Ricardo, << rih KAHR doh, >> David (1772-1823), was the leading British economist of the early 1800’s. He helped establish the field of classical economics, which stresses the importance of free trade and market competition for economic growth. In his book Principles of Political Economy and Taxation (1817), Ricardo defined the conditions that would enable a nation’s economy to reach its greatest potential. He argued that private businesses should be free to seek high profits so they can accumulate capital and expand business operations.
Ricardo considered labor to be the most important source of wealth. But he also thought that population growth would push wage rates down to a level that would barely support the people. As the economy expanded and the population continued to grow, land rent would rise. This would reduce profits and limit economic growth. Ricardo recommended free international trade as a remedy for this problem.
Ricardo was influenced by The Wealth of Nations (1776), the classic book by the economist Adam Smith of Scotland. In turn, Ricardo’s theories influenced other economists. His theory of comparative advantage—which states that each country should concentrate on making goods it can produce most efficiently—remains central to the modern theory of international trade (see International trade ). Karl Marx was influenced by Ricardo’s labor theory of value, which held that the value of a commodity is determined by the amount of labor needed in its production. Henry George, a land reformer, expanded on Ricardo’s theory of rent. John Stuart Mill, a British philosopher and economist, used Ricardo’s ideas as the basis for a philosophy of social reform.
Ricardo was born on April 19, 1772, in London. He made a fortune on the stock exchange while still in his 20’s. He served in Parliament from 1819 until his death on Sept. 11, 1823.
