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Questions about David Ricardo

Short answers, pulled from the story.

What did David Ricardo die from and how old was he?

David Ricardo died on the 11th of September 1823 from an infection of the middle ear that spread into his brain and caused septicaemia (sepsis). He was 51 years old. At his death his assets were estimated at between 675,000 and 775,000 pounds sterling.

What is David Ricardo's theory of comparative advantage?

Comparative advantage holds that a nation should concentrate resources in industries where it has the greatest efficiency of production relative to its own alternative uses of resources, not simply industries where it outperforms rivals. Ricardo argued that even if one country can produce every good more efficiently than another, both countries still gain from specialisation and free trade. Paul Samuelson called the numbers in Ricardo's England-Portugal example the "four magic numbers."

Why did David Ricardo oppose the Corn Laws?

Ricardo believed the Corn Laws raised subsistence costs, which forced wages higher, which in turn squeezed manufacturers' profits and reduced investment. He argued that rising rents enriched landlords at the direct expense of the productive economy. Parliament repealed the Corn Laws in 1846, more than two decades after his death, and Ricardo's nephew John Lewis Ricardo, MP for Stoke-upon-Trent, advocated for that repeal.

How did David Ricardo make his fortune?

Ricardo made the bulk of his fortune financing government borrowing, growing his wealth dealing in securities during the Revolutionary and Napoleonic Wars. He was described as possessing an extraordinary quickness in perceiving accidental differences in the relative prices of different stocks. After his estrangement from his family at age 21, the banking house of Lubbocks and Forster backed his early independent ventures.

What is Ricardian equivalence and did Ricardo believe it?

Ricardian equivalence is the proposition that a government's choice between tax financing and deficit financing may have no effect on the economy, because the public saves in anticipation of future tax rises to pay off the debt. Ricardo noted that this is theoretically implied by rational intertemporal behaviour but that taxpayers do not actually act so rationally, and therefore the proposition fails in practice. The economist Robert Barro is responsible for its modern prominence.

What did David Ricardo argue about central banking?

Ricardo argued for a central bank with genuine autonomy as the sole issuer of money, opposing the unchecked power of the Bank of England and rural banks to expand or contract the money supply at will. His Plan for the Establishment of a National Bank, published posthumously in 1824, proposed securing the central bank's liquidity through a combination of gold, Treasury bills, and a fixed claim against the government. His student John Stuart Mill, who favoured laissez-faire policies everywhere except banking, carried the argument forward.