A Book of Taxing Theory

August 3, 2010 § 4 Comments


On the Principles of Political Economy and Taxation (Ricardo, David)

Having successfully navigated my way through a) Adam Smith‘s Wealth of Nations (a few years ago), and b) a handful of economics courses during my MBA (a few more years ago), I rashly purchased this book last year, with the ambitious intent of establishing a solid theoretical foundation in economics. It was in line with my similarly ambitious forays into the worlds of number theory, general system theory, quantum physics, philosophy and art: indeed, it was core to my whole philosophy of reading, which is that the tougher the book, the more satisfaction I would get from reading it.

So there I was. Armed with little more than a resounding, if incompletely substantiated, confidence in my own ability to read dense, esoteric prose without keeling over (which I got primarily from having read Crime and Punishment as a 14-year old), and the fact that I knew a Laffer curve from a Phillips curve (just about), I sailed, full steam ahead, right into Ricardo… and was soon all at sea, in choppy waters, and in a sinking boat.

Perhaps it was Ricardo’s writing style, possibly his frequent use of logic and hypothetical, over-simplified numerical analyses (as opposed to Adam Smith’s drawing on historical data to support his theses), but probably because I have been highly distracted for the last few weeks (my second child is due to be born any day now): whatever the reason, I have found it hard – incredibly hard – to get from one end of the book to the other end.

This, of course, is a pity, and my loss, entirely, because David Ricardo was a great economist, best-known for his theory of Comparative Advantage, which is the basis for modern international trade. If this theory had not been correct, or, more pertinently, if it had not been articulated or become accepted wisdom, rich countries might have considered it advantageous to trade only with other equally developed nations, and the poor would have had to muddle through among themselves. The world may have been even more polarized than it currently is between the haves and the have-nots. One might even argue, if one were romantically inclined, that Ricardo’s theory was the philosophical base for an open and inclusive society, one that believes that engaging with everyone else, however littler or larger, is mutually beneficial. It is surely not a coincidence that the man who resurrected Ricardo from obscurity and brought out his Collected Works (of which this was the first volume), Piero Sraffa, was an outspoken anti-fascist in Mussolini’s Italy.

A perfunctory scan of the internet makes me aware of radically contradictory viewpoints to mine, espoused, among others, by Korean economist, Ha-Joon Chang in his book, Kicking Away the Ladder, which I do mean to read in the future. Both the validity of Ricardo’s theory, and its effects on developmental economics, have been topics of heated dispute, and while I cannot contribute meaningfully to this debate, there is no doubt in my mind that the controversy adds to the historical importance of the book itself.

If Ricardo were only more readable! I wound my weary way through Ricardo’s weighty pronouncements on Value and Rent and Profits and Wages, and struggled all the way to the end of his chapter on Foreign Trade (where, finally, I stumbled upon his commentary on comparative advantage, explained, in typical style, in terms of a hypothetical case where only England and Portugal existed, and they only each produced wool and wine). This I read with interest and satisfaction, even though I find myself in agreement with Fernand Braudel, who dismisses Ricardo’s view that a division of tasks along the lines of comparative advantage is a natural and spontaneous tendency. In the third volume of his trilogy on Capitalism and Civilization, Braudel says such a division of labour

“…cannot be described as a concerted agreement made between equal parties and always open to review. It became established progressively as a chain of subordinations, each conditioning the others. …if trade between England and Portugal in Ricardo’s time was such that the former was selling cloth and other industrial products and the latter wine, then Portugal was in the primary and therefore inferior sector. For centuries before this England had left off exporting raw materials such as wool even before the reign of Elizabeth, in order to advance her industry and trade; and for centuries Portugal, once a rich country, had been moving in the other direction, or had been pushed towards it…Who could possibly claim that the Anglo-Portuguese relations were dictated by ‘common ties of interest’ between friendly communities, rather than by power politics developing in an irreversible direction?”

I flipped the page and discovered that the next few chapters were devoted entirely to Taxation. Now I am broadminded enough to allow that the millions of people on the planet who find Taxation a tremendously stimulating subject cannot be simultaneously and severely mistaken; I merely submit that I, alas, am not among them. Like a mountaineer at the very end of his endurance, alone in a blizzard and his supplies lost, confronted suddenly with an impregnable vertical climb, and yet only halfway up the mountain, with one last, long, wistful glance at the last chapter, I decided that it was prudent to abandon the quest.

In retrospect, I should never have bought this book. Somewhere in the world, even as I speak, I’ll bet there is a scholar who is frittering his life away in frantic but futile search of a copy of this book, and who, were he to obtain one and read it from cover to cover, would find his mind ignite with unimaginably brilliant ideas that could eventually save the world. By selfishly – and uselessly – hanging on to my copy, I am depriving him, and all mankind, of this glorious future, and I have therefore resolved to donate it to a library at the earliest possible opportunity.

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§ 4 Responses to A Book of Taxing Theory

  • Robert says:

    The book falls into three sections: the theory you read, taxation, and responses to others. You might want to skip to the third section, which might even be clearer than the first.

  • The 'Cruel Youth' says:

    Quite possibly the most boring thing in or about this book is this article.
    -The ‘Cruel Youth’

  • The 'Cruel Youth' says:

    No, that was a joke, but actually, this does have several interesting analogies. For instance, in the second to last paragraph you state that ” Like a mountaineer at the very end of his endurance, alone in a blizzard and his supplies lost, confronted suddenly with an impregnable vertical climb, and yet only halfway up the mountain, with one last, long, wistful glance at the last chapter, I decided that it was prudent to abandon the quest.” This is an excellent analogy and not your only one. You do however seem to make the point that the book isn’t boring but that you couldn’t read it was circumstantial. I beg to differ. Many of the books you read I can’t understand, and in all modesty, I know more about economics than the average 9th grader (very little). If you couldn’t read this book then I doubt it was your fault.
    Your one fault here is your tendency to say the same thing in the 2nd, 3rd, 4th, 6th, 8th, and 9th paragraphs: you wish you could read ricardo but you can’t. In each one you come up with different ways of phrasing it or even leave it as an afterthought, a transition.
    I have little doubt that the blog is better than the book.
    sincerely, The ‘Cruel Youth’

  • The one says:

    methinks the ‘cruel’ youth merits the quotation marks on the cruel – there is kindness in his heart

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