Proposals for an Economical and Secure Currency: With Observations on the Profits of the Bank of England, as They Regard the Public and the ... - British and Irish History, 19th Century)
David Ricardo was born on April 18, 1772, in Inner Temple, London. He was the third of seventeen children. His family was descended from Iberian Jews who had fled to Holland in the early 18th Century. Ricardo’s father, a stockbroker, emigrated to England shortly before David was born.
Career
David Ricardo began working with his father at the age of 14. But following the estrangement of his parents from him because of his religious denomination, David went into business for himself with the support of Lubbock's and Forster, an eminent banking house.
He excelled in stock exchange operations, and after 12 years left the stockbroker's occupation. By the age of 38, he became a major financial figure. At 42 he retired from active work to do scientific research in the field of economic theory, having a fortune, according to various estimates, from 500 thousand to 1 million 600 thousand pounds. In 1799, he was interested in economic theory, after reading Adam Smith's book The Wealth of Nations. In 1809 he wrote the first economic note. The main work of Ricardo is the book "The Beginnings of Political Economy and Taxation", written in 1817. In 1819 he finally withdrew from business and was elected a member of the House of Commons from one of the electoral districts of Ireland - a "rotten place" in which Ricardo never visited, and bought a deputy mandate from the local landlord.
The Sunday Times reported in Ricardo’s obituary, published on 14 September 1823, that during the Battle of Waterloo Ricardo "netted upwards of a million sterling", a huge sum at the time. He immediately retired, his position on the floor no longer tenable, and subsequently purchased Gatcombe Park, an estate in Gloucestershire, now owned by Princess Anne, Princess Royal and retired to the country. He was appointed High Sheriff of Gloucestershire for 1818 - 19.
In 1819 he finally left the business and was elected a member of the House of Commons from one of the electoral districts of Ireland - a "rotten place" which Ricardo never visited. He also bought a deputy mandate from the local landlord. Having taken a seat in parliament, Ricardo became a supporter of the reform, which would close such an opportunity to become a deputy. Ricardo did not formally join either the ruling Tory party or the Whig opposition. Whig party was closer to him, he enjoyed great authority in their circles, but he held an independent position and often voted contrary to their position. David Ricardo died at the age of 51 in Gloucestershire from an ear infection.
At age 21, Ricardo eloped with a Quaker, Priscilla Anne Wilkinson, and, against his father's wishes, converted to the Unitarian faith. The religious difference resulted in estrangement from his family, and he was led to adopt a position of independence. His father disowned him and his mother apparently never spoke to him again.
Politics
Ricardo’s interest in political economy was ignited by Adam Smith’s Wealth of Nations (1776), and it was amplified by economic events at the time, especially the Bank of England’s suspension of the convertibility of bank notes into gold in February 1797 and inflationary tendencies during the Napoleonic Wars.
Ricardo supported a tax on capital to pay off the national debt; currency reform; abolition of the Corn Laws protecting British wheat; parliamentary, poor-law, legal, and military reform; a secret ballot; and Catholic emancipation; he also condemned political repression.
Views
David Ricardo gave systematized, classical form to the rising science of economics in the 19th century. Although the analysis is abstract, often ambiguous, and disorganized, seven related economic laws can be extracted.
First, prices are determined by the cost of production. Second, the value of any item is set by the quantity of labor used to produce it. In the revised edition of 1821, Ricardo suggested that value might also be influenced by the cost of production. A third law, a theory of rent, was based upon Malthus's prediction of increasing population. When population increases, more food is needed and less fertile land is planted. Rent is the difference in the price of wheat per acre between the most and least productive land. As population grows, rent increases at the expense of capital's profits and labor's wages. The interests of landlords were not only antithetical to the rest of the community, but landlords and capitalists were necessary enemies.
The fourth and fifth laws deal with the wages fund and the natural price of labor. These laws assumed that the price of labor, like other market prices, fluctuated with supply and demand; but at any given time there was a fixed supply of money for the payment of wages. This wages fund was the amount of capital in circulation. As capital increased, population grew, less fertile land was planted, rent increased, capital profits decreased, and wages dropped. Ricardo held that population will tend constantly to rise above the wages fund, especially in old countries like England, causing the working man's standard of living to fall. Disaster was arrested only by population reduction, essentially through infant mortality. Ricardo, like Thomas Malthus, never anticipated either population control or technological increase of food supplies. If wages fell below subsistence level, population decreased; when wages neither increased nor decreased the labor supply, they reached their "natural" or subsistence level. Popularizers of Ricardo's general model interpreted this to mean that most people were doomed inexorably to bare subsistence.
The sixth law argues the "diminishing returns" of profits, the earnings of the most useful class. As increasingly inferior land is cultivated, rent and food prices rise, and profits fall since the higher wages required for subsistence wages come out of the existing amount of circulating capital. The final law, the quantity theory of money, applies value theory to gold: the rise or fall in prices depends inversely upon the amount of money in circulation.
Quotations:
“Taxes are not necessarily taxes on capital, because they are laid on capital; nor on income, because they are laid on income. ”
“If a tax in proportion to profits were laid on all trades, every commodity would be raised in price.”
“Whatever raises the wages of labour, lowers the profits of stock; therefore every tax on any commodity consumed by the labourer, has a tendency to lower the rate of profits.”
Membership
Ricardo was an independent member of Parliament for the pocket borough of Portarlington from 1819 until his death. He also was a member of Malthus' Political Economy Club, and a member of the King of Clubs. He was one of the original members of The Geological Society.
Parliament for the pocket borough of Portarlington
,
United Kingdom
1819 - 1823
Malthus' Political Economy Club
,
London
King of Clubs
,
London
The Geological Society
,
London
Personality
Ricardo was a close friend of James Mill. Other notable friends included Jeremy Bentham and Thomas Malthus, with whom Ricardo had a considerable debate (in correspondence) over such things as the role of landowners in a society.
Connections
In 1793 Ricardo married Priscilla Anne Wilkinson. They had eight children.