David Ricardo

Lore & Background

Ricardo was born in London as the third surviving child of a successful stockbroker from a Sephardic Jewish family of Portuguese origin. At age 21, he eloped with a Quaker and converted to Unitarianism, causing estrangement from his family. He made his fortune financing government borrowing, later retired to an estate in Gloucestershire, served as High Sheriff of Gloucestershire, and bought a seat in Parliament as an earnest reformer. He was friends with James Mill, Jeremy Bentham, and Thomas Malthus, and was a member of The Geological Society.

As MP for Portarlington, Ricardo advocated for liberal reforms including free trade, parliamentary reform, and criminal law reform. He opposed the Corn Laws, which he saw as barriers to economic growth. He wrote his first economics article at age 37, advocating for a reduction in the note-issuing of the Bank of England. He contributed to theories of rent, wages, and profits, defining rent as the difference between produce obtained by equal capital and labour, and posited that as real wages increase, real profits decrease.

Ricardo introduced the concept of comparative advantage, arguing that nations should concentrate resources in industries where they have the greatest efficiency relative to their own alternatives. He believed international trade is always beneficial, even if one country is more competitive in every area. He died at 51 from an ear infection that led to septicaemia, leaving a considerable fortune.

Reader's Guide

David Ricardo's significance lies in his foundational contributions to classical economics, particularly the theory of comparative advantage, which remains a cornerstone of international trade theory. His work challenged mercantilist ideas by demonstrating that free trade benefits all nations, even those with absolute disadvantages. Ricardo's opposition to the Corn Laws and his advocacy for free trade influenced British economic policy, with his views eventually becoming public policy after his death. His theories on rent, wages, and profits shaped later economic thought, and his insistence on the labour theory of value influenced both classical and Marxist economics. Despite his friend John Louis Mallett's doubts about Ricardo's disregard for experience and practice, his ideas have had a lasting impact on economic policy and theory, promoting specialization and free trade as engines of growth.

Did You Know?

• Ricardo made his fortune financing government borrowing, not from speculating on the Battle of Waterloo, though a popular story claimed he netted upwards of a million sterling.
• He was an abolitionist and believed in the autonomy of a central bank as the issuer of money.
• Ricardo served as High Sheriff of Gloucestershire and bought a seat in Parliament for Portarlington for £4,000.
• He died at age 51 from an ear infection that led to septicaemia.

Notable Quotes (Wikiquote)

"Money is neither a material to work upon nor a tool to work with." — David Ricardo "Sufficiently rich to satisfy all my desires and the reasonable desires of all those about me." — David Ricardo "Utility then is not the measure of exchangeable value, although it is absolutely essential to it." — David Ricardo "Possessing utility, commodities derive their exchangeable value from two sources: from their scarcity, and from the quantity of labour required to obtain them." — David Ricardo