‘ABSOLUTE VALUE AND EXCHANGEABLE VALUE’: A KEY ELEMENT IN RICARDO’S THEORY OF VALUE

Abstract

The article argues that in his last paper Ricardo had arrived at a correct method for determining prices and distribution, which goes beyond the use of the labour theory of value, and therefore raises doubts on the pre-eminent position attributed to the labour theory of value in Ricardo’s thinking after the Essay on Profits, as maintained in Sraffa’s influential interpretation. A reconstruction of the numerical examples developed by Ricardo in that manuscript leads us to maintain that in fact he was determining prices by means of reduction equations, which he had come to view as a valid alternative to the labour theory of value. This appears to be confirmed by Ricardo’s conclusions in the same manuscript: the replacement of the labour theory with the notion of ‘absolute value’, expressing the price in terms of the ‘average commodity’, as provided by the reduction equation. It is also pointed out that Ricardo illustrates his final advance as a transition between two different measures of value, namely from labour embodied to the labour commanded by the commodity conceived as the invariable standard of value, and that in this respect some similarities can be found between Ricardo’s last pages on value and the puzzling passage of Production of Commodities in which Sraffa commutes his standard commodity into the ‘variable quantity of labour’ which the former is able to command.