Emil Kauder, Review of Progress and Profits in British Economic Thought 1650–1850, by G. S. L. Tucker (1959)

Emil Kauder’s book review evaluates Tucker’s history of British explanations of declining profit rates, concentrating on its reinterpretation of Ricardo and its recovery of John Lalor as a precursor of Keynesian reasoning. Kauder considers these substantial contributions but disputes Tucker’s account of Ricardo and finds the book’s organization and historical contextualization inadequate. The review moves from the scope of Tucker’s survey to its principal theoretical discoveries, then closes with an assessment of its historical method. Its governing question is how economic progress could increase wealth while reducing the return on capital.

Most of the writers have agreed that increasing wealth is linked up with a fall in the rate of profit.

For Kauder, this recurring proposition gives continuity to a history whose explanations change with knowledge of market mechanisms and business conditions. Tucker follows the debate from early mercantilists, including Child and North, through Cantillon, Hume, Massie, Turgot, and Smith, to Ricardo, Malthus, and Lalor. Much of this material had already received repeated attention since Marx’s Theories of Surplus Value. The book’s novelty lies particularly in evidence drawn from Sraffa’s Ricardo edition and Lalor’s Money and Morals. Kauder therefore devotes most of the review to what these sources add, rather than treating every figure in the survey equally.

The central controversy concerns whether Ricardo’s falling profit rate describes a temporary adjustment or a long-run tendency. Earlier writers had recognized that rising money incomes could depress profit and interest rates when they enlarged savings rather than consumption. In Tucker’s interpretation, Ricardo adds the effects of diminishing returns, capital growth, and population, but eventually restricts falling profitability to the short run. Capital accumulation can strengthen workers’ bargaining position and raise money wages. Under the labor theory of value, this wage increase does not raise commodity prices, since production embodies no additional labor; instead, it reduces profits.

Tucker’s Ricardo then supplies mechanisms that reverse this pressure. Capitalists substitute machinery for workers, reducing labor demand, while higher wages encourage marriages and increase labor supply. Wages consequently fall and profits recover. In the eventual long-run configuration, capital and labor supply grow at the same rate, leaving profitability comparatively unaffected. Kauder acknowledges Tucker’s extensive textual support without accepting this reconstruction.

Although Tucker backs up his very interesting interpretation with many quotations I still prefer John Stuart Mill's interpretation.

Kauder’s objection turns on agricultural productivity, not merely on wage bargaining. Even proportional increases in capital and population enlarge the demand for wheat. Cultivation must extend to less productive land, and money wages must rise to maintain workers’ commodity wages. Profits therefore decline over the long run. Mill’s interpretation, in which Ricardo does envisage such a decline, better preserves the causal importance of diminishing returns. Kauder also argues that Malthus’s summary of Ricardo makes sense only if Ricardo is addressing a long-term tendency. The disagreement thus concerns whether adjustments in labor supply and demand can neutralize the pressure exerted by increasingly costly food production.

The review next explains Malthus’s distinction between the limitation and regulation of profit. Industrial productivity limits the possible size of profit, but the discrepancy between the value of inputs and outputs regulates its actual level. When capitalists fail to consume their share of output, consumer goods become abundant, prices fall, and profitability contracts. Excessive saving also accelerates capital accumulation beyond profitable requirements. These connected processes produce a different account of economic distress from Ricardo’s wage-profit opposition.

It is not low profits and high money wages that are linked together, as Ricardo assumed, but low profits, falling wages, and unemployment.

Kauder treats this conjunction as an important but limited anticipation of Keynes. Following Tucker, he stresses that Malthus’s excessive accumulation includes investment as well as saving: it does not yet establish the distinction between the two that matters for Keynesian analysis. The review consequently resists identifying an earlier theory with a later one simply because both connect accumulation with distress.

Lalor provides the stronger conceptual anticipation. He distinguishes money saving from opportunities for profitable investment and argues that savings can outgrow those opportunities. The surplus feeds speculative bursts; subsequent crises are aggravated by further money saving, while unproductive investments destroy savings and lower the profit rate. Kauder therefore places Lalor closer to Keynes than Malthus, while noting that Lalor apparently was unknown to the author of the General Theory. The resemblance establishes an earlier formulation, not a demonstrated line of influence.

The discovery of Lalor and the interesting Ricardo interpretation are the highlights of Tucker’s book.

This favorable judgment is qualified by criticism of the book’s presentation and historical ambitions. Its unclear organization obscures the main contributions, and Tucker does not consistently distinguish essential arguments from secondary material. More importantly, his promised connection between economic theories and the practical conditions of their countries remains largely at the level of sketchy allusion. Kauder nonetheless recommends the book to historians of economic thought. The review’s significance lies in its combination of openness to new evidence with insistence on conceptual precision: the timescale of Ricardo’s argument, Malthus’s mechanisms of profit regulation, and Lalor’s separation of saving from investment must remain distinct if the history of falling-profit theories is to explain more than a recurring conclusion.