David Ricardo
David Ricardo, a British economist, was born in London in 1772. He left school at the age of fourteen to join a brokerage house; by his mid-20s he had amassed a fortune on the stock market. In his first work on economic theory, The High Price of Bullion a Proof of the Depreciation of Bank Notes (1809), he argued for a sound currency based on metal. In his major work Principles of Political Economy and Taxation (1817), Ricardo offered several theories based on his studies of the long-range distribution of wealth. Ricardo feared increasing population would lead to a shortage of productive land; his theory of rent is based on relative land productivity. He supported the theory of wages. Ricardo supported the classical theory of international trade, emphasizing national specialization and freedom of competition. His labor theory of value, which is determined by the cost of production, itself determined by the amount of labor required to produce the food; in other words, labor determines value. He also proposed as a means to this end the removal of all political and social restraints on economic relations, believing that individuals are free to the extent their commercial life is unrestricted or in other words Laissez-faire (Microsoft
He held out the belief that the rate of profit for society as a whole depends on the amount of labor necessary to support the workers who farm "the most barren land that can still maintain agriculture." This Specialization and trade increase the productivity of a nation's resources and allow for larger total output than otherwise. According to Adam Smith in 1776: He also stresses the principle of comparative advantage. Following this principle, a country can still gain from trading certain goods even though its trading partners can produce those goods more cheaply. The comparative advantage comes if each trading partner has a product that will bring a better price in another country that it will at home. If each country specializes in producing the goods in which it has a comparative advantage, more goods are produced, and the wealth of both buying and the selling nations increases. It is ironic that although Ricardo's ideas helped provide a basis for Marxist critiques of the capitalist system, his own policy recommendations, like those of Robert Malthus, are grounded in the
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Approximate Word count = 1802
Approximate Pages = 7 (250 words per page double spaced)
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