Misunderstanding Classical Economics? A Reply to Blaug

From Professor Blaug's 1999 article (unspecified page references are to it) there emerges the paradox that an interpretation pointing to the basic role of institutional and historical factors in the classical theory of distribution and capital accumulation is criticized as “amazingly narrow” (215), one that looks at those economists “‘through the lenses of the linear production model'” (234). Further, the contrast between the seeming narrowness of the interpretation and the evident broad character of classical works induces Blaug to view that interpretation as one that reads “backwards” into Smith's and Ricardo's texts Sraffa's theoretical alternative to neoclassical theory (215)—as if the contrary was not rather the case, with those texts being the sources to which one had to resort in order to understand Sraffa's terse Production of Commodities (1960). A need for clarification is therefore present.

Blaug is critical of the interpretation advanced by “Sraffian” authors (I may note in passing how such collective references may easily if unwittingly result in blurring the issues) because, in his view, the notion of social surplus they refer to, while adequate for the French physiocrats (Blaug 1987, 439), does not provide a valid interpretation of Ricardo and the English classical economists.

A first reaction to this is one of some surprise. In his concrete work on the classical economists, Blaug has often acknowledged elements that are at the basis of Sraffa's interpretation of Smith and Ricardo. Recall his references to Ricardo's “corn model” and “fundamental theorem of distribution.” Or remember his recognition of permanent labor unemployment in Ricardo (Blaug [1958] 1973, 179), a feature basic enough to raise the question of a theoretical approach alternative to the modern one and along the lines of Sraffa's interpretation. The contradiction in Blaug comes, we shall suggest, from his seeing those classical elements in isolation, and not in the connections that make them aspects of an approach to distribution and prices basically different from the modern one: an expression, one may argue, of the difficulty of conceiving the possibility of an approach to distribution and prices other than some form of the modern one, based on demand and supply functions for “factors of production.” One result is that Blaug has to repeatedly fall back on ascribing the undeniable and striking differences between Smith's or Ricardo's analyses and the modern ones, to confusions and primitivism (see below).

A preliminary observation is, however, in order here. Sraffa's interpretation was explicitly advanced for “the old classical economists from Adam Smith to Ricardo” (Sraffa 1960, v; emphasis added); Blaug argues instead as if the interpretation he criticizes referred to a wider “British tradition of classical political economy, starting more or less with Smith in the third quarter of the eighteenth century and ending more or less with John Stuart Mill and Karl Marx in the third quarter of the nineteenth century” (215).

This is surprising from the author of a book (Ricardian Economics), a chapter of which was titled “The Half Way House of J. Stuart Mill,” and who is therefore aware of the reasons for which Sraffa may have wished to exclude Mill (for one) from his purview. However, the inconsistency may have been favored by Blaug's tendency to locate in subject matter (220) the domain of Sraffa's interpretation, which is instead focused on the logical structure of Smith's and Ricardo's theory.¹

A Central Misreading

Blaug describes the Sraffian interpretation as one for which the classical economists addressed the question of “how an ‘economic surplus' is generated, spent, and augmented from period to period,” where the “economic surplus” is “the disposable part of total output that is left over after capital consumption has been made good and the workers fed” (216; see also 214). However, what was originally meant in that interpretation was more specific: it was the tracing in Adam Smith and Ricardo of an approach to distribution...