§1. Ricardo claimed that expensive food harmed the nation far more than it benefitted the landlords profiting from higher food prices. (This makes sense… read more about the Corn Laws and how their repeal in 1846 massively helped the poor.)
Ricardo then says that higher taxes on domestic grain (“corn”), in the special case of no imports and perfectly inelastic demand, will only result in higher prices to consumers. Relaxing these restrictions, higher taxes would result in producing shifting to other crops (“substitution”) and lower prices for producers (“incidence”), both of which illustrate the limits to the power of taxes as well as the dead weight losses (from changes in production) that taxes bring.
Finally, Ricardo claims that higher returns to capital will result in LESS investment in each area, as capital is removed for use elsewhere and local profits are maintained. This is slightly counter-intuitive, but not if you think of profit seeking being a more important goal than grain production.
Overall, Ricardo — Marshall claims — had deep and interesting insights into what would (today) be called general equilibrium theory.
This is where my year-and-a-half “review” of Marshall stops. There’s one chapter left — the Mathematical Appendix — but I can’t be bothered to review, interpret (there are many novel symbols and expressions) and compare that Appendix to the current practice of (over) using mathematics in economics. I am sure that it has many interesting insights, but those are best left to others who are into the math.
This post is the
last penultimate in part of a series for 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.