Vladimir Gligorov

Ricardo on Horses, Soldiers, and The Rise of Machines

“We have always known everything there is to know in

moral sciences.” Anonymous
“Moral sciences are about translating mathematics into
stories, not stories into mathematics.” Anonymous

The Idiots
Rereading Ricardo “On Machinery”. I was led back to that chapter in the Principles
thinking about Samuelson’s claim that there is something like absolute disadvantage, which is the
lack of any comparative advantage.
I thought the idea of comparative advantages implied that there is a place for everybody in
the labour market, though that does not necessarily secure employment (one may be voluntarily or
involuntarily unemployed or inactive, though employable). But if somebody has no ability in their
set of abilities that they are comparatively good at, then they might be out of a job and would be
out of the labour market altogether.
They would be somebody out of place like Prince Myshkin in Dostoevsky’s novel “The
Idiot” – an idiot.
How can that be?
Assume that individual abilities, the aggregate of which is the social set of abilities, are all
directly or indirectly useful in the production of goods and services (leisurely activities, and
consumption more generally, being indirectly productive with welfare being the end and
production the mean). Aggregation counts on each and every ability.
People specialize in one of the abilities, called functionings in the jargon (or endowments
in Arrow-Debreu), in which they have the comparative advantage.1 Other abilities that the

1
Comparative advantage is the ability that one is the best at, given the abilities of others. Absolute advantage is the
ability one is best at. So, people specialise not in what they are best at, but in what they are best at, given other people’s

1
individuals have are either made inoperative or are used to support the one the person specialises
in.
Thus, though every individual ability counts in the social aggregate, one per individual
counts in the social set of abilities.
One can assume, with Plato, that individual abilities are distributed by nature, one for each
person, or alternatively we could follow Aristotle and assume that there is a social selection process
which allocates specific individual abilities into social functionings (e.g. institutions that attribute
social roles and statuses in anthropology and sociology; or self-selection of tasks in labour
economics; or rules that guide the choices and actions in decision and game theories; or indeed the
evolutionary rules of selection).
Selecting abilities according to comparative advantages is one such mechanism.
In the former case, Plato’s case, absolute advantages (what one does best) are the same as
comparative advantages (what one does best compared to what other people do best) while in the
second case, Aristotle’s case, comparative advantages out of diverse abilities become absolute
advantages after specialisation.
One could also follow Descartes and assume that while people differ in physical abilities,
res extensa, in cognitive abilities, res cogitans, people are the same. So, differences in physical
abilities are Platonist, they are distributed by nature; differences in cognitive, learning, or more
broadly moral abilities are Aristotelian, they are social by nature.
When it comes to res extensa abilities, machines could complement people, who may be
more or less deficient in some ability, so that there is the equality of abilities across individuals,
but they can also be used as substitutes for specific abilities of people; while in the case of res
cogitans, to the extent that they have to be developed through learning, it is the circumstances,
including the cultural and political ones, which account for the differences in people’s abilities.
One can add the requirement that social set of abilities is efficient in Plato’s sense of proper
allocation of individual specialisations, which is Pareto optimal.

specialisations. In general, most people will be employed to do what they are comparatively best at and not what they
are absolutely best at. Labourers can do better than the specialisations they are assigned to do by the workings of the
comparative advantages.
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 Alternatively, the selection of individual abilities into social functionings in Aristotle’s
sense can be seen as the proper allocation of people’s capabilities, the specific sum total of their
individual abilities, perhaps enhanced by machines, as defined by Sen, which is also at least Pareto
optimal, and efficient as well as just.
In any case, after specialisation, comparative advantages are absolute advantages too (as
the other abilities suffer for lack of use and thus of hysteresis). Put differently, the individual set
of abilities shrinks to one in which a person specialises, while the social set of abilities is diverse,
so:
Individuals specialise, society diversifies.
That raises the issue of social stability and thus of individual security. Or, put differently,
individual specialisation and social diversification raise the issue of proper allocation of risks of
the permanence of social demand for individual specialisations within potentially shifting social
diversity, where the balance between social and individual (or private) insurance of risks must be
struck.
In Plato’s case there are risks of misallocations of individual abilities to social functionings
in part due to trade, foreign in particular, and to international conflicts, but also due to internal
Machiavellian, Thrasymachus’ type of political passions: tyrannical, democratic and populist ones,
even in a closed state, in an autarchy.
While in Aristotle’s case there are additional risks arising from wrong moral choices and
corrupt political set-ups. In the latter case, moderation and democracy, rather than Platonist
specialisation and technocracy is the way to good life and government.
E.g. in terms of comparative advantages, individuals may choose to specialise in their
absolute advantages or in other abilities in which they have comparative disadvantage, e.g. they
choose the wrong vocation. That is an inefficient allocation of abilities and can prove to be unjust
and morally corrupt.
The inefficiency, and indeed unhappiness, can also be the outcome because the selection
or the aggregation mechanism, the allocation mechanism in general, is inadequate or is being
tempered with, as we know not just from Dostoevsky but also from modern game theory and
efficient allocation mechanisms theory, and of course from the theory of the general competitive
equilibrium, all of which are basically Platonist.

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 The social set of abilities, or functionings, is a proper subset of the set of individual
abilities, the two being coextensive after specialisation in equilibrium. Different functionings
complement each other, while the same are substitutes, they compete for employment.
So, the issue is: are there functionings which are not complements?
In other words, are there individual abilities (functionings) which fall outside of the social
set of abilities (functionings).
Put aside the dependents and in particular: the old, who have mostly lost their employable
abilities, and the young who are yet to develop their abilities and enter the labour market. The
inclusion of dependents leads to issues with the maintenance of social stability and thus with
Samuelson’s social contract across overlapping generations and consequently with secular
demographic changes, which include the issues of risk-taking and risk-sharing across generations
and populations, i.e. the stability of the moral and social web between people living today and the
future generations, e.g. within families and through public finances.
From the point of view of the future, we might all be idiots. Thus, history might just be “a
tale told by an idiot”.

Appendix: Abilities: Individual and Social, Venn Diagrams

The blue circle in the Venn Diagrams is the social set of abilities or functionings. The white
circle is the individual set of abilities, functionings, or capabilities.
With comparative advantages aggregating all specialised individual into the social set of
abilities, Diagram 1 should be the equilibrium outcome. It should also be the equilibrium outcome
with self-sufficient individuals within a self-sufficient society (or state or republic).
With gradual technological progress, Diagram 2 should be the phase in the adjustment to
an equilibrium – which could be through the expansion of the social set of abilities or through the
shredding of the individual set.
Diagram 3 is the Malthusian adjustment to technological revolution. It also covers the case
of comparative advantages across countries due to foreign trade and investment.
Diagram 4 shows the labour augmenting productivity technological revolution with
declining population. Thus, these are inter-generational comparative advantages with increasing
technological sophistication.

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 There are two adjustment mechanisms to the equilibrium of Diagram 1. Either the set of
individual activities adjusts to the social set of activities or social set of activities adjusts to
accommodate the diverse individual set of activities, i.e. to accommodate individual capabilities.
To the extent that the latter means an adjustment to cross-countries comparative advantages, that
requires some kind of enduring cosmopolitanism.

Diagram 1 Diagram 2

Diagram 3 Diagram 4

Enter Horses and Machines

Now, Ricardo introduces the example of a horse being substituted for a worker. Workers
displaced or outcompeted by horses would be driven out of their employment, but not out of the
labour market. They have lost their jobs, but not their abilities and comparative advantages. If the
landlords or capitalists, the owners of the horses and of the products, decide to invest the extra

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profits which the employment of horses brings, rather than spend them on luxuries (on Sraffa’s
non-basics), there will be jobs on offer for the temporarily unemployed workers.2
Horses are substitutes for people, and the same is true of the substitution of people with
machines.
What people do, horses and machines do at least as productively. Horses substitute people
out of employment, but not out of the labour market. The subsistence wage will have to decline
ate least temporarily to bring people back into employment.
Similarly, the profits and the rents may stay the same or increase after the introduction of
machines, while either there will be less employment or wages will decline after an inconsiderable
period of time (Ricardo counts in years, thus after a year’s time). Because resources will be shifted
from the production of subsistence or wage goods to production of machines (e.g. as in Marx’s
two-sectoral model).
The mechanisms of adjustment to employment of horses and machines may indeed be
different, however. Horses and people may compete at least in part for the same subsistence goods,
while machines do not. Thus, employing horses will compete people out of their jobs if horses’
subsistence costs less, if the use of horses instead of people cuts costs, while machines drive out
production of subsistence goods, compared to production of machines, and thus either lower wages
permanently or reduce employment of people and perhaps drive them out of the labour market
altogether.
Which is why horses are substitutes for people and may drive them out of employment but
not out of the labour market, while machines may also make some people’s specialisations
redundant, i.e. comparatively disadvantages, driving the displaced people out of the labour market
altogether.
In the end, the effects of the use of horses and machines in production on employment and
wages, though via different routes, end up at the same outcome – temporarily lower employment
with wages temporarily below the previous or even below the level of subsistence.

2
As Sraffa argued, I think correctly, issues of the returns to scale – constant, increasing or decreasing – are not relevant
for Ricardo’s economics. So, assuming constant or even increasing returns to scale is harmless if helpful. Indeed,
given the complementarity of activities guided by comparative advantages, increasing returns to scale are to be
expected.

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 Except for the potential effect of the introduction of machinery on the people’s comparative
advantages.

The Machinery Problem

Ricardo’s machinery (or horses) problem is that of the possibility that the net domestic
income (profits plus rents) may at least stay the same (which includes the case of zero profits)
while the gross domestic income (net income plus wages) stays at most the same– when machinery
is preferred to labour. So, the demand for employment may be deficient (Say’s and Walras’ Laws
being satisfied however).3
Thus, if investment in machinery cuts into employment, capitalists will not employ the laid
off workers as long as their profits are as high as they were before they substituted machinery for
labour. In general, the machinery problem being just an example of Ricardo’s main insight, as
brought to light most clearly by Sraffa, that allocation of abilities and resources is not independent
from the distribution of rewards, reflected in this case by the dependence of the gross income on
the net income, or put differently, reflected in the dependence of wages on profits.
However, in a growing economy, the growth being perhaps due to the technological
progress, i.e. due to growing investments in machinery, though the workers are hurt by the greater
use of machines, this is temporary, and should not have, and that is important, Malthusian
demographic consequences - the population need not adjust, need not shrink to the lower level of
employment in order to adjust to the lower supply of means of subsistence.
In Ricardo, as wages are at subsistence level in equilibrium, adjustment to lower supply of
wage goods can only work within the business cycle, where in good times wages are above their
equilibrium level and in the bad times below. In case of larger swings, Malthus takes over with
population adjusting, though not necessarily misadjusting, to the availability of wage or
subsistence goods.
The dynamics of employment, however, is based on the assumption that labour
complements machines:
People can produce without machines; machines cannot produce without people.

3
Say’s Law is an accounting identity of aggregate supply equalling aggregate demand. Walras’ Law is an assumption
or a theorem of aggregate zero net excess demand and thus of the equality of aggregate supply and demand.
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 So even though temporarily there will be unemployed people, they will get employment
over time. Though, for the return to full employment, growth of population may have gradually to
slow down or even turn negative - depending on the way and speed that the constant, golden path
of machines to labour ratio is being approached. The introduction of robots modifies this
assumption somewhat, with labour complementing machines at one remove thus putting additional
pressure on population growth.
That is so as long as the laid off workers continue to keep their comparative advantages,
even if those have to change. Their wages may have to decline with the growing use of machinery,
especially if there is the threat that investments might move abroad, but the labour market will
adjust to full employment and the wages will grow back up over time.
The introduction of machinery and technological progress in general may present a
temporary or transitory employment or rather unemployment problems with wages providing for
the equilibrating mechanism in the neoclassical manner, though around the subsistence level which
is where the wages settle in equilibrium according to Ricardo (thus, though they are flexible, they
are more rigid on the down side, as in Keynes).

Exit Soldiers
At the very end of what is indeed an essay rather than a chapter, when discussing the foreign
trade and investment aspect of technological progress, which is what the growing use of machinery
is, Ricardo does not bring in directly the possible changes in comparative advantages. But the
context is about changes in productivity and of the exchange rates, which clearly have implications
for employment and wages, but also for shifts in comparative advantages.
Before coming to that, he discusses the case of wars and of specialisations they bring about
with implications for growth of population or indeed its decline.
When a war ends, there are all those soldiers whose special skills of soldiering are not
needed any more. That leads not just to the decline of wages when they enter the labour market
but may lead to the decline of population as the soldiers may not have the skills which are needed
in the time of peace – they might have specialised them away.
If peace endures, one needs to adjust this possibility of an unemployable specialisation
with the consideration of the possible expansion of various criminal activities or of the spread of
military dictatorships which may increase the demand for the skills of demobilised soldiers –
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which Ricardo however does not consider, but was very much at the centre of political thought
from Xenophon and Plato onwards.
E.g. some kind of praetorianism is a distinct possibility.
That will have consequences for taxation, taxes according to Ricardo falling entirely on the
net income, as wages are at or close to subsistence level, so negative effects for employment and
wages of non-military employees are to be expected. As rising production of military might
constitute the expansion of what are luxury or non-basic goods and services.
So, in the example of demobilised soldiers, what happens is that the set of individual
abilities, e.g. soldiering, falls in part outside of the social set of abilities which complement each
other when peace breaks out.
Military skills and soldiering as the specialisation have no complement within the social
set of abilities in time of peace.
Thus, with complete specialisation, which ensures efficient use of resources, where
employment is guided by comparative advantages, if the social set of functionings shifts, or rather
shrinks in this case, there will be people who will find themselves not only without employment,
but outside of the labour market altogether. Except if they turn to revolutionary politics, take over
and run the state, thus changing the whole system of production and distribution.
One remembers that both for Plato and Aristotle good government is rarer than a bad one
- it is almost utopian.
Enduring peace is one such shift in the social set of functionings. There will be no
specialisation for soldiers, e.g. unlike in Plato’s state, and no need to grow the population, by birth
or conquest, to have enough soldiers to at least maintain the balance of powers in the manner of
Hobbes or Hegel.
The same might be the effect of the rise of machines, e.g. of the introduction of robots.
Ricardo, still not considering the problem within the context of comparative advantages, argues
that only the shock of sudden and widespread introduction of new technologies may lead to people
with redundant specialisations being driven out of the labour market and indeed out of the social
set of abilities altogether, so not just the level of employment, but that of population would have
to adjust, Mathus way (which is to say population will adjust if there is not enough food or other
necessary goods at the subsistence level for all).
Warring nations might need a growing population, while peaceful ones may not.
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 Plato thought that the political geography might help, as some kind of natural fortification,
so population can stay constant at the constant, golden, land to labour ratio. But international
security threats are still needed for all those natural born soldiers to have employable abilities in
the well-functioning state (to use Rawls’ terminology).
Except of course if machines take over the art of war and warriors take over the art of
politics. The themes Ricardo does not go into.

Exit People
Ricardo addresses the question of cross-border investments which may grow if the
introduction of innovations, e.g. of machines, not to mention robots, is retarded in one nation but
not in the others. Capital movements across borders is almost inevitable in the world with trading
nations. So, Ricardo does not need to introduce it as an additional assumption.
In terms of innovations and investments, his world is global. Investment will go where
machines are, if machines cannot be employed at home.
That will keep the workers in the domestic labour market, but as unemployed. This is worse
than being displaced at home, because of the assumption that machines need people to operate.
But, if those are people in other countries, there will be no jobs and indeed no need for workers at
home.
They have the abilities, but there is no demand for them.
Machines would have not only substituted people, but people who had retained their
functionings would have lost the needed complements to stay in the labour market, they would
have lost their comparative advantages.
People would have to change their specialisations, perhaps reigniting their shear labour
power while moving across industries and territories.
Over time wages would have to adjust downwards to support employment and the
exchange rate would have to depreciate to support exports; or population growth will have to stop
as the downward adjustment of wages cannot be as deep as needed, if they are to sustain all the
people given that they are close to the subsistence level in equilibrium.
So, Malthusian albeit gradual demographic adjustment will have to take over.4

4
There is the so-called transfer problem here, I discuss in a separate essay.
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 Ricardo does not consider emigration explicitly. Though this is to be expected if machines,
albeit via foreign investments, are pushing out people. In addition, emigration would be the
recourse if the social set of abilities of one’s nation does not include the particular individual
ability.
People without comparative advantages in their own countries might move or emigrate in
order not to drop out altogether from the labour market.
E.g. to become a mercenary if one is a soldier in a peaceful country, or if one works with
robots in a country, e.g. a backward or a developing one, where the use of robots is not profitable.
Or perhaps people will migrate out of countries where there are relatively cheap horses or
machines.
All that mobility is in accordance with the extended Stolpar-Samuelson theory – people
moving from where they are abundant to where they are scarce while land is abundant.
So various types of emigration and indeed of colonisation are possible. Ricardo considers
some of the potential consequences of colonisation for trade (in the chapter On Colonial Trade),
but not because of the cross-border movement of people. In this context, acquiring colonies might
support domestic employment with protectionist policies which might also slow down the
introduction of machinery.
He does, considering the introduction of machinery, compare the availability of food in
America and in England and argues that machines are more competitive with labour in the latter
than in the former country. That would be conducive to emigration from England and immigration
into America.
That example also supports or rather complements his discussion of the opposite cross-
border investments from places with high food prices and low level, let us say, of industrialisation,
due to protectionism designed to deter investments in machinery, which would drive investments
out of the latter place and drive wages down while supporting outward migration to new worlds
with affordable prices of food or subsistence goods in general.
This is apart from the influence of demographic changes due to growing use of machines
on migration flows – from more technologically advanced countries to new worlds and from
backward countries to the more advanced world.
Or drive people to migrate out of existence altogether.

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 His Malthusian mechanism of population growth and decline is indeed another way to
bring in migrations, though not cross-border ones directly. People migrate in and out of
employment and of the labour market and indeed of the population altogether. Substituting the exit
from existence with regional and cross-border mobility is straightforward.

Rise of Machines
Ricardo considers volumes of produced goods and services, of commodities, not values.
Wages are subsistence goods and services. So, less people employed, less subsistence goods
needed for their wages. Or, rather, more goods being used to produce machines, less subsistence
goods and thus less people employed. While profits and rents, the net income, stay at least the
same, there are more machines and less subsistence goods, so wages decline leading either to a
lower subsistence level or to less employment.
Secular rise of machines need not lead to persistent unemployment or to permanently lower
wages, though the share of wages in the gross income may indeed decline.
However, like the outbreak of the enduring peace, technological revolution which changes
dramatically the distribution of comparative advantages will have strong immediate and
irreversible long-term effects. At least on the current generation of people.
Assume that a technological revolution brings in robots that change completely the way
things are done, e.g. mechanically.
To see what that means, take Plato’s state. It has three classes: legislators (philosophers),
producers, and soldiers. Everybody is fully specialised in one or the other role. Permanent peace
breaks out, so there is no need for soldiers and security services in general. And assume that
production of food, agriculture but also food processing, is entirely mechanised, so neither people
or horses are need to produce food. And assume that profits are distributed to households as in the
general equilibrium theory. Only engineers and technocrats or philosophers, who are also the
promotors of the technological advancement, remain needed by the process of production;
otherwise the whole mechanism of production would have no welfare purpose. Even they need to
specialise because of the rise of artificial intelligence.
People specialising in physical tasks, in soldiering or in toiling the fields, would lose their
comparative advantages and given Plato’s natural distribution of abilities, would simply get extinct

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as there will be nothing for them to do. Except if, as already mentioned, they find a way to run the
world, which the power enhancing technology would actually make easier.
Technological revolution, i.e. the shock of massive use of new machines, e.g. robots or
artificial intelligence, might trigger a wholesale loss of employment or spur mass mobility or exit
of people and indeed lead to an even more profound shake up of the labour market with large
number of people losing their comparative advantages and being driven out of the labour market
in the dramatically changed economy.
Technological revolution does not just change comparative advantages, but in addition
shifts the social set of functionings far away from the specialisations of large number of people,
who end up with no comparative advantages in the newly mechanised economy. They have to
move from country to city or from industry to services. And then out of services to science and
learning industry.
That would lead to Malthusian effects on the level of population, on the rate of growth of
population, and indeed on the stability of the economy, society, and of course of politics akin to
mass demobilisation.
Ricardo thought that piece-meal technological progress will not have negative
demographic consequences. But that is only as long as the set of individual abilities is coextensive
with the social set of abilities. If some of the individual abilities drop out of the social set when
they are substituted by machines, e.g. by robots, then the demographic decline may come slowly,
but it will still happen.
One should expect that with people becoming comparatively disadvantaged due to the
increasing use of machines, there will be decreasing growth of population with changing set of
individual specialisations which get included into the social set of functionings.
And with the technological revolution, there will be the Malthusian dramatic type of
demographic adjustment.

Diversify to Adjust
Ricardo considers labour market adjustments with people moving out from industry to
(domestic) services. That, though to a limited extent, does require that people not only have but
preserve diverse abilities.

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 The difference between the employment of horses and the use of machines comes out here.
In agriculture, horses specialise, while people diversify. This is so in Aristotle’s economics, which
is about husbandry. The use of diverse abilities is needed to attend to production on land, with
horses, tools, and all that. Horses substitute for shear labour power but complement other abilities
of people.
Horses do not increase the division of labour as it were.
Industrialisation of agriculture as well as the rise of industry and the increased introduction
of machines support specialisation. But they also increase the demand for services e.g. for
domestics. Eventually, the industrialisation of services will change that too.
Thus, people always face some risk not only of losing their current jobs, but of being driven
out of the labour market altogether.
Diversification is one way to insure against changing specialisations due to technological
changes. And the fact that society diversifies over people’s abilities is not enough of an insurance
and can indeed be the additional source of risks due to being based on individual specialisation.
Thus, people need to diversify over their abilities or functionings, which is what one means by
capabilities. People need to hold on to their capabilities, to store them as it were, as they specialise
in one of their abilities, or functionings.
The idea of capabilities is Aristotelian in the sense that it suggests self-sufficiency – of
individuals, economies, and states.
Assume that everybody is endowed with a set of abilities which come out to what they are
capable of in changing environments. With specialisation, they need to invest in Arrow-Debreu
securities in abilities – which amounts to maintaining diverse abilities in order to be capable to
dealing with changing comparative advantages.
While diversifying one’s abilities is inefficient in terms of comparative advantages with
certainty, it is efficient if the risk of increased introduction of machines and possible displacement
from the labour market is considered.
Mobility is one way to diversify, as Ricardo suggests, e.g. from country to city.
Demographic change is another, as Ricardo also suggests. In general, some combination of
individual with social insurance of risks through diversification will be required. Which means
that both individual capabilities and the social set of abilities or functionings will need to be
managed – by moral and political means.
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 There are obviously limits to diversification of physical or inborn abilities, but there are no
limits to the scope of diversification of cognitive abilities, though the scale of diverse knowledge
is dependent on circumstances, on the history of science and technology and on the system of
education. The latter also being dependent on the individual and social circumstances of all kinds,
e.g. on those ascribed to people by birth, geography, social practices, or by culture, and especially
by religious beliefs.

Capitalism in One Country

Ricardo considers protectionism to slow down industrialisation or technological advance,
the rise of the machines, and finds that it is self-defeating due to cross-border movements of
investments. Though protectionism does, however, support diversification by interfering with the
working of comparative advantages in foreign trade.
If also movement of capital is interrupted, specialisation could be combined with
diversification, Aristotle way.
Slaves Aristotle argued clearly criticising Plato, his teacher, specialise in what they are by
their nature the best at. Citizens and even aliens, as Aristotle himself, could and aliens indeed must
diversify. If nothing else, citizens might divide their time between pursuing private interests and
public interests too, even in the case of the latter that meant turning to soldiering when needed.
Slaves would specialise as in Plato, though Plato did not approve of slavery.
Slaves for Aristotle are like machines or machines are slaves – specialised one purpose
devices that allow people to engage in diverse productive or leisurely activities.
To see this, take Aristotle’s definition of justice: to treat the equal equally, and the unequal
unequally (citizens diversify, slaves specialise). Then compare it to Marx’s definition of justice
(which is in fact Ricardo’s specialisation with subsistence, and equivalent to the neoclassical
welfare economics): from each according to their abilities, to each according to their needs. Plato’s
definition of justice could be put thus: treat the unequal equally.
The needs, the Marxian welfarist aspect of justice, do not appear in Plato. This is because
Marx (though his meaning is not altogether clear) had in mind specialisation in capabilities, i.e.
the use of diverse abilities, as individual productive contributions, and income as the compensation
that supports people’s capabilities and thus includes the distributed net income from Arrow-
Debreu securities, as in general equilibrium theory.
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 Plato, however, had in mind the contributions of specialised abilities or functionings, with
the command of land or tools needed for their exercise with the provision of an adequate
subsistence income. Philosophers or legislators for instance, do not need much in a way of either
wealth or income.

Of Slaves, Citizens, and Aliens

Similar to Plato, Ricardo did not consider the changing demand for goods with the view to
increasing the individual welfare, at least for those living out of their labour. Though in Ricardo’s
case specialisation comes through the social or economic mechanism of comparative advantages,
which regulate social demand for individual functionings, and not because of the natural
distribution of specialised abilities as in Plato.
- Dependents and declining population
- Diverse tastes and growth of services (Moore’s utilitarianism)
However, Ricardo was impressed by Smith’s observation that there are diminishing returns
to the satisfaction of physical needs, but not to the refinement of taste. So, reproduction of res
extensa determines the needed amount of subsistence goods, while res cogitans can very well
exhibit increasing returns and the appetite for it may never be satiated. Increasingly, individual
welfare will depend on the diversity of taste rather than on subsistence goods. Taste for truth for
instance can never be satiated, thus the growth of science and learning. Similarly, the taste for
beauty and goodness in Moore’s sense of that word. That will require the people to be increasingly
employed in services of all minds rather than in the production of subsistence goods.
Thus, while people will still specialise in production, they will increasingly diversify in
consumption.
So, Plato’s soldiers, labourers, and even philosophers are basically slaves or human
machines in Aristotle’s sense, as they just exercise their natural abilities, most of them just physical
ones. Citizens, by contrast, are moral beings (or social or political creatures), who are capable of
diverse activities and responsibilities, both private and public.
Thus, to Aristotle, treating slaves as slaves and citizens as citizens is just.
While slaves are not, citizens are capable of more than doing their comparative best. They
can engage in diverse activities, including in the business of running the slaves they own and the

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cities they live in; they can take part in politics, pursuing their private and public interests or duties,
not necessarily bothering to excel in all or any of them.
Ricardo does describe capitalists and landlords as diversifiers at least when it comes to
their taste for fine things of one kind or another. He indeed thinks that their taste for luxuries might
very well have negative consequences for the employment of the labouring classes at least
temporarily.
Sraffa took pains to formalise all that in his discussion of basic and non-basic commodities,
and in the construction of the system of production of commodities by means of commodities
together with the standard commodity and with the concepts of standard product and standard
income. Which is really the formalisation of Ricardo’s distinction between the net and gross
income.
Where workers specialise and receive the subsistence wage, while capitalists and landlords
diversify and demand whatever goods and services increase their welfare.
Marx, however, took a Platonist view of capitalism with capitalists being the slaves of the
ever-growing capital as their workers are. Everybody just specialises including the politicians who
manage the capitalist system.
In a war, or in a preparation for the war, taxes increase the production of subsistence goods,
at the expense of luxury goods mostly, in order to support growing population. In times of peace,
demobilised soldiers put pressure on the wages while taxes are cut, and the production of luxury
goods increases. Public debt financing changes that, though not qualitatively.
Taxation, however, could be used in the time of peace for the purpose of supporting
employment and the increase of wages without profits declining. In other words, taxation could be
used to keep the development of net and gross income in the same direction as shown by
Haavelmo.
For that, the equality of people needs to be asserted or liberalism, equality of freedoms and
rights that is, needs to prevail.
In addition, the interests of the labouring classes need to be represented, which is to say
democracy to be endorsed.
In the times of Plato and Aristotle, Persia represented the example of the state where the
masses were equal in the eyes of the ruler (the tyrant): there were masses and there was the tyrant,
the populus and for instance Stalin – any populist version would do. Aristotle did argue for
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democracy in a diverse small state where the people with diverse capabilities, the middle class,
were in the majority or plurality. Thus, there was no threat of Persian despotic populism. The
theme later taken up by Montesquieu.
Descartes added the argument of people being equal in their cognitive and moral abilities,
which additionally justified both liberalism and democracy.
Consequentially, private and public risk-taking or risk-insurance could be combined so that
people could develop diverse capabilities while the public could diversify over those capabilities
and thus provide for insurance against the changes in technology.
In addition, liberal constitutionalism, a social contract in the spirit of Rawls, would provide
for the necessary stability from one generation to another, with ever changing capabilities and
functionings of people.

Perpetual Peace
Take the world where there is Athens and Sparta and then there is Persia. Or take the
Ricardian world with cross-border trade and investment. Demography is in part determined by a
Malthusian mechanism in the international set up of the balance of power. Countries maintain
armies and go to war periodically in part to support larger populations. They also get involved in
trade wars in order to promote technological advancement or to protect from it.
Assume that Alexander the Great follows Aristotle’s advice and globalises the world, and
let it be run by the Kantian cosmopolitan confederation. Soldiers will have to diversify or drop out.
And the same may happen to the other specialisations. Efficiency will require specialisation and
thus potentially machines may push people out of the global set of functionings and capabilities.
The cosmopolitan democratic, meaning benevolent, government may tax and spend
Haavelmo style to coordinate the growth of net and gross global income and thus of all the incomes
of the members of the confederation (with the fiscal multiplier of one), but the population growth
would have to moderate and potentially turn negative in order for the wages and generally incomes
which are not profits and rents (i.e. wages and transfers) to grow.
So, Plato-Malthus conclusion of demographic stagnation or of the decline of population is
the consequence of the rise of machines, of the Aristotle-Sen diverse capabilities, and of the
Kantian globalisation and perpetual peace.

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 Thus if Kantian perpetual peace breaks out, population growth would slow down or even
reverse due to specialization in production, the cosmopolitan insurance from risks of the rise of
machines, and because of the increased productivity of science and knowledge which would keep
the consumption on the subsistence level. Thus gradually, Descartes and the machines will take
over.

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