The Empirical Content and Longevity of Ricardian Economics

Abstract

There is generally recognized gap, though of uncertain width, between abstract analytical propositions of Ricardian economics and concrete implicit in their use by contemporaries as guides to legislative action. The first purpose of this paper is to inquire into nature of economic statements made by Ricardo, and by John Stuart Mill. Can their key propositions be construed as, and did they intend them to be, empirical statements? What tests did they accept to measure truth of their theory? How did they bridge gap between their abstractions and real world? A second purpose, to which first inquiry is necessary preliminary, is to throw some light on related historical issue of some importance. Mark Blaug has recently charged Mill with having given an artificial extension of life to Ricardian system, after it had become empirically untenable. Blaug argues that the body of doctrine which Ricardo bequeathed to his followers rested on series of about course of economic events which were subject to empirical verification, in strictest sense of term. These included a rising price of corn, rising share of national income going to rent receivers, constant real wages, and gradual vanishing of investment opportunities in industry. But statistical evidence, available in 1830s and 1840s, falsified these predictions. At that stage, Blaug argues, system was retained only because of its usefulness to opponents of Corn Laws. Still more, therefore, with repeal of those laws in 1846, should system have been rejected as obsolete. For then even its basic assumption-an insulated economy-was no longer realistic. Thus, in 1848 Mill revived system which, it is claimed, had been falsified as to its key deductions, and rendered irrelevant by attainment of its chief policy objective.2 Mill effected this in some instances, Blaug suggests, by conveniently ignoring gap between facts and his theory. In others, it is charged, he actively sought to remove theory from any possibility of falsification by facts. This involved two gambits. One was to turn Ricardo's definite predictions into vague statements of tendency, guarded by