David Ricardo
Birth	18 April 1772 London ( Great Britain )
Deaths	11 September 1823 Gloucestershire ( UK )
Nationality	UK
Fields	Economy , politics
Famous for	his book Principles of Political Economy and Taxation , work on the theory of value and on the comparative advantage
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David Ricardo (1772 - 1823), economist English of the ^nineteenth century , was also a stockbroker and member.

He is considered one of the most influential economists of the classical school alongside of Adam Smith and Thomas Malthus.

David Ricardo was born on 18 April 1772 and died on 11 September 1823.

Youth

Born 18 April 1772 at London , England , David Ricardo is the third of seventeen children of a bourgeois family of Jewish financiers, who emigrated from the Netherlands to the UK just before his birth. At fourteen, David Ricardo joined his father at the London Stock Exchange, where he began to learn the functioning of finance.

Ricardo rejected the orthodox Judaism of his family and fled at the age of 21 years with a Quaker , Priscilla Anne Wilkinson, he just married. His mother, in retaliation, he did speak again. At that time, Ricardo is also a Unitarian.

Financial: practitioner and theorist

The break with his family forced him to set up his own by becoming a stockbroker. His early writings on monetary problems of the Napoleonic wars, appear as three articles in the Morning Chronicle between 1809 and 1810. He published a year later test on the high price of bullion: proof of the depreciation of banknotes (1811), where he developed a thesis quantitativist where excess ticketing has helped to devalue the currency during the English Napoleonic wars. This book will influence the drafting of the "Bullion Report" by the commission of the same name of the House of Commons.

The MPP

The debates generated by the publication of his works bring monetary Ricardo to develop its knowledge economy. In 1799 while vacationing in the past especially troublesome resort English Bath , He is interested in reading the economy Inquiry into the Nature and Causes of the Wealth of Nations ( 1776 ) of Adam Smith

His work as a stockbroker makes it rich enough to retire in 1814 at the age of 42. He moved to Gatcombe Park and divides his time between politics and economics.

Entered the British Parliament in 1819, after buying a seat together representative of Portarlington, a peerage of Ireland , he served until 1823, the year of his death. As a member, Ricardo defends free trade and the repeal of the Corn Laws in 1815 voted.

The Economist

Ricardo is an autodidact of economic thought. There is abundant with Jeremy Bentham , Thomas Malthus and Jean-Baptiste Say , on such topics as the role of landowners in society. He also frequents London's intellectual circles, and became a member of the Club of political economy of Malthus (Malthus' Political Economy Club) and the King of Clubs (King of Clubs).

In 1815, Ricardo publishes Essay on the influence of low wheat prices on the profits of capital ( 1815 ).

In 1817, has published his masterpiece, The Principles of Political Economy and Taxation ( 1817 ) that will change the rest of his life. The second edition was released in 1819 and third in 1821.

He died of an ear infection in 1823 at Gatcombe Park at the age of 51 years, one year after making a grand tour of Europe. On his death his fortune was about 725 000, a significant sum for the time ^Theoretical

Value Theory

The exchange value of a product is not for its usefulness, the proof is as valuable products such as water have no exchange value. If some goods are naturally limited, most have their volume based on the work that we are willing to devote to their production. So much work so it makes the exchange of goods. On the other hand, the amount of work that requires the production of the property also includes one's need for fixed capital formation. In addition, Ricardo sets properties of non-reproducible reproducible. The exchange value of the latter depends on their rarity.

See work as a sole source of value later led Karl Marx in his theory of class struggle , to consider the benefit of capitalists as a result of the exploitation of labor power of the proletariat. Marx quotes Ricardo frequently elsewhere in the Capital and resume the concept of "goods reproducible" by Ricardo as the "goods".

Opposition to protectionism

The import of wheat, which is prohibited by laws protectionist (the "Corn Laws"), seems to be a solution to restore profits. (Essay on the influence of low wheat prices on the profits of stock) Indeed, a British lobby spinners, the Anti Corn Laws League, will get their repeal in 1846.

Ricardo also advance the theory of the " comparative advantage "(in addition to the theory of absolute advantage of Adam Smith ): that every nation's interest to specialize in the production where it has the advantage over the high or disadvantage the less pronounced vis--vis other nations.

Theory of Comparative Advantage

David Ricardo showed that every country even less competitive, are in some theoretical conditions (perfect competition, without political pressure so), an interest in returning to the game of international trade by specializing in production, where they hold the largest relative advantage or disadvantage on the less serious consequences.

In Chapter VII of the Principles of Political Economy and Taxation, Ricardo develops the example of trade in wine and cloth between England and Portugal. With the number of hours given, Portugal produces 20 meters of cloth and 300 liters of wine while England produced 10 yards of cloth and 100 liters of wine. England is at a disadvantage in both productions. Ricardo, however, reveals that Britain's interest to specialize in the production of cloth, where it has a comparative advantage, because with 10 meters of cloth, it will get 150 liters of wine Portuguese (cons 100 in it). Conversely, Portugal will specialize in wine production since the exchange with England 300 liters of Portuguese wine he will get 30 meters of English cloth instead of 20 meters of cloth Portuguese. England has a comparative advantage in producing cloth while Portugal has an absolute advantage.

Ricardo's analysis shows that specialization based on comparative advantages allows a simultaneous increase in the production of wine and cloth. In his model, there is always a combination of prices such as free trade is beneficial to each country, including the less productive it is a positive sum game.

In reaching this conclusion David Ricardo makes four assumptions: the value of labor equals the price times the quantity of work, competition must be perfect, there must be immobility of factors of production at international level (only goods moving) and finally the productivity should be constant. In reality, these theoretical conditions are never fulfilled, and the practical application of the theory of comparative advantage raises more problems than it solves.

In fact, a country that specializes in production becomes dependent for other productions, the international market. Besides the political pressures that can then undergo, it is also more vulnerable to international speculators.

An example of result: the specialization of a country in a poor crop for export could result in lower local availability of basic foodstuffs in this country. It follows a rise in local prices of staple foods, and risk of famine.

The theorist of the gold standard

In the Bullion Report submitted to the House of Commons in 1810, Ricardo condemns the excessive issue of banknotes in his source of inflation. It suggests that the issue of money is limited by the stock of gold in order to guarantee the value.

The theory of rent

Wealth is divided among three components of wages, profits and rent. For Ricardo, the evolution of the population inevitably leads to higher prices of food (because of diminishing returns to earth ) and that of the rent (after the increased need for farmland). The result of this inflation, that workers suffer in misery, is to make higher wages necessary to ensure their survival. And population growth necessarily lead to a crash in profits annuity, and therefore the end of productive investment, what Ricardo called "steady state" state of the economy that may be hampered by technical progress. Ricardo joins the views of Thomas Malthus and critical social aid granted to the indigent that create poverty in the long term by promoting unwanted births.

Ricardian equivalence

The "Ricardian equivalence" or "Ricardian neutrality" is an economic theory. It is also called "Barro-Ricardo effect" or "equivalence theorem Ricardo-Barro". This theorem was first stated by David Ricardo, the classical economist of the nineteenth century, then taken by Robert Barro in 1974. According to this theorem, there would, under certain conditions, equivalence between the increase of public debt today and the future tax increases required by the repayment of this debt and interest payments. If economic agents behave rationally, a recovery policy (distribution of income financed by public debt) does not push them to consume, but to save (savings rate increase), in anticipation of an increase of future taxes. The validity of the "Ricardian equivalence" has long been - and still is - discussed. The theorem has been stated in very specific situations, limited by numerous assumptions. A study of DGTPE suggested that households in the euro zone and France, could follow a Ricardian behavior: "An increase of 1 percentage point of GDP of the structural deficit would be offset by an increase of 3 / 4 point of GDP private savings, which would be consistent with a behavior largely Ricardian households in the euro area. "(Authors of this study note that it should not be" interpreted too hastily as a causal correlation of this type. ") 1. Christian Bialas, in his blog, talks about challenging the assumptions of the Ricardian equivalence, so that its development should also lead to challenging the principle itself: in effect, an increase of public debt induces an increase in any future taxes. Governments can choose to reduce spending, borrow or raise taxes or a combination of all three.

Works

• The high price of bullion, proof of the depreciation of bank notes ( 1810 )
• Response to practical observations of Mr. Bosanquet on the Report of the Bullion Committee "( 1811 )
• Essay on the high price of bullion (The High Price of Bullion, A Proof Of The Depreciation of Bank Notes, 1811 )
• Essay on the influence of low wheat prices on the profits of capital (An Essay on the Influence of a Low Price Of Corn On The Profits of Stock, 1815 )
• Principles of Political Economy and Taxation (On the Principles of Political Economy and Taxation, 1817 )
• The consolidation system, Encyclopaedia Britannica ( 1820 )
• Protection of Agriculture (On Protection in Agriculture, 1822 )
• Plan for the establishment of a National Bank ( 1824 )

References

See also

• List of famous economists
• Principles of Political Economy and Taxation

• Economy Portal
• Portal of liberalism

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