The Ricardo Puzzle

This paper tackles the puzzle of Ricardo's stubborn commitment to a labor theory of value that he himself saw as no more than an approximation to reality and which was heavily opposed by Malthus, his most respected contemporary. We show it is wrong to think that the theory was just the result of personal stubborness with no analytical benefit. Quite to the contrary, it was the only defense Ricardo could find against Malthus' destructive criticism, which introduced an unacceptable degree of indetermination in his theory of profits. By adopting the labor theory of value, Ricardo drastically simplified the method of proof of his main proposition, which otherwise seemed to present impossible analytical challenges. The irony is that the proposition was correct, quite independently of the labor theory of value, but Ricardo was just unable to prove it.