David Ricardo (1772–1823)

British economist; renowned representative and the perfecter of English bourgeois classical political economy.

Ricardo was born on April 18, 1772, in London, England, into a Jewish immigrant family. His father was a stock exchange broker. Ricardo’s early education was incomplete. At the age of 12 he went to a Dutch commercial school, and at the age of 14 he followed his father’s activities in the stock exchange, and in 1793 he broke away from his family to run his own stock exchange business, which was extremely successful and made him the top tycoon in England.

In 1799 Ricardo happened to read Adam Smith’s book Wealth of Nations in 1799, which aroused his interest in the questions of political economy. In 1809, after ten years of study of political economy, Ricardo anonymously published his first economic paper, The Price of Gold, in the British The Morning Chronicle, which criticized the then Bank of England’s policy of issuing excessive paper money and laid the foundation of his theory of the quantity of money. In 1810, he reorganized and rewrote the views of his previous paper, and published his first economic work, The High Price of Bullion, a Proof of the Depreciation of Bank Notes. This book chiefly discussed the Bank of England’s policy issues and was of great significance to the theory of central bank operations.

In 1815, in opposition to Corn Laws, Ricardo published the book Essay on the Influence of a Low Price of Corn on the Profits of Stock, which fiercely criticized the arguments of the landlord-class thinker Malthus in defense of the Corn Laws, pointing out that raising the duties on the importation of grain would inevitably increase the ground-rent, lead to lower profits for manufacturers, and hinder the development of the productive forces and the progress of technology. He therefore argued that free trade in grain should be allowed and low-priced grains imported, thereby lowering wages, increasing profits, and promoting the development of capitalism. The publication of this book attracted the attention of James Mill, who held that Ricardo was the most excellent economic thinker at that time and should be the most excellent economic writer, so Mill urged and helped Ricardo to expand and revise this booklet. With the help of Mill, Ricardo published his representative work of economics, On the Principles of Political Economy and Taxation in 1817. Starting from Bentham’s utilitarianism, the book established a theoretical system of political economy based on the labor theory of value and centered on the theory of distribution.

On the question of labor theory of value, Ricardo’s main contributions are: (1) He inherited Smith’s labor theory of value, upheld the principle that the value of a commodity is determined by the labor-time spent in its production, and criticized Smith’s view that the value is measured by the labor purchased. (2) He put forth the concept of socially necessary labor, holding that the labor that determines the value of a commodity is socially necessary labor, and that this labor that determines the value of a commodity includes not only living labor, but also labor materialized in the means of production. (3) He clarified the relationship between wages, profit and rent with the labor theory of value. He held that all value is produced by labor and distributed among three classes: the wages were determined by the value of the means of subsistence required by the worker, the profit was the excess over the wages, and the rent was the excess over the wages and profit. He thus illustrated the antagonism between wages and profit, and between profit and rent, thus in fact revealed the economic root of the antagonisms between the proletariat, the bourgeoisie and the landlord class. However, there are also obvious errors in Ricardo’s labor value theory. First of all, Ricardo regarded capitalist system as eternally immutable, paying attention only to the quantitative relations of economic categories but not to the factor of social system, which was a defect in his methodology. Secondly, he could not illustrate the exchange between capital and labor and that capitals of equal size yield equal profits on the basis of the law of value. These two puzzles eventually led to the disintegration of the Ricardian theoretical system.

Ricardo also directly connected the theory of differential rent with the labor theory of value, criticized the Physiocratic conceptions in Smith’s doctrine of ground-rent, explained the formation of ground-rent with the labor theory of value, and expounded the thought that ground-rent originated from labor. He hald that there must be two conditions for the existence of land rent, namely, the limitation of land and the differentiation of land in terms of degree of fertility and location, and that the amount of differential land rent depended on the difference in the productivity of labor on different lands. These thoughts had an important influence on Marx’s theory of ground-rent. However, Ricardo’s theory of ground-rent also has obvious shortcomings and errors. Because of his supra-historical conception caused by his bourgeois limitations, his theory of ground-rent was in fact premised on the developed capitalist relations of production in England at the time, and he could not see that the differential rent that he was studying was characterized as a category of capitalist relations of production. As Marx pointed out in The Poverty of Philosophy, Ricardo, after postulating bourgeois production as necessary for determining “rent”, applies the conception of “rent”, nevertheless, to the landed property of all ages and all countries. This is an error common to all the economists, who regarded the bourgeois relations of production as eternal categories.

Ricardo has formally established the theoretical edifice of classical political economy on the basis of Smith’s doctrine, which reached the peak of classical English political economy, and had a great influence on Marx’s thought of political economy. Ricardo’s labor theory of value was an important source of Marx’s labor theory of value, providing valuable inspiration for Marx’s studies for Capital, and is one of the immediate ideological-theoretical sources of Marxist political economy. Marx’s theories of value, money and capital are, with respect to essentials, a necessary development of the doctrines of Smith and Ricardo.