Page "On the Principles of Political Economy and Taxation" Paragraph 2

In his book Adam's Fallacy: A Guide to Economic Theology, ecomonist Duncan K. Foley highlights that in the Principles Ricardo criticizes Adam Smith's treatment of the theory of value and distribution for circular reasoning, in particular as far as concerns rent, and that Ricardo considers the labor theory of value, properly understood, a more logically sound basis for political economic reasoning.

Foley briefly discusses also the chapter On Machinery, which Ricardo included in a revised version of the Principles and in which he discusses the impact of the adoption of machinery on the different classes of society, revising his earlier view that mechanization could be expected to be of benefit to each of the classes of the society.

The increase in productivity due to mechanization lowers the production costs and thus also the real prices of commodities.

Whereas the landowning class and capitalists benefit from the lower prices, workers in contrast do would not reap such benefit from the lower prices if capitalists reduce the wage fund in order to finance the expensive machinery, lowering employment among workers.

In this case, Ricardo points out, wages are forced down by competition among workers, and the introduction of new machines can lead to an over-all decline in the well-being of the working class.