David Ricardo (1772 - 1823) was a British political economist, stockbroker, and Member of Parliament who became one of the most influential figures of the classical school of economics. [1] His 1817 work On the Principles of Political Economy and Taxation introduced the theory of comparative advantage and a systematic account of value, rent, and distribution. [2] Having made a fortune in finance, he devoted his later years to economic theory and public affairs. [1]
Early life and career
David Ricardo was born in London on 18 April 1772, the third of a large family of Sephardic Jewish descent. [1] His father was a successful stockbroker, and Ricardo entered the family business as a teenager, gaining an early and thorough grounding in the workings of the London financial markets. [1] In 1793 he married outside his faith and broke with his family and community, establishing himself independently on the Stock Exchange. Through shrewd dealing, particularly in government securities, he amassed a substantial personal fortune that later allowed him to withdraw from active business. [3]
Turn to economics
Ricardo's interest in political economy is often traced to his reading of Adam Smith's The Wealth of Nations around 1799. [1] He began writing on monetary questions, and during the debates over the suspension of gold payments by the Bank of England he argued that the depreciation of the currency stemmed from over-issue of paper money. These pamphlets, including his contributions to the bullion controversy, established his reputation as a rigorous analytical thinker among contemporaries such as Thomas Malthus and James Mill. [3]
Principles of Political Economy
His major work, On the Principles of Political Economy and Taxation, appeared in 1817. [2] In it Ricardo developed a labour theory of value, an analysis of rent based on differences in land fertility, and an account of how national income is distributed among wages, profits, and rent. [2] The book's most enduring contribution is the theory of comparative advantage, which demonstrated that two countries can both benefit from trade even when one is more efficient at producing everything, provided each specializes according to its relative costs. [4]
Parliament and later life
In 1819 Ricardo entered the House of Commons as member for the Irish borough of Portarlington. [1] Though a somewhat reluctant orator, he spoke on economic questions, currency reform, and free trade, and advocated a return to the gold standard. [3] He died at his country estate, Gatcombe Park in Gloucestershire, on 11 September 1823, at the age of fifty-one. [1]
Legacy
Ricardo ranks with Adam Smith as a founder of classical economics, and his method of abstract, deductive reasoning set a lasting pattern for economic theory. [4] The doctrine of comparative advantage remains a cornerstone of the modern case for international trade, while his ideas on value and distribution influenced later thinkers ranging from John Stuart Mill to Karl Marx. [2]
