On Some Tendencies in Modern Economic Theory [1949]

An inevitable result of the refinement of the scope of economic theory has been to exclude a large tract of economic territory which to any realistic view is of great importance for understanding the economic shape, and especially the larger movement, of society. Of a separate theory of distribution modern economic theory contains even less, whatever label may be used. It is hardly surprising in the circumstances that modern economic theory should have abandoned the attempt to provide a theory of distribution: a problem which Ricardo had regarded as central to economic enquiry. The two value theories which can lay claim to fulfil the condition that has just been mentioned are the classical Labour Value Theory of Ricardo and Marx and the modern Utility Theory. True, modern price theory gives an appearance of saying something more: of explaining an exchange ratio in terms of something outside the exchange transaction itself—namely, a demand curve, or schedule of demand prices.