silver are accumulated not for themselves, but as a fund of capital with which to "drive trade."17 Hoarding was clearly inimical to this purpose, and The Second Treatise restriction on spoilage for those accumulating "larger possessions" in the form of stock or durable goods again suggests that Locke was in considerable de- gree concerned with the extension of trade. Ricardo, then, would have found Locke, or the trad- ition of Locke, not too distant from his own concerns. Thus, if we are to emphasize the influence of this line of thought in the interpretation of Ricardo's work it- self, it is important to place in the foreground the theoretical character of the conceptual foundations of 182 Classical Liberalism. In particular, since in the Lock- ean tradition natural rights are intrinsic to all forms and stages of society, and since they are in essence con- stitutive of natural laws which then govern society at all times and in all places, social relations on this view can never be said to change in their fundamental as- pects, so that the laws of political economy must them— selves be timeless and unchanging. On the one hand, then, this implies that the laws of political economy, once id- entified, are fully determinate in their abstract expres- sion, and lack any open—endedness that would require sup- plementation with reference to historical fact or regular- ity. Indeed, reference to historical fact and particular circumstances can at best be illustrative of natural laws which are true and necessary in themselves. On the other hand, this formalist conception also implies that the principles or laws of political economy are unchanging through time. Once set forth, they are as appropriate to one historical period as another, and historical dev- elopment of society and economy is non-existent in all ‘but the most insignificant sense. This rationalist or Platonist conception of a sys- ‘bem.of deductions that can be set out in a hierarchy of Ixrinciples, it must be emphasized again, is closely tied in) the epistemology of intuitionism. That is, if one's 183 basic principles are knowable apart from historical ap- plication and demonstration, then they can only be vali- dated as knowledge by inner reflection and contemplation. In particular, if free trade is a first, indubitable prin- ciple of political economy, this postulate must stand a- part from any evaluation by historical evidence. It must be self-evident, and held with the same conviction with which Locke insisted that certain rights are simply na- tural, irrespective of historical circumstance. Yet, though Ricardo never indicated any doubts about laissez faire, it seems difficult to believe he produced his en- tire analysis of the Principles without relying on his observation of historical practices and rules of custom. was he, then, obligated to a methodology of investiga- tion which he did not, and perhaps could not, practice, in order to explain the workings of the economy? It is the premise of this dissertation that Ricardo was in this dilemma. While his goals were formalist, be- cause of the appeal of this methodology in defense of :free trade, Ricardo's actual investigation relied upon ‘the understanding of specific, impermanent historical in- stitutions and practices. At the same time, it cannot Ice said that the tensions imposed upon his work were ap- Parent to Ricardo. He was not particularly concerned “filth the more philosophical aSpects of his investigation, 184 and accordingly proceeded with a somewhat naive personal optimism about his own efforts, which appears ironic in comparison with the 'dismal' projections often attributed to him. Thus, in the next chapter below, concerning the im- pact on the Principles of the addition of the "On Machine- ry" chapter to the third edition, we see that the system of political economy Ricardo originally sets forth is transformed by his admission that involuntary unemploy- ment results from the replacement of labor by machinery. The social relations originally identified in the first two editions, then, cease to be the focus of the analy- sis that comes out of the changed Principles. According- ly, the status of the natural laws underlying these new social relations is brought into question. While it may still be correct to say that these laws would obtain if historical circumstances were such as Ricardo originally believed, nonetheless, that changes in the economy have occurred by the time of publication of the third edition suggests that these laws are not representative of those principles explaining the economy's operation. Specifi- cally, it may well still be a natural law that increas- ed cultivation results in a declining labor productivity, :yet should profits no longer be subject todthc threat of :rising wages when labor can.be replaced by machinery, 185 then the principles that govern distribution must be sought in the relationship between employers and labor- ers, and these principles may lack a basis in natural law altogether. Generally, then, Ricardo's effort to model the economy on timeless natural law encounters difficulties related to changing historical circumstances, so that given his conviction that history did not modify the basic principles of political economy little success comes of his incorporation of the "On Machinery" chapter in the Principles. In the chapter on profits that follows, a more de- tailed examination of the kinds of principles Ricardo employs in his distributional analysis is developed. On the one hand, the labor value logic of commodities' va- lues is set forth with its emphasis on an objective, cost of production method of determination. Here we see the legacy of the Lockean tradition of natural value. On the other hand, to explain distribution Ricardo resorts to explication of the different historical and institue tional factors involved in explaining the different levels at which the different income classes are rewarded. In the first two editions of the Principles, when it is the contest between the landlords and capitalists that is foremost, profit and rent can only be made sense of for .Ricardo if the fact that rent is not paid on a cost of 186 production basis is emphasized. In the third edition of the Principles, when it is the contest between laborers and capitalists that is central, profit and wages can on- ly be made sense of for Ricardo if it is emphasized that wages are not paid on a cost of production basis. As we will see on the whole, then, Ricardo requires elements of explanation for his distributional theory that cannot be identified without examining the specific, historical ways in which rents and wages were actually determined. Again, therefore, the formalist methodology is inappro- priate to successful investigation of the principles of political economy, and to the extent that Ricardo failed to realize this, the complete accounting of his distri- butional theory must be accomplished by his interpreters. The general conclusions that have been drawn here, it should be said, were anticipated by Piero Sraffa, the editor of Ricardo's complete works. Sraffa, from his study of Ricardo, concluded in his own Production 93 Commodities hy Commodities that a full accounting for the principles that operate in the economy could not be established without reference to the particular, his- torical conditions that operate at any one time. Thus, the linear input-output model presented in Sraffa's own ‘work lacks closure until the level at which wages are paid is specified. This implies that while some of 187 the structures of the economy can be described in natur- alistic terms, namely, that particular commodities that are produced with certain other commodities must always employ those commodities in certain proportions, other components of the economy, namely, its distributional as- pects, depend upon surveying the particular, historical practices and institutions at work in the determination of income shares. Specifically, the proportion in which wages share in the total value produced in an economy cannot be established as if it were a timeless of para- meter of a commodity economy. Wages, and thus profits, are socially and thereby historically determined. These themes, then, dictate Sraffa's reading of Rio- ardo, which this dissertation in good part pursues. Howb ever, Sraffa did not devote much of his discussion of Ricardo to this more philosophical matter. His written contribution is, as all of his writing, concise and un- amplified. Accordingly, demonstration of his philosoph- ical convictions rests along another route. Indeed, Sraffa's philosophical convictions have played a highly notorious role in the history of twentieth century phil- osophy through Sraffals own personal imptct on the man generally regarded as the most important philosopher of this period, Ludwig Wittgenstein. Thus, by establish- ing the philosophical character of this relationship, we 188 may implicitly characterize Sraffa's own philosophical point of view. Wittgenstein, first of all produced two philosophies, one early and one late, and it is the transition to the latter, and the rejection of the principles of the former, that attracts much of the contemporary philosophical in- terest in his work. The first philosophical system Witt- genstein developed, however, was formalist and Platonic. Commonly referred to as logical atomism, it amounted to an analysis of a formal or logical language made up of simple propositions which each corresponded to a fact a- bout the world. The link between reality and thought de- pended upon there being atomic propositions which were said to picture atomic facts, so that complex statements about the world were a matter of representation of collec- tions of facts. These complex statements, moreover, were arrived at by combination of simple propositions accord- ing to the rules of logic. Consequently, the structure of reality itself was indistinguishable from the struc- ture of logic. Further, the only language that was sig- nificant was that which produced truth statements from logically well-ordered simple propositions picturing sim- jple facts. Thus while individuals often utter sentences that appear meaningful, Wittgenstein concluded that they frequently do not say anything whatsoever. '-————7 189' While this account was intended to capture the es- sence of actual language, and thereby the essence of real- ity as well, it was soon argued by Wittgenstein's critics that this formal conception bore little resemblance to actual language. In fact, it was said, one could not be- gin to claim that formal or logical languages of this sort were the essence of everyday language, unless one first analyzed the patterns of meaning in the latter. In this case, however, the structure of reality that Wittgenstein had proposed was evident in the structure of logic would also be open to reinterpretation. Thus, the question of the nature of language dominated early twentieth century philosophical debates, just as had the question of know- ledge dominated earlier debates over Kant and Hume. Wittgenstein, however, came to reverse his position entirely in the early 19308. He inaugurated what came later to be known as the philosophy of ordinary language, and produced at the end of his life the text of the Phil- osophical Investigations, his most famous and influential work. In it, in the words of G. J. Warnock: He came to reject in particular three of the implications or assumptions of his earlier views - first, that language is essentially used for one purpose, the stating of facts; second, that sentences essentially get their meanings in one way, namely, through 'pictur- ing'; and third, that any language essentially has, though it may be hard to see it, the clear and firm structure of the formulae in a logical calculus.18 190 More importantly for our purposes, this position was re- versed when Wittgenstein returned to Cambridge shortly after Sraffa. We may cite Georg Henrik Von Wright's tes- timony to Sraffa's influence on Wittgenstein at this im- portant juncture in the latter's work. Of great importance in the origination of Witt- genstein's new ideas was the criticism to which his earlier views were subjected by two of his friends. One was Ramsey, whose premature death in 1930 was a heavy loss to contemporary thought. The other was Piero Sraffa, an Italian economist who had come to Cambridge shortly before Witt- genstein returned there. It was above all Sraffa's acute and forceful criticism that compelled Witt- genstein to abandon his earlier views and set out upon new roads. He said that his discussions with Sraffa made him feel like a tree from which all branches had been out. That this tree could be- come green again was due to its own vitality. The later Wittgenstein did not receive an inspiration from outside like that which the earlier Wittgen- stein got from Frege and Russell.19 From the preface to the Philosophical prestigations it— self, we may note Wittgenstein's own testimony: I was helped to realize these mistakes - to a degree which I myself am hardly able to esti- mate - by the criticism which my ideas encoun- tered from Frank Ramsey, with whom I discussed them in innumerable conversations during the last two years of his life. Even more than to this - always certain and forcible - criticism I am indebted to that which a teacher of this university, Mr. P. Sraffa, for many years un- ceasingly practised on my thoughts. I am in- ‘ debted to this stimulus for the most consequen- tial ideas—To this book.20 Sraffa, thus, by all accounts has a key place in the or- igins of twentieth century philosophy as it is currently E Practiced. What precisely, then, was this influence? 191 We can get a suggestion of this influence from Nor- man Malcolm's description of an event that took place be- tween Sraffa and Wittgenstein, and which was instrumental in precipitating the latter's abandonment of the logical atomist philosophy he had presented in his Tractatus £257 ico-Philosophicus. Wittgenstein and P. Sraffa, a lecturer in econ- omics at Cambridge, argued together a great deal over the ideas of the Tractatus. One day (they were riding, I think, on a train) when Wittgen- stein was insisting that a proposition and that which it describes must have the same 'logical form', the same 'logical multiplicity', Sraffa made a gesture, familiar to Neapolitans as mean- ing something like disgust or contempt, of brush- ing the underneath of his chin with an outward sweep of the finger-tips of one hand. And he asked: 'What is the logical form of that?‘ Sraffa's example produced in Wittgenstein the feeling that there was an absurdity in the in— sistence that a proposition and what it describes must have the same 'form'. This broke the hold on him of the conception that a proposition must literally be a 'picture' of the reality it des- cribes.2 Sraffa's example, in fact, conveyed to Wittgenstein that meaning is communicated by more than logical form. In par- ticular, a meaning might depend upon the context in which it was created, and any sort of abstract proposition that might be employed to represent the general content of that particular meaning would, in virtue of its provision of the general sense meant, miss the very quality of empha- sis involved in its actual expression. More generally, meaning was not independent of social context as the for- 192 malist Wittgenstein had believed in the Tractatus. In- deed, it was the context of an utterance which distin- guished the meaning present in language, so that formal language was itself ultimately dependent upon ordinary language and its social environment. Sraffa, therefore, criticized Wittgenstein for his formalist conviction that reality could be explained en- tirely apart from the evaluation of the changing circum-' stances of that reality. The world, this implied, could not be known or described completely prior to the ident- ification of those features and relationships which were not true for all time and places. That is, historical development continually transformed society, so that the understanding of language or political economy depended in large part upon grasping what was changed and what unchanged as one moved from one situation to another. Thus, although it would be difficult to say when it was that Sraffa reached these conclusions about ex- planation of social reality, it is clear that he had al- ready developed them with some considerable degree of clarity when he began his work on Ricardo. The role of Ricardo in political economy and social theory, then, has in Sraffa's interpretation a significance beyond what is normally thought to be the case, since Sraffa re-intro- duces Ricardo without, in his own mind, any formalist 193 illusions. Sraffa, that is, makes Ricardo consistent in the latter's explanation of the market economy by allow- ing the full development of those historical elements pre- sent but undeveloped in the analysis of the Principles. He thus completes for Ricardo the Classical explanation of distribution and production as it culminated in the the thinking of its foremost representative in the early 1800s. There is another aspect, however, to Sraffa's re-in- troduction of Ricardo to the study of political economy. Metaphorically, it can be described in terms of a circle of influence in history between philosophy and political economy. That is, while the rationalist philosopher of Classical Liberalism, John Locke, originally impressed upon David Ricardo, the preeminent Classical political economist, the lessons of formalism, these instructions were misguided: thus, when the modern Ricardo, Piero Sraffa, came to address the modern Locke, Ludwig Witt- genstein of the Tractatus, the failures of formalism be- came the lesson, and they were acknowledged. Political economy and philosophy, consequently, cannot be con- structed Platonically in the realm of ideas alone. Moreover, just as for the later Wittgenstein logi- cal atomism required abandonment, so for Sraffa logical individualism of neo-Classical economics required aban- 194 donment. Specifically, on Sraffa's view, the formalist assumption of neo-Classicism that every economic expla- nation is one of constrained optimization on the part of individual economic agents had to be rejected, because this methodology would preclude the analysis of those historically specific economic relationships between in- dividuals in which something other than or additional to individuals simply seeking their own best interest had occurred. Accordingly, Sraffa's presentation of his own version of the Classical program in the Production 2T Commodities hy heehe eT Commodities is appropriately subtitled, Prelude he e Critigue eT Economic Theohy, im- plying a critique of neo-Classical theory. Logical in- dividualism, then, like its philosophical relative, at- tempted a determinacy of explanation which could not be achieved in social analysis. For Sraffa, Ricardo orig- inally demonstrated the contradictions of formalism, yet the consequences of his efforts remained to be learned by political economists and social philosophers more than one hundred years after the last edition of the Principles. In what follows, no explicit attempt to follow out the logic of the Sraffian neo-Ricardian critique will be made. It should be wondered, however, whether the par- ticular theoretical combination of naturalism and his- 195 torical analysis that emerges in the Classical Ricardian system is ultimately a viable one. Indeed, it should al- so be wondered whether Sraffa's hinted-at critique can be carried out on the basis he proposes. Specifically, if one takes the structure of commodity production as given, as somehow natural, and only inquires of the historical forces involved in distribution, it seems that one accepts the notion that commodities have a value in virtue of the individual effort expended on their production. Distri- bution, then, however it may be seen to be historically determined, ultimately is constrained by the proposition that value arises from individual effort. This Classical natural rights principle, nonetheless, cannot justifiably be said to be a priori valid for all times and places. Indeed production can be carried out on other terms, and in fact has been, in other societies and times. Putting these considerations aside, however, what were the initial difficulties Ricardo encountered in his investigation of the principles of political economy in formalist terms? Let us examine the impact of the added "On Machinery" chapter on the third edition of the EEEE? ciples. FOOTNOTES 1. For a discussion of the background on different traditions in the British Enlightenment, see John Herman Randall, The Career of Philoso h , (New York: Columbia University Press, 196?), Vol. l, pp. 711-14. 2. Ibid., p. 924. 3. Cited in Ibid., p. 718. 4. John Locke, £2 Essa Concernin Human Understand- in , edited by A. D. Woozley, (Cleveland: Meridian Books, 1964), Book II, Chapter 3, Section 18. 5. David Hume, AE Enguiry Concernin Human Under- standin , edited by C. W. Hen e , Indianapolis: B0553- fierrlll, 1955), p. 23n. 6. David Hume, A Treatise 2; Human Nature, edited by L. A. Selby-Bigge, (Oxford: at the Clarendon Press, 1888), p0 no ‘ 7. Adam Smith, The Theor e; Moral Sentiments, 6th edition, 1790, (New York, 7? p. 237. 8. gpig., P. 55. Thirg:%d%tgggfg?N§3b§ggk:AHgltégfilngfiatt;éfiég%ln§tgfi§x1961), 10. John Locke, The Second Treatise of Government, edited by T. P. Peardofi7'(lfidlaiafiall§tnfio55s3EEEEIIIT'1952), Section 124.: - d 11. Tth,, Section 173. 12. Thig., Section 4. 13. lp;g., Section 27. 14. Ibid., Section 31. 15. Thie., Section 56. 16. Ibid., Section 57. 196 197 17. John Locke, The Works eT John Locks, 10 Volumes, (London: Thomas Tegg, T883), Vol. 5, p. . 18. G. J. 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