I wonder whether the Ricardian Vice applies only to partial and not general equilibrium. Then Walrasian and Arrow-Debreu models will have to be exempted from it. Although Alfred Marshall said that “when several balls are lying in a bowl, they mutually govern one another's positions” he resorted to models with ‘ceteris paribus’ assumptions. The Ricardian Vice seems to be in that partial equilibrium vein.

First, we find Ricardo talking about some core processes that put the economy in motion toward a state of steady equilibrium (Ricardo’s Principles, Ch. XIX) Displacement from that path are fictions that work themselves out. (A. Lowe, On Eco. Knowledge, p. 72)

Second, Schumpeter brings in the concept of “Ricardian Vice” to characterize the partial equilibrium models. Here are some of his quotes:

“…a famous Ricardian theory is that profits ‘depend upon’ the price of wheat. And under his implicit assumptions and in the particular sense in which the terms of the proposition are to be understood, this is not only true, but undeniably, in fact trivially, so. Profits could not possibly depend upon anything else, since everything else is ‘given,’ that is, frozen. It is an excellent theory that can never be refuted and lacks nothing save sense. The habit of applying results of this character to the solution of practical problems we shall call the Ricardian Vice.” (Schumpeter His. Of Eco. Anal., p. 448)

“…establishing simple relations between aggregates that then acquire a spurious halo of causal importance, whereas all the really important (and, unfortunately, complicated) things are being bundled away in or behind these aggregates.”(Ibid, 637)

“Keynes was Ricardo’s peer in the highest sense of the phrase. But he was Ricardo’s peer also in that his work is a striking example of what we have called above the Ricardian Vice, namely, the habit of piling a heavy load of practical conclusions upon a tenuous groundwork, which was unequal to it yet seemed in its simplicity not only attractive but also convincing. All this goes a long way though not the whole way toward answering the questions that always interest us, namely, the questions what it is in a man’s message that makes people listen to him, and why and how. (Ibid., p. 1137)

It seems to me that the general equilibrium theorists want to establish the Ricardian steady state with a minimal of assumptions and givens. But they seem to be struggling in that endeavor. Their models are not free of assumptions. Increasing returns and uncertainties are usually missing. Future and contingent future market are weakly approached. Equilibrium may be unstable. Assumed preferences are not stable but subject to advertising and the invention of new commodities. They find equilibrium but cannot explain the path to equilibrium. But as Frank Hand puts it, general equilibrium is not “a mathematical crystal, (which) cannot be improved.” He pointed to sequence economies, stochastic equilibria, equilibria relative to information as progressive research. (Frank Hahn, “Equilibrium and Macroeconomics”, p. 141) Hahn has some telling criticism of the Arrow-Debreu framework as well, which we do not take up here.

Lall B. Ramrattan,

Thank you for your supplementary remarks to get the true meaning of Schumpeter's Ricardian Vice.

I have read your paper "A Framework for the Appraisal of economic Crisis," even though very briefly. I could not fully follow your logic in a short time I could afford, but I received a strong impression. Your imagination is really extraordinary. A very few economists can imagine that inclusive framework. I was also impressed by your wide knowledge in economics as well as disciplines other than economics.

If you are doing a research in this way, please join us in the discussions:

Are there any papers or books which examined historical change of the concept "hoarding"?

https://www.researchgate.net/post/Are_there_any_papers_or_books_which_examined_historical_change_of_the_concept_hoarding

Is saving necessarily invested or not? How can this contradiction in Keynes be solved?

https://www.researchgate.net/post/Is_saving_necessarily_invested_or_not_How_can_this_contradiction_in_Keynes_be_solved

Dear Professor Yoshinori Shiozawa,

I thank you for your nice words about my work. Your works are even more important, being at the heart and frontier of economic thoughts and analyses. About your warm welcome to join in your conversations, I will join in from time to time if I can. Meanwhile, keep up the good work.

I made a brief survey on the notion of "Ricardian Vice" and recent related discussions.

Different authors discuss different themes or subjects. Arguments are terribly confused, since some authors and proponents do no distinguish different themes. At least three themes must be distinguished.

(1) Concept of "Ricardian Vice" as defined by J.A. Schumpeter and its appropriateness.

In this regard, Kurz's dictionary article on Ricardian Vice deserves to be consulted.

Ricardian Vice. International Encyclopedia of the Social Sciences. 2nd Edition. pp.241-243.

http://www.uni-graz.at/heinz.kurz/papers/2008_RicardianVice.pdf

Kurz claims that Ricardian Vice originates from Schumpeter's misunderstanding and the alleged "habit of introducing into utterly bold assumptions into already oversimplified representation of the economy and treating these as given" is his invention and reveals Schumpeter's incomprehension.

It is not a good habit to use the term Ricardian Vice in order to indicate overindulgence to abstract model building. I proposed the term Walrasian Vice (See my post to my own question below Why are we all so forgetful? Is the crisis of economics over? 2nd page), but it may indicate too narrow meaning to represent the major cause of present day economics’ serious disease.

Does anybody have a better term?

(2) Overindulgence in abstract model building as an etiologic cause of the modern economics

The lack of appropriate name for this state of the art, some people are obliged to use the term Ricardian Vice in order to stand for overindulgence in abstract model building.

Thomas Colignatus, admitting inappropriateness of the term Ricardian Vice, argues, for example, that there is some useful element in this notion. It is concerned with the present overindulgence in abstract model building which we observe in economics. This must be just Giorgio Baruchello wanted to blame as the cause of actual economics disarray.

See

Thomas Colignatus The Ricardian Vice anno 2011 Royal Economic Society Newsletter 154:9-10, July 2011.

http://thomascool.eu/Papers/Drgtpe/Crisis-2007plus/2011-07-RicardianVice-RES-Newsletter.pdf

Colignatus, as statistician, pays attention to his Ricardian Vice anno 2011, the state of our mind which fails to recognize that the model is wrong while the evidence tells us to reject it.

A question arises why this overindulgence occurred in the history of economic analysis.

In my understanding, it is not Ricardo who paved the way to this overindulgence. He inaugurated investigation based on logical reasoning and this made economics scientific discipline. If economics stayed in the level of Adam Smith's arguments, it remained a historical discipline and its knowledge a collection of miscellaneous facts and observations. From Ricardo, economics started the way to science. It went astray somewhere between Ricardo and us. We should clarify this history. Schumpeter incorrectly specified the cause of present day trouble with economics.

(3) No separation between laws, theory, policy and ideology.

It seems to me that there are strong tendencies to identify laws, theory, policy and ideology. It is true that classical as well as modern economists discussed all these topics in his life. But, a conspicuous identification is often made between them. Section 5 of Andres Blancas is an example.

Andres Blancas The Ricardian Vice : A Schumpeter's observation.

http://eaepe.econ.tuwien.ac.at/pepe/papers/Blancas_2012.pdf

Blancas examines what Schumpeter meant when he coined the term Ricardian Vice (Section 1) and considers the virtue and vice of alleged Ricardian habit (Sections 2 and 3). We may agree or disagree on various points but they are small points. In Section 4 he examines the Ricardo's value theory. He constructs his argument on the assumption that the Ricardo's theory was labor theory of value. I object to this proposition, since what Ricardo intended was the cost of production theory of value (See my working paper "Ricardo's Two Rectification Problems" in my ResearchGate Profile).

The biggest problem lies in Section 5. Blancas discusses here "The Ricardian Vice effect in policy makers nowadays." In fact, he blames neoliberal policy makers' inventions as effects of Ricardian Vice. However, there is a big logical gap between these two. As this is a big question, I would like to discuss it in a following post.

https://www.researchgate.net/post/Why_are_we_all_so_forgetful_Is_the_crisis_of_economics_over

Confused identification of laws, theory, policy and ideology

I do no deny that an economic vision influences theory making but law and theory are separated from policy and ideology. A theory which is almost perfect does not imply any policy in a concrete way.

The best way is to consider an example. Blancas (cited in the above post) cite Ricardo's policy recommendation on free trade. This is true. We may say Ricardo wrote his Principles with a purpose to persuade people to abolish the Corn Law. Even though, as Schumpeter had alerted (as Blancas mentions it), economic theory is not a stock of political recipes.

I have worked on Ricardian trade theory for a long time and arrived to extend it to include input trade (or trade of intermediate goods).

See my paper:

A New Construction of Ricardian Trade Theory--A Many-country, Many-commodity Case with Intermediate Goods and Choice of Production Techniques

https://www.researchgate.net/publication/233943493_A_New_Construction_of_Ricardian_Trade_Theory--A_Many-country_Many-commodity_Case_with_Intermediate_Goods_and_Choice_of_Production_Techniques

In Subsection 4.2 Views from Different Interest Groups I observed that transition from autarchy to free trade is profitable for workers who continue to be employed. However, the transition often requires occurrence of unemployment, even if it is a brief period one. Those workers who lose their job suffer from the transition to free trade. This is a part of the theory. Ricardian trade theory does not necessarily imply free trade.

Another argument is of course the infant industry theory and other related questions. A country which has competitiveness in a decreasing to scale industry or demand saturating industry will suffer in the future if it completely specializes in such industries. A typical argument is given by F. D. Graham (1923) Some Aspects of Protection Further Considered. Please note that Graham was the greatest theoretician of Ricardian trade theory in the first half of the 20th century.

Blancas misunderstands that Ricardian theory always recommends free trade. This kind of misunderstanding rather widely acknowledged among highly learned economists. One example is the manifest of The Other Canon. In a kind of platform document for The Other Canon movement, the authors wrote:

• In Ricardo’s theory of value ― the labor theory of value ― originates the communist claim that the workers have the right to the whole produce of their labor. Ricardo's mechanical analysis is also the origin of the trade theory of the Washington Consensus, of Samuelson's factor-price equalization in a world of perfect information. The Ricardian theory as it was formulated into a tool of economic policy disregards the ‘true’ factors of production like ideas, initiative, entrepreneurship, leadership and innovations. It reduces work to a wholly mechanical task void both of the dynamic werden (becoming) and of the human Geist which is the basic moving force in the German economic tradition.

They do not distinguish theory and policy. They know that ideological extreme left and extreme right both comes from Ricardo's theory of value. But the fact that they identify Ricardo's theory with labor theory of value reveals they have never read Ricardo's Principles in detail. Let me cite two phrases from his Principles.

• Mr. Malthus appears to think that it is a part f my doctrine, that the cost and value of a thing should be the same; ―― it is, if he meant by cost, "cost of production" including profits. Ricardo (1821: Sraffa Ed. p.47, Note.)

 Has not Mr. May forgotten, ... , that it is the cost of production which ultimately regulate price? Ricardo (1821: Sraffa Ed. p.73, Note.)

Although Ricardo did not succeeded in construction cost of production theory of value when he was alive, the theory was developed by P. Sraffa (1960) and others.

See my conference paper On Ricardo's Two Rectification Problems.

https://www.researchgate.net/profile/Yoshinori_Shiozawa

The Other Canon does not make any distinction between classical and neoclassical theories of value and blame Ricardo, as the source of two extremes. If it is true, Ricardo is not responsible for the later exploitation of his theory in one's favor. What we can say is that his theory was vulnerable to this kind of exploitations, but this is a destiny of any powerful theory. Blancas and The Other Canon people claim that Neoliberalism, Washington Consensus and New Consensus Macroeconomics all derive from Ricardo. The Other Canon adds that

• The actual policy carried out against the Second and Third World is based on the unscientific use of Ricardo's arbitrary analysis.

Ricardo's analysis was logically strict above all other arguments of his time and before him. He gave a firm base to induce economics to be a logical system (I do not say he has completed it). Ricardo is not responsible of most of all what happened after him. It was those successors who disfigured and exploited Ricardo's theory beyond what can be said within a theory. Those who blame them are as well responsible as those exploiters, since they have identified theory and policy (and policy and ideology) and brought a total confusion in economics.

Article A New Construction of Ricardian Trade Theory--A Many-country...

I agree with Flemming Bjerke.

The examination of Milton Friedman's "positivist thesis" is extremely important. More than a half century has passed after Freedman's article The Methodology of Positive Economics in Essays in Positive Economics (1953) appeared. I am astonished to know that many young economists are still believing the Friedman thesis that realism of the assumption does not matter.

Science always pursued the coherence of laws and observations, even if this was not the unique motive of scientific researches or driving forces of scientific developments. Many of assumptions we make in a model are observable facts and we can verify  if they are true or not. To ask realism of assumptions is an essay to re-establish the coherence among various facts and propositions. If unrealistic assumptions are made, we should ask how they can be deemed as idealized state and how they can reflect essential features of the phenomenon we are observing.

Friedman's thesis is totally anti-scientific and seriously flawed, because he refuses an essay or trial to build a coherent theory. I know this target (to make a coherent theory) is very difficult and cannot easily achieve it. But, once we abandon it, sciences cease to develop. Even if we accumulate enormous amount of of knowledge, that knowledge is a garbage.

I know that a book was published in commemoration of 50th anniversary of Friedman's Essays (U. Mäki　Ed. The Methodology of Positive Economics: Reflections on Milton Friedman Legacy, 2009). I wonder there were no such reflections from the anti-Friedman thesis view point.   

When Schumpeter named the pursuits of causal chains Ricardian Vice, he abandoned at the same time the pursuits of causal chains themselves. He imagined that, in view of complexity of economies, Walrassian framework gives better results than the pursuits of causal chains. He denied the causal relationships and he adopted  Walrassian framework where  every thing is related to every thing. This is a total confusion. 

I believe it is necessary to build a new philosophy of science or scientific view which is adapted to economics.  

Schumpeter talked of Ricardian Vice. I think we should éalso talk about Schumpeter's misconception or contradiction if it may not be a Schumpeterian Vice. 

The most serious contradiction appears in Chapter 1 of his Theory of Economic Development. This chapter is titled The Circular Flow of Economic Life as Conditioned by Given Circumstances. 

The concept of circular flow (German original is Kreislauf) is very important. Schumpeter starts from circular flow of economic life and defines economic development as a change of this circular flow. One of such change is innovation which is the key concept of Schumpeterian economics. 

Schumpeter explains this concept in sentence like this: 

Since the circular flow of the economics periods, this most striking of all economic rhythms, goes relatively fast, and since in every economic period essentially the same thing occurs, the mechanism of the exchange economy operates with great precision. (p.6) 

He knows it is difficult for a person to change this circular flow as he writes like this: 

All the preceding periods have, furthermore, entangled him in a net of social and economic connections which he cannot easily shake off. ... All these hold him in iron fetters fast in his tracks.(p.6) 

However, Schumpeter thinks that this circular flow can be rebuild from nothing. He uses a Latin expression "ab ovo" (from egg) to make this more impressive. He uses the term "ab ovo" three times in his book. I cite the explanation at the first appearance of the word. 

This picture may be refined, and made to yield more insight into the functioning of economic system, by means of a well known device. We assume all this experience to be nonexistent, and reconstruct it ab ovo1, as if the same people, still having the same culture, tastes, technical knowledge, and the same initial stocks of consumers' and producers' goods2, but unaided by experience, had to find their way towards the goal of the greatest possible economic welfare by conscious and rational effort. (p.10) 

Note 1. This method is due to Léon Walras. (p.10)

 I don't know if Walras used this kind of parable. This may be Schumpeter's interpretation. 

Note 2. As every reader of J. B. Clark knows, it is strictly speaking necessary to consider these stocks, not in their actual shapes -- as so many ploughs, pairs of boots, and so on -- but as accumulated productive forces which can at any moment and without loss or friction be turned in to any specific commodities wanted. (p.10) 

Note 2 reminds me the Capital Controversy. "Productive forces" here mentioned is exactly what Joan Robinson called "leets". 

Schumpeter warns (and in fact apologizes) that this ab ovo parable does not mean that he believes this is practically possible. 

We do not thereby imply that people would in practical life be capable of such an effort.3 We merely want to bring out the rationale of economics behavior irrespective of actual psychology of the households and firms under history. (p.10)

Note 3. There is, therefore, misunderstanding in the objection so often leveled at pure theory that it assumes the hedonistic motive and perfectly rational conduct to be the only forces actually at work in economic life. (p.10 Emphasis added by me.)

Schumpeter emphasizes that "what he want to analyze" is "the working of its mechanism or organism at any given stage of development." 

Is it innocent to assume this kind of ab ovo construction is possible? In my understanding, Schumpeter is missing the very mechanism how an economic system works. Economic agents modify their conducts when they realize their (former) conducts did not produced expected results. 

Schumpeter mentions on Wieser's continuity principle but he does not understand that he contradicts himself in assuming ab ovo construction is possible in modern complex economy. If it is possible in principle or theoretically, innovation looses its significance, because any innovation is an ab ob conduct adapting to the new environment. There is no innovation at all.

Dear Yoshinori,

When I read your new comment on the topic, I am reminded of a couple of ways Schumpeter thinks. In describing Adam Smith's growth model, he call it a "hitchless" process. (See his His. of  Eco. Thought Book). By this he meant some sort of spiral (circular) growth process, where the wealth of a nation grows without hitches. Then, he considered Ricardo's diminishing returns, Malthus's dismal demographic forecast, and Marx prediction of the demise of Capitalism as possible hitches. 

I am reminded also that he postulated the "Creative Destruction" thesis to dampen or reduce the influence of old innovation by new innovations. When you brought up the "ab ovo" concept, my first thought is that it might be related to this thesis. But I am still thinking of this. Keep up the good work.