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I refer to Tim Davis's extraordinarily insightful editorial on 
Ricardo's policy prescriptions made during the recessions which 
followed the Napoleonic Wars. He makes the startling point that 
Ricardo correctly assessed the nature of the economic problems 
Britain was dealing with at the time and provided policy advice 
that correctly addressed the problems as they actually then were. 
 
Why this has become a controversial position is largely because 
of the near universal belief that Ricardo held, as Davis states, 
"a dogmatic version of the law of markets in the face of evidence ... contradicting that
theory. His apparent use of an extreme version
of Say's Law leaves authors sympathetic to him perplexed." What 
makes Davis's article so compelling is that he has gone through 
contemporary accounts of the actual events as they unfolded to 
demonstrate that Ricardo, far from being trapped by an 
inadequate and rigid theoretical structure, was in fact perfectly 
attuned to the economic problems of his time. 
 
The reason Ricardo is looked down upon in the way he has been is 
because his name was blackened by Keynes in the opening pages of 
the General Theory. Ricardo was said to have been responsible for 
economists having adopted Say's Law from the early years of the 
nineteenth century down through until 1936. Their adoption of 
Say's Law had meant, so Keynes wrote, that economists were unable 
to understand the nature of recessions or provide advice on how 
unemployment could be brought to an end. At the same time, again 
according to Keynes, Malthus's views had been rejected by an 
economics community too dense to understand what Malthus had been 
saying about the causes of the post-Napoleonic War depressions 
and about what actions were needed to hasten recovery. All this 
is part of the founding mythology of the Keynesian Revolution 
which remains largely in place to this day. 
 
So if I could, I would make a number of points which take up, 
from a different perspective, the argument being made by Davis. 
The first and primary point is that the modern textbook version 
of Say's Law - the Say's Identity/ Say's Equality version - is 
a completely nonsensical depiction of what the law of markets 
really meant to classical economists. But why take my word for 
it? This was also stated by William Baumol who in 1952, along 
with Gary Becker, invented this modern straw man caricature of 
Say's Law, ironically in an article which was, in reality, a 
defence of classical monetary theory against Keynesian attacks. 
The following is a quote from Baumol taken from my book, Say's 
Law and the Keynesian Revolution (Elgar 1998, page 192-93). Here 
Baumol makes it abundantly clear that Say's Equality and Say's 
Identity provide no insight whatsoever into what classical 
economists actually believed: 
 
"All of the writers, Say, Mill, Ricardo, etc., said some things 
that sound like either 'Say's identity' or 'Say's equality', and 
mean something related to one or another of them. However, my test 
of whether a particular author meant something that is attributed 
to him or her is the following imaginary experiment: Consider a 
James Mill brought back to life, and read to him what Keynes 
attributed to him, and also the Becker-Baumol passages defining the 
identity or the equality. Give Mill a choice of the following 
comments (a) 'This is just what I meant.' (b) 'This is certainly 
not what I meant.' and (c) 'Did I say that? - I'm not even sure 
I understand what you are talking about.' I am reasonably confident 
that Mill and the others would not select either (a) or (b) and 
that they would very likely choose (c). This is in contrast, say, 
with Marx, who would unambiguously select (b) (with some expletives) 
if told he believed in 'the iron law of wages', while Dupuit 
would surely say that modern interpreters have his views on consumer's 
surplus right." 
 
This is no minor matter. Ricardo has been accused of adopting a rigid 
version of the law of markets when in fact no classical economist 
accepted anything so ridiculous. No classical economist of consequence 
ever accepted either Say's Identity or Say's Equality as a valid 
statement of how an economy actually worked. Ricardo cannot be tarred 
with this brush. 
 
But what Davis has uncovered goes even deeper. What every classical 
economist of consequence accepted was that recessions were never 
caused by there being too little demand. That was the precise and 
practical meaning of the law of markets to classical economists. This, 
too, was underscored by Ricardo in a letter to Malthus dealing with 
the law of markets (October 9, 1820). Ricardo wrote, "men err in their productions, there
is no deficiency of demand" (Ricardo 1953-71,
VIII, page 277). He was here not denying the existence of recessions but explaining how
they came about.
 
Davis has looked into the nature of the recessions which followed the 
Napoleonic Wars and has uncovered, firstly, that there were four separate 
recessions, not just one, and, secondly, that none of the four can be 
attributed to a failure of demand. Moreover, when Davis explains the 
causes of the manufacturing and trade recessions, he argues that they 
were due to "a significant dislocation of capital". That is, the 
existence of these recessions could be explained by the basic pre- 
Keynesian framework for understanding recession, a fault in the 
structure of production. None of it was due, as Davis writes, to "a 
lack of aggregate demand" or a "chronic lack of consumption". 
 
Yet it was upon Keynes's polemical attack on Ricardo at the very 
start of the General Theory that the most profound revolution in 
economic theory has been based. As it turns out, however, it was 
Ricardo rather than Malthus who was right, not only about the nature 
of the recessions through which both he and Malthus lived, but also, 
and more importantly, about the validity of the law of markets 
which helped economists for more than a century understand 
what they saw. 
 
It nevertheless remains the judgement of textbooks to this day that 
Ricardo, one of the finest minds every associated with economics, 
had been unable to understand the nature of the recessions which he 
lived in the midst of. What Davis has done, in providing a detailed understanding of the
actual economic circumstances of Ricardo's time,
is provide additional evidence that the Keynesian Revolution was 
built on a false premise which has implications not just for the 
history of economics, but for the very nature of economic 
theory itself. 
 
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