David Ricardo was born in London on 18 April 1772, the third son of Abraham Israel Ricardo, a Sephardic Jew who had moved from Amsterdam to London around 1760. The young Ricardo was groomed to follow his father on the London Stock Exchange. Although his education was by no means negligible, it appears to have been somewhat narrow, perhaps explaining in part his later outbursts of despair over his literary ability.
Ricardo worked with his father for seven years until, at the age of 21, he married a Quaker and disavowed the Jewish faith. Estranged from his parents, Ricardo pursued a brilliant career as a jobber and loan contractor. Through a combination of fine judgement and good luck he soon amassed a considerable fortune and began a gradual retirement from business in 1814.
It was in 1799 that his interest in Political Economy was aroused by a chance perusal of Adam Smith’s (1981 [1776]) The Wealth of Nations. His first rash of publications came ten years later with letters and pamphlets addressed to the ‘Bullion Controversy’. Ricardo, always a strict quantity theorist, sought to expose the inflationary consequences of the Bank Restriction Act 1797, which had suspended the free convertibility of paper currency into gold. He argued that the government had been mistaken in suspending convertibility and even more wayward in trusting ignorant Bank of England officials with monetary control. The remedy for inflation was a return to convertibility, ideally accompanied by the establishment of an independent authority to oversee monetary management.
Following the Bullion Controversy, Ricardo’s next important publication, An Essay on the Influence of a Low Price of Corn on the Profits of Stock (1815), was one of many pamphlets spawned by the Tory government’s controversial proposal to impose a new scale of duties on the importation of foreign corn. Borrowing and adapting the theory of differential rent, rediscovered by his contemporary and friend, Thomas Robert Malthus, Ricardo inveighed against protection. His principal argument was that a protection-induced expansion of domestic cultivation would tend to run up against diminishing returns, thus resulting in a rising corn price, higher money wages, a falling general rate of profit and a slackening pace of capital accumulation. The only true gainers would be the landlords, whose rents would increase as general profitability declined.
Ricardo’s major work, The Principles of Political Economy and Taxation (three editions: 1817, 1819, 1821), was initially conceived as an expanded Essay and, although its scope was broader, the contents of the core theoretical chapters reflect that early conception. In particular, Ricardo now sought to demonstrate beyond logical doubt that diminishing agricultural returns must (permanently) depress general profitability in the absence of technological advances and the free importation of foreign grain. Since, as far as he was concerned, rising corn prices posed the sole empirical threat of permanently declining profitability, the clear message of his work was that the newly revised corn law should be scrapped.
Prominent among the theoretical innovations in the Principles was the development of a pure labour theory of value according to which permanent changes in exchange relationships between most commodities result from alterations in direct or indirect quantities of labour expended on their production. At the same time, Ricardo had discovered various limitations to the theory, later reduced by him to differences in the ‘time profiles’ of labour inputs. Pressed by Malthus to justify a theory which he had himself undermined, Ricardo embarked on his futile quest for a perfect measure of value which would magically restrict (permanent) variations in exchange relationships to those resulting from altered expenditures of labour-time, and this without assuming identical time profiles of labour inputs. That bizarre line of enquiry found expression in an extensively rewritten chapter ‘On Value’ for the third edition of the Principles, in which Ricardo also asserted the empirical relevance of the ‘pure’ labour theory. The complexities of value continued to trouble him until his death, not least because of his muddled attempt to reconcile ‘value’ in the sense of expended labour with ‘value’ in the more conventional sense of cost-of-production.
Adumbration of a theory of comparative advantage in international trade, the treatment of profit of as a residual or ‘surplus’, consideration of the possibility of labour displacement following the introduction of new machinery (in the third edition of the Principles) and a strict adherence to the ‘law of markets’ (in short, the doctrine that ‘supply creates its own demand’), all count among the distinctive features of the Principles. Mention should also be made of Ricardo’s austere, logico-deductive style of reasoning, for which he has been often condemned as an ultra-abstractionist. Despite superficial appearances, however, Ricardo’s political economy was mostly addressed to the concrete issues of his time; with the partial exception of his later deliberations on ‘value’, his was not an interest in theory for its own sake.
The success of the Principles was decisive in persuading Ricardo that he should follow the advice of his mentor, James Mill, to enter Parliament. So it was that in 1819 he took his seat as the member for the small pocket borough of Portariington in Ireland. From the floor of the Commons, Ricardo was untiring in his efforts to disseminate the scientific truths of political economy, as he saw them. With an almost fanatical belief in the efficiency and wealth-generating potential of competitive capitalism, he campaigned vigorously against monopolies, international trade restrictions, the poor laws, relief works and government borrowing generally (he boldly proposed that the national debt should be paid off over a two or three-year period by the imposition of a property tax). As a convert to the Bentham-Mill cause of parliamentary reform, though always remaining a moderate reformer, he also argued for a (very) limited extension of the electoral franchise, triennial parliaments and, most important of all in his view, the introduction of a secret ballot. He apparently believed, and certainly hoped, that those reforms would bring about a Parliament free from party and factional interest: a legislative environment which would promote the greatest happiness of the greatest number. When, at some future point in time, the working class came to appreciate the unique benefits of laissez-faire capitalism, they too could be trusted with democratic participation.
Ricardo’s ‘Political Economy’ has attracted and repelled, both in his lifetime and subsequently. Nor is there any consensus over his location in the history of economic thought: some have claimed him for the neoclassical school, others for the Marxian, others still for a Neo-Ricardian (or Sraffian) school. Part of the reason for the seemingly endless debate over his doctrinal home can be traced to the presence of a confusion and ambiguity in his writings which facilitates contradictory readings. But it is also the fate, perhaps even the hallmark, of great historical figures that they should be enlisted in support of causes held dear by subsequent generations. By that criterion, David Ricardo is one of the greatest Political Economists ever.
Terry Peach
University of Manchester
References
Ricardo, D. (1951–73) The Works and Correspondence of David Ricardo, ed. P.Sraffa with M.H.Dobb, 10 vols, Cambridge, UK.
Smith, A. (1981 [1776]) An Inquiry into the Nature and Causes of the Wealth of Nations, ed. R.Campbell and A.Skinner, Indianapolis, IN.
Further reading
Blaug, M. (1958) Ricardian Economics: A Historical Study, New Haven, CT.
Hollander, J.H. (1910) David Ricardo: A Centenary Estimate, Baltimore, MD.
Hollander, S. (1979) The Economics of David Ricardo, Toronto.
Peach, T. (1993) Interpreting Ricardo, Cambridge, UK.
Sraffa, P. (1951) Introduction, The Works and Correspondence of David Ricardo, vol. 1, Cambridge, UK.
