David Ricardo (1772 – 1823) was a prominent classical economist who gave a systematized form to a rising discipline of ‘economics’, rightly termed then as ‘political economy’. The opening paragraph of his book On The Principles of Political Economy and Taxation (1817) contributes to this endeavour and it also bears insights neglected by his professional successors:
“The produce of the earth—all that is derived from its surface by the united application of labour, machinery, and capital, is divided among three classes of the community; namely, the proprietor of the land, the owner of the stock or capital necessary for its cultivation, and the labourers by whose industry it is cultivated.
But in different stages of society, the proportions of the whole produce of the earth which will be allotted to each of these classes, under the names of rent, profit, and wages, will be essentially different; depending mainly on the actual fertility of the soil, on the accumulation of capital and population, and on the skill, ingenuity, and instruments employed in agriculture.
To determine the laws which regulate this distribution, is the principal problem in Political Economy.”
In may view, especially interesting in this excerpt is Ricardo’s observation of four phenomena the understanding of which mostly vanished from current mainstream economics: the imminent class division (also spotted by Adam Smith), the difference between ‘finance capital’ and ‘real capital’ (firstly analyzed in 1910 by Rudolf Hilferding), the interdependence of economies and natural ecosystems, and the existence of various and changing socio-economic structures. One could rightly say that these oversights are the key problem of mainstream economics.