RICARDO'S THEORY OF VALUE

Ricardo was described by Karl Marx as an economist who tended to focus on "production alone," having "defined distribution as the exclusive object of economics," because he "conceived the forms of distribution as the most specific expression into which the agents of production of a . . . society are cast." Marx was not completely correct in his assessment of Ricardo because Ricardo did consider demand in his theories and analyses. Ricardo, however, did not emphasize demand to the same extent that he did production and distribution. Marx was thus correct when he stated that Ricardo's body of theory was heavily related to the problem of distribution and its implications for growth within an economy.

Although Ricardo and Malthus disagreed on many interpretations of economic theory and explanations of economic events, Ricardo "acknowledged his debt to . . . Malthus," with respect to an earlier description by Malthus of the principle of diminishing returns and with respect to Malthus' law of population. Malthus' theory relating population growth with growth in productive capacity was used by Ricardo as a base for his demand increase theory. Ricardo stated that the "rate of profi

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hought, however, that economists were in error when they concluded that Ricardo did not accord a significant role to demand in price theory. Rankin clarifies Ricardo's price theory by examining the Ricardian approach to long-run equilibrium and by examining his theory with respect to rent. Through this approach, he clearly develops a theory which supports his conclusions that Ricardo did accord a significant role to demand in price theory and Ricardo's theories with respect to long-run equilibrium were consistent with those of Adam Smith. In the development of economic theory, there have been three broad approaches to the analysis of value. The first approach concerns general use. The general use theories are based on an assumption that the value of a commodity is related to the functions for which it may be used. The second approach considers production costs and is often referred to as the labor theory of value. The labor theory approach to the analysis of value postulates that value reflects the cost of production, as that cost is measured in terms of absorbed labor. The third approach concerns utility. The utility theory postulates that the final increment in demand and supply determines the exchange value
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Approximate Word count = 2385
Approximate Pages = 10 (250 words per page)