The Ricardian Theory of Production and Distribution

Abstract

On the assumption that the primary interest in the “ancients” in such a field as economics is to learn from their mistakes, the principal theme of this discussion will be the contrast between the “classical” system and “correct” views. The system is taken in the sense indicated by the title, with little regard to other writers than Ricardo's own great master and the two successors most competent and closest to his own spirit, Senior and Mill. While our special interest is distribution theory, it is useful to have in the background clear views of essential doctrines or points of view in the authors' theory of value or price; for these are often closely connected with fallacies in the other field. It will be appropriate to give by way of introduction a kind of formal list of main deficiencies and sources of error in the system as a whole. At least seven such “aberrations” appear to have vital importance.The first to be noticed is the unfortunate conception of value, in negative terms—cost, interpreted as “pain”—instead of positive terms—desire or utility. This fallacy occurs explicitly in the parts of the argument which have come to be referred to in the literature as the “philosophical” account of value. Specific discussion of the determination of value (price) as a quantity (the “empirical account”) runs, indeed, largely in other, more “correct” terms, of the equalization of return from productive expenditure in different fields through correct allocation.