NeoRicardianism

NeoRicardianism is a school of economic thought that emerged in the mid-20th century, drawing heavily on the theories of classical economist David Ricardo. It represents a critique and reformulation of neoclassical economics, particularly concerning its treatment of value, distribution, and capital. NeoRicardians emphasize the importance of relative prices and the distribution of income between wages and profits in determining economic outcomes, rather than the marginalist principles central to neoclassical thought.

A key concept in NeoRicardianism is the critique of the neoclassical theory of capital. NeoRicardians argue that aggregating diverse capital goods into a single measure of capital is problematic, leading to paradoxes such as the reswitching of techniques, where a more capital-intensive technique becomes profitable at lower interest rates, and then again at even lower interest rates. This challenges the neoclassical notion of a stable relationship between the rate of profit and the amount of capital employed.

The NeoRicardian approach focuses on the analysis of surplus. They contend that in a capitalist economy, a surplus is generated over and above the cost of labor and means of production, and the distribution of this surplus between profits and wages is a fundamental determinant of economic activity. This perspective aligns with Ricardo's concern for the distribution of wealth among different social classes. Notable figures associated with NeoRicardianism include Piero Sraffa, Luigi Pasinetti, and Ian Steedman, who have contributed significantly to developing its theoretical framework and applying it to various economic issues.