|Editor(s):||Kurz, Heinz D. |
|Reviewer(s):||Ahiakpor, James C.W. |
Published by EH.Net (December 2015)
Heinz D. Kurz and Neri Salvadori, editors, The Elgar Companion to David Ricardo. Cheltenham, UK: Edward Elgar, 2015. xiv + 603 pp. $290 (hardcover), ISBN: 978-1-84844-850-6.
Reviewed for EH.Net by James C.W. Ahiakpor, Department of Economics, California State University – East Bay.
This book is another in the collection of essays edited by Heinz Kurz and Neri Salvadori on classical economics. It includes eighty-six essays written by fifty-seven authors, with Kurz and Salvadori themselves writing the greatest number: twelve by Kurz and seven by Salvadori, some collaboratively, besides a short Preface. As the title suggests, the book aims at assisting readers to understand David Ricardo’s economic analysis. The editors cite three reasons for the collection: (1) Piero Sraffa’s 1960 interpretation of classical economics in the Production of Commodities by Commodities, a model of the economy “that is fundamentally different from the one advocated by the later marginalist authors from Willian Stanley Jevons to Léon and Alfred Marshall” (p. xiii); (2) a renewed interest in “the problem of income distribution [that had been given] short shrift in much of economics” for decades but recently provoked by “the remarkable success of Thomas Piketty’s … Capital in the Twenty-First Century” (p. xiv); and (3) several “exegetical issues, which have led to important corrections of the picture we have of Ricardo’s view” (p. xiv). The entries include topics on which Ricardo wrote as well as other writers’ views about Ricardo’s economic analysis, listed alphabetically from A, “Accumulation of Capital” to W, “Wicksell, Knut, on Ricardo.” The contributors include familiar authors such as Roger Backhouse, Riccardo Faucci, Peter Groenewegen, Harald Hagemann, John King, Andrea Maneschi, Maria Marcuzzo, Murray Milgate, Gary Mongiovi, D.P. O’Brien, and Hans-Michael Trautwein.
The editors claim that “Ricardo, like other great economists, had repeatedly sound intuitions into particular economic problems, but was not yet capable of expressing them in a clear and coherent way: his vision surpassed what he could state using the analytical tools and language at his disposal” (p. iv). On the contrary, I find Ricardo to have stated his arguments clearly in his numerous publications, parliamentary speeches, and letters that are collected in Sraffa’s edited volumes. Thus, the essays on some prominent authors’ views on Ricardo, including those of Mark Blaug, Alfred Marshall, John Maynard Keynes, Karl Marx, Paul Samuelson, Joseph Schumpeter, and Knut Wicksell are more informative than several of those written on Ricardo’s economic analysis, particularly those cluttered with tedious mathematical formulas. The latter include Ricardo’s theory of value, capital accumulation, determination of market prices, wage rates, interest rates, monetary theory, Say’s Law, General Glut, and “Ricardian equivalence.” For these analyses, Sraffa’s Volume XI, General Index, is a more reliable guide to what Ricardo actually argued. The Keynes-Marx-Sraffian interpretations of Ricardo’s analyses in several of the essays border on distortions of his work. The exceptions include the entries that pay close attention to Ricardo’s own arguments, e.g. Andrea Maneschi’s on “Corn Laws.”
Ricardo made utility foundational to his theory of value, arguing: “If a commodity were in no way useful, – in other words, if it could in no way contribute to our gratification, – it would be destitute of exchangeable value, however scarce it might be, or whatever quantity of labour might be necessary to procure it” (Works, 1: 11). Also, “Possessing utility, commodities derive their exchange value from two sources: from their scarcity, and from the quantity of labour required to obtain them” (1: 12). He also modified the labor-embodied theory by time, capital depreciation, and capital-labor ratios. But it is Karl Marx’s derivation of the labor theory of value from Ricardo that dominates the interpretations. That Ricardo’s dissent from Smith on the theory of value can be traced to his having misinterpreted Smith’s “value of labor” to mean the wage rate (1: 16−17) does not feature in the restatements. Ricardo also followed Smith’s market price determination in the short run by supply and demand, especially in chapter 30 of his Principles, titled, “Of the Influence of Demand and Supply on Prices,” and yet some authors in the volume seek to distance Ricardo from that explanation. Several entries do not treat Ricardo’s insistence on the rise of wage rates as the cause of profit rate’s decline as an elaboration of Smith’s competition of capitals being the cause, despite Ricardo’s (1: 163) own argument that “the accumulation of capital naturally produces an increased competition among the employers of labour, and a consequent rise in its price.”
Other troublesome entries include Ferdinando Meacci’s, treatment of Ricardo’s contribution to Say’s Law. He relies on Schumpeter’s unhelpful “final assessment of the debate,” with the conclusion that Ricardo understood the Law but “put it to illegitimate use” (p. 514), rather than making use of recent literature elaborating Ricardo’s contributions. The classics dealt with a monetary economy, which is why the so-called “Identity” version of the Law does not represent what Ricardo argued. Similarly, while minimizing the legitimacy of the so-called Ricardian Socialists’ claim to Ricardo’s analysis as a basis for their arguments, John King claims that J.F. Bray gave “an unusually explicit refutation of Say’s Law of markets” (p. 460). Harald Hagemann’s entry on “General Glut” repeats the false claim that Ricardo, like the other classics, did not treat money as a store of value (but see Ricardo 3: 136−7) and that Ricardo’s defense of the Law was only for the long run to argue the Law’s validity only for the short run. He also ignores J.S. Mill’s (1874) defense of the Law explaining that money itself must be considered a commodity, thus “there cannot be an excess of all other commodities, and an excess of money at the same time.” Failing to treat saving as the purchase of financial assets, as in Smith, Ricardo, and J.S. Mill, Hagemann repeats the Keynes-Schumpeter difficulty with recognizing savings as investments by households, hence saving being a source of insufficient demand.
Ricardo also followed closely David Hume’s as well as Adam Smith’s monetary analysis. Yet Ghislain Deleplace’s entry claims that Ricardo was “unorthodox on money” (p. 344), insisting that, to him, “the theory of value of commodities [supply and demand] does not apply to money … but to a standard that ‘regulates’ the quantity of money, hence its value” (p. 345). Ricardo’s explanation of money’s non-neutrality — on account of the existence of absolute and proportional taxes, a point Ricardo noted as “never [having] been averted to” (1: 208), and which is still not widely known — does not feature in Deleplace’s entry. Also, rather than the supply and demand for labor determining wage rates, an analysis Ricardo took from Smith, Enrico Bellino’s entry contends that “Wage determination is a rather complex phenomenon in classical political economy, which cannot be linked by a set of mechanical or deterministic relations with the other variables of the system” (p. 9). I also found Bellino’s claim that Ricardo invoked “diminishing returns to scale” (p. 10), rather than diminishing marginal returns to equal doses of capital and labor to less fertile or marginal land as “the cause of a decrease in profits” to be strange. Regarding the equivalence of debt and tax finance of government budgets, Ricardo gave reasons why people do not act according to the intertemporal equivalence that Robert Barro has employed in his models. Ricardo rather emphasized their contemporaneous equivalence as the primary basis for his objecting to debt finance. But Richard Sturn’s entry on “Ricardian Equivalence” merely repeats the intertemporal equivalence argument that has dominated the literature.
A subject index would greatly have helped readers to recognize the overlap of several entries. For example, the entries on “Funding System,” “National Debt,” and “Ricardian Equivalence” that are far apart because of their alphabetical order cover pretty much the same ground, but are not readily linked through the author index. It also would have helped to find a clear connection between the entries and Piketty’s commercial success with his 2013 book; most academic reviews of that book that I have seen do not rate it highly, e.g. McCloskey (2014). That the rate of return on “capital” is greater than GDP growth is hardly a valid basis for claiming that the world economy is in trouble unless measures are taken to redistribute income and wealth, as Piketty claims.
My reservations notwithstanding, Kurz and Salvadori have done researchers on Ricardo a great service with their compilation of these essays. They add to the likes of “Notes for Further Reading” in Robert Ekelund, Jr. and Robert Hébert’s A History of Economic Theory and Method. I would urge readers of the book to check volume 11 of Sraffa’s edited Works and Correspondence of Ricardo for accuracy of many of the interpretations of Ricardo’s analyses.
McCloskey, D. N. (2014), “Measured, Unmeasured, Mismeasured, and Unjustified Pessimism: A Review Essay of Thomas Piketty’s Capital in the Twenty-first Century.” Erasmus Journal for Philosophy and Economics 7, Issue 2 (August): 73−115.
Mill, John Stuart (1874), Essays on Some Unsettled Questions of Political Economy. 2nd ed., reprinted. Augustus M. Kelley, 1968.
Ricardo, David (1951, 1957), Works and Correspondence of Ricardo. Edited by Piero Sraffa. Cambridge: Cambridge University Press.
James C.W. Ahiakpor is Professor of Economics at California State University, East Bay in Hayward, California. His publications include: “Ricardo on Money: The Operational Significance of the Non-Neutrality of Money in the Short Run,” History of Political Economy, 1985; Classical Macroeconomics: Some Modern Variations and Distortions (Routledge 2003); “Say’s Law: Keynes’s Success with its Misrepresentation,” in Steven Kates, ed., Two Hundred Years of Say’s Law (Elgar 2003); and “The Modern Ricardian Equivalence Theorem: Drawing the Wrong Conclusions from David Ricardo’s Analysis,” Journal of the History of Economic Thought, 2013.
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|Subject(s):||History of Economic Thought; Methodology|
|Geographic Area(s):||General, International, or Comparative|
|Time Period(s):||18th Century|
20th Century: Pre WWII
20th Century: WWII and post-WWII