David Ricardo

English economist

• Born: April 18, 1772
• Birthplace: London, England
• Died: September 11, 1823
• Place of death: Gatcombe Park, Gloucestershire, England

Acknowledged as the founder of political economy, Ricardo was the most influential of the early nineteenth century thinkers who formalized the growing science of economics. His impact on economics has continued into the twenty-first century.

Early Life

Born in England, David Ricardo was descended from Jewish-Spanish ancestors who had migrated to Italy and then to Holland before 1700. His father, Abraham Israel Ricardo, left Holland while in his early twenties to visit England, where he remained. He became a citizen, married Abigail Delvalle, from a well-to-do Jewish merchant family, and established himself as a successful merchant-banker with a broker’s license. The family was important in the London Jewish community. David was the third child, and third son, of fifteen children.

Groomed to enter the family business, David received practical schooling in England and then was sent to Holland to continue his education in a commercial school under the care of an uncle. After two years in Holland he returned to England for a final year of schooling, after which he entered his father’s business, at the age of fourteen.

Ricardo soon became involved in high-level financing of bills of exchange and public securities, quickly becoming a respected participant in the world of finance. His ability, however, led to conflict with his father over the latter’s role as chief of the family. When Ricardo reached the age of twenty-one, he married a Quaker woman, Priscilla Ann Wilkinson, and was instantly ostracized by his family. Priscilla, too, was ostracized, but with less severity. David never again had any dealings with his mother; he was removed from his godfather’s will as of the date of the wedding. By 1810, he was, however, fully reconciled with his father.

Ricardo was a small man and well proportioned. His skin appears to have been darker than the typical Englishman’s; his eyes were reported to evince intelligence and thoughtfulness. His voice was high and squeaky, perhaps an advantage in Parliament, because that made it distinct. Although he was not robust or athletic, he enjoyed good health.

Life’s Work

Ricardo, in 1793, was on his own. He and Priscilla leased a house in the Kennington Place area of London, followed by two more nearby in the next three years—each larger than the last. Having begun speculating in the stock market prior to his marriage, he was respected by private bankers, who provided him with a line of credit.

In 1796, Ricardo expanded his interests, becoming an avid amateur mineralogist. (In 1807, he would be one of the first members of the Geological Society.) In 1799, while he and Priscilla were in Bath for her health, David read Adam Smith’s The Wealth of Nations (1776), the first work on capitalist economics. He immediately took an interest in political economy, the subject that would become his area of achievement.

During the years of the wars with revolutionary and Napoleonic France, Ricardo was active in war finance through purchase of government bonds and the creation of the professionalized stock exchange. He also served as an officer in volunteer military units. As one of a thousand originators of the London Institution, an organization to promote science, literature, and the arts, he made friends with the publisher of the Morning Chronicle, James Perry.

In 1797, the British government had suspended gold payments and issued paper bank notes. The effects of bank failures and inflation had created a long-standing controversy identified as “paper against gold.” Perry asked Ricardo to write about the issue, which he did in 1809, publishing an essay titled “The Price of Gold.” The next year, he published The High Price of Bullion: A Proof of the Depreciation of Banknotes and became a public figure. His next publication was A Reply to Mr. Bosanquet’s Practical Observation on the Report of the Bullion Committee (1811), considered the best controversial work on an economic topic to that date. His argument in both pieces was that government should control the supply of paper currency to reflect accurately the value of gold bullion. Ricardo, the successful man of finance, had become the public theorist.

By 1809, Ricardo was active in the Unitarian Church. Priscilla and the children eventually became Anglicans, but David would not do so. He was attracted to Unitarianism for its respect for reasoned toleration.

With escalating costs as the war with France neared its end in 1815, Ricardo and others loyally continued to buy and deal in bonds. When Napoleon was finally defeated at Waterloo, the market soared, and Ricardo made a fortune. He purchased a grand London home—on land used for the American Embassy in the twentieth century—and the estate of Gatcombe in Gloucestershire, where as chief landholder he was expected to perform extensive community services. He also indulged in support of the arts, book collecting, educational reform, and intellectual discussions with such thinkers as Jeremy Bentham, James Mill (father of John Stuart Mill), and Thomas Malthus.

In 1815, Ricardo published his critique of the Corn Laws, An Essay on the Influence of a Low Price of Corn on the Profits of Stock . The Corn Laws were a means of guaranteeing English grain producers a high price for their products. Ricardo contended that they were an artificial interference with the workings of the market and thus benefited the landowner at the expense of everyone else.

By 1817, Ricardo had taken much of the profit from his war bonds and invested in other areas: in land, French bonds, and mortgages, which allowed him to retire from day-to-day business and devote time to other activities, including the writing of his On the Principles of Political Economy and Taxation (1817) and participation in Parliament.

On the Principles of Political Economy and Taxation was Ricardo’s account of the growing discipline of economics. Ricardo propounded seven principles upon which an economy is based. First, the cost of production determines price. Second, the amount of labor required determines the value of an item. (This idea was based on Smith’s “labor theory of value”; in the 1821 edition Ricardo conceded that the cost of production might also influence value.) The third principle described a rent theory based on Malthus’s idea of population growth outstripping food production and wherein rent was the difference in price between the most and least productive acres. (Ricardo contended that this created permanent conflict between landowners and capitalists.) Further, for Ricardo there is a fixed supply of money for wages—the amount of capital in circulation—and as capital increases, population grows, more land is rented, capital profits shrink, and wages are lowered.

Ricardo’s fifth principle is that when wages fall below a minimum for survival, population drops as a result of war, pestilence, and disease (Malthus’s contention). According to Ricardo’s sixth principle, “diminishing returns” set in when capitalists must spend more on subsistence wages and therefore have less to invest and expand production. Ricardo’s seventh and last principle is based on a quantity theory of money that projects rising prices resulting from an increased supply of gold, through domestic or foreign trade. These principles became the basis for economics as a scientific study, and some are at the heart of late twentieth century schools of thought.

In exchange for a four-thousand-pound fee and a large mortgage loan, Ricardo was given the House of Commons seat of Portarlington by the earl of Portarlington. He took his seat in Parliament on February 26, 1819. His first speech, a month later, was on a bill to reform the Poor Laws. Not a great orator, Ricardo reluctantly joined in debate, but his wisdom on matters relating to economics was always in demand.

In 1820, Ricardo was reelected. He would retain his seat in the House of Commons until his death in 1823. His politics were decidedly those in support of tolerance, individual rights, and limits on the size of government. He attacked the Corn Laws, usury laws, bounties, economic restrictions, and Robert Owen’s pastoral socialist schemes. He supported an annuity plan for the poor, the reduction of taxes, and the idea of paying off the national debt with a onetime tax on all land.

On July 12, 1822, Ricardo and family boarded a steamboat at the Tower of London steps and headed for the Continent for a five-month Grand Tour. The tour started in Amsterdam and extended to Leghorn, near Florence, Italy, where Spanish Jews had first migrated around 1600. In 1823, Ricardo was joined in Parliament by Joseph Hume, an advocate of the ideas of James Mill and Bentham. The two joined forces, voicing concern over the need for parliamentary reform. Ricardo began work on a plan to create a national bank (published after his death, in 1824). He also drew up plans for refurbishing Gatcombe. An earache, first noted in Italy, recurred early in September. Ricardo died of a mastoid infection near noon on September 11, 1823. He was buried in the churchyard at Hardenhuish.

Significance

David Ricardo managed in his lifetime to meld the world of finance with the life of the mind and the good of the body politic. Personally successful in business, he systematized the general principles of what would become the science of economics. Gifted in the practical, he contributed an original view on the theoretical. During the later years of his life, Ricardo expanded his interest to politics, tempering what he saw as the laws by which political economies worked with a concern for toleration, justice, and the public good.

Although his ideas have been superseded or modified by new theoretical approaches to economics, Ricardo managed to influence all positions on the economic spectrum, from the proponents of laissez-faire capitalism to those of socialism.

Bibliography

Churchman, Nancy. David Ricardo on Public Debt. New York: Palgrave, 2001. An analysis of Ricardo’s ideas about public debt, describing how those ideas connect with his other economic theories.

Grampp, William D. “Scots, Jews, and Subversives Among the Dismal Scientists.” Journal of Economic History 36 (September, 1976): 543-571. An account of the abuse hurled at Ricardo and other political economists because they were Scots, Jews, or political radicals. Ricardo is shown to have been damned also for being a stockbroker.

Heilbroner, Robert L. The Worldly Philosophers. 6th ed. New York: Simon & Schuster, 1986. Chapter 4 is titled “The Gloomy Presentiments of Parson Malthus and David Ricardo.” The gloom from Malthus concerns his theories on population. Ricardo is presented as a theorist dealing with abstractions—abstract workers, abstract capitalists. A good comparison of their ideas.

Henderson, John P. The Life and Economics of David Ricardo. With supplemental chapters by John B. Davis; edited by Warren J. Samuels and Gilbert B. Davis. Boston: Kluwer Academic, 1997. Comprehensive, intellectual biography, recounting Ricardo’s early years, career, economic theories, and relationships with Thomas Malthus and other classical economists.

Hollander, Jacob H. David Ricardo: A Centenary Estimate. New York: August M. Kelley, 1968. A reprint of the 1910 edition, from three lectures at Harvard University in 1910, Hollander’s book is helpful in understanding the connection between later writings and his parliamentary activities.

Kuhn, W. E. The Evolution of Economic Thought. Cincinnati, Ohio: South-Western, 1963. Includes a short sketch of Ricardo’s life and contribution to economic ideas and public life. Also includes an analysis of Ricardo’s monetary and banking theory in chapter 9.

Marshall, Alfred. Principles of Economics. 8th ed. London: Macmillan, 1920. A discussion of the fundamental economic law of value. The human side of Ricardo is seen as a barrier to a clear exposition of his ideas. Marshall contends that Ricardo’s unwillingness to repeat his ideas, to explain them in greater detail, led to errors of omission.

Peach, Terry. Interpreting Ricardo. New York: Cambridge University Press, 1993. Explains the full range of Ricardo’s economic theories, including his ideas about profits, the law of markets, and the labor theory of value.

Ricardo, David. Biographical Miscellany. Vol. 10 in The Works and Correspondence of David Ricardo. Edited by Piero Sraffa. Cambridge, England: Cambridge University Press, 1955. A collection of sketches and other personal data. The one source with some information about his physical appearance. A helpful volume of memorabilia. The most revealing personality glimpses, however, are in Maria Edgeworth, Letters from England, 1813-1844, edited by Christina Colvin (Oxford, England: Oxford University Press, 1971).

Weatherall, David. David Ricardo: A Biography. The Hague: Martinus Nijhoff, 1976. The most readable, human account. Particularly useful insights into the events that affected Ricardo and his times.