Ricardo David 1772 1823

Ricardo David 1772 1823

Ricardo, David (1772-1823), English economist of Jewish descent; a leading member of the classical school of political economy. He completed his formal education at the age of fourteen but his business ability led him to become a wealthy stockbroker and he retired from business at the age of forty-two. The bulk of his economic publications appeared during the remaining nine years. They reveal deep analytical insight, and quickly established his reputation as a leader among economists. He became influential in public life and was elected to Parliament in 'Big.

Ricardo became interested in political economy in his late twenties after an earlier flirtation with the physical sciences (during which he became a founder member of the Geological Society). His early interest lay in the monetary problems arising out of the Napoleonic wars and led to his important and best known essay, The High Price of Bullion (i8io). It was followed in 1815 by his essay On the Influence of a Low Price of Corn on the Profits of Stack and in 1816 by Proposals for an Economical and Secure Currency His most important work, The Principles of Political Economy and Taxation, first appeared in 1817. The third edition (1821) is the final version to which reference is usually made.

The Principles embodied Ricardo's main achievements in the theory of value and distribution. The importance of the latter to him is shown by his statement in the preface to the first edition that 'to determine the laws which regulate this distribution of economic produce is the principal problem in Political Economy'. His theory of value was a Quantity-of-Labour theory. He dismissed 'scarce' (i.e. irreproducible) commodities; he concentrated on the mass of goods that may be 'increased by human industry' and tried to demonstrate that the exchange values of commodities will be proportional to the quantities of labour embodied in them (including 'stored-up' labour in the form of machines, etc.). The simplicity of this proposition was stretched in later passages on production requiring the use of proportions of capital and labour of varying qualities, but Ricardo retained it as a fundamental element in his theory.

The explanation of the distributive shares of the three factors of production, land, labour and capital, was implicit in Ricardo's theory of value once the rent of land had been eliminated. The rent of land was regarded as a surplus over cost of production, the extent of which was determined by the differing fertility and situation of land. Price that would warrant production on the poorest or worst-situated land would yield a surplus over production costs on more favoured plots, which would be appropriated in rent by landowners. Thus rent could be ignored as an element in cost of production: 'corn is not high in price because a rent is paid, but a rent is paid because corn is high'. This explained the distributive 'share' of land. That of labour was determined by the amount of capital available for the payment of wages and by the size of the labour force; and profit was the residual: 'there can be no rise in the value of labour without a fail of profits'. This theory of distribution had much influence on other economists. It suggested that, as population grew, the increased demand for food would tend to raise rents and the price of food: hence wages would rise and profits would fall. The community of interest expounded by Adam Smith no longer seemed to be valid, a view later elaborated by Karl Marx and the 'Ricardian' Socialists.

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