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A Note on the Role of Aggregate Demand in Ricardo.

1. Introduction

The dominant view in the history of economic thought is that there is no role for aggregate demand in Ricardo's political economy owing to his adherence to Say's Law (Eltis 1984 is a good example, and for a recent reaffirmation of this view, see King 2013). This paper argues that aggregate demand matters in Ricardo, where aggregate demand is defined as investment and consumption in the aggregate. In Section 2, Ricardo's methodology is presented where we engage with the determinants of 'value and riches', the distinction Ricardo draws between the motive to accumulate and produce, the saving-is-investment assumption, and his behavioural assumptions regarding consumption demands. These render transparency to Ricardo's theoretical framework and pave the way for our core argument: it is owing to Ricardo's assumptions that saving is investment and consumption demand is continuously forthcoming that he is able to argue that 'demand is only limited by production'; the former provides the 'ability' to purchase and the latter is a consequence of the unlimited 'will' to purchase. Section 3 demonstrates that Ricardo recognized the aggregate-demand-generating role of both government expenditure and unproductive labour in the unlikely event of a universal glut. Furthermore, the part played by 'the extension of the market' in the determination of 'riches' also points towards a key role for aggregate demand in Ricardo.

2. Ricardo's Methodology

Ricardo assumes that both labour and capital are freely mobile in his study of 'value and riches': '[i]t is through the inequality of profits, that capital is moved from one employment to another' (Ricardo 1951a, 119). And furthermore, that '[t]his restless desire on the part of all the employers of stock, to quit a less profitable for a more advantageous business, has a strong tendency to equalize the rate of profits of all (Ricardo 1951a, 88; cf. Hagemann 2015, 163). Ricardo recognizes that this process of equalization of profit rates with output supplies adapting to sectoral output demands takes time and renders workers unemployed, especially if industries make use of a greater proportion of fixed capital relative to circulating capital (see Ricardo 1951a, 266, outlining the effects of a 'revulsion in trade'; also see 268-9). 'If his profits are high and above the usual level they can only remain so till other capitalists can be brought to compete with him, and then his profits, and the price of his goods will sink to their natural level' (Ricardo 1951b, 392). Thus, according to Ricardo, the competition among capitalists 'has a strong tendency to equalize the rate of profits of all' (Ricardo 1951a, 88). And in Ricardo's political economy, the distributive variables are bound together by the given technology, and the wage rate and profit rate cannot vary independently of each other (cf. Kurz 2010, 1193).

2.1 'Value and Riches'

In Chapter 20 of the Principles entitled 'Value and Riches, Their Distinctive Properties', Ricardo distinguishes between factors that affect price/Value' and those that affect quantity/'riches'/'wealth'. (1) This entails an analytical separation between the theory of value and distribution and the theory of activity levels and economic growth. Hence Ricardo (1951a, 273; emphases added) writes:
[b]y the invention of machinery, by improvements in skill, by a better
division of labour, or by the discovery of new markets, where more
advantageous exchanges may be made, a million of men may produce
double, or treble the amount of riches, of 'necessaries, conveniences,
and amusements,' in one state of society, that they could produce in
another, but they will not on that account add any thing to value; for
every thing rises or falls in value, in proportion to the facility or
difficulty of producing it, or, in other words, in proportion to the
quantity of labour employed on its production.

Similar to 'riches', 'wealth always depends on the quantity of commodities produced ...' (Ricardo 1951a, 279; emphasis added). In his Notes on Malthus too, Ricardo makes a similar point: '[w]ealth is estimated by its utility to afford enjoyment to man; value is determined by facility or difficulty of production. The distinction is marked, and the greatest confusion arises from speaking of them as the same' (Ricardo 1951b, 34). Another way to view this distinction is to treat 'riches' as contributing to use value and 'value' as contributing to exchange value. Ricardo had already clarified the analytical distinction in his Principles: '[m]any of the errors in political economy have arisen from errors on this subject, from considering an increase of riches, and an increase of value, as meaning the same thing...' (Ricardo 1951a, 274).

From Ricardo's Principles, it can be surmised that the 'wealth' of a country can be increased in three distinct ways: (1) increasing the employment of 'productive labour', (2) increasing the productivity of the existing 'productive labour', and (3) by an 'extension of the market' (Ricardo 1951a, 278-9, 132). (2) Through the first method, both 'riches' and 'value' will increase whereas through the second, it is axiomatic that only 'riches' will increase without altering the aggregate 'value'. Of these 'two modes of increasing wealth', Ricardo prefers the second because the first mode warrants a reduction in expenditure on unproductive labour, which is a 'privation and diminution of enjoyments'. And the third route directly increases 'riches' (see Section 3.2).

It is this analytical separation between 'value and riches' in Ricardo which underpins Garegnani's statement that the 'Ricardian theory of distribution... is not incompatible with effects of... [aggregate] demand on aggregate output or the speed of accumulation' (Garegnani 1978, 340n). Also it must be noted that Ricardo's distinction between 'value and riches' has nothing to do with 'the distinction between marginal and total utility' as suggested by Marshall (1890 [2013], 670).

2.2 Motive to Produce and Motive to Accumulate

While debating Malthus's views on rent, Ricardo asks: 'Of what increased quantity does Mr. Malthus speak? Who is to produce it? Who can have any motive to produce it, before any demand exists for an additional quantity?' (Ricardo 1951a, 407n; emphases added). While this extract can be interpreted as one which simply tells us how profit-maximizing capitalists function, the following excerpt (Ricardo 1951a, 293) makes it clear that Ricardo understands that an increase in investment without a corresponding increase in consumption negatively impacts production or the motive to produce.
If every man were to forego the use of luxuries, and be intent only on
accumulation, a quantity of necessaries might be produced, for which
there could not be any immediate consumption. Of commodities so limited
in number, there might undoubtedly be an universal glut, and
consequently there might neither be demand for an additional quantity
of such commodities, nor profits on the employment of more capital. If
men ceased to consume, they would cease to produce.

In other words, the motive for production is consumption. The key assumptions Ricardo makes regarding consumption demand will be presented in Section 2.4. As Ricardo (1951b, 137) asks, 'Why produce more of a commodity, if the consumption of it be not increased?' (3) Note however that the earlier excerpt is an extension of this individual case to the economy as a whole. Indeed, Ricardo does not possess a conception of aggregate demand as in Keynes, but the above extract is evidence that Ricardo did possess a conception of accumulation and consumption in the aggregate. Moreover, another route through which Ricardo is able to talk about aggregate investment and consumption in the latter-day sense is through his distinction between productive and unproductive labour, wherein both these terms make analytical sense at the level of the economy as a whole.

For Ricardo, it is the rate of profit which provides capitalists with the motive to accumulate. Ricardo (1951a, 290) states that the 'motive for accumulation' depends solely on the rate of profit and therefore
[t]here cannot, then, be accumulated in a country any amount of capital
which cannot be employed productively, until wages rise so high in
consequence of the rise of necessaries, and so little consequently
remains for the profits of stock, that the motive for accumulation

And in the following excerpt, Ricardo (1951a, 296) reiterates his view that capital accumulation is limited only by the rate of profit.
... there is no limit to demand--no limit to the employment of capital
while it yields any profit, and that however abundant capital may
become, there is no other adequate reason for a fall of profit but a
rise of wages, and further it may be added, that the only adequate and
permanent cause for the rise of wages is the increasing difficulty of
providing food and necessaries for the increasing number of workmen.

However, in this excerpt, Ricardo qualifies his phrase 'there is no limit to demand' with the condition that the accumulation of capital must yield positive profits.

Ricardo distinguishes the motive to accumulate from the motive to produce, a conceptual separation which is difficult to uphold. The former depends on the rate of profit which is determined by the real wage and production conditions, whereas the latter depends on the volume of consumption demand. This is perhaps reflective of the analytical separation between the price and quantity system within Ricardo's economics (Section 2.1). However, if aggregate demand is less than the aggregate supply occasioned by accumulation, the market prices are below their natural levels and normal profits are not realized, thereby highlighting Ricardo's erroneous distinction between the motive to accumulate and the motive to produce.

2.3 Saving Is Investment

The agricultural and manufacturing capitalists invest the bulk of their profits and it is this reinvestment which causes economic growth in Ricardo (Pasinetti 1960, 81; Eltis 1984, 202). It has been repeatedly pointed out in the secondary literature that, like Smith, Ricardo treats a decision to save as being one and the same as a decision to invest (cf. Garegnani 1978, 339-40; also see Garegnani 1998, 398; Gehrke and Kurz 2001, 455; Davis 2005, 173; Hagemann 2015, 160, 164).
If ten thousand pounds were given to a man having 100,000/. per annum,
he would not lock it up in a chest, but would either increase his
expenses by 10,000/.; employ it himself productively, or lend it to
some other person for that purpose; in either case, demand would be
increased, although it would be for different objects. (Ricardo 1951a,
291; also 289-90 and Ricardo 1951b, 329) (4)

Incomes are used for consumption or investment or are lent to someone for either immediate consumption or investment; that is, 'all incomes are spent' (Pasinetti 1960, 84). (5) This point is clearly illustrated in the following excerpt: 'By accumulation of capital from revenue is meant an increase of consumption by productive labourers instead of by unproductive labourers. Consumption is as certain in one case as in the other, the difference is only in the quantity of productions returned' (Ricardo 1951b, 326-7; also 391). (6) Ricardo makes this special assumption regarding saving and investment despite his discussion of manufacturers who engage in external financing from 'bankers and monied men' (Ricardo 1951a, 89; also 297-8). His discussion of external financing indicates that Ricardo is familiar with the idea that investment can be financed through external borrowing and therefore his special assumption warrants a closer analysis. Although this matter deserves a detailed investigation, it is beyond the scope of this paper.

In the following passage, Ricardo (1951b, 429) articulates a kind of Harrodian growth path--where investment is undertaken for purposes of further investment.
I may employ 20 workmen to furnish me food and necessaries for 25, and
then these 25 to furnish me food and necessaries for 30--these 30 again
to provide for a greater number. Should I not get rich although I
employed capital 'merely for the sake of the demand occasioned by those
who work for me[']?

Here, Ricardo is visualizing a growth path with growing productive labour. However, as noted in Section 2.2, a growth in investment without a commensurate growth in consumption can negatively affect the motive to produce.

2.4 Behavioural Assumptions

Ricardo assumes that the demand for agricultural produce is certain and invariant with respect to 'fashion, prejudice, or caprice' whereas the demand for manufactures is subject to 'the tastes and caprice of the purchasers'.
The demands for the produce of agriculture are uniform, they are not
under the influence of fashion, prejudice, or caprice. To sustain life,
food is necessary, and the demand for food must continue in all ages,
and in all countries. It is different with manufactures; the demand for
any particular manufactured commodity, is subject not only to the
wants, but to the tastes and caprice of the purchasers. (Ricardo 1951a,
263; also see 292)

It is interesting to note that Ricardo gets this idea from Smith: '[t]he desire of food is limited in every man by the narrow capacity of the human stomach; but the desire of the conveniencies and ornaments of building, dress, equipage, and houshold furniture, seems to have no limit or certain boundary' (Smith 1976 [1776], 181; also quoted at Ricardo 1951a, 293 and 387).

Furthermore, Ricardo is certain that in England both necessaries and luxuries are produced and therefore there is no reason to be concerned about the production of too much of necessaries which could cause a universal glut. 'In such a country as England, for example, it is difficult to suppose that there can be any disposition to devote the whole capital and labour of the country to the production of necessaries only' (Ricardo 1951a, 293). This is why Ricardo writes: 'Mr. Malthus's peculiar theory is that supplies may be so abundant, that they may not find a market... We all like to buy and consume, the difficulty is in the production' (Ricardo 1951b, 240).

Given the preceding discussion, it is perhaps an overstatement to suggest that Ricardo 'did not possess a demand theory' as Pasinetti (1960, 85; also 90) does. After all, Ricardo explicitly points out the crucial role played by consumption demand in the context of general commodity production and he makes behavioural assumptions about the 'desire' for necessaries and luxuries.

2.5 Say's Law

According to Ricardo, 'M. Say has... most satisfactorily shewn, that there is no amount of capital which may not be employed in a country, because demand is only limited by production' (Ricardo 1951a, 290); this is popularly known as Say's Law. (7) After all, production creates income which in turn can be used for investment and/or consumption demand. However, for Ricardo to state that 'demand is only limited by production' it presupposes that the following two conditions (discussed in Sections 2.3 and 2.4 respectively) are met. First, that investment demand equivalent to the volume of savings is forthcoming. Second, there is adequate consumption demand in the economy as a whole.

Owing to Ricardo's separate analytical treatment of 'value' and 'riches' and the analytical divorcing of the 'motive for accumulation' from the motive for production, changes in aggregate demand cannot influence the rate of profit. In Ricardo's framework, the rate of profit can change only if the natural wage or methods of producing the wage-goods change (Ricardo 1951a, 132). Alterations in aggregate demand have no impact on the rate of profit except via influencing these two factors.
An extraordinary stimulus may be also given for a certain time, to a
particular branch of foreign and colonial trade; but the admission of
this fact by no means invalidates the theory, that profits depend on
high or low wages, wages on the price of necessaries, and the price of
necessaries chiefly on the price of food.... (Ricardo 1951a, 119)

As Garegnani also notes, '[n]o room was left for any permanent influence of demand on profits' (Garegnani 1978, 340). However, since this refers to an equilibrium profit rate concept in Ricardo, it is consistent with excess commodity supply causing actual profit rates to change.

3. Aggregate Demand Matters

3.1. Gluts

Ricardo admits to the possibility of gluts of particular commodities. However, he argues that these gluts are temporary in nature.
Too much of a particular commodity may be produced, of which there may
be such a glut in the market, as not to repay the capital expended on
it; but this cannot be the case with respect to all commodities; the
demand for corn is limited by the mouths which are to eat it, for shoes
and coats by the persons who are to wear them; but though a community,
or a part of a community, may have as much corn, and as many hats and
shoes, as it is able or may wish to consume, the same cannot be said of
every commodity produced by nature or by art. Some would consume more
wine, if they had the ability to procure it. Others having enough of
wine, would wish to increase the quantity or improve the quality of
their furniture. Others might wish to ornament their grounds, or to
enlarge their houses. The wish to do all or some of these is implanted
in every man's breast; nothing is required but the means, and nothing
can afford the means, but an increase of production. (Ricardo 1951a,

In the long run--after capital and labour have been reallocated and a uniform rate of profit is obtained across sectors--'capital is apportioned precisely, in the requisite abundance and no more, to the production of the different commodities which happen to be in demand' (Ricardo 1951a, 88). As Ricardo (1951b, 137) asks, '[w]hy produce more of a commodity, if the consumption of it be not increased?' But in the interim, the capitalists may make 'mistakes' in the apportioning of capital (cf. Davis 2005, 180, who terms it 'irrational investment').
Mistakes may be made, and commodities not suited to the demand may be
produced--of these there may be a glut; they may not sell at their
usual price; but then this is owing to the mistake, and not to the want
of demand for productions. (Ricardo 1951b, 305; also 413)

What I wish to impress on the readers mind is that it is at all times
the bad adaptation of the commodities produced to the wants of mankind
which is the specific evil, and not the abundance of commodities.
Demand is only limited by the will and power to purchase. (Ricardo
1951b, 306; also 313-14)

In all cases a good distribution of the produce, and an adaptation of
it to the wants and tastes of society are of the utmost importance to
the briskness of trade and the accumulation of capital. The want of
this is in my opinion the only cause of the stagnation which commerce
at different times experiences. It may be all traced to miscalculation,
and to the production of a commodity which is not wanted instead of one
which is wanted. (Ricardo 1951b, 415; also 416, 303-4)

In the above excerpts, Ricardo clarifies his assumptions regarding the 'wants of mankind'. And as outlined earlier in Section 2.4, since the demand for manufactures is subject to 'the tastes and caprice of the purchasers', capitalists may make 'mistakes'. Moreover, based on these passages, it would not be an overstatement to argue that Ricardo places the burden of adjustment on the supply side and ascribes relative autonomy to the size and composition of aggregate demand.

Despite Ricardo's general insistence that 'demand is only limited by production', the following excerpt, already quoted in Section 2.2, has a Keynesian, or more accurately, a Malthusian flavour to it.
If every man were to forego the use of luxuries, and be intent only on
accumulation, a quantity of necessaries might be produced, for which
there could not be any immediate consumption. Of commodities so limited
in number, there might undoubtedly be an universal glut, and
consequently there might neither be demand for an additional quantity
of such commodities, nor profits on the employment of more capital. If
men ceased to consume, they would cease to produce. (Ricardo 1951a,
293; cf. Ricardo 1951b, 302)

And here, Ricardo reverses the causation found in Say's Law and states that production is limited by consumption. This, in particular, can happen if there is no unproductive consumption, i.e. if 'every man were to forego the use of luxuries', pointing to the importance of Ricardo's behavioural assumptions.

Investment, according to Ricardo, plays the dual role of creating future capacity as well as demand. The following excerpts demonstrate Ricardo's explicit knowledge that investment adds to productive capacity.
By constantly increasing the facility of production... we not only add
to the national riches, but also to the power of future production.
(Ricardo 1951a, 274)

Capital is that part of the wealth of a country which is employed with
a view to future production... (Ricardo 1951a, 279)

Ricardo, as already noted, believes that net investment will generate adequate aggregate demand to validate the additional aggregate supply. In other words, the assumptions that saving is investment and that there exists an unlimited want for luxuries (unproductive consumption) together provide the sufficient conditions for arguing that 'demand is only limited by production'. Bleaney (1976, 47) highlights this key point in the following passage.
For while a very sudden increase in the production of any one commodity
will very likely result in wastage, the real question is whether, if
men find their incomes suddenly increased by 50 per cent, they will
still spend them all. In Ricardo's view, they will, because 'the wants
and tastes of mankind' are unlimited.

Davis (2005, 173; emphasis added) also notes this aspect of Ricardo's methodology in his presentation of Ricardo's engagement with the views of William Blake where he states that Ricardo 'knew that increased production gave rise to an increased ability to demand commodities. And he thought this demand would be effectual.' As noted in Section 2.5, the saving-is-investment assumption provides the 'ability to demand' and the behavioural assumptions provide the 'willingness to demand'. Together, they make the demand 'effectual' (to use Malthus's term). However, these underlying methodological assumptions are not rendered explicit in either Bleaney (1976) or Davis (2005).

Therefore, it follows that, if either of his two assumptions are not borne out in reality, there is aggregate demand deficiency and a universal glut is inevitable. And Ricardo (1951b, 307; emphasis added) recognizes this.
... if, of the two things necessary to demand, the will and the power
to purchase the will be wanting, and consequently a general stagnation
of trade has ensued, we cannot do better than follow the advice of Mr.
Malthus, and oblige the Government to supply the deficiency of the

This excerpt is also quoted by Davis (2005, 181) to point out that 'Ricardo did not dispute his [Malthus's] case for expansionary fiscal policy'. Also Ricardo (1951b, 450) later asks, 'If the people will not expend enough themselves, what can be more expedient than to call upon the state to spend for them?' In other words, if in the aggregate, net saving does not generate net investment and therefore additional incomes, and/or consumption demand is not forthcoming, Ricardo admits the need for government expenditure to revive aggregate demand. (8)

3.2. 'Extension of the Market'

This discussion builds on Section 2.1 where the determinants of 'value and riches' in Ricardo were outlined. According to Ricardo, the 'extension of the market' does not affect value but 'it will very powerfully contribute to increase the mass of commodities' (Ricardo 1951a, 128; cf. Ricardo 1951b, 363, 394, 403, 407, 420).
... the extension of the market... may be... efficacious in increasing
the mass of commodities, and may thereby enable us to augment the funds
destined for the maintenance of labour, and the materials on which
labour may be employed. (Ricardo 1951a, 132)

... by the discovery of new markets, where more advantageous exchanges
may be made, a million of men may produce double, or treble the amount
of riches, of 'necessaries, conveniences, and amusements,' in one state
of society.... (Ricardo 1951a, 273)

The 'extension of the market' is analytically equivalent to an increase in, to use modern macroeconomic parlance, aggregate demand. An increase in foreign trade is one important route through which aggregate demand can be increased.

If the extent of the market is diminished, it negatively impacts the motive to produce (Section 2.2). Capitalists in agriculture and manufacturing, as noted in Section 3.1, try their best to allocate capital--both size and composition--depending on the size and composition of aggregate demand. Hence, Ricardo writes in his chapter on foreign trade: T deny that less capital will necessarily be devoted to the growth of corn, to the manufacture of cloth, hats, shoes, &c. unless the demand for these commodities be diminished...' (Ricardo 1951a, 129). A mismatch in the size and composition of aggregate supply and aggregate demand causes gluts. However, the impact on agriculture and manufacturing is different. In agriculture, a glut can lower the price of corn 'and much agricultural distress will be produced till the average supply is brought to a level with the average demand' (Ricardo 1951a, 272), but manufacturing is not greatly affected because it possesses some spare capacity in order to quickly respond to demand variations: '[the manufacturer] has always some portion of... floating capital, increasing or diminishing according to the activity of the demand for his commodities' (Ricardo 1951a, 89; emphasis added). Hence, in Ricardo, there is no reason to assume that productive capacity is fully utilized. However, according to King (2013, 117), Ricardo implicitly assumed that 'capital stock is always fully utilized', but King rightly notes that this assumption cannot be easily reconciled with Ricardo's acceptance of the possibility of partial overproduction. More importantly, it is clear from the above excerpt (from Ricardo) that productive capacity is not always fully utilized in the manufacturing sector in Ricardo, and that it is demand which determines the degree of capacity utilization. While the excerpts quoted above are suggestive of the autonomy of demand, they also point towards the asymmetry of demand and supply in Ricardo's political economy.

4. Conclusion

The discussion of 'value and riches' in Ricardo underscores the analytical separability of the price and quantity system. While aggregate demand determines 'riches', it has no impact whatsoever on 'value'. In a similar manner, Ricardo divorces the motive of accumulation from that of production; the rate of profit determines the motive for accumulation whereas the motive for production is provided by aggregate demand. Like Smith, Ricardo makes the special assumption that saving is investment. When Ricardo's belief in the empirical reality of constantly forthcoming consumption demand (in Britain) is added to his extant list of methodological points, the implication is that 'demand is only limited by production'. However, this does not imply that there is full employment of labour.

Subsequently, it was shown that aggregate demand matters in Ricardo's political economy through a re-examination of his views on gluts. Of particular note is Ricardo's admission that public expenditure is needed if aggregate demand proves insufficient, and that this could arise if the 'ability' or 'will' to purchase is lacking. Moreover, for Ricardo, an 'extension of the market' increases aggregate demand and therefore aggregate activity levels or 'riches'.

Ricardo believed that the practical possibility of a deficiency of the 'ability' or 'will' to purchase is very unlikely. One of the reasons behind this unlikelihood of aggregate demand deficiency is the lack of a proper theoretical analysis of saving and investment in Ricardo. Another related reason is the nature of behavioural assumptions regarding consumption found in Ricardo. In a way, a satisfactory account of aggregate demand in the determination of aggregate activity levels is possible only when the interrelationships between consumption and saving, consumption and investment, and investment and saving are fully understood--which had to wait until the 1930s contributions by Michal Kalecki and John Maynard Keynes. While this article is a modest attempt at understanding the role of 'aggregate demand' in Ricardo from a methodological standpoint, much work remains to be done in further clarifying its meaning and significance not only in Ricardo but also in other classical economists.


(1.) Sraffa informs us that Ricardo rewrote several paragraphs in the chapter over the course of the three editions (Ricardo 1951a, lvii) but his views on the determination of 'value' and 'riches' remained fundamentally unchanged.

(2.) Therefore, the most favourable conditions for growth are (or, to use Ricardo's phrase for growth, '[w]ealth increases most rapidly' due to): (1) availability of fertile land and (2) 'agricultural improvements' (Ricardo 1951a, 77).

(3.) Extracts which make a similar point can be found in Ricardo's Notes on Malthus. Here is one such instance: 'No producer can have any interest in supplying his commodity in a greater abundance than it is demanded at its natural price' (Ricardo 1951b, 110; also see 139 where Ricardo discusses 'adequate demand').

(4.) The following are two further instances wherein Ricardo makes the special assumption: 'I know no other way of saving, but saving from unproductive expenditure to add to productive expenditure' (Ricardo 1951b, 417). 'Mr. Malthus never appears to remember that to save is to spend, as surely, as what he exclusively calls spending' (Ricardo 1951b, 449). In other words, saving is investment.

(5.) This is exactly as in Smith, where saving is automatically invested and workers consume their entire wages (cf. Aspromourgos 2009, 193-5).

(6.) Here, Ricardo is following Smith's definition of productive and unproductive labour, viz., productive labour returns more 'quantity of productions' than unproductive labour.
There is one sort of labour which adds to the value of the subject upon
which it is bestowed. There is another which has no such effect. The
former, as it produces a value, may be called productive; the latter,
unproductive labour (Smith 1976 [1776], 330).

(7.) See Sowell 1987 for a short discussion of Say's Law.

(8.) In response to the questions posed by the referees, I have found no textual evidence which explains why Ricardo relaxed his methodological assumptions to allow for a temporary fiscal stimulus. This may be viewed as a hypothetical policy response to the unlikely contingency proposed by Malthus.


An earlier version of this paper was presented at the 15th annual conference of the Society of Heterodox Economists (SHE) held at Sydney, 5-6 December 2016, and was subsequently revised for the 44th annual History of Economics Society (HES) conference held at Toronto, 23-25 June 2017; besides the discussant and participants at both these places, I would like to acknowledge John King and Heinz Kurz for their helpful comments. Finally, I am very grateful to Tony Aspromourgos and the two anonymous referees for their valuable comment and criticism on the revised draft, without implicating them in any way in the final product.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Alex M. Thomas is Assistant Professor of Economics, School of Liberal Studies, Azim Premji University, Bengaluru, India.


Alex M. Thomas (id)


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Alex M. Thomas (iD)

School of Liberal Studies, Azim Premji University, Bengaluru, India

CONTACT Alex M. Thomas [??] [??] School of Lberal Studies, Azim Premji University, PESIT South Campus, Electronic City, Bengaluru 560100, Karnataka, India.

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