The leading economic textbook of the mid-19th century, English philosopher John Stuart Mill's Principles of Political Economy (1848), paid tribute once again to Ricardo's genius and secured his reputation with yet another generation of students. With the onset of the ‘marginal revolution’ in the 1870s, Ricardo's star finally began to wane and many now agreed with English economist William Jevons that he had ‘shunted the car of economic science onto a wrong line’. The fact that German philosopher and economist Karl Marx hailed Ricardo as his intellectual mentor served if anything to accelerate the anti-Ricardian trend, and even English economist Alfred Marshall's charitable effort in his Principles of Economics (1890) to make the best case for Ricardo failed to save his declining reputation.

At the heart of Ricardo's system is the notion that economic growth must sooner or later peter out owing to a scarcity of land. As cultivation is extended to ever less fertile land, he showed that the rate of profit on capital must fall, the rent of land must rise, but workers are no better off because wages cannot fall below a minimum-of-existence level.

The root of the trouble being the declining yield of land, it is evident that the short-run solution is to import wheat from countries better endowed with fertile land in exchange for domestically-produced manufactured goods. No wonder then that Ricardo vigorously attacked the existing corn laws, which protected British wheat farmers by prohibiting foreign wheat imports except in years of famine.

Eager to show that Britain would benefit from specializing in manufactured goods and importing the bulk of its food supply, he hit upon the doctrine of comparative advantage which marked his most lasting contribution to economics: under free trade, each country will find it profitable to export, not just goods in which it has an absolute advantage but goods in which it has a comparative advantage relative to the goods which it imports; even when it cannot produce anything more cheaply than any other country, there are still benefits to be obtained from international trade, not just for the country in question but for all countries taken together. This is the fountainhead of all 19th-century free trade doctrine. Although the corn laws were not in fact repealed until 1846, 23 years after Ricardo's death, his writings helped to make free trade a popular objective of British policy. Unwittingly, Ricardo provided the theoretical justification for the long-run solution to the growth problem which Britain actually adopted in the 19th century: Britain became the ‘workshop of the world’ and bought most food abroad.

Ricardo was born in London, England, the third child of a Sephardic Jewish family that had emigrated from Holland in 1760. At the age of 14 he started working for his father, who had become a successful member of the Stock Exchange. At the age of 21 he married the daughter of a Quaker against the wishes of his parents, who disinherited him. Striking out on his own, he soon accumulated a small fortune as a stock-jobber and loan contractor. In 1814, at the age of 42, he retired from business, purchased an estate, Gatcombe Park in Gloucestershire and began to devote himself to literary pursuits.

Ricardo's interest in economics dated back to 1799, when he came across a copy of Scottish economist Adam Smith's Wealth of Nations (1776). Ten years later he made his debut in print with a newspaper article on the bullion controversy, subsequently expanded into a pamphlet entitled The High Price of Bullion: A Proof of the Depreciation of Bank Notes (1810). The Bullion Committee Report, which appeared the following year, agreed with Ricardo that the current inflation was due to the Bank of England's failure to restrict the issue of bank notes. The fame of the committee's report lent prestige to Ricardo's tract, so much so that later commentators incorrectly credited Ricardo with inspiring it.

In 1814 he turned his attention to commercial policy and a year later published the Essay on the Influence of a Low Price of Corn on the Profits of Stock (1815), which laid down what was soon to become one of the cornerstones of classical political economy: the law of diminishing returns to increments of capital and labour applied to acres of land. Two years later he expanded this pamphlet into his major treatise, On the Principles of Political Economy and Taxation (1817).

In 1819 he obtained a seat in the House of Commons and for the next few years took an active part in parliamentary discussions of current issues. He died of a cerebral infection, leaving an estate valued at £750,000 (the equivalent of about £75 million today).

Ricardo's intellectual appeal then and now rested on his remarkable gifts for heroic abstractions: he seized hold of a wide range of significant problems with a simple analytical model that involved only a few strategic variables and yielded, after a few elementary manipulations, dramatic conclusions of a distinctly practical nature.

quotations

Ricardo, David

weblinks

Principles of Political Economy