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Lecture notes, cheat sheets
История экономической мысли. Классическая политическая экономия (конспект лекций)
Directory / Lecture notes, cheat sheets Table of contents (expand) LECTURE 3. CLASSICAL POLITICAL ECONOMY 1. Classical economic theory - origins. Economic views of W. Petty We have already said that mercantilism as an economic theory was the dominant direction of economic thought for almost three centuries (from the beginning of the sixteenth to the first half of the eighteenth century). But not the only one. At the same time, the prerequisites for another powerful economic doctrine emerged, which later became known as classical political economy. W. Petty is considered the founder of this trend. W. Petty (1623-1687), an Englishman, a man of diverse interests, who went from a cabin boy to a landlord and, as if by the way, expressed in his works devoted mainly to the justification of economic policy (in particular, in the “Treatise on Taxes and Duties”, 1662), those economic ideas that later became part of classical political economy. In Petty we already see the basic premises of classical political economy: ▪ research not into the circulation process, but directly into the production process, ▪ a critical attitude towards the unproductive classes that do not provide any product, to which he included merchants, ▪ classification of labor employed in the sphere of material production as productive. Petty was the first to formulate the thesis fundamental for all classical political economy that the wealth of a nation is created in all spheres of material production, and it is labor that is the basis of this wealth. His phrase "Labor is the father and the active principle of Wealth, and the earth is his mother" is widely known. Proceeding from this axiom, it is necessary to analyze all other economic views of Petty, in particular the assertion that it is precisely the rarity of the population that is the true source of the poverty of the state. Disagreeing with the mercantilists that the nation's wealth is embodied in precious metals, Petty formulates his criterion of wealth, considering that the period in which each participant in the division will be the richest (assuming that all the money available in the country is divided equally between residents - author's note) will be able to hire more workers, i.e., to use more labor. However, living in an era dominated by the ideas of mercantilism, Petty cannot completely avoid their influence, although here he remains an original thinker. Therefore, it seems interesting to give a comparative analysis of the views of Petty and the mercantilists on the problems of foreign trade, the policy of protectionism, and a number of other problems. Under the influence of mercantilists, Petty still singles out foreign trade, which, in his opinion, to a greater extent than other sectors of the economy, contributes to the growth of the wealth of the nation, sharing the point of view that the real meaning of wealth lies in attitude rather than in quantity and therefore It is beneficial for any country to have more money (precious metals) in reserve than other countries have. At the same time, Petty proposed to reduce a significant part of the merchants, leaving just enough of them so that they would be able to exchange the surplus goods of a given country for the surplus goods of other countries, since, in his opinion, merchants “... do not deliver any product to society, but play only the role of veins and arteries, distributing back and forth... agricultural and industrial products.” To be sure, Petty saw the negative effects of the influx of precious metals, expressed in rising prices. In his writings, he repeatedly emphasized that there is a certain measure or proportion of money necessary for the conduct of the trade of a country, where a surplus or shortage of them against this measure will be harmful. Surplus, as we have already said, causes prices to rise, but Petty immediately offers an antidote - excess money should be kept in the state treasury, which, in his opinion, will not harm either the country, or the king, or private individuals. At the same time, the lack of money has harmful consequences. Firstly, it is the reason for the poor payment of taxes, and secondly, it leads to a reduction in the number of work performed. Petty gives the following proof: "100 pounds, having passed through 100 hands in the form of their wages, gives an impetus to the production of commodities worth 10 thousand pounds; These same hands would remain idle and useless if there were no constant incentive to their use". Petty also shares the policy of protectionism aimed at protecting the national market by introducing customs duties, believing that the size of duties should be such that the prices of imported goods become somewhat more expensive than the same items produced within the country. Petty also supports the thesis that the passion for luxury of the rich stimulates trade and production. In particular, he writes, considering the problems of taxation, ".. People become indignant at the thought that the collected money will be spent on entertainment, magnificent spectacles, triumphal arches... but such a waste means the return of this money to the fishing people engaged in the production of these of things". The influence of mercantilist views on Petty seems significant, however, we consider Petty to be the founder of the classical movement. In addition to the fundamental thesis common to all representatives of classical political economy that the wealth of a nation is created in all spheres of material production, Petty formulates the foundations of the labor theory of value, arguing that the equality of goods means nothing more than the equality of labor spent on their production. This idea is most clearly expressed by Petty in the following sentence: "...if anyone can extract from the soil of Peru and bring to London one ounce of silver at the same time in which he can produce one bushel of corn, then the first represents the natural price of another." However, again finding himself to a certain extent in captivity of mercantilist ideas, Petty adds that value is created not by all labor, but only by that spent on the production of gold and silver, and the value of labor products in other branches of production is determined only as a result of their exchange for noble metals. Anticipating the Physiocrats, Petty suggested that the surplus product is the part of the product that remains after the deduction of costs and takes the form of rent. However, unlike the Physiocrats, he considered rent not a gift of land as such, but a product of labor, which has greater productivity on lands of better quality. Petty introduces the concept of differential rent, the reasons for the existence of which he sees in the different fertility and location of plots of land. After analyzing the rent and defining it as a net income from the land, Petty raises the question of the price of land, which should be equal, in his opinion, to a certain amount of annual rents. But what is the quantification of this certainty? According to Petty, the price of land is the sum of annual rents for 21 years, the time of the simultaneous life span of three generations. In close connection with the theory of rent, Petty has the question of interest on loans. By the way, finally breaking with medieval ideas about the predatory essence of interest, Petty justifies the collection of interest as compensation for the inconvenience that, by lending money, the creditor creates for himself, since he cannot demand them back before a certain period, no matter how much he himself needs during this time. With a little effort, one can see here the rudiments of the theory of interest as the price of abstinence, which finally took shape only in the nineteenth century. Determining the "natural" level of interest, Petty argues that it should be equal to the rent on as much land as can be bought with the money lent, under conditions of complete public safety. But if this condition is in doubt, the natural interest is intertwined with something like an insurance premium, which can increase the interest to any amount. Here, too, a hint of the opportunity cost doctrine can be seen. A significant place in Petty's works is devoted to issues of taxation and finance. One of Petty's fundamental ideas, which connects him with the principles of classical political economy, is the idea of the natural order and the harmfulness of its violations by state power. The defect of government, according to Petty, is that "too much of what should have been governed by nature, by ancient customs, and by universal convention, has fallen under the regulation of law." It is no coincidence that Petty sharply opposes government regulation if it contradicts the “laws of nature.” At the same time, it assigns important functions to the state to ensure the full use of the labor force, as well as to improve its quality. Petty proposes using public funds to provide homeless people and beggars with work building roads, erecting bridges and dams, and developing mines. And here it is not only humanity that speaks, but also economic calculation, because, according to Petty’s views, “... allowing someone to beg is a more expensive way of maintaining those people whom the law of nature does not allow to die of hunger.” And further, being consistent in his assertion that the quality of the labor force, the quality of human capital, is the most important factor in increasing the wealth of a nation, Petty writes that “it is better to burn the product of the labor of one thousand people than to allow these people to do nothing and, as a result, They lost their ability to work." By the way, the positive effect of ensuring full employment is considered in the works of such a famous twentieth-century economist as John Keynes, albeit from a slightly different perspective. In accordance with his views on the role of the state in the economy, Petty in his "Treatise on taxes and fees" thus regulates the targeted spending of the state: ▪ defense spending; ▪ management costs; ▪ church expenses; ▪ expenses for schools and universities; ▪ expenses for the maintenance of orphans and disabled people; ▪ expenses for roads, water pipelines, bridges and other items necessary for the benefit of everyone. As you can see, the structure of expenses resembles the expenditure part of the budget of modern states. As for taxation, Petty advocates predominantly indirect taxation. Agreeing with the generally accepted point of view of this era that the population should participate in covering government expenses in accordance with their interest in public peace, that is, in accordance with their property or wealth, Petty distinguishes two types of wealth - actual and potential. Actual wealth, in his opinion, means a high real level of consumption, and potential wealth means the ability to provide it. In the latter case, people who are rich, but who make little use of their wealth, are rather managers of their capital. Within the framework of these views, Petty's arguments in favor of an excise tax boil down to the following: first, justice requires that everyone pay according to what he consumes, and such a tax is not imposed by force and is easy to pay for those who are content with the necessities of nature ; secondly, such a tax encourages frugality, which is the only way to enrich the nation. Here Petty casually expresses the idea of the exceptional role of frugality in increasing the wealth of the nation, which sounds like a leitmotif in A. Smith. But all the economic ideas expressed by Petty are rather in the form of guesses and do not represent a complete theory. Perhaps it was precisely the fragmentation and scattering of W. Petty’s economic ideas across numerous pamphlets written on the topic of the day that was the reason that Petty entered the history of economic thought primarily as the inventor of statistics, which he called “political arithmetic.” In a work called “Political Arithmetic” (1676), Petty not only gave an analysis of a specific economic situation based on the widespread use of factual data, but also described methods for indirectly determining the value of certain indicators, in particular, the sampling method, which without doubt was important given the paucity of statistical data at that time. Using his method, Petty made the first calculations of the national income and national wealth of England. It is interesting to note that Petty included in the national wealth not only material wealth, but also the monetary value of the population itself, in order to somehow assess the value of human capital (its labor skills, dexterity, qualifications). Petty paid great attention to determining the economic value of the population, g.k. He believed that it was the rare population that was the true source of the country's poverty. In this we see a fundamental difference between Petty's views and the mercantilists, who reduced the country's wealth to gold and silver reserves. In the calculations of Petty himself, the share of precious metals in the total wealth of England was less than 3%. Petty carried out not only calculations of England's national wealth, but also its national income. True, in contrast to modern ideas, Petty calculated national income only as the sum of consumer expenditures of the population, neglecting the share of national income going to accumulation. But since the share of accumulation in seventeenth-century England was extremely low, the admitted inaccuracy did not distort the overall picture. Despite this significant (from modern point of view) lack of calculations, it can nevertheless be said with good reason that the modern system of national accounts grew out of these calculations by W. Petty. The name of Petty is associated with the origin of classical political economy, and its real creators were A. Smith and D. Ricardo. 2. The formation of political economy as a science. Economic views of A. Smith The term “political economy” itself arose long before political economy became a science. It was introduced into circulation by the representative of mercantilism Montchretien de Votteville back in 1615, writing “Treatise of Political Economy,” a purely practical work containing recommendations in the spirit of representatives of this school. The meaning that was invested in the concept of “political economy” is important to us. Since the time of Xenophon, economics has been understood as the science of rational housekeeping. Montchretien, like other representatives of mercantilism, was interested in issues related to the prosperity of the state and the national economy as a whole. And the emergence of a new term (“polis” - state) meant the emergence of a new science - the science of the prosperity of the national economy. Although in the strict sense there was no science yet, since science begins where deep, stable, repeating cause-and-effect relationships and dependencies are discovered. And the formation of political economy as a science is associated with the name of the outstanding English scientist A. Smith. It is thanks to him that political economy stands out as an independent branch of knowledge from the circle of humanities, ceases to be the lot of self-taught geniuses, and becomes an academic discipline and an obligatory element of the education of young people of the highest, and then other classes. A. Smith's services to political economy are so great that it is worth saying a few words about him. A. Smith (1723-1790), a Scot by nationality, was born in 1723 in the family of an official, at the age of fourteen he entered the University of Glasgow in the class of moral philosophy. In 1746, Smith was already lecturing on natural law, which in the eighteenth century included jurisprudence, political doctrine, sociology, and economics. Already during that period, Smith formed the basic ideas of economic liberalism. The end of the eighteenth century - the formation of bourgeois ethics and special attention was paid to substantiating the concept of natural, inalienable rights and freedoms of the individual. This also implied human freedom in the sphere of economic activity. A person always uses freedom to achieve his own selfish interests. It is impossible not to admit this, but the conclusions from this situation may be exactly the opposite. English philosophers of the seventeenth century, in particular T. Hobbes (1588-1679), recognized the existence of selfish interest, considering it “the most powerful, most destructive human passion,” concluding from this that an authoritarian state is necessary, which should keep a person’s individual egoism in check. Among the French rationalist philosophers, for example, Helvetius (1715-1771), egoism was declared a natural property of the human personality and a factor of social progress. Smith adopted the ideas of the latter, applying them to the sphere of economic activity. A. Smith recognizes that the main motive of human activity is selfish interest. But a person, in his opinion, can pursue his interest only by offering his goods and services for exchange to other people. As Smith writes, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect to get our dinner, but from their observance of their own interests. We appeal not to their humanity, but to their selfishness, and never tell them our needs, but theirs.” benefits." And consequently, the natural desire of people to improve their condition is such a powerful stimulus that he himself is able to lead society to well-being. The policy of non-intervention or "natural freedom" also followed from the concept of self-interest. After all, if the economic activity of everyone ultimately leads to the good of society, it cannot be constrained. However, A. Smith's economic views will not be fully understood unless one takes into account his first major work, The Theory of Moral Sentiments, which was published in 1759 and contains his social and philosophical ideas. Based on the thesis of the existence of “natural laws,” characteristic of eighteenth-century philosophy, Smith introduces two basic concepts in his work as natural characteristics of a person: “feelings of sympathy” and “internal observer” (conscience). At the same time, Smith considered the basis of sympathy to be a person’s ability, through the power of imagination, to put himself in the place of other people and to feel for them. Remaining in the position of the existence of natural laws, Smith argues that what is natural is fair, and it is natural for a person to strive for his own good with a benevolent attitude towards other people. The possibility of reconciling egoism and sympathy is ultimately inherent in nature (God), which endowed man with conscience. It is interesting to note that Smith’s thesis about the harmony of interests of different people is not a conclusion following from the action of the “invisible hand” (objective economic laws), but an initial ideological premise based on faith in God; Therefore, his search for economic laws is based on faith in natural, primordial harmony. It is no coincidence that Smith’s description of the action of the “invisible hand” contains not only an economic aspect, which boils down to the benefits for society of the unintended consequences of people’s purposeful actions, but also a worldview - faith in the wisdom of Providence, recognition of the limitations of the human mind. It is in “The Theory of Moral Sentiments” that Smith describes a situation where, guided by the “hand of Providence,” an insensitive, proud and greedy (A. Smith’s epithets - author’s note) rich owner without any deliberate desire serves the interests of society, for, caring exclusively about his own wealth, he provides work, and therefore food, to the poor. At the same time, the rich consume only a small part of their wealth, so small that, according to Smith, it is comparable to the level of consumption of each of the poor. Therefore, it only seems that Providence has given everything to a few, while disinheriting others and turning them into hired laborers. The seemingly enormous inequality of property between people, when carefully examined, is equality, and such as if the land were distributed equally among all people. The allusion to Providence seems to say that God created everything. He also cares about the structure of society. In appearance, the device seems unfair, but in fact, one only has to comprehend God’s secret plan and the world will appear in a different light. We can rightfully say that the philosophical and ethical side of A. Smith’s economic teachings was laid down in the “Theory of Moral Sentiments”; it was in it that the idea of justice and human nature, of freedom and moral obligations laid down by Nature and God, of the meaning of and the place of material interest in human life and society. The most important idea of this work was the idea of trust in a person, which was closely related to the recognition of his right to freedom, including freedom in the field of economic activity. It is interesting to note that at the end of The Theory of Moral Sentiments, Smith promises in his next work to explain the mechanism of the operation of the “natural law of justice”, as a result of which “everyone receives his share of all that the earth produces.” “The Theory of Moral Sentiments” went through five editions during the author’s lifetime, but it was not it that immortalized the name of A. Smith. His second book, An Inquiry into the Nature and Causes of the Wealth of Nations, published in London in 1776, brought him world fame and influence, although internally both works remained sides of the same subject, studying human nature from different angles. And if, in the figurative expression of G. Buckle, in “The Theory of Moral Sentiments” Smith explores the sympathetic side of human nature, then in “The Wealth of Nations” - its self-interested side. In accordance with the title of his book, Smith primarily explores the causes of the growth of the nation's wealth, the role of labor in this process, the factors that increase its productivity, the "natural" distribution of the product between different classes, the nature of capital, the methods of its gradual accumulation, and much more. Since the work is called "An Inquiry into the Nature and Causes of the Wealth of Nations," the first chapter of the book gives the answer to this question. The wealth of a nation, according to Smith, is the products of material production, and the value of the latter depends on two factors: ▪ share of the population engaged in productive labor; ▪ and labor productivity. At the same time, Smith understood productive labor as all labor employed in the sphere of material production, precisely that labor that increases the value of the object to which it is attached and in which it is fixed. Smith considered the division of labor or specialization to be the main factor in the growth of labor productivity, considering the operational one to be especially effective (a textbook example with a pin manufactory). Depicting the advantages of the division of labor, Smith raises the question of money and considers it as a technical tool that facilitates the course of economic processes, as a result of an agreement between people. This idea, as you remember, was expressed by Aristotle. And then, like Aristotle, Smith proceeds to figure out the rules according to which people exchange goods for each other; rules that determine the relative or exchange value of a commodity. This is one of the most difficult sections of the book. It is no coincidence that Smith asks his readers for attention and patience when he starts it. In this section, you can find elements of both the labor theory of value and the theory, which later became known as the theory of the three factors of production. Smith himself presents three concepts of value. ▪ On the one hand, recognizing the equivalence of all types of productive labor from the point of view of creating value, Smith comes to the conclusion that value is nothing more than the amount of necessary labor contained in a product. Thus, labor is not only a source of wealth, but also a measure of value. By the way, the labor theory of value also has social content: the determination of value by labor presupposes the universality and equality (in a qualitative sense) of all types of labor. This can be interpreted as recognition of the equality of all people: if goods are equal in exchange, then the labor of the producers of these goods is the same, and they are equal as individuals. ▪ The second concept comes down to the fact that value is determined by the amount of labor that can be purchased for a given product. If we consider simple commodity production, then there is no fundamental difference between the first and second concepts. However, if we take production in which there is capital and hired labor, then the picture is different. The entrepreneur receives more value than he pays for labor. There is a violation of the principle of equivalence, which is the basis of the labor theory of value. Avoiding this contradiction, Smith concludes that the value of goods is determined by labor only in the “primitive” state of society. ▪ Under the conditions of capitalist production, value, according to Smith, consists of costs, including wages, profit and rent. He writes that “Wages, profit and rent are the three original sources of all income, as well as of all exchange value.” And the price, or exchange value of any commodity, is reduced to all these three parts. This concept of A. Smith formed the basis of the theory, which later became known as the theory of three factors of production. From A. Smith's theory of value follows his theory of product distribution. And it is as dual as his theories of value. On the one hand, if labor is considered the final basis of value, then the entire product of labor must belong to the direct producer. According to Smith, this was the case in a society where both the owner of the factors of production and the producer were united in one person. Under the conditions of capitalist production, when the worker is alienated from the means of production, part of the product he creates is deducted in favor of the landowner (in the form of rent) and in favor of the entrepreneur (in the form of profit). Essentially, Smith views these forms of income as the appropriation of unpaid labor. But at the same time, Smith has another interpretation of the source of these incomes, resulting from his concept of value as the amount of income. In this case, profit and rent cannot be deductions from the value of the created product, since capital and land, as factors of production, participate equally in the creation of the value of the product and, accordingly, claim their share. By adding up the value of the incomes, Smith tries to determine what determines the natural rate of each income, paying particular attention to the factors that determine the level of wages. The usual level of wages, he observed, depends on the contract between employers and workers. But is its size determined by the subsistence minimum, which Smith calls "the lowest standard that is only compatible with simple humanity"? Smith does not accept this point of view, emphasizing that the theory of the living wage is of little use for explaining how wages are determined in real life. And gives the following arguments: ▪ wages for agricultural workers are always higher in summer than in winter, although the cost of living for workers in winter is certainly higher, ▪ wages are different in different parts of the country, but food prices are the same everywhere, ▪ wages and food prices often move in opposite directions, etc. It is also interesting that Smith associated wage changes with the economic state of the country, believing that wage growth is evidence of economic progress, since wage growth is due to a large demand for labor. Profit, according to Smith's ideas, is not only wages for a special type of management work, it also includes other elements, since it is obvious that the amount of profit is determined by the amount of capital and is not related to the severity of labor. As for the tendency in changes in the size of profits, they are caused, according to Smith, by the same reasons that cause an increase or decrease in wages, that is, they depend on the increase or decrease in the wealth of society. But these causes have very different effects on wages and profits. An increase in capital, which increases wages, leads to a decrease in profits, because in a situation where many capitals are invested in one branch, their mutual competition naturally leads to a decrease in their profits. Therefore, Smith repeatedly emphasizes that the private interests of entrepreneurs never coincide with the public interests, since the higher the level of production and national wealth, the lower the rate of profit. And since the rate of profit is inversely related to social welfare, the entrepreneurial class is usually interested in misleading and even oppressing society. It is no coincidence that Smith advises with extreme distrust of any proposal for a new law emanating from this category of people. He also notes the desire for monopolism inherent in this class. Smith pays great attention to the problem of capital accumulation, considering it as the key to the wealth of the nation. As already mentioned, Smith made the wealth of a nation dependent on the proportion of the population engaged in productive labor, where by productive labor he understood all labor engaged in the sphere of material production (this is his difference from the mercantilists and physiocrats). It is curious that Smith also included entrepreneurs among the productive population, believing that they perform the most important social function - the function of accumulation. And, according to Smith, whoever saves is the benefactor of the nation, and the spendthrift is its enemy. Why? Yes, because thrift, by increasing the fund intended to attract additional productive workers, ultimately leads to an increase in the value of the country's annual product, i.e., to an increase in the wealth of the nation. It is not surprising that for Smith, thrift, and not industry, is the immediate cause of the growth of capital, since "... although industry creates that which accumulates savings, capital could never increase if thrift did not save and accumulate" . In the last chapters of the book, Smith again returns to his "invisible hand" principle, proving the harmony of the interests of the individual and society, believing that the self-interest of each will lead to the public good. Hence the corresponding economic program, which requires the abolition of all measures restricting the mobility of the labor force, the abolition of government regulation of industry and trade, and the permission of free trade in land. Being consistent, Smith advocates reducing the role of the state, reducing its functions to providing military security, the administration of justice and the obligation to maintain public buildings and public institutions. A. Smith also paid considerable attention to the issue of public finance, formulating, in particular, his famous four principles of taxation. Speaking about the sources of taxation, Smith, in accordance with his views on the unproductive nature of government spending, opposed attracting capital as a tax source, distinguishing between the concepts of capital and income. This view will be characteristic of all representatives of the classical school, who believed that to tax capital means to destroy it, in accordance with the principle “what is taxed decreases.” It is interesting to note that the theory of the unproductive nature of government spending does not, however, prevent Smith from recognizing the tax as a fair price for paying for government services. This gave grounds for later researchers to believe that in his interpretation of the tax, Smith stood on the position of the theory of equivalent exchange. A. Smith laid the foundations of the theory of international trade, considering the development of foreign economic relations between countries, based on differences in the absolute levels of production costs in individual countries. Every country has goods whose price is lower than in other countries because their production costs are lower. Therefore, you need to buy goods where they are cheaper, accordingly offering in exchange your goods, the production costs of which are lower than in other countries. He wrote: “If any foreign country can supply us with any commodity at a cheaper price than we ourselves are able to manufacture it, it is much better to buy it from her with some part of the product of our own industrial labor applied in that area, in which we have some advantage." A. Smith also substantiated the principle of “free trade” between countries, according to which foreign trade should not be subject to any restrictions on the part of individual national states. Concluding the consideration of the views of A. Smith, I would like to once again draw attention to the fact that he laid a certain idea of human nature as the basis of an entire theoretical system, where the supporting structures are: the initial inclination to exchange and selfishness inherent in a person. The first leads to the division of labor, the second leads to the choice of an occupation that will bring a person more income, which means that a person will specialize in the production of those products that he produces of better quality and at lower costs than competitors. Here emerges the figure of the “economic man,” rational and self-interested, who will become the central figure of economic research in the next two centuries. But the classics’ model of economic man applies only to entrepreneurs. Smith's rationality and morality still go hand in hand, and this belief in harmony permeates his entire economic theory with optimism. This is reflected in views on the prospects for economic growth and capital accumulation and on the relationships between classes. Considering labor to be the only source of a nation's wealth, Smith considers the increase in demand for it to be the most indisputable evidence of the prosperity of any country. Naturally, wages also increase. Smith writes on this subject, "Large wages are both the inevitable consequence and the natural symptom of the growth of national wealth... To complain about it is to lament the necessary effects and causes of the greatest public welfare." But is not the growth of wages an obstacle to the growth of capital accumulation? Smith gives a negative answer to this question, believing that the growth of wages is accompanied by an increase in the productive power of labor due to various improvements. This results in lower labor costs per unit of output, which more than offsets the increase in labor costs, thereby increasing profits. Increasing profits, in turn, will increase the fund for the maintenance of productive workers and increase their wages. Thus, the dynamics of the social welfare of workers depends on the growth of capital: the higher the demand for labor, the higher the price of labor. But this is not the only beneficial effect of capital accumulation. An increase in the latter, by increasing the volume of production activity and the number of productive workers, leads to an increase in the value of the annual product, which in turn ensures an increase in the real wealth and income of the country's inhabitants. Do we still need proof of the harmony of interests of all classes of society? Smith's merit in the development of classical political economy is indisputable, but it owes not only to him its influence on the economic thought of the next century. The completion of the system of classical political economy is associated with the name of another major English economist - D. Ricardo; it was in his works that political economy acquired the features of a science as a system of knowledge about the economic basis of society. 3. Economic views of D. Ricardo D. Ricardo (1771-1823) - a talented financier and one of the richest people in the London financial world of his time - is at the same time a person who made a huge contribution to the development of classical political economy. D. Ricardo studied the economy as a complex system where objective economic laws operate and there is a mechanism that ensures the operation of these laws as prevailing trends. Ricardo most fully outlined his views in his work “Principles of Political Economy and Taxation” (1817), in the preface to which he writes that the main task of political economy is to determine the laws that govern the distribution of the created product. However, initially Ricardo's sphere of interest was in the field of monetary circulation research. And here, considering his views, one cannot fail to mention the contribution of Ricardo to the development of problems of monetary circulation. According to Ricardo, the stability of money circulation, which is the most important condition for economic growth, can only be ensured by a monetary system based on gold. At the same time, gold can be largely or even completely replaced by banknotes (which will give the nation great savings), but only if they are freely exchanged for gold at a fixed rate. It is no coincidence that therefore Ricardo is considered the ideologist of the "gold standard". Speaking as a consistent supporter of the quantity theory of money, he considers the increase in the market price of gold to be a consequence and manifestation of the depreciation of banknotes as a result of their excessive issuance into circulation. But let us return to the Principles of Political Economy. Ricardo shares Smith's position that the wealth of a nation is the product of material production, and labor is the main source of social wealth. However, being more consistent than Smith in developing the labor theory of value, Ricardo argues that value is determined solely by labor, "the determination of value by labor time is an absolute, universal law." Ricardo's theory of value is based on strict monism. An exception is made only for a very limited range of so-called non-reproducible goods (works of art, wines of a special taste, etc.), the value of which is determined by their rarity. Unlike Smith, who ultimately presented value as the result of the addition of wages, profits, and rents, Ricardo argued that value does not consist of these components, but is decomposed into them. Thus, the primacy of value in relation to these forms of distribution was recognized. And this is the essential difference between Ricardo and Smith. Recognizing labor as the only substance of value, Ricardo made a logical conclusion that a change in wages without any change in labor productivity does not affect the price, but only changes the distribution of the value of the created product between the entrepreneur and the worker, that is, changes the ratio of wages and profit in the value of the product. According to Ricardo's ideas, wages and profits can only change in the opposite ratio, so Ricardo's theory was often called "a system of discord and enmity between classes." On the basis of the labor theory of value, Ricardo also created the theory of rent, in which the source of rent is not the special generosity of nature, but the applied labor. And in this question one can see the difference between the views of Ricardo and Smith. The latter believed, not without the influence of the Physiocrats, that rent is a special gift of nature, since not only man works and creates a product in agriculture (as in industry), but also the land. Thus rent, as a surplus of production, which is always more than sufficient to replace capital and to make a profit on it, is the result of a special generosity of nature. Ricardo takes a completely different position. The starting point of his theory is the conviction that when there is an abundance of fertile land in a country, a small part of which needs to be cultivated, there is no rent, because no one will pay for the use of land if it is available in unlimited quantities and it is of the same quality. (This is consistent with the general laws of supply and demand). But when, in the course of the development of society, with an increase in population, land of poorer quality or less conveniently situated (let us call it land of the second category) comes into cultivation, rent immediately arises on the land of the first category, the amount of which will depend on the difference in the quality of these two plots. And so, with every increase in population, when the country resorts to the use of land of inferior quality, rent will rise from more fertile plots of land. It follows from this that rent is the result not of generosity, but of the special avarice of nature and the scarcity of resources. But how is Ricardo's theory of rent related to the labor theory of value? In his opinion, the value of agricultural products is determined by labor costs in relatively worse areas, in modern terminology - marginal areas where marginal capital investments are made. The surplus of production, obtained on the lands of better quality, is the rent paid to the owner of the land. According to Ricardo's views, high rent payments are the result of high prices for agricultural products, which makes it necessary to involve land of inferior quality in circulation. And since the regulator of the price of agricultural products is the product produced with the greatest expenditure of labor, then rent, according to Ricardo, cannot enter as an integral part of its price. Rent is the result of high prices, and what the landowner receives in this way, he receives at the expense of the whole society. It all boils down to one class benefiting at the expense of another. Finishing the review of Ricardo's theory of rent, with certain reservations, we can say that it was a special case of the theory of marginal values, which are the basis of modern microeconomic analysis. In the field of wage theory, Ricardo consistently pursues Smith's idea that its size should be regulated by free market competition and should not be controlled by government legislation. The demand for labor, like the demand for every other commodity, necessarily regulates the production of men, and wages will not fall below that level at which the race of laborers would become extinct after the first generation. Developing the views of A. Smith, Ricardo believed that wages come down to the cost of subsistence of the worker and his family, however, unlike Smith, he believed that wages are kept within the strict limits of the subsistence level due to the so-called natural law of population, on which We will take a closer look at the economic views of T. Malthus. This law was later called the “iron law” of wages. According to Ricardo's views, labor has a natural and market value. The natural price of labor is that necessary for workers to have the means to procreate without increasing or decreasing their numbers (a kind of equilibrium price that ensures a stationary level of population). The natural price depends on manners and customs. If the price of labor falls below the natural price, the condition of the workers deteriorates considerably and "becomes most deplorable." Only after deprivations, by depriving them of those comforts which habit makes absolutely necessary, have reduced their number, will the market price rise to natural. It should be noted that within the framework of the premises of classical political economy, unemployment in a market economy is impossible, because the excess population is dying out. This is the essence of the Ricardian "iron" law of wages. As for the market rate of wages, Ricardo, following Smith, admits that in a progressive society (in a society where capital will gradually and constantly increase) it can be higher than natural for an indefinite time. D. Ricardo developed A. Smith's theory of foreign trade, supplementing it with the theory of “comparative costs of production” (also called the theory of “comparative advantage”). Unlike A. Smith, who attached decisive importance to the magnitude of absolute costs in explaining the patterns of development of world trade, D. Ricardo believed that absolute costs are not necessarily a prerequisite for international exchange. National states, according to D. Ricardo, receive economic benefits through the production and export of goods that cost them relatively less, and the import of goods that are produced abroad relatively cheaper than within the country. He explains this principle using the example of the trade in cloth and wine between Portugal and England. It is assumed that trade is carried out on an equivalent basis. Even if the costs of producing cloth in England are slightly higher than in Portugal, and wine is much higher, then the foreign trade exchange of cloth and wine between these countries is still mutually beneficial (based on A. Smith’s principle of absolute costs, such trade does not make sense for Portugal, because , that it is not beneficial for her). Let us assume that the cost of producing the same amount of wine in Portugal is 100 conventional units (for example, pounds sterling), and in England - 3000. At the same time, the cost of producing the same amount of cloth in Portugal is 300 units, and in England - 350. Then Portugal, having exported this amount of wine to England, receives an effect of 2900 (3000 - 100) units and will be able to purchase a significantly larger amount of cloth for this amount than if it produced it itself. At the same time, England’s benefit lies in the fact that by selling cloth to Portugal, it will buy a significantly larger amount of wine for this cloth than if it produced it itself. Countries, specializing in the production of goods in which they have a relative advantage, can produce them in much larger quantities and of better quality in order to export these goods to other countries, while at the same time they are able to import those goods that are not produced domestically. countries and import goods whose domestic production costs are extremely high. Specialization based on the principle of comparative advantage and based on it trade between countries increases the total volume of world production of goods. Participation in international trade and the international division of labor enables each country to meet its needs more efficiently and at lower cost. A. Smith and D. Ricardo are considered the founders of classical political economy, having a common point of view on the basic economic categories and problems of society (the essence of the nation’s wealth, the sources of its increase, the role of capital accumulation in this process, the concept of productive labor and a number of others). It is all the more interesting to consider how optimistic and pessimistic worldviews coexist within the same direction. The representative of the first is A. Smith with his belief in natural harmony, the representative of the second is D. Ricardo. The difference between these worldviews is most clearly manifested in their views on the problem of capital accumulation and the prospects for economic growth. Finding complete unity with Smith that the source of a nation's wealth is the accumulation of capital, Ricardo nevertheless admits that the accumulation of capital can lead to the impoverishment of the entire nation. A paradoxical statement that requires proof. What are Ricardo's arguments? The starting point of Smith's and Ricardo's reasoning is the same - an increase in the size of capital accumulation increases the demand for labor, thereby leading to an increase in the wages of workers. But if in Smith the growth of wages primarily increases diligence, then, according to the views of Ricardo, high wages encourage workers to multiply, as a result of which the supply of labor increases and wages again fall to the "natural" price, determined by the subsistence minimum. But what is the connection between the wage-setting mechanism and the problem of accumulation? The most immediate. An increase in wages and the resulting increase in the birth rate increases the demand for agricultural products, mainly for bread. Consequently, its price rises and it becomes expedient to involve land of inferior quality, where production costs are higher, into circulation. Thus, with the accumulation of capital and the growth of wealth, the required additional amount of food is obtained with the expenditure of more and more labor. This leads to an increase in rent from better quality land. And since rent, according to Ricardo, is a deduction from the value of the product created in society, it can increase only by reducing the other parts into which value breaks down: profit and wages. Consequently, as a result of the growth of rent, which is a consequence of the growth of population, profit has a natural tendency to fall, which cannot but be an obstacle to the accumulation of capital. The position that labor is the only source of value, and the latter is divided into wages, profit and rent, where a change in each of the parts is possible only at the expense of the other, inevitably leads Ricardo to a pessimistic conclusion about the antagonism of economic interests in a society of different classes. Nevertheless, from the standpoint of Ricardo, the state should not intervene either in production, or in exchange, or in distribution. State policy as a whole should be based on economic principles, and the main way of interaction between the state and the population is reduced to taxation. But taxes should not be too high, because if the state “swings” at a part of the capital, then the result of this is the poverty of the majority of the population, because the only source of growth in the wealth of the nation is precisely accumulation. According to Ricardo, "the best tax is a smaller tax." Of interest is Ricardo's argument in defense of taxation as opposed to borrowing as a way of financing the conduct of war. The classic argument against public debt is fully developed: public debt leads to capital flight, and deficit financing reduces private savings. Thus, the burden of debt lies not so much in the annual payment of interest, but in the waste of resources. Classical political economy, represented by Smith and Ricardo, was the dominant trend in economic thought in the first half of the nineteenth century, which did not exclude criticism of its individual provisions by various economists. Therefore, it seems interesting to trace the evolution of the classical school, considering the views of the most famous representatives of economic science of that period. Author: Agapova I. I. << Back: First economic schools (Mercantilism - theory and practice. Physiocrats) >> Forward: The development of classical political economy in the works of economists of the 19th century: followers and opponents (Economic views of J. B. Say. Economic views of T. Malthus. Economic views of S. Sismondi. Economic views of J. Mill)
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