David Ricardo

Biography
David Ricardo was the third of seventeen children in a familyJewishSephardicwho emigrated from
Netherlandsto Englandbefore his birth. He started working at the age of fourteen in the
London Stock Exchangeas his father's employee. In 1793 he married outside the Jewish faith and the
relations with his family became more strained, so Ricardo decided to settle down
on their own. They specialized in public securities negotiation, and prospered quite quickly.
and by 1815 he had amassed a considerable fortune. After having acquired his fortune
at the London Stock Exchange, he became a landowner. In 1819 he was elected a member of the
Parliamenthe held the position until his death. Inthe House of Commonsyour opinions
he enjoyed authority, and it has been said of him that he was the first to educate the Chamber in the
economic analysis. He retired from business which allowed him to dedicate himself to work
intellectuals from a very young age. His interest in the issues of economic theory is
developed in the middle of his life. His first contact with the subject seems to date back to 1799,
when he/she read toAdam [Link] 1809, his first opinions on appeared.
economy in the form of letters to the press signed by 'R' in relation to thedevaluation of
the coin.

His most important work, the labor for which he would be recognized as one of the most economists
important of the timePrinciples of Political Economy and Taxationit appeared in 1817, and
it constitutes the most mature and precise exposition of classical economics; in the preface, it states
that "the main problem of political economy is to determine the laws that regulate the
distribution." To that end, he developed a theory of labor value. The theory of labor value
in classical political economy, the theory of value and a theory of distribution. He wrote
also a large number of essays, letters, and notes that contain important contributions.
However, his writings are so condensed and complex that many readers
they find their ideas better expressed in the works of Juan-Baptiste SayThomas Malthus
by John Ramsay McCulloch.
This economist, whose work is particularly important due to the prominent place in which
he placed the problem of value, especially highlighting clearly that the
Distribution problems depend on the theory of value, according to which the price or value
The value of goods depends on production costs; it defended the free circulation of goods.
agricultural products and stated the Iron Law of Wages, according to which 'the wage
It will always tend to be reduced to the strictly necessary, allowing the worker only
"to subsist and reproduce." According to this idea, if the salary rises more than strictly
necessary, the population will increase and with a greater job supply, wages will decrease. For
On the contrary, if wages are lower than strictly necessary, the population will decrease.
causing a labor shortage and consequently an increase in the
salaries. This theory influenced Marx to assert that the worker would never enjoy the
benefits of capitalism.
Economic Thought, Theory and Contributions
He developed a labor-value theory, which clearly demonstrates that the
Distribution problems depend on the theory of value, where the price or value of the
goods, depends on the production costs.
Regarding the value of work (salary), Ricardo also considered that it would come from the
number of hours allocated to the production of essential goods, which would allow
to support the worker and their family. According to this idea, if the salary increases more than what
strictly necessary, the population will increase and with a greater job supply,
salaries will decrease. On the contrary, if salaries are below what is strictly necessary the
population will decrease, causing a shortage of labor and consequently
an increase in salaries.
David Ricardo also defended the free movement of agricultural products and stated the
Iron Law of Wages.
Economic Thoughts
He dedicated special attention to the theory of value. He considered that the exchange value of the
goods, was determined by the amount of work necessary for its production, which
Adam Smith considered it accurate in primitive societies, but not in those where
the production of goods required capital and labor in turn. Regarding the value of
work (salary), Ricardo also considered that it would depend on the number of hours
intended for the production of subsistence goods, which would allow to sustain the
worker and his family. The salary determined by the market through supply and
the demand for labor could match, or not, with this natural wage, but it would always fluctuate
around him. In such a way that if both salaries do not match, movements will occur
of population growth or decline, depending on whether the market wage is higher or
inferior to the natural, thus maintaining a tendency towards equilibrium between them.
Theory of differential rent
Ricardo also devoted great attention to the issue of land rent and created the Theory of the
Differential Rent, which indicates that the rent of the land is due to the different fertility of
the same and to the law of diminishing returns. When the population is low with
regarding the available lands, only the best will be cultivated, therefore there will be no
rent, since no one would be willing to pay it while there are other equally good and not
occupied.

The thesis he maintains is that the rent of the land is due to the different fertility of the same.
and the law of diminishing returns. According to Ricardo, when the population is low with
Regarding the available lands, only the best will be cultivated, thus there will be no
rent, since no one would be willing to pay it as long as there are other equally good options available and not
occupied. The same would happen if the law of diminishing returns did not exist, since
if a greater amount of labor and capital is applied to the same land, more is obtained from it
proportional yields, only the most fertile ones would be cultivated and therefore there would be no rent.
The rent on the margins of extensive cultivation No one pays rent in a newly colonized country and
where fertile land abounds. But: When in the progress of society, the land of
the second degree of fertility is dedicated to cultivation, the rent begins immediately upon the
of first quality and the amount of that rent will depend on the difference in the quality of those
two plots of land. When third quality land is used for cultivation, the rental fee
starts immediately on the second one and is regulated as before, due to the difference in
its productive powers. At the same time, the rent for prime quality will increase,
which must always be above the second rent, due to the difference between the
product that yields with a certain amount of capital and labor. With each step in
the progress of the population, which will force a country to rely on land of poorer quality
to allow you to increase your food supply, the rent on all will increase
most fertile lands
International trade
Regarding international trade, the Theory of Comparative Advantage stands out, which
defends the advantages of international trade and, in essence, is an expansion of the
division of labor proposed by Adam Smith and opposed to protectionist theories.

In his book Principles of Political Economy from 1817, David Ricardo proposed that a country
should specialize in those goods and services that it can produce most efficiently
efficient and acquire from other countries those that produce in a less efficient manner, even
when, on occasions, this represents acquiring foreign goods whose final production may
to be more efficient. In this way, David Ricardo's theory emphasizes productivity
of the countries.

Both the theory of absolute advantage and that of comparative advantage simplify in their
models the behavior of the economy far beyondother things being equalordinary, in
where one variable is studied and the others are kept static. Here factors are being omitted.
like those mentioned in the previous section, for example: what happens when more than
a country is the most efficient in the production or acquisition of a good in two regions
different from the world. It is, however, a great achievement to define the advantage of countries in the
productivity. However, it is worth noting that a country can become more productive in the
acquisition of a certain item thanks to factors such as technological development.
Ricardian Equivalence
Another of the ideas associated with David Ricardo is theRicardian [Link] theory
It argues that it does not matter how a country finances public spending, whether through a
tax increases or through the issuance of public debt, neither of the two cases,
produce this effect in the real economy. This idea is based on the rationality of the
taxpayers forecast that an increase in public spending will lead to increases in
taxes in the future to finance that spending. Therefore, in the face of an increase in public spending
taxpayers will reduce their consumption and increase their savings to ensure a future
stable and offset that future tax increase. In this way, if the reduction of
consumption by the taxpayers is the same as the debt that must be repaid
Government, there will be no change in aggregate demand.

Works
In 1809, his first opinions on economics were published in the form of letters.
to the press in relation to the devaluation of the currency.
His most important work, the effort for which he would be recognized as one of the most prominent economists.
important of the time, Principles of Political Economy and Taxation, appeared in
1817. The book suggests that a country should specialize in those goods and services that
can produce more efficiently and acquire from other countries those that it produces from
less efficient way.