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David Ricardo (April 18th 1772 September -11 1823), economist English of the 19th century, is one of the most influential economists of the economists of the traditional school at the sides of Adam Smith and Thomas Malthus. It was also stockbroker and deputy.

Biography

Youth

Born the April 18th 1772 with London, England, David Ricardo is the third of the seventeen children of a middle-class family of financial Jews, which emigrated of the Netherlands towards the England right before his birth. At the fourteen years age, David Ricardo joined his father with London Stock Exchange, where it starts to learn operation from finance.

Ricardo rejects the orthodoxe Judaïsme of its family and flees at the 21 years age with a Quaker, Priscilla Anne Wilkinson. His/her father, in reprisal, will speak to him never again. At that time, Ricardo becomes also a utilitarian .

Financier: expert and theorist

The rupture with its family forced it to be put on its account while becoming stockbroker. Its first writings, on the monetary problems of the Napoleonean wars, were published in the form of three articles published in Morning Chronicle between 1809 and 1810. It publishes one year later Essai on the high price of the ingot: proof of the depreciation of banknotes (1811), where it develops a thesis quantitativist where the excess of emission of tickets contributed to depreciate the English currency at the time of the Napoleonean wars. This book will influence the drafting of the " Bullion Report" by the commission of the same name of the House of Commons?

The economist and the deputy

The debates generated by the publication of its monetary works led Ricardo to develop its knowledge in economy. Ricardo started to be interested in the economy after the reading of Recherche on nature and the causes of the richness of the nations (1776) of Adam Smith in 1799 at the time of particularly tedious holidays last in the English vacation resort of Bath.

Its work of stockbroker makes it sufficiently rich to take its retirement in 1814, at the 42 years age. It is at this time that he moves in Gatcombe Park. It shares its time between politics and economics. It will enter to the British Parliament in 1819, after having bought a seat like par representing of Portarlington, a Pairie of Ireland. It will preserve its station until 1823, the year of its death. As a deputy, Ricardo defends the Libre-échange and the abrogation of the Corn Laws voted in 1815.

Ricardo is an autodidact of the economic thinking. It maintains an important correspondence with Jeremy Bentham, Thomas Malthus and Jean-Baptiste Say, on subjects such as the role of the landowners in the company. He attends also the London intellectual mediums, and becomes member of the political Club of saving in Malthus ( Malthus' Political Economy Club ) and member of the King of the clubs ( King off Clubs ).

In 1815, Ricardo publishes Essai on the influence of the low prices of corn on the profits of the capital (1815). Then it publishes in 1817, its main work, Of the principles of the political economy and the tax (1817) which it will modify the remainder of its life. The 2nd edition leaves in 1819 and the third in 1821.

He dies in 1823 with Gatcombe Park at the 51 years age, one year after having made a large turn of Europe.

Theoretical contributions

A theory of value

The exchange value of a product is not function of its utility, the proof is that very useful products as water do not have any exchange value. It is more the scarcity which determines the latter. If some goods are naturally limited, the majority have their volume according to the work which one agrees to devote to their production. Thus it is thus well the work which makes the value of the goods. In addition, the quantity of work which the production of the good requires includes/understands also that which the constitution of the fixed assets required.

To regard work as single source of the value, will lead Karl Marx later, in its theory of the Class struggle, to consider the profit of the Capitaliste S besides as being a turnover of the labor force of the Prolétaire S. Marx quotes frequently Ricardo in the Capital .

Opposition to the Protectionism

The importation of corn, prohibited by protectionist laws (“Corn Laws”), seems to be a solution with the restoration of the profits (Test on the influence of the low prices of corn on the profits of the capital). In fact, a British lobby of spinners, Anti Corn Laws League, will obtain their abrogation in 1846.

Ricardo advances also the theory of “the comparative Avantage”: with knowing that each nation may find it beneficial to specialize in the production where it has the highest advantage or the disadvantage less pronounced with respect to the other nations.

Theory of the comparative advantage

David Ricardo showed that all the countries, even least competitive, find an interest to return in the play of the International business while specializing in the production where they hold the relative advantage most important or the relative disadvantage least full of consequences.

In chapter VII of the Principles of the political economy and tax , Ricardo develops the example of the exchanges of Vin and cloth between the England and the Portugal. With a number of work hours given, Portugal produces 20 meters of cloth and 300 liters of wine while England produces 10 meters of cloth and 100 liters of wine. England is thus handicapped in the two productions. Ricardo however shows that England may find it beneficial to specialize in the production of cloth, where it has a relative advantage, because with 10 meters of cloth, it will obtain 150 liters of Portuguese wine (against 100 at it). Contrary, Portugal will have to specialize in the viticultural production since the exchange with England of 300 liters Portuguese wine will enable him to obtain 30 meters of English cloth instead of 20 meters of Portuguese cloth. England has a comparative advantage in the production of cloth whereas Portugal has a favors absolute .

The analysis of Ricardo shows thus that the specialization based on the comparative advantages allows a simultaneous increase in the production of wine and cloth. In its model, there exists always a combination of price such as the Libre-échange is advantageous with each country, including the least productive; it is about a Jeu to positive sum.

To arrive at this conclusion David Ricardo puts forth four assumptions: the value of work is equal to the price multiplied by the quantity of work; competition must be perfect; there must be immobility of the factors of production to the international level and finally the productivity must be constant.

The theorist of the gold standard

In the Bullion Carryforward given to the House of Commons in 1810, Ricardo denounces the excessive emission of banknotes, source according to him of inflation. He recommends that the emission of currency is limited by the gold stock, in order to guarantee the value of it.

A pessimistic vision of the future?

The richness is distributed between three components which are the wages, the profits, and the revenue. For Ricardo, the evolution of the population inevitably leads to the rise in the price of the subsistence (because of the decreasing outputs of the ground) and to that of the ground rent (following the need increased for cultivable grounds). The result of this inflation, that already undergo of the workers in misery, is to make necessary a rise of the wages in order to ensure the survival of the latter. Thus the population growth will cause necessarily a crushing of the profits by the revenue, and consequently the end of the productive investment. Ricardo thus joined the point of view of Thomas Malthus and critical the social securities granted to poor which create poverty on the long run by supporting nondesirable births.

Equivalence ricardienne

August 1st

Works

the high course of the ingot, proof of the depreciation of banknotes (1810)
Answer to the practical observations of Mr. Bosanquet on the " Report/ratio of Bullion Comittee" (1811)
Test on the high price of the ingots (The High Price off Bullion, has Proof off the Depreciation off Bank Notes, 1811)
Essai on the influence of the low prices of corn on the profits of the capital (Year Essay there the Influence off is Low Price off Corn one the Profits off Stock, 1815)
Of the principles of the political economy and the tax (One the Principles off Political Economy and Taxation, 1817)
the system of consolidation , Encyclopedia Britannica (1820 )
Of the protection of Agriculture (One Protection in Agriculture, 1822)
Plane for the establishment of a National Bank (1824)

References

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