RICARDO'S ANALYTICAL PROGRAMME

The central core of Ricardian theoretical argument was contained in one fundamental proposition: 'that in all countries, and all times, profits depend on the quantity of labour requisite to provide necessaries for the labourers, on that land or with that capital which yields no rent'.7 Indeed the bulk of his analysis was dedicated to supplying arguments to support this conclusion.

The importance of this proposition within the larger context of classical thought can be readily appreciated. The rate of profit for Ricardo, as for the earlier classicists, was a primary regulator of the rate of economic growth. An understanding of the mainsprings of economic expansion and of forces that might check it clearly required a firm grasp on the determinants of this income share.

But what justification had Ricardo for maintaining that the conditions of production in agriculture had a decisive bearing on profit rates throughout the economy? Could it not be held with equal plausibility (as Malthus observed when criticizing Ricardo's position) that the circumstances of other branches of the economy determined rates of return within agriculture? A fully satisfactory answer to this question cannot be found within the pages of Ricardo's Principles. The evidence compiled by Piero Sraffa, the tireless collector and editor of Ricardo's papers, now permits a reconstruction of the argument Ricardo must have had in mind.

Agriculture, it would appear, was to be regarded as unique because of two special attributes. It was the only sector in which the same commodity (Ricardo used 'corn' as a composite term to embrace all agricultural output) figured as both input and output. Corn was obviously an input when used as seed. Moreover, because corn was the basic component of subsistence, it was also crucial to the other indispensable input - labour. Following the classical view of 'advances' to labour, wages could be reduced to advances of corn and, in turn, all inputs could be expressed in terms of corn.

The net return in agriculture, calculated in this fashion, would not, in all cases, provide a measure of profits. Much of the land under cultivation would also yield rent. In their handling of this matter, Malthus and Ricardo adopted much the same approach. The 'niggardliness of nature' had made land scarce and uneven in quality. Acreages of high fertility (which, it could be reasonably assumed, would be the first to be drawn into cultivation) would provide a windfall to their owners. Moreover, the size of this windfall would swell as population growth enlarged the demand for food. As food prices rose, less fertile areas would be brought under the plough, so long as their cultivators could obtain going rates of return for their efforts. Meanwhile, the owners of fertile acreages would reap higher and higher rents. The outputs of the last units, on the other hand, would be sufficient only to cover the costs of cultivation and would fail to yield a rent.

With the aid of this argument, it could thus be maintained that rent and profit could be isolated by observing zero-rent land where the net return would consist entirely of the return on capital - profits. The rate of profit could then be calculated as a percentage by dividing the net return (corn outputs less corn inputs) by total inputs (measured in terms of corn).

With this exercise part of the claim to a unique status for agriculture could be established. In this sector of the economy, profit rates could be determined without reference to prices. In no other sector could a similar calculation be undertaken in real terms (i.e. with physical rather than monetary units of measurement). But agriculture had a further claim to a special position. Its outputs were indispensable as inputs in all other lines of production. The availability of food supplies was required if nonagricultural employers were to make wage advances to their work force.

While Ricardo's argument assigned a special role to agriculture, he rejected the Physiocratic view that agriculture was the economy's only productive sector. For Ricardo, agricultural production had only an analytical primacy in that it supplied useful leverage on the economy as a whole. Once conditions in agriculture had been established, other pieces in the analytical puzzle fell into place. So long as it could be assumed that the market tended to produce uniform rates of return in all sectors of the economy, then profits in agriculture could be interpreted as typical of profit rates prevailing throughout the economic system. By looking first at agriculture, the general behaviour of profits could thus be derived in a manner independent of monetary valuation.

The argument on uniform rates of return throughout the economy applied with equal force to wages. But wages were likely to be tied to an even more basic regulator - the requirements for subsistence. In his handling of this point Ricardo largely absorbed Malthusian teaching on population. He was aware of the differing results yielded by psychological and physiological interpretations of subsistence and his personal hope was that the habits of the working class could be elevated.8 But he saw little prospect that these tastes could be altered except over a prolonged time period. For the immediate future it thus appeared that a natural wage gravitating around the conventional level of subsistence should be regarded as normal.

With population growth, rates of profit were likely to deteriorate even though real wages were unaltered. The margin of cultivation would then be extended to poorer lands where more labour input per unit of output would be required than had previously been the case. More corn would thus have to be advanced to labour in order to obtain the increments to corn output needed to feed a larger population. As Ricardo phrased the outcome, 'the quantity of labour required to produce necessaries on zero-rent land' would rise. Hence, rates of profits in agriculture and throughout the economy would be squeezed.

Ricardo's simple model, though built around an analysis of productive conditions in agriculture, thus had contained within it a broad vision of the forces regulating the distribution of the social product and, in turn, of the forces likely to frustrate its continued expansion.

3.