Simultaneous determination of prices and distribution

Next, Dmitriev refuted Leon Walras’s contention (1874 [1954], lesson 40, s.368) that Ricardo’s “cost of production explanation of prices” involved circular reasoning, because the number of unknowns exceeds the number of equations in the classical approach to value and distribution.

In the remainder of his essay, Dmitriev also discussed the theory of competition, the problem of the choice of technique, the problem of fixed capital, and the theory of rent. In the course of his investigation he also introduced the concept of “total requirements for gross output” and thereby anticipated some elements of the so-called “hypothetical extraction method” of modern input-output analysis (see Mariolis and Rodousaki 2011);

he also provided the first clear statement of the so-called “(dynamic) non-substitution theorem”. Although he aimed at “an organic synthesis” of classical and marginal utility theory, Dmitriev nevertheless retained the fundamental asymmetry in the treatment of the distributive variables which characterizes the classical approach to economic analy­sis, arguing that the investigation of the conditions affecting the level of real wages “falls outside the scope of political economy” (Dmitriev 1974: 74).

Dmitriev’s formalization of Ricardo’s theory of prices and distribution was a major source of inspiration for Ladislaus von Bortkiewicz, who praised his essay of 1898 as a “remarkable work”, which “bears evidence of an exceptional theoretical talent and presents something really new” (Bortkiewicz 1952: 20, n. 31). As von Bortkiewicz pointed out, Vladimir K. Dmitriev introduced the idea of solving systems of simultane­ous equations into the classical analysis of prices and distribution and contributed to the clarification of the analytical structure of the classical approach to economic theory.