- Published: November 21, 2022
- Updated: November 21, 2022
- Language: English
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David Ricardo, a Briton is a well renowned economist whose contribution to the economics especially political economy is enormous. According to Peach in the book ‘ David Ricardo: Critical Responses’, Ricardo was born in London on 8th April 1722. He worked with his father from a tender age of 14 in a London stock exchange as both a messenger as well as a clerk for seven years. This was a very critical time in influencing his career. This paper focuses on the life of David Ricardo from when he was young up to when he made remarkable impact in the economics discipline.
According to Online Library of liberty, Ricardo was better placed in as far as his career in stock exchange business was concerned. This is attributed to the fact that his father had introduced him to it at an early age and again his two year training at a Hollard School equipped him with relevant knowledge. Ricardo valued abstract reasoning and was determined to address issues from their deepest roots to form a concrete opinion that was most convincing to him. Ricardo was different from his father in the sense that he did not accept views or perceptions of others blindly.
On the contrary, he questioned the values introduced to him by his father and this is evident in his change of religion. However, despite their differences Ricardo respected his father. (Library of liberty). In 1793, Ricardo married Priscilla Ann Wilkinson who is thought to have had a great impact in as far as Ricardo’s religious beliefs were concerned. Priscilla was a Quaker by faith and it was after their marriage that Ricardo distanced himself from Judaism. According to ‘ works and correspondence of David Ricardo, Priscilla’s family had settled earlier in England as opposed to Ricardo’s family.
Ricardo was a third born in a family of 14 and his father was a devoted orthodox Jew. He sent Ricardo to school at Talmud Torah School. His mother however died in 1801. (Dobb et al 26). David concentrated on his job as a jobber in the stock exchange market though he later worked as a loan contractor for a government stock’. (Peach 2). Soon after denouncing the Jewish religion, Ricardo was thrown out by his father and this played a significant role in boosting his independence. He was devotedly engaged in the stock exchange business and his talent and character earned him respect and recognition.
Ricardo’s friends acknowledged his remarkable talents in obtaining wealth. To them, ‘ he had comprehensive knowledge of all the intricacies his business entailed’. (Library of liberty). He was also intelligent and numerate as can be bore witness by his swiftness in calculations. He was also very easy going and of sound and cool judgment that attracted much admiration from many. (Library of liberty) At 25 years old, Ricardo had shown interest in studying mathematical science, chemistry and mineralogy. He actually established a laboratory and was a member of the Geological Society before his interest in political economy changed this dimension.
Peach noted that Ricardo’s interests in the political economy took effect in 1799 when he came across Adam Smith’s ‘ the wealth of nations’ while accompanying his wife for health or medical needs. Since then he had a ceaseless interest in matters related to the political economy. Whenever he was not preoccupied with his financial career Ricardo, read the political economy publications in Edinburgh review. (Peach 2). Ricardo was better placed to make contributions in the ‘ rising bullion market prices and falling exchange’ given his experience in the stock exchange market.
He applied his abstract reasoning personality in trying to analyze the issue in terms of causes or factors triggering it as well as expected results. As he carried out his in depth investigations regarding the issue he had no intentions of making his position public. Publication of his work was however possible courtesy of the influence of his friend Mr. Perry who was a proprietor and editor of the Morning Chronicle. (Library of liberty). 6th September 1809 was the day that his first letter was published. This letter reported a significant success and many gave their responses and queries.
In response to the various issues raised a systematic tract was formed, ‘ the high price of bullion a proof of the depreciation of bank notes’ which ran for a whole month. In this tract, Ricardo made a firm assertion that ‘ values of currencies in coins, gold or silver could neither raise nor fall in value to an extent that necessitates importation of foreign currencies if the currencies were easily convertible for instance in England such notes could not be exported to other countries when there was redundancy’. (Library of liberty).
On the contrary the exchange would be depressed and prices of bullion would rise. Ricardo’s proposals to restore the ‘ bullion crisis’ were however faced by much criticism and were only to be implemented later. A major opponent of Ricardo’s ideology was Mr. Bosanquet who argued that Ricardo views were not impressive. In response to Mr Bosanquet’s queries, Ricardo published a tract in 1811 named ‘ Reply to Mr. Bosanquet’s practical observation on report to bullion committee’. This tract is deemed as ‘ one of the best essays that have appeared on any disputed question of political economy’. (Library of liberty).
Ricardo carefully used a very effective counter argument strategy to dismiss Bosanquet’s ideologies. He highlighted the ideas his opponent had raised and dismissed his allegations clearly making a conclusion that Mr. Bosanquet was mistaken or analyzing a different theory altogether. Ricardo made a conclusion that there was no problem with the theory and instead Mr. Bosanquet was the problem. Ricardo was credited for knowing his theory both practically as well as the principles involved. This tract earned Ricardo admiration and friendship of great economists and intellectuals like Malthus and Mill.
Ricardo resurfaced as an author in 1815 when the bill about raising the limit of corn imported for consumption was being discussed. During the same period Ricardo and others (Malthus and Sir Edward West) revisited the ‘ true theory of rent which had been discovered in 1777’. Ricardo in essay on ‘ influence of low prices of corn on the profits of stock’ highlighted how increased prices affected wages and profits. He made a conclusion that freedom of corn trade ought to be embraced. (Library of liberty).
In 1815 Ricardo together with other economists like Malthus, Torrens and Sir West brought about the concept of ‘ law of diminishing returns’. Ricardo also introduced the ‘ differential theory or rent’. He formulated the theory of distribution in a single commodity market (corn) where he noted that the profits as well as rents were to be determined in the agriculture sector. Ricardo used the ‘ concept of arbitrage’ to argue that the profits as well as rents in the agricultural sector would at some point be equal to those in the industrial sector. (cepa. newschool. edu).
According to this theory, he noted that increased wages translated to reduced profits and not necessarily higher prices. This argument was published in 1815 in the ‘ essay on profits’. In 1817 Ricardo in ‘ principles of political economy and taxation’ noted that it was necessary for prices to be fixed in a ‘ multiple commodity economy’ if the rents as well as profits were to remain residuals. Ricardo also disagreed with Adam Smith especially on his ideology that ‘ natural prices’ were determined by hours of labor dedicated to production. To him, value was not dependent on distribution and consequently Smith’s theory could not work.
He also noted the effect of capital on laborers in terms of amount spent and profits earned. To him, relative prices varied with wages in an economy where competition was embraced. He argued that the ‘ labor theory of value’ would only be applicable if the amount of capital invested was the same for all sectors. This viewpoint was to change the viability of this theory. Ricardo further argued that application of his earlier ‘ theory of distribution’ would have an influenced on the prevailing problem with the ‘ labor theory’. He also coined the theory of growth.
In 1816 Ricardo published ‘ Proposals for an economical and secure currency with observation on the profits of the bank of England’. In this pamphlet he assessed the conditions that affected value under two different circumstances. In one situation there was freedom of supply while in the other option restrictions were introduced for instance in a monopoly. The value of money under restrictions ‘ depended on other freely supplied costs’ (Library of liberty). The value of money however depended on the demand when no restrictions were imposed.
This finding was important as it made it clear that the ‘ intrinsic value of money was not very essential or applicable to currencies’. This means that the value of money would not change depending on its form that is whether gold, paper or coins. Ricardo also noted that easy exchangeability of money especially the paper money would save the government the cost incurred making metallic money. According to Ricardo, bank notes were better made exchangeable for ‘ bars of gold bullion of the standard weight and purity’ instead of gold coins. (Library of liberty).
This would reduce the ‘ over issue of paper money’ it would also cut on the cost of coinage, reduce the loss of coins as well as their wear and tear. In 1817 Ricardo published ‘ principles of political economy and taxation’. Ricardo was a very principled man who could not compromise on airing his views to gain majority favor as long as they were based on principle. He was a distinguished member of parliament who placed public interests at the forefront. In 1820, Ricardo wrote the article ‘ funding system’ where he advocated for increased taxation to raise funds to finance war.
To him, taxation ‘ would not only expedient but practicable to pay off the public debt by an assessment of capital. ’ (Library of liberty). In 1822, Ricardo published ‘ protection to agriculture where he highlighted the influence of taxation on agriculture’ where he highlighted issues of pricing as well as effects of ‘ high and low value of corn over wages and profits’. (Library of liberty). In 1814 Ricardo noted that he found himself ‘ sufficiently rich to satisfy all my desires and the reasonable desires of all those about me’ (cepa. newschool. edu). Upon retirement he settled as a country man at Gatcomb Park.
Four years after his retirement he joined politics ‘ to represent a borough in Ireland’ where he served until he met his death. His ‘ strong interest in money matters especially on taxation, financing of government loans as well as ‘ repeal of Corn Laws’ were his major concerns while in parliament’. (cepa. newschool. edu). Ricardo discussed his economic ideas with his friends especially James Mill and Robert Malthus. Although Ricardo different in terms of ideologies with Malthus, the two had a good relationship to an extent of offering investment advise.
Ricardo offered him investment advice especially before the waterloo saga. Malthus failed to follow his due to his conservatism tendencies. On the other hand Ricardo made a fortune from the bond investment. (cepa. newschool. edu). Ricardo also made a significant impact in as far as foreign trade was concerned through his introduction of the comparative advantage where nations were expected to produce what they could best. (cepa. newschool. edu) In analyzing his private life the Library of liberty noted that he was a committed loving father and husband.
He engaged in intelligent talks with his friends especially on the political economy subject. Ricardo’s speeches portrayed his talent and skillfulness and are comparable to a few. He clearly discussed abstract topics in speeches that proved to be better than his publications. He also engaged in charitable work where he donated to the less fortunate members in the society. David Ricardo died at 51 years living behind a widow and seven children three sons and four daughters. He left a legacy that not many would.
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