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

The historical relevance of the issue of bounties on exportation as a policy measure and of its analytical foundations in classical political economy is confirmed in two opposite directions. One goes back to the literature that developed in the years between the fist edition of the Wealth and that of Ricardo’s Principles. The other brings us forward to the years of Sraffa’s publication of Ricardo’s works and of the following revival of interest on Ricardian economics. The scope of this paper is narrower than that of the whole literature developed on this subject in the distant or more recent past but is broad enough to encompass the theoretical foundations underlying Smith’s arguments and Ricardo’s criticisms on that particular issue. After providing a table with a synthetic view of these arguments and criticisms, the paper proceeds by putting forward the counter-criticisms of a fictitious subject called Smith redivivus. Moving from one to the other of these criticisms and counter-criticisms, the paper argues that the divergences between these two authors stem from Ricardo’s initial misunderstanding of money prices for real prices as well as from his peculiar view of the wage-profit inverse relationship. Ricardo’s reconstruction and criticisms of Smith’s arguments are then traced to Ricardo’s neglect or misunderstanding, partly shared by Smith, of the differences between vérité de raison and vérité de fait and between the point of view of an individual and the point of view of society. Smith’s virtual self-defence is eventually focused on the money vs. real, temporary vs. permanent and market vs. natural price of commodities as work done as distinct from the money vs. real, temporary vs. permanent and market vs. natural price of labour as work to be done.