Machinery And The Honesty Of David Ricardo

Consider the introduction of new, advanced machinery into a capitalist economy. This will raise productivity and be good for the population as a whole. It will displace workers, at least temporarily, who were previously making the product of the machine with handicraft production or now obsolete machines with lower productivity. But the production of the machines requires workers too. So, ignoring short-run frictions, will the workers not remain as well off?

David Ricardo believed something like this at one point in his life. But he had come to the opposite conclusion when he revised his Principles for the third edition. And he was forthright in saying so. Some of the displaced workers will be more or less permanently unemployed. By the way, this was not a matter of coming to agree with Malthus on a point about effectual demand.

Ricardo's change of mind was not some abstract academic view. This was a time in England shortly after the Luddites were at their peak. The Luddites had been rioting and destroying new machinery being introduced by industrialists. Ricardo's friend, J. R. McCulloch writes to Ricardo, and he immediately saw the potential of these changes (Ricardo, Works, volume 8, pp. 381-386):

Edinburgh 5 June 1821

My dear Sir

I have to apologise for being so long in returning you my best thanks for the valuable present of the third Edition of your great work - I congratulate you on its success - It is the best proof that can be given of the growing attention now paid to this important science; and it must have a powerful influence in furthering the dissemination of sound principles -

At the same time I must say (and I say it with that regret which I ever must feel in differing widely from one to whom I shall always be proud to look up as to my master) that in my humble opinion the Chapter on Machinery in this Edition is a very material deduction from the value of the work... ...Excess of candour has in this instance occasioned your doing a very serious injury to your favourite science - It was certainly proper that you should have renounced your previous opinions the moment you were satisfied of their fallacy; but this may be done in various ways, and I do not think it was at all necessary for you to make a formal recantation - our object never has been and never can be any other than to endeavour to promote the real interests of the science...

However the manner in which you have published your change of opinion is of comparatively little consequence - It is what I consider the extreme erroneousness of the principles to which you have incautiously lent the sanction of your name that has excited my principal regret - It is impossible to fritter away your argument by fencing it about with conditions - If it is good for any thing at all it is conclusive against all employment of machinery - It is not with greater or less gross or net produce that we have the smallest concern in considering this question; but simply whether does machinery produce commodities cheaper or not? If it does not produce them cheaper it will not be erected, and if it does produce them cheaper its erection must be profitable to every class of persons - The example which you have given does not, as far as I can perceive, by any means warrant a single one of the extraordinary conclusions you have drawn from it - You have not said whether the machine worth £7,500 is to last one, ten, or one hundred years -

...Your argument is to be sure hypothetical; but the hypothesis will be thrown aside, and all those who raise a yell against the extension of machinery, and ascribe to it that misery which is a mere necessary consequence of the oppressiveness of taxation, and of the restraints on commerce will fortify themselves by your authority! If your reasoning and that of Mr. Malthus be well founded, the laws against the Luddites are a disgrace to the Statute book -

Let me beg of you to reconsider this subject - A heresy on a mere doctrinal point is of no moment; but really I could not recommend to any of my friends to bestow the least attention on the study of this science, if I was satisfied that it remained yet to be settled whether the reducing of the price of commodities was advantageous or not - Truly if we are not got this length, our disputes about profits and our other remote conclusions ought to afford infinite amusement to the scoffers - But, I, at least, am not in this quandary - I will take my stand with the Mr. Burke of the American war not with the Mr. Burke of the French revolution - with the Mr. Ricardo of the first not of the third edition - Were there nothing else to allege on the subject I should be perfectly satisfied with what I consider the inherent fallacy involved in all the arguments which have been advanced against machinery...

Were I not aware that in all your speculations you are actuated solely by a desire to contribute to the improvement of the science, I should not have presumed to address to you this hasty and ill-digested letter - But I am satisfied that opinions dictated equally by a regard to the interests of the science, and coming from one who is not the least sincere of your admirers, though they may seem erroneous, will claim and meet with your attentive perusal - I am with the greatest regard and esteem

ever faithfully yours

J. R. McCulloch

Those are extracts from a long letter. I have left out many details of the argument.

Ricardo's friendship with Malthus is another testament to his personality. They continually argued that the other was wrong on political economy. Ricardo would lend out his notes on one of Malthus' books (Works, volume 2) to his friends. He did not try to publish them, for they did not make much sense without the text of Malthus' Principles of Political Economy. Malthus explained to Ricardo that he was mistaken, both in person and through a long interchange of letters. It was Malthus' insistence that even in agriculture, no product and its capital advances consist of the same mixture of commodities that induced Ricardo, as I understand it, to take up the labor theory of value.

Anyways, despite these persistent disagreements, Ricardo continued as a life-long friend of Malthus. I do not think I have that temperament.

Edit: Reference as suggested in coments:

• Paul A. Samuelson. 1989. Ricardo was right! Scandinavian Journal of Economics 91(1): 47-62.