The Machinery Question and the Making of Political Economy
Ricardo's argument on the machinery question explains the rise of industrial capitalism in Britain. Ricardo, however, makes a special assumption regarding the magnitude of savings, which misses the emergence of technological unemployment. This article discusses Ricardo's argument in terms of the composition of national products and total capital. It shows how Ricardo's argument misses this change. But what about Ricardo's special assumption about the magnitude of saving?
Ricardo's special assumption on savings as an unchanging magnitude
The conventional wisdom on government finances and the economy is based on a number of false assumptions. For example, the idea that saving is equivalent to discouraging consumption is not true. In fact, increasing the savings rate reduces the demand for goods, and therefore reduces the quantity of those goods. The notion also presumes that what is possible for an individual is also true for an entire economy.
Ricardo's interpretation of Ricardo's argument about technological unemployment misses the change in composition of national product and of total capital
Although Ricardo remained unpopular in his day, he is now well-known, having written two tracts in 1810 and 1811 that outlined his theories on money and economics. In his first tract, he described a plan for resuming cash payments, but missed an important detail: the composition of total capital and national product changed.
While acknowledging that social factors also affect the level of workers' subsistence, Ricardo's theory on the natural wage largely relies on a mechanical supply-demand equilibrium. However, this differs from the natural-price mechanism that governs the prices of other commodities. Ricardo's argument about technological unemployment is a significant example of how this mechanism fails to address the real-world changes that affect national product and total capital.
Although Ricardo wrote only one book after 1811, he continued to correspond with Malthus over monetary and political issues. Their correspondence was likely connected to the corn trade restrictions. Ricardo and Malthus began discussing how new markets affected profits. Ricardo supported Say's Law, but dismissed Malthus's theory of underconsumption. Their correspondence developed into a legendary friendship.
In Ricardo's 1819 Parliamentary evidence, he appears to be less rigid than before. However, this does not mean that he abandons his theory of value entirely. In fact, he makes some concessions. The focus of the enquiry in 1819 shifted to practical matters, not theoretical ones.
Davis tries to play up the superiority of Ricardo over Marx by asserting that Smith merely used the term capital to refer to funds transferred to the government, whereas Marx and B?hm-Bawerk interpreted it as capital goods. Consequently, Ricardo failed to recognize the importance of non-wage capital in the composition of national product.
The chapter on the post-war period focuses on Ricardo's analysis of the postwar events, and contrasts his view with Robert Malthus'. Ricardo's argument is more consistent with historical facts than the arguments of his critics. The next two chapters address Ricardo's view of the law of markets, and the role of money in the economy. The final chapter summarizes the argument and draws parallels with Keynes's theory of monetary policy.
Despite the skepticism of Marshall and his followers, Ricardo's 'Classical' system of political economy dominated economic thinking for much of the nineteenth century. Ricardo's father was a wealthy stockbroker. His mother was a Quaker who died at an early age. Ricardo's estate was divided among his seven children, excluding his daughter Fanny. His wife Priscilla received an annuity and a further bequest, while the rest went to his friends.
Despite the skepticism of many economists, the 'labour theory of value' posits that value changes when the distribution of wages and profits changes. Such a conception obfuscates the simple picture of the division between profits and wages and endangers Ricardo's conclusion that if one slice of pie grows, the other must shrink.
Introduction of machinery has two meanings
Ricardo uses the term "introduction of machinery" in two different ways. In the first sense, he means the production of machinery that has not yet been built, while the second is used to refer to already built machinery. This latter interpretation makes Ricardo's "previous opinion" about the value of machinery in society redundant. It also means that a society's gross revenue might decrease even though its net revenue might increase.
The use of machinery in politics can have negative effects. It can cause hostilities in divided neighbourhoods because the majority of jobs are awarded to those from the same social background as the political elite. In addition, machine politics may be the last line of defense for white neighbourhoods against a rising black population. Black politicians viewed their constituents as merely the latest group to benefit from the political machine. However, there are some advantages of this method of politics.
Written by: Onur Uludag
Onur has worked in the industry for many years, especially interested in the maintenance of heavy machinery and trained himself in this field.
