David Ricardo
David Ricardo died on the 11th of September 1823 from an ear infection that crept into his brain and triggered septicaemia. He was 51 years old. At his death, his assets were estimated at between 675,000 and 775,000 pounds sterling. The man who shaped how the world thinks about trade, wages, and the nature of money had started with almost nothing after his father disowned him at the age of 21. How does a young man cast out by his family for eloping with a Quaker end up reshaping the foundations of modern economics? And how do ideas written on paper in the early nineteenth century still sit at the centre of arguments between nations today?
Abraham Israel Ricardo, David's father, was a successful London stockbroker who had brought his family from the Dutch Republic to England. The Ricardos were Sephardic Jews of Portuguese origin, and Abraham had 17 children. David was the third to survive. At 14, he was already working alongside his father, learning the rhythms of the market.
At 21, David eloped with Priscilla Anne Wilkinson, a Quaker, and converted to Unitarianism against his father's explicit wishes. Abraham disowned him. His mother, Abigail, apparently never spoke to him again. The estrangement was complete.
From that rupture, Ricardo went into business for himself. The banking house of Lubbocks and Forster backed him. He made the bulk of his fortune financing government borrowing, and he proved extraordinarily adept at it. An obituary published on the 14th of September 1823 in The Sunday Times claimed he had netted upwards of a million sterling from speculation on the outcome of the Battle of Waterloo. In reality, he sold his latest government stock in June 1815, before the result of the battle was known in London, and missed half of the subsequent rise. The legend flatters him; the truth is that he was already very rich before Waterloo.
He eventually purchased Gatcombe Park, an estate in Gloucestershire, and retired to country life. He was appointed High Sheriff of Gloucestershire for 1818-19. Then, in August 1818, he bought Lord Portarlington's seat in Parliament for four thousand pounds, as part of the terms of a loan of twenty-five thousand pounds. His eight children included Osman Ricardo, who would later serve as MP for Worcester from 1847 to 1865, and David Ricardo the younger, MP for Stroud in 1832-33.
As MP for Portarlington, Ricardo voted with the opposition on a striking range of causes. He supported inquiry into the Peterloo Massacre. In 1821 he voted for abolition of the death penalty for forgery. He voted for repeal of the Blasphemous and Seditious Libels Act and backed parliamentary reform vocally at the Westminster anniversary reform dinner in 1822.
Nothing in Parliament animated him more than trade. Government intervention in the grain trade could be traced as far back as the 1400s in Britain, but the Corn Laws that Ricardo despised were a modern form of that interference. They imposed tariffs on imported agricultural products, protecting domestic landowners at the expense of everyone else. Ricardo believed the mechanism was ruinous: the laws drove up the cost of subsistence, which pushed wages higher to compensate, which in turn squeezed the profits of manufacturers and reduced the capital available for investment. Rising rents enriched landlords at the direct expense of the productive economy.
His friend John Louis Mallett captured Ricardo's intensity on questions like this: he meets you upon every subject that he has studied with a mind made up, and opinions in the nature of mathematical truths. Mallett also admitted this very quality made him doubtful of Ricardo's opinions, since Ricardo showed what Mallett called "entire disregard of experience and practice."
Ricardo envisioned Britain as an importer of agricultural products in exchange for manufactured goods. Parliament did not repeal the Corn Laws until 1846, more than two decades after his death. In 1846, his nephew John Lewis Ricardo, MP for Stoke-upon-Trent, was among those who advocated for exactly that repeal.
Ricardo wrote his first economics article at 37, initially in The Morning Chronicle, calling for a reduction in the Bank of England's note-issuing. That piece preceded his 1810 publication, The High Price of Bullion, a Proof of the Depreciation of Bank Notes. His major theoretical work, Principles of Political Economy and Taxation, appeared in 1817.
In that book he took on Adam Smith directly. Both men agreed that land, labour, and capital were the three basic factors of production. But Smith had focused on labour as the primary determinant of value. Ricardo believed that with three factors in play, no single one could alone determine value. He demonstrated this by reworking Smith's deer-beaver analogy: even when labour is the only factor, the hardship and tools involved drive a wedge between the relative values of goods. The economist George Stigler would later describe Ricardo's framework as a "93% labor theory of value."
His theory of rent was equally pointed. Ricardo defined rent as the difference between the produce obtained by employing equal quantities of capital and labour on two different plots of land. As population grows and farmers are forced onto less fertile land, the owners of the better land can charge rent simply for that superiority. That premium, Ricardo argued, is at best a paper monetary return to society; it benefits the individual landowner without creating new wealth for the nation as a whole.
In 1821, Ricardo turned to a concern that still resonates: the short-term impact of machines on workers. He wrote that he had become convinced that the substitution of machinery for human labour is often very injurious to the interests of the class of labourers, and that workers' fears about machinery were not founded on prejudice and error, but conform to the correct principles of political economy. That acknowledgement from a free-market economist who had himself grown rich in the markets was a notable concession to the lived experience of working people.
Between 1500 and 1750, most economists accepted mercantilism: the idea that a nation grew rich by accumulating gold and silver through trade surpluses. Ricardo attacked this directly. His concept of comparative advantage proposed something counterintuitive. A nation should concentrate its resources in industries where it has the greatest efficiency of production relative to its own alternative uses, not simply in industries where it outperforms every rival.
The practical implication was radical. Even if one country could produce every good more efficiently than another, both countries would still gain from specialisation and trade. Paul Samuelson called the specific numbers Ricardo used in his example about trade between England and Portugal the "four magic numbers." Portugal could produce both cloth and wine with less labour than England, yet Ricardo argued both nations would benefit from trade.
Ricardo himself was the first to flag the limits of the theory. He noted explicitly that comparative advantage applies only when capital is immobile. He acknowledged that if capital were free to move across borders, the logic would point toward offshoring, economic decline, and job loss. His response was to argue that most men of property would prefer a lower return at home to chasing higher returns abroad, and that capital was functionally immobile in practice.
Critics have pressed that gap ever since. Joan Robinson observed that following the opening of free trade with England, Portugal endured centuries of economic underdevelopment; the imposition of free trade killed off a promising textile industry and left her with a slow-growing export market for wine. Ha-Joon Chang argued that Ricardo's theory is correct within its narrow confines but fails when a country wants to acquire more advanced technologies, because technologically backward producers need a period of protection to absorb new methods.
Roy J. Ruffin returned to Ricardo's four magic numbers in 2002 and argued that the long-standard reading of them was overly simplistic. Andrea Maneschi examined the question in detail in 2004. Their reinterpretation, now called the new interpretation, had actually been touched on by Piero Sraffa in 1930 and Kenzo Yukizawa in 1974, though neither received credit at the time.
Where Adam Smith had pointed to Scotland's free commercial banking system, with no central bank when Wealth of Nations was written in 1776, as a model worth emulating, Ricardo drew the opposite lesson. He observed that the Bank of England and banks in rural areas had increased their note lending sharply in 1810, and he traced subsequent changes in price levels to that unchecked expansion.
In 1816 he wrote: "In the present state of the law, they have the power, without any control whatever, of increasing or reducing the circulation in any degree they may think proper: a power which should neither be entrusted to the State itself, nor to anybody in it."
His Plan for the Establishment of a National Bank, published posthumously in 1824, argued that a central bank should operate with genuine autonomy as the sole issuer of money. He proposed that a combination of gold and Treasury bills, alongside a fixed claim against the government, would secure the central bank's liquidity. His students, including John Stuart Mill, who favoured laissez-faire policies in every domain except banking, carried the argument forward.
Ricardo's thinking on a related question, now called Ricardian equivalence, is one of the stranger chapters in his legacy. The proposition holds that whether a government funds its spending through taxes or through debt may make no economic difference, because the public saves in anticipation of future tax rises to pay off that debt. Ricardo himself did not believe it held in practice. He noted that rational intertemporal optimisation by taxpayers was a theoretical precondition that real people did not satisfy. The proposition bears his name largely because the economist Robert Barro later gave it modern prominence.
US economists rank Ricardo as the second most influential economic thinker prior to the twentieth century, behind Adam Smith alone. That ranking carries an irony: Ricardo's writings fascinated a number of early socialists in the 1820s who drew conclusions he would not have endorsed. Thomas Hodgskin, William Thompson, John Francis Bray, and Percy Ravenstone argued that Ricardo's labour theory implied labour produces the entire product and that capitalist profits represent exploitation.
Henry George's 1879 work Progress and Poverty drew heavily on Ricardo's theory of rent, and in the preface to the fourth edition George wrote that he sought to unite the truth perceived by the school of Smith and Ricardo with the truth perceived by the school of Proudhon and Lasalle.
After the rise of the neoclassical school, Ricardo's influence contracted for a time. It was Piero Sraffa, editor of the Collected Works of David Ricardo and author of Production of Commodities by Means of Commodities, who revived Ricardo as the originator of a distinct strand of economic thought. The school that emerged, neo-Ricardian or Sraffian economics, includes Luigi Pasinetti (1930-2023), Pierangelo Garegnani (1930-2011), Ian Steedman (1941-), Geoffrey Harcourt (1931-2021), Heinz Kurz (1946-), and Neri Salvadori (1951-).
A separate neo-Ricardian trade theory, inspired by Sraffa and developed mainly by Steedman and Stanley Metcalfe, challenged the Heckscher-Ohlin model of international trade by arguing that capital as a primary factor has no way of being measured before the profit rate is determined. Depoortere and Ravix judged that this critique failed to offer a genuine alternative classical approach, and its impact on mainstream trade theory remained limited.
Ricardo is buried in an ornate grave in the churchyard of Saint Nicholas in Hardenhuish, now a suburb of Chippenham, Wiltshire. His abolitionist views, rarely the centrepiece of his biography, were still active near the end of his life: in March 1823, just months before his death, he spoke at a meeting of the Court of the East India Company and said he regarded slavery as a stain on the character of the nation.
Common questions
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.
All sources
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