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David Ricardo (April 18, 1772
— September 11, 1823), a
British political economist, is often credited with systematizing
economics, and was one of the most influential of the classical
economists. He was also a successful businessman, financier and speculator, and amassed a considerable fortune.
Personal life
Born in London, Ricardo was the third of seventeen children in a Sephardic Jewish family (from Portugal) that
emigrated from The Netherlands to England just prior to his birth. At age 14 Ricardo joined his father at the London Stock Exchange.
Ricardo rejected the orthodox Jewish beliefs of his family and
eloped with a Quaker, Priscilla Anne
Wilkinson, when he was 21. His father was so unhappy with this that he abandoned Ricardo and never spoke to him again. Around
the same time Ricardo became a Utilitarian.
Ricardo's work with the stock exchange made him quite wealthy, which allowed him to retire from business in 1814 at the age of 42. He then purchased and moved to Gatcombe Park, an estate in Gloucestershire.
In 1819, Ricardo purchased a seat in the British parliament as a representative of Portarlington, a borough of Ireland. He
held the post until the year of his death in 1823. As an MP, Ricardo advocated free trade and the repeal of the Corn Laws.
He died at Gatcombe Park at 51 years of age.
Ricardo was a close friend of James Mill, who encouraged him in his
political ambitions and writings about economics. Other notable friends included Thomas Malthus, whose ideas on population growth Ricardo accepted, and Jeremy Bentham.
Ricardo's most famous work is his Iron law of wages, a
document which shows his capatalist tendencies. In this book Ricardo states that the wages of 19th century British workers should
not be increased, though it was encouraged greatly by the masses. This was due to his observation of the direct link evident
between money and population. An increase in income of workers equals an increase in children, resulting in a larger workforce.
Such an increase means that employers will be forced to lower wages as their working population grows exponentially. Also, the
surplus of workers and lower wages will combine to create a greater state of poverty that existed before wages were originally
raised. Ultimately, he favoured employers far more than workers, a philosophy adopted by Karl Marx.
Ideas
Ricardo became interested in economics after reading Adam Smith's
The Wealth of Nations in 1799.
His publications included:
- The High Price of Bullion, a Proof of the Depreciation of Bank Notes (1810),
which advocated the adoption of a metallic currency
- Essay on the Influence of a Low Price of Corn on the Profits of Stock (1815),
which argued that repealing the Corn Laws would distribute more wealth to the
productive members of society
- Principles of Political Economy and Taxation (1817), an analysis that concluded that land rent
grows as population increases. It also clearly laid out the theory of comparative advantage, which showed that all nations could benefit from free trade, even if a nation was less efficient at producing all kinds of goods than its trading
partners.
Other ideas associated with Ricardo:
- Ricardian equivalence, an argument suggesting that in
some circumstances a government's choice of how to pay for its spending (ie, whether to use tax revenue or issue debt and run a
deficit) might have no effect on the economy. Ironically, while the proposition bears his name, he does not seem to have believed
it. Robert Barro is responsible for its modern prominence.
- The iron law of wages, which asserted that real income of workers would remain near the
subsistence level, despite any attempts to raise wages.
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