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The concept and process of competition in the theories of Malthus and Ricardo

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The concept and process of competition in the theories of Malthus and Ricardo

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Content THE CONCEPT A ND PROCESS OF COMPETITION IN THE THEORIES OF M ALTHUS A N D RICARDO by A rth u r B enjam in C la rk e A T h e s is P re s e n te d to th e FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In P a r t i a l F u lf illm e n t o f th e R eq u irem en ts f o r th e D egree MASTER OF ARTS (Econom ics) Ja n u a ry 1966 UMI Number: EP44817 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. U M I* ' Dissertation Publishing UMI EP44817 Published by ProQuest LLC (2014). Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 4 8 1 0 6 - 1346 U N IV E R S IT Y O F S O U T H E R N C A L IF O R N IA T H E GRADUATE SC H O O L UNIVERSITY PARK L O S A N G ELE S 7, C A LIFOR N IA C 577 This thesis, written by A rth u r B enjam in C la rk e under the direction of h.±&...Thesis Committee, and approved by all its members, has been pre sented to and accepted by the Dean of The Graduate School, in partial fulfillment of the requirements for the degree of MASTER OF ARTS Dean D a t e JanuOTjl966 THESIS COMMITTEE / 9 7 3 e . 2.-63 2M—G 4 TABLE OF CONTENTS CHAPTER PAGE I ............................... INTRODUCTION....................................................... 1 The P r o b l e m ............................................................................ 5 A Review o f th e L i t e r a t u r e ....................... 8 R e le v a n t Terms and C o n cep ts ...................................... 15 M ethods o f R e sea rc h and A n a l y s i s ............................. 20 O rg a n iz a tio n o f th e R em ainder o f th e T h e s i s ............................................................................ 21 I I . T. R. MALTHUS: AN OVERRIDING PESSIMISM......................... 23 N a tu ra l Law: The Hand o f G o d ...................................... 25 The P o p u la tio n T h e s is .................................................... 25 The P ro f fe re d S o lu tio n s ................................................ 27 The G lu t: A Second S p e c t e r ................................ 33 S o lu tio n s f o r a C o lla p s e ........................................... 61 C o m p e titio n in th e M odel--A S u m m a r y ................... 63 I I I . RICARDO: A RELUCTANT CIRCUMLOCUTION........................... 66 i i The R ic a rd ia n C oncept o f V a l u e .................................. 76 CHAPTER PAGE The D is t r i b u t i o n M o d e l.................................................... 85 C o n c l u s i o n ..................................... I l l IV. SU M M A R Y OF PRINCIPAL CONCLUSIONS A N D AREAS OF FURTHER STUDY........................................................................ 112 The C o n c l u s i o n s ........................................................................ 112 S u g g ested A reas o f F u rth e r S tudy ............................... 116 BIBLIOGRAPHY . . . . . ....................................................................... 118 | C H A P T E R I INTRODUCTION I | The c o n c e p t o f c o m p e titio n as a s o c i a l , b e h a v io r i s t i c p a t t e r n and as a t o o l o f n o n - c e n tr a liz e d c o n t r o l o v e r i m a rk e ts and in d iv id u a ls h a s b ee n re c o g n iz e d and a n a ly z e d o n ly in th e l a s t two hundred y e a r s . The ta r d in e s s o f t h i s p e r c e p tio n i s a l l th e m ore re m a rk a b le when one d is c o v e r s * t h a t e i t h e r c o m p e titio n b etw een th e f o r c e s in th e m a rk e t, ;o r th e r e s u l t s w hich c o m p e titio n w ould h av e pro d u ced a r e now w id e ly c o n s id e re d to b e th e n o rm al o r d e s ir e d b e h a v io r o f human b e in g s . The a d v o c a te s o f a p o s i t i v e d e f i n i t i o n o f , and r o l e f o r , c o m p e titio n came a lm o st e x c lu s iv e ly w ith Sm ith o r |a f t e r him . T h is " p o s t-S m ith ia n " e v o lu tio n o u g h t n o t to o b s c u re , how ever, th e v e ry lo n g p e rio d d u rin g w hich com p e t i t i o n had b een d e fin e d i n a n e g a tiv e way. I t may be term ed " n e g a tiv e " in t h a t th e d e fe n s e o f c o m p e titio n came by way o f an open a t t a c k , w e ll s u s ta in e d , upon m onopoly. 1 ; 2 i F o llo w in g S m ith, R icard o and M alth u s came to occupy th e s ta g e c e n te r in econom ic a n a ly s is , and th e y rem ained i n t h a t p o s i t i o n u n t i l a t l e a s t th e f o u r th d ecad e o f th e l a s t c e n tu r y , and m ore p ro b a b ly u n t i l 1890. Today, th e b e g in n in g s o f many c u r r e n t d e b a te s in th e s tu d y o f ec o - i nom ics can b e found lu r k in g in th e l e t t e r s w hich p a sse d i : betw een th e s e two e a r l y ec o n o m ists and in t h e i r m ajo r * i w orks. I t i s i n t e r e s t i n g to n o te t h a t so l i t t l e h as been w r i t t e n upon th e r o l e o f c o m p e titio n in M althus* and R icard o * s in d iv id u a l a n a l y t i c s t r u c t u r e s . E s p e c ia lly i s ' t h i s re m a rk a b le when one c o n s id e r s th e im p o rta n c e o f th e 1 c o n c e p t to t h e i r r e s p e c t i v e sy ste m s, and th e in f lu e n c e th e y have en jo y e d . C o m p e titio n i s one o f th e p rim a ry fo u n d a tio n s to n e s o f th e ho u se th e c l a s s i c a l E n g lis h e c o n o m ists b u i l t . |A c a r e f u l i n v e s t i g a t i o n o f th e r o l e o f c o m p e titio n i n th e c a p i t a l i s t i c o r m ixed sy stem s h as b een , how ever, f o r th e m ost p a r t th e work o f th e f i r s t h a l f o f t h i s c e n tu r y . A lm ost n o th in g h as been w r i t t e n upon th e m anner i n w hich i ; t h i s i n s t i t u t i o n f i t t e d in to th e fram ew ork o f th e R ic a rd ia n and M a lth u s ia n sy ste m s. As we a p p ro a c h th e l a s t o n e - th ir d o f th e tw e n tie th ic e n tu r y , th e v i t a l i t y o f th e m ixed sy stem s as r e p r e s e n te d |b y th e U n ited S ta te s and to a c e r t a i n d e g re e W estern E urope [can n o t b e d e n ie d ; y e t t h i s e s s e n t i a l l y c o m p e titiv e sy stem i h as o f te n b e f o r e re a d i t s p re m a tu re o b itu a r y . Time a f t e r tim e th o u g h tf u l men h av e deduced t h a t th e c o m p e titiv e c o n - I t r o l o f p ro d u c tio n had l o s t i t s a b i l i t y to g e n e ra te th e fo rw ard t h r u s t o f ch an g e, o r even to keep p ace w ith ch an g e when, f o r exam ple, th e e n g in e o f d ev elo p m en t and d i r e c t i o n jbecomes g overnm ent. Even th e S ch u m p eterian gloom o v e r th e j f u tu r e h o s t i l i t y a g a in s t in n o v a tin g c o m p e titio n h as b een b r ig h te n e d by a c o m b in a tio n o f a t l e a s t two m a ssiv e jch an g es: f i r s t , th e c o n tin u in g , p e r s i s t e n t p erfo rm an ce o f th e e n g in e g u id e d by an in c r e a s in g ly w ise s o c i a l i n t e l l i g e n c e ; and seco n d , th e grow ing aw aren ess among i n t e l l e c tu a l s o f th e c o n d itio n s w ith in th e h e a v ily c o l l e c t i v i z e d i co m m u n ities--c o m m u n ities w here c o m p e titio n , i f i t do es jin d e ed o p e r a te , do es so a t a m ore p r im it iv e l e v e l th a n t h a t i i w hich o c c u rs betw een b u y e rs and s e l l e r s . I The m a ssiv e im p act o f g o v ern m e n tal a c tio n s in c e , f o r a s t a r t i n g p o in t, 1940 can h a r d ly b e d e n ie d ; y e t hand in Jo se p h S chum peter, C a p ita lis m , S o c ia lis m and Democracy (3 rd e d i t i o n ; New Y ork: H arp er and B ro th e rs , P u b lis h e r s , 1 9 5 0 ), pp. 72-86, 156-163. 4 • hand w ith t h i s p e n e tr a tio n and in f lu e n c e h a s gone a renew ed j v i t a l i t y - - q u i t e u n ex p e c te d by many o b s e rv e rs - -f r o m th e ' 2 i p r i v a t e c o m p e titiv e s e c to r . In d eed , one may w itn e s s th e < I am azing in tr o d u c t io n o f a v e ry lim ite d form o f c o n tr o l o v e r p ro d u c tio n by c o m p e titio n in to th e h ig h ly c e n t r a l i z e d j" c o o p e r a tiv e " econom ies o f th e s o - c a lle d com m unist b lo c , i :a lth o u g h th e m eaning and r e s u l t s , n o t to m e n tio n th e perm anency, o f t h i s ex p e rim en t a r e n o t a t a l l c e r t a i n . i i i -W ith in th e U n ite d S ta te s t h e r e i s a p e r s i s t e n t and e n e r g e tic p r e s s u r e to re d u c e c o m p e titio n a t a l l l e v e l s . A v o c a l and h ig h ly o rg a n iz e d gro u p c o n s i s t e n t l y lo b b ie s f o r i th e r e e s ta b lis h m e n t o f th e F a ir T rad e p r i n c i p l e . O rg an ized , la b o r s t i l l h as a s one o f i t s m ain g o a ls th e e lim in a tio n o f wage c o m p e titio n b etw een la b o r e r s . P r a c tic e s lim itin g e n tra n c e i n to c e r t a i n tr a d e s o r p r o f e s s i o n s - - th e m e d ic a l f r a t e r n i t y h as b een p e rh a p s th e m ost s u b je c t to t h i s i I a c c u s a tio n —and th e e r e c tio n o f h u rd le s in t r a i n i n g and i i !a p p r e n tic e s h ip program s h av e se rv e d to c u r t a i l e f f e c t i v e l y th e d e g re e o f c o m p e titio n in th e s e m a rk e ts a s th e g u ild s and c o r p o r a tio n s d id in e a r l i e r tim e s . 2 , Seymour E. H a r r is , Economics o f th e Kennedy Y ears j (New Y ork: H arp er and Row, 1964), pp. 247 f f . Men f o r c e n tu r ie s h av e s tr u g g le d w ith th e th o rn y i |p ro b lem s posed by th e c o m p e titiv e s o lu t io n s o f c o n t r o l , and i jby th e e n d le s s schem es d e v is e d by o th e r men to circ u m v e n t i 1 th e s e ch eck s upon w hat th e y c o n s id e re d to b e t h e i r freedom . The q u e s tio n s o f when, w here, how much, and w hat k in d o f c o m p e titio n i s d e s i r a b l e a r e a s much a l i v e to d a y as th e y i have e v e r b ee n ; and th e h i s t o r i c a l d e b a te s o v e r them and i o v e r r e l a t e d q u e s tio n s a r e s t i l l f u l l y p e r t i n e n t . I I . THE PROBLEM What th e n i s th e a r e a w ith w hich t h i s p a p e r w i l l l i a tte m p t to c o n c e rn i t s e l f ? What a r e th e l i m i t a t i o n s o f t h i s r e s e a r c h , and w hat i s i t s sco p e? I S ta te m e n t o f th e Problem The p ro b lem i s p o se d : in w hat ways d id R ic ard o and : M alth u s em ploy th e c o n c e p t o f c o m p e titio n in t h e i r th e o r ie s I o f th e econom ic p ro c e s s ? What was th e k in d and form o f ! I 1 c o m p e titio n w hich th e y su pposed to b e e i t h e r g iv e n o r d e s ir a b le ? F i n a l l y , to w hat e x te n t d id t h e i r p ro p h e c ie s ; depend upon a p re m ise o f c o m p e titiv e o r g a n iz a tio n f o r t h e i r v a l i d i t y ? 1 S ig n if ic a n c e o f th e P ap er T h is t h e s i s m ust b e o n ly th e b e g in n in g o f a much !g ra n d e r u n d e rta k in g ; f o r , in a s e n s e , th e p o s i t i v e d e f i n i t i o n o f a p o s i t i v e r o l e f o r c o m p e titio n a t th e hands o f S m ith, R ic a rd o , and M alth u s was th e c u lm in a tio n o f a v e ry lo n g p e rio d in w hich c o m p e titio n was assum ed, a lth o u g h junnamed and u n d e fin e d . The p ro lo n g ed s tr u g g le to e s t a b l i s h i a c o n c e p t o f v a lu e w as, in r e a l i t y and among o th e r th in g s , an a tte m p t to s p e l l o u t a c o m p e titiv e o r g a n iz a tio n o f m ar k e t s . Men from t h e tim e s o f c l a s s i c G reece h av e p e rc e iv e d t h i s p ro b lem . T hus, th e s ig n i f ic a n c e o f a s tu d y such as j t h i s i s t h a t R ic a rd o and M alth u s m ark, a t th e same tim e , th e b e g in n in g o f one p e rio d o f th e a n a ly s is o f c o m p e titio n , and th e end o f a n o th e r ; th e y g av e to c o m p e titio n a p o s i t iv e t r o l e , and th e y made a b e g in n in g upon a p o s i t i v e d e f i n i t i o n . I i O b je c tiv e o f th e P ap er I The p u rp o se o f t h i s r e s e a r c h i s th e n to te n d e r an answ er to th e p ro b lem a s s t a t e d ab o v e. F u rth e rm o re , i t m arks an a tte m p t to commence a stu d y o f th e w hole h i s t o r y r o f th e r o l e o f c o m p e titio n in th e sy stem s and s ta te m e n ts o f t h a t lo n g p r o g r e s s io n o f e c o n o m ists, p o l i t i c a l 7 jp h ilo s o p h e r s , p a m p h le te e rs and th e l i k e who have moved th e stu d y o f econom ic th e o ry and p o l i t i c a l economy to i t s I p r e s e n t em inenc e . I I L im ita tio n s o f th e T h e s is T h is i n v e s t i g a t i o n d o es n o t p re te n d to be ex h a u s t i v e . T h ere i s an e x te n s iv e body o f c o rre sp o n d e n c e by b o th I ;w r ite r s w hich in c lu d e s l e t t e r s to each o th e r and to o th e r I Inoted men o f th e p e r io d . T hese h av e b een la r g e ly n e g le c te d | as beyond th e sco p e o f r e s e a r c h a t t h i s l e v e l . The c h i e f c o n c e rn o f t h i s t h e s i s w i l l b e w ith th e m anner in w hich th e c o n c e p t o f c o m p e titio n became an u n d e rp in n in g o f th e I s t r u c t u r e o f a n a ly s is o f R ic a rd o and M a lth u s. Q u e stio n s i ab o u t th e m e r its o r w eaknesses o f th e s t r u c t u r e s and o f th e a n a ly s is w i l l n o t d e t a i n u s . The c o n c e n tr a tio n o f t h i s p a p e r lik e w is e w i l l n o t be upon th e a c c u ra c y o f t h e i r view s i I o f w hat t h e i r sy stem s seemed to p o rte n d . Such s e lf-im p o s e d I l i m i t a t i o n s w i l l f r e e th e r e s e a r c h from lin g e r i n g o v er I c r i t i c i s m s and q u e s tio n s o f th e re a s o n a b le n e s s o f th e a u th o r s ’ a s su m p tio n s . Only in th e s i n g l e c a s e o f R ic a rd ia n wage th e o ry d o es th e p a p e r move away from t h i s i d e a l d e l i n e a tio n . I t seems so re m a rk a b le t h a t R ic a rd o ’ s e s s e n t i a l and e a rly -im p o s e d q u a l i f i c a t i o n s as to th e s u b s is te n c e > |c o u r s e o f c o m p e titiv e wage r a t e s c o u ld b e so l a r g e l y I J ig n o re d by l a t e r co m m en taries t h a t a d ig r e s s io n i s in j o r d e r . ! i I I . A REVIEW OF THE LITERATURE i i j ; The g e n e ra l l i t e r a t u r e on M alth u s and R ic a rd o i s i ,e x te n s iv e and g row ing, th ough s lo w ly . N e a rly ev e ry work on th e h i s t o r y o f econom ic th o u g h t g iv e s them a c h a p te r < a p ie c e o r th e e q u iv a le n t. Y et i n n e a r ly e v e ry su ch w ork, a s p e c i f i c d is c u s s io n o f th e r o l e o f c o m p e titio n in [R ic a rd o 's and M althus* sy stem s i s m is s in g . In ev e ry c a s e , ! ith e a u th o r m e n tio n s, a lm o st i n p a s s in g , t h a t th e s e two I ibased t h e i r sy stem s upon th e assu m p tio n s o f a c o m p a ra tiv e t |o r g a n iz a tio n o f m a rk e ts --p e rh a p s in a p a ra g ra p h o r tw o, o r, m ore l i k e l y , a s e n te n c e o r tw o --an d th e n moves on in to ja n o th e r a r e a . | T h ere a r e , a t p r e s e n t, no w orks on th e h i s t o r y o f th e r o l e o f c o m p e titio n , so t h i s p o s s ib le avenue o f in ^ v e s t i g a t i o n i s c lo s e d . P erh ap s th e m o s t.re w a rd in g a r e a f o r r e s e a r c h i s t h a t w hich c e n te r s a b o u t th e n e g a tiv e d e f i n i t i o n o f c o m p e t i t i o n - - i . e . , th e a n a ly s is o f th o u g h t on m onopoly. T h ere a r e a few good w orks on th e h i s t o r y o f i L |t h e m onopoly c o n c e p t, and th e s e a r e m ost h e l p f u l . The b e s t !o f th e s e , a lth o u g h d a te d , i s H u n d 's M onopoly. A H is to ry 1 3 and T h eo ry . T h is w ork tr a c e s th e d ev elo p m en t o f econom ic |th o u g h t on m onopoly th ro u g h th e l a t e 1 9 2 0 's . Dewey’ s M onopoly in Econom ics and Law i s v e ry h e l p f u l in f i l l i n g o u t th e h i s t o r i c a l background o f l e g a l th o u g h t a g a in s t w hich M alth u s and R ic a rd o w orked o u t t h e i r s t r u c t u r e s .^ - IMoving b ack from th e n in e te e n th c e n tu r y in t o e a r l i e r j E n g lis h and E uropean th o u g h t on m onopoly and c o m p e titio n |s o t h a t S m ith 's , R ic a r d o 's , and M althus* c o n t r ib u t io n s a r e •p laced in b e t t e r p e r s p e c tiv e , P io tr o w s k i's C a r te ls and IT ru s ts i s e x c e l l e n t . S w eezy's M onopoly and C o m p etitio n I !in th e E n g lis h C o al T ra d e . 1550-1850 d e a ls i n t e n s i v e ly w ith |a tte m p ts to c irc u m v e n t th e c o m p e titiv e m a rk e t in a p a r - 1 f : j t i c u l a r E n g lis h in d u s tr y . P r i c e 's The E n g lis h P a te n ts i 3 V ernon A. Mund, M onopoly. A H is to r y and T heory (P r in c e to n : P rin c e to n U n iv e r s ity P re s s , 1933). i 4 1 D onald Dewey, M onopoly i n Econom ics and Law :(C h icag o : Rand M cN ally and Company, 195 9 ). 5 Roman P io tro w s k i, C a r te ls and T r u s ts (London: ;George A lle n and Unwin, L td ., 1933). ! a P au l M. Sweezy, M onopoly and C o m p e titio n in th e E n g lis h C oal T ra d e . 1550-1850 (C am bridge: H arvard U n iv e r s i t y P re s s , 1 9 3 8 ). 10 i o f M onopoly p ro v id e s a f r u i t f u l a r e a o f r e s e a r c h i n t o th e j s i x t e e n t h and s e v e n te e n th c e n tu r y ’ s p r o l i f e r a t i o n o f r o y a lly g ra n te d r e s t r a i n t s on tr a d e , and i s u s e f u l in f i l l - i ' i in g o u t th e background a g a in s t w hich th e c l a s s i c a l s jw o rk ed .^ Noonan*s The S c h o la s tic A n a ly s is o f U sury p r o v id e s some o f th e e v id e n c e t o s u p p o rt th e c o n c lu s io n t h a t c o m p e titio n h as lo n g b een c o n s id e re d to b e th e d e s ir e d g a r b i t e r o f norm al o r f a i r v a lu e . Dempsey’ s I n t e r e s t and g U sury a l s o te n d s to s u p p o rt t h i s c o n c lu s io n .7 S p e n g le r and ! A lle n ’ s E ssay s in Economic T h ought: A r i s t o t l e t o M a rs h a ll i . , . c o n ta in s th e a r t i c l e by Dempsey from The A m erican Economic i iReview o f S eptem ber, 1935, in w hich he p r e s e n ts th e c o r e 10 ;o f th e t h e s i s m en tio n ed ab o v e. S p e n g le r and A lle n a ls o i |in c lu d e two o u ts ta n d in g p ie c e s o f r e s e a r c h on R ic a rd o , one by S t i g l e r and th e o th e r by C a s s e ls , and a u s e f u l d is c u s s io n I i ^W illiam Hyde P r ic e , The E n g lis h P a te n ts o f M onopoly (B o sto n : H oughton, M i f f l i n and Company, 1 9 0 6 ). | g 1 Jo h n T. Noonan, The S c h o la s tic A n a ly s is o f U sury (C am bridge: H arvard U n iv e r s ity P re s s , 1957). q B ern ard W . Dempsey, I n t e r e s t and U sury (W ashington: A m erican C o u n c il on P u b lic A f f a i r s , 1 9 4 3 ). f _ Jo se p h J . S p e n g le r and W illia m R. A lle n , E ssay s in Economic T hought: A r i s t o t l e to M a rs h a ll (C h icag o : Rand M cNally and Company, 1 9 6 0 ). 11 , o f th e M a lth u s ia n p o p u la tio n t h e s i s by S p e n g le r him - ; s e l f . 11 G ram pp's The M a n ch ester S chool o f Econom ics i s a v e ry u s e f u l s h o r t com m entary upon th e im p act M alth u s and R icard o had on E n g lis h tr a d e p o lic y , and d e m o n s tra te s th e im p le m e n ta tio n o f a sy stem o f c o n t r o l by c o m p e ti tio n - - th i s , 12 i a t l e a s t , was th e s c h o o l's i d e a l . An o u ts ta n d in g d i s - ;c u s s io n o f M a lth u s, and a somewhat l e s s e r tr e a tm e n t o f R ic a rd o , a p p e a rs in T u c k e r's P ro g re s s and P r o f i t s in B r i t i s h Economic T hought, 1650-1850. 1^ The c h a p te r w hich T ucker t i t l e s "M alth u s and th e P r i n c i p l e o f C o m p e titio n " I !becam e, how ever, an e x p o s itio n o f th e t h e s i s o f th e 11 I b i d . D em psey's w ork, as m e n tio n ed , f i r s t ia p p ea re d in The A m erican Economic Review . XXV (S eptem ber, jl9 3 5 ), 471 -4 8 6 , e n t i t l e d , " J u s t P r ic e in a F u n c tio n a l jEconom y." G eorge S t i g l e r 's "The R ic a rd ia n T heory o f V alue and D is tr ib u ti o n " a p p e a re d in The J o u r n a l o f P o l i t i c a l ! Economy, LX (Ju n e , 1952), 187-207. Jo h n C a s s e ls ’ "A Re- !I n t e r p r e t a t i o n o f R ic ard o on V alue" a p p e a re d i n The Q u a r te r ly J o u r n a l o f Econom ics. XLIX (May, 1 9 3 5 ), 518-532. I Jo se p h S p e n g le r 's " M a lth u s 's T o ta l P o p u la tio n T heory: A I R e sta te m e n t and R e a p p ra is a l" ap p e ared i n The C an ad ian J o u r n a l o f Econom ics and P o l i t i c a l S c ie n c e , XI (F e b ru a ry - May, 194 5 ), 83-110, 2 34-264. ' 1^ W illia n D. Grampp, The M a n ch ester S chool o f Eco- Inom ics (London: O xford U n iv e r s ity P re s s , 1 9 6 0 ). 13 G. S. L. T u ck er, P ro g re s s and P r o f i t s in B r i t i s h Economic T hought. 1650-1850 (C am bridge: C am bridge U n iv e r s i t y P re s s , I9 6 0 ). 12 |" g e n e r a l g l u t " r a t h e r th a n an a n a ly s is o f c o m p e titio n . (W hile i t i s tr u e t h a t t h i s M a lth u s ia n c o n t r ib u t io n was i I b ased upon th e r e s u l t s o f a c o m p e titiv e o r g a n iz a tio n , I n e i t h e r M althus* t h e s i s n o r T u c k e r's comments upon i t d e a l iw ith c o m p e titio n in i t s e l f . The g e n e r a l a r e a o f th e w orks on th e h i s t o r y o f , econom ic th o u g h t c o n ta in s n e a r ly an e n d le s s l i s t o f w o rk s. | A few p ro v ed to b e h e l p f u l in o u tl i n in g th e sy stem s o f R ica rd o and M a lth u s. The s t y l e and o r g a n iz a tio n o f th e w orks o f b o th M alth u s an,d R ic a rd o a r e su ch t h a t one i s i !g r e a t l y h e lp e d by an o u t l i n e o f t h e i r c e n t r a l th e s e s . L acking su ch a i d s , an a tte m p t to re a d e i t h e r o f t h e i r P r in c ip le s f o r co m p reh en sio n w o u ld 's u r e ly p ro v e f r u s t r a t i n g . As m en tio n ed below , th e r e i s n o t g e n e r a l ag reem en t on th e R ic a rd ia n t h e s i s , and M alth u s h as b ee n , w ith th e e x c e p tio n o f th e p o p u la tio n e s s a y s , c a v a l i e r l y n e g le c te d . Schum p e te r* s H is to r y o f Economic A n a ly s is i s th e s ta n d a rd 14 w ork. The p ro b lem w ith S chum peter i s , how ever, t h a t th e e x p o s itio n o f th e sy stem s i s s c a tte r e d ,^ a n d th e r e s e a r c h e r fa c e s th e n e a r ly in su rm o u n ta b le ta s k o f s e p a r a tin g th e i i------------------------------------- ; ^ J o s e p h A. S chum peter, H is to ry o f Economic A n a ly s is J(New Y ork: O xford U n iv e r s ity P re s s , 195 4 ). 13 |th em es from S c h u m p e te r's ru n n in g com m entary and c r i t i q u e upon th o s e th e m es. i | H ansen’ s g r e a t w ork, B u sin e ss C y cles and N a tio n a l I Income was a g r e a t a id in d e a lin g w ith M a lth u s, b u t, g iv e n h i s s u b je c t m a tte r , he n e g le c ts R i c a r d o . ^ G ide and R i s t 's A H is to r y o f Economic D o c trin e s , a lth o u g h now d a te d on !r e c e n t d ev e lo p m e n ts, c o n ta in s an e x c e ll e n t s e c t io n on I R ic a rd o --p e rh a p s th e c l e a r e s t e x p o s itio n o f th e c l a s s i c i n t e r p r e t a t i o n o f th e d i s t r i b u t i v e m o d e l .^ They l i m i t t h e i r d is c u s s io n o f M alth u s to th e p o p u la tio n e s s a y , y e t ih e re a g a in th e y a r e v e ry c l e a r . Kuhn pro v ed to b e o f i i | l i t t l e a d d i t i o n a l v a lu e ; he s t a t e s in h i s The E v o lu tio n o f I Economic T hought th e e s s e n t i a l th in g s and l i t t l e else."*"7 One h i s t o r y o f econom ic th o u g h t p ro v es to b e a b o u t a s good as a n o th e r f o r a s t a r t ; once th e s t a r t h as b een made th e y i become l a r g e l y re d u n d a n t. O s e r 's The E v o lu tio n o f Economic i t i--------------------- --------------- 15 A lv in H. H ansen, B u sin e ss C y cles and N a tio n a l ,Income (New Y ork: W. W. N o rto n and Company, 1 9 5 1 ). 16 i D C h a rle s G ide and C h a rle s R is t, A H is to ry o f Eco nom ic D o c trin e s (2nd E n g lis h e d i t i o n ; B o sto n : D. C. H eath and Company, 194 7 ). 17W. E. Kuhn, The E v o lu tio n o f Economic Thought ( C in c in n a ti: S o u th -W estern P u b lis h in g Company, 1 9 6 3 ). 14 ; T hought (same t i t l e a s Kuhn’s work a b o v e ), L ekachm an's I A H is to r y o f Economic Id e a s , and W h itta k e r ’s S ch o o ls and ! S tream s o f Economic T hought a r e among th e b e s t , i t seem s, I l I o f th e m ore r e c e n t w o rk s; y e t none o f th e s e b re a k s any new 18 s ground upon th e s e two men. F i n a l l y , one tu r n s to th e I • ' ■ ■ ■ ■ w r itin g s th e m se lv e s and to th e d i f f i c u l t ta s k o f l i f t i n g I from two v e ry in v o lv e d m odels th e c o m p e titiv e a s sim p t io n s iupon w hich th e y a r e b a s e d . i j S in c e th e t h e o r e t i c a l s t r u c t u r e s b u i l t by M alth u s I and R ic ard o w ere p e r t i n e n t to th e p o l i t i c a l and econom ic problem s fa c e d by E ngland, a s tu d y o f t h e i r comments and ip o lic y recom m endations i s a id e d by b ackground re a d in g in E n g lis h econom ic h i s t o r y . In t h i s a r e a , R e id ’ s Economic H is to ry o f G re a t B r i t a i n and Clough and C o le ’ s Economic IQ H is to ry o f E urope s e rv e d w e ll. v \ 18 Jaco b O ser, The E v o lu tio n o f Economic Thought (New Y ork: H a rc o u rt, B race and W orld, I n d ., 1 9 6 3 ); R o b ert Lekachman, A H is to r y o f Economic Id e a s (New Y ork: H arp er and B ro th e rs , 1 9 5 9 ); Edmund W h itta k e r, S ch o o ls and S tream s :o f Economic T hought (C h icag o : Rand M cN ally and Company, I9 6 0 ). 1 19 W . S ta n fo rd R eid , Economic H is to r y o f G re a t B r i t a i n (New Y ork: The R onald P re s s , 195 4 ); S hepard B. C lough and C h a rle s W. C o le, Economic H is to ry o f E urope (3 rd e d i t i o n ; B o sto n : D. C. H eath and Company, 1 9 5 2 ). 15 | j To r e l a t e th e b e g in n in g s o f c o m p e titiv e th e o ry to j m odern d ev elo p m en ts and a n a ly s is , Jo a n R o b in s o n 's The ! Economics o f Im p e rfe c t C o m p etitio n i s one o f th e m ost u s e - i 20 ; f u l w o rk s. I f t h i s i s augm ented by M achlup *s The Eco- 1 nom ics o f S e lle r s * C o m p e titio n and L ie b h a fs k y 's The N a tu re o f P r ic e T h eo ry , a co m p leted p i c t u r e o f th e r e l a t i o n s h i p ' ■ <r" ’ 21 o f th e b e g in n in g s to c u r r e n t developm ent o u g h t to em erge. I I I . RELEVANT TERMS AND CONCEPTS 1 i M ark ets i In th e sy stem s o f b o th R icard o and M a lth u s, d e c i s i o n s a r e made in m a rk e ts . At l e a s t , th e y become e f f e c t i v e jin th e m a rk e t. W hile M alth u s seemed t o add t h a t u n d er i c o n d i tio n s o f a g e n e r a l c o m p e titiv e g l u t th e a to m is tic I jm arket p ro c e s s m ig h t b e augm ented by a c o l l e c t i v e in te r v e n - i jtio n in th e sy stem ; f o r R ic a rd o , no su ch a d ju s tm e n t was I c o n s id e r e d . Y e t, a s id e from t h i s M a lth u s ia n p r o p h e tic |i n s i g h t , th e m a jo r d e c is io n m aker was th e im p e rs o n a l i 20 Jo an R obinson, The Econom ics o f Im p e rfe c t C om peti- it i o n (London: M acm illan and C o ., L td ., 1 9 3 3 ). ! 21 F r i t z M achlup, The Economics o f S e l l e r s ' C om peti t i o n (B a ltim o re : The Jo h n s H opkins P re s s , 19 5 2 ); H. H. iL ie b h afsk y , The N a tu re o f P r ic e T heory (Homewood, I l l i n o i s : .The D orsey P re s s , I n c ., 196 3 ). t . _ _ . . - - ■ ■ ■ ■ — ------— . . . .................. ........ ■ 16 I ;m a rk e t. W hile n e i t h e r w r i t e r c l e a r l y d e fin e d t h i s i n s t i t u - l I tio n , th e y seemed to im ply a d e f i n i t i o n so m eth in g l i k e ! I t h i s : a m a rk e t i s a g e o g ra p h ic a r e a w ith in w hich th e f o rc e s i |o f su p p ly and o f demand m eet to s e t a s in g l e p r i c e . !V alue i I G iven enough tim e , th e m a rk e t was th e a r b i t e r o f lv a lu e . The v a lu e o f a good was a t l e a s t th r e e s e p a r a te i jth in g s . The r a t i o a t w hich i t exchanged f o r o th e r goods o r ! f o r money was i t s m ark et v a lu e o r p r i c e . T h is f i r s t k in d o f v a lu e was an o b je c ti v e o r com m unity a p p r a i s a l o f w o rth a t a g iv e n tim e . The seco n d k in d o f v a lu e was th e m ark e t i lv a lu e o r p r ic e tow ard w hich th e d a y -to -d a y p r ic e s o f th e l m ark et w ould te n d . T h is w ould a p p ro x im a te th e c o s t o f |p ro d u c tio n o f th e good and w ould b e i t s lo n g -ru n v a lu e . i i iT his to o was an o b je c ti v e r e a l i t y . F in a ll y , th e t h i r d c o n c e p t o f v a lu e had l i t t l e to do w ith th e m ark et* s p r ic e s o r i I r a t i o s and was th e w o rth o f th e good to th e in d iv id u a l b u y e r and s e l l e r ( p o s s e s s o r and w o u ld -b e p o s s e s s o r ) and w as, h e n c e , a lm o st p u r e ly s u b je c ti v e . M alth u s i n s i s t e d t h a t th e i v a lu e o f a good depended upon b o th i t s c o s t and i t s u s e f u ln e s s , w h ile R ic a rd o s t r e s s e d th e c o s t o r s c a r c i t y elem en t a lo n e . 17 As an a b s t r a c t i o n , v a lu e ca n and d o es e x i s t a s id e t ! from th e m a rk e t, b u t i t s em ergence as a r e a l i t y upon w hich I J a m e a n in g fu l sy stem o f econom ics m ig h t b e b u i l t r e q u ir e s n o t o n ly t h a t a m a rk e t, o r s e r i e s o f them , b e p r e s e n t, b u t |a l s o t h a t f o r th e m ost p a r t th e m a rk e ts b e o rg a n iz e d a lo n g { la rg e ly c o m p e titiv e l i n e s . W ith o u t m a rk e ts and c o m p e ti- I I tio n , one c o u ld n o t assum e t h a t m ost p r i c e s w ould te n d tow ard t h e i r r e a l c o s t s . R ica rd o and M a lth u s, a lo n g w ith th e m a jo r ity o f th e e a r l y e c o n o m ists, n eed ed f o r t h e i r sy stem s an e x p la n a tio n o f th e n o rm al v a lu e o f g o o d s. T h is [ s t a t i c , lo n g -ru n a n a ly s is o f v a lu e had to r e s t upon a I sy stem o f c o n t r o l by c o m p e titio n ; o th e rw is e , th e y knew t h a t i t h e i r s t r u c t u r e s r e s t e d upon weak and u n r e a l f o u n d a tio n s . The v a lu e o f a good was th e same a s i t s lo n g -ru n c o s t o f p ro d u c tio n . 1 C o m p etitio n i ^ What th e n was c o m p e titio n ? In i t s e l f , c o m p e titio n i s so b ro a d a te rm , and h as b een so w id e ly em ployed s in c e i [1750, t h a t each w r i t e r u s e s i t w ith h i s own f i n e c o lo r in g s and s h a d in g s o f m eaning. A few h av e s tr u g g le d to g iv e a p r e c i s e d e f i n i t i o n ; o th e r s , p e rh ap s r e a l i z i n g th e f u t i l i t y o f a s e a rc h f o r a d e f i n i t i o n by c o n s e n s u s , h av e h e ld t h a t 18 ie a c h e x p o s i t o r ’ s c o n t r ib u t io n o u g h t t o b e lo o k ed upon a s th e s o u rc e o f th e d e f i n i t i o n in i t s e l f . j C o m p etitio n c l e a r l y i s a d e v ic e o f c o n t r o l , y e t i t | i s n o t th e o n ly su ch d e v ic e . M a lth u s, a lth o u g h th e ma j o r i t y o f h i s t h e s i s r e s t e d upon th e n o rm alcy o f c o m p e ti t i o n , y e t s u g g e s te d t h a t o th e r c o n t r o l s o v e r th e m a rk e t a r e , on o c c a s io n , d e s i r a b l e . One c o u ld im a g in e , f o r |ex am p le, a k in d o f c o l l e c t i v e c o n t r o l by th e e l i t e o f th e j s t a t e , a s M alth u s d id ; t h i s w ould b e im posed o v e r and ibeyond th e c o m p e titiv e m a rk e ts in o rd e r t o c o r r e c t th e f a i l i n g s o f th o s e m a rk e ts . The d e g re e o f s t a t e c o n t r o l w ould ra n g e a lo n g a continuum from n e a r n o n - in te r v e n tio n I a t one ex trem e to a lm o st co m p lete c e n t r a l i z a t i o n a t th e o th e r a s few er and few er d e c is io n s w ere made by m a rk e ts . M alth u s and R ic a rd o te n d ed to th e fo rm e r w ith R ic a rd o seem - lin g to fa v o r even l e s s i n t e r v e n t i o n th a n M a lth u s. ( N o n -c e n tra liz e d c o n t r o l o v e r m a rk e ts lik e w is e ra n g e s a lo n g a co n tin u u m from a h ig h ly c o m p e titiv e o r g a n iz a tio n to je x te n s iv e ly c o o p e r a tiv e . U n lik e M ill and M a rs h a ll, who w ere to s t r e s s w hat th e y th o u g h t to b e th e h ig h p ro m ise o f c o o p e r a tiv e , a s c o n tr a s te d to c o m p e titiv e , a c t i v i t y , b o th R ic a rd o and M alth u s f e l t th e norm to b e v e ry much on 19 j t h e c o m p e titiv e s i d e . A tte n tio n a ls o o u g h t to b e g iv e n j to b ia s e s w hich a t t a c h th e m se lv e s to th e two e x trem es o f |c o m p e titio n and c o o p e r a tio n . B oth may a t th e same tim e b e j e n g in e s and g o a l s . B oth o p e r a te upon in d iv i d u a ls and g ro u p s to e l i c i t , i n c i t e , o r c o e rc e tow ard c e r t a i n a c tio n s . They become i n s t i t u t i o n s w here an i n s t i t u t i o n i s d e fin e d a s a p a t t e r n o f b e h a v io r common enough to a la r g e enough g ro u p to b e a b s t r a c t l y d e s c r ib e d . I t i s th e c h a r a c t e r i s t i c o f a b s t r a c t i o n w hich a llo w s f o r th e d ev elo p m en t o f th e o ry . W ith o u t i t , one i s lim ite d to th e d e s c r i p t i o n o f a p a r t i c u l a r e v e n t in i s o l a t i o n . I n s t i t u t i o n s , su ch as i c o m p e titiv e m a rk e ts , g iv e r i s e to th e g e n e r a l p r o p o s itio n s o f t h e o r e t i c a l a n a l y s i s . I t was t h i s g e n e r a l, t h e o r e t i c a l ! e x p la n a tio n w hich b o th R ic a rd o and M alth u s aim ed f o r in subsum ing th e i n s t i t u t i o n o f c o m p e titio n in t h e i r sy ste m s. ! What i s t h i s i n s t i t u t i o n o f c o m p e titio n b e s id e s an e n g in e o f c o n t r o l , and how d o es i t s e c u re i t s c o n t r o l o v er ;m a rk e t f o rc e s ? The r o o t o f t h i s word means to s e e k a f t e r |o r p u rs u e a g o a l a c t i v e l y w ith o th e r c o n t e s t a n t s ; w ith in 't h e word n e s t l e s th e id e a o f r i v a l r y . I t was Sm ith who b ro u g h t t h i s c o n c e p t to th e f o r e o f econom ic th e o r y . i S m ith, R ic a rd o , and M a lth u s saw i t a s a s e r i e s o f i n s t i t u tio n s by w hich s o c ie ty m ig h t c o n t r o l n o t o n ly i t s own members, b u t im pose i t s w i l l upon e n te r in g o u t s i d e r s . As an i n s t i t u t i o n , i t s p e lle d o u t th e r u l e s by w hich th e game jwas to b e p la y e d . The q u in te s s e n c e o f th e c o n t r o l m echan- !ism o f c o m p e titio n i s th e a c t u a l i t y o r t h r e a t o f th e i n t e r s p e r s i o n o f r i v a l s b etw een th e in d iv i d u a l, o r gro u p a c tin g a s one, and a g o a l o r rew ard w hich i s d e s ir e d by o th e r s ( th e r i v a l s ) , b u t w hich i s lim ite d ( r e l a t i v e l y ) so |t h a t n o t a l l th e c o n t e s ta n ts a r e a b le f u l l y to s a t i s f y t h e i r d e s i r e s . The p re s e n c e o f th e r i v a l s th u s ch eck s th e a b i l i t y o f any one p a r t i c i p a n t to g a in h i s g o a l a t th e I |ex p e n se o f , o r to th e d e trim e n t o f, th e o th e r s . One o f th e d i s t in g u i s h i n g c h a r a c t e r i s t i c s o f com pe- i t i t i o n i s , t h e r e f o r e , th e p re s e n c e o f r i v a l s ; and i t o u g h t to b e c l e a r th e n t h a t th e o n ly re a s o n f o r th e r i v a l r y i s th e r e a l i t y o f s c a r c i t y . Thus, th e w hole o f th e c o n c e p t r e l i e s f o r i t s p e r tin e n c e upon th e p ro b lem o f s c a r c i t y . | I t i s th e r e l a t i v e and a b s o lu te s c a r c i t y o f th e g o a ls w hich in e c e s s a r ily m eans t h a t n o t a l l w i l l b e a b le to g a in a l l t h a t th e y w ould. IV. METHODS OF RESEARCH A N D ANALYSIS I t h as been rem arked t h a t by a c a r e f u l g le a n in g and i 'c o n ju n c tio n o f th e w r i t t e n w ords o f a n o th e r , one c o u ld 21 ; d e m o n s tra te t h a t th e p e rs o n in q u e s tio n had ta k e n a lm o st any im a g in a b le p o s it io n on n e a r ly any is s u e . T h is c e r - ; t a i n l y i s t r u e o f b o th R ic a rd o and M a lth u s . The w an d erin g I and am biguous c h a r a c te r o f t h e i r P r in c ip le s w i l l , i n many le a s e s , a llo w o f a lm o st any i n t e r p r e t a t i o n . F u rth e rm o re , j ja d e l i b e r a t e d i s t o r t i o n o f b o th o f t h e i r c o n t r ib u t io n s jc o u ld b e ac co m p lish ed by a s e l e c t i v e d ev elo p m en t o f q u o ta t i o n s . The lik e lih o o d o f su ch d i s t o r t i o n ca n b e m inim ized i 1 by lin k i n g an a n a ly s is o f t h e i r p o s i t i o n s t o th e g e n e r a l sy stem s th e y p r e s e n t. Viewed a g a in s t th e b ackground o f ;t h e i r m o d els, an a n a ly s is o f th e r o l e o f c o m p e titio n w ith in th o s e m odels i s u n lik e ly to do an i n j u s t i c e to t h e i r p o s i- ; I j t i o n s . Such i s th e c o u rs e t h i s p a p e r w i l l ta k e . The g o v e rn in g p r i n c i p l e o f e x p o s itio n w i l l be to l i n k t h e i r s ta te m e n ts on c o m p e titio n to th e s t r u c t u r e s M alth u s and R ic a rd o e r e c te d . I t i s th e g o a l o f t h i s r e s e a r c h to d i s - i |c o v e r how c o m p e titio n p la y e d a p a r t in t h e i r sy ste m s. V. ORGANIZATION OF THE REMAINDER OF THE THESIS C h a p te r I I w i l l d e a l w ith M a lth u s ' c o n t r ib u t io n s in i th e a r e a o f p o p u la tio n an d , r e l a t i v e to th e t h e s i s o f h is P r i n c i p l e s , we s h a l l a l s o lo o k a t c e r t a i n o c c a s io n a l 22 p a p e rs h e p ro d u ced . C h a p te r I I I w i l l c o n s id e r R ic a rd o , i iand w i l l s t r e s s th e g e n e r a l th e o ry h e p r e s e n te d in h is P r i n c ip l e s , once a g a in augm ented by some o f h i s o c c a s io n a l p a p e rs . C h a p te r IV w i l l a tte m p t t o o f f e r some t e n t a t i v e c o n c lu s io n s , and w i l l s u g g e s t o th e r a r e a s o f s tu d y . C H A P T E R II j T. R. MALTHUS: AN OVERRIDING PESSIMISM Thomas R o b e rt M a lth u s sto o d i n th e f i r s t t h i r t y jy e a rs o f th e n in e te e n th c e n tu r y as a man a lm o st a lo n e i if a c in g th e r i s i n g t i d e o f R ic a rd ia n p re o c c u p a tio n w ith d i s - i j t r i b u t i o n . M alth u s s u r e ly re g a rd e d much o f w hat h i s c lo s e !f r i e n d was p ro p o u n d in g as c l e a r ad v an ces in th e s c ie n c e o f j p o l i t i c a l economy; y e t much was m is s in g . In many w ays, .M althus seemed to b e o b je c tin g to th e gloomy im p lic a tio n s f o r th e f u tu r e w hich u n d e r R ic a rd ia n d o c t r in e becam e a p ro g re s s tow ard s ta g n a ti o n . Y et in th e p la c e o f th e s e e v i l s , M a lth u s, r a t h e r th a n d e fe n d in g o r a tte m p tin g to r e s u r r e c t Adam S m ith*s o p tim ism , saw b e f o r e E ngland o th e r s p e c t e r s , e q u a lly a p p a lli n g . T hus, w h ile i t m ig h t a p p e a r t h a t in r e a c t i o n to R ic a rd o , M alth u s w ould b e e b u l l i e n t , h e i s e q u a lly p e s s i m i s t i c . 1 Jaco b O ser, The E v o lu tio n o f Economic T hought (New Y ork: H a rc o u rt, B race and W orld, I n c ., 1 9 6 3 ), p p . 7 6 -7 7 . See a l s o : R o b e rt Lekaehman, A H is to r y o f Economic Id e a s i i 23 _____________ 24 1 M alth u s i s known to d a y t o a l l e d u c a te d men, a lth o u g h a lm o st none h a s re a d th e e s s a y w hich gave r i s e to h i s fam e. I t seem s s tr a n g e t h a t a man sh o u ld become i n t e r n a t i o n a l l y fam ous f o r a t h e s i s w hich was n o t o r i g i n a l and w hich i s v i r t u a l l y u n re a d . M alth u s was a man o f r e l i g i o u s t r a i n i n g and a g r e a t h u m a n ita ria n . He w ould h av e disow ned many who u sed h i s arg u m en ts f o r th e d e fe n s e o f t h e i r p r i v a t e schem es I I , in th e c e n tu r y and a h a l f to fo llo w . They w ould have b een ! s tr a n g e and m ost u n c o m fo rta b le b e d fe llo w s . T hose who to d ay I jwould lo o k upon him w ith d i s t a s t e f o r th e c a u s e s to w hich h is arg u m en ts w ere tu rn e d by o th e r s n eed o n ly re a d th e 1 second book o f h i s P r in c ip le s o f P o l i t i c a l Economy to s e e I h i s d eep c o n c e rn f o r th e g e n e r a l w e llb e in g o f th e common p e o p le . The p essim ism o f th e t h e s i s he p r e s e n te d was u n welcome to h i s m ind, b u t th e f o r c e o f th e lo g ic l e f t him 2 no o th e r c o u rs e th a n to a c c e p t i t . i I I I (New Y ork: H arp er and B ro th e rs , 1 9 5 9 ), pp. 125-126; W . E. Kuhn, The E v o lu tio n o f Economic Thought ( C in c in n a ti: ^ S o u th -W estern P u b lis h in g Company, 1963), pp. 3 8 -4 1 ; and |f i n a l l y , Jo se p h A. S chum peter, H is to r y o f Economic A n a ly s is (New Y ork: O xford U n iv e r s ity P re s s , 1954), pp. 480 f f . i 2 Schum peter, op. c i t . , p . 481. I . NATURAL LAW : THE H A N D OF G O D 25 I f th e r e i s one p rim a ry fo u n d a tio n upon w hich a l l i o f th e c l a s s i c a l s ec o n o m ists b u i l t , M alth u s in c lu d e d , i t i s I | |t h e c o n c e p t o f n a t u r a l law . They lo o k ed upon th e w o rld as b e in g s u b je c t to u n iv e r s a l p r i n c i p l e s w hich an in d iv id u a l o r g roup m ig h t f o r a tim e c irc u m v e n t b u t w ith w hich th e y m ust f i n a l l y come to te rm s . G ide and R i s t p o in t o u t t h a t : j W ith o u t some such p o s t u l a t e i t seem ed to them t h a t i no c o l l e c t i o n o f t r u t h s , how ever w e ll a t t e s t e d , c o u ld | e v e r la y c la im to th e t i t l e o f s c ie n c e . But th e s e j n a t u r a l law s had n o n e o f t h a t " p r o v i d e n t i a l , " " f i n a l - j i s t i c , " and " n o rm a tiv e " c h a r a c te r so f r e q u e n tly d w e lt i upon by th e P h y s io c r a ts and th e O p tim is ts . They a r e sim p ly n a t u r a l laws l i k e th o s e o f th e p h y s ic a l o r d e r , and a r e c l e a r l y n o n -m o ra l. They may p ro v e u s e f u l o r th e y may b e h a rm fu l, and men j u s t a d a p t th e m se lv e s to them a s b e s t th e y c a n . To say t h a t p o l i t i c a l economy i s a " d is m a l s c ie n c e " b e c a u se i t shows t h a t c e r t a i n law s may h av e u n f o r tu n a te r e s u l t s i s a s a b su rd a s i t i w ould b e t o c a l l p h y s ic s a " d is m a l s c ie n c e " b e c a u se l i g h t n in g k i l l s . ^ I I . THE POPULATION THESIS In th e e s s a y on p o p u la tio n , two o f th e s e n a t u r a l law s come i n t o p la y . The f i r s t c e n te r e d a b o u t th e a b s o lu te 3 C h a rle s G ide and C h a rle s R i s t, A H is to ry o f Eco nom ic D o c trin e s (2nd E n g lis h e d i t i o n ; B o sto n : D. C. H eath and Company, 194 7 ), p p . 35 9 -3 6 0 . 26 lim its o f th e e a rth in accommodating people both in th e sense o f th e ir demands fo r p h y sic al space, and in th e ir ineeds fo r th e output o f th e e a rth . There was such a lim it, I ;and given th e p ro c re a tiv e powers and p ro p e n s itie s o f man, I th e growing p o p u latio n of th e e a rth must ev e n tu ally bump a g a in st i t . Behind th is v is io n o f M althus lay th e concept 'of dim inishing re tu rn s . The second law was th e tendency of p o p u latio n to expand up to th e v ery m argin of existence.^ 1 Taking th e se two rem arkable prem ises as fo u n d atio n s, M althus concluded th a t th e p o p u latio n would be checked I e ith e r by th e n a tu ra l law of dim inishing re tu rn s lead in g i to an in c re a se in th e number o f d eath s r e la tiv e to b ir th s , o r by checks upon th e r a te o f b ir th s . One o r th e o th e r must f in a lly come in to p la y --o r perhaps i t would be a com b in a tio n . The id ea o f the development o f a com petition [was h ere im plied. I t did n o t ta k e th e form o f c le a r ly ! s ta te d b u y ers’ com petition, b u t th is is what i t must mean. The p ric e of n e c e s s itie s would slow ly creep upward, w hile ' 4 Thomas Robert M althus, P opulation: The F i r s t Essay ;(Ann Arbor: The U n iv ersity o f M ichigan P ress, 1959), pp. 4 -5 . The p u b lic a tio n d a te o f the F ir s t Essav was, of co u rse, n o t 1959 b u t 1798 when i t appeared anonymously. I ~ * Ib id . , pp. 23 f f . ! ! L _____________________________ „ _____ _____ _______________ _ 27 6 I w ages f e l l to , o r h o v ered a b o u t, a s u b s is te n c e l e v e l . |P r i c e s o f n e c e s s i t i e s w ould ad v an ce b e c a u se th e s o c ie ty I I 'w ould b e fo rc e d to t i l l p o o re r and p o o re r la n d s , w h ile wages w ould rem ain low b e c a u se o f th e p r o p e n s ity t o p ro d u ce ;c h i ld r e n . In th e E ssay , th e arg u m en t more o r l e s s n e g le c ts jtnoney p r i c e s , and c o n c e n tr a te s upon th e p rim a l c o m p e titio n as more and more m ouths w ere t o b e fe d w ith o n ly somewhat more fo o d . The c o m p e titio n becam e one f o r l i f e i t s e l f among th o s e who so u g h t to s u r v i v e .7 Many seemed d e s tin e d jto f a i l . I I I . THE PROFFERED SOLUTIONS T h is was th e way i t w as. No m a le v o le n t Supreme B eing d e c re e d t h a t t h i s m is e ry was i n e v i t a b l e . He o n ly e s ta b li s h e d th e law s w ith in th e bounds o f w hich man m ust 8 f u n c tio n . I t was o n ly th e n a tu r e o f th in g s t h a t w ith o u t v o lu n ta r y c o n t r o l o v e r th e r a t e o f in c r e a s e i n th e p o p u la c e t h a t th e m a jo r ity sh o u ld rem ain on th e f r in g e s o f s u b s i s t en ce. The p u rp o se o f th e E ssay was t o c o u n te r a c t th e r i s e i * _ ■ - - - ■ | 6I b i d . . p . 12. 7I b i d . . p . 27. 8I b i d . . p . 138. I \ 28 i i n p o p u la tio n w hich th e v is i o n s o f C o n d o rcet and Godwin ' 9 ;m ig h t w e ll c a u s e . E n g lan d ’ s fa rm in g la n d s w ere p o o r, and th e demand f o r E n g lis h e x p o r ts , p a r t i c u l a r l y o f w oolen c l o t h , had le d to a g r e a t e n la rg e m e n t o f sh e ep r a i s i n g a t t 1 th e ex p en se o f t i l l a g e . M alth u s arg u e d t h a t , r a t h e r th a n s u p p o rt a co m p lete f r e e t r a d e in ’’c o rn 1 ' i t w ould b e b e t t e r to en c o u ra g e by e v e ry means th e e x te n s io n o f g r a in c u l t i v a t i o n on th e i s l a n d s . ^ But h e was d is c o u ra g e d b e c a u se th e s o - c a lle d Poor Laws seem ed to him to a g g ra v a te r a t h e r th a n a m e lio ra te th e b a s ic p ro b lem . They o n ly s e rv e d to s h i f t th e b u rd e n o f r e s p o n s i b i l i t y f o r p a re n th o o d to th e w hole s o c ie ty and to im pede, r a t h e r th a n f a c i l i t a t e , th e m o b ility o f la b o r by ty in g la b o r e r s to th e p a r is h o f t h e i r b i r t h . M alth u s h im s e lf was in s tr u m e n ta l in th e r e w r i tin g o f th e s e famous P oor Laws. N o tic e h i s a t t i t u d e tow ard them : Mr. P i t t ’ s P o o r - b i l l h a s th e a p p e a ra n c e o f b e in g fram ed w ith b e n e v o le n t i n t e n t i o n s , and th e clam o u r r a is e d a g a in s t i t was i n many r e s p e c ts i l l - d i r e c t e d 9 I b i d . , p p . 5 5 -9 4 . ^T hom as R o b e rt M a lth u s, P r in c ip le s o f P o l i t i c a l Economy (2nd e d i t i o n ; New Y ork: A ugustus M. K e lle y , I n c ., ,1 9 5 1 ), pp. 392 -3 9 4 . The o r i g i n a l p u b lic a t io n was is s u e d ' in 1836. 29 and u n re a s o n a b le . But i t m ust b e c o n fe s s e d t h a t i t p o s s e s s e s in a h ig h d e g re e th e g r e a t and r a d i c a l d e f e c t o f a l l sy stem s o f th e k in d , t h a t o f te n d in g to in c r e a s e p o p u la tio n w ith o u t in c r e a s in g th e means f o r i t s s u p p o r t, and th u s to d e p r e s s th e - c o n d itio n o f th o s e t h a t a r e n o t su p p o rte d by p a r is h e s , and, c o n s e q u e n tly , to c r e a t e m ore p o o r. To rem ove th e w an ts o f th e lo w er c l a s s e s o f s o c ie ty i s in d e ed an ard u o u s ta s k . The t r u t h i s t h a t th e p r e s s u r e o f d i s t r e s s on t h i s p a r t o f th e com m unity i s an e v i l so d e e p ly s e a te d t h a t no human in g e n u ity ca n re a c h i t . Were I to p ro p o se a p a l l i a t i v e , and p a l l i a t i v e s a r e a l l t h a t th e n a tu r e o f th e c a s e w i l l a d m it, i t sh o u ld b e , in th e f i r s t p la c e , th e t o t a l a b o l i t i o n o f a l l th e p r e s e n t p a r is h - la w s . T h is w ould a t any r a t e g iv e l i b e r t y and freed o m o f a c t i o n to th e p e a s a n try o f E ngland, w hich th e y c a n h a r d ly b e s a id to p o s s e s s a t p r e s e n t. They w ould th e n b e a b le to s e t t l e w ith o u t i n t e r r u p t i o n , w h erev er t h e r e was a p r o s p e c t o f a g r e a t e r p le n ty o f w ork and a h ig h e r p r i c e f o r la b o u r. The m a rk e t o f la b o u r w ould th e n b e f r e e , and th o s e o b s ta c le s rem oved, w hich a s th in g s a r e now, o f te n f o r a c o n s id e r a b le tim e p re v e n t th e p r i c e from r i s i n g a c c o rd in g to th e demand. The d o le to th e p o o r, r a t h e r th a n in c r e a s in g th e consum able o u tp u t o f th e sy stem , w ould o n ly en c o u ra g e th e p ro d u c tio n o f m ore h u n g ry m ouths among th e p o o r b etw een w hich l a r g e r g ro u p th e same su p p ly o f n e c e s s i t i e s m ust b e d iv id e d . Wages w ould f a l l and m is e ry e n s u e . T h is t h e s i s o f M alth u s seem s, on th e s u r f a c e , to ru n c o u n te r to th e g e n e ra l argum ent o f h i s P r in c ip le s w here h e in d ic a t e s t h a t ^■*Malthus, P o p u la tio n : The F i r s t E ssay , p. 33. 30 an e x c e ss o f consum ers demand o v e r e x i s t i n g su p p ly m ust I . [ I g e n e ra te an in c r e a s e in em ploym ent and a le s s e n in g o f 12 m is e ry among th e m a sse s. More on t h i s s h o r t l y . The im p o rta n t th in g to n o te h e r e i s M althus* a p p a re n t a s sump - j ' I tio n o f n e a r ly f u l l em ploym ent and o f th e c o m p e titiv e i j e f f e c t o f th e d o le on w ages: . . . I th o u g h t t h a t su ch a r e g u l a t io n w ould b e h ig h ly b e n e f i c i a l , b u t f u r t h e r r e f l e c t i o n on th e s u b j e c t h a s co n v in ced me t h a t i f i t s o b je c t b e to b e t t e r th e c o n d itio n o f th e p o o r, i t i s c a lc u l a te d t o d e f e a t th e v e ry p u rp o se w hich i t h as in v iew . I t h a s no te n d e n c y t h a t I ca n d is c o v e r t o in c r e a s e th e p ro d u ce o f th e c o u n try , and i f i t te n d to in c r e a s e th e p o p u la t i o n , w ith o u t in c r e a s in g th e p ro d u c e , th e n e c e s s a ry and i n e v i t a b l e co n seq u en ce a p p e a rs to b e t h a t th e same p ro d u c e m ust b e d iv id e d among a g r e a t e r num ber, and c o n s e q u e n tly t h a t a d a y 's la b o u r w i l l p u rc h a s e a s m a lle r q u a n t ity o f p r o v is io n s , and th e p o o r t h e r e f o r e in g e n e r a l m ust b e m ore d i s t r e s s e d . M alth u s c o u ld h av e s t a t e d t h a t r e a l wages w ould f a l l b e c a u se th e p r i c e o f o u tp u t was r i s i n g r e l a t i v e to money w ages, o r h e m ig h t have arg u e d t h a t money wages w ould f a l l r e l a t i v e to p r i c e s , r e s u l t i n g in lo w er r e a l w ages. What h e c h o se to r e p e a t a g a in and a g a in was t h a t th e p e r - p e r s o n ;s h a re o f o u tp u t g o in g to la b o r was f a l l i n g b e c a u se t h e i r 416. 12 ‘ ‘M a ith u s , P r in c ip le s o f P o l i t i c a l Economy, p p . 4 1 4 - 13 M a lth u s, P o p u la tio n : The F i r s t E ssay , p . 4 7 . I 31 num bers w ere in c r e a s in g so r a p id l y . They c l e a r l y c o u ld n o t * I lo n g rem a in below s u b s is te n c e l e v e l , how ever, s in c e th e I f a l l in th e p o p u la tio n w hich w ould fo llo w upon su ch low r e tu r n s to la b o r w ould c a u s e i t s su p p ly to b e c u r t a i l e d and i 14 (wages w ould a g a in r i s e . I t was an e q u ilib r iu m o f m is e ry I and d e s p a ir . No w onder h e lam en ted t h e i r d e c lin in g l o t . I iThe i n t e r e s t i n g p o in t to n o te i s t h a t b o th th e c a u s e and i ;th e c u r e a r e c o m p e titio n . C o m p e titio n , e i t h e r in th e b a s ic i ‘s e n se o f a s t r u g g l e to s u r v iv e , o r i n th e p r i c i n g s e n s e o f a d e c lin e in l a b o r ’ s s h a re , cau sed th e p ro b lem . Y et, a s :a p a r t i a l s o l u t io n , M alth u s co n c lu d ed t h a t th e la b o r m a rk e t Jought to b e m ore c o m p e titiv e . T h is a p p a re n t p arad o x can b e r e s o lv e d by c o n s id e r in g th e i n s t i t u t i o n a l im pedim ent o f th e P o o r-law s w hich by r e s t r a i n i n g l a b o r 's m o b ility , cau sed th e a d ju s tm e n t o f th e la b o rin g c l a s s e s to b e l e s s e f f i c i e n t th a n i t o th e rw is e w ould h av e b e e n . Even rem oving th e p a r is h c la u s e , how ever, w ould n o t h av e a f f o rd e d a n y th in g imore th a n a te m p o ra ry slo w in g o f th e m arch tow ard a g e n e ra l 15 e q u ilib r iu m o f h o p e le s s n e s s . ^ M a lth u s , P r in c ip le s o f P o l i t i c a l Economy, p . 223. ^ M a lth u s , P o p u la tio n : The F i r s t E s s a y , pp. 128-130. 32 I T h is v iew o f th e econom ic sy stem f i r s t a p p e a re d anonym ously in 1798. The E ssay on P o p u la tio n w ent th ro u g h s i x e d i t i o n s , and a lth o u g h t h e r e w ere a l t e r a t i o n s in th e arg u m en t, and th e m eager d o c u m e n ta tio n o f th e f i r s t e d i t i o n was c o n s id e r a b ly e n la rg e d , th e t h e s i s rem ain ed i n t a c t . M a lth u s s t a t e d in th e seco n d e d i t i o n o f h i s P r in c ip le s t h a t w ith c e r t a i n m o d if ic a tio n s he r e s t e d upon th e b a s ic 16 jthem e o f th e f i r s t e s s a y . In th e f i f t h e d i t i o n o f th e {essay h e s t a t e d : I t i s p ro b a b le , t h a t h a v in g found th e bow b e n t to o much one way, I was in d u c ed to bend i t to o much th e ' o th e r , in o r d e r to make i t s t r a i g h t . B ut I s h a l l alw ays b e q u i t e re a d y t o b l o t o u t any p a r t o f th e w ork , w hich i s c o n s id e re d , by a co m p eten t t r i b u n a l a s h a v in g j a te n d en c y to p re v e n t th e bow from becom ing f i n a l l y ; s t r a i g h t , and to im pede th e p ro g re s s o f t r u t h . In d e fe re n c e to t h i s t r i b u n a l I h av e a lr e a d y expunged th e p a s s a g e s w hich h av e b e e n m ost o b je c te d t o , and I h av e made some few f u r t h e r c o r r e c t i o n s , o f th e same k in d , i n th e p r e s e n t E d itio n . By th e s e a l t e r a t i o n s , I h ope, and b e l ie v e , t h a t th e w ork h as b een im proved w ith o u t im p a irin g i t s p r i n c i p l e s . ^ 16 M a lth u s, P r i n c i p l e s o f P o l i t i c a l Economy, pp. 4 3 5 - 436. 17 I b i d . , p . l i i . T h is q u o ta tio n a p p e a rs in th e in tr o d u c to r y e s s a y : "Memoir o f R o b e rt M a lth u s" in th e isecond e d i t i o n o f th e P r i n c i p l e s . The a u th o r o f th e i n tr o d u c to r y e s s a y c i t e s a s f o llo w s : V ol. i i i , p . 428, 5 th !E d itio n o f an E ssay on P o p u la tio n [ s i c ] . 33 I And a g a in , in th e I n tr o d u c tio n to th e second e d i - i j tio n o f th e P r i n c i p l e s : 1 I sh o u ld n e v e r h av e had t h a t s te a d y and un sh ak en c o n f id e n c e in th e th e o ry o f p o p u la tio n w hich I h a v e i n v a r ia b l y f e l t , i f i t had n o t a p p e a re d to me to b e c o n firm e d , in th e m ost re m a rk a b le m anner, by th e s t a t e o f s o c i e t y a s i t a c t u a l l y e x i s t s in e v e ry c o u n try w ith w hich we a r e a c q u a in te d . ° IV. THE GLUT: A SECOND SPECTER The M a lth u s ia n sy stem o r v i s i o n r e s t e d n o t a lo n e upon h i s th e o ry o f p o p u la tio n and th e te n d e n c y tow ard an i je q u ilib riu m o f m is e ry . T h is was o n ly a f i r s t ap p ro x im a t i o n . The v i s i o n commenced w ith t h i s gloom y v iew b u t t h i s | was o n ly to s e rv e a s an in tr o d u c t io n to w hat was p e rh a p s h i s g r e a t e r c o n t r i b u t i o n . The E ssay i n d i c a t e s t h a t w h ile g e n e r a l w e a lth i n a s o c ie ty m ig h t b e in c r e a s in g , u n le s s i t 'ad v a n ces a t a f a s t e r r a t e th a n do es th e in c r e a s e in p o p u la t i o n , w ages w i l l f a l l to a n e a r s u b s is te n c e l e v e l . W orking upon S m ith ia n fo u n d a tio n s w hich M a lth u s i n g e n e r a l a c c e p ts i W ith o u t s i g n i f i c a n t m o d if ic a tio n s , h e c o n c lu d e s in th e 18 I b i d . . p . 8 . T h is o c c u rs in M althus* own i n t r o d u c to ry c h a p te r to th e second e d i t i o n o f th e P r i n c i p l e s . T hus, h e seem s to h av e h e ld f ir m ly to h i s v iew s r i g h t up u n t i l th e tim e o f h i s d e a th . f i 34 P r i n c i p l e s t h a t th e o u tlo o k f o r th e c o n tin u e d g ro w th o f i 19 ith e n a tio n * s w e a lth i s n o t re m a rk a b ly b r i g h t . H ere, in t h i s b i t o f h i s t h e s i s , h e becom es by f a r th e m ost m odern o f th e E n g lis h c l a s s i c a l s . He c l e a r l y a n t i c i p a t e s th e K ey n esian them e o f m ore th a n one h u n d red y e a rs in th e ;f u t u r e . Keynes acknow ledged h i s d e b t to M alth u s in th e G e n e ra l T heory and t h i s le d to a renew ed i n t e r e s t in th e I 20 l a t t e r * s P r in c ip le s w hich had so lo n g b ee n n e g le c te d . R ic a rd o , how ever, c o n tin u e d to d o m in ate E n g lis h th o u g h t u n t i l th e 1930*s when a b e la te d r e c o g n itio n was g iv e n to 21 M a lth u s. I t was l e s s h o n o r th a n h e d e s e rv e d . An exam ple o f h i s m o d e rn ity c a n b e found by r e a d in g one o f th e i n t r o d u c to ry t e x t s in c u r r e n t u se on th e to p ic o f econom ic I 19I b i d . , pp. 309-310. 1 20 i John M aynard K eynes, The G e n e ra l T heory o f Employ- Im ent, I n t e r e s t and Money (New Y ork: H a re o u rt, B race and jW orld, I n c ., 1 9 3 6 ), p . 362. I 21 S ee, f o r exam ple, K enneth E. B o u ld in g * s "F orew ord" to M a lth u s, P o p u la tio n : The F i r s t E ssay , p . v . He q u o te s from Keynes* e s s a y on M alth u s as f o llo w s : " I f o n ly M a lth u s, , in s te a d o f R ic a rd o , had b een th e p a r e n t stem from w hich ln in e te e n th - c e n tu r y econom ics p ro c e e d e d , w hat a much w is e r and r i c h e r p la c e th e w o rld w ould b e to d a y !" and c i t e s : J . M. K eynes, E ssays in B io g rap h y (New e d i t i o n ; London: 195 1 ), p . 120. 35 22 , g ro w th . i ! What th e n i s th e a d d itio n w hich M alth u s m akes to i i h i s i n i t i a l t h e s i s a b o u t p o p u la tio n ? W ealth may w e ll |i n c r e a s e - - b y t h i s M alth u s means a n n u a l incom e. But th e i n c r e a s e in t h a t w e a lth , h o p e f u lly o f f s e t t i n g th e in c r e a s e s in th e p o p u la tio n , may b e h a lte d by an in s u f f ie n c y o f ( e f f e c t i v e demand f o r o u tp u t. The b a s ic c a u s e f o r t h i s i n s u f f i c i e n c y M alth u s a t t r i b u t e s to p a t t e r n s in th e d i s t r i b u t i o n o f incom e m o s tly in th e a r e a o f th e d i s t r i b u t i o n betw een p r o d u c tiv e and u n p ro d u c tiv e la b o r as h e c a l l e d i t . |Thus h e s t a t e s : i I f th e a c t u a l r ic h e s o f a c o u n try n o t s u b je c t to r e - ! p e a te d v io le n c e s and f r e q u e n t d e s tr u c ti o n o f p ro d u c e , 22 The m odern g e n e r a l s ta te m e n t on w e lf a r e , p a r t i c u l a r l y as a p p lie d to th e u n d e r-d e v e lo p e d c o u n t r i e s , i s j t h a t th e g ro s s o u tp u t o f th e sy stem m ust b e d iv id e d by !p o p u la tio n in o r d e r to m easu re g ro s s p r o g r e s s . T h is i s n o th in g m ore o r l e s s th a n w hat M alth u s c la im e d a s a m ea s u r e . One w ould, o f c o u r s e , w ant to know so m eth in g a b o u t th e c o m p o sitio n o f th e o u tp u t and i t s d i s t r i b u t i o n , b u t v th e b a s ic y a r d s ti c k re m a in s GNP o v e r p o p u la tio n . S ee, f o r .exam ple, L loyd G. R ey n o ld s, E conom ics: A G e n e ra l I n t r o d u c tio n (Homewood, I l l i n o i s : R ic h a rd D. Irw in , I n c ., ,1 9 6 3 ), pp. 648 f f . , o r , P a u l A. Sam uelson, E conom ics: An I n tr o d u c to r y A n a ly s is ( 5 th e d i t i o n ; New Y ork: M cG raw -H ill Book Company, I n c ., 1 9 6 1 ), pp. 800 f f . Sam uelson s t a t e s : ’’F o r some p u rp o s e s , p o s s ib ly su ch as w ar, th e a b s o lu te m ag n itu d e o f r e a l GNP may c o u n t; b u t g e n e r a lly in th in k in g ja b o u t w e lf a r e , one w ould w ant to d e f l a t e GNP f o r p o p u la tio n I c h a n g e s ." r 36 J b e n o t a f t e r a c e r t a i n p e r io d in some d e g re e p ro p o r tio n e d to i t s pow er o f p ro d u c in g r i c h e s , t h i s d e f i c ie n c y m ust h av e a r i s e n from th e w ant o f an a d e q u a te s tim u lu s t o c o n tin u e d p r o d u c tio n .^3 j F or an u n d e rs ta n d in g o f w hat t h i s s h o r t s ta te m e n t i [im p lie s and th e c o n c e p ts upon w hich i t sh e d s l i g h t , one I m ust c a r e f u l l y c o n s tr u c t a m odel o f th e M a lth u s ia n v i s i o n i jo f th e p ro d u c tiv e p r o c e s s . The " r i c h e s ” w ould to d a y b e c a l l e d N a tio n a l Incom e. The n a t i o n a l re v e n u e was c o n - i js id e r e d by M alth u s to b e a flo w r a t h e r th a n a s to c k . "What ;i s now w anted in t h i s c o u n try i s an in c re a s e d n a t i o n a l re v e n u e --a n in c r e a s e in th e e x c h a n g e a b le v a lu e o f th e w hole 24 p ro d u ce e s tim a te d in b u l l i o n . " When we h av e a t t a i n e d 25 t h i s , "we may th e n b e g in a g a in to a c c u m u la te ," b u t i f , in s te a d o f s a v in g from in c re a s e d p r o f i t s , we sa v e from d im in ish e d e x p e n d itu r e , "we go on s a v in g from o u r r e v e - 26 n u e ." I n c r e a s in g s a v in g i s good i f accom panied by r i s i n g n a t i o n a l incom e and co n su m p tio n ; th e y w i l l le a d t o i n c re a s e d w e a lth and w e ll b e in g , b u t i f th e in c re a s e d s a v in g s [a re made a t th e ex p e n se o f co n su m p tio n , th e r e s u l t s a r e 23, M a lth u s, P r in c ip le s o f P o l i t i c a l Economy, p . 310. 24I b i d . . p . 424. 26I b id . 25 I b i d . , p . 425. 37 27 jd i s a s t r o u s . Thus M althus* c l e a r view o f th e flo w c o n c e p t !i s a p p a re n t. The w e a lth c o n s i s t s (a s ab o v e) o f th e "e x - ! 'c h a n g e a b le v a lu e o f th e w hole p ro d u ce" and "A c o u n try w i l l J th e r e f o r e b e r i c h o r p o o r, a c c o rd in g to th e abundance o r I I 28 j s c a r c i t y w ith w hich th e s e m a te r ia l o b je c ts a r e s u p p lie d . ;S in c e th e a c t i v e v o ic e i s h e r e em ployed, a r a t e o f o u tp u t (o f m a t e r i a l goods o f v a lu e ) f o r th e e n t i r e n a t io n i s c o n - jc e iv e d by M alth u s as b e in g th e m easu re o f i t s w e ll b e in g . ! iIncome th e n becom es a v a r i a b l e in th e sy ste m . i | Not a l l , how ever, o f th e w ork o f m e n 's han d s r e s u l t s in ad d in g to th e n a t i o n a l re v e n u e . The te rm " v a lu e " m ean in g o n ly " v a lu e in e x c h a n g e ," a s M alth u s i s so c a r e f u l 29 ito p o in t o u t, i s c r e a te d f o r th e m ost p a r t o n ly when m a t e r i a l o b je c ts a r e p ro d u ce d . Thus, th e n a t i o n a l rev en u e i s a flo w o f m a t e r i a l o b je c ts o f v a lu e p ro d u ced by la b o r 30 in c o n ju n c tio n w ith la n d and c a p i t a l - - n e v e r la b o r a lo n e :and may b e d e f l a t e d s t a t i s t i c a l l y by u s in g th e g o in g r a t e 27 ! A lv in H. H ansen, B u sin e ss C y cles and N a tio n a l Income (New Y ork: W. W. N o rto n and Company, I n c . , 1951), pp. 244-245. 28 M a lth u s, P r in c ip le s o f P o l i t i c a l Economy, p . 34. < j 2 9 I b i d . . p . 50. 3 0 I b i d . , p . 85. L ____________________________________________ _____ __________________________________ 31 f o r common la b o r . T h is i s n o t a la b o r th e o ry ( i . e . , ! a la b o r - q u a n ti ty th e o ry ) o f v a lu e , and M alth u s i s e x p l i c i t in a v o id in g th e t r a p i n t o w hich R icard o stu m b led d ra g g in g 32 Marx b e h in d him . In t h i s s e n s e th e n , and in t h i s s e n s e o n ly , la b o r becom es a s ta n d a r d o f v a lu e . But w hat s h a l l jwe do a b o u t th e la b o r o f th o s e engaged in s e r v ic e s ? I |M alth u s h a n d le s t h i s p ro b lem by sim p ly r e f e r r i n g to la b o r I |i n g e n e r a l a s f a l l i n g i n t o two c l a s s e s : th o s e t h a t a r e i I c a l l e d " p r o d u c tiv e ” and th o s e t h a t a r e c a l l e d "u n p ro d u c- I t i v e ." T h is a t f i r s t seem s to b e an e r r o r on M a lth u s ' p a r t , b u t f u r t h e r th o u g h t w i l l r e v e a l i t a s n o t f a r o u t - o f - s t e p w ith m odem th e o ry . M a lth u s was co n c e rn e d w ith th e 31 I b i d . , p . 111. " R e c o lle c tin g th e n alw a y s, t h a t I h av e n o t b een in q u ir in g f o r some o b je c t w hich a p p r o x i m ates to a s ta n d a rd m easu re o f v a lu e in ex ch an g e, on th e s u p p o s itio n t h a t th e p ro p e r d e f i n i t i o n o f th e v a lu e o f a com m odity i s i t s pow er o f p u rc h a s in g g e n e r a lly , b u t upon I th e s u p p o s itio n t h a t th e m ost u s e f u l , and t h e r e f o r e th e Im ost c o r r e c t i n t e r p r e t a t i o n o f th e te rm , i s i t s pow er o f !p u rc h a s in g a r i s i n g from i n t r i n s i c c a u s e s , we may s a f e l y c o n s id e r la b o u r as th e o b je c t w hich w i l l answ er th e p u rp o se r e q u ir e d ; and sa y , t h a t th e v a lu e o f a com m odity a t any tim e , and a t any p la c e , may b e m easu red by th e q u a n t ity o f th e s ta n d a r d la b o u r o f t h a t tim e and p la c e , w hich i t w i l l ex ch an g e f o r o r command." I t a l i c s a r e M a lth u s* . 32 S chum peter, op. c i t . , p . 560. 39 'd e c lin in g l o t o f th e la b o r in g c l a s s e s . E ngland was f a c in g I s e v e re tim e s and unem ploym ent was w id e s p re a d , b u t among whom? Not among s e r v a n ts ; th e r i c h m a in ta in e d t h e i r m anner o f l i f e r i g h t on th ro u g h th e p e r io d . The unem ploym ent was among th e i n d u s t r i a l and a g r i c u l t u r a l w o rk e rs, and t h e i r unem ploym ent r e s u l t e d in r i s i n g in v e n t o r i e s , f a l l i n g j p r o f i t s and a r e t r e a t to th e p a r is h e s f o r th e d o le . The jw ealth y s t i l l had t h e i r t e a p o u red , rooms d u s te d and d o o rs ,opened. B e s id e s , one c o u ld h a rd ly w atc h an in v e n to ry b u ild - u p o f s e r v i c e s . "•N I I I s t h i s r e a l l y so f o r e ig n to m odern th in k in g ? I ^A rthur F. B um s s t a t e s t h a t c y c l i c a l i n s t a b i l i t y i s f a r i l e s s in th e s e r v ic e i n d u s t r i e s (a s c o n t r a s te d w ith th e m a n u fa c tu rin g i n d u s t r i e s ) , and t h a t th e grow ing p e rc e n ta g e o f th e w ork f o r c e em ployed in p ro d u c in g s e r v ic e s h as i n - 33 c re a s e d th e s t a b i l i t y o f th e e n t i r e sy stem . So t h a t w h ile th e d i s t i n c t i o n may seem t o b e an a b e r r a t i o n , i t i s j m ost u s e f u l in th e a n a ly s is o f unem ploym ent. P erh ap s we i 33 A rth u r F . B u m s, ” P ro g re s s Toward Economic S ta b i l i t y / ’ Economic P o lic y : R eadings i n P o l i t i c a l Economy. |W illia m D. Grampp and Emanuel T. W e ile r, e d i t o r s (3 rd .e d i t i o n ; Homewood, I l l i n o i s : R ic h a rd D. Irw in , I n c ., 1 9 6 1 ), pp. 5 -2 3 . T h is a r t i c l e a p p e a re d o r i g i n a l l y in A m erican Economic Review , M arch 1960, pp. 1 -1 9 . 40 would s t a t e : u n p ro d u c tiv e la b o r i s to b e c o n t r a s te d w ith t (p ro d u c tiv e la b o r in t h a t th e l a t t e r c r e a t e s m a t e r i a l goods (u s u a lly s to r e d in in v e n t o r i e s , th e demand f o r w hich may I jw ell f a l l s h o r t o f th e su p p ly a t g o in g o r n o rm al p r i c e s , w h ile u n p ro d u c tiv e la b o r p ro d u ces no m a t e r i a l goods w hich m ig h t b e so s to r e d . T h is i s n o t to im ply t h a t th e demand f o r s e r v ic e s m ig h t n o t f a l l f a r s h o r t o f th e s u p p ly a t th e g o in g r a t e o f re m u n e ra tio n , b u t M alth u s seem s to f e e l t h a t , s in c e wages a r e s e t by su p p ly com pared to dem and, th e com p e t i t i o n betw een th e s e l l e r s o f th e s e r v ic e s w i l l c a u s e th e is la c k to b e a b s o rb e d . Nor does h e n e g l e c t th e f a c t t h a t isp en d in g upon s e r v i c e s , a lth o u g h i t does n o t a t f i r s t i n c r e a s e th e demand f o r o u tp u t in g e n e r a l, d o es in c r e a s e i t when th e incom e from s e r v ic e s i s s p e n t: But though th e te n d e n c y o f p e r s o n a l s e r v ic e s to a c t as a s tim u lu s to th e p ro d u c tio n o f w e a lth b e f u l l y a llo w e d , th e y can n e v e r b e s a id d i r e c t l y to c r e a t e i t , so lo n g a s th e d e f i n i t i o n i s c o n fin e d to m a t e r i a l o b j e c t s . and I f in c a l l i n g p e r s o n a l s e r v ic e s p r o d u c tiv e o f w e a lth , we do n o t lo o k to th e c h a r a c te r o f w hat i s p ro d u ced , b u t m e re ly to i t s e f f e c t in s tim u la tin g o th e r p r o d u c e rs , t h i s i s in tr o d u c in g a new and s e p a r a te 34 ! M a lth u s, P r i n c i p le s o f P o l i t i c a l Economy, p . 4 5 . I c o n s id e r a tio n , w hich h as no r e l a t i o n t o th e d i r e c t p ro d u c tio n o f w e a lth . In t h i s v ie w , i t w i l l b e se e n t h a t I c o n s id e r p e r s o n a l s e r v ic e s to a c e r t a i n e x te n t as v e r y e f f i c i e n t ; b u t t h i s i s e v i d e n tl y n o t a s b e in g p ro d u c tiv e th e m s e lv e s , b u t as e n c o u ra g in g th e p ro d u c - I t i o n o f m a t e r i a l o b je c ts to b e exchanged f o r them and ' as m aking a demand in p r o p o r tio n to th e paym ents r e c e iv e d . I t i s no d o u b t t r u e , t h a t th e d e s i r e t o e n jo y th e c o n v e n ie n c e o f a p a ra d e o f p e r s o n a l a tte n d a n c e , and th e a d v a n ta g e s o f l e g a l and m e d ic a l a d v ic e , h as a s tr o n g te n d e n c y t o s ti m u la te i n d u s t r y . ^5 N o tic e : ”... m aking a demand in p r o p o r tio n to th e paym ents r e c e i v e d .” H ere i s th e e a r l y b e g in n in g o f th e j iid e a o f a co n su m p tio n f u n c tio n . Demand w i l l depend upon incom e. I t w i l l v a r y w ith incom e, b u t i t w i l l r e p r e s e n t in i t s ch an g es a p r o p o r ti o n a l com m itm ent to th e l e v e l o f i n come ( ’’paym ents r e c e iv e d ” ) . T h is i s a re m a rk a b le i n s i g h t , I p a r a l l e l i n g K eynes' fu n d am e n ta l p r o p o s itio n t h a t a r i s e in jincom e w i l l b e accom panied by a r i s e in co n su m p tio n b u t 36 " n o t by so m uch.” One m ig h t a ls o a rg u e t h a t s in c e a minimum s u b s is te n c e l e v e l o f incom e i s e n v is a g e d , M alth u s ■formed th e c o n c e p t o f autonom ous co n su m p tio n . T h is i s n o t th e c a s e , how ever, f o r th e g ro s s co n su m p tio n o f th e economy would depend upon th e p o p u la tio n , and t h i s , a lo n g w ith ^~*I b i d . , p p . 4 4 -4 5 . 3 6 K eynes, op. c i t . , p . 114. 42 incom e, i s i t s e l f v a r i a b l e d ep e n d in g on incom e. ! W ealth th e n , M althus* c h i e f c o n c e rn , i s m easured by i lv a lu e and i s a r a t e o f o u tp u t o f m a t e r i a l g o o d s. P r ic e , o r th e m easu re o f v a lu e , i s n o t, as we h av e s a id , a f u n c tio n o f la b o r a lo n e . M alth u s c o n tin u e s : i | . . . th e v a lu e s o f any co m m o d ities, o r th e m ass o f I co m m o d ities a r e alw ays d e te rm in e d by th e s t a t e o f th e ! su p p ly com pared w ith th e dem and; and t h e i r v a lu e s may b e m easured by th e q u a n tity o f s ta n d a rd la b o u r w hich th e y w i l l command.37 H ere a g a in th e c o n c e p t o f an a g g re g a te demand and js u p p ly o f o u tp u t i s d e l i n e a t e d . The p h ra s e , " o r o f th e I Imass o f co m m o d ities" c o u ld mean n o th in g e l s e . T hus, u n lik e i : th e g e n e r a l e q u ilib r iu m m odels w hich w ere to fo llo w in th e t 1 Jnext s i x t y y e a r s , an o v e rsu p p ly o f one com m odity r e l a t i v e t o th e c o s t o f p ro d u c tio n o r n o rm al p r i c e w ould n o t n e c e s s a r i l y le a d to w ard an in c r e a s e i n th e demand f o r o th e r i c o m m o d ities. Im p lie d h e r e and e x p l i c i t l a t e r on i s th e c o n c e p t o f a g e n e r a l o v e rsu p p ly o f o u tp u t, o r o f an e q u i lib r iu m a t l e s s th a n f u l l em ploym ent. The n o rm al p r i c e s o f goods i n th e m a rk e t w ere f u n c tio n s o f su p p ly and demand, i ;and th e y te n d e d to e q u a l th e c o s t o f p r o d u c tio n - - n o t j u s t ^M alth u s, P r in c i p l e s o f P o l i t i c a l Economy, p . 266. I th e la b o r c o s t , b u t a l l th e c o s t s : i i ' I t may b e s a f e l y a f f irm e d , th e n , t h a t how ever c u r io u s ! and d e s i r a b l e i t may b e to know th e e x a c t q u a n t ity ' o f la b o u r, ac cu m u late d and im m ed iate, w hich h a s been em ployed in th e p r o d u c tio n o f co m m o d ities, i t i s 1 c e r t a i n l y n o t t h i s la b o u r a lo n e w hich e i t h e r d e t e r - \ m ines o r m easu res t h e i r r e l a t i v e v a lu e s i n exchange j a t th e same p la c e , and a t th e same tim e .^ S I |r a t h e r , I i . . . th e p erm anent p r ic e s [ i . e . , n o rm al o r lo n g ru n p r i c e s ] o f th e g r e a t m ass o f com m odities w i l l b e d e te rm in e d by th e o r d in a r y c o s t o f t h e i r p ro d u c t i o n . ^ j Y et, s t i l l i t i s t r u e , t h a t in a l l t r a n s a c t i o n s o f b a r g a in and s a l e th e r e i s a p r i n c i p l e in c o n s ta n t o p e r a tio n , w hich can d e te rm in e , and d o es a c t u a l l y ! d e te rm in e , th e p r ic e s o f co m m o d ities, in d e p e n d e n tly o f any c o n s id e r a tio n s o f c o s t , o r o f th e o r d in a r y w ages, ' p r o f i t s and r e n t expended i n t h e i r p ro d u c tio n . ^ ' i t i s c o m p e titio n w hich b r in g s p r i c e i n t o e q u a l i t y w ith jth e c o s t o f p ro d u c in g a good, f o r M alth u s a rg u e s t h a t th e i 'p re s e n c e o f m onopoly c a u s e s a d iv e rg e n c e from c o s t s a llo w in g s p e c i a l p r o f i t s w h ile th e g e n e r a l r a t e o f p r o f i t s h a s 41 n o t v a r i e d . What i s i t w hich f o r c e s down th e p r i c e o f th e com m o d ity ? . . . i t i s an a c t u a l o r c o n tin g e n t e x c e s s o f s u p p ly . . . . What i s i t s p e c i f i c a l l y w hich f o r c e s up 38 39 I b i d . . p . 92. I b i d . . p . 69. 40 41 I b i d . . p . 70. I b i d . 44 th e p r i c e ? . . . . i t i s an a c t u a l o r c o n tin g e n t f a i l u r e j o f s u p p ly .*2 1 i T h u s: I j In e s tim a tin g th e u s u a l c o s t o f a m a t e r i a l o b je c t, J we a r e p r e t t y s u r e o f com ing n e a r to i t s u s u a l p r i c e . G e n e ra lly sp e a k in g , th o s e co m m o d ities, th e c o n d itio n s o f th e su p p ly o f w hich h av e b een th e same, a r e found to h av e n e a r ly th e e x c h a n g e a b le v a lu e , o r i f n o t, th e e s tim a te i s v e ry soon r e c t i f i e d by an a p p e a l to th e n e x t m a rk e t. ^ A lth o u g h a d is c u s s io n o f th e f a c t o r s o f u t i l i t y ly in g b e h in d th e demand f u n c tio n i s s u r e ly m is s in g , i t i s i n t e r e s t i n g to n o te , f i r s t o f a l l , how c l o s e l y t h i s a p p r o x i m ates M a rs h a ll* s s ta te m e n ts on v a lu e , p r i c e and c o s t o f s e v e n ty y e a rs l a t e r , and s e c o n d ly , to b e amazed by how i !c o m p le te ly th e R ic a rd ia n sy stem triu m p h e d in th e i n t e r v a l . L i t t l e w onder t h a t Marx showed o n ly co n tem p t f o r M a lth u s, f o r h e r e was a c l e a r r e f u t a t i o n o f th e p re m ise upon w hich th e w hole e x p l o i t a t i o n t h e s i s r e s t e d - - t h a t la b o r a lo n e , ■ e ith e r im m e d ia te ly em ployed o r s to r e d in c a p i t a l , c r e a te d !v a l u e . 44 P erh ap s th e d is m is s a l o f th e u t i l i t y c o n c e p t sim p ly o c c u rs b e c a u se Bentham had n o t y e t b een r e c e iv e d , a lth o u g h 4 2 I b i d . . p . 71. 4 3 I b i d . , p . 31. 4 4 S chum peter, o p. c i t . . p p . 4 8 0 -4 8 1 . the th e sis had appeared in 1776 along w ith another, some- i w hat m ore fam ous w ork. In d is c u s s in g , i n th e Q u a r te r ly t 1 Review o f Ja n u a ry 1824, M c C u llo ch 's "E ssa y on P o l i t i c a l ^Economy," M alth u s r e j e c t s th e u t i l i t y c o n c e p t a s b e in g o n ly th e c h a r a c t e r i s t i c o f " u s e f u l n e c e s s ity " and so o b v io u s an a c c o u te rm e n t was i t o f pro d u ced goods t h a t c e n te r in g an i n v e s t i g a t i o n o f v a lu e upon i t a p p e a re d to him to b e a d is p la y o f suprem e so p h ism . Thus h e s t a t e d : The a u th o r b e g in s th e seco n d d i v i s i o n o f h i s T r e a t i s e w ith a d e f i n i t i o n o f p ro d u c tio n , w hich he sa y s i s n e v e r " p ro d u c tio n o f m a tte r , f o r t h a t i s e x c lu s iv e ly th e a t t r i b u t e o f O m nipotence, b u t th e ! p ro d u c tio n o f u t i l i t y , and c o n s e q u e n tly o f ex ch an g e- ■ a b le v a l u e " - - ( p . 2 3 4 ). T h is may b e s t r i c t l y t r u e ; i b u t, a s Adam S m ith had b e f o r e c a l l e d th o s e m o d ific a - | tio n s o f m a tte r w hich a d a p t i t to th e v a r io u s t a s t e s and w an ts o f s o c ie ty , p ro d u c tio n , we s e e no a d v a n ta g e in th e ch an g e o f te r m s . On th e c o n t r a r y , i t a p p e a rs i to u s o b v io u s ly c a l c u l a t e d to m is le a d ; b e c a u se e x c h a n g e a b le v a lu e i s n e v e r p ro p o rtio n e d t o u t i l i t y , though i t may b e to th e t a s t e s and w an ts o f s o c ie ty . The cobweb p ie c e o f m u s lin , p ro d u ced by a g r e a t q u an t i t y o f la b o u r and s k i l l , i s n o t n e a r l y so u s e f u l , a c c o rd in g to th e n a t u r a l and common a c c e p ta tio n o f th e term , a s a p ie c e o f c o tto n o b ta in e d by a t h i r d p a r t o f j th e e x e r t io n ; y e t th e fo rm e r w ould u n q u e s tio n a b ly b e | c o n s id e re d as th e p ro d u c tio n o f th e g r e a t e r am ount o f w e a lth . ^ Thomas R o b ert M a lth u s, U n titl e d e s s a y com m enting on M c C u llo c h 's "E ssay on P o l i t i c a l Economy" w hich ap p e a re d , in th e Supplem ent to th e E n c y c lo p e d ia B r i t a n n i c a , V ol. V I, P a r t I , in 1823, in th e Q u a r te r ly Review o f J a n u a ry 1824 in O c c a s io n a l P ap ers o f T. R. M alth u s on I r e la n d , P o p u la t i o n , and P o l i t i c a l Economy. B ern ard Sem m ell, e d i t o r (New Y ork: B u rt F r a n k lin , 1 9 6 3 ), p . 178. |The n o rm al, o r lo n g ru n v a lu e o r p r ic e o f a good i s , i . . . I ( th e r e f o r e , d e te rm in e d by su p p ly and demand u n d e r c o n d itio n s | !of c o m p e titio n and i t i s n o t a f u n c tio n o f e i t h e r i t s I ; u t i l i t y , as M alth u s im p lie s in h i s d e f i n i t i o n o f " u t i l i t y , ” i I o r o f th e la b o r t i e d up in i t s p ro d u c tio n . T h is p r i c e f o r i * th e good te n d s to a p p ro x im a te i t s c o s t o f p r o d u c tio n b e - ic a u se o f th e im p act o f c o m p e titio n upon p r o f i t m a rg in s -- l I by p r o f i t m arg in s h e c l e a r l y means b o th i n t e r e s t and p r o f i t s . I i B ut i f t h i s be t r u e , i t fo llo w s t h a t th e g r e a t law o f | demand and su p p ly i s c a l l e d in t o a c t i o n to d e te rm in e j w hat Adam S m ith c a l l s n a t u r a l p r i c e s , a s w e ll a s w hat j he c a l l s m a rk e t p r i c e s . ° jand The s p e c i f i c e r r o r o f th e new s c h o o l in E ngland i s th e h a v in g ta k e n [ s i c ] so c o n fin e d a v iew o f v a lu e a s n o t to in c lu d e th e r e s u l t s o f demand and s u p p ly , and o f th e r e l a t i v e abundance and c o m p e titio n o f c a p i t a l . ^ In r e a l term s th e o u tp u t o f th e sy stem i s d iv id e d i n t o th r e e s h a r e s . In t h i s a s in many o th e r p la c e s M alth u s i I fo llo w s th e le a d o f S m ith , and th e t h r e e p o r tio n s becom e: w ages, p r o f i t s , and r e n t s . S in c e M a lth u s 1 w ork i s in ^ ^ M alth u s, P r in c ip le s o f P o l i t i c a l Economy, p . 71. ^ 'M a lth u s , O c c a s io n a l P a p e rs , p . 208. 47 ■ essence a r e p ly to R ic a rd o ’ s P r in c ip le s o f 1817, i t i s b e s t to s t a r t w ith a c o n s id e r a ti o n o f r e n t s . R ic a rd o had h e ld t h a t th e sim p le e x te n s io n o f a g r i c u l t u r e w ith in a lim ite d ;g e o g r a p h ic a l a r e a w ould n a t u r a l l y le a d to th e em ergence o f ,r e n t s a s p o p u la tio n in c re a s e d and a s th e s o c ie ty was fo rc e d |t o r e s o r t to e v e r l e s s f e r t i l e a c re a g e . | W hile M alth u s a g re e d t h a t t h i s i s one c a u s e o f I r e n ts , he added two o t h e r s : th e f i r s t , and m ost q u e s tio n - i i a b le i s th e t h e s i s t h a t la n d r e tu r n s an o u tp u t in e x c e ss o f th e am ount n e c e s s a r y to m a in ta in th e la b o r and c a p i t a l i em ployed in i t s w o rk in g . M alth u s h e ld , a lo n g w ith S m ith, t h a t c a p i t a l em ployed in a g r i c u l t u r e w ould b e m ore p ro d u c t i v e th a n c a p i t a l em ployed in m a n u fa c tu rin g b e c a u se la n d , th e y th o u g h t, b e n e f i c e n t ly a id e d th e c a p i t a l i s t by i t s f r i e n d l y p r o d u c t i v i t y . A g r e a t argum ent ensued b etw een R ic a rd o and M alth u s c e n te r in g a b o u t th e q u e s tio n o f w h e th e r n a tu r e was n i g g a r d ly o r g e n e ro u s . T h is c o n tro v e rs y was r e a l l y s e n s e le s s f o r i t i s r e a l l y th e same th in g a s dem anding w h e th e r la n d ca n b e a t th e same tim e p ro d u c tiv e and s c a rc e --w h ic h i t o b v io u s ly c a n . The t h i r d c a u s e o f r e n t d e s c r ib e d by M alth u s was I r e a l l y a r e s ta te m e n t o f h i s g e n e r a l t h e s i s on p o p u la tio n : I th e em ploym ent o f la n d in th e p ro d u c tio n o f n e c e s s i t i e s i i I w ill g e n e r a te a p o p u la tio n s u f f i c i e n t l y l a r g e t o demand a l l jo f t h a t o u tp u t a t th e g o in g p r ic e -- w h ic h g o in g p r i c e i s j s e t by th e c o s t o f p ro d u c in g ’’c o rn ” on th e l e a s t p ro d u c tiv e A Q la n d u n d e r th e plow . T hus, i t becom es t h a t r e n t i s n o t I a lo n e a p ro d u c t o f e i t h e r th e s c a r c i t y o r p r o d u c tiv i ty o f I la n d , b u t o f c o m b in a tio n o f th e s e two c h a r a c t e r i s t i c s i | lin k e d to th e demand f o r th e l a n d 's o u tp u t. R ic a rd o im p lie d t h i s t h i r d M a lth u s ia n c a u se b u t, as alw ays in h i s i I c o n s id e r a tio n s o f th e c a u s e s o f v a lu e , f a s te n e d upon th e Ic o s ts o f p ro d u c tio n subsum ing a demand a s g iv e n — in t h i s I i c a s e g iv e n by th e s i z e o f th e p o p u la tio n . T h ere i s h e re th e n , n o th in g new, o n ly a r e a f f i r m a ti o n o f th e im p o rta n c e o f demand and a r e s ta te m e n t o f th e th e o ry o f p o p u la tio n . 'C le a r ly fo llo w in g th e R ic a rd ia n le a d , M alth u s s t a t e d : i i j From th e p re c e d in g a c c o u n t o f th e p ro g re s s o f r e n t , I i t fo llo w s t h a t th e a c t u a l am ount o f th e n a t u r a l r e n t j o f la n d in th e a c t u a l s t a t e o f a g r i c u l t u r a l s k i l l , i s , 1 w ith v e ry l i t t l e draw back, n e c e s s a r y to th e a c t u a l p ro d u c e ; and t h a t th e p r i c e o f c o m in e v e ry p r o g r e s s iv e c o u n try , m ust b e j u s t a b o u t e q u a l to th e c o s t o f p ro d u c tio n on la n d o f th e p o o r e s t q u a l i t y a c t u a l l y 48 j M a lth u s , P r in c ip le s o f P o l i t i c a l Economy, I pp. 140 f f . 49 in u s e , w ith th e a d d i tio n o f th e r e n t i t w ould y ie ld in i t s n a t u r a l s t a t e ; o r to t h e c o s t o f r a i s i n g a d d i- ! t i o n a l p ro d u ce on o ld la n d , w hich a d d i t i o n a l p ro d u ce | y i e l d s o n ly th e u s u a l r e t u r n s o f a g r i c u l t u r a l c a p i t a l w ith no r e n t . From t h i s i t ca n b e se e n t h a t r e n t , w hich em erges on a l l b u t th e l a s t la n d u n d e r c u l t i v a t i o n , r e p r e s e n ts a d e d u c tio n from th e s a l e s v a lu e o f o u tp u t b e f o r e th e o th e r s o - c a lle d ad v an ces a r e r e p a i d . T h is v a lu e o f o u tp u t ' a p p ro ac h ed th e c o s t o f p ro d u c tio n on th e m a rg in a l u n i t em ployed. Thus s a l e s m inus r e n t s w ould e q u a l th e t o t a l o f w ages, ta x e s , i n t e r e s t , and p r o f i t s . Or, as M alth u s i I s t a t e s : The p r o f i t s o f c a p i t a l c o n s i s t o f th e d i f f e r e n c e b etw een th e v a lu e o f a com m odity p ro d u ced , and th e v a lu e o f th e ad v an ces n e c e s s a r y to p ro d u ce i t , and th e s e ad v an ces c o n s i s t o f a c c u m u la tio n s g e n e r a lly made up o f w ages, r e n t s , ta x e s , i n t e r e s t , and p r o f i t s . T axes a r e , o f c o u r s e , d e te rm in e d ex o g en o u sly and a r e j ita k e n a s g iv e n by th e p ro d u c e r. I n t e r e s t and p r o f i t s a r e g e n e r a lly t r e a t e d u n d e r th e s i n g l e t i t l e o f p r o f i t s . , H aving th u s e s ta b l i s h e d th e c a u s e s o f r e n t , i f wages c a n b e d e te rm in e d , p r o f i t s becom e, a s M a lth u s c l e a r l y s t a t e s , ■ a r e s i d u a l paym ent, and g iv e n th e l e v e l o f ta x e s , th e 4 9 I b i d . , p . 177. 5 0 I b i d . . p . 262. p r o d u c tiv e p ro c e s s becom es a ro u g h ly d e te r m in a te p ro b lem . T h is summary v iew o f th e p ro d u c tiv e p ro c e s s i s s k e tc h e d in ! f o r u s by M alth u s in th e fo llo w in g : . . . th e v a lu e s o f co m m o d ities, o r o f th e m ass com m odities a r e alw ay s d e te rm in e d by th e s t a t e o f th e su p p ly com pared w ith th e demand; and t h a t t h e i r v a lu e s may b e m easured by th e q u a n t ity o f s ta n d a r d la b o u r w hich th e y w i l l command. I t i s a l s o o b v io u s from w hat h as b een s a id , t h a t d u rin g th e s h o r t p e r io d s w hich u s u a lly in te r v e n e b etw een th e ad v a n ces o f c a p i t a l and ; th e r e tu r n s o f p ro d u c e , th e y may b o th b e e s tim a te d | c o r r e c t l y in money. In th e em ploym ent o f c a p i t a l i th e r e f o r e , i n any b u s in e s s , th e a d v a n c e s, w h e th e r i n - I c r e a s in g o r d im in is h in g i n v a lu e , may b e known and m easured b e fo re h a n d , w h ile th e v a lu e o f th e p ro d u c t, j and th e p r o p o r tio n o f t h a t v a lu e w hich goes to r e p la c e th e ad v an ces rem a in s to b e a s c e r ta in e d when th e p ro d u ce i s s o ld . The v a ry in g r a t e o f p r o f i t s , t h e r e f o r e , in th e p r o d u c tio n o f e v e ry com m odity dep en d s upon th e e x c e ss o f i t s v a lu e when s o ld above th e known v a lu e o f th e a d v a n c e s , d e te rm in e d in a l l c a s e s by th e s t a t e o f th e su p p ly and th e dem and. F u rth e rm o re , th e b u sin e ssm a n lo o k s to th e g o in g r a t e jo f p r o f i t s in c o n s id e r in g v a r io u s em ploym ents f o r h is j s to c k , and " th e c a p i t a l i s t g e n e r a lly e x p e c ts an e q u a l j p r o f i t upon a l l th e p a r t s o f th e c a p i t a l w h ich h e a d - 52 v a n c e s ." Thus wages become th e key v a r i a b l e . T h ere i s , how ever, one im p o rta n t p o in t to n o te ; th e u n d e rta k in g o f 51 I b i d . , pp. 2 6 6 -2 6 7 . 52 I b i d . , p . 268. 51 ( b u s in e s s a c t i v i t y h in g e s upon th e r a t e o f p r o f i t s . I t i s |t o t h i s t h a t th e c a p i t a l i s t lo o k s , and, a lth o u g h th e s e may l h av e a g o in g r a t e , u n d e r some k in d o f w o rk a b le c o m p e titio n , I I th e y a l s o in v o lv e e le m e n ts o f u n c e r t a i n t y a b o u t th e demand f o r f i n a l o u tp u t in th e s e n s e o f th e p r ic e s i t w i l l com mand and an i n t e r v a l o f com m itm ent b e f o r e th e in v e s tm e n t i s r e p a id . The em ploym ent o f men in p ro d u c tiv e a c t i v i t i e s j th u s depends upon th e e x p e c te d demand f o r o u tp u t a t a i n o rm al p r i c e - - i . e . , one w h ich w i l l c o v e r th e c o s t s o f p r o d u c tio n and r e t u r n a t l e a s t a n o rm al p r o f i t . A lthough M alth u s hoped f o r b e t t e r , h e seem s to c o n - i ! 1s i d e r th e w ages o f la b o r a s s e t , w ith a c c o u n t ta k e n f o r i , im p e rf e c tio n s and la g s in th e m a rk e t, by th e am ount o f ! ■ n e c e s s a r ie s and c o n v e n ie n c e s p ro d u ced r e l a t i v e t o th e la b o r in g p o p u la tio n . B ro a d ly , in th e lo n g ru n , a c e r t a i n a n n u a l p ro d u ce m ust somehow b e d iv id e d b etw een a p o p u la tio n I o f so many m ouths to fe e d and b o d ie s t o h o u se and c l o t h e . i T h is we can re c o g n iz e a s th e sim p le r e s ta te m e n t o f th e ;f i r s t e s s a y . On th e o th e r h an d , th e g o in g w ages, w hich i may n o t re sp o n d to ch an g es i n b i r t h s le d by th e ch an g es in wages th e m s e lv e s , may la g b e h in d by as much a s e ig h te e n y e a r s : M . . . a sudden in c r e a s e o f c a p i t a l and p ro d u ce 52 I c a n n o t e f f e c t a p r o p o r tio n a te su p p ly o f la b o u r i n l e s s th a n I CO j s i x te e n o r e ig h te e n y e a r s ." 1 S in c e r e n t s and ta x e s h a v e b ee n d e d u c te d from th e i ! i p r ic e r e c e iv e d , th e re m a in in g sum i s d iv id e d betw een j p r o f i t s and w ages, and in d e f in in g and an sw e rin g t h i s p ro b - jlem , M alth u s ch o se to c o n c e n tr a te upon a g r i c u l t u r e . He 'c o n s id e re d a g r i c u l t u r e to b e th e le a d in g s e c t o r in th e s e n se t h a t m a n u fa c tu rin g fo llo w e d a g r i c u l t u r e . In w o rk in g I th e la n d , man was a id e d by n a tu r e , n o t so w ith m a n u fa c tu r in g ; i n fa rm in g th e n , up t o a p o in t, men c o u ld b e em ployed w ith c a p i t a l and th e y w ould r e t u r n a g r e a t e r v a lu e th a n th o s e em ployed in m a n u fa c tu rin g . The o n ly f o r c e w hich j e n te r e d to s h a t t e r t h i s calm le a d in g a s i t w ould to an j economy o v erw h elm in g ly c e n te r e d upon c u l t i v a t i o n o f th e la n d was th e famous law o f d im in is h in g r e t u r n s . t In h i s d is c u s s io n o f t h i s fam ous p r i n c i p l e , M alth u s o b v io u s ly fo resh ad o w ed th e l a t e r m a r g i n a l i s t s . The s u c c e s s iv e r e c o u r s e to l e s s and l e s s p r o d u c tiv e la n d m eant t h a t th e la b o r a p p lie d to i t becam e l e s s p r o d u c tiv e a t th e m ar g in w ith each s u c c e e d in g d o se : 53Ibid. , p. 280. 53 In d w e llin g th u s upon th e p o w e rfu l e f f e c t s w hich I m ust i n e v i t a b ly be prod u ced by th e p r o p o r tio n w hich ! c a p i t a l and p ro d u c e b e a r to la b o u r, and upon th e I n e c e s s ity o f g iv in g a d e q u a te w e ig h t to th e p r i n c i p l e o f demand and s u p p ly , o r c o m p e titio n , i n e v e ry e x p la n a tio n o f th e c irc u m s ta n c e s w hich d e te rm in e p r o f i t s , i t i s n o t m eant to u n d e r r a te th e im p o rta n c e o f t h a t ] c a u se w hich depends upon th e d im in is h in g p r o d u c tiv e n e s s o f la b o u r on th e l a s t la n d ta k e n i n t o c u l t i v a t i o n . T h is c a u s e i s in d e e d o f su ch a n a tu r e , t h a t , i f i t s a c ti o n goes on, i t m u st f i n a l l y overw helm e v e ry o th e r . j On th e o th e r h an d , th e law d o es n o t seem to be i j a p p lie d by M alth u s t o m a n u fa c tu rin g , whose p ro d u c ts w ere jassum ed to h av e n e a r ly h o r i z o n ta l o r c o n s ta n t c o s t c u rv e s . T hus, la b o r m ig h t c o n tin u e to b e a p p lie d i n in d u s tr y w ith o u t a d e c lin e in lo n g -ru n w a g e s --g iv e n th e a ssu m p tio n t h a t th e m a rk e t wage had f o r a tim e b een above th e n o rm al o r s u b s is te n c e w age. Man, how ever, liv e d b y b re a d . M alth u s d e v o te d many p ag es in h i s P r in c ip le s to d is c u s s io n s o f th e r e l a t i o n s h i p s w hich had h i s t o r i c a l l y p r e v a ile d b etw een th e ip r ic e o f c o m ( i . e . , o f fo o d ) and th e p r i c e o f o r d in a r y i la b o r . S in c e b re a d becam e th e p r i n c i p a l n e e d , and s in c e i ! th e p r i c e o f c o m was r e g u la te d by th e p r i c e o f p ro d u c in g c o m on th e p o o r e s t la n d , and s in c e on la n d s u f f i c i e n t l y jp o o r a la b o r e r c o u ld n o t even fe e d h im s e lf , i t fo llo w s 34Ibid. . p. 281. j t h a t a l l wages (assu m in g some l e v e l o f c o m p e titio n ) m ust I h o v e r a b o u t th e s u b s is te n c e l e v e l . i But i f wages f e l l , t h i s m ust mean t h a t p r o f i t s would r i s e g iv e n th e p re c e d in g a s su m p tio n s a b o u t th e d i v i s i o n o f r e t u r n s from p r o d u c tio n a f t e r r e n t s and ta x e s b etw een o n ly p r o f i t s and w ages. Wages go down and p r o f i t s go up; i t i s i la s sim p le a s t h a t , i t seem s. Not s o , h o ld s M a lth u s, f o r th e r i s i n g p r i c e o f c o rn ( o r i f you l i k e , th e f a l l i n g l e v e l Jof w ages) w i l l le a d to an i n s u f f i c i e n t e f f e c t i v e demand |f o r i n d u s t r i a l o u tp u t, and i n to a g e n e r a l c o l la p s e o r g l u t I i on th e m a rk e t. ; The m ech an ics by w hich t h i s a p p a r i ti o n becam e a i r e a l i t y in th e M a lth u s ia n sy stem a r e m ost i n t e r e s t i n g . Wages f a l l w h ile r e n t s r i s e o v e r tim e - - a lo n g w ith t h i s , r e tu r n s to c a p i t a l i n a g r i c u l t u r e may a l s o r i s e . As i ^ p o p u la tio n p r e s s e s a g a in s t th e m eans o f s u b s is te n c e , th e la b o r p r i c e o f c o rn r i s e s le a v in g l e s s w ages to b e s p e n t upon m a n u fa c tu re d g o o d s. The d e c l i n e in th e m a rk e t f o r i n d u s t r i a l o u tp u t le a d s to a d e c lin e in p r i c e s and to a f a i l u r e to r e p la c e th e ad v an ces m ade. P r o f i t s and wages f a l l to g e th e r and unem ploym ent fo llo w s le a d in g to m o rb id ity in e x p e c ta tio n s a b o u t p r o f i t s . P e o p le r e t r e a t to th e 55 I 1 p a r is h e s to s e c u re th e d o le and E ngland la n g u is h e s . i j M ight n o t t h i s m o tio n tow ard s ta g n a tio n b e a r r e s t e d ? j Was th e r e no s o lu tio n ? M alth u s h e ld a lo n g w ith S m ith t h a t j in c r e a s e s in c a p i t a l came from s a v in g s and t h a t u n d e r c o n d itio n s o f r i s i n g demand th e b u ild u p o f c a p i t a l w ith in th e economy c o u ld b e accom m odated w ith o u t a g e n e r a l o v e r- su p p ly o f o u tp u t, b u t th e b a la n c e b etw een c a p i t a l goods and p ro d u ce ( i . e . , b etw een s a v in g s and co n su m p tio n ) was a d e l i c a t e and e x tre m e ly c r i t i c a l b a la n c e -- o n e upon w hich th e w e llb e in g o f th e e n t i r e s o c ie ty d ep en d ed . I f th e s a v in g s w ere u sed to add to th e a lr e a d y o v e rs to c k e d body o f c a p i t a l , th e r e s u l t s w ould b e d i s a s t r o u s . I f , how ever, th e s a v in g s w ere u sed to s u p p o rt an " u n p ro d u c tiv e ” g ro u p i o f r e t a i n e r s , an a m e lio r a tiv e f o r c e w ould b e s e t in a c t i o n . T hese s e r v i c e - s e l l e r s , p ro d u c in g no s t o r a b l e o u tp u t and \ y e t dem anding i n d u s t r i a l o u tp u t, w ould form a g ro u p by w hich th e e x c e ss s a v in g s c o u ld b e pumped b a c k i n t o th e sy stem . I t m ig h t a p p e a r t h a t an in c r e a s e i n th e s to c k o f I c a p i t a l c a p a b le o f b e in g advanced w ould le a d to a n i n c r e a s e in th e t o t a l o f ad v an ces made to la b o r and h en ce to a d e c lin e in th e ra n k s o f th e unem ployed, b u t su ch 56 j a c t s o f s a v in g do n o t le a d to th e happy r e s u l t : I I f i t w ere t r u e t h a t , in o r d e r to em ploy a l l t h a t ! a r e o u t o f w ork and to c r e a t e a t th e same tim e a s u f f i c i e n t m a rk e t f o r w hat th e y p ro d u c e , i t i s o n ly n e c e s s a ry t h a t a l i t t l e m ore sh o u ld b e sav ed from th e ! rev en u e and added to th e c a p i t a l o f th e c o u n try , I am j f u l l y p e rsu a d e d t h a t t h i s s p e c ie s o f c h a r i t y would I n o t w ant c o n t r ib u t io n s , and t h a t a change w ould soon ] b e w rought in th e c o n d itio n o f th e la b o u rin g c l a s s e s . j j But when p r o f i t s a r e low and u n c e r t a in , when c a p i t a l i s t s a r e q u i t e a t a lo s s w here th e y can s a f e ly , em ploy t h e i r c a p i t a l s , and when on th e s e a c c o u n ts ; c a p i t a l i s flo w in g o u t o f th e c o u n try ; in s h o r t, when j a l l th e e v id e n c e w hich th e n a t u r e o f th e s u b je c t ad - I m its , d i s t i n c t l y p ro v e s t h a t th e r e i s no e f f e c t i v e demand f o r c a p i t a l a t home, i s i t n o t c o n tr a r y t o th e I g e n e r a l p r i n c i p l e s o f p o l i t i c a l economy, i s i t n o t a | v a in and f r u i t l e s s o p p o s itio n to t h a t f i r s t , g r e a t e s t and m ost u n i v e r s a l o f a l l i t s p r i n c i p l e s , th e p r i n c i p l e o f su p p ly and demand, to reconanend s a v in g , and th e c o n v e rs io n o f m ore rev en u e i n t o c a p i t a l ? I s i t i n o t j u s t th e same s o r t o f th in g as to recommend m ar- j r i a g e when p e o p le a r e s ta r v i n g and e m ig ra tin g ? ! 1 N o tic e th e f i n e b a la n c e M alth u s a c h ie v e s in d i s c u s s - I i jin g th e d i f f e r e n c e b etw een d e tr im e n ta l and u s e f u l s a v in g : I t i s n o t, o f c o u rs e , m eant t o b e s t a t e d t h a t p a r sim ony, o r even a te m p o ra ry d im in u tio n o f co n su m p tio n i s n o t o f te n in th e h ig h e s t d e g re e u s e f u l , and som e tim es a b s o lu te l y n e c e s s a ry to th e p ro g re s s o f w e a lth . A s t a t e may c e r t a i n l y b e ru in e d b y e x tra v a g a n c e ; and a d im in u tio n o f th e a c t u a l e x p e n d itu r e may n o t o n ly b e n e c e s s a ry on t h i s a c c o u n t, b u t when th e c a p i t a l o f a c o u n try i s d e f i c i e n t , com pared w ith th e demand f o r i t s p ro d u c ts , a te m p o ra ry economy o f co n su m p tio n i s r e - ; q u ir e d , i n o r d e r to p ro v id e t h a t s u p p ly o f c a p i t a l 55I b i d . . pp. 4 2 5 -4 2 6 . 56I b i d . , pp. 4 1 7 -4 1 8 . 57 w hich can a lo n e f u r n is h th e means o f an in c re a s e d co n su m p tio n in f u t u r e . A ll t h a t i s c o n te n d e d f o r i s , t h a t no n a t io n can p o s s ib ly grow r i c h by an accu m u la t i o n o f c a p i t a l , a r i s i n g from a p erm an en t d im in u tio n o f co n su m p tio n ; b e c a u se such a c c u m u la tio n b e in g beyond w hat i s w anted in o r d e r to su p p ly th e e f f e c t u a l demand f o r p ro d u c e , a p a r t o f i t w ould v e ry soon lo s e b o th i t s u s e and i t s v a lu e , and c e a s e to p o s s e s s th e c h a r a c t e r o f w e a lth . ^ 7 j I b i d . , p p . 3 2 6 -3 2 7 . M a lth u s b a la n c e s t h i s a r g u m en t a s fo llo w s : "On th e o th e r h an d , i f th e c a p i t a l o f th e jc o u n try w ere d im in is h e d by th e f a i l u r e o f demand in some ;la rg e b ra n c h e s o f t r a d e , w hich had b e f o r e b ee n v e ry p r o s p e r o u s , and a b so rb e d a g r e a t q u a n t ity o f s to c k ; o r even i f , Iw h ile c a p i t a l w ere su d d e n ly d e s tro y e d , th e re v e n u e o f th e la n d lo r d s was d im in is h e d in a g r e a t e r p r o p o r tio n owing to p e c u l i a r c irc u m s ta n c e s , th e s t a t e o f th in g s , w ith th e e x c e p tio n o f th e d i s t r e s s e s o f th e p o o r, w ould b e a lm o st e x a c tly r e v e r s e d . The re m a in in g c a p i t a l i s t s w ould b e i n no R e s p e c t b e n e f i te d by e v e n ts w hich had d im in is h e d demand in ia s t i l l g r e a t e r p r o p o r tio n th a n th e y had d im in is h e d th e s u p p ly . C om m odities w ould b e ev ery w h ere c h e a p . C a p ita l Iwould b e s e e k in g em ploym ent, b u t w ould n o t e a s i l y f in d i t ; and th e p r o f i t s o f s to c k w ould b e low . T h ere Would be no p r e s s in g and im m ediate demand f o r c a p i t a l , b e c a u se th e r e w ould b e no p r e s s in g and im m ediate demand f o r co m m o d ities; and, u n d e r th e s e c irc u m s ta n c e s , th e s a v in g from re v e n u e to add to c a p i t a l , in s te a d o f a f f o r d in g th e rem edy r e q u ir e d , would o n ly a g g ra v a te th e d i s t r e s s e s o f th e c a p i t a l i s t s , and f i l l th e s tre a m o f c a p i t a l w hich was flo w in g o u t o f th e c o u n try . The d i s t r e s s e s o f th e c a p i t a l i s t s w ould b e a g g ra v a t e d , j u s t upon th e same p r i n c i p l e a s t h e d i s t r e s s e s o f th e la b o u rin g c l a s s e s w ould b e a g g ra v a te d i f th e y w ere e n co u rag ed t o m arry and in c r e a s e , a f t e r a c o n s id e r a b le d e s t r u c t i o n o f p e o p le , a lth o u g h accom panied by a s t i l l g r e a t e r d e s t r u c t i o n o f c a p i t a l w hich had k e p t th e w ages o f la b o u r v e ry low . T h ere m ig h t c e r t a i n l y b e a g r e a t d e f i c ie n c y o f p o p u la tio n , com pared w ith th e t e r r i t o r y and pow ers o f th e c o u n try , and i t m ig h t b e v e r y d e s i r a b l e t h a t i t sh o u ld b e g r e a t e r ; b u t i f th e wages o f la b o u r w ere s t i l l low, n o tw ith s ta n d in g th e d im in u tio n o f p e o p le , to en co u rag e ith e b i r t h o f m ore c h i l d r e n w ould b e to e n c o u ra g e m is e ry and m o r t a l i t y r a t h e r th a n p o p u la tio n ." I b i d . , p . 415. 58 i i T h is p a ra g ra p h d is c l o s e s a so u n d e r a p p ro a c h t o th e I I |q u e s tio n o f th e u s e f u ln e s s o f s a v in g th a n do many o f th e j arg u m en ts d e v e lo p e d in t h i s c o u n try p a r t i c u l a r l y d u rin g i i ( th e ’ t h i r t i e s and ’ f o r t i e s o f o u r own c e n tu r y . The r e s u l t s I jo f an in c r e a s e in s a v in g a r e tw o -fo ld : f i r s t , a d e c lin e in (consum ption sp e n d in g ; and se co n d , even i f th e s a v in g s a r e !in v e s te d , a p o s s ib le in c r e a s e in th e s to c k o f c a p i t a l goods I w hich w ould lo w er th e v a lu e o f a l l e x i s t i n g c a p i t a l . Thus, even in v e s tin g th e s a v in g s may n o t o f f e r a s o lu t i o n : But i t a p p e a rs to me p e r f e c t l y c l e a r i n th e o ry , and u n iv e r s a l ly c o n firm e d by e x p e rie n c e , t h a t th e em ploy m ent o f c a p i t a l may, and in f a c t o f te n d o e s , f in d a | l i m i t , lo n g b e f o r e th e r e i s any r e a l d i f f i c u l t y in p ro c u rin g th e m eans o f s u b s is te n c e ; and t h a t b o th c a p i t a l and p o p u la tio n may b e a t th e same tim e , and f o r a p e rio d o f c o n s id e r a b le le n g th , re d u n d a n t, com pared w ith I th e e f f e c t u a l demand f o r p ro d u c e . The key to n a t i o n a l p ro g re s s i s , t h e r e f o r e , an e f f e c t i v e demand f o r co m m o d ities s u f f i c i e n t to a b s o rb th e i ! s a v in g s o f th e sy stem , n e t o f sp e n d in g on " u n p ro d u c tiv e " i [ s e r v ic e s . T h is le a d s to a p r o f i t a b i l i t y f o r c a p i t a l i n - i i (v e stm e n ts and a r i s e in b u s in e s s u n d e r ta k in g s . T hus: . . . when th e su p p ly o f com m odities i s i n some d e g re e d e f i c i e n t com pared w ith th e demand, w h e th e r t h i s a r i s e s from th e in c r e a s e o f demand, o r th e 58Ibid. , p. 402. 59 d im in u tio n o f s u p p ly , th e s t a t e o f tr a d e i s b r i s k , ! p r o f i t s a r e h ig h , and m e r c a n tile s p e c u la tio n s a r e | g r e a t l y en c o u ra g ed ; and on th e o th e r h an d , when th e i su p p ly i s ab u n d an t com pared w ith th e demand, th e r e i s a p e rio d o f c o m p a ra tiv e s ta g n a ti o n , w ith low p r o f i t s , and v e ry l i t t l e en co u rag em en t to m e r c a n tile ! s p e c u la tio n . * J S chum peter, coiranenting upon M althus* g e n e r a l o b je c - I tio n s t o S a y 's Law, f o r t h a t i s w hat t h i s am ounts to , |l a b e l s M alth u s a s em ploying an " a n ti- s a v in g " argum ent.^® I T h is i s , how ever, an e r r o r on S c h u m p e te r's p a r t , f o r iM althus c l e a r l y i s a t ta c k in g th e n o tio n t h a t th e c u r e f o r t JE n g la n d 's woes m ust b e an in c r e a s e i n th e s to c k o f c a p i t a l I I ;e i t h e r a s a fund f o r em ploying la b o r o r a s a c t i v e i n v e s t m ent i n c a p i t a l eq u ip m en t. The r e a l v i l l a i n , a c c o rd in g to M a lth u s, was an i n s u f f i c i e n c y o f e f f e c t i v e demand f o r o u t- | Pu t . The c a u s e o f th e s ta g n a tio n , b e f o r e th e la n d i s j jpushed to i t s v e ry l i m i t s , i s a l i m i t a t i o n in m a rk e t demand i ;f o r o u tp u t: ! I t h a s b een f u l l y s t a t e d and a llo w e d , t h a t a p e rio d i o f c o m p a ra tiv e s ta g n a ti o n m ust f i n a l l y a r r i v e in e v e ry ^M alth u s, O c c a s io n a l P a p e r s , p . 147. T h is q u o ta - i t i o n i s ta k e n from an e s s a y by M alth u s com m enting upon 'Thomas T ooke’ s "T houghts and D e ta ils on th e H igh and Low ; P r ic e s o f th e L a s t T h ir ty Y ears" a p p a r e n tly p u b lis h e d in i London in 1823. M althus* r e p ly and coirm ent was p u b lis h e d by th e Q u a r te r ly Review o f A p r il 1823. ! ^ S c h u m p e te r, o p . c i t . , p . 623. 60 c o u n try from th e d i f f i c u l t y o f p r o c u r in g s u b s is te n c e , j But a d e f ic ie n c y o f e f f e c t u a l demand h a s o f te n o c c a - ! sio n e d a s i m i l a r s ta g n a ti o n a t an e a r l y p e r io d o f a | n a t i o n 's p r o g r e s s . No c o u n try w ith a v e ry c o n fin e d ' m a rk e t, i n t e r n a l a s w e ll as e x t e r n a l , h a s e v e r been a b le to a c c u m u la te a la r g e c a p i t a l , b e c a u se su ch a ' m ark et p r e v e n ts th e fo rm a tio n o f th o s e w an ts and < t a s t e s , and t h a t d e s i r e to consum e, w hich a r e a b s o - | l u t e l y n e c e s s a ry to keep up th e m a rk e t p r i c e s o f com- j m o d ifie s , and p r e v e n t th e f a l l o f p r o f i t s . j M alth u s i s e x p l i c i t in d i s t i n g u i s h i n g b etw een a p a r t i a l and a g e n e r a l g l u t i n th e fo llo w in g ( n o tic e e s p e c i a l l y t t h a t th e r e may b e no f o r c e s i n o p e r a tio n , even assum ing a h ig h d e g re e o f c o m p e titio n among c a p i t a l , to p o in t th e way tow ard a r e c o v e ry ) : The d o c t r in e o f th e e q u a l i t y o f p r o f i t s te a c h e s us t h a t p a r t i a l g l u t s c a n n o t b e o f lo n g d u r a tio n . The i n t e r e s t o f i n d iv i d u a l p ro d u c e rs to move t h e i r c a p i t a l s to m ore p r o f i t a b l e em ploym ents i s so o b v io u s and p r e s s in g , t h a t i t c a n n o t lo n g b e u n a tte n d e d t o , th o u g h th e ch an g e may o c c a s io n te m p o rary l o s s . B ut when th e w areh o u ses a r e g e n e r a lly f u l l , and th e r e i s a sudden and u n u s u a l f a l l o f p r o f i t s i n a l l em ploym ents, w hich i s w hat i s m eant by a g e n e r a l g l u t , th e p ro d u c e r c a n - j n o t r e l i e v e h im s e lf . I t i s o f l i t t l e c o n seq u en c e in j t h i s c a s e , t h a t a l l th e a r t i c l e s a r e p ro d u ced in t h e i r i p ro p e r p r o p o r tio n s to ea ch o th e r , and t h a t c o t to n s , b ro a d c l o t h s , s i l k s , h ard w a re , &c. &c. ex ch an g e among | th e m se lv e s e x a c tly a t th e same r a t e a s th e y d id b e f o r e . I f w ith o u t im provem ents in m a ch in e ry , th e y h av e a l l f a l l e n com pared w ith la b o u r, w hich th e y may v e ry e a s i l y do from th e c o m p e titio n o f c a p i t a l a c tin g on a s la c k demand, f o r e ig n and d o m e s tic , th e r e m ust n e c e s s a r i l y be ^ ^M alth u s, P r i n c i p l e s o f P o l i t i c a l Economy, p . 367. 61 a g e n e r a l f a l l o f p r o f i t s accom panied w ith a l l th e a p p e a ra n c e s o f a g e n e r a l g l u t . How lo n g t h i s m ig h t l a s t , i t w ould n o t b e v e ry e a sy to sa y : i t would depend e n t i r e l y upon th e t a s t e s and h a b i t s o f th e e f f e c t u a l dem anders, and th e p e rs e v e ra n c e and compe t i t i o n o f th e p ro d u c e rs . V. SOLUTIONS FOR A COLLAPSE j What s o lu t i o n s th e n d o es M alth u s o f f e r to th e p ro b - i lem o f a w id e ly d if f u s e d g e n e r a l g l u t o c c u rr in g even i n th e j ;fa c e o f c o m p e titiv e f a c t o r s and p r ic e s ? He r e j e c t s th e i c o n te n tio n t h a t w hat i s n e c e s s a ry i s an in c r e a s e i n th e i fu n d s a v a i l a b l e f o r ad v an ces t o la b o r and h e lik e w is e d i s - ! f ■cards (u n w ise ly ) a sim p le in c r e a s e in r e a l in v e stm e n t b e c a u se o f i t s te n d e n c y to t h r e a t e n th e p r o f i t m a rg in s o f e x i s t i n g c a p i t a l . Thus h e h o ld s t h a t th e s o l u t i o n m ust r e s t upon an in c r e a s e in th e demand f o r o u tp u t. B ut how m ig h t t h i s be ac co m p lish ed ? i | F i r s t o f a l l , th e s a v in g s n e c e s s a r y to an accu m u la- I |t i o n o f c a p i t a l m ust come from in c re a s e d p r o f i t , w ages, and r e n t s : M a lth u s, O c c a s io n a l P a p e rs , pp. 2 0 4 -2 0 5 . Once a g a in M althus* com m enting upon M eC ulloch*s e s s a y as in n o te 45 ab o v e. The f o r tu n e o f a c o u n try , th o u g h n e c e s s a r i l y made 1 more slo w , i s made in th e same way as th e f o r tu n e s o f j in d iv i d u a ls in tr a d e a r e g e n e r a lly m ade—by s a v in g s , c e r t a i n l y ; b u t by s a v in g s w hich a r e f u r n is h e d from in c r e a s e d g a in s , and b y no means in v o lv e a d im in is h e d | e x p e n d itu re on o b je c ts o f lu x u ry and en jo y m en t. A lth o u g h h e i s n o t e x p l i c i t , M alth u s seemed to c o n te n d t h a t a g e n t le i n f l a t i o n r a t h e r th a n b e in g a m ere a d ju n c t o f (LA p r o s p e r i t y i s a c a u s e o f i t . He go es on to a rg u e t h a t i | i t i s th e d u ty o f th e r i c h to em ploy " u n p ro d u c tiv e " la b o u r, |a n d to engage in c a p i t a l e x p e n d itu r e s and im provem ents in I t h e i r h o ld in g s . ^ One a id t o re c o v e ry w ould b e an in c r e a s e I i in g o v ern m e n tal sp e n d in g : j . . . i f some o f th e p r i n c i p a l governm ents c o n c e rn e d I spend th e ta x e s w hich th e y r a i s e d i n a m anner t o c r e a t e | a g r e a t e r and more c e r t a i n demand f o r la b o u r and com m o d itie s . . . we c a n n o t b e s u r p r i s e d a t th e d u r a tio n o f th e e f f e c t s a r i s i n g from th e t r a n s i t i o n from w ar to p e a c e . & And i n an argum ent upon th e b u rd e n o f th e n a t i o n a l d e b t, jM althus i s c l e a r in p o in tin g o u t t h a t d e b t h as a b u rd e n i ■which can o n ly b e m easured m e a n in g fu lly r e l a t i v e to th e n a t i o n a l revenue**7 n o r i s th e d e b t t o b e c o n s id e re d a c a u s e 63 M a lth u s, P r in c ip le s o f P o l i t i c a l Economy, p . 367. 64I b i d . . pp. 385, 3 9 2 -3 9 3 . 65I b i d . , p . 407. 6 6 I b i d . , p . 421. 67I b i d . , p . 422. ! 68 o f d e p r e s s io n and unem ploym ent. In a re m a rk a b le q u o ta t i o n h e a d v o c a te s a s e r i e s o f p u b lic w orks: I I t i s a ls o o f im p o rta n c e to know t h a t , in o u r e n d e a v o u rs to a s s i s t th e w o rk in g c l a s s e s i n a p e r io d l i k e th e p r e s e n t, i t i s d e s i r a b l e to em ploy them in | th o s e k in d s o f la b o u r, th e r e s u l t s o f w hich do n o t come f o r s a l e i n t o th e m a rk e t, su ch a s ro a d s and p u b lic w o rk s. ^ |And f i n a l l y a c u t i n ta x e s i s p ro p o sed b e c a u se o f th e |s e c o n d a ry b e n e f i t s w hich o c c u r when th e in c r e a s e d incom e j i s s p e n t . 79 i V I. COMPETITION IN THE MODEL--A SU M M A R Y i j M alth u s p u t to g e th e r a v i s i o n o f th e econom ic sy stem i o f n e a r ly u n b e lie v a b le m o d e rn ity . T h at h i s c o n t r ib u t io n s sh o u ld h av e b een so lo n g e c lip s e d i s a g a in i n c r e d i b l e . I j W here in sum m ation d o es th e c o n c e p t o f c o m p e titio n f i t i n t o iM a lth u s ' work? T h ere a r e , I b e l ie v e , s i x b a s ic p o in ts to | !b e r e c a l l e d : i ! 1. C o m p e titio n , f u n c tio n in g th ro u g h th e p r i n c i p l e j o f s u p p ly and demand, i n th e lo n g ru n c a u s e s p r i c e to e q u a l i th e c o s t o f p r o d u c tio n ; and t h i s i s th e n o rm al p r i c e o r 68 I b i d . , p . 4 2 6 . 69I b i d . , p . 429. 70Ibid., p. 436. 64 'v a lu e . M arket p r i c e s may r i s e above o r f a l l below t h i s jlo n g -ru n n o rm al p r i c e , b u t c o m p e titio n among c a p i t a l w i l l 'g e n e r a te c o r r e c t i v e f o r c e s when any d e p a r tu r e b e g i n s .'7* ' I i | 2. C o m p e titio n b etw een b lo c s o f c a p i t a l w i l l te n d I t o c r e a t e an e q u a l i t y o f p r o f i t r a t e s , b u t th e a c t u a l r a t e 72 iand l e v e l o f p r o f i t s w i l l be d e te rm in e d by o th e r f a c t o r s . 3 . The wages o f la b o r become a f a c t o r o f c o m p e ti- I I t i o n in th e s e n s e t h a t th e n a t u r a l wage o f la b o r i s a f u n c tio n o f s u p p ly and demand and m ust b e s u f f i c i e n t to en co u rag e th e su p p ly o f la b o r e r s to c o n tin u e to r e c r e a t e iand o f f e r i t s e l f . ^ j ! 4 . M onopoly power le a d s to a slow -dow n i n th e r a t e 1 7 A o f n a t i o n a l p ro g re s s and i s d e f in e d a s a la c k o f f r e e 75 c o m p e titio n among s e l l e r s . J When a m onopoly fa c e s com pe t i t i o n among b u y e rs , th e r e i s no a b s t r a c t l y d e te r m in a te 71 I b i d . , p p . 31, 186. 72 I b i d . , p . 278: s e e a l s o O c c a s io n a l P a p e rs , pp. 196-202. 73 M a lth u s, P r in c ip le s o f P o l i t i c a l Economy, pp. 224, 1232, 234, and 360; s e e a l s o P o p u la tio n : The F i r s t E ssay . !pp. 12, 33, 46, and 4 7 . ! \ i 1 ^ M a lth u s , P r i n c i p l e s o f P o l i t i c a l Economy, p . 153. ! ^ I b i d . , p . 70; s e e a l s o O c c a s io n a l P a p e rs , p . 173. 65 !p r i c e o r v a lu e and th e common c h a r a c t e r i s t i c o f m onopoly i s h ig h p r o f i t s . 7^ 5. A g e n e r a lly c o m p e titiv e fram ew ork in th e o rg a n - ! i z a t i o n o f p r o d u c tio n may n o t le a d to f u l l em ploym ent and n a t i o n a l p r o s p e r it y . I n s te a d a g e n e r a l g l u t may o c c u r. Demand f o r o u tp u t may b e exceeded by o u tp u t f o r a c o n s id e r a b le tim e and no c o r r e c t i v e f o r c e s w i l l b e a u to m a tic a lly g e n e ra te d . Norm al p r i c e s w i l l n o t b e re a c h e d , sums o f c a p i t a l s advanced w i l l n o t b e re c o v e re d , and unem ploym ent and m is e ry w i l l fo llo w . 77 6 . F i n a l l y , in c o n t r a s t t o th e d o m in an t th o u g h t o f i |t h e n e x t o n e-h u n d red y e a r s , a c o m p e titiv e fram ew ork, a l th ough i t i s a fo u n d a tio n b lo c k o f M a lth u s ia n a n a l y s i s , y i e l d s when com bined w ith o th e r f a c t o r s a v iew o f th e 78 f u t u r e n o t o v e rly o p t i m i s t i c . 1 1 i i 78M a lth u s, P r in c ip le s o f P o l i t i c a l Economy, pp. 145- 146. 77I b i d . , pp. 4 2 4 -4 2 5 .__________78I b t d . , pp . 4 3 6 -4 3 7 . j CHAPTER I I I RICARDO: A RELUCTANT CIRCUMLOCUTION The c r i t i c a l d i f f e r e n c e b etw een R ic a rd o and M alth u s !i s c e n te r e d a b o u t th e tim e p e rio d s o v e r w hich t h e i r a n a ly s i s s t r e t c h e d - - i t i s th e c o n t r a s t o f th e lo n g v ie w w ith th e s h o r t . From h i s c o rre s p o n d e n c e w ith M alth u s th e fo llo w in g i s R ic a rd o ’ s own v iew o f t h e i r d is a g re e m e n ts : I t a p p e a rs to me t h a t one g r e a t c a u s e o f o u r d i f f e r e n c e s in o p in io n , on th e s u b je c ts w hich we h av e so o f te n d is c u s s e d , i s t h a t you h av e alw ay s in y o u r mind th e im m ediate and te m p o ra ry e f f e c t s o f p a r t i c u l a r c h a n g e s--w h e re a s I p u t th e s e im m ed iate and te m p o ra ry I e f f e c t s q u i t e a s id e , and f i x my w hole a t t e n t i o n on th e i p erm anent s t a t e o f th in g s w hich w i l l r e s u l t from them . P erh ap s you e s tim a te th e s e te m p o ra ry e f f e c t s to o h ig h ly , w h i l s t , I am to o much d is p o s e d t o u n d e rv a lu e them . To m anage th e s u b je c t q u i t e r i g h t th e y sh o u ld be I c a r e f u l l y d is t in g u is h e d and m e n tio n e d , and th e due j e f f e c t s a s c r ib e d to e a c h . 1 | L a te r s tu d e n ts o f econom ics h av e p e rh a p s w ish ed t h a t D avid R ic a rd o , The Works and C o rresp o n d e n ce, ed. P ie ro S r a f f a (C am bridge: 1 9 5 1 -1 9 5 5 ), V II, 120, as c i t e d in .R o b ert Lekachman, A H is to r y o f Economic Id e a s (New Y ork: H arp er and B ro th e rs , 1959), p . 151. 66 67 Jam es M ill had b ee n a somewhat l e s s p e rs u a s u v e man; f o r i t was M ill th e e l d e r who goaded and c a jo le d R ic a rd o in to a tte m p tin g h i s fam ous The P r in c ip le s o f P o l i t i c a l Economy , and T a x a tio n . R ic a rd o was a m odest man c o n f e s s in g o p en ly 1 h is la c k o f academ ic t r a i n i n g and h i s i n a b i l i t y to e x p re s s i jh im s e lf in fo rm a l d is c u s s io n ; y e t h i s f r i e n d s a l l a t t e s t e d 1 to th e c a n d o r and f o r c e w hich h e d is p la y e d in c o n v e rs a - ' o |t i o n . i R icard o b ro u g h t to th e s u b je c t o f econom ics th e b r i l l i a n c e o f a m ind t r a i n e d in th e r e a l w o rld o f fin a n c e ; h e knew th e s to c k m a rk e ts , and a t a re m a rk a b ly young ag e was c o n s id e re d an e x p e r t in th e m ost in v o lv e d and a b s t r a c t 'a r e a o f f in a n c e : i n t e r n a t i o n a l a r b i t r a g e . G iven t h i s e a r l y | |t r a i n i n g , one w ould e x p e c t t h a t h i s econom ics w ould b e e m in e n tly n o ta b le f o r d o w n -to -e a rth p r a c t i c a b i l i t y , f o r h e r e was a man who by h is own e f f o r t s had c r e a te d f o r him s e l f a s i z a b l e f o r tu n e . Y et su ch i s n o t th e c a s e . I M a lth u s, th e c l o i s t e r e d s c h o la r and te a c h e r , i s th e v o ic e o f th e r e a l w o rld , w h ile R ic a rd o becam e th e m ost a b s t r a c t 3 o f th e n o te d E n g lis h e c o n o m ists. 2 Lekachman, op. c i t . , p p . 143 f f . 3 Jo se p h S chum peter, H is to r y o f Economic A n a ly s is (New Y ork: O xford U n iv e r s ity P re s s , 1 9 5 4 ), p . 473n. ; R icard o was b o m th e son o f a w e ll- to - d o London sto c k b ro k e r* H is p a r e n ts w ere Je w ish , th o u g h R ic a rd o l a t e r I | l e f t th e f a i t h when h e m a rr ie d ; s u b s e q u e n tly h e n o m in a lly | / ;ad o p ted th e C h r is t ia n r e l i g i o n . ' Such an o v e r t r e j e c t i o n i j jo f th e a n c ie n t t i e s in an o rth o d o x fa m ily b ro u g h t upon R ic a rd o an o s tr a c is m w hich was n e v e r h e a le d . Thus c u t o f f , h e e n te r e d th e s to c k m a rk e t on h i s own, and by th e ag e o f tw e n ty - f iv e was a b le to r e t i r e on th e r e t u r n s from h i s in v e s tm e n ts . T h is was a b le s s in g f o r th e s tu d y o f e c o nom ics o r p o l i t i c a l economy as i t was th e n c a l l e d . I t was a b l e s s in g in t h a t much o f th e r e s t o f h i s l i f e was d e v o te d p a r t l y to a s tu d y o f th e s c ie n c e th e n s tr u g g lin g in i t s b e g in n in g s , and p a r t l y to a tte m p ts to l e g i s l a t e f o r E ngland a fram ew ork w ith in w hich h is v i s i o n s o f th e sy stem c o u ld grow . And he gave econom ics a m ethod o f m e a su rin g i t s v a r i a b l e s m a th e m a tic a lly in te rm s o f money w hich M a rs h a ll l a t e r s a id was t o e n a b le econom ics " f a r to o u tru n e v e ry jo th e r b ra n c h o f th e s tu d y o f m an ."^ i R ic a rd o ’ s f i r s t w r i tin g s w ere open a t t a c k s upon th e I ieconom ic p o l i c i e s o f th e p a r lia m e n t. S p rin g in g from h is ^ A lfre d M a rs h a ll, P r in c ip le s o f Econom ics ( 8 th e d i t i o n ; New Y ork: The M acm illan Company, 1920), p . 14. 69 I |i n s i g h t i n t o th e n a t u r e and f u tu r e c o u rs e o f r e n t , he ! !o p e n ly , a s Sm ith had b e f o r e him , a d v o c a te d f r e e tr a d e f o r th e is la n d kingdom . He was even m ore ex tre m e i n h i s p o s i- I jtio n th a n Sm ith had b e e n . R ic a rd o saw in f r e e tr a d e th e i I o n ly hope f o r s o lv in g th e problem s w hich flo w ed from th e ila n d lo r d 's d i s t r i b u t i v e p o s i t i o n . S m ith saw f r e e tr a d e a s a m a tte r o f econom ic a d v a n ta g e to th e c o u n try w hich c o u ld |b e ad o p ted slo w ly to th e b e n e f i t o f a l l . R ic a rd o looked upon i t a s th e b e s t im m ediate s o l u t i o n to a d e e p e n in g , s tr a n g l i n g p ro b lem ; t h a t th e p ro g re s s o f r e n t w ould im p o v e ris h th e la b o r in g and c a p i t a l c l a s s e s o f th e is la n d s i |and b r in g to a h a l t t h e i r econom ic d ev elo p m en t. In t h i s i I d o c t r in e we can se e a g a in R ic a r d o 's v e ry r e a l c o n c e rn f o r th e w e ll-b e in g o f la b o r : The f r ie n d s o f h u m an ity c a n n o t b u t w ish t h a t in a l l c o u n tr ie s th e la b o u rin g c l a s s e s w ould h av e a t a s t e f o r c o m fo rts and en jo y m en ts, and t h a t th e y sh o u ld b e s tim u la te d by a l l l e g a l means in t h e i r e x e r tio n s to p ro c u re them . T h ere c a n n o t b e a b e t t e r s e c u r i t y a g a in s t a su p e ra b u n d a n t p o p u la tio n .^ He a tta c k e d th e c u r r e n t n o tio n s o f th e E ngland o f 1710 on m o n etary p ro b lem s s p r in g in g from th e d e v a lu a tio n 5 D avid R ic a rd o , The P r in c ip le s o f P o l i t i c a l Economy and T a x a tio n (3 rd e d i t i o n ; New Y ork: E. P. D u tto n and I Company, I n c ., 1821), p . 57. i I o f th e p a p e r money, h o ld in g t h a t a p a p e r c u rre n c y r i g i d l y t i e d to th e q u a n t ity o f g o ld b u l l i o n w ould e x t r i c a t e th e c o u n try from i t s d i f f i c u l t i e s : i i ! The o n ly l e g i t i m a t e s e c u r i t y w hich th e p u b lic can p o s s e s s a g a in s t th e i n d i s c r e t i o n o f th e Bank i s to o b lig e them to pay t h e i r n o te s on demand in s p e c ie ; and t h i s can o n ly b e e f f e c t e d by d im in is h in g th e am ount o f bank n o te s in c i r c u l a t i o n t i l l th e n o m in al p r i c e o f g o ld b e lo w ered to th e M int p r i c e . Even w ith o u t fo rm a l t r a i n i n g - - h i s i n t e r e s t i n ec o - i nom ics was a ro u se d when h e happened upon a copy o f Sm ith w h ile v a c a t i o n i n g - - t h e p e r c e p tio n and tim e lin e s s o f h i s w r itin g s r a i s e d R ic a rd o to a p o s i t i o n b e s id e S m ith w ith in o n ly a few y e a r s , and th e s e two d o m in ated E n g lis h econom ic th o u g h t u n t i l M a r s h a ll's P r in c ip le s ap p e a re d in 1890. Even M i l l 's g r e a t w ork n e v e r to o k upon i t s e l f th e c lo a k o f I i a u th o r ity w hich R ic a r d o 's e n jo y e d . He was th e a u t h o r i t y , jth e m a s te r to whom a l l lo o k ed f o r g u id a n c e . j i A lth o u g h th e r e i s much to b e p r a is e d in th e w orks !of R ic a rd o , th e r e a r e a d d itio n s w hich h e made to th e s tu d y i w h ich , in r e a l i t y , am ount to n e t d e t r a c t i o n s . They a r e D avid R ic a rd o , The H igh P r ic e o f B u llio n (London: 180 9 ), as c i t e d in Howard P a tte r s o n , R ead in g s in th e H is to r y o f Economic Thought (New Y ork: M cG raw -H ill Book Company, I n c . , 193 2 ), p . 202. 71 I ]d e t r a c t i o n s b e c a u se th e y have e i t h e r o b sc u re d th e r e a l jn a tu r e o f th e pro b lem s w ith w hich th e y d e a l t , o r b e c a u se !th e y p ro d u ced f o r g e n e r a tio n s an in v e r te d s e r i e s o f l i n - i g u i s t i c p e ra m b u la tio n s w hich h av e s e rv e d to le a d l a t e r s tu d e n ts i n t o f r u i t l e s s and m e a n in g le ss s i d e t r a c k s . In th e b e g in n in g s o f a s c ie n c e , c e r t a i n d o c t r in e s may a p p e a r, h a v in g an a i r o f p l a u s i b i l i t y , a lo o k o f lo g ic , and s u f f i c i e n t r e a l i t y a b o u t them to seem to b e a d e q u a te , v a l i d , and c o m p lete e x p la n a tio n s o f c e r t a i n phenom ena. T hese a r e I j r e a d i ly a c c e p te d , and to them men e a s i l y g iv e c r e d e n c e — even u n q u a lif ie d en d o rse m en t. Then, as th e s c ie n c e p r o g r e s s e s , a m ore c a r e f u l s c r u t i n y r e v e a ls t h a t some o f th o s e |e a r l y e x p la n a tio n s w hich once ap p e a re d so c o m p le te and t r u e w ere e i t h e r w h o lly w rong o r w ere o n ly p a r t i a l l y c o r r e c t . P erh ap s i t i s t h i s l a t t e r ty p e , th e p a r t i a l l y c o r r e c t id e a s , w hich h av e c a u se d th e g r e a t e s t d i f f i c u l - j t i e s . ^ I t i s so w ith R ic a rd o ; much o f w hat h e w r ite s i s I i c o r r e c t in th e l i g h t o f to d a y ’ s econom ics, p e rh a p s o n ly in c o m p le te ; b u t some i s o n ly p a r t i a l l y c o r r e c t , and t h i s ^S chum peter, op. c i t . . pp. 1 9 -2 0 . 'p a r t h as le d t o s e v e r a l c o m p le te ly f a l s e c o n c lu s io n s . One | i would n o t a t a l l w ish to s c o re down th e p e rfo rm a n ce on l th e s e a c c o u n ts . Y et i t i s i n t e r e s t i n g to n o te t h a t th e w ea k est b lo c k s in th e R ic a rd ia n s t r u c t u r e h av e become i :s t a r t i n g p o in ts from w hich o th e r s h av e c o n s tr u c te d i n f l u - i Q e n t i a l , i f f a u l t y , sy ste m s. R ic a rd o , f o r exam ple, h e ld t h a t r e n t a c c ru e d to th e I jla n d lo r d f o r l i t t l e o r no econom ic s e r v i c e . I f t h i s i s so , |s a id l a t e r w r i t e r s , th e n th e la n d lo rd i s f u n c ti o n l e s s and i jso i s th e i n s t i t u t i o n o f p r i v a t e p r o p e r ty i n la n d . L et b o th be done away w ith . R icard o w ould h a r d ly h av e gone t h i s f a r . A gain, R ic a rd o ’ s th e o ry o f v a lu e , a lth o u g h n o t o r i g i n a t i n g w ith him , y e t was c l e a r l y e n d o rse d by him in I i t s f i r s t a p p ro x im a tio n , and i t h as le d to c e r t a i n o f th e i { p rin c ip a l d o c t r in e s o f s o c ia lis m . Much o f th e c o n fu s io n w hich h a s d e v e lo p e d around th e R ic a r d ia n t h e o r e t i c s t r u c t u r e h a s a r i s e n b e c a u se o f h i s jo b s c u r ity o f s t y l e and a m b ig u ity o f arg u m en t. When th e s e Ia re added to , f o r exam ple, an e x p o s itio n on v a lu e w hich can h av e a t l e a s t th r e e i n t e r p r e t a t i o n s , th e ta s k o f 8I b i d . . pp. 4 7 3 -4 7 9 . i L _____________________________ 73 \ u n r a v e lin g i s n e a r ly in s u rm o u n ta b le . T h is c o n fu s io n i s c l e a r l y e v id en ce d by an i n v e s t i g a t i o n o f R ic a rd o ’ s e d i f i c e as d ev e lo p e d by th e p r i n c i p a l w orks on th e h i s t o r y o f e c o nom ic th o u g h t. In th e p e r t i n e n t s e c tio n , beyond r e n t th e o ry and th e d o c t r in e o f c o m p a ra tiv e a d v a n ta g e , th e com m e n ta rie s a r e u n a b le to a g re e upon w hat th e y th in k R ic a rd o i s a tte m p tin g to s t a t e . A te n -p a g e p e r u s a l o f th e P r i n - i c i p l e s w i l l r e v e a l why su ch d i f f i c u l t i e s e x i s t . I t h as b een s t a t e d t h a t th e m ost l o g i c a l and c l e a r l y o rg a n iz e d s e c ti o n o f t h a t w ork i s th e in d e x , and Jam es M ill p u t t h a t 1 to g e th e r . Much p r a c t i c a l in f lu e n c e flow ed from R ic a rd o ’ s s h o r t e r w r itin g s w h ich , u n lik e Je v o n s * w ork, c o u ld n e v e r i b e c a l le d "c h a rm in g ," b u t w hich, in a v e ry fu n d am e n tal s e n s e , becam e th e "m oving fo rm s" in th e th in k in g and a f f a i r s o f th e w e s te rn w o rld . j The c o m p e titiv e norm becam e th e f o u n d a tio n upon jw hich R ic a rd o b u i l t ; th e p rim acy o f t h i s c o n c e p t now came I I !to th e f o r e , and th e somewhat n e b u lo u s th in k in g o f Sm ith i I was c r y s t a l i z e d i n t o a w an d erin g b u t d e f i n i t i v e s ta te m e n t. The th r e a d s o f t h i s c o m p e titiv e t h e s i s a r e found in n e a r ly ; ev e ry f a c e t o f th e R ic a rd ia n d ev elo p m e n t: in th e v a l u a ti o n ' o f o u tp u t and th e f a c t o r s o f p r o d u c tio n in f o r e ig n tr a d e i J c o n c e p ts , and i n h i s v i s i o n o f th e f u t u r e c o u rs e o f d i s - i ’ t r i b u t i o n . C o m p e titio n comes ’’i n t o i t s own” and d e t e r m in es, e i t h e r by i t s p re s e n c e o r by i t s a b s e n c e , w hat i s , w hat w as, and w hat sh o u ld o r s h a l l b e . I t was a b r i l l i a n t |p e rfo rm a n c e even in th e f a c e o f i t s s h o rtc o m in g s , i The c o m p e titiv e , f re e - m a r k e t m odel w h ich , how ever d im ly , was p e rc e iv e d in i t s c ru d e o u t l i n e s by b o th Sm ith and R ic a rd o , evoked from th e s e two e a r l y ec o n o m ists two rem a rk a b ly d i f f e r e n t v iew s o f th e f u t u r e . As w ith S m ith, R ic a rd o was c o n te n t to d e s c r ib e th e sy stem a s a r e a l i t y i 'w ith o u t a s u p e r io r re a s o n . B oth a p p e a r to h av e ad o p te d , know ingly o r n o t, th e l a t e r v iew s o f Hume. The m o tio n , th e lo g ic , th e c o h e s io n , a s th e y b o th saw i t , was d u e, n o t to th e o m n isc ie n c e o f an o v e r - s e e in g m ind, b u t to th e summing o f in d iv i d u a l, s h o r t - s i g h t e d , b a s i c a l l y s e l f i s h a c t i v i t i e s by more o r l e s s ig n o r a n t m e n --ig n o ra n t o f th e o v e r - a l l harm ony w hich seemed to r e s u l t . i W hatever th e s i m i l a r i t i e s b etw een th e a n a ly s is o f I Sm ith and t h a t o f R ic a rd o , i t i s th e d i f f e r e n c e s w hich a r e c r i t i c a l . S m ith 1s o p tim ism a b o u t th e f u t u r e u n d er a r e l a t i v e l y f r e e sy stem was r e p la c e d by R ic a r d o 's gloom . 75 P erh ap s th e s e c o n t r a s ti n g v is i o n s s p ra n g from d i f f e r e n t v ie w p o in ts --fro m th e p la c e s th e two w ere s ta n d in g r e l a t i v e 1 to th e econom ic sy ste m i t s e l f , o r from th e la p s e o f o v e r !t h i r t y - f i v e y e a r s . F o r S m ith, th e p u rp o se o f h i s en d e av o r w as, among o th e r th in g s , p u r e ly academ ic and i n t e l l e c t u a l , to demon s t r a t e how much b e t t e r E ngland w ould b e i f th e encum bering tr a c e s o f s ta t e - s a n c t i o n e d m o n o p o lies w ere rem oved. Only th e n w ould th e sy stem o f freed o m b e a b le to p e rfo rm w ith a l l o f i t s p o t e n t i a l b r i l l i a n c e . H is mind c e n te r e d upon q u e s tio n s o f gro w th and e f f i c i e n c y ; he n e v e r a d d re s s e d ,h im s e lf w ith f o r c e to q u e s tio n s o f d i s t r i b u t i o n . I t was s u f f i c i e n t f o r Sm ith t h a t th e n a tio n * s incom e w ould r i s e ja s m a rk e ts expanded and a s la b o r , a id e d by m a c h in e ry , becam e e v e r more s p e c i a l iz e d . I t was alw ays th e v a lu e o f jo u tp u t t h a t c h i e f l y c o n c e rn e d him . D is c u s s io n s o f d i s t r i b u t i o n w ere d e to u rs from h i s m ain and ch o sen c o u r s e . ! / ! R ic a rd o , on th e o th e r h an d , saw, o r th o u g h t h e saw, e n ta n g lin g th e m se lv e s a b o u t th e S m ith ia n e n g in e an a r r a y o f f o r c e s p r e c lu d in g th e o v e r - a l l s u c c e s s o f th e m a rk e t in i ip ro v id in g n a t i o n a l and p r i v a t e w e ll- b e in g . P ro g re s s in th e f u t u r e w ould slo w ly g r in d t o a h a l t a s th e in e x o ra b le 76 f o rc e s o f th e law s o f d i s t r i b u t i o n fo llo w e d t h e i r a p p o in te d p a th s . F o r S m ith, th e w hole re a s o n th e e n g in e r a n was p r i v a t e g a in . F o r R ic a rd o , th e g a in s o f th e p ro d u c tiv e !g ro u p s in th e economy w ould s h r in k and s h r in k u n t i l th e w hole sy stem ground to a s to p . Thus sp o k e th e n a t u r a l law s. j I . THE RICARDIAN CONCEPT OF VALUE | I j W hile d i s t r i b u t i o n th e o ry was to occupy th e c e n te r s ta g e o f h i s e x p o s itio n , R ic a rd o found i t n e c e s s a r y to !b e g in by s k e tc h in g th e o u t l i n e s o f a m easu re o f v a lu e . H is |a n a ly s i s o f v a lu e , how ever, r a t h e r th a n b e in g th e c e n t r a l jco n cern o f th e w ork, was more o f a c o n c lu s io n . A lth o u g h |th e c h a p te r d e a lin g w ith v a lu e a p p e a rs a t th e b e g in n in g o f ith e w ork, y e t , a s G ide and R is t and C a s s e ls and m ost o th e r i com m entators p o in t o u t, i t i s p ro b a b ly t r u e t h a t h is n o tio n s a s to v a lu e a r o s e from h i s th e o ry o f d i s t r i b u t i o n , * Q jand n o t th e o th e r way a b o u t. ^ C h a rle s G ide and C h a rle s R i s t, A H is to r y o f Eco nomic D o c trin e s (2nd E n g lis h e d i t i o n ; B o sto n : D. C. H eath and Company, 194 7 ), p . 156. " I t i s , m o reo v er, p ro b a b le ' t h a t R ic a rd o h im s e lf d id n o t b e g in w ith an e l a b o r a te th e o ry o f v a lu e from w hich h e deduced th e law s o f d i s t r i b u t i o n , * ; (b u t a f t e r h a v in g d is c o v e r e d , o r h a v in g c o n v in c ed h im s e lf 77 i | The R ic a rd ia n v a lu e c o n c e p t i s lim ite d to th o s e ! ]goods w hich a r e th e p ro d u c ts o f human e f f o r t and w hich may b e pro d u ced and re p ro d u c e d w ith o u t m ark ed ly r i s i n g a v e ra g e t o t a l c o s t s . H is m easu re o f v a lu e w i l l n o t, h e co n te n d e d , b e u s e f u l in d e a lin g w ith goods f a i l i n g to m eet th e s e q u a l i f i c a t i o n s . He added c o m p e titio n a s th e n e c e s s a ry f o r c e c a u s in g p r i c e ( r e l a t i v e p r i c e ) to e q u a l v a lu e : In s p e a k in g , th e n , o f co m m o d ities, o f t h e i r e x c h a n g e a b le v a lu e , and o f th e law s w hich r e g u la t e t h e i r r e l a t i v e p r i c e s , we mean alw ays su c h co m m o d ities o n ly as can be in c re a s e d in q u a n t ity by th e e x e r tio n o f human in d u s tr y , and on th e p ro d u c tio n o f w hich c o m p e ti t i o n o p e r a te s w ith o u t r e s t r a i n t . t h a t h e had d is c o v e r e d , th e law s o f d i s t r i b u t i o n h e a tte m p te d to d ed u ce from them a th e o ry o f v a l u e . ” See a l s o , John M. C a s s e ls , A R e - I n t e r p r e t a ti o n o f R ic a rd o on V alu e, w hich a p p e a rs in Jo se p h J . S p e n g le r and W illia m R. IA llen , e d s ., E ssay s in Economic T hought: A r i s t o t l e to M ar- is h a l l (C h icag o : Rand M cN ally and Company, 196 0 ), pp. 4 3 1 - 432, w h e re in C a s s e ls s t a t e s : ” In w hat fo llo w s i t w i l l be shown t h a t h i s fam ous c h a p te r on v a lu e was n e v e r in te n d e d as an e x p o s itio n o f any th e o ry o f v a lu e i n th e a c c e p te d s e n s e o f th e te rm b u t was w r i t t e n f o r th e s p e c i a l p u rp o se io f p ro v id in g him w ith a p a r t i c u l a r l o g i c a l l i n k t h a t was jr e q u ir e d in h i s e l a b o r a te c h a in o f r e a s o n in g a b o u t th e dynam ics o f d i s t r i b u t i o n . . . t h a t th e th e o ry o f v a lu e iw hich R ic a rd o q u i t e e v i d e n tl y re g a rd e d as a x io m a tic was an ex p en ses o f p r o d u c tio n th e o ry in w hich p r o f i t s a r e in c lu d e d among th e n e c e s s a ry c o s t s . ” ^ R i c a r d o , P r in c ip le s o f P o l i t i c a l Economy and { T a x a tio n , p . 6 . i i 78 i i I f c o m p e titio n d id n o t e x i s t to a s u f f i c i e n t d e g re e , th e I i j p r i c e o f a good u n d e r th e s e c o n d itio n s w ould n o t b e a M e a su re o f i t s v a lu e : "The e x c h a n g e a b le v a lu e t h e r e f o r e o f I ja com m odity w hich i s a t a m onopoly p r i c e i s now here re g u - i ' 11 l a t e d by th e c o s t o f p r o d u c tio n ." U nder th e s e c o n d i t i o n s , th e p r i c e o f a good w ould a lm o st s u r e ly n o t conform to i t s lo n g -ru n o r n o rm al v a l u e - - i . e . , to i t s c o s t o f i p ro d u c tio n . R icard o d is m is s e d u t i l i t y a s a d e te rm in a n t o f v a lu e ; f o r i t seemed o b v io u s t h a t o n ly " u s e f u l" goods w ould b e p ro d u c ed . To c o n te n d a t le n g th t h a t u t i l i t y was a prim e Ip a r t o f any v a lu e m easure la b o re d th e o b v io u s. T hus, h e w r o te : P o s s e s s in g u t i l i t y , co m m o d ities d e r iv e t h e i r ex c h a n g e a b le v a lu e from two s o u r c e s ; from t h e i r s c a r c i t y , and from th e q u a n t i ty o f la b o u r r e q u ir e d to o b ta in th em . ^ H ere, w ith one q u ic k c u t, h e d is m is s e d u t i l i t y and i I p ro ce e d ed to exam ine c o s t . T h is b ro u g h t him q u ic k ly to h i s p r i n c i p a l i n t e r e s t : d i s t r i b u t i o n . The c o s ts ( c o s ts o f p ro d u c tio n ) o b v io u s ly w ere th e incom es to th e g ro u p s he w ish ed to exam ine. Had h e lin g e r e d v e ry lo n g o v e r u t i l i t y • ^ I b id . , p. 165. ^ Ibid. , p. 5. 79 th e o r ie s - - a n d h en c e o v e r q u e s tio n s o f dem and--he w ould h av e i b een d e la y e d i n h i s ta s k a s M alth u s was to d is c o v e r . By I •• Im erely s t a t i n g , ’'p o s s e s s in g u t i l i t y , " h e was a b le to ta k e t h i s n e c e s s a ry b u t n o t s u f f i c i e n t d e te rm in a n t o f v a lu e and 1 I u s h e r b o th u t i l i t y and demand o u t o f th e th e o ry . The p rim acy o f t h i s c o s t o f p ro d u c tio n c o n c e p t as th e R ic a rd ia n m easu re o f v a lu e w ith demand a s o n ly o f p a s s in g o r i n c i d e n t a l in f lu e n c e may b e se e n from th e q u o ta tio n b elow . The e r r o r o f assum ing t h a t v a lu e c o u ld b e a f u n c tio n o f c o s ts a lo n e s p ra n g from a b se n ce o f a c o n c e p t o f changes i n u t i l i t y , d e riv e d from u n i t s o f incom e s p e n t, w hich i in e c e s s a r ily le a d s to a demand c u rv e . Had t h i s v i s i o n b een p r e s e n t in th e P r i n c i p l e s --o n e in w hich u t i l i t y v a r i e s p e r u n i t w ith ch an g es e i t h e r o f th e u n i t p r i c e o r o f th e num ber o f u n i t s a c q u ire d o r co n su m ed --R icard o p ro b a b ly would n o t have so p a s s iv e ly ex cu sed th e id e a from h i s th e o ry . Thus, I , la c k in g an a n a ly s is o f demand b ased upon u t i l i t y th e o ry , h e s t a t e d : l I t i s th e c o s t o f p ro d u c tio n w hich m ust u l ti m a t e l y r e g u l a t e th e p r i c e o f co m m o d ities, and n o t, as h as b een o f te n s a id , th e p r o p o r tio n b etw een th e su p p ly and I demand; th e p r o p o r tio n betw een su p p ly and demand may, I in d e e d , f o r a tim e a f f e c t th e m a rk et v a lu e o f a com- 1 m o d ity , u n t i l i t i s s u p p lie d in g r e a t e r o r l e s s abun- i d an c e, a c c o rd in g as th e demand may h av e in c re a s e d 80 j o r d im in is h e d ; b u t t h i s e f f e c t w i l l b e o n ly o f tem po- I r a r y d u r a tio n . D im in ish th e c o s t o f p ro d u c tio n o f 1 h a t s , and t h e i r p r i c e w i l l u l t i m a t e l y f a l l to t h e i r new n a t u r a l p r i c e , a lth o u g h th e demand sh o u ld b e d o u b le d , t r e b l e d , o r q u a d r u p le d .1^ L a te n t h e r e a g a in i s th e id e a o f c o n s ta n t c o s ts in m a n u fa c tu rin g . T h ere a p p e a rs to b e a s e p a r a tio n in v a lu e th e o ry b etw een th e d a i l y random movements o f p r i c e and th e lo n g -ru n , n o rm al p r i c e . The l a t t e r i s R ic a rd o f s n a t u r a l i i p r i c e u n d e r c o n d itio n s o f c o m p e titio n : W henever c o m p e titio n can h av e i t s f u l l e f f e c t , and th e p ro d u c tio n o f th e com m odity b e n o t lim ite d by n a t u r e , a s i s th e c a s e w ith some w in e s, th e d i f f i c u l t y o r f a c i l i t y o f t h e i r p ro d u c tio n w i l l u l t i m a t e l y r e g u l a t e t h e i r e x c h a n g e a b le v a lu e . ^ The s e p a r a tio n o f th e v a lu e c o n c e p t i n t o m a rk e t and lo n g -ru n p e r io d s was a c l e a r s te p fo rw a rd . By means o f t h i s d ich o to m y , R ic a rd o was a b le to tr a n s c e n d th e d a i l y , random movem ents o f in d iv i d u a l p r i c e s and a d d re s s h im s e lf to th e g ra n d e r q u e s tio n o f u l t i m a t e r e l a t i v e v a lu e . The |p e r c e p tio n o f th e r o l e o f c o m p e titio n i n d e te rm in in g , o r i r a t h e r e s t a b l i s h i n g , lo n g -ru n p r i c e as a m easure o f v a lu e i 1 3 I b i d . . p . 260. ^ D a v id R ic a rd o , An E ssav on th e I n flu e n c e o f a Low I P r ic e o f C om on th e P r o f i t s o f S to c k (1 8 1 5 ), as c i t e d in Howard P a tte r s o n , R ead in g s in th e H is to r y o f Economic T hought (New Y ork: M cG raw -H ill Book Company, I n c ., 193 2 ), p. 204. and as th e norm tow ard w hich p r i c e te n d ed to move m arked a n o th e r s i g n i f i c a n t fo rw ard t h r u s t . R icard o saw t h a t th e c o s t o f p r o d u c tio n f o r a good i jwas d e p e n d e n t upon th e c o s ts o f th e m a rg in a l p ro d u c e r i f i (th e ATC c u rv e s f o r th e p a r t i c i p a t i n g firm s had a s lo p e l jg r e a te r th a n z e ro . At l e a s t th e argum ent seems to im ply i i t h i s p r e s u p p o s itio n . In f a c t , no c o n c e p t i s m ore c a r d i n a l to h i s d i s t r i b u t i o n t h e s i s th a n th e id e a t h a t p r i c e w i l l depend upon th e c o s t s o f th e m a rg in a l f irm . N o tic e th e m anner in w hich t h i s m a rg in a l b a s is i s p r e s e n te d : The ex c h a n g e a b le v a lu e o f a l l co m m o d ities, w h eth e r th e y b e m a n u fa c tu re d , o r th e p ro d u ce o f th e m in e s, o r th e p ro d u ce o f la n d , i s alw ay s r e g u la te d , n o t by th e le s s q u a n t ity o f la b o u r t h a t w i l l s u f f i c e f o r t h e i r p ro d u c tio n u n d e r c irc u m s ta n c e s h ig h ly fa v o u r a b le , and e x c lu s iv e ly en jo y ed by th o s e who h av e p e c u l i a r f a c i l i t i e s o f p ro d u c tio n ; b u t by th e g r e a t e r q u a n t ity o f la b o u r n e c e s s a r i l y b esto w ed on t h e i r p ro d u c tio n by th o s e who h av e no su ch f a c i l i t i e s ; by th o s e who c o n tin u e to p ro d u ce them u n d e r th e m ost u n fa v o u ra b le ! c irc u m s ta n c e s , m e a n in g --b y th e m ost u n fa v o u ra b le ! c irc u m s ta n c e s , th e m ost u n fa v o u ra b le u n d e r w hich th e I q u a n tity o f p ro d u ce r e q u ir e d r e n d e r s i t n e c e s s a r y t o ; c a r r y on th e p ro d u c tio n . I T h at t h i s i n s i g h t i n t o m a r g in a lity was n o t sim p ly an a c c id e n t s p r in g in g from R ic a rd o ’ s o b s c u r ity o f la n g u ag e "^ R ic a rd o , P r in c ip le s o f P o l i t i c a l Economy and T a x a tio n , p . 37. j 82 ! may b e se e n in th e fo llo w in g , w hich, w h ile i t does n o t d e a l w ith v a lu e p e r s e , y e t i s s im i l a r in th e a p p l i c a t i o n o f J th is t o o l o f a n a l y s is : ; The g e n e r a l p r o f i t s o f s to c k depend w h o lly on th e p r o f i t s o f th e l a s t p o r tio n o f c a p i t a l em ployed on I th e la n d ; i f , th e r e f o r e , la n d lo rd s w ere to r e l i n q u i s h J th e w hole o f t h e i r r e n t s , th e y w ould n e i t h e r r a i s e i th e g e n e r a l p r o f i t s o f s to c k , n o r lo w er th e p r i c e o f j c o rn to th e co n su m er. ^ i | Thus, th e v a lu e o f r e p r o d u c ib le goods depended upon th e c o s t o f p ro d u c in g th o s e goods u n d e r th e l e a s t f a v o r a b le c o n d itio n s . T h is i s n o t re m a rk a b ly d i f f e r e n t from m odern r e l a t i v e v a lu e th e o ry i n w h ich , g iv e n th e a ssu m p tio n o f an upward s lo p in g su p p ly c u rv e and c o n d itio n s o f su p p ly |o th e r th a n th o s e o f m onopoly, th e c o s t o f p ro d u c tio n i s a i f u n c tio n o f th e c o s t s o f th e m a rg in a l firm . A ll o th e r firm s g a in some s o r t o f p r o d u c e r s ' s u r p lu s in t h a t th e low p o in ts o f t h e i r lo n g -ru n a v e ra g e t o t a l c o s t c u rv e s l i e !below th e low p o in t o f t h a t same c u rv e o f th e m a rg in a l f irm . The o th e r f ir m s , w hich m ig h t b e c a l l e d ’’f a v o r e d ," r e c e iv e a p r i c e f o r o u tp u t h ig h e r th a n th e y m ig h t be w i l l - 1 in g to a c c e p t and th u s g a in a k in d o f econom ic r e n t . As 1 ( s R ic a rd o , E ssay on th e I n flu e n c e o f a Low P r ic e o f C om on th e P r o f i t s o f S to c k , in P a tte r s o n , op. c i t . , p . 205. 83 i th e num ber o f p ro d u c in g firm s grow s, we to d a y assum e t h a t m ost o f th e e n te r in g firm s w i l l b e in th e s o - c a l le d " r e p r e s e n t a t i v e ” p o s i t i o n w ith p r o f i t s o n ly n o r m a l - - i . e . , w ith no econom ic r e n t . I t i s c r i t i c a l to u n d e rs ta n d t h a t R ic a rd o m eant th e ; t o t a l money c o s t o f p ro d u c tio n to th e l e a s t f a v o r a b le p ro - ( ! d u c e r and n o t th e la b o r c o s t a lo n e . W hile h e began by e s p o u sin g S m ith*s la b o r - c o s t p r i n c i p l e , h e soon was fo rc e d i t o abandon i t a s i n s u f f i c i e n t . As C a s s e ls p o in ts o u t, I i 1 R ic a rd o arg u ed t h a t w h ile goods d id n o t d e r iv e t h e i r v a lu e s s o l e l y from th e q u a n t ity o f la b o r expended in t h e i r 1 p ro d u c tio n , th e y d id te n d to ex change f o r each o th e r in i ' p r o p o r tio n to th e la b o r em ployed i n t h e i r c r e a t i o n . The r e l a t i v e p r ic e s o f th e v a r io u s g ra d e s and s k i l l s o f la b o r a r e d is m is s e d as h a v in g a lr e a d y been i n s t i t u t i o n a l i z e d and 'a d ju s te d by th e t r i a l and e r r o r o f a c o m p e titiv e m a rk e t. I R ic a rd o c o m p le te ly abandoned h i s f i r s t p r o p o s itio n ) r e l a t i v e to v a lu e n e a r th e c l o s e o f h i s f i r s t c h a p te r , th e 17 lone on v a lu e , when h e s t a t e d : i | E very im provem ent in m a c h in e ry , i n t o o l s , i n b u i l d in g s , in r a i s i n g th e raw m a t e r i a l , sa v e s la b o u r, and i i 17 Cassels, op. c i t . , pp. 436-437. : 84 t e n a b le s us to p ro d u c e th e com m odity to w hich th e im provem ent i s a p p lie d w ith m ore f a c i l i t y , and c o n s e q u e n tly i t s v a lu e a l t e r s . ;T h is i s o b v io u s ly p e r m ittin g v a lu e to b e a f u n c tio n o f more i [th a n la b o r . E n la rg in g upon th e im p act o f c a p i t a l upon p ro d u c tio n , R ic a rd o f u r t h e r d e m o n stra te d t h a t v a lu e c a n n o t b e s o l e l y d e p e n d e n t upon th e r e l a t i v e p r o p o r tio n s o f la b o r t i e d up in th e p r o d u c tio n o f th e good: " th e s u p e r io r p r ic e j o f one com m odity i s owing to th e g r e a t e r le n g th o f tim e I 19 w hich m ust e la p s e b e f o r e i t can b e b ro u g h t to m a rk e t." R ic a rd o ’ s id e a t h a t v a lu e was a f u n c tio n n o t o f i la b o r a lo n e b u t a l s o o f w a itin g and c a p i t a l o r m ach in ery re d u c e s h i s o r i g i n a l p r o p o s itio n to m e a n in g le s s n e s s . I f , f o r exam ple, we w ere to assum e t h a t la b o r had a " c e a s e le s s i d e s ir e " t o se e k i t s h ig h e s t r e t u r n , and t h a t th e d o se s o f la b o r w ere c o n s ta n t in d i f f e r e n t em ploym ents, a s h e had j assum ed f o r c a p i t a l , th e n one c o u ld say t h a t goods ex - i changed in p r o p o r tio n to th e am ount o f c a p i t a l em ployed in t h e i r m a n u fa c tu re , r a t h e r th a n in p r o p o r tio n to th e amount 18 R ic a rd o , P r in c ip le s o f P o l i t i c a l Economy and T a x a tio n , p . 22. 19 lb id . , p. 23. o f la b o r . R ic a rd o d o es t h i s w ith o u t th e n e c e s s a ry q u a l i f i c a t i o n t h a t la b o r in p u ts a r e c o n s ta n t, and h e th u s re d u c e s h i s p o s i t i o n to t h i s : goods ex ch an g e, u n d e r com pe- I ' t i t i o n , in p r o p o r tio n to th e n e c e s s a r y c o s t s o f p ro d u c tio n |o f th o s e goods to th e m a rg in a l p ro d u c e r w here th e r e n t f o r | la n d i s n o t c o n s id e re d a j u s t i f i e d o r " n e c e s s a ry " c o s t , jC a s s e ls and S chum peter b o th re a c h t h i s c o n c lu s io n , and a c a r e f u l re a d in g o f s e c tio n s IV and V o f C h a p te r I o f th e P r in c ip le s e s t a b l i s h e s t h a t t h i s i s w hat R ic a rd o c o n ten d ed .^® R e la tiv e t o t h i s f i n a l , o r c o s t o f p ro d u c tio n , c o n - j c e p t o f v a lu e , S chum peter p o in ts o u t t h a t th e r e i s a g la r in g w eakness o f a n a ly s is p r e s e n t when a la b o r th e o ry o f v a lu e , su ch a s R icard o f i r s t seem ed to em brace, r e s t s upon th e a ssu m p tio n t h a t d i f f e r e n t i a l wage r a t e s b etw een 21 1 s k i l l g ro u p s h av e been a d ju s te d by th e m a rk e t. I I . THE DISTRIBUTION MODEL G iven th e a ssu m p tio n s and r e s t r i c t i o n s w hich R icard o j im posed upon h i s m odel o f d i s t r i b u t i o n , th e r e i s l i t t l e I ■ — , ........ 20 C a s s e ls , op. c i t . , pp. 4 3 7 -4 3 9 . See a l s o , S chum peter, op. c i t ., pp. 593-594. i I 21 S chum peter, o p . c i t . , p . 594. 86 I ! b a s is to c r i t i c i z e i t . I t i s t r u e t h a t from h i s c o n c e p t ] j o f s o - c a lle d " c a p i t a l ad v an ces" an e v e r-w id e n in g r i n g o f I , e r r o r fo llo w e d , y e t , in th e v e ry s h o r t- r u n , w hat h e was s t r i v i n g f o r was an e x p la n a tio n o f w hat r e a l l y w as. I t i s a l s o p ro b a b ly t r u e t h a t th e v e ry p essim ism w hich en sh ro u d s h i s schem a was i n p a r t , a s i t had b ee n w ith M a lth u s, a r e s u l t o f th e gloom y tim e s w hich f e l l upon E ngland d u rin g t j th e f i r s t d ecad e and a h a l f o f th e n in e te e n th c e n tu r y . The w a rs, th e bad h a r v e s ts , th e p o o r law s, th e su b se q u e n t unem ploym ent in th e i n d u s t r i a l c i t i e s , a l l c o lo re d th e I view s o f o b s e r v e r s . I t seemed a s i f th e S m ith ia n v i s i o n , !w ith a l l o f i t s o p tim ism , had b ee n o v e rta k e n by some in e x o ra b le f o r c e , and t h a t th e g e n e r a l d e c lin e in w e l l b e in g was somehow th e n o t - t o - b e d e n ie d p r i c e o f th e r i s i n g e x p e c ta tio n s and acco m p lish m en ts o f th e l a s t q u a r t e r o f th e p re c e d in g c e n tu r y . I t m ig h t b e s a id t h a t R ic a rd o sim p ly I I o v e r - g e n e r a liz e d a p a r t i c u l a r l y bad s p e l l o f E n g lis h h i s - I to r y . W hatever th e r e a s o n s , and w h a te v e r h i s f a u l t s , he s e t b e f o r e h im s e lf th e t a s k o f e x p la in in g w hat seemed to b e h a p p e n in g . I t was a l s o t r u e t h a t d e c lin in g wages in a h ig h ly i c o m p e titiv e u rb a n la b o r m a rk e t, and th e r i s i n g p r i c e o f 87 c o m le d to e x te n s iv e m is e ry among th e p o o r and unem ployed I |and to a p re o c c u p a tio n w ith a g r i c u l t u r e in R ic a rd o ’ s d i s t r i b u t i v e m odel. The w ars w hich had so th o ro u g h ly engaged E ngland had p ro v id e d an ex c u se f o r a lo n g s e r i e s o f p r o h i b i t i o n s on th e im p o r ta tio n o f g r a i n s . B ehind th e s e b a r r i e r s , E n g lis h la n d lo r d s had im m ensely p ro s p e re d from th e s u b s e q u e n tly h ig h p r i c e s f o r d o m e stic c o m . G ra in p r ic e s I in th e p re c e d in g t h i r t y y e a rs had n e a r l y d o u b le d , from s i x t y to o v e r o n e-h u n d red s h i l l i n g s a b u s h e l. T h ere was a n o th e r re a s o n why a g r i c u l t u r e and th e p r ic e o f food sh o u ld p la y so param ount a r o l e in th e i |R ic a rd ia n sy ste m : i t was th e n , and i t c o n tin u e d to b e f o r a t l e a s t h a l f a c e n tu r y a f t e r , th e c h i e f o c c u p a tio n and ( econom ic a c t i v i t y o f th e E n g lis h . When we sp e a k o f th e s o - c a lle d i n d u s t r i a l r e v o lu tio n in E ngland, and d a te i t s b e g in n in g a t a b o u t 1760, we te n d to im ag in e t h a t s u d d e n ly -- in sa y a d e c ad e o r tw o --th o s e is la n d s w ere tra n s fo rm e d from i a n e a r f e u d a l o r g a n iz a tio n i n t o a m odem i n d u s t r i a l , u rb a n [complex h a v in g ro u g h ly th e o u t l i n e s o f an A m erican in d u s t r i a l c i t y o f th e 1920’ s . Such was n o t th e c a s e . The m a jo r ity s t i l l w orked th e la n d , d e a l t w ith i t s p ro d u c ts , liv e d and d ie d t i e d to i t . I t i s u n f a i r th e n to c r i t i c i z e 88 i ; R ic a rd o 1s sy ste m a s r e s t i n g to o h e a v ily on a ssu m p tio n s and law s p e r t i n e n t t o a g r i c u l t u r e w hich he a tte m p te d to g e n e r a l i z e i n t o an e x p o s itio n o f a com plex i n d u s t r i a l s o c i e t y , j W hat, a f t e r a l l , d id h e sa y ? The r e t u r n to c a p i t a l i jw ould b e s e t by th e r e t u r n i t c o u ld e a rn on th e l e a s t |p r o d u c tiv e la n d . Wages w ould te n d to e q u a l th e n e c e s s a r y and cu sto m ary wage o f th e m a rg in a l w o rk ers on m a rg in a l la n d . B ecause o f d im in is h in g r e t u r n s on la n d , p r o f i t s would f a l l a s th e am ount o f r e t u r n was s t r e t c h e d e v e r m ore t i g h t l y b etw een th e la n d lo rd s and th e e x t r a f i e l d h a n d s . Thus, i t was a m odel bound up w ith th e problem s o f a g r i - ! ;c u l t u r e - - t i e d to th e problem s o f la n d . Where had th e te c h n o lo g ic a l im p act b een g r e a t e s t ? I t was n o t upon th e I |la n d . The a p p l i c a t i o n o f s c ie n c e t o p ro d u c tio n , w hich was jand i s th e c o r e o f th e i n d u s t r i a l r e v o lu ti o n , found i t s m ost re w a rd in g e x p re s s io n s in t r a n s p o r t and m a n u fa c tu rin g r a t h e r th a n in a g r i c u l t u r e . Thus R ic a rd o h e ld t h a t la n d tr e n ts w ould c o n tin u e to r i s e a t th e ex p en se o f p r o f i t i(w h ich h e a l s o term ed i n t e r e s t ) and o f w ages. On Wages < W hile th e g e n e r a l b a s is o f th e w hole sy stem o f R ic a r d ia n d i s t r i b u t i o n r e s t s upon th r e e b a s ic p r o p o s itio n s : and th e fo re m o st o f th e s e i s r e n t th e o ry , y e t th e r e n t t h e s i s i t s e l f dep en d s f o r i t s v a l i d i t y upon a th e o ry o f | p o p u la tio n , and p a r t i c u l a r l y upon th e r e l a t i o n s h i p betw een i | th e b i r t h r a t e o f th e la b o r in g c l a s s e s and th e w ages th e y | r e c e iv e . I t h as lo n g b een th e cu sto m to r e f e r t o R ic a r d o 's i wage th e o ry a s th e " ir o n law o f w ages" th u s im p ly in g t h a t | th e r e was so m eth in g in h i s th e o ry w hich was u n c h a n g e a b le , t h a t i t was a law w hich c o u ld n e i t h e r b e b e n t n o r b ro k e n . T h is n o tio n r e s t e d upon a p o p u la tio n c o n c e p t in w hich t h e r e was a p o s i t i v e r e l a t i o n s h i p b etw een th e r e a l le v e l o f wages and th e b i r t h r a t e , and upon th e id e a t h a t money I wages w ere p a id from ad v an ces made t o la b o r by b u sin essm en from t h e i r c a p i t a l in a n t i c i p a t i o n o f p r o f i t a b l e s a l e o f th e o u tp u t. The ir o n law seem ed to i n f e r t h a t wages would c o n s i s t e n t l y te n d to w ard a s u b s is te n c e l e v e l . R ic a rd o , ;how ever, q u a l i f i e d th e " i r o n law " when h e s t a t e d , "The i w ages o f la b o u r a r e r e a l l y r e g u la te d by th e p r o p o r tio n b etw een th e su p p ly and demand o f n e c e s s a r i e s , and th e 22 su p p ly and demand o f la b o u r ." 0 9 * R ic a rd o , P r i n c i p l e s o f P o l i t i c a l Economy and T a x a tio n , p . 102. 90 T hus, w ages seem to depend upon th e p r ic e o f food I jand th e money wage o f la b o r . I f t h i s i s t r u e , th e above I p a s sa g e m ust r e f e r to r e a l wage r a t e s . A lso , in th e u s u a l f I |i n t e r p r e t a t i o n o f R ic a rd o , wages depend upon p o p u la tio n 'w ith o u t r e f e r e n c e to th e demand f o r la b o r o th e r th a n t h a t |demand w hich a r i s e s from th e c a p i t a l d e v o te d t o i t s em- i p lo y m e n t. However, i f th e demand f o r la b o r i s c r i t i c a l , ]a s R ic a rd o im p lie d , th e n i t m ust b e t h a t w ages depend upon th e p r o d u c tiv i ty o f l a b o r - - i . e . , upon th e p r o f i t a b i l i t y o f c a p i t a l advanced to s u p p o rt la b o r . The seq u en ce o f c a u s a l r e l a t i o n s h i p s among th e v a r i a b l e s d e te rm in in g th e l e v e l o f w ages may b e g ra s p e d from th e fo llo w in g , t y p i c a l l y com p r e s s e d , R ic a rd ia n s ta te m e n t: An a c c u m u la tio n o f c a p i t a l n a t u r a l l y p ro d u ces an in c re a s e d c o m p e titio n among th e em p lo y ers o f la b o u r, and a c o n s e q u e n t r i s e in i t s p r i c e . The in c re a s e d wages a r e n o t alw ay s im m ed ia tely expended on fo o d , b u t a r e f i r s t made to c o n t r i b u t e to th e o th e r enjoym ents o f th e la b o u r e r . H is im proved c o n d itio n , how ever, in d u c e s and e n a b le s him to m a rry , and th e n th e demand f o r food f o r th e s u p p o rt o f h i s fa m ily n a t u r a l l y s u p e rs e d e s t h a t o f th o s e o th e r en jo y m en ts on w hich h is wages w ere te m p o ra rily expended. Corn r i s e s , th e n , b e c a u se th e demand f o r i t in c r e a s e s , b e c a u se th e r e a r e th o s e in th e s o c ie ty who h av e im proved means o f p a y in g f o r i t ; and th e p r o f i t s o f th e fa rm e r w i l l be r a i s e d above th e g e n e ra l l e v e l o f p r o f i t s , t i l l th e r e q u i s i t e q u a n t ity o f c a p i t a l h as b een em ployed on i t s p ro d u c tio n . W hether, a f t e r t h i s h as ta k e n p la c e , c o m s h a l l a g a in f a l l to i t s fo rm e r p r i c e , o r s h a l l c o n tin u e p e rm a n e n tly h ig h e r , w i l l depend on th e q u a l i t y : 9i i ' o f th e la n d from w hich th e in c re a s e d q u a n t ity o f c o m 1 h as b een s u p p li e d . 2 3 i ! T hus, wages depend upon th e c o m p e titiv e demand f o r la b o r w hich in tu r n depends upon th e s to c k o f c a p i t a l w hich ;may be advanced to s u p p o rt i t w h ile p ro d u c tio n i s c a r r i e d I Jon, and upon th e su p p ly o f la b o r , w hich in i t s e l f i s a f u n c tio n o f th e cu sto m ary and h a b i t u a l l i v i n g s ta n d a rd o f I th e la b o r in g c l a s s e s , assu m in g t h a t th e r a t e o f human i I r e p r o d u c tio n i s a p o s i t i v e f u n c tio n o f th e r e a l wage r a t e . | R ic a rd o i n s i s t e d upon c a s t i n g h i s th e o ry o f wages j in r e a l te rm s . The d i f f i c u l t i e s w hich flo w from t h i s l i n e I I o f th in k in g become c l e a r when one r e a l i z e s t h a t th e c a p i t a l ja d v an ce s w hich g iv e o c c a s io n to th e em ploym ent o f la b o r a r e alw ays th o u g h t o f i n money te rm s . T h e re fo re i t becom es n e c e s s a r y to a c c o u n t f o r ch an g es in p r i c e s : The power o f th e la b o u r e r to s u p p o rt h im s e lf , and th e fa m ily w hich may b e n e c e s s a r y to keep up th e num b e r o f la b o u r e r s , d o es n o t depend on th e q u a n t ity o f money w hich h e may r e c e iv e f o r w ages, b u t on th e q u a n t ity o f fo o d , n e c e s s a r i e s , and c o n v e n ie n c e s become | e s s e n t i a l to him from h a b i t w hich t h a t money w i l l p u r- j c h a s e . ^ I However, wages depended n o t o n ly on th e s to c k o f c a p i t a l and th e p r ic e s o f wage g o o d s, b u t ta k in g a lo n g 23Ibid. . p. 103. 24 Ibid., p. 52. enough v iew upon th e p o p u la tio n p r i n c i p l e : When, how ever, by th e encouragem ent w hich h ig h wages g iv e to th e in c r e a s e o f p o p u la tio n , th e number o f la b o u re rs i s in c r e a s e d , wages a g a in f a l l to t h e i r I n a t u r a l p r ic e , and in d e ed from a r e a c t i o n som etim es | f a l l below i t . 25 i j R ic a rd o , in c h a p te r f i v e o f th e P r i n c i p l e s , seemed i jto a tte m p t to d i s t i n g u i s h m a rk e t wage r a t e s fro m t h e i r ! lo n g -ru n l e v e l s . I t a p p e a rs t h a t he h e ld t h a t m a rk et Iwages depended upon th e p r ic e s o f wage goods and th e s to c k i o f c a p i t a l , w h ile lo n g -ru n wages w ere a f u n c tio n o f th e re p r o d u c tio n r a t e o f la b o r , and th e q u a l i t y and q u a n tity o f la n d . T h is l a t t e r elem e n t w ould r e f l e c t i t s e l f i n th e lo n g -ru n te n d en cy f o r a g r i c u l t u r a l o u tp u t to r i s e i n la b o r c o s t . The t o t a l p a id to la b o r in r e a l term s w ould r i s e , b u t th e r a t e w ould depend upon th e cu sto m and h a b i t s o f la b o r r e l a t i v e to s u b s is te n c e . The m ark et r a t e c o u ld f l u c t u a t e a b o u t th e lo n g -ru n r a t e : The m ark et p r i c e o f la b o u r i s th e p r i c e w hich i s r e a l l y p a id f o r i t , from th e n a t u r a l o p e r a tio n o f th e I p r o p o r tio n o f th e su p p ly to th e dem and; la b o u r i s d e a r when i t i s s c a r c e and ch eap when i t i s p l e n t i f u l . However much th e m a rk e t p r i c e o f la b o u r may d e v ia te from i t s n a t u r a l p r i c e , i t h a s , l i k e co m m o d ities, a te n d en cy to co n fo rm to i t . ” 25Ibid. . p. 53. 26Ibid. 93 ! G iven th e s e a s su m p tio n s , w hich, in th e lo n g -ru n a r e ! p ro b a b ly re a s o n a b ly a c c u r a te , w ages, th o u g h t R ic a rd o , o u g h t 1 to b e c o n t r o ll e d by c o m p e titio n : L ik e a l l o th e r c o n t r a c t s , wages sh o u ld b e l e f t | to th e f a i r and f r e e c o m p e titio n o f th e m a rk e t, and sh o u ld n e v e r b e c o n t r o l l e d by th e i n t e r f e r e n c e o f th e l e g i s l a t u r e . 27 I > | I t fo llo w e d th e n t h a t any f o r c e w hich te n d e d to l i m i t th e m o b ility o f la b o r , te n d e d lik e w is e to re d u c e c o m p e titio n ian d th u s to c r e a t e wage i n e q u a l i t i e s . T h e re fo re , R ic a rd o opposed th e Poor Laws w hich t i e d th e la b o r e r and h i s 28 fa m ily to t h e i r p a r is h o f r e c o r d . G iven a c o m p e titiv e m a rk e t f o r la b o r , R ica rd o was h o p e fu l t h a t an in c r e a s e in money wages and, th e r e f o r e , r e a l wages w ould b e fo llo w e d by a r i s e in th e minimum s ta n d a rd o f l i v i n g among th e la b o r in g c l a s s , and t h a t t h i s h ig h e r minimum s ta n d a rd o f l i v i n g w ould become h a b i t u a l th u s c h e c k in g th e te n d e n c y o f t h a t c l a s s to p ro d u ce c h i l - j d re n w hich c o u ld n o t b u t lo w er r e a l wages in th e f u t u r e . W hile, to R ic a rd o ’ s m ind, t h i s f o r c e , te n d in g to h o ld down I r e a l w ages, was f u l l y o p e r a tiv e , y e t i t s im p act m ig h t b e I 1 o f f s e t f o r many y e a rs i f th e above " h a b itu a l ch eck " came 2 7 I b i d . , p . 61. 2 8 I b i d . , pp. 6 1 -6 3 . in to p la y , o r i f th e s to c k o f c a p i t a l o r th e body o f m ach in ery d e v o te d to a id in g la b o r was in c r e a s in g . Thus, h e s t a t e d : I i j N o tw ith s ta n d in g th e te n d e n c y o f w ages to conform [ to t h e i r n a t u r a l r a t e , t h e i r m ark e t r a t e may, in an im pro v in g s o c ie ty , f o r an i n d e f i n i t e p e r io d , b e c o n s t a n t l y above i t ; f o r no so o n e r may th e im p u lse w hich an in c re a s e d c a p i t a l g iv e to a new demand f o r la b o u r J b e obeyed, th a n a n o th e r in c r e a s e o f c a p i t a l may p ro - 1 d u ce th e same e f f e c t ; and th u s , i f th e in c r e a s e o f c a p i t a l b e g r a d u a l and c o n s ta n t, th e demand f o r la b o r may g iv e a c o n tin u e d s tim u lu s to an in c r e a s e o f j p e o p le . C a p ita l i s t h a t p a r t o f th e w e a lth o f a c o u n try w hich i s em ployed in p ro d u c tio n , and c o n s i s t s o f fo o d , c l o th in g , t o o l s , raw m a t e r i a l s , m a c h in e ry , e t c . , n e c e s s a ry to g iv e e f f e c t to la b o u r. ^ The h a b i t u a l o r cu sto m ary le v e l o f w ages w as, i | a c c o rd in g to R ic a rd o , t h a t l e v e l w hich w ould e i t h e r h o ld th e su p p ly o f la b o r c o n s ta n t, o r , m ore p ro b a b ly , t h a t w hich would a llo w th e su p p ly o f la b o r to r i s e a t a r a t h e r c o n s t a n t r a t e . The v i s i o n o f th e s t a t i o n a r y s t a t e was alw ays I | a p o s s i b i l i t y f o r th e f u t u r e ; i t was n e v e r w r i t t e n o f a s j | a p r e s e n t c o n d itio n . T h is r a t e f o r la b o r , R ic a rd o term ed ! i t s n a t u r a l p r i c e : I t i s n o t to b e u n d e rs to o d t h a t th e n a t u r a l p r ic e o f la b o u r, e s tim a te d even i n food and n e c e s s a r ie s , 29Ibid. , p. 53. i s a b s o lu te l y f ix e d and c o n s ta n t. I t v a r i e s a t d i f - I f e r e n t tim e s i n th e same c o u n try , and v e ry m a t e r i a l l y j d i f f e r s in d i f f e r e n t c o u n t r i e s . I t e s s e n t i a l l y J depends on th e h a b i ts and custom s o f th e p e o p le . i | | I f th e m a rk e t y ie ld e d a wage s i t u a t i o n in England i jw hich t o R ic a r d o 's mind was u n s a t i s f a c t o r y , why would h e |h o ld t h a t th e w e lf a r e a c t i v i t y o f th e Poor Laws o ught to 1 1 b e a b o lis h e d ? The answ er i s s im p le ; th e s e law s t i e d p e o p le | i to c e r t a i n p a r is h e s , and th u s re d u c e d , f i r s t o f a l l , t h e i r ! m o b ility and c o n s e q u e n tly t h e i r a b i l i t y t o com pete, and se c o n d ly , R ic a rd o , a lo n g w ith m ost o th e r a n a ly s ts o f h is d ay , th o u g h t t h a t th e y te n d e d to en c o u ra g e th e grow th o f i Ia su p e ra b u n d a n t p o p u la tio n . The g e n e r a l w e ll- b e in g o f |s o c ie t y r e s t e d upon a h ig h r a t e o f e f f e c t i v e em ploym ent, and t h i s , R ic a rd o seem ed to th in k , w ould b e m ore p ro b a b le w ith a h ig h d e g re e o f c o m p e titio n and l e s s l i k e l y th e 31 g r e a t e r th e p o p u la tio n . R ica rd o a ls o p ro p o sed t h a t th e l o t o f th e la b o r e r s would b e m itig a te d by a n a t i o n a l p o lic y o f f r e e tr a d e . The n a t u r a l p r o g re s s o f r e n t and la n d u sa g e w ould i n e v i ta b ly le a d to r i s i n g food p r i c e s in te rm s o f la b o r . By I • ' a llo w in g th e f r e e im p o r ta tio n o f g r a in from a b ro a d , h e 30Ibid. . p. 55. 3:1 Ibid. , pp. 61-62. 96 j j a rg u e d , th e p r o g re s s o f r i s i n g r e n t s and f a l l i n g r e a l wages | c o u ld b e h a l t e d , a t l e a s t f o r a tim e . T hus: The wages o f la b o u r a r e r e a l l y r e g u la te d by th e p r o p o r tio n b etw een th e su p p ly and demand o f n e c e s s a r i e s , and th e su p p ly and demand o f la b o u r; and money i s m e re ly th e medium, o r m easu re, in w hich wages a r e e x p re s s e d . In t h i s c a s e , th e n , th e d i s t r e s s o f th e la b o u re r i s u n a v o id a b le , and no l e g i s l a t i o n can a f f o r d a rem edy, e x c e p t by th e im p o r ta tio n o f a d d i t i o n a l food o r by a d o p tin g th e m ost u s e f u l s u b s t i t u t e s . Thus, R ic a rd o arg u ed t h a t wages w ere a f u n c tio n o f c a p i t a l , la n d , th e law o f p o p u la tio n , and th e d e g re e o f c o m p e titio n . The p r o d u c tiv i ty o f la b o r d e c lin e d a s i t was a p p lie d to l e s s p ro d u c tiv e la n d o r to l e s s p ro d u c tiv e em ploym ents, b u t t h i s downward p r e s s u r e c o u ld be o f f s e t by an in c r e a s e in a p p lie d c a p i t a l . The means o f im p ro v in g l a b o r ’ s l o t th u s r e s t e d upon an in c r e a s e i n c a p i t a l and upon an in c r e a s e i n c o m p e titio n in two a r e a s . F i r s t , d o m e stic g r a in p ro d u c e rs o u g h t to b e s u b je c t to th e f r e e im p o r ta tio n o f g r a in s , an d , seco n d , i [ la b o r o u g h t to b e f r e e d from th e r e s t r a i n t s o f th e Poor i Law s. In th e v e ry lo n g -ru n he hoped t h a t an a m e lio r a tio n !o f l a b o r ’ s s i t u a t i o n would come by ch e c k s im posed by th e j p o p u la tio n on i t s own g ro w th r a t e tr ig g e r e d by a r i s e i 32Ib id ♦, pp. 102-103. 97 I in th e cu sto m ary l i v i n g s ta n d a r d . He was n o t, I th in k , n e a r ly as p e s s im is tic o v e r th e p r o s p e c ts f o r th e s e a d j u s t m ents a s many h av e th o u g h t him to b e . i i ! t ; On R en ts R ic a rd o b a se d n e a r ly h i s e n t i r e d i s t r i b u t i v e m odel upon a th e o ry o f p o p u la tio n and a th e o ry o f r e n t . T hese becam e th e exogenous f o r c e s w hich, lin k e d w ith a p r i n c i p l e o f d im in is h in g r e t u r n s , gave c o h e s io n to th e sy stem . I f wage r a t e s r o s e o r rem ain ed s u b s t a n t i a l l y c o n s ta n t w h ile th e t o t a l wage b i l l in c r e a s e d , and i f r e n t s in c re a s e d w ith i th e p ro g re s s o f w e a lth , th e n p r o f i t s m ust f a l l . I t i s a s ! I sim p le as t h a t . C o n cern in g th e th e o ry o f r e n t f o r w hich R ic a rd o i s j u s t l y fam ous, h e c a l l e d i t , in th e p r e f a c e to h i s P r in c i p l e s , " th e t r u e d o c t r i n e o f r e n t ; w ith o u t a know ledge o f ! iw hich i t i s im p o s s ib le to u n d e rs ta n d th e e f f e c t o f th e 33 p ro g re s s o f w e a lth on p r o f i t s and w a g e s." In a d e f i n i - ; t i o n o f la n d and r e n t w hich h as become one o f th e c l a s s i c s i [o f econom ic th o u g h t, h e w ro te , "R ent i s t h a t p o r tio n o f th e p ro d u ce o f th e e a r t h w hich i s p a id to th e la n d lo rd i 33Ib id . . p. 1. ; 98 !f o r th e u s e o f th e o r i g i n a l and i n d e s t r u c t i b l e pow ers o f th e s o i l . ” 3 4 I ' G iven th e f a c t t h a t th e s u p p ly o f la n d i s lim ite d , land t h a t th e la n d had a l l b een a p p r o p r ia te d and w as, f o r th e m ost p a r t , p r i v a t e l y h e ld , and g iv e n th e a ssu m p tio n o f a r i s i n g demand f o r good t r i g g e r e d by th e p r e s s o f p o p u la t i o n a g a in s t th e f ix e d f a c t o r o f la n d , i t fo llo w e d : . . - t h a t th e i n t e r e s t o f th e la n d lo rd i s alw ays opposed to th e i n t e r e s t o f e v e ry o th e r c l a s s in th e com m unity. H is s i t u a t i o n i s n e v e r s o p ro s p e ro u s , a s when food i s s c a r c e and d e a r : w h e re a s, a l l o th e r p e r so n s a r e g r e a t l y b e n e f ite d by p ro c u rin g food c h e ap . H igh r e n t and low p r o f i t s , f o r th e y in v a r ia b ly accom - ! pany each o th e r , o u g h t n e v e r to b e th e s u b je c t o f J c o m p la in t, i f th e y a r e th e e f f e c t o f th e n a t u r a l i c o u rs e o f t h i n g s . ^ 5 T h is l a s t s e n te n c e may seem , a t f i r s t g la n c e , n o t to f i t w e ll i n t o th e su p p o sed a n ta g o n ism R ic a rd o i s s a id to h av e h e ld f o r th e la n d h o ld in g c l a s s . Y et su ch i s n o t th e c a s e . The r i s e in p o p u la tio n and o u tp u t n a t u r a l l y e n t a i l e d r e c o u r s e t o l e s s f a v o r a b le la n d s and a c o n s e q u e n t in c r e a s e in r e n t s upon a l l s u p e r io r la n d . The r i s e i n r e n t s upon | 3 4 I b i d . , p . 33. I 3 5 I R ic a rd o , E ssay on th e I n flu e n c e o f a Low P r ic e o f j C om on th e P r o f i t s o f S to c k , in P a tte r s o n , op . c i t . , p . 205. 99 th e m ore p r o d u c tiv e la n d was n o t, to R ic a r d o 's m ind, a p ro d u c t o f th e g re e d o f , o r e x p l o i t a t i o n b y , th e la n d lo r d ; j i t was th e n a t u r a l outcom e o f c o m p e titio n among th e fa rm e rs j who r e n te d th e la n d . They w ould, fo llo w in g t h e i r own i s e l f - i n t e r e s t , and g u id e d by a d e s i r e f o r p r o f i t s , b id up th e p r i c e o f b e t t e r la n d u n t i l a l l o f th e econom ic r e n t a c c ru e d t o th e la n d lo r d . No g re e d was p r e s e n t, n e c e s s a r i l y , sa v e on th e p a r t o f th e fa rm e rs th e m s e lv e s , b u t th e y w ere ch eck ed in t h e i r a b i l i t y to s a t i s f y t h i s g re e d by th e n a t u r a l w o rk in g o f c o m p e titio n . Thus, th e p ro g re s s o f r e n t w as, a s i t w ere, th e e x p e c te d r e s u l t o f n a t u r a l law s o f c o m p e titio n s p r in g in g from s e l f - i n t e r e s t in o p e r a t i o n . The p ro g re s s o f s o c i e ty w ould, g iv e n th e p re m is e s , le a d to an in c r e a s e in r e n t s ; and b e c a u se th e g o a l was p r o g r e s s , one o u g h t n o t to co m p lain o f th e c o n c o m ita n t a l t e r a t i o n o f th e d i s t r i b u t i v e s h a r e s . T h at th e r i s e o f I r e n t s w ould a c c ru e to th e la n d lo rd th ro u g h th e c o m p e titio n o f th e fa rm e rs may b e se e n in th e fo llo w in g : I The common r a t e o f p r o f i t w ould b e in t h a t p r o p o r tio n , 1 and i f th e o r i g i n a l te n a n t r e f u s e d , some o th e r p e rso n w ould b e found w i l l i n g to g iv e a l l w hich ex ceed ed th e r a t e o f p r o f i t to th e ow ner o f th e la n d from w hich h e d e riv e d i t . ^ 6 ^ ^ R ic a rd o , P r in c ip le s o f P o l i t i c a l Economy and T a x a tio n , p . 36. 100 i ! R ent th e n becam e a r e s u l t o f p r i c e r a t h e r th a n a |c o n t r i b u t o r to i t . S tr e s s in g a g a in th e m a rg in a l c o n c e p t i ! o f p r i c e (o r c o s t) d e te r m in a tio n , and p o in tin g o u t t h a t i {r i s i n g food p r i c e s w ould accompany th e p r o g re s s o f s o c ie ty , R ica rd o s t a t e d : The re a s o n , th e n , why raw p ro d u ce r i s e s in com para t i v e v a lu e i s b e c a u se m ore la b o u r i s em ployed i n th e p r o d u c tio n o f th e l a s t p o r tio n o b ta in e d , and n o t b e c a u se a r e n t i s p a id to th e la n d lo r d . The v a lu e o f c o rn i s r e g u la te d by th e q u a n t ity o f la b o u r bestow ed on i t s p r o d u c tio n on t h a t q u a l i t y o f la n d , o r w ith t h a t p o r tio n o f c a p i t a l , w hich pays no r e n t . Corn i s n o t h ig h b e c a u se a r e n t i s p a id , b u t a r e n t i s p a id b e c a u se c o m i s h ig h . W hile wage r a t e s , in r e a l te rm s , h o v e r a b o u t a r i s i n g tr e n d b a se d upon h a b i t and cu sto m , th e la b o r p r i c e o f p ro d u ce from la n d r i s e s a s a r e s u l t o f th e r e c o u r s e to l e s s p r o d u c tiv e a c r e s : "As p o p u la tio n in c r e a s e s , th e s e n e c e s s a r ie s w i l l b e c o n s ta n tl y r i s i n g in p r i c e , b e c a u se 38 !m ore la b o u r w i l l b e n e c e s s a r y to p ro d u c e th e n ." Money wage r a t e s w i l l r i s e , b u t p r ic e s w i l l a l s o r i s e le a v in g r e a l wage r a t e s c o n s ta n t w h ile th e r e c o u r s e to l e s s p r o d u c tiv e la n d f o r c e s th e t o t a l wage b i l l in r e a l and money , te rm s to in c r e a s e . 3 7 I b i d . , p . 3 8 . 3 8 I b i d . , p . 57. 101 ; The im p o rta n t c o n c e p t h e r e i s t h a t i t i s th e com- |p e t i t i o n b etw een fa rm e rs w hich f o r c e s any d if f e r e n c e i (betw een re v e n u e and c o s ts to flo w to th e la n d lo r d s . T hus, i R ic a rd o c o u ld re a s o n t h a t th e ’’r i s e o f r e n t i s alw ays th e e f f e c t o f in c r e a s in g w e a lth o f th e c o u n try , and o f th e d i f f i c u l t y o f p ro v id in g food f o r i t s augm ented p o p u la - 39 . * f t ✓ t i o n . j Both th e r e a l and th e money r e n t o f la n d w i l l r i s e as th e s o c ie ty p r o g r e s s e s . The money wages o f la b o r w i l l r i s e b u t t h e i r r a t e o f in c r e a s e w i l l p ro b a b ly b e exceeded by th e in c r e a s e s in th e p r ic e s o f co m m o d ities. The r i s i n g 1 i I r e n ts flo w in g to th e la n d lo r d s , and th e g e n e r a l in c r e a s e in th e common wage r a t e o f la b o r, b o th become f u n c tio n s o f an in c r e a s in g p o p u la tio n , a f ix e d q u a n t ity o f la n d , and a c o m p e titiv e o r g a n iz a tio n o f th e m a rk e ts f o r th e s e :f a c t o r s . i 1 iOn M ach in ery . I n t e r e s t . C a p ita l, and P r o f i t s I 1 The in c r e a s e in p o p u la tio n , f o r c in g r e c o u r s e to e v e r I !l e s s p ro d u c tiv e la n d , c r e a te d , u n d e r c o m p e titio n , n o t o n ly a te n d e n c y f o r t o t a l r e a l wages to r i s e w h ile wage r a t e s t i 39Ib id .. p. 40. 102 h o v ered ab o u t a cu sto m ary s u b s is te n c e l e v e l , b u t a l s o a te n d e n c y f o r th e r e t u r n upon f ix e d c a p i t a l to f a l l a s i t becam e l e s s e f f i c i e n t in a g r i c u l t u r e . R ic a rd o was n o t c l e a r i n d is t i n g u i s h i n g b etw een th e r a t e o f r e t u r n and th e a b s o lu te r e t u r n to c a p i t a l . I t a p p e a rs from a c a r e f u l re a d in g o f c h a p te r s i x o f th e P r in c ip le s t h a t th e r a t e o f r e t u r n w ould s u f f e r from a downward te n d en cy w h ile th e a b s o lu te amount m ig h t w e ll r i s e . T h is i s t r u e o f w ages and i t seem s to b e th e p re m ise upon w hich R icard o w orked w ith r e s p e c t to c a p i t a l . W hile th e l e v e l o f r e t u r n to c a p i t a l c o u ld o n ly s u f f e r a s a r a t e i f th e r a t e o f wages w ere to i i r i s e , b o th m ig h t ad v an ce a s a b s o lu te am o u n ts. What th e n m ig h t b r in g down th e r e t u r n o f c a p i t a l o v e r th e lo n g p u ll? j R ic a rd o answ ered t h a t th e r e t u r n to c a p i t a l was a f u n c tio n o f i t s r e t u r n on m a rg in a l la n d . Why h e sh o u ld l i m i t i t to la n d i s n o t c l e a r ; h e d id n o t f a l l i n t o th e t r a p o r c o n c lu d in g a s had Sm ith and th e P h y s io c r a ts t h a t la n d had some p e c u l i a r p ro d u c tiv e c a p a c ity u n p o sse sse d by ;th e o th e r s w hich ca u sed i t to a id man o r y i e l d a s u r p lu s . I N e v e rth e le s s , th e g e n e r a l r e t u r n to c a p i t a l depended upon i t s p r o d u c tio n on th e m a rg in a l la n d and n o t upon i t s m ar g i n a l em ploym ent in g e n e r a l. C a p ita l, l i k e la b o r , becam e i i _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _________________________________________________ 103 in c r e a s in g ly i n e f f i c i e n t as r e c o u r s e was had to l e s s p r o d u c tiv e la n d ( l e s s p r o f i t a b l e la n d ) . I f t h i s w ere so th e n th e r a t e o f r e t u r n r e l a t i v e to th e v a lu e o f th e c a p i t a l d o se w ould f a l l . T e c h n o lo g ic a l ch an g e m ig h t o f f s e t t h i s , b u t th e s p e c te r alw ay s rem ain ed lu r k in g i n th e w in g s. The r e t u r n to m a rg in a l c a p i t a l d o se s w ould te n d tow ard e q u a lity b e c a u se o f c o m p e titio n . The n a tu r e o f t h i s a d ju s tm e n t may b e se e n from th e fo llo w in g : L et u s su p p o se t h a t com m odities a r e a t t h e i r n a t u r a l p r i c e , and c o n s e q u e n tly t h a t th e p r o f i t s o f c a p i t a l in a l l em ploym ents a r e e x a c tly a t th e same r a t e , o r d i f f e r o n ly so much a s , in th e e s tim a tio n o f th e p a r t i e s , i s e q u iv a le n t t o any r e a l o r f a n c ie d a d v a n ta g e w hich th e y p o s s e s s o r fo re g o . Suppose now t h a t a ch an g e o f ! fa s h io n w ould in c r e a s e th e demand f o r s i l k s and le s s e n , t h a t f o r w o o lle n s ; t h e i r n a t u r a l p r i c e , th e q u a n tity o f la b o u r n e c e s s a r y to t h e i r p ro d u c tio n , w ould c o n tin u e u n a lte r e d , b u t th e m a rk e t p r i c e o f s i l k s would r i s e and t h a t o f w o o lle n s w ould f a l l ; and c o n s e q u e n tly th e p r o f i t s o f th e s i l k m a n u fa c tu re r w ould b e above, w h i l s t th o s e o f th e w o o lle n m a n u fa c tu re r w ould b e below , th e g e n e r a l and a d ju s te d r a t e o f p r o f i t s . Not o n ly p r o f i t s , b u t th e wages o f th e workmen, w ould be a f f e c t e d in th e s e em ploym ents. T h is in c r e a s e d demand f o r s i l k s w ould, how ever, soon b e s u p p lie d by th e tr a n s f e r e n c e o f c a p i t a l and la b o u r from th e w o o lle n to th e s i l k m a n u fa c tu re ; when th e m a rk e t p r ic e s o f s i l k s and w o o lle n s w ould a g a in ap p ro ach t h e i r n a t u r a l p r i c e s , and th e n th e u s u a l p r o f i t s w ould b e o b ta in e d by th e I r e s p e c tiv e m a n u fa c tu re rs o f th o s e co m m o d ities. R ic a rd o , E ssay on th e I n flu e n c e o f a Low P r ic e o f Corn on th e P r o f i t s o f S to c k , in P a tte r s o n , op. c i t . , jp . 205. 104 i I t i s th e n th e d e s i r e , w hich e v e ry c a p i t a l i s t h a s , o f d i v e r t i n g h i s fu n d s from a l e s s to a m ore p r o f i t a b l e em ploym ent t h a t p re v e n ts th e m a rk e t p r i c e o f commodi t i e s from c o n tin u in g f o r any le n g th o f tim e e i t h e r ! much above o r much below t h e i r n a t u r a l p r i c e . I t i s j t h i s c o m p e titio n w hich so a d j u s t s th e c h a n g e a b le v a lu e i o f conranodities t h a t , a f t e r p a y in g th e wages f o r th e la b o u r n e c e s s a r y to t h e i r p ro d u c tio n , and a l l o th e r ex p en ses r e q u ir e d to p u t th e c a p i t a l em ployed in i t s o r i g i n a l s t a t e o f e f f i c i e n c y , th e re m a in in g v a lu e o r o v e rp lu s w i l l in each t r a d e b e in p r o p o r tio n to th e v a lu e o f th e c a p i t a l e m p lo y e d .^ The r e t u r n s from th e s a l e s o f o u tp u t, R icard o h e ld , jm ust o f n e c e s s i t y r e p la c e th e ad v an ces o f c a p i t a l - - b o t h f ix e d and v a r ia b le - - w h ic h had fin a n c e d th e o r i g i n a l p ro d u c t i v e u n d e r ta k in g . C le a r ly , th e c a p i t a l so in v e s te d had to i r e t u r n a p r o f i t o r an i n t e r e s t . As S chum peter r e a s o n s , to R ic a rd o and a l l ec o n o m ists o f h i s tim e , p r o f i t s and i n t e r j e s t w ere a lm o st synonym ous. The f a i l u r e t o r e p la c e th e ad v an ce o f c a p i t a l le d to th e " d ry in g up" o f t h a t f irm . jT hus, g iv e n th e r e n t s , w hich w ere ex o g e n o u sly d e te rm in e d |by th e p r e s s o f p o p u la tio n , and w hich w ould ap p ro ac h th e l i m i t o f z e ro on m a rg in a l la n d , th e p r i c e o f o u tp u t w ould b e d iv id e d b etw een p r o f i t s and w a g e s: f ! j We h av e s e e n , to o , t h a t a l l m a n u fa c tu re d commodi t i e s r i s e and f a l l in p r i c e in p r o p o r tio n as m ore o r ^ R i c a r d o , P r in c ip le s o f P o l i t i c a l Economy and I T a x a tio n , p . 50. l e s s la b o u r becom es n e c e s s a ry to t h e i r p ro d u c tio n . N e ith e r th e fa rm e r who c u l t i v a t e s t h a t q u a n t ity o f lan d w hich r e g u l a te s p r i c e , n o r th e m a n u fa c tu re r who manu f a c t u r e s goods, s a c r i f i c e any p o r tio n o f th e p ro d u ce f o r r e n t . The w hole v a lu e o f t h e i r co m m o d ities i s d iv id e d i n t o two p o r tio n s o n ly : one c o n s t i t u t e s th e p r o f i t s o f s to c k , th e o th e r th e wages o f l a b o u r .4 ^ I As w ith n e a r l y th e w hole o f th e c l a s s i c a l s c h o o l o f I ! e c o n o m ists, th e r e was a c o n fu s io n b etw een p r o f i t s and i n - I I ! t e r e s t . I t was c l e a r t h a t p r o f i t s g av e r i s e to i n t e r e s t ; in o th e r w ords, i n t e r e s t was p a id b e c a u s e c a p i t a l o r money was p r o d u c tiv e o r p r o f i t a b l e . In th e lo n g -ru n , i t was d o u b tf u l i f i n t e r e s t c o u ld h av e b een p a id i f p r o f i t s d id j n o t e x i s t . To R ic a rd o * s m ind, p r o f i t s w ere e i t h e r th e ! a b s o lu te d i f f e r e n c e b etw een c o s ts and re v e n u e , o r w ere t h i s I a b s o lu te am ount m easured a g a in s t s a l e s . T h is y ie ld e d a p r o f i t p e r c e n t o f s a l e s . On th e o th e r h an d , i n t e r e s t seemed to b e e i t h e r t h i s a b s o lu te d i f f e r e n c e , a s an amount s e t a g a i n s t in v e s te d c a p i t a l - - b o t h f ix e d and v a r i a b l e , o r i t was a paym ent made f o r th e u s e o f a n o th e r* s fu n d s. R ic a rd o s t a t e d : . . . th e r a t e o f i n t e r e s t . . . [ i s ] r e g u la te d by th e p r o f i t s on th e em ploym ent o f c a p i t a l , and n o t by I 42Ib id . . p. 64. 106 l th e number o r q u a l i t y o f th e p r i c e s o f m e ta l w hich a r e u sed t o c i r c u l a t e i t s p ro d u c e . ^ And a g a in : i ) . . . i t rem a in s f o r us t o c o n s id e r w hat i s th e j c a u se o f th e p erm anent v a r i a t i o n s in th e r a t e o f p r o f i t , and th e c o n se q u e n t p erm an en t a l t e r a t i o n s in th e r a t e o f i n t e r e s t . 4 4 The p r i c e , in th e lo n g -ru n , had to r e p la c e th e i 1"ad v an ce" made to c r e a t e th e o u tp u t. T h is "ad v an ce" c l e a r l y c o v e re d n o t o n ly a paym ent to la b o r in a n t i c i p a t i o n o f s a l e s , b u t to o th e r c a p i t a l s th a n t h i s v a r i a b l e one. The p r o f i t r a t e th e n became th e p r o p o r tio n b etw een th e s e n e t r e c e i p t s and th e t o t a l am ount o f th e ad v an ce w ith a llo w a n c e made f o r th e la p s e o f tim e b etw een th e com m itm ent o f th e c a p i t a l and i t s r e p la c e m e n t.4 " * I f th e s to c k o f c a p i t a l d e v o te d t o p a y in g la b o r and a id in g i t by means o f m ach in ery w ere th e n to in c r e a s e a t a f a s t e r r a t e th a n th e la b o r f o r c e , th e r e t u r n to c a p i t a l w ould f a l l a s a r a t e , I b u t y e t m ig h t r i s e a b s o lu te l y and even p e rh a p s m a in ta in i AO J R ic a rd o , The H igh P r ic e o f B u llio n , in P a tte r s o n , op. c i t . . p . 199. 44 R ic a rd o , P r in c ip le s o f P o l i t i c a l Economy and T a x a tio n , p . 64. 45Ib id . . pp. 21, 198. I 107 1 I j i t s s h a r e o f th e d i v i s i o n b etw een la b o r and p r o f i t s , j F a ili n g t h i s , i t m ig h t a p p e a r t h a t p r o f i t s w ould i { e v e n tu a lly c e a s e to e x i s t . T h is i s n o t, how ever, th e c a s e ; f o r a c c o rd in g to R ic a rd o , th e y c o u ld n o t d is a p p e a r , b u t / " 7 r a t h e r would te n d to move tow ard a conanon, minimum l e v e l . T h at l e v e l , i t seem ed, w ould o n ly b e s u f f i c i e n t to c a u s e c a p i t a l to b e r e p l a c e d .4 ® G uided by c o m p e titio n , e x t r a o r d in a r y p r o f i t s w ere o n ly s h o r t - l i v e d and th e s e , a s w ith w ages, w ould te n d to w ard a cu sto m ary o r n o rm al l e v e l s e t by th e p r o f i t s on m a rg in a l la n d . T hus, h e s t a t e d , r e l a t i v e to p r o f i t d i f f e r e n t i a l s : . . . a l l e x tr a o r d in a r y p r o f i t s a r e in t h e i r n a tu r e b u t o f lim ite d d u r a tio n , a s th e w hole s u r p lu s p ro d u ce o f th e s o i l , a f t e r d e d u c tin g from i t o n ly su c h m o d e ra te p r o f i t s as a r e s u f f i c i e n t to en co u rag e a c c u m u la tio n , m ust f i n a l l y r e s t w ith th e l a n d l o r d . ^ And a g a in : j 4 6 I b i d . . p p . 76, 234. t ; 4 ^I b i d . . p p . 197, 70. See a l s o , R ic a rd o , The High .P r ic e o f B u llio n , in P a tte r s o n , op. c i t . , p . 200. i A O | R ic a rd o , P r in c ip le s o f P o l i t i c a l Economy and I T a x a tio n , pp. 7 1 -7 3 . r ! 4 9 I b i d . . pp. 2 2 4 -2 2 5 . 108 I do n o t deny t h a t th e f i r s t d is c o v e r e r o f a new and b e t t e r m ark et may, f o r a tim e , b e f o r e c o m p e ti t i o n o p e r a te s , o b ta in u n u s u a l p r o f i t s . ^ 0 The c o m p e titiv e m a rk e t g u id e d th e employment o f i 'c a p i t a l in r e a c t i o n to ch an g es in co n su m p tio n w hich w ere i !r e f l e c t e d in p r ic e s and th e n in p r o f i t s : In th e o r d in a r y c o u rs e o f e v e n ts , th e r e i s no com m o d ity w hich c o n tin u e s f o r any le n g th o f tim e to be s u p p lie d p r e c i s e l y in t h a t d e g re e o f abundance w hich th e w an ts and w ish e s o f m ankind r e q u i r e , and t h e r e f o r e t h e r e i s none w hich i s n o t s u b je c t t o a c c id e n ta l and tem p o ra ry v a r i a t i o n s o f p r i c e . I t i s o n ly th e co n seq u en c e o f su ch v a r i a t i o n s t h a t c a p i t a l i s a p p o rtio n e d p r e c i s e l y , in th e r e q u i s i t e - abundance and no m ore, to th e p ro d u c tio n o f th e d i f f e r e n t co m m o d ities w hich happen to b e in demand. W ith th e r i s e o r f a l l o f p r ic e , p r o f i t s a r e e le v a te d above, o r d e p re s s e d below , t h e i r g e n e r a l l e v e l ; and c a p i t a l ; i s e i t h e r e n co u ra g ed to e n t e r i n t o , o r i s w arned to I d e p a r t from , th e p a r t i c u l a r em ploym ent in w hich th e j v a r i a t i o n h a s ta k e n p la c e . I | W h ils t e v e ry man i s f r e e to em ploy h i s c a p i t a l w here j h e p le a s e s , h e w i l l n a t u r a l l y se e k f o r i t t h a t em ploy- ' m ent w hich i s m ost a d v a n ta g e o u s; h e w i l l n a t u r a l l y be d i s s a t i s f i e d w ith a p r o f i t o f 1 0 p e r c e n t, i f by r e m oving h i s c a p i t a l h e can o b ta in a p r o f i t o f 15 p e r c e n t. T h is r e s t l e s s d e s i r e on th e p a r t o f a l l th e em ployers o f s to c k to q u i t a l e s s p r o f i t a b l e f o r a more ad v a n tag e o u s b u s in e s s h as a s tr o n g te n d en cy t o e q u a lis e th e r a t e o f p r o f i t s o f a l l , o r to f i x them in such p r o p o r tio n s as may, in th e e s tim a tio n o f th e p a r t i e s , 50 ! R ic a rd o , E ssay on th e I n flu e n c e o f a Low P r ic e o f Corn on th e P r o f i t s o f S to ck , i n P a tte r s o n , op. c i t . , p . 207. ! 109 l co m pensate f o r any a d v a n ta g e w hich one may h av e , o r may a p p e a r to h av e , o v e r th e o th e r . Thus, th e o r d in a r y c o u rs e o f p r o f i t s would b e to v a ry a b o u t a n o rm al l e v e l . L o n g -ru n d i f f e r e n t i a l s would c o n tin u e to e x i s t b e c a u se o f d if f e r e n c e s in r i s k and s h o r t - ru n d i f f e r e n t i a l s b e c a u se o f in n o v a tio n s , im m o b ility o f c a p i t a l , o r m onopoly. The c o m p e titio n betw een c a p i t a l s to c k s w ould ch eck abn o rm al p r o f i t s and f o r c e o u tp u t to re sp o n d to consum er w is h e s : The h ig h p r o f i t s on c a p i t a l em ployed i n p ro d u c in g t h a t com m odity w i l l n a t u r a l l y a t t r a c t c a p i t a l to t h a t t r a d e ; and as soon a s th e r e q u i s i t e fu n d s a r e s u p p l i e d , and th e q u a n t ity o f th e com modity i s d u ly in c r e a s e d , i t s p r i c e w i l l f a l l , and th e p r o f i t s o f th e t r a d e w i l l conform to th e g e n e r a l l e v e l . A f a l l i in th e g e n e r a l r a t e o f p r o f i t s i s by no means incom - I p a t i b l e w ith a p a r t i a l r i s e o f p r o f i t s in p a r t i c u l a r em ploym ents. I t i s th ro u g h th e in e q u a l i t y o f p r o f i t s t h a t c a p i t a l i s moved from one em ploym ent to a n o t h e r .52 ! ( t j T h is a d ju s tm e n t c a n n o t, how ever, o c c u r in th e c a s e i :o f th e m a n u fa c tu re o f goods w here a m onopoly e x i s t s . The |n a t u r a l flo w o f c a p i t a l i n t o t h a t o u tp u t w i l l n o t m a t e r i a l - ! ; iz e , f o r : 1 When a com m odity i s a t a m onopoly p r i c e i t i s a t th e v e ry h ig h e s t p r i c e a t w hich th e consum ers a r e R ic a rd o , P r in c ip le s o f P o l i t i c a l Economy and T a x a tio n , p . 48. 52Ib id ., p. 70. 110 w illi n g to p u rc h a s e i t . C om m odities a r e o n ly a t a m onopoly p r i c e when by no p o s s i b le d e v ic e t h e i r q u an t i t y can b e augm ented; and when, t h e r e f o r e , th e com p e t i t i o n i s w h o lly on one s id e --a m o n g s t th e b u y e r s . 33 As w ith r e n t , p r o f i t s a s a r a t e w i l l b e s e t by th e y i e l d on c a p i t a l in v e s te d a t th e m a rg in o f c u l t i v a t i o n , and u n d er th e in f lu e n c e o f c o m p e titio n , t h i s m a rg in a l r a t e w i l l d i f f u s e th ro u g h o u t th e sy stem : i Thus we a g a in a r r i v e a t th e same c o n c lu s io n w hich I we have b e f o r e a tte m p te d t o e s t a b l i s h : t h a t in a l l c o u n t r ie s , and a l l tim e s , p r o f i t s depend on th e q u an t i t y o f la b o u r r e q u i s i t e to p ro v id e n e c e s s a r ie s f o r th e la b o u r e r s on t h a t la n d o r w ith t h a t c a p i t a l w hich y ie ld s no r e n t . 3^ I f one m ust g e t m ore, th e o th e r m ust g e t l e s s - - t h i s h e ld w h e th e r one spoke o f a f ix e d o u tp u t, o r th e p r o p o r tio n s o f an in c r e a s in g o u tp u t. So r i s e s th e s p e c te r o f th e s t a t i o n a ry s t a t e . As m en tio n ed above, c e r t a i n c h e c k s upon t h i s p r o g re s s io n a r o s e , ch e ck s w hich R ic a rd o c o n s id e re d p o s- i s i b l e , b u t ch e ck s from w hich he a b s tr a c te d i n th e c o n - i i !s t r u c t i o n o f h i s th e o ry : th e in tr o d u c t io n and e x te n s io n o f I |t e c h n o lo g i c a l ch an g e; th e r i s i n g cu sto m ary s ta n d a rd o f I l i v i n g among th e la b o r in g c l a s s ; and d e c r e a s in g lo n g -ru n * c o s ts in m a n u fa c tu rin g lin k e d to th e d ev elo p m en t o f an i e x te n s iv e f r e e t r a d e i n g r a i n s . 53I b id ., p. 165. 3^ Ib id ., pp. 75-76. I I I . CONCLUSION 111 A cco rd in g to R ic a rd o , v a lu e i s a f u n c tio n o f th e c o s t o f p ro d u c tio n , and c h i e f l y o f la b o r c o s t s , and i s ( e s t a b l i s h e d u n d er c o n d itio n s o f c o m p e titio n . R ent d ep en d s upon th e q u a n t ity o f la n d and i t s q u a l i t y and upon p o p u la t i o n , and a c c ru e s to th e landow ner b e c a u se o f c o m p e titio n . iP o p u la tio n dep en d s upon th e s to c k o f c a p i t a l w hich i s g u id e d by p r o f i t m a rg in s o r r a t e s u n d e r c o m p e titio n , and upon th e wage r a t e i n r e a l te rm s . R eal wages a r e a fu n c t i o n o f th e law o f p o p u la tio n and th e m arg in o f c u l t i v a t i o n and a r e e s ta b li s h e d and le v e le d th ro u g h c o m p e titio n . The exogenous v a r i a b l e s a r e th e n Only tw o: th e la n d , and th e p o p u la tio n . R ic a rd o was le d by h is t h e o r e t i c a l s t r u c t u r e to a d v o c a te i n t e r n a t i o n a l f r e e t r a d e g u id e d by c o m p e titio n . [Woven i n and th ro u g h h i s e n t i r e s t r u c t u r e o f b o th i n t e r - f [ n a tio n a l and d o m e stic econom ic th e o ry i s th e e s s e n t i a l 'a ss u m p tio n o f c o m p e titio n a s a d e v ic e o f c o n t r o l . C om peti- i tio n becam e i n R ic a rd o f s hands one o f th e p rim a ry fo u n d a - i ti o n s to n e s o f th e c l a s s i c a l e d i f i c e . r i i i CHAPTER IV i I | SU M M A R Y OF PRINCIPAL CONCLUSIONS AND AREAS OF FURTHER STUDY W hat, in summary, ca n b e s t a t e d , b a se d upon th e fo re g o in g r e s e a r c h ? What c o n c lu s io n s c a n b e te n d e re d , and w hat rem a in s to b e done? I . THE CONCLUSIONS T h ir te e n b a s ic c o n c lu s io n s seem t o fo llo w from th e w r i tin g s o f M alth u s and R ic a rd o r e l a t i v e to th e r o l e o f c o m p e titio n i n th e sy stem s w hich th e y d e v e lo p e d . They a r e a s f o llo w s : 1. N e ith e r a u th o r d e fin e d th e m ech an ics o f a sy stem I io f c o m p e titio n w ith w hich th e y d e a l t . The d e g re e o r form i jo f c o m p e titio n w hich th e y assum ed i s n o t s p e c i f i e d . By i ;c o m p e titio n th e y seem ed to im ply a b u n d le o f b e h a v io r p a t - I ' t e r n s e x h ib ite d in m a rk e ts by w hich r i v a l s a r e ch eck ed by each o th e r in th e p u r s u i t o f t h e i r g o a ls . The t h r e a t o r I 112 i 113 I a c t u a l i t y o f th e i n t e r s p e r s i o n o f r i v a l s b etw een th e i n d i v id u a l and th e g o a l, th e y th o u g h t, w ould p re v e n t a b u se s I by any one, o r by any gro u p a c tin g as o n e. 2 . B oth w r i t e r s b ased t h e i r sy stem s upon c e r t a i n |p rim a ry a s s u m p tio n s . They assum ed th e c o m p e titiv e o rg a n - t i z a t i o n o f m a rk e ts in b o th f a c t o r s and o u tp u ts . They , assum ed a s e t o f p r i n c i p l e s o r p r o p o s itio n s a b o u t th e f !c h a r a c t e r i s t i c s o f la n d and la n d r e n t . They assum ed th e | p r i n c i p l e o f d im in is h in g r e t u r n s . F i n a l l y , th e y assum ed a s e t o f p r o p o s itio n s c o n c e rn in g p o p u la tio n and a l s o , th e r e f o r e , c o n c e rn in g w ag es. | 3 . B oth R icard o and M a lth u s te n d e d to b e le s s o p t i m i s ti c th a n Sm ith had b een c o n c e rn in g th e w o rk in g o f a c o m p e titiv e o r g a n iz a tio n o f p ro d u c tio n , b u t n e i t h e r i s a s p e s s im i s t i c as th e y a r e commonly d e s c r ib e d , n o r i s Sm ith ja s o p t i m i s ti c as one i s o f te n le d to b e l ie v e , j 4 . T h e ir m u tu a l p essim ism o v e r th e f u t u r e s p ra n g t ;from th e n a t u r a l law s th e y b e lie v e d w ere o p e r a tiv e in th e a r e a s o f p o p u la tio n , r e n t , and th e c o m p e titiv e o r g a n iz a tio n o f p ro d u c tio n . 5. They d is a g re e d on c e r t a i n q u e s tio n s a r i s i n g from ]J . B. S a y 's t h e s i s on m a rk e ts , d e p r e s s io n s , and g e n e r a l ! 114 I :g l u t s ; and th e y d is a g re e d upon th e s o lu t i o n s to th e s e econom ic c h a n g e s. W hile M alth u s s t r e s s e d c o l l e c t i v e i n t e r v e n tio n in th e m a rk e t, R icard o te n d ed to fa v o r a r e d u c tio n < i in th e l i m i t a t i o n s on c o m p e titio n . M alth u s n e v e r was a b le to em brace f r e e tr a d e , w h ile R ic a rd o was a le a d in g a d v o c a te o f i t s v i r t u e s . 6 . R ic a rd o and M alth u s b o th re c o g n iz e d a m o n o p o li- iz in g te n d e n c y , and b o th fa v o re d i t s e l im in a tio n . They w ere l n o t a s o u tsp o k e n a s S m ith had b een , f o r th e in te r v e n in g y e a rs had w itn e s s e d th e p a s s in g from th e sc e n e o f much w hich had d is tu r b e d Adam S m ith. | 7. B oth opposed th e Poor Laws a s th e n c o n s t i t u t e d i b e c a u se o f t h e i r r e s t r i c t i o n o f la b o r m o b ility , and b e c a u se o f t h e i r te n d e n c y to g e n e r a te u n re a s o n a b le in c r e a s e s in p o p u la tio n . 8 . B oth fa v o re d wages e s ta b li s h e d u n d e r c o m p e titiv e c o n d i tio n s . C o m p e titio n , to them , m eant c o m p e titio n I jbetw een th e b u y e rs o f la b o r and th e s e l l e r s o f la b o r , b u t i j th e y te n d e d to s t r e s s th e a d v a n ta g e s w hich th e y th o u g h t I ;w ould fo llo w when th e la b o r e r s com peted w ith each o th e r i r a t h e r th a n th e o th e r way a b o u t. 9 . V alu e, in th e m inds o f R ic a rd o and M a lth u s, was 1 115 I j a f u n c tio n o f th e c o s t o f p ro d u c tio n in th e lo n g -ru n , and j iw ould te n d to e q u a l p r i c e u n d er c o n d itio n s o f c o m p e titio n . i The c o s ts o f p r o d u c tio n w hich th e y th o u g h t w ere p e r t i n e n t w ere th o s e o f th e m a rg in a l p ro d u c e r. ■ 10. The v a lu e o f a good, th e y h e ld , c o u ld b e s t a t e d I in term s o f th e la b o r h o u rs w hich t h a t good w ould p u rc h a s e . T h is w ould, th e y th o u g h t, a llo w f o r co m p ariso n s o f th e v a lu e s o f goods o v e r tim e . T h is , how ever, i t sh o u ld b e s t r e s s e d , was n o t a m easu re o f a b s o lu te v a lu e , b u t r a t h e r allo w ed one to com pare r e l a t i v e v a lu e s . 11. C o m p e titio n , w orking o v e r a p e r io d o f tim e , I iwould te n d , th e y h e ld , to e q u a liz e p r o f i t r a t e s f o r u n d e r- I I ta k in g s o f e q u a l r i s k . I t was t h i s te n d e n c y tow ard a c o m p e titiv e s t r u g g l e b etw een s to c k s o f c a p i t a l w hich ca u se d m a rk e ts to re sp o n d to th e d e s i r e s o f s o c i e t y . » 12. C o m p e titio n among fa rm e rs w ould te n d to e q u a l iz e p r o f i t r a t e s in a g r i c u l t u r e and w ould c a u s e r e n t , an u n ea rn e d r e t u r n , to flo w to th e la n d ow ners. 13. G iven t h e i r a ssu m p tio n s, th e c o m p e titiv e o rg a n i z a t i o n o f p ro d u c tio n , w h ile l a r g e l y s e l f - r e g u l a t i n g , would le a d to a s t a t i o n a r y economy. I 116 ! I I . SUGGESTED AREAS OF FURTHER STUDY T h is i n v e s t i g a t i o n to u c h e s o n ly th e u p p e r la y e r s o f th e v a s t econom ic l i t e r a t u r e o f th e e a r l y n in e te e n th c e n tu r y . M alth u s and R ic a rd o a r e th e p la c e to s t a r t , f o r t h e i r v iew s d o m in ated econom ic th o u g h t th ro u g h o u t th e l a s t c e n tu r y . A m ore co m p lete u n d e rs ta n d in g o f t h a t p e r io d , ( jb o th a s a b e g in n in g o f th e s c ie n c e , and a s th e end o f an e a r l i e r e v o lu tio n o f th o u g h t on c o m p e titiv e c o n t r o l , w ould flo w from an in te n s iv e i n v e s t i g a t i o n o f a l l econom ic I :w r i tin g s from 1776 to 1840. i Beyond t h i s , th e back g ro u n d r e a d in g and r e s e a r c h f o r l |t h i s p a p e r h av e in d ic a te d t h a t from th e v e ry e a r l i e s t tim e s Imen h av e so u g h t to p r o t e c t th e m se lv e s from th e a b u s e s o f i s e l l e r s by a tte m p tin g to e s t a b l i s h a c o m p e titiv e o r g a n iz a t i o n o f m a rk e ts . T h is lo n g a t t a c k upon m onopoly, a t th e I Ihands o f S m ith, R ic a rd o , and M a lth u s, became e f f e c t i v e f o r i jth e f i r s t tim e in h i s t o r y . 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University of Southern California Dissertations and Theses

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Creator Clarke, Arthur Benjamin (author)

Core Title The concept and process of competition in the theories of Malthus and Ricardo

Degree Master of Arts

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag Economics, theory,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Pollard, Spencer D. (committee chair), Anderson, William H. (committee member), Elliott, John E. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c20-454901

Unique identifier UC11264514

Identifier EP44817.pdf (filename),usctheses-c20-454901 (legacy record id)

Legacy Identifier EP44817.pdf

Dmrecord 454901

Document Type Thesis

Rights Clarke, Arthur Benjamin

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA