David Ricardo's Economic Theory

David Ricardo was a self-made millionaire landowner who argued vehemently against the interests of landowners. He published only one book, Principles of Political Economy and Taxation, but is recognized for putting forth an economic theory based on business interests. In putting forth economic theories that contradicted the interest of landowners, Ricardo incurred the criticism and anger of others in his class. Nonetheless, Ricardo continued to be a vociferous critic of laws which favored landowners, most notably the so-called "Corn Laws" and argued in favor of free trade as a way of better distributing goods across international borders. This research examines Ricardo's arguments and positions, and evaluates his contribution to modern economic and political discussions regarding free trade and distribution of wealth.

According to Adam Smith, economies are made up of producers who manufacture (or grow) a variety of goods. Each producers is able to do so at a particular cost, with the cost being affected by any number of factors. The concept of absolute advantage holds that the producer who can produce a good more cheaply than any other producer should do so. He will then sell his good to those producing other goods (which they do more efficiently than anyone else) and the result is an economy with a large number of efficiently produced goods and the income with which to produce them. In this way, if one farmer can produce corn at $5 per

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The landowners proved more persuasive than the businessmen, however, and the Corn Laws were passed. These laws made it illegal to import grain below certain prices; this enabled British growers to keep their prices artificially high, and ensured that workers would continue demanding relatively high wages in order to meet their standard of living. As might be expected, Ricardo argued against the Corn Laws and against such protectionism in general. According to Ricardo, British subjects might well end up eating imported grain, which would, indeed, force British farmers out of the grain business. However, Ricardo argued that if this were the case, the British farmers would now be free to put their resources toward other uses, either ranching or some other enterprise; the product of these enterprises would then be exported to those countries which were raising the grain that the British were eating. After all, these countries now had an excess of cash, but were apparently lacking some products since they were producing high quantities of grain (their opportunity cost). If Britain could meet that demand through free trade, according to Ricardo, both economies would be better off. Malthus Thomas Malthus, a minister born in 1766, s

Category: Economics - D