Notes on Ricardo’s theory of value and taxation

The purpose of this paper is twofold: on the one hand is to discuss Ricardo’s version of the labour theory of value; and on the other hand, is to analyse some crucial aspects of Ricardo’s theory of taxation as an extension and further elaboration of his theory of value. This discussion is illustrated with the use of a formal model based on a generalisation of Ricardo’s numerical examples. The claim that the paper raises is that Ricardo’s analysis of taxation is a kind of a comparative statics exercise, where the real wage, the state of technology and the level of output are taken as givens. Furthermore, it is shown that Ricardo’s claim that money’s role in the presence of taxation of profits is not neutral becomes questionable, when various feedback effects are accounted for.