From bounties on exportation to the natural and market price of labour: Smith versus Ricardo

Schumpeter’s remarks on Ricardo’s criticisms of Smith’s system of thought (1954, p.472) can be further articulated by noting that while Ricardo’s most explicit and fundamental criticisms reach a climax in his chapter On Value, a number of explicit criticisms are concerned with apparently more specific or practical issues. One of these issues can be found in Chapter XXII, Bounties on Exportation, and Prohibitions of Importation of his Principles. This chapter provides a criticism of Chapter V, Of Bounties, Book IV of the Wealth of Nations and is intended to prove that “perhaps in no part of Adam Smith’s justly celebrated work, are his conclusions more liable to objection, than in the chapter on bounties” (1821, p.304). The historical relevance of Ricardo’s criticisms on this issue is confirmed in two opposite directions. One goes back to the years between the fist edition of the Wealth and that of Ricardo’s Principles. The other brings us forward to the years of Sraffa’s publication of Ricardo’s works and to the following revival of interest on Ricardo’s thought, either as such or as an alternative to Smith’s. Thus the issue has eventually fallen into the hands, or between the lines, of a growing number of authors who have dealt with Ricardo’s or Smith’s systems of thought in recent years. Among these recent authors are Peach (1993, 2008, 2009), S. Hollander (1973, 1979, 1980, 1982, 1987 [1992], 1992), O’Brien (1981 [2004]), O’Donnell (1990), West (1982), Gibbard (1994), Samuelson (1977, 1992), Elmslie (2004), Hueckel (2000a, 2000b, 2009) and others. The scope of this paper is narrower than that of the whole literature developed in the two periods above. It will not be confined, however, to the details of Ricardo’s criticisms of Smith’s argument but will reach for the analytical foundations both of these criticisms and of that argument. At this deeper level, the paper will be structured so as to provide, wherever possible, Smith’s virtual self-defence against Ricardo’s criticisms. Thus it will proceed by assessing, fist, whether or to what extent Smith and Ricardo are on this particular issue consistent “with themselves”, i.e. with the foundations (or other parts) of their different works; and, secondly, whether Ricardo’s criticisms are based on a misunderstanding of at least some of the foundations (or other parts) of his predecessor’s work. Smith’s virtual self-defence will be carried out by focusing on some diverging foundations of his system vis-à-vis Ricardo’s and, more particularly, on the temporary vs. permanent, money vs. real and market vs. natural price of labour (work to be done) as distinct from the temporary vs. permanent, money vs. real and market vs. natural price of commodities as products of labour (work done