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David Ricardo – With Trump’s pending inauguration, suddenly the old giants become relevant again

David Ricardo

David Ricardo (Photo credit: Wikipedia)

David Ricardo (1772-1823) was an English economist, influenced by Thomas Robert Malthus, and often credited along with Adam Smith and John Stuart Mill as a founder of the so-called classical school of economics.

Ricardo had learned the art of stockbroking while working with his successful father, Abraham. Eloping with a Quaker, however, his Jewish parents disowned him at age 21.

Undaunted by the loss of his parents, by his mid-twenties Ricardo had become a wealthy stockbroker. He became interested in economic theory after reader Adam Smith‘s The Wealth of Nations in 1799. Later, he joined the British Parliament from 1819-1823.

Ricardo’s main contribution to the history of ideas is found in Principles of Political Economy and Taxation (1817), where he develops innovative theoretical models to account for the distribution of wealth.

Ricardo advocated national specialization and open competition (free trade). He was against protectionism and believed that a nation should focus on what it does best, and forget the rest. Being merely competitive wasn’t good enough for Ricardo. Instead, having a “comparative advantage” is key.¹

His work on the labor theory of value had an effect on Karl Marx. Marx adapted some of Ricardo’s ideas to fit his

  • Teleological view of history (now recognized as flawed)
  • Critique of Capitalism
  • Advocacy of worldwide socialism
Profile of Adam Smith

Adam Smith (Photo credit: Wikipedia)

Ricardo’s labour theory of value suggests that food prices determine wages. Food prices, themselves, are determined by production costs, which in turn are determined by the amount of labor required for production. In short, his theory suggests that value is set by labor.

When Ricardo became an MP in 1819, he used his newfound status to foster the free-trade movement, in keeping with Adam Smith’s belief that national wealth is best generated with minimal government interference—that is, laissez-faire.

More recently the idea of free trade has been critiqued by those believing that some degree of government regulation is necessary for a nation’s economic prosperity, not to mention all the other human and environmental variables that go into nationhood and our emerging global reality.

¹ See https://en.wikipedia.org/wiki/David_Ricardo

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Adam Smith

Profile of Adam Smith

Profile of Adam Smith (Photo credit: Wikipedia)

Adam Smith (1723-1790) was a Scottish-born philosopher and economist closely linked to the philosopher David Hume. Smith’s pioneering study in economics, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), studied political economy apart from the standpoint of political science, ethics and law. From this, some call him the father of modern economics.

The main thrust of The Wealth of Nations is that national wealth is best generated with minimal government interference – laissez-faire – in conditions of free trade. As an ideology, laissez-faire has deep roots not just in Europe but also in the United States and in (Confucian) China.

Smith believed that, with government non-interference, private industry and commercial entrepreneurs would be automatically guided by market forces; a so-called “invisible hand” would ultimately lead society toward the greatest common interest.

At one point Smith talks about a “Great Architect of the Universe” but scholars debate whether or not he actively believed in God or not.¹ His father was a Christian, belonging to the Church of Scotland.

Related » David Ricardo

¹ https://en.wikipedia.org/wiki/Adam_Smith

On the Web:

  • Filmed as part of a second year course in social anthropology at Cambridge University in November 2001.”


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Malthus, Thomas Robert

Malthus' "An Essay on the Principle of Po...

Malthus' "An Essay on the Principle of Population..." (at APS' Dialogues with Darwin exhibit) by Colin Purrington via Flickr

Thomas Robert Malthus (1766-1834) was a British economist, professor and clergyman stationed in a parish at Cambridge, where he was educated.

He’s known in economics for his theory of population, outlined in An Essay on the Principle of Population (1798).

For Malthus, population usually increases faster than the means of subsistence (i.e. available food supply).

According to his theory, whenever the rate of population growth slightly exceeds that of food production, an even higher rate of population growth follows. But if the population growth rate is a great deal higher than that of food production, population growth is limited by famine, pestilence and war.

Malthus’ ideas challenged the accepted early 19th century view that population growth meant economic growth. Malthusian theory encouraged decreasing the birth rate, a view that became somewhat popular.

On the down side, his work was often taken up as a weapon against attempts to improve the lot of the poor. But Malthus’ legacy contributed to the development of contemporary demographics—the statistical study of society. His outlook also had a profound influence on the economist David Ricardo. And Charles Darwin wrote that Malthus’ work influenced the theory of natural selection.

I happened to read for amusement Malthus on Population, and being well prepared to appreciate the struggle for existence which everywhere goes on from long- continued observation of the habits of animals and plants, it at once struck me that under these circumstances favourable variations would tend to be preserved, and unfavourable ones to be destroyed. The results of this would be the formation of a new species. Here, then I had at last got a theory by which to work”.¹

¹ Charles Darwin, autobiography (1876), cited at http://www.ucmp.berkeley.edu/history/malthus.html

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Malthus’ “An Essay on the Principle of Population…” (at APS’ Dialogues with Darwin exhibit)

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