Ricardo’s theory of value

Appendix I

§1. Ricardo didn’t spell out all his assumptions, connect his theories with the real world, or bring logical vigor to his 1820 Principles of Political-Economy, which has led to — according to Marshall — unfair critiques that focussed on his inconsistencies rather than his larger ideas.

§2. Marshall gives many examples of where Ricardo’s partial or over-simplified statements led to confusion. The most significant misunderstanding was where Marx, using Ricardo’s own words, concluded that Ricardo thought that value arose only through labor inputs whereas Ricardo considered other inputs’ influences in other parts of his work.

§3. Marshall spends a few pages documenting arguments about the relations between production cost (supply), utility value (demand) and price, which reconciles the two in the same way as each blade of scissors (Marshall’s analogy) jointly produce a cut.

This post is part of a series in the Marshall 2020 Project, i.e., an excuse for me to read Alfred Marshall’s Principles of Economics (1890 first edition/1920 eighth edition), which dominated economic thinking until Van Neumann and Morgenstern’s Theory of Games and Economic Behaviour (1944) and Samuelson’s Foundations of Economic Analysis (1946) pivoted economics from institutional induction to mathematical deduction.

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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