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.
Ricardo, David. 1817. On The Principles of Political Economy and Taxation
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[…] produce of a country among the different classes – in the form of rents, profits and wages – to be the “principal problem in Political Economy.” And Thomas Malthus’s essay on population is known […]
[…] produce of a country among the different classes – in the form of rents, profits and wages – to be the “principal problem in Political Economy.” And Thomas Malthus’s essay on population is […]
There’s a 5th oversight: the idea that economics is a set of “laws.” This was brought up by Marx in his critique of Jean-Baptise Say & Jeremy Bentham (in Vol. 1 of Capital), whose effects we feel today. The idea that organizing society by economic means has natural laws similar to gravity or quantum mechanics prevails today. Is there supply & demand? Sure. Are they “laws” that apply universally across galaxies? Of course not. Yet mainstream economists are increasing thinking themselves more like physicists.
Also an interesting note: It was Ricardo who came up with the labor theory of value, which Marx begrudgingly adopted. However, Ricardo was also trying to get out of paying his land tax at the time, and insisted that his tax be calculated on the productivity of his land (which couldn’t be done without labor) instead of a market value, so that he could pay a lower tax. It doesn’t make him wrong, just an interesting little factoid.
thanks for this insightful comment, David!