The Ricardian Vision Versus the Mengerian Vision of the Production Process

When we move from Smith’s world to the world of Ricardo’s Principles we find that things are not so simple. Ricardo strove valiantly to apply Smith’s insights and method to a world in which much of the productive equipment was in the form of heterogeneous “machinery.” He salvaged homogeneity by banishing considerations of change, by focusing on the conditions of the “long-run” stationary state. Those who followed Ricardo thus came to see this long-run equilibrium not only as the condition toward which the economy was always moving, but also as a sort of essential reality that characterized the market system below the surface reality of which our senses may at any time be aware.

In this sense, all modern-day theorists who work in terms of stationary or steady-state economics are “Ricardians.” Their approach is to be contrasted with that of Carl Menger who, while also following Adam Smith in some respects, offered a different vision of the economy and of the process of production. For Menger production was characterized by a time structure of production that was the result of individual intertemporal planning. There is no suggestion that the economy is in a stationary-state equilibrium.

--Peter Lewin, introduction and outline to Capital in Disequilibrium: The Role of Capital in a Changing World, 2nd ed. (Auburn, AL: Ludwig von Mises Institute, 2011), 9.