Handbook on the History of Economic Analysis Volume II

Handbook on the History of Economic Analysis Volume II

Schools of Thought in Economics

Edited by Gilbert Faccarello and Heinz D. Kurz

Volume II contains entries on the major schools of economic thought and analysis. These schools differ with regard to their 'vision' of the working of the economic system, the major forces and interactions that shape its path, and the policy recommendations proposed. At any moment of time, several such schools typically compete with one another, striving for dominance within the economic and political discourse. Each Handbook can be read individually and acts as a self-contained volume in its own right. It can be purchased separately or as part of a three-volume set.

Chapter 29: Neo-Ricardian economics

Heinz D. Kurz and Neri Salvadori

Subjects: economics and finance, history of economic thought


The term “neo-Ricardian” became prominent in the aftermath of the publication of The Works and Correspondence of David Ricardo (hereafter Works), edited by Piero Sraffa with the collaboration of Maurice H. Dobb (Ricardo 1951–73), and the publication of Sraffa’s Production of Commodities by Means of Commodities (Sraffa 1960). Rowthorn (1974) used it to distinguish Sraffa’s approach to the theory of value and distribution in strictly material terms (that is, quantities of commodities and labour) from Marx’s labour-value based reasoning. Rowthorn considered Sraffa’s analysis as a variant of “vulgar economics”, dealing with “appearances” only, whereas Marx’s theory was credited with investigating “the real relations in bourgeois society” (Marx 1954a: 84 n.). A second meaning simply refers to the fact that Sraffa saw his reconstructive work as a return to the “standpoint of the old classical economists from Adam Smith to Ricardo, [which] has been submerged and forgotten since the advent of the ‘marginal’ method” (Sraffa 1960: v). Finally, some neoclassical or marginalist economists (for example, Hahn 1982) used the term to describe the analysis of the critics of marginalism in the so-called Cambridge controversies in the theory of capital. For a summary account of the criticism put forward, see Kurz and Salvadori (1995: ch. 14). Variously also the label “Sraffian economics” is used. What Sraffa in fact provides in the Ricardo edition and in his book is a reformulation of the classical approach to the problem of value and distribution that sheds the weaknesses and builds upon the strengths of its earlier formulations. Hence it would be more appropriate to speak of a revival and development of “classical economics”. It is a characteristic feature of classical economics that profits and all property incomes (such as the rents of land and interest) are seen to be based on the social surplus left over after the necessary means of production and the wages in the support of workers have been deducted from the gross outputs produced during a year. In Ricardo’s words: “Profits come out of the surplus produce” (Works II: 130–31; similarly I: 95). A characteristic feature of the classical approach is that wages and profits are treated asymmetrically: while one of the distributive variables is assumed to be a known magnitude (its level being determined in another part of the theory, that is, the theory of capital accumulation and technical progress), the other is regarded as a residual. In the classical economists the theory of value and distribution was designed to lay the foundation of all other economic analysis, including the investigation of economic development and growth; of social transformation and structural change; and of taxation and public debt. The pivotal role of the theory of value and distribution in the classical authors can be inferred from the fact that it typically occupies a place right at the beginning of major classical works: in Smith it is dealt with in book I of The Wealth of Nations (1776 [1976]) and in Ricardo in chapter 1 of the Principles (Works I). Sraffa is to be credited with having elaborated a logically coherent and general analysis of the problem under consideration. He was thus able to show that it had been prematurely abandoned, because its defects had wrongly been considered to be irremediable. In addition to this constructive task Sraffa also pursued a critical task: the propositions of his book were explicitly “designed to serve as the basis for a critique of [the marginal theory of value and distribution]” (Sraffa 1960: vi).

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