2.19 There are two kinds of composite commodities: scarce commodities and industrial commodities.

1. Composite commodities can be reproduced at will by human industry, while others are not.

This observation was introduced into economic theory by David Ricardo (17721823), in the first paragraphs of the first chapter On the Principles of Political Economy and Taxation⁶⁹. Neoclassical (marginalist) political economy ignores this observation, which there is no doubt is so fundamental in Ricardo's work and in the facts that its proponents go too quickly when they consider themselves to be continuators of this work. Logically, and because of the observation very explicitly introduced by Ricardo, see quote below, neoclassical theorization is in contradiction with classical political economy, Ricardo's version⁷⁰.

2. Ricardo provides an exemplary model for deriving economic scarcity from the wider notion of scarcity.

From the fourth to the sixth paragraph of section 1 of his chapter 1, On Value, of On The Principles of Political Economy, and Taxation, Ricardo wrote: ⁷¹

There are some commodities, the value of which is determined by their scarcity alone. No labor can increase the quantity of such commodities, and therefore their value cannot be lowered by an increased supply. Some rare statues and pictures, scarce books and coins, wines of peculiar quality, which can be made only from grapes grown on a particular soil, of which there is a very limited quantity, are all of this description. Their value is wholly independent of the quantity of labor originally necessary to produce them, and varies with the varying wealth and inclinations of those who are desirous to possess them.

These commodities, however, form a very small part of the mass of commodities who are daily exchanged on the market. By far the greatest part of those commodities which are the objects of desire, are procured by labor; and they may be multiplied, not in one country alone, but in many, almost without any assignable limit, if we are disposed to bestow the labor necessary to obtain them.

In speaking then of commodities, of their exchangeable value, and of the laws which regulate their relative prices, we mean always such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint.

3. A commodity is economically scarce only when it cannot be produced permanently or temporarily by human industry.

Land and real estate, as soon as they are put up for sale and expropriated for which the public authorities compensate, constitute a scarce commodity whose social importance and economic benefits are considerable.

Other resources that cause economic scarcity include fossil minerals and fuels. Their farms create and maintain windfalls at the expense of buyers: who nowadays has never heard of oil rents?⁷²

4. In the light of the foregoing considerations, we agree to say that composite commodities, of which no industry can increase the quantity they form, the subtype of scarce commodities.

Symmetrically, we agree to say that the composite commodities which are produced or duplicated in series by human industry form the subtype of industrial commodities.

5. Almost all collectibles become, when they are put up for sale, scarce commodities.

While the sole or main determinant of the price of a scarce commodity is the process of selling to the highest bidder or the quickest acceptor, the effective prices of commodities of such a nature as to be reproducible at will are brought back to their sufficient levels, under several conditions which are set out in the following (Chapter 11, in particular).⁷³

6. Price theories are articulated as if only scarce commodities existed.⁷⁴

Within the commodity ontology there is a subtype of elementary commodities and a subtype of composite commodities. Within the composite commodities set there is a small subtype of scarce commodities and a very large subtype of industrial commodities. Ignoring this ontology of commodities pave the way to make scarcity the deus ex machina of the economic system — see textbooks for secondary and higher education in "economics" "See secondary and higher education textbooks in 'Economic Sciences' that intone this refrain from their very first pages and return to it incessantly.

Notes

69. First edition in 1817, third and last during its author's lifetime in 1821 ↩
70. The observation on scarcity introduced by Ricardo played such a great role that the verbatim of this introduction appears twice in this site. ↩
71. n the final edition published during Ricardo's lifetime, Chapter 1 contains 7 sections. Section 1 itself comprises 21 paragraphs. It is therefore at the very beginning of his Principles of Political Economy that he placed his observation on scarcity, which has played a major role since time immemorial through the syllogism—as famous as it is logically untenable: since what is rare is dear (expensive), dearness (high price) proceeds from scarcity. ↩
72. The rent earned by a household from its investments and the oil rent—or formerly the land rent received by large agricultural landowners—have only one thing in common: they are still referred to by the same word. This is unfortunate. In the rent drawn from letting out a property, there is no capital gain. In the rent that an individual derives from investing their savings, a capital gain does not necessarily enter into it. In the case of oil rent, as in other rents generated by economic scarcity, what it contains is primarily or exclusively capital gain. One way to distinguish these two kinds of rent is to speak of the “oil windfall / stock-market windfall / real-estate windfall / gold-price windfall / etc.” so that rent becomes more narrowly associated again with another noun derived from it: rate of return. ↩
73. Sraffa restricts his price equations to commodities produced, and reproduced, by means of commodities: Ricardo’s restriction to commodities that human industry can multiply at will. Land and other natural resources enter his system as non-produced means of production; they have no production equation and receive a rent that the system determines (P. Sraffa, Production of Commodities by Means of Commodities, Cambridge University Press, 1960, ch. XI). This agrees with Proposition 2.8 (a natural resource is not in itself a commodity) and with the present proposition. The taxonomy of the Objective Political Economy contains, in addition, the subtype of scarce commodities, whose price the sale to the highest bidder determines; Sraffa’s system has no counterpart to it. See the appendix Objective Political Economy and Sraffa. ↩
74. See P. Fabra, Capital for Profit, Rowman & Littlefield, 1991, p. 232: for Ricardo, scarce goods were the exception; the marginalist school made the exception the rule. On pp. 315–316, Fabra describes marginalism as a misinterpreted extension of the Ricardian theory of rent. ↩