On Composition of Demand and Income Distribution In Classical Economics

Abstract

In several reviews of my Classical Economics (1987; henceforth CE) a criticism recurs relating to my proposition that distribution in Ricardian economics is dependent upon the pattern of final demand. Anthony Brewer, who is convinced by the demonstration in the book of ‘a fundamentally important core of general equilibrium economics accounting for resource allocation in terms of the rationing function of relative prices,’ has stated the objection fairly and his formulation invites and deserves a response:[Hollander] does overstate his case at times. For example, he claims that, in Ricardo's theory, changes in the pattern of demand should react on the demand for labour, and thus on wages, while admitting that ‘Ricardo himself never formally made’ this extension [CE, p. 104]. He later uses exactly this interaction of demand and wages to support his interpretation of Ricardo against Dobb [CE, p. 360]. Surely, the fact that Ricardo did not ‘formally make’ this point (i.e., did not make it at all) is an argument against Hollander's reading, not for it (1988, p. 555).