Who was David Ricardo?
David Ricardo was a British political economist, stockbroker, and politician. Celebrated as one of the most influential classical economists of all time, Ricardo is widely recognized for his contributions to the development of theories related to rent, wages, profits, and international trade. American economists regard Ricardo as the second-most prominent economic thinker, after the ''Father of Economics,'' Adam Smith. Despite his short career, Ricardo influenced economic development significantly. Ricardo had proposed many “laissez-faire” (meaning “to leave alone,” or “to allow to do”) doctrines in his 'Iron Law of Wages.' Before he emerged as an influential economist, Ricardo had worked in the domain of politics. Though he was not a regular speaker, the field of economics highly respected him for his thoughts on free trade, which were, however, less dominant in the ‘House.’ Despite winning support throughout England, he was subjected to criticism for his views. His writings provide a base for many contemporary economic ideas. Unfortunately, many of Ricardo's ideas are now no more in existence, while some have been replaced. Nevertheless, 'Neo-Ricardian' thoughts still exist and are relevant.
Childhood & Early Life
Ricardo was born on April 18, 1772, in London, into an affluent Portuguese Sephardic Jewish family from the Dutch Republic. He was the third of the 17 children born to successful stockbroker Abraham Ricardo and his wife.
His youngest sister, Sarah Ricardo-Porter, later became an author.
Ricardo was 14 when he joined his father at the 'London Stock Exchange.' His father disowned him after Ricardo (aged 21) eloped with a ‘Quaker’ named Priscilla Anne Wilkinson and embraced the Unitarian faith. His mother, too, never spoke to him again.
Ricardo, however, with the support of the eminent banking house ‘Lubbocks and Forster,’ speculated on the Battle of Waterloo and earned a fortune.
Ricardo's newly found financial status allowed him to pursue literature and science, particularly the fields of mathematics, chemistry, and geology. He became a dealer in government securities. He also purchased the 'Gatcombe Park' in Gloucestershire.
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Years in Parliament
In 1814, Ricardo retired from business. He entered the ‘British Parliament’ in 1819, after purchasing a seat in the ‘House of Commons.’ He was an independent representative of Portarlington, and served the ‘Parliament’ until his death. Ricardo was named the ''High Sheriff of Gloucestershire'' (1818–1819).
Ricardo's parliamentary years were primarily focused on the currency and economics. He supported free trade and criminal law reforms but was against the renewal of sugar duties, the higher duty on East (compared to West Indian produce), and timber duties.
Ricardo held the memberships of Malthus's 'Political Economy Club,' the 'King of Clubs,' and 'The Geological Society.'
Around 1799, Ricardo developed an interest in economics after he got inspired by Adam Smith's 'Wealth of Nations.' He had pursued economics for 10 years.
His first article on economics was published in 'The Morning Chronicle.'
Ricardo's first published book was 'The High Price of Bullion, a Proof of the Depreciation of Bank Notes' (1810), which further fueled the controversy regarding the 'Bank of England.'
Ricardo stressed on the link between the volume of banknotes and price levels, which impacted foreign exchange rates and the flow of gold.
Supporting Ricardo's views, a ‘House of Commons’ committee, the 'Bullion Committee,' recommended the cancelation of the 'Bank Restriction Act.'
Ricardo's 'Essay on the Influence of a Low Price of Corn on the Profits of Stock' (1815) was a result of an opposition caused by the tariff increment on imported wheat ('Corn Laws').
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Ricardo opposed the 'Corn Laws,' which he believed had deteriorated the British economy.
'Principles of Political Economy and Taxation' (1817) has been Ricardo's most celebrated work. It contains an analysis of the laws that determine the distribution of what has been a result of the "three classes of the community." The book also contains his extension of the labor theory of value, which is regarded as his best-known contribution to the field of economics and which eventually laid the foundations of Marxism.
Ricardo's law of rent was later applied to political economy. Like his greatest influence, Adam Smith, he, too, opposed the policy of protectionism for national economies, especially for the agricultural sector.
Ricardo was the first to present the law of rent, which he had formulated around 1809. He presented an advanced version of the law and also spoke about his 'Theory of Profit.'
He also put forward the ways thorough which international trade benefits countries. Ricardo provided theoretical proofs to support the fact. American economist Paul Samuelson later named the numbers used in Ricardo's example of the trading deal between England and Portugal as the "four magic numbers."
In 1821, Ricardo wrote about his concerns regarding the short-term impact of technological change on labor.
Ricardo's writings inspired many of the early socialists in the 1820s, who considered his value theory as a radical approach.
Ricardo is credited for providing a more detailed explanation of the classical system of economics than his predecessors.
Ricardo's ideas are known as the "Classical" or "Ricardian” school of thought.
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A huge supporter of the abolitionist movement, Ricardo delivered a speech at an 'East India Company' conference in March 1823. He stressed on the negative impacts of slavery on the nation.
Ricardo decided to retire in 1823, due to health issues.
Ricardo recognized that the application of his theory of comparative advantage was conditional. He proposed two arguments to rectify the error. Many other economists have criticized the theory.
Ricardo's arguments for free trade, too, have been criticized, and some critics have called them a logical paradox.
Development economist Ha-Joon Chang challenged Ricardo's argument.
Family Life & Death
Ricardo and Priscilla Ann Wilkinson had eight children. His sons include Osman Ricardo (1795–1881), who was an M.P. for Worcester (1847–1865); David Ricardo (1803–1864), who was an M.P for Stroud (1832–1833); and Mortimer Ricardo, who was a lifeguard officer and a deputy lieutenant for Oxfordshire.
After a prolonged illness, Ricardo died of induced septicaemia on September 11, 1823. His grave lies in the churchyard of ‘Saint Nicholas’ in Hardenhuish.
English economist John Stuart Mill reformulated Ricardo's theory of international trade and coined the term "comparative advantage." He also established a neoclassical version of the theory, which eventually revived the anti-Ricardian concept of law of supply and demand.
In 2002, Professor Dr. Roy J. Ruffin first pointed out the errors in Ricardo's concept of the "four magic numbers."
The introduction of the ''Neoclassical'' school led to the fall of Ricardo's influence. However, editor Piero Sraffa (of the 'Collected Works of David Ricardo') revived his economic theories and introduced a new school, known as the ''Neo-Ricardian'' or ''Sraffian” school.