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David Ricardo

by Pubali Chakravarty

 

 Karl Marx, when adopting theories and ideas from various economists to fashion his revolutionary views against capitalism, was very influenced by the concepts introduced by David Ricardo.  In particular, Ricardo’s Labor Theory of Value, which Marx felt embodied the inner workings of capitalism and shed light on the unjust system[1].

David Ricardo was born in London in 1772 to a wealthy Jewish family.  His father, a stockbroker, chose not to educate him in the traditional Jewish manner, choosing instead to school him at a private school in Amsterdam.  When Ricardo returned from Amsterdam, his formal schooling was almost at an end.  But school is only a part of education and in this particular case, a very small part.  His education in the arts and sciences was to be the long process of self-education.  His education in finance began when at the age of fourteen he joined his father on the London stock market[3].

 

 The Bank of England is where it all came together for the young David Ricardo.  It was there that he learned the practical details of business, obviously by observing the dealings and on-goings of his father and his peers at this prestigious financial institution.  He was an apprentice there for seven years, and when his apprenticeship was over, David Ricardo had amassed a fortune

In 1809 Ricardo published the first of his economic writings, The High Price of Bullion, a Proof of the Depreciation of Bank notes, in which he argued for a sound currency based on metal.[4]   Ricardo was very proud of this work, and he thought well enough of it to send it to the Prime Minister of London.

 

The book was so controversial that it had circulated throughout the British parliament and by 1810, moved into the House of Commons where it caused the Bullion Committee to publish a formal report about the book and later hold a debate about the material Ricardo covered. 

 The debates were intense, and it was during these times that Ricardo wrote what is now considered to be his finest of all his controversial works, and what was considered at the time to be the finest controversial work ever written on an economic subject[5].  It was another book, titled A Reply to Mr. Bosanquet’s Practical Observations on the Report of the Bullion Committee.

 

  Upon the public’s reception of the latest Ricardo publication, he had become a quite famous economist whose opinions were very important to society.  So it was not a surprise when another great controversy arose which involved the ideas of David Ricardo. 

In March 1814, the termination of the Napoleonic wars brought society’s attention back to the old problems, namely the Corn Laws. The chief purposes of the Corn Laws were to secure an adequate supply of grain to meet domestic requirements and to maintain grain prices at profitable levels. The laws principally provided for duties on imported and exported grains.[6] Thus, the laws would ensure that significant profits would be made by monopolizing the business of grain farming in England. Though the actual laborers would not gain anything from the laws, the landowners and the crown would benefit from the trades.

 

Ricardo’s theoretical system emerged directly from debating the efficiencies of the law.  Ricardo felt that the growth of capital and population lead to extension of cultivation to less fertile and less accessible land and to decreasing returns on cultivated land upon the application of heavy farming.[7]  As a result, there would be a decrease in profit, resulting in increased labor with no reimbursement.

 Ricardo’s debates against the Corn Laws eventually brought them to an end in 1846, when the next generation of economists influenced by his theories took control of the committees and put an end to the controversial laws

Unlike many of his colleagues in the history of economics, Ricardo was not flamboyant.  He did not stage revolutions or protest.  Rather, he used the power of knowledge and know-how to silently state his opinions.  He made an impact in the field of economics, and developed a new system of thinking.  He wrote several books and papers emphasizing international trade, national specialization, and freedom of competition. 

 

Ricardo did all of these things without ever having formal education in the field of economics, rather he learned by doing, and to this day people are effected by his thoughts on modern economics. 

 

1"economics," Microsoft(r) Encarta(r) 97 Encyclopedia. (c) 1993-1996 Microsoft Corporation. All rights reserved.

2"Ricardo, David," Microsoft(r) Encarta(r) 97 Encyclopedia. (c) 1993-1996 Microsoft Corporation. All rights reserved.

3 Weatherall, David : David Ricardo, A Biography. The Hague, Netherlands, 1976.

4"Ricardo, David," Microsoft(r) Encarta(r) 97 Encyclopedia. (c) 1993-1996 Microsoft Corporation. All rights reserved.

5 Weatherall, David:  David Ricardo: A Biography. The Hague, Netherlands,1976.

6"Corn Laws," Microsoft(r) Encarta(r) 97 Encyclopedia. (c) 1993-1996 Microsoft Corporation. All rights reserved.

7 Blaug, Mark. Ricardian economics. Greenwood Press, Connecticut, 1958.

         

         

 

 

 

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