David Ricardo
David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, politician, and member of the Parliament of Great Britain and Ireland. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Adam Smith and James Mill.[2][3]
For other people named David Ricardo, see David Ricardo (disambiguation).
David Ricardo
18 April 1772
London, England
11 September 1823 (aged 51)
Gatcombe Park, Gloucestershire, England
Including David the Younger
- Businessman
- economist
Ibn Khaldun · Smith · Bentham
Ricardo, born in London as the third surviving child of a successful stockbroker and his wife, came from a Sephardic Jewish family of Portuguese origin. At 21, he eloped with a Quaker and converted to Unitarianism, causing estrangement from his family. He made his fortune financing government borrowing and later retired to an estate in Gloucestershire. Ricardo served as High Sheriff of Gloucestershire and bought a seat in Parliament as an earnest reformer. He was friends with prominent figures like James Mill, Jeremy Bentham, and Thomas Malthus, engaging in debates over various topics. Ricardo was also a member of The Geological Society, and his youngest sister was an author.
As MP for Portarlington, Ricardo advocated for liberal political movements and reforms, including free trade, parliamentary reform, and criminal law reform. He believed free trade increased the well-being of people by making goods more affordable. Ricardo notably opposed the Corn Laws, which he saw as barriers to economic growth. His friend John Louis Mallett described Ricardo's conviction in his beliefs, though he expressed doubts about Ricardo's disregard for experience and practice. Ricardo died at 51 from an ear infection that led to septicaemia (sepsis). He left behind a considerable fortune and a lasting legacy, with his free trade views eventually becoming public policy in Britain.
Ricardo wrote his first economics article at age 37, advocating for a reduction in the note-issuing of the Bank of England. He was also an abolitionist and believed in the autonomy of a central bank as the issuer of money. Ricardo worked on fixing issues in Adam Smith's Labour Theory of Value, stating that the value of a commodity depends on the labor necessary for its production. He contributed to the development of theories of rent, wages, and profits, defining rent as the difference between the produce obtained by employing equal quantities of capital and labor. Ricardo's Theory of Profit posited that as real wages increase, real profits decrease due to the revenue split between profits and wages.
Ricardian theory of international trade challenges the mercantilism concept of accumulating gold or silver by promoting industry specialization and free trade. Ricardo introduced the concept of "comparative advantage," suggesting that nations should concentrate resources only in industries where they have the greatest efficiency of production relative to their own alternative uses of resources. He argued that international trade is always beneficial, even if one country is more competitive in every area than its trading counterpart. Ricardo opposed protectionism for national economies and was concerned about the short-term impact of technological change on labour.
Personal life[edit]
Born in London, England, Ricardo was the third surviving of the 17 children of successful stockbroker Abraham Israel Ricardo (1733?–1812) and Abigail (1753–1801), daughter of Abraham Delvalle (also "del Valle"), of a respectable Sephardic Jewish family that had been settled in England for three generations as "small but prosperous" tobacco and snuff merchants, and had obtained British citizenship. Abigail's sister, Rebecca, was wife of the engraver Wilson Lowry, and mother of the engraver Joseph Wilson Lowry and the geologist, mineralogist, and author Delvalle Lowry.[4][5][6][7] The Ricardo family were Sephardic Jews of Portuguese origin who had recently relocated from the Dutch Republic.[6] Ricardo began working with his father at the age of 14. At the age of 21 Ricardo eloped with a Quaker, Priscilla Anne Wilkinson, and, against his father's wishes, converted to Unitarianism.[8] This religious difference resulted in estrangement from his family, and he was led to adopt a position of independence.[9] His father disowned him and his mother apparently never spoke to him again.[10]
Following this estrangement he went into business for himself with the support of Lubbocks and Forster, an eminent banking house. He made the bulk of his fortune by profitably financing Government borrowing. There is a story that he made his fortune as a result of speculation on the outcome of the Battle of Waterloo: The Sunday Times reported in Ricardo's obituary, published on 14 September 1823, that during the battle Ricardo "netted upwards of a million sterling", a huge sum at the time, and this was later popularised by the economist Paul Samuelson; in reality Ricardo was already very rich and in June 1815 sold his latest government stock before the result of the battle was known in London, so missing half of the rise.[11]
He retired, and subsequently purchased Gatcombe Park, an estate in Gloucestershire, and retired to the country. He was appointed High Sheriff of Gloucestershire for 1818–19.[12] In August 1818 he bought Lord Portarlingtons' seat in Parliament for £4,000, as part of the terms of a loan of £25,000. His record in Parliament was that of an earnest reformer. He held the seat until his death five years later.[13]
Ricardo was a close friend of James Mill. Other notable friends included Jeremy Bentham and Thomas Malthus, with whom Ricardo had a considerable debate (in correspondence) over such things as the role of landowners in a society. He also was a member of Malthus' Political Economy Club, and a member of the King of Clubs. He was one of the original members of The Geological Society.[10] His youngest sister was author Sarah Ricardo-Porter (e.g., Conversations in Arithmetic).
Parliamentary record[edit]
As MP for Portarlington, Ricardo voted with the opposition in support of liberal political movements in Naples and Sicily, and for inquiry into the administration of justice in Tobago. He divided for (voted for) repeal of the Blasphemous and Seditious Libels Act; then for inquiry into the Peterloo massacre; and, in 1821, for abolition of the death penalty for forgery.
He adamantly supported free trade. In 1821 he voted against renewal of the sugar duties, and objected to the higher duty on East Indian as opposed to West Indian produce. He opposed the timber duties. He voted silently for parliamentary reform and in 1822 spoke in its favour at the Westminster anniversary reform dinner; and again voted for criminal law reform.
Ricardo believed that increasing imports by free trade boosted the wellbeing of mankind by increasing the amount of goods cheaply available for subsistence and consumption. He was said to have "possessed an extraordinary quickness in perceiving in the turns of the market any accidental difference which might arise between the relative price of different stocks".[14] And he grew his wealth dealing in securities during the Revolutionary and Napoleonic wars.
As the Napoleonic Wars waged on, Ricardo developed a disdain for the Corn Laws imposed by the British to encourage exports. Notably, government intervention in the grain trade can be traced as far back as the 1400s; and thereafter trade was controlled, regulated, and taxed. Meanwhile, England developed a capitalist economy involving workers and landlords generating and consuming incomes and capital accumulations that depended entirely on capitalists’ profits,[15] and these key economic elements were under perpetual pressure during the eighteenth and early nineteenth centuries.
Political reform was needed as agricultural output was struggling to keep pace with population growth. The Corn Laws imposed barriers to imports that increased subsistence/consumption costs and triggered demand for higher wages. Higher wages reduced profits for agricultural producers, and had the immediate effects of reducing capital investments and slowing the growth of a nation's economy. Rising rents, attributed by Ricardo to the Corn Laws, came at the expense of the economic profits of nations. For David Ricardo, free trade was ever the answer; he envisioned Britain as importing agriculture products in exchange for exporting manufactured goods.[16] Eventually, after his death, the interventionist laws were repealed, and his free trade views became public policy in Britain.[17]
Of David Ricardo, his friend John Louis Mallett commented: " … he meets you upon every subject that he has studied with a mind made up, and opinions in the nature of mathematical truths. He spoke of parliamentary reform and ballot as a man who would bring such things about, and destroy the existing system tomorrow, if it were in his power, and without the slightest doubt on the result … It is this very quality of the man’s mind, his entire disregard of experience and practice, which makes me doubtful of his opinions on political economy."
Death and legacy[edit]
Ten years after retiring and four years after entering Parliament, Ricardo died from an infection of the middle ear that spread into his brain and induced septicaemia. He was 51.
He and his wife Priscilla had eight children together including Osman Ricardo (1795–1881; MP for Worcester 1847–1865), David Ricardo (1803–1864, MP for Stroud 1832–1833) and Mortimer Ricardo, who served as an officer in the Life Guards and was a deputy lieutenant for Oxfordshire.[18]
Ricardo is buried in an ornate grave in the churchyard of Saint Nicholas in Hardenhuish, now a suburb of Chippenham, Wiltshire. At the time of his death his assets were estimated at £675,000–£775,000.[7]
Ricardian equivalence[edit]
Another idea associated with Ricardo is Ricardian equivalence, an argument suggesting that in some circumstances a government's choice of how to pay for its spending (i.e., whether to use tax revenue or issue debt and run a deficit) might have no effect on the economy. This is due to the fact the public saves its excess money to pay for expected future tax increases that will be used to pay off the debt. Ricardo notes that the proposition is theoretically implied in the presence of intertemporal optimisation by rational taxpayers: but that since taxpayers do not act so rationally, the proposition fails to be true in practice. Thus, while the proposition bears his name, he does not seem to have believed it. Economist Robert Barro is responsible for its modern prominence.
Ricardo's publications included:
His works and writings were collected in Ricardo, David (1981). The works and correspondence of David Ricardo (1st paperback ed.). Cambridge: Cambridge University Press. ISBN 0521285054. OCLC 10251383.
