One of David Ricardo's theories is the theory of Ricardian equivalence. Under the theory of Ricardian equivalence, government budget deficits do not change the level of consumption among consumers. The theory behind this is that, no matter when the government chooses to pay for its expenditures, citizens are ultimately responsible for paying those deficits. Therefore, people will change their spending based on government expenditures, regardless of whether the government is borrowing to pay for those expenditures.

             Another of David Ricardo's economic theories is the theory of comparative advantage. Under the theory of comparative advantage, a country should focus its production efforts on those items it produces best. In order to obtain items that a country finds difficult to produce, it should trade with other nations, who are, in turn, focusing their production efforts on those items they produce best. Furthermore, under the theory of comparative advantage, it may be more advantageous for country one to trade products with country two, even if country one can produce everything more cheaply than country two. In order to determine trade advantage, one looks at the ratio of the resources that go into production in various countries. A consideration of all resources, not strictly monetary resources, is necessary in order to determine the degree of difficulty in producing a particular item. A country that is able to produce an item using fewer resources than another country has an absolute advantage over the other country. .

             Not surprisingly, Ricardo did not believe in protectionist trade policies, which he believed would encourage countries to use their resources in an inefficient manner. For example, Ricardo opposed the corn laws, because he believed that they put money into the hands of landlords rather than those directly involved in production, which kept that money from circulating in the economy.