On the Role of Demand in Ricardo and Marshall

Abstract

The present note is a development of a paper I presented some four years ago at the 1987 meeting of the History of Economics Society (Caravale 1987), and that was later published in Rivista di Politico Economica in an expanded version (Caravale 1988). The aim of these two writings was to emphasize that—contrary to what is often maintained—demand conditions play a fundamental role in classical and classical-type theories. This role is different from that played by demand in neoclassical theories (where equilibrium prices are determined by demand and supply functions), and is so to speak “internal” to the theory of natural equilibrium since it is connected with the definition, for each situation, of the Smithian “point of effectual demand.” Before turning to the specific object of this note, let me recall very briefly the main points of the general thesis developed in the above-mentioned papers.

Alfred Marshall, autor del siglo XX: desempleo involuntario, monopolio, amortización acelerada, competencia por nuevos productos e intervención estatal orientada a alcanzar el producto máximo

“…[…] De ese modo, se extiende la desorganización comercial: la de una industria desorganiza a otra, y así sucesivamente". (Marshall, 1963, p. 583) 6 En este pasaje, Marshall, al igual que Marx, critica la formulación de Mill de la Ley de Say en la medida en que las ganancias de los capitalistas -ventas-no se traducen necesariamente en nuevas inversiones -compras-, dando lugar al referido espiral recesivo por déficit de la demanda agregada 7 (Marshall, 1963, p. 583) 8 . La crisis comienza en la producción de bienes de capital y se extiende a todos los sectores.…”

The Relevance for Present Economic Theory of Economic Theory Written in the Past

“…Giovanni Caravale, however, noted the classical concept of equilibrium as a center of gravity (Caravale 1991, pp. 175, 179-81) and used that idea to construct his own view of the behavior of the economy (Caravale 1994). W. Hildenbrand and A. P. Kirman (1988, p. v) asserted that they drew their inspiration from two neoclassical economists, developing "solutions or themes" that were "due to Walras and Edgeworth."…”