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  • br Epilogue interpreting Ricardo Wicksell s

    2018-10-30


    Epilogue: interpreting Ricardo Wicksell\'s change of mind about the machinery question was related to the way he interpreted Ricardo\'s chapter 31. Whereas Wicksell in the Lectures stressed Ricardo\'s claim that the introduction of machinery may reduce output and employment, in the 1890 article he focused instead on Ricardo\'s qualifications, and in the 1900 lecture notes he still considered both possibilities without deciding for none. As recounted by Wicksell (1934 [1901,1911], pp. 134–35), the 17th century mercantilist view, that labour-saving machinery caused unemployment and “took the bread from the mouths of the workers”, was superseded by the victory of the physiocratic approach that, “especially as formulated by J.B. Say, goods must always ultimately exchange against goods”. From that perspective, an increased productivity of labour brought about by the introduction of machinery should lead to an increased demand for goods and therefore for labour to produce them, with ensuing higher wages. According to Wicksell\'s historical reconstruction, “this optimist view received a set-back” when Ricardo established, as it seemed, that the introduction of machinery may be advantageous to employers even when it involves a decrease in the size of the product – “in such a case the labourers could not be compensated by an increased demand for other commodities” (Wicksell, 1934 [1901,1911]). Interestingly enough, Wicksell\'s description of “compensation theory”, in terms of Say\'s Law argument for labour reabsorption, corresponds to his own interpretation of the machinery question in the “Empty stomachs” article. Wicksell (1890) largely endorsed the cytotoxicity mechanism through price fall accompanied by increase in consumption and/or investment, outlined by McCulloch in the 1820s. Ricardo\'s (1951 [1821], chapter 31) “paradoxical manner of asserting one thing on one page and retracting it all on the next one”, as described by Blaug (1985, p. 72), made life difficult for his interpreters. Indeed, in correspondence with Ricardo in 5 June 1821 McCulloch reacted strongly against the new chapter on machinery, and rejected Ricardo\'s reservations and qualifications by asserting that “it is impossible to fritter away your argument by fencing it about with conditions” (Sraffa, 1973a, p. 382). Schumpeter (1954, p. 683), on the other hand, regarded Ricardo\'s qualifications at the end of the chapter as a natural long-run extension of Ricardo\'s model, enough to name him the “father of what Marx called the Theory of Compensation”. Wicksell\'s (1958 [1900], [1901,1911] 1934) new interpretation – that Ricardo\'s chapter 31 presented the unmistakable thesis that machinery may reduce output and employment – is partly explained by the material made available by the Ricardo scholarship developed in the 1890s, particularly by J.H. Hollander. The publication by Hollander of Ricardo\'s letters to McCulloch in 1895 brought to light his reply (dated 18 June 1821) to McCulloch\'s criticism: Ricardo\'s objection to machinery, as stated on the same letter, was not incompatible with Say\'s Law. It was not a matter of excess supply as in Malthus\'s over-production theory. On the contrary, “the use of machinery often diminishes the quantity of gross produce, and although the inclination to consume is unlimited, the demand will be diminished, by the want of means of purchasing” (Ricardo, 1895, p. 106; Sraffa, 1973a, p. 387). In another letter, dated 7 May 1822, while commenting on an early draft of McCulloch\'s Principles, Ricardo (1895, p. 136; Sraffa, 1973b, p. 194) reacted to the latter\'s claim that “the interests of individuals are never opposed to the interests of the public” by referring to “the case of machinery”, where “the interests of master and workmen are frequently opposed” – a remark Wicksell would repeat in his 1899 review of Walras\'s Études. Moreover, Ricardo added, “I deny that we should be able to employ the workmen displaced by the employment of machinery”. Hollander (1895, p. xx) pointed out in his editorial introduction the relevance of Ricardo\'s letters for the assessment of the machinery question. Wicksell\'s (1934 [1901,1911], p. 135) comment about the analytical novelty represented by Ricardo\'s argument of output reduction, quoted at the outset of this section, is very close to the gist of Ricardo\'s letter of 18 June 1821. That letter probably made an impression on him cytotoxicity and clarified the central message of chapter 31 of Ricardo\'s Principles in Wicksell\'s own mind.