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On “effectual demand” and the “extent of the market” in Adam Smith and David Ricardo

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  • Alex M. Thomas

Abstract

This paper revisits the question of demand in the works of Adam Smith and David Ricardo by adopting a novel approach: the joint examination of the concepts of “effectual demand” and the “extent of the market.” The discussion on “effectual demand” highlights its social nature and finds that in a multi-commodity framework, the vector of commodity supplies adapts to the vector of effectual demands. Subsequently, the “extent of the market” is seen to play a distinct role in determining economic growth as a demand-side determinant alongside the supply-side determinants of net saving and technological progress. The connections between the “extent of the market” and “effectual demand” are also explored in this paper. The findings point to a more important analytical role for demand in both Smith and Ricardo than has hitherto been highlighted.

Suggested Citation

  • Alex M. Thomas, 2021. "On “effectual demand” and the “extent of the market” in Adam Smith and David Ricardo," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 28(3), pages 305-323, May.
    • Handle: RePEc:taf:eujhet:v:28:y:2021:i:3:p:305-323
    DOI: 10.1080/09672567.2020.1817120
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