Political economy by a smith and d ricardo. D
The pioneer of classical political economy was the English mercantilist William Petty. For the first time, back in 1662, he clearly and unequivocally declared that the source of all wealth is labor. Thus, economic thought re-opens the forgotten idea of Aristotle. At the same time, W. Petty distinguished two sides of the price: one that is constantly changing depending on the market situation - the market price and the other, natural, which does not change after production - the value of the goods. W. Petty is scientifically consistent. In the future, in all his works, he proceeds only from the position that labor is the content of value. He writes that the basis of the exchange proportions in which grain is exchanged for silver is the labor expended on their production. This shows that the value of bread depends on the productivity of labor in the extraction of silver, but this simple logic led him to the general assumption that only labor in the extraction of precious metals produces value. And yet, in the end, he makes the absolutely correct conclusion that "the difference in the types of labor does not matter here - everything depends only on the working time."
W. Petty combined two hypostases: the mercantilist and the classic of political economy. "The main and final result of trade is ... an abundance of silver, gold and precious stones, which are imperishable and not so variable in price ... Therefore, the extraction of these values ... is more profitable than anything else." According to W. Petty, money has a value especially for the development of production.
At the same time, dividing natural and market prices in a commodity, he writes: “The appraisal of all objects should be brought to two natural denominators - land and labor. We should have said: the value of a ship or a frock coat is equal to the value of such and such an amount of land, such and such an amount of labor, because both the ship and the frock coat are produced by land and human labor. "
The merit of W. Petty is also in the definition of land as a special commodity that is not a product of labor. Consequently, the price of land should be determined by the income that it brings, i.e. rent. Thus, the price of land is equal to: annual rent x 21 years (the period of change of one generation of people at a time).
Associated with the name of W. Petty is the remarkable idea that the wealth of the state (sovereign) is the wealth of all its subjects, since the wealth of the former is a derivative of the latter, as well as the methods of calculating the national income. He described in such detail the latter, which economists consider W. Petty the creator of economic statistics.
W. Petty made a great contribution to the theory of money. He defined money as a commodity of labor origin, for which reason they are the universal equivalent. Consequently, the value of money itself depends on the amount of labor expended in its production. For the first time in economics, W. Petty raised the question of the amount of money required in circulation, and although he did not solve this problem, the merit of defining and posing it belongs to him. After all, it is known how often the solution of a question depends on its correct formulation.
A special place in the development of economic science belongs Adam Smith(1723-1790), an outstanding English economist, a classic of political economy. The place of A. Smith in economic science is determined by the fact that he was the first to set out economic theory as an integral science in the interconnection of all its elements.
Developing the economic theory as a whole and relying on the labor theory of value, A. Smith discovers two sides of the commodity - value and use value (utility) and points out the differences between them. An important step in the development of the theory of value was his differentiation between simple and complex labor, and, consequently, the determination of the basis for comparability, commensurability of various forms of labor.
A. Smith highly appreciated the importance of division of labor and specialization as factors in the development of productive forces. The division of labor makes it more productive and, therefore, more efficient. On this basis, he developed the theory of comparative advantage and eventually came to an ingenious conclusion in the theory of exchange. According to A. Smith, exchange is both equivalent and mutually beneficial. Consequently, not only value equivalents can be exchanged, but also the same, subjectively assessed utilities. The fact is that, according to A. Smith, in exchange, a person is not interested in how much the purchased goods cost, but in how much they can save their own labor. After all, if you do not buy this product, then you can spend much more on its production.
A. Smith defined, in modern terms, the institutional, objective and subjective conditions for effective development market system.
- 1. The state must guarantee the inviolability of property, both its own and especially its citizens. Property is a guarantee of the sustainability and stability of society. The state collects taxes from citizens precisely for this in order to fulfill its obligations to them. At the same time, A. Smith formulated the principles of taxation: proportionality, certainty (when and how much), convenience and minimalism (taxes are needed only to cover the needs of the state).
- 2. Each business entity must strictly and honestly fulfill its obligations, because trust in each other and all business entities in the state becomes a powerful economic force.
- 3. A citizen, an economic entity, must be completely free in choosing a place, time, and branch of production. Nobody and nothing, except for objective economic laws, should influence it.
According to A. Smith, these conditions are quite enough for the existence of the market.
A. Smith carefully develops the concept of the natural price of a commodity, to which the market price tends as a result of competition. Likewise, the natural rates of wages, profits, and rent also determine the natural price of commodities, since they constitute its content.
A. Smith made a significant contribution to the development of the theory money circulation, bank capital. He determined that with the development of technological progress, the rate of profit tends to decrease.
His theory of comparative advantage in international trade and the related development of a country's balance of payments framework are also important.
One of the most significant discoveries of A. Smith consists in his determination of the value of labor power and its differences from the value that this labor power creates. He almost came close to solving the mystery of the production of surplus product and surplus value, for he concludes that the value created by labor power is greater than the value of the labor power itself, therefore, goods are exchanged not just in proportion to the cost of labor, but in proportion to the cost of production. The return on capital is generated by the worker and the capital. In other words, it represents the additional value that arises in the labor process through the efforts of the employee.
The enduring fame of one of the best economists of all time brought A. Smith general theory market, especially in terms of the mechanism of its functioning. He convincingly substantiated the position that each economic entity, pursuing its own personal goal, thereby achieves the fulfillment of social goals. His idea of the “invisible hand of the market” is nothing more than an explanation of the self-regulation mechanism of the market system. “We expect to receive our lunch, not because the butcher, brewer and baker are supportive of us, but because they care for their own benefit ... Each individual continually endeavors to find the most beneficial use for whatever capital he has. disposes. In an effort to extract from this production the product of the greatest value, he pursues only his own goal, and in this case, as in many others, he is led by an invisible hand, leading to a result that has nothing to do with his intentions. " The idea of the “invisible hand” of market incentives, directing people's activities in such a way that they benefit everyone, is, according to economists, A. Smith's most significant contribution to economics, because it essentially means that no one can achieve well-being , cannot make wealth if he has not previously satisfied some social need. A. Smith here clearly and clearly formulated the capitalist ideology: "the natural striving of every person to improve his position" will protect and realize public interests by itself, spontaneously, independently of anyone.
Classical political economy was further developed in the works of the English economist David Ricardo(1772-1823). He cleared economics from many of the errors of its predecessors and freed the labor theory of value from internal contradictions. Economic theory appears in D. Ricardo in the form of a consistent, logical concept. First of all, the analysis of D. Ricardo is characterized by objectivity. He was the first to characterize the concept of socially necessary costs labor as opposed to individual and substantiated that value is determined by them. So he came close to the discovery of the law of value.
An essential contribution of D. Ricardo to economics was also the explanation of the processes of transferring the value of means of production to the finished product. He showed that living labor is involved in the process of creating value, but the transferred value of the means of production is also included in the value of the finished product.
D. Ricardo's contribution to the development of the theory of rent is great. He defines rent as "the share of the product of the land that is paid to the landowner for the use of the original and inviolable forces of the soil." It is very important that "rent is paid for the use of land because the amount of land is not unlimited ... When, with the development of society, land of the second fertility category comes into cultivation, rent immediately arises on the land of the first category." D. Ricardo quite rightly asserts that rent arises from the limited land, due to which the fertility of the land tends to decrease. But society cannot feed itself without involving more and more bad lands in the economic turnover, and therefore it is obliged to reimburse the costs of production on these lands. Consequently, the price of agricultural products, in contrast to industrial ones, is determined by the conditions of production on the worst lands.
D. Ricardo was a very unusual predecessor of T. Malthus, although he was his contemporary. He believed that "the rate of profit is gradually falling due to higher wages and the increasing difficulty of supplying the growing population with basic necessities." Therefore, according to D. Ricardo, "the natural price of labor is that which is necessary for workers to be able to exist." That is, since wages are always a deduction from the capitalist's profits, they should strive to a minimum. This is a very illogical conclusion for a person whose theory became the pinnacle of classical political economy and who considered wages as the price of labor. And here living wage, if the amount of wages is determined, according to D. Ricardo himself, by the price of labor?
D. Ricardo further develops the theory of comparative advantage in international trade, which should be free. In addition, he solved many specific economic problems - from calculations economic efficiency international trade and the theory of comparative advantage to the infamous “minimum wage,” or cost of living.
And finally, the merit of D. Ricardo lies in the fact that he presented political economy in a strict logical sequence, in a systemic form, at the level of development at which it was in his time. This is evidenced by the title of his main work "Principles of Political Economy and taxation". D. Ricardo's theory is the pinnacle of classical political economy.
- Smith A. Research on the nature and causes of the wealth of peoples. M .: Sotsekgiz, 1962. P. 33.
- Ricardo D. The beginning of political economy and taxation. Moscow: Politizdat, 1955.
The founder of classical political economy was the English mercantilist William Petty. For the first time, back in 1662, he clearly and unequivocally declares that the source of all wealth is labor. Thus, economic thought re-opens the forgotten idea of Aristotle. On the other hand, V. Petty distinguishes two sides of the price: one, which is constantly changing depending on the market situation, is the market price, and the other is natural, which does not change after production, is the value of the commodity. V. Petty is scientifically consistent. In the future, in all his studies, he proceeds only from the position that labor is the content of value. He writes that the basis of the exchange proportions in which grain is exchanged for silver is the labor expended on their production. This shows that the value of bread depends on the productivity of labor in the extraction of silver, but this simple logic led him to the general assumption that only labor in the extraction of precious metals produces value. Nevertheless, in the end, he makes an absolutely correct conclusion that "the difference in the types of labor does not matter here - everything depends only on the working time." V. Petty made a great contribution to the theory of money. He defined money as a commodity of labor origin, for which reason they are the universal equivalent. Consequently, the value of money itself depends on the amount of labor expended in its production. For the first time in economics, V. Petty raised the question of the amount of money needed in circulation, and although he did not solve this problem, the merit of defining and posing it belongs to him. After all, it is known how often the solution of a question depends on its correct formulation. A special place in the development of economic science belongs to Adam Smith (1723-1790) - an outstanding English economist, a classic of political economy. A. Smith's special place in economic science is determined by the fact that he was the first to set out economic theory as an integral science, in the interconnection of all its elements. Developing the economic theory as a whole and relying on the labor theory of value, A. Smith discovers the two sides of the commodity: value and use value (utility) and gives the differences between them. An important step in the development of the theory of value was his differentiation of simple and complex labor, and, consequently, the determination of the basis of comparability, commensurability of various forms of labor. A. Smith highly appreciated the importance of division of labor and specialization as factors in the development of productive forces. On this basis, he developed the theory of comparative advantage and eventually came to an ingenious conclusion in the theory of exchange. For Smith, exchange is both equivalent and mutually beneficial. Consequently, not only value equivalents can be exchanged, but also the same, subjectively estimated, utilities. One of the most significant discoveries of A. Smith consists in his determination of the value of labor power and its differences from the value that this labor power creates. A. Smith almost came close to solving the mystery of the production of surplus product and surplus value, for he concludes that the value created by labor power is greater than the value of the labor power itself, therefore, goods are exchanged not just in proportion to the cost of labor, but in proportion to the cost of production. The enduring fame of one of the best economists of all time, A. Smith, was brought by the general theory of the market, especially in terms of the mechanism of its functioning. He convincingly substantiated that each business entity, pursuing its own goal, thereby achieves the fulfillment of social goals. His idea of the “invisible hand of the market” is nothing more than an explanation of the self-regulation mechanism of the market system. “We expect to receive our lunch, not because the butcher, brewer and baker are supportive of us, but because they care for their own benefit ... Each individual continually endeavors to find the most beneficial use for whatever capital he has. disposes. In an effort to extract from this production the product of the greatest value, he pursues only his own goal, and in this case, as in many others, he is led by an invisible hand, leading to a result that has nothing to do with his intentions. " The idea of the “invisible hand” of market incentives, directing people's activities in such a way that they benefit everyone, is, according to economists, A. Smith's most significant contribution to economic science, because it essentially means that no one can achieve prosperity, not can make wealth if he has not previously satisfied some social need. A. Smith here clearly and clearly formulated the capitalist ideology. Classical political economy was further developed in the works of David Ricardo (1772-1823), an English economist. He cleared economics from many of the errors of its predecessors and freed the labor theory of value from internal contradictions. Economic theory appears in D. Ricardo in the form of a consistent, logical concept. First of all, the analysis of D. Ricardo is characterized by objectivity. He was the first to characterize the concept of socially necessary labor costs as opposed to individual ones and substantiated that value is determined precisely by them. So he came close to the discovery of the law of value. An essential contribution of D. Ricardo to economics was also the explanation of the processes of transferring the value of means of production to the finished product. He showed that living labor is involved in the process of creating value, but the transferred value of the means of production is also included in the value of the finished product. In addition, D. Ricardo solved many specific economic problems. From calculating the economic efficiency of international trade and the theory of comparative advantage to ... determining the infamous "minimum wage" or cost of living. And finally, the merit of D. Ricardo lies in the fact that he presented political economy in a strict logical sequence, in a systemic form, at the level of development at which it was in his time. This can be seen from the title of his main work, "Principles of Political Economy and Taxation". D. Ricardo's theory is the pinnacle of classical political economy.
The economic views of W. Petty
We have talked about the fact that mercantilism as an economic theory was the mainstream 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. Simultaneously with it, the prerequisites for another powerful economic doctrine appeared, 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 versatile interests, who went from a cabin boy to a landlord and, as it were, by the way, expressed in his works devoted mainly to the justification economic policy(in particular, in "Treatise on taxes and fees", 1662), those economic ideas that then entered as an integral part of classical political economy. In Petty we already see the basic premises of classical political economy:
- research not of the circulation process, but directly of the production process,
- a critical attitude towards unproductive classes that do not deliver any product, to which he ranked merchants,
- referring to productive labor employed in the sphere of material production.
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” * 1 * is widely known. Proceeding from this axiom, it is necessary to analyze all other economic views of Petty, in particular, the statement that it is the scarcity of the population that is the true source of poverty in the state. Disagreeing with the mercantilists that the wealth of a nation is embodied in precious metals, Petty formulates his criterion of wealth, believing that the richest period will be the period in which each participant in the division (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. use more labor.
However, living in the era of the dominance of the ideas of mercantilism, Petty cannot completely escape 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, protectionist policies and a number of other problems.
* 1 * The context in which this phrase is uttered is less known, but it is curious. This is the chapter "0 Punishments" in Petty's Treatise on Taxes and Duties, where he reminds that the state, by mutilating and imprisoning its subjects, thereby punishes itself. Therefore, Petty considers it advisable, if possible, to replace such punishments with monetary fines that will increase labor and social wealth.
Under the influence of the 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 nation's wealth, sharing the point of view that the real meaning of wealth lies more in relation than in quantity, and therefore it is beneficial for any country to have more money (precious metals) in stock than other countries. At the same time, Petty proposed to reduce a significant part of the merchants, leaving them just enough so that they would be able to exchange surplus goods of a given country for surplus goods of other countries, since, in his opinion, merchants “... do not deliver any product to society, and play only the role of veins and arteries, distributing back and forth ... the products of agriculture and industry ”* 1 *.
To be sure, Petty saw the negative impact of the precious metal influx, reflected in higher prices. In his works, he repeatedly emphasized that there is a certain measure or proportion of money needed to conduct trade in a country where a surplus or lack of money against this measure would be harmful. The surplus, as we have already said, causes a rise in prices, but Petty immediately offers an antidote - the excess money should be kept in the state treasury, which, in his opinion, will not harm the country, the king, or private individuals. At the same time, the lack of money has harmful consequences. Firstly, it causes poor payment of taxes, and secondly, it leads to a reduction in the number of work performed. Petty gives the following proof: “£ 100. having passed through 100 hands in the form of their wages, they give an impetus to the production of goods worth 10 thousand pounds sterling. These same hands would remain idle and useless if there was no constant incentive to use them ”* 2 *.
Petty also shares the policy of protectionism aimed at protecting the national market by introducing customs duties, believing that the amount of duties should be such that the prices of imported goods become somewhat more expensive than the same items produced domestically. Supports Petty and the thesis) that the passion for luxury of the rich stimulates trade and production. In particular, he writes, considering the problems of taxation, “... People are indignant at the thought that the money collected will be spent on amusements, magnificent shows, triumphal arches ... things ”* 3 *.
* 1 * Anthology of economic classics. T. 1.M., 1993, p. 20.
* 2 * Same, p. 26.
* 3 * Ibid, p. 23.
The influence of mercantilist views on Petty seems to be significant, nevertheless, we consider Petty to be the ancestor of the classical direction. 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 expended on their production. This idea is most clearly expressed by Petty in the following phrase “... if anyone can extract from the Peruvian soil and deliver to London one ounce of silver at the same time during which he is able to produce one bushel of bread, then the first is the natural price of another ”* 1 *. However, again finding himself to a certain extent captive to mercantilist ideas, Petty adds that not all labor creates value, but only that which is spent on the production of gold and silver, and the value of the products of labor in other branches of production is determined only as a result of their exchange for precious 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 the 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 land plots. After analyzing the rent and defining it as net income from land, Petty raises the question of the price of land, which, in his opinion, should be equal to a certain amount of annual annuities. But what is the quantitative assessment of this certainty? According to Petty, the price of land is the sum of annual rents for 21 years, the time of a simultaneous lifespan of three generations.
Closely related to the theory of rent is Petty's question of interest on loans. By the way, finally breaking with the medieval ideas about the predatory nature 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 it back before a certain period, no matter how he needs it. during this time. With a little effort, here you can see the beginnings of the theory of interest as payment for abstinence, which was finally formed only in the nineteenth century. Determining the "natural" rate of interest, Petty argues that it should be equal to the rent on the amount of land that can be bought with the money given in the loan, provided there is complete public safety. But if this condition is in doubt) natural interest is intertwined with something like an insurance premium, which can raise the percentage to any size. A hint of the opportunity cost doctrine can also be seen here.
* 1 * Anthology of economic classics. T. 1. M., 1993, p. 38. In addition to the category of "natural price", the basis of which is labor, Petty also has a category of "political price", which he considers as a market price.
A significant place in the work of Petty is given to issues of taxation and finance. One of Petty's fundamental ideas, linking him to the principles of classical political economy, is the idea of the natural order and the harmfulness of its violations by state power. Flaw government controlled, according to Petty, is that "too much of what should have been governed by nature, ancient customs and universal agreement, fell under the regulation of the law." It is no coincidence that Petty sharply opposes state regulation if it contradicts the "laws of nature." At the same time, he assigns to the state important functions to ensure the full use of the labor force, as well as to improve its quality. Petty proposes, at the expense of public funds, to provide vagrants and beggars with work on the construction of roads, the construction of bridges and dams, and the development of mines. And here not only humanity speaks, but also economic calculation, because, according to Petty's views, “... allowing someone to begging is a more expensive way of keeping those people who are not allowed by the law of nature to die of hunger” (* Anthology of economic classics T. 1. M., 1993, p. 13.). And further, being consistent in his assertion that the quality of labor, 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 lost their ability to work ”* 1 *. By the way, the positive effect of ensuring full employment is considered in the works of such a famous economist of the twentieth century as J. Keynes, albeit from a slightly different standpoint.
* 1 * Anthology of economic classics. T. 1.M., 1993, p. 47.
In accordance with his views on the role of the state in the economy, Petty in his "Treatise on Taxes and Duties" thus regulates the targeted expenditures of the state: - defense spending; - management costs; - expenses for the church; - expenses for schools and universities; - expenses for the maintenance of orphans and disabled people; - expenses for roads, water pipes, bridges and other items necessary for the benefit of all.
As you can see, the structure of expenditures resembles the expenditure side of the budget of modern states. With regard to taxation, here Petty is a predominantly supporter of indirect taxation... Agreeing with the generally accepted point of view in this era that the population should participate in covering public expenditures 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 - 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, the arguments in favor of excise tax in Petty boil down to the following: first, justice requires that everyone pays according to what he consumes, and such a tax is not imposed by force and it is easy to pay it to someone who is content with natural necessities. ; secondly, such a tax is conducive to frugality, which is the only way to enrich the nation. Here Petty ripplingly expresses the idea of the exceptional role of frugality in increasing the wealth of the nation, which sounds like the leitmotif of A. Smith.
But all the economic ideas expressed by Petty are rather in the form of conjectures and do not represent a complete theory. Perhaps, it was precisely the fragmentation and scattering of U. Petty's economic ideas among numerous pamphlets written on the topic of the day that caused Petty to enter the history of economic thought primarily as the inventor of statistics, which he called “political arithmetic”. In his work, which is called “Political Arithmetic” (1676), Petty not only gave an analysis of the specific economic situation based on the widespread use of actual 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 scarcity of statistical data at the time * 1 *.
Using his method, Petty first performed 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 work skills, dexterity, qualifications). Petty paid much attention to determining the economic value of the population, since believed that it was the rare population that was the true source of the country's poverty * 2 *. In this we see a fundamental difference between the views of Petty and the mercantilists, who reduced the wealth of the country to reserves of gold and silver. In Petty's own calculations, the share of precious metals in the total wealth of England was less than 3%.
Petty performed not only calculations of the national wealth of England, but also of her national income. True, in contrast to modern concepts, Petty calculated the national income only as the sum of the consumption expenditures of the population, neglecting the share of the national income going to accumulation. But since the share of accumulation in seventeenth century England was extremely low, the inaccuracies did not distort the big picture. Despite this significant (from modern positions) lack of calculations, nevertheless, it can be said with good reason that the modern system of national accounts grew out of these calculations by W. Petty.
* 1 * To determine the number of doctors required, Petty suggests, firstly, based on the number of dying people, to establish how many patients there are in London, then, based on the proportion of the capital, to establish the number of doctors are required for the whole country, and therefore find out how many students of this profession should be allowed to study and encouraged.
* 2 * The optimistic point of view on population growth characterizes the largest representative of classical political economy - A. Smith.
The birth of classical political economy is associated with the name of Petty, and its real creators were A. Smith and D. Ricardo.
2. Formation of political economy as a science.
A. Smith's economic views
The term “ political Economy”Originated long before political economy became a science. It was introduced into circulation by the representative of mercantilism, Montchretien de Votgueville, back in 1615, when he wrote "A Treatise on Political Economy", a purely practical work containing recommendations in the spirit of the representatives of this school. The meaning that has been put into the concept of "political economy" is important to us. Since the days of Xenophon, economics has been understood as the science of rational management household... Montchretien, like other representatives of mercantilism, was interested in issues related to the prosperity of the state, national economy generally. And the emergence of a new term ("policy" - the state) and meant the emergence new science- science about the prosperity of the national economy. Although, in the strict sense of science, there has not yet been, since science begins where deep, stable, repetitive cause-and-effect relationships and dependencies are found. 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 the humanities, ceases to be the lot of brilliant self-taught, becomes an academic discipline and an obligatory element in the education of young people of the highest, and then other classes.
A. Smith's services to the political economy are so great that it is worth saying a few words about him. A. Smith (1723-1790) is a Scottish 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 already lectures on natural law, which in the eighteenth century included jurisprudence, political doctrines, sociology, economics.
Already at that time, Smith formed the basic ideas of economic liberalism. The end of the eighteenth century - the formation of bourgeois ethics and special attention is paid to substantiating the concept of natural, inalienable rights and freedoms of the individual. This also meant 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 position may be directly opposite. English philosophers of the seventeenth century, in particular, Thomas Hobbes (1588-1679) recognized the existence of selfish interest, considering it “the most powerful, most destructive human passion”, drawing from this the conclusion about the need for an authoritarian state, which should keep individual egoism in check. In the French rationalist philosophers, for example, in Helvetius (1715-1771), selfishness was declared a natural property of the human person and a factor of social progress. Smith took the ideas of the latter, applying them to the sphere of economic activity.
A. Smith admits that the main motive of human activity is self-serving interest * 1 *. But a person, in his opinion, can pursue his interest only by offering his goods and services in exchange to other people. As Smith writes, “It is not from the benevolence of the butcher, brewer, or baker we expect our dinner to come, but from their self-interest. We do not appeal to their humanity, but to their egoism, and we never tell them about our needs, but about their benefits ”* 2 *. And therefore, the natural desire of people to improve their position is such a powerful incentive that it itself is able to lead society to prosperity. The concept of self-serving interest also led to the policy of non-interference, or "natural freedom." After all, if the economic activity of everyone ultimately leads to the good of society, it cannot be constrained.
* 1 * To be fair, it should be noted that in Smith, as in Ricardo, only the capitalists behave in accordance with the logic of their own interest. As for the workers, their behavior is subject to habits and instincts; and the landowners are an idle class of rent recipients with no control over their economic position.
* 2 * Anthology of economic classics. T. 1.M., 1993, p. 91.
Nevertheless, the economic views of A. Smith will not be fully understood, if one does not take into account his first major work, The Theory of Moral Sentiments, which was published in 1759 and contains his socio-philosophical ideas. Proceeding from the thesis of the existence of “natural laws” characteristic of the philosophy of the eighteenth century, Smith introduces two basic concepts as natural characteristics of a person in his work: “feeling of sympathy” and “inner observer” (conscience). At the same time, Smith believed that the basis of sympathy was the ability of a person to put himself in the place of other people and feel for them with the power of imagination. Remaining in the position of the existence of natural laws, Smith argues that what is natural is true, 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 laid down by nature (God), which endowed a person with a conscience.
It is interesting to note that Smith's thesis about the harmony of interests of various 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 rests 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 deliberate actions of people, but also an ideological aspect - belief 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 when, guided by the “hand of Providence,” an insensitive, proud and greedy (epithets of A. Smith - author's note) wealthy owner without any deliberate desire serves the interests of society, because, caring exclusively about his own wealth, he gives work, and therefore food for the poor. At the same time, the rich consumes only a small part of his 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 others have been deprived of their inheritance and turned into hired workers. Seemingly huge wealth inequality between people, under close scrutiny, is equality, as if the land were divided equally among all people. The allusion to Providence, as it were, says that God created everything. He also cares about the structure of society. On the surface, the device seems unfair, but in fact, one has only to comprehend the secret plan of God and the world will appear in a different light.
We can rightfully say that the philosophical and ethical side of the economic doctrine of A. Smith was laid down in the “Theory of moral feelings”, 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 and the place of material interest in the life of a person 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 business. It is interesting to note that at the end of The Theory of Moral Sentiments, Smith promises in the next work to clarify the mechanism of operation of the "natural law of justice", as a result of which "everyone gets his share of everything produced by the land."
During the life of the author, The Theory of Moral Feelings went through five editions, but it was not it that immortalized the name of A. Smith. World fame and influence was brought to him by his second book "A Study on the Nature and Causes of the Wealth of Nations", published in London in 1776, although internally both works remained sides of the same subject, studying human nature from different angles. And if, according to the figurative expression of H. Bockle, in The Theory of Moral Sentiments, Smith explores the sympathetic side of human nature, then in The Wealth of Nations - its self-serving side.
In accordance with the title of his book, Smith primarily examines the reasons for the growth of the nation's wealth, the role of labor in this process, the factors that increase its productivity, the “natural” order of distribution of the product between different classes, the nature of capital, the ways of its gradual accumulation, and much more.
Since the work is called “Investigation of the nature and causes of the wealth of nations,” the first chapter of the book gives an 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:
- the share of the population engaged in productive labor
- and labor productivity;
At the same time, under productive labor, Smith understood 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 manufacture) * 1 *.
Having depicted the advantages of the division of labor, Smith raises the question of money and sees 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 clarify the rules according to which people exchange goods for each other; rules that determine the relative, or exchange value of goods * 2 *.
This is one of the most difficult sections of the book. It is not by chance that Smith asks readers for attention and patience when starting to work on 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 three factors of production. Smith himself presents three concepts of value.
* 1 * As Smith writes, if everyone worked alone, carrying out all the operations on their own, no one would be able to produce even 20 pins a day. But with such an organization of production, when one worker pulls the wire, another straightens it, a third cuts it, a fourth sharpens it, etc., ten people, specializing in an independent operation, produced more than 48,000 pins a day. As you can see, productivity has increased 24 times as a result of specialization.
* 2 * Smith notes that the word “value” has two different meanings: sometimes it denotes the usefulness of an item, and sometimes it means the ability to acquire other things that the possession of the item gives. The first he calls use-value, the second - exchange value. And he draws attention to the fact that very often goods with a very large use value have very little or no exchange value, and vice versa. (A classic example with water and diamond.)
On the one hand, recognizing the equivalence of all types of productive labor from the point of view of value creation, Smith comes to the conclusion that value is nothing more than the amount of necessary labor contained in a commodity. 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 a social content: the definition of value by labor presupposes the universality and equality (in a qualitative sense) of all types of labor. This can be interpreted as a recognition of the equality of all people: if the goods are equal in exchange, then the labor of the producers of these goods is the same, and they are equal as individuals * 1 *.
The second concept boils down to the fact that value is determined by the amount of labor that can be bought for a given good. 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 capital and wage labor exist, 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. Moving away from this contradiction, Smith concludes that the value of goods is determined by labor only in the “primitive” * 2 * state of society.
In the conditions of capitalist production, value * 3 *, according to Smith, is made up 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” * 4 *. And the price, or exchange value of any commodity, is reduced to all the three indicated parts. This concept of A. Smith formed the basis of the theory, which later received the name of the theory of three factors of production.
From the theory of value A. Smith also follows his theory of product distribution. And it is as dual as his theory of value. On the one hand, if labor is considered the ultimate 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. In conditions of capitalist production, when the worker is alienated from the means of production, part of the product created by him 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 sees 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, arising 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 on equal terms in creating the value of the product and, accordingly, claim their share.
* 1 * Aristotle, as you remember, rejected the proposition that the labor of a slave can be equal to the labor of a free man.
* 2 * To which he refers all pre-capitalist forms of management.
* 3 * Within the framework of this concept, Smith equates the concepts of "value", "exchange value", "price".
* 4 * Anthology of economic classics. T. 1.M., 1993, p. 122.
By adding value to income, Smith tries to determine what determines the natural rate of each income, with 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 cost of living is of little use for explaining how wages are determined in real life. And gives the following arguments:
- the level of wages of agricultural workers is always higher in summer than in winter, although the cost of living for workers in winter is certainly higher,
- in different parts of the country, wages are different, and food prices are the same everywhere,
- wages and food prices often move in opposite directions, etc.
It is also interesting that Smith linked changes in wages with the economic state of the country, believing that the rise in wages is evidence of economic progress, since the rise in wages is due to the greater demand for labor.
Profit, according to Smith, is not only wages for a special type of labor in management, it also includes other elements, since it is obvious that the size of profit is determined by the size of capital and is not related to the severity of labor. As for the tendency in the change in the size of profits, they are caused, according to Smith, by the same reasons that cause an increase or decrease in wages, i.e. depend on the increase or decrease in the wealth of society. But these reasons are very differently reflected in wages and profits. An increase in capital, which increases wages, leads to a decrease in profits, since in a situation where many capitals are invested in one industry, 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 interests of the public, 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 striving for monopoly inherent in this class.
Smith pays much attention to the problem of capital accumulation, considering it as the key to the wealth of the nation. As already mentioned, Smith put the wealth of a nation in dependence on the share of the population engaged in productive labor, where by productive labor he understood all labor employed in the sphere of material production (this is his difference from mercantilists and physiocrats). It is curious that Smith also classified entrepreneurs as a productive population, believing that they perform the most important social function - the function of accumulation. And, according to Smith, he who saves is the benefactor of the nation, and the squander is its enemy. Why? 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 (Smith has repeatedly emphasized that the annual product of a nation, other than the natural fruits of the land, is the result of productive labor.) those. to the growth of the wealth of the nation. Not surprisingly, for Smith, thrift, rather than industriousness, is the direct cause of capital growth, for "... although industriousness creates what accumulates savings, capital could never grow if thrift did not save and accumulate." *one*.
In the last chapters of the book, Smith again returns to his principle of the "invisible hand", proving the harmony of interests of the individual and society, believing that the self-serving interest of everyone will lead to the public good. Hence follows the corresponding economic program, which requires the abolition of all measures limiting the mobility of labor, the abolition of government regulation of industry and trade, and the permission of free trade in land. Consistently, Smith advocates reducing the role of the state, reducing its functions to military security, the administration of justice, and the responsibility to maintain public buildings and public institutions.
A. Smith paid considerable attention to the issue of public finance, formulating, in particular, his famous four principles of taxation * 2 *. Speaking about the sources of taxation, Smith, in accordance with his views on the unproductive nature of government spending, opposed the attraction of 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 taxing capital meant destroying it, in accordance with the principle that what is taxed is diminishing. It is interesting to note that the theory of the unproductive nature of government spending does not prevent Smith, nevertheless, to recognize the tax as a fair price for paying for government services. This gave reason for later researchers to believe that in the interpretation of the tax, Smith stood on the positions of the theory of equivalent exchange.
* 1 * Anthology of economic classics. T. 1.M., 1993, p. 363.
* 2 * The first principle is that the subjects of the state are obliged to participate in the support of the state in accordance with their means, i.e. according to the income that everyone receives under the protection of the state. The second principle is that the tax must be paid by everyone, it must be precisely defined, and not arbitrary. The time of its payment, the method and amount of the tax paid must be clear and known both to the payer himself and to everyone else. The third principle is that each tax should be collected at such a time and in such a way that is convenient for the payer. And finally, the fourth principle - each tax should be designed so that it extracts from the pockets of the population as little as possible in excess of what goes to the state treasuries.
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. In every country there are goods whose price is lower than in other countries because the cost of producing them is lower. Therefore, it is necessary to buy goods where they are cheaper, accordingly offering in exchange their own goods, the production costs of which are lower than in other countries. He wrote: “If some foreign country can supply us with some commodity at a cheaper price than we ourselves are able to manufacture it, it is much better to buy it from her for some part of the product of our own industrial labor applied in that area, in which we have some advantage ”* 1 *.
* 1 * Smith A. Research on the nature and causes of the wealth of nations. - M., 1962, p. 333.
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.
Finishing the consideration of A. Smith's views, I would like to draw your attention once again that he laid a certain idea of human nature at the basis of an entire theoretical system, where the supporting structures are: the initial tendency to exchange and egoism in a person. The first leads to the division of labor, the second to the choice of an occupation that will bring a person more income, and this means that a person will specialize in the production of those products that are obtained from him of better quality and at lower costs than those of competitors. Here the figure of the "economic man", rational and self-interested, is drawn, who will become the central figure of economic research in the next two centuries. But among the classics, the model of an economic man applies only to entrepreneurs.
The rationality and morality of man are still blown hand in hand in Smith, and this belief in harmony permeates all his economic theory with optimism. This also manifests itself in perspectives. economic growth and capital accumulation and the relationship between classes. Considering labor as the only source of wealth for a nation, Smith considers the growing demand for it to be the most indisputable evidence of the prosperity of any country. Naturally, wages also rise. Smith writes about this, - “Generous wages are both an inevitable consequence and a natural symptom of the growth of national wealth ... To complain about it is to mourn the necessary consequences and causes of the greatest social welfare” * 1 *
But isn't the rise in 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 leads to a decrease in labor costs per unit of output, which more than compensates for the increase in the price of labor, thereby increasing profits. The growth in 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 provides an increase in the real wealth and income of the inhabitants of the country. Do we still need proof of the harmony of interests of all classes of society?
Smith's merit in the formation of classical political economy is indisputable, but not only to him it owes 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 prominent English economist - D. Ricardo, it was in his works that political economy acquired the features of 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 also a man who made a huge contribution to the development of classical political economy. D. Ricardo investigated 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 expounded his views most fully in The 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.
* 1 * Anthology of economic classics. T. 1.M., 1993, p. 148.
However, Ricardo's original sphere of interest was in the field of monetary circulation research. And here, considering his views, one cannot but mention the contribution of Ricardo to the development of the problems of monetary circulation. According to Ricardo, the stability of monetary circulation, which is essential condition economic growth can only be provided 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 this is why Ricardo is considered the ideologue of the “gold standard”. Speaking as a consistent supporter of the quantitative 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 release into circulation.
But let us return to The Principles of Political Economy. Ricardo shares Smith's position that the wealth of a nation is a product of material production, and the main source of social wealth is labor. However, being more consistent than Smith in the development of the labor theory of value, Ricardo argues that value is determined exclusively 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 sum of wages, profits, and rent, Ricardo argued that value does not consist of these components, but decomposes into them. Thus, the primacy of value was recognized in relation to these forms of distribution. 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, it changes the ratio of wages and profits in the value of the product. According to Ricardo's views, wages and profits can change only in the opposite ratio, therefore Ricardo's theory was often called "the 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 a special generosity of nature, but applied labor. And in this matter, 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 in agriculture, not only man (as in industry) works and creates a product, but also 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 completely different positions. The basic premise of his theory is the belief that when a country has an abundance of fertile land, a small proportion of which needs to be cultivated, rent does not exist, because no one will pay for the use of land if it is available in unlimited quantities and of the same quality. (This corresponds to the general laws of supply and demand). But when, in the course of the development of society, with the growth of the population, land of a worse quality or less conveniently located (let us call it land of the second category) comes into cultivation, rent immediately arises on the land of the first category, the value of which will depend on the difference in the quality of these two plots. And so with each increase in population, when the country resorts to the use of land of inferior quality, rent will rise from more fertile areas of land. It follows from this that rent is the result not of generosity, but of the special avarice of nature and limited resources * 1 *.
* 1 * Ricardo writes that the special advantage of the land (in Smith's theory of rent) is precisely the property that should be considered its disadvantage in comparison with the natural factors used by the factory owners. If air, water, vapor pressure were inhomogeneous in their qualities, if they could be turned into property and each category were available in limited quantities, then they, like earth, would give rent as the lower categories are used.
But how does Ricardo's theory of rent relate 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 - the marginal areas where marginal capital investments are made. The surplus of products obtained on the land of better quality is the rent paid to the owner of the land. According to Ricardo's views, high rental payments are a consequence of high prices for agricultural products, which forces the use of land of inferior quality into circulation. And since the regulator of the price of agricultural products is the product produced with the greatest labor input, then rent, according to Ricardo, cannot be included as a component in 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 of society. It all comes down to the fact that one class gets benefits at the expense of another.
Finishing the consideration of Ricardo's theory of rent, with certain reservations, we can say that it was a special case of the theory of limiting values, which are the basis of modern microeconomic analysis.
In the field of the theory of wages, Ricardo consistently pursues Smith's idea that its size should be regulated by free market competition and should not be controlled by government laws. The demand for labor, like the demand for any other commodity, necessarily regulates the production of people and wages will not fall below the level at which the worker race would become extinct after the first generation. Developing the views of A. Smith, Ricardo believed that wages are reduced to the cost of the means of subsistence of the employee and his family, however, unlike Smith, he believed that wages are kept within the strict limits of the subsistence level by virtue of the so-called natural law of population, on which we will dwell in more detail, considering 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 which is necessary for workers to have the means to reproduce without increasing or decreasing their number (a kind of equilibrium price that ensures a stationary level of the population). The natural price depends on mores and customs * 1 *. If the price of labor falls below the natural price, the situation of the workers deteriorates significantly and "becomes extremely sad." Only after deprivation, depriving them of those comforts that habit makes absolutely necessary, reduce their number, the market price will 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 surplus 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, recognizes that in a progressive society (in a society where capital will gradually and constantly grow) can be higher than natural for an indefinite time * 2 *.
D. Ricardo developed A. Smith's theory of foreign trade, supplementing it with the theory of “comparative production costs” (otherwise it is also called the theory of “comparative advantages”). Unlike A. Smith, who attached decisive importance in explaining the patterns of development of world trade to the magnitude of absolute costs, D. Ricardo believed that absolute costs are not necessarily a prerequisite for international exchange.
* 1 * Ricardo notes that the natural price of labor varies at different times in the same country and varies very significantly across different countries, since even the dwellings and clothing needed in one country may not be needed at all in another.
* 2 * Like Smith, Ricardo recognizes the beneficial effects of capital accumulation on workers.
National states, according to D. Ricardo, receive an economic effect through the production and export of goods, which are relatively cheaper for them, and the import of goods that are produced abroad relatively cheaper than domestically. He explains this principle on the example of the cloth and wine trade between Portugal and England. In this case, it is assumed that trade is carried out on an equivalent basis. Even if the production costs of cloth in England are somewhat 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 the principle of A. Smith's absolute costs, such trade does not make sense for Portugal, therefore that it is not beneficial to her). Let's say 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, gets an effect in the amount of 2900 (3000 - 100) units and will be able to buy a much larger amount of cloth for this amount than if it produced it itself. At the same time, the benefit of England is that by selling cloth to Portugal, she will buy for this cloth a much larger amount of wine than if she herself produced it.
Countries specializing in the production of goods in which they have relative advantages can produce them in much greater volume and better quality in order to export these goods to other countries, at the same time they have the opportunity to obtain through imports those goods that are not produced domestically. countries and import goods whose production costs within the country are extremely high.
Specialization based on the principle of comparative advantage and based on 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 costs.
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 the views on the problem of capital accumulation and the prospects for economic growth. Showing complete unity with Smith in the fact that the source of the 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 initial premise of reasoning in Smith and Ricardo is the same - an increase in the amount of capital accumulation increases the demand for labor, thereby leading to an increase in the wages of workers. But if, in Smith's work, wage growth primarily increases industriousness, then, according to Ricardo's views, high wages encourage workers to reproduce, as a result of which the supply of labor rises and wages again fall to the “natural” price determined by the subsistence minimum. But what is the connection between the mechanism for fixing wages and the problem of accumulation? The most direct one. The 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 in turnover the land of inferior quality, where production costs are higher. 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 is, according to Ricardo, a deduction from the value of the product created in society, it can only increase by reducing the other parts into which value is split: profit and wages. Consequently, as a result of the growth of rent, which is a consequence of population growth, profit has a natural tendency to fall, which cannot but be an obstacle to capital accumulation * 1 *.
* 1 * It is no coincidence that Ricardo was an active supporter of the abolition of high import duties on grain. While acknowledging that landlords will suffer losses in this case due to lower rents, Ricardo notes that they will be more than offset by the increase in the wealth of other classes. It is also understandable why he advocated the repeal of the Poor Law. In his opinion, support for the poor stimulates their birth rate, with all the ensuing economic implications... Moreover, the result of the "Law on the Poor" will be the withdrawal of part of the income from hardworking workers and part of the profits of the capitalists, which could be directed to the expansion of production. Ricardo predicts that as a result of such a policy, the sums for the maintenance of the poor will progressively increase until they absorb the entire net income of the country.
The proposition that labor is the only source of value, and the latter breaks down into wages, profit and rent, where 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 society of different classes. However, from Ricardo's point of view, the state should not interfere with production, exchange, or 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 part of the capital, then the result 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 the lower tax”.
Of interest is Ricardo's argument for taxation as opposed to borrowing as a way of financing the war. The classic argument against public debt has been fully developed: public debt leads to capital flight, and deficit financing reduces private savings. Thus, the burden of debt is not so much an annual interest payment as a 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 some of its provisions 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.
The founder of classical political economy was the English mercantilist William Petty. For the first time, back in 1662, he clearly and unequivocally declared that the source of all wealth is labor. Thus, economic thought re-opens the forgotten idea of Aristotle. At the same time, W. Petty distinguished two sides of the price: one, constantly changing depending on the market situation, - the market price, and the other - natural, not changing after production - the value of the goods. W. Petty is scientifically consistent. In the future, in all his works, he proceeds only from the position that labor is the content of value. He writes that the basis of the exchange proportions in which grain is exchanged for silver is the labor expended on their production. This shows that the value of bread depends on the productivity of labor in the extraction of silver, but this simple logic led him to the general assumption that only labor in the extraction of precious metals produces value. And yet, in the end, he makes the absolutely correct conclusion that "the difference in the types of labor does not matter here - everything depends only on the working time."
W. Petty combined two hypostases: the mercantilist and the classic of political economy. "The main and final result of trade is ... an abundance of silver, gold and precious stones, which are imperishable and not so variable in price ... Therefore, the extraction of these values ... is more profitable than anything else." According to U Petty, money has a value especially for the development of production.
At the same time, dividing natural and market prices in a commodity, he writes: “The appraisal of all objects should be brought to two natural denominators - land and labor. We should have said: the value of a ship or a frock coat is equal to the value of such and such an amount of land, such and such an amount of labor, because both the ship and the frock coat are produced by land and human labor. "
The merit of Petty is also in the definition of land as a special commodity that is not a product of labor. Consequently, the price of land should be determined by the income that it brings, i.e. rent. Thus, the price of land is equal to: annual rent X 21 years (the period of change of one generation of people at that time).
Petty's name is associated with the remarkable idea that the wealth of the state (sovereign) is the wealth of all its subjects, since the wealth of the former is a derivative of the latter, as well as the methods of calculating rational income. He described in such detail the latter that economists consider U Petty to be the creator of economic statistics.
W. Petty made a great contribution to the theory of money. He defined money as a commodity of labor origin, for which reason they are the universal equivalent. Consequently, the value of money itself depends on the amount of labor expended in its production. For the first time in economics, W. Petty put
the question of the amount of money required in circulation, and although he did not solve this problem, the merit of defining and posing it belongs to him. After all, it is known how often the solution of a question depends on its correct formulation.
A special place in the development of economic science belongs to Adam Smith (1723-1790), an outstanding English economist, a classic of political economy. A. Smith's special place in economic science is determined by the fact that he was the first to set out economic theory as an integral science, in the interconnection of all its elements.
Developing the economic theory as a whole and relying on the labor theory of value, A. Smith discovers two sides of the commodity: value and use value (utility) and points out the differences between them. An important step in the development of the theory of value was his differentiation between simple and complex labor, and, consequently, the determination of the basis for comparability, commensurability of various forms of labor.
A. Smith highly appreciated the importance of division of labor and specialization as factors in the development of productive forces. The division of labor makes labor more productive and therefore more efficient. On this basis, he developed the theory of comparative advantage and eventually came to an ingenious conclusion in the theory of exchange. According to A. Smith, exchange is both equivalent and mutually beneficial. Consequently, not only value equivalents can be exchanged, but also the same, subjectively estimated, utilities. The fact is that, according to A. Smith, in exchange, a person is not interested in how much the purchased goods cost, but in how much they can save their own labor. After all, if you do not buy this product, then you can spend much more on its production.
A. Smith defined, in modern terms, the institutional, objective and subjective conditions for the effective development of the market system.
1. The state must guarantee the inviolability of property, both its own and, especially, citizens. Property is a guarantee of sustainability and stability of society. The state collects taxes from citizens precisely for this in order to fulfill its obligations to them. At the same time, A. Smith formulated the principles of taxation: proportionality, certainty (when and how much), convenience and minimalism (taxes are needed only to cover the needs of the state).
2. Each business entity must strictly and honestly fulfill its obligations, because trust in each other and all business entities in the state becomes a powerful economic force.
V- 3. A citizen, an economic entity, must be completely free in the choice of place, time, branch of production. Nobody and nothing, except for objective economic laws, should influence it.
According to A. Smith, these conditions are quite enough for the existence of the market.
A. Smith carefully develops the concept of the "natural" price of a product, to which the market price tends as a result of competition. Similarly, the natural rates of wages, profits and rent also determine the natural price of goods, since it is they that constitute its content.
A. Smith made a significant contribution to the development of the theory of money circulation, bank capital, he determined that with the development of technical progress, the rate of profit tends to decrease.
The theory of comparative advantages in international trade and the development, in this regard, of the foundations of the country's balance of payments, brought fame to A. Smith.
One of the most significant discoveries of A. Smith consists in his determination of the value of labor power and its differences from the value that this labor power creates. A. Smith almost came close to solving the mystery of the production of surplus product and surplus value, for he concludes that the value created by labor power is greater than the value of the labor power itself, therefore, goods are exchanged not just in proportion to the cost of labor, but in proportion to the cost of production. The return on capital is generated by the worker and the capital. In other words, it represents the additional value that arises in the labor process through the efforts of the employee.
The enduring fame of one of the best economists of all time, A. Smith, was brought by the general theory of the market, especially in terms of the mechanism of its functioning. He convincingly substantiated the position that each business entity, pursuing its own personal goal, thereby achieves the fulfillment of social goals. His idea of the “invisible hand of the market” is nothing more than an explanation of the self-regulation mechanism of the market system. “We expect to receive our lunch, not because the butcher, brewer and baker are supportive of us, but because they care for their own benefit ... Each individual continually endeavors to find the most beneficial use for whatever capital he has. disposes. In an effort to extract from this production the product of the greatest value, he pursues only his own goal, and in this case, as in many others, he is led by an invisible hand, leads to a result that has nothing to do with his intentions. " hands ”of market incentives, directing the activities of people in such a way that they would benefit everyone, is, according to economists, the most significant contribution of A. Smith to economic science, because it, in essence, means that no one can achieve well-being, cannot to acquire wealth if he has not previously satisfied some social need A. Smith here clearly and clearly formulated the capitalist ideology: "the natural desire of every person to improve his position" will protect and realize public interests by itself, spontaneously, independently of anyone.
Classical political economy was further developed in the works of David Ricardo (1772-1823), an English economist. He cleared economics from many of the errors of its predecessors and freed the labor theory of value from internal contradictions. Economic theory appears in D. Ricardo in the form of a consistent, logical concept. First of all, the analysis of D. Ricardo is characterized by objectivity. He was the first to characterize the concept of socially necessary labor costs as opposed to individual ones and substantiated that value is determined precisely by them. So he came close to the discovery of the law of value.
An essential contribution of D. Ricardo to economics was also the explanation of the processes of transferring the value of means of production to the finished product. He showed that living labor is involved in the process of creating value, but the transferred value of the means of production is also included in the value of the finished product.
D. Ricardo's contribution to the development of the theory of rent is great. He defines rent as "the share of the product of the land that is paid to the landowner for the use of the original and inviolable forces of the soil." It is very important that "rent is paid for the use of land because the amount of land is not unlimited ... When, with the development of society, land of the second fertility category comes into cultivation, rent immediately arises on the land of the first category." D. Ricardo quite rightly asserts that rent arises from the limited land, due to which the fertility of the land tends to decrease. But society cannot feed itself without involving more and more bad lands in the economic turnover, and therefore it is obliged to reimburse the costs of production on these lands. Consequently, the price of agricultural products, in contrast to industrial ones, is determined by the conditions of production on the worst lands.
D. Ricardo is a very unusual predecessor of T. Malthus, although he was his contemporary. He believes that "the rate of profit is gradually falling due to higher wages and the increasing difficulty of supplying the growing population with basic necessities." Therefore, according to D. Ricardo, "the natural price of labor is that which is necessary for workers to be able to exist." That is, since wages are always a deduction from the capitalist's profits, they should strive to a minimum. It is highly illogical for a person who has become the pinnacle of classical political economy and who considered wages as the price of labor. And what does the cost of living have to do with it, if the amount of wages is determined, in the opinion of Ricardo himself, by the cost of labor?
In addition, D. Ricardo solved many specific economic problems. From calculating the economic efficiency of international trade and the theory of comparative advantage to ... determining the infamous "minimum wage." Or the cost of living.
And finally, the merit of D. Ricardo lies in the fact that he presented political economy in a strict logical sequence, in a systemic form, at the level of development at which it was in his time. This can be seen from the title of his main work, “The Principles of Political Economy and Taxation.” D. Ricardo's theory is the pinnacle of classical political economy.
“On the whole, in the history of economic thought, Ricardo is just as great a figure as A. Smith. But these figures themselves are very different. “The Wealth of Nations” contains more essential deep generalizations, but “Beginnings ...” laid the foundation for a model approach to the construction of economic theory. As a strict and consistent theorist, able to obtain non-obvious conclusions from the analysis of the relatively simple models proposed by him, Ricardo (with the possible exception of Keynes) still has no equal among all economists ”1. And it is difficult to disagree with this definition of D. Ricardo's talent.
Studied issues
A. Smith's book "Research on the nature and causes of the wealth of nations", its content and structure. A. Smith's doctrine of exchange and money. A. Smith on the factors of the wealth of the people.
A. Smith's theory of value. Theory of income: wages, profits, interest, rent. The theory of capital, its structure and reproduction. D. Ricardo's theory of value.
The theory of wages and profits by D. Ricardo, trends in the movement of wages and profits in the capitalist economy. The theory of land rent D. Ricardo.
Theoretical provisions
A. Smith (1723-1790) - an economist who generalized the ideas of the manufacturing period of production at the stage of transition to the industrial revolution. He critically interpreted the end of the era of mercantilism and created the political economy of industrial capitalism. The main work of A. Smith - "Investigation of the Nature and Causes of the Wealth of Nations" (1776), in which he summed up the century-old development of the classical school of political economy, which began with W. Petty. A. Smith's work consists of five parts: the theory of value and distribution of income; capital and its accumulation; feature article economic history Western Europe; criticism of mercantilism and presentation of views on economic policy; state finances.
Smith's doctrine was based on the concept of economic laws that act like the laws of nature and determine the development of society. He was close to the idea of "natural harmony" (equilibrium), which, as he believed, spontaneously established in the economy in the absence of external (state) intervention and is the optimal mode of functioning economic system.
It is Smith's merit that he was the first to define the twofold task of political economy as a science: conducting an abstract analysis
objective economic reality and, on the basis of the findings, preparation of recommendations for the implementation of the economic policy of the company, the state. As an analyst, Smith was able to penetrate into the inner connection of the phenomena of capitalism and make a number of scientific generalizations. Smith took the labor theory of value as the basis for explaining all the phenomena of the capitalist economy. Rejecting the idea of the physiocrats about the exclusive nature of agricultural labor as productive labor, he put forward the thesis that value is created by labor independently of the branch of production. Smith spoke of industrial profit as the main form of unearned income based on ownership of the means of production. Since he viewed profit (as well as ground rent) as a kind of deduction in favor of the owners of the means of production from the total value of the product created by labor, he came closer to understanding the surplus product.
Smith put forward the concept of value determined by the purchased labor, that is, in essence, wages, and then - the idea that the value of the product produced is the sum of the three main incomes received from its sale - wages, profits and ground rent. This concept of value was the starting point for the theory of factors of production.
In the doctrine of capital, Smith considered capital as a factor entailing a deduction in the form of profit from the total value of a product. Smith's interpretation of the categories of the main and working capital, which he developed in polemics with the Physiocrats. At the same time, Smith considered capital a natural and eternal category, understanding by it any stock of material goods, regardless of social conditions and relations.
In the theory of reproduction of the social product, Smith made an important distinction between gross and net national income. By gross income, he essentially understood the aggregate social product in value form (including repeated counting of raw materials and materials), and by net income, the consumption fund as such (the consumption fund together with the accumulated part of income). However, reducing the value of the aggregate product to income and ignoring the compensation fund was a step backwards in comparison with the theory of reproduction by F. Quesnay and made it difficult to further analyze the problems of reproduction and economic growth by representatives of the classical school of political economy.
Smith's teachings had a great influence on the development of economic thought in Western Europe. At the end of the 18th and the beginning of the 19th centuries. it spread widely in Great Britain, France and other countries, including Russia. Smith's progressive, anti-feudal, humanistic ideas contributed to their popularity.
In economic theory, Smith's closest successor was Ricardo, who completed the creation of classical political economy. D. Ricardo (1772-1823) - English economist who continued to develop
theoretical foundations the concept of the classical school, overcoming some of the shortcomings of the teachings of A. Smith. Ricardo's writings represent the pinnacle of English classical political economy.
The first economic works of D. Ricardo were devoted to the issues of money circulation and currency (1809), in 1817 his main theoretical work "Principles of Political Economy and Taxation" was published. Ricardo's 32-chapter book is divided into three parts: the foundations of economic theory (value and income); theory and practice of taxation; his views on a number of specific problems and analysis of the concepts of A. Smith, T. Malthus, J. Say. The main theoretical provisions of Ricardo's teachings are given in the first two chapters of the book, to which he subsequently made significant additions.
Ricardo defined the subject of political economy as economic relations people forming social classes. He considered its main task to study the laws underlying the distribution of national income between the main classes in the form of wages, profits and land rent. Applying the method of scientific abstraction, Ricardo formulated the law of labor value as the most general regulating principle of economics and sought to reveal the compatibility of economic phenomena with this principle. In the theory of distribution, Ricardo revealed the opposition of the economic interests of different classes and from this he deduced that a general increase in the level of wages leads to a decrease in the general rate of profit and vice versa. He believed that the wages of workers are "naturally" determined by the value of the means of subsistence. Based on the theory of population of Malthus, Ricardo believed that the value of wages is kept within the physical minimum by virtue of natural law.
The most important part of Ricardo's economic doctrine is his theory of rent, in which the mechanism of differential rent was first revealed. In the theory of money, he tried to reveal the mechanism of monetary circulation, the relationship between gold and paper money, the phenomenon of the depreciation of the latter. He owns the theoretical substantiation of the need for the development of the economy of the gold standard in combination with the exchange of banknote circulation. An important place in his teaching is occupied by the issues of foreign trade, the world market, and the currency mechanism.
Questions for self-examination on topic 2.3
- Why does A. Smith begin his research with the division of labor and what is the meaning of the term "invisible hand"?
- What definitions of value does A. Smith give?
- What does A. Smith understand by "natural price" and "market price"?
- Expand the content of the concept "A. Smith's dogma".
- How does D. Ricardo define value, money and profit?
- Give a description of land rent according to D. Ricardo.
- How did D. Ricardo define the essence of capital?