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
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.