How David Ricardo wrote about problem of distribution and inequality 200 years ago…

It is 200 years anniversary of David Ricardo’s idea of comparative advantage.  His book “On The Principles of Political Economy and Taxation” was released in 2017.

Oleg Komlik of Economic Sociology blog has a different take on the 200 anniversary of the book. One should not be surprised as economists usually hype very limited ideas from such classics. The best example is Adam Smith’s Wealth of Nations which has so many ideas but the profession just writes about invisible hand which Smith mentions just once in the book!

Coming to Ricardo. Hewrote about problems of distribution right at the beginning of the book. Economics is mainly about two problems: production and distribution. For the longest time, the profession focused just on first problem. After years of ignorance, this distribution problem is haunting much of the economics profession today.

But like of Ricardo wrote about it way back:

David Ricardo (1772 – 1823) was a prominent classical economist who gave systematized form to the 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 some 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.” 

Especially interesting in this excerpt is Ricardo’s observation of four phenomena the understanding of which mostly vanished from 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 even say that these oversights are the principal problem of economics…

Indeed. One can read the opening lines right here.

How all these ideas are so old, yet economists keep telling us how the world is facing these new problems of inequality and distribution. The problem of course is total ignorance of history of economic thought from our curriculum.

4 Responses to “How David Ricardo wrote about problem of distribution and inequality 200 years ago…”

  1. Oleg Komlik Says:

    Thanks for sharing! But I think that to give a link to the original post is customary, isn’t it? 🙂 Please add it to you post – thanks!

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