Ricardo, David

Ricardo, David (1772-1823), British political economist born in London on April 18, 1772, to Sephardic Jewish parents. His father had emigrated from the Netherlands and it was to a school attached to the Portuguese synagogue in Amsterdam that he sent his son for an orthodox education. At the age of 14, a year after his return to London, David Ricardo entered his father’s stockbroking business. From then on anything he learned was self-taught. This included political economy, the taste for which he acquired as a result of reading The Wealth of Nations (1776) by Adam Smith. Ricardo was disinherited when he married outside his faith and he was forced to begin business on his own account as a stockjobber and government loan contractor. Skill and prudence in managing this business enabled him to amass a large fortune during the final years of the Napoleonic Wars, which he then reinvested in land.

During the war Ricardo had contributed to the pamphlet debates on currency questions connected with the suspension of the gold standard in 1797. He was to become one of the leading critics of the Bank of England and an advocate of return to the gold standard after the war. In 1814-1815 he opposed the successful attempt on the part of the landed interest to increase the level of protection granted to domestic agriculture. He formulated a distinctive theory that connected increased grain prices and money wages with a fall in the general level of profit. It supported the controversial conclusion that the economic interests of landowners were opposed to those of society in general.

As a result of these writings, Ricardo formed friendships with other devotees of political economy and with Thomas Malthus and James Mill in particular. He adopted two of Malthus’s main ideas, his population principle and the theory of rent, but found himself at odds with Malthus on the subject of exchange value, the possibility of general gluts, and the consequences of agricultural protection. Through his friendship with James Mill, Ricardo was encouraged to expand on the ideas he had advanced in his attack on the Corn Laws by writing his Principles of Political Economy and Taxation (1817). He made the laws that regulate the distribution of national income between landowners as rent, capitalists as profits, and labour as wages (see Labour Theory of Value), the principal problem of the science. His approach gave prominence to the law of diminishing returns in agriculture as the clue to what was happening in the rest of the economy.

Mill also prevailed on Ricardo to use his fortune to obtain a seat in Parliament in 1819, where he advocated free trade, low taxes and reduction in the national debt, and the restoration of convertibility to the currency. He also supported the parliamentary reform programme of the group of philosophic radicals that had formed around the ideas of Mill and the Utilitarian philosopher Jeremy Bentham.

Ricardo died at Gatcombe Park, Gloucestershire, on September 11, 1823. After his death Ricardo became the supreme example of the use of abstract deductive methods to establish economic principles, often later thought to be unfeeling applications of the logic of self-interest to human affairs. His legacy was prolonged into the second half of the 19th century when John Stuart Mill (son of James Mill) retained the outlines of Ricardo’s theoretical system in his own Principles of Political Economy (1848). Modern economics retains several theories, notably on rent and on comparative advantage as the source of gains from trade, which are Ricardian in origin. The dominant influence he had on economic discourse was attacked by John Maynard Keynes in the 1930s as part of his attempt to restore ideas on the causes of unemployment held by Malthus, which Keynes considered to have been unjustly overturned by Ricardo.