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David Ricardo

Ricardo was born on 19 April 1772 in London. He was the third son of a Dutch Jew who had made a fortune on the London Stock Exchange. When he was 14, Ricardo joined his father's business and showed a good grasp of economic affairs. In 1793 he married a Quaker called Priscilla Anne Wilkinson and converted to Christianity, becoming a Unitarian. This caused a breach with his father and meant that Ricardo had to establish his own business. He continued as a member of the stock exchange, where his ability won him the support of an eminent banking house. He did so well that in a few years he acquired a fortune. This enabled him to pursue his interests in literature and science, particularly in mathematics, chemistry, and geology.

In 1799 he read Adam Smith's Wealth of Nations and for the next ten years he studied economics. His first pamphlet was published in 1810: entitled The High Price of Bullion, a Proof of the Depreciation of Bank Notes, it was an extension of the letters that Ricardo had published in the Morning Chronicle in 1809. In it, he argued in favour of a metallic currency, giving a fresh stimulus to the controversy about the policy of the Bank of England. The French Wars caused Pitt's government to suspend cash payments by the Bank of England in 1797. Consequently, there had been an increase in the amount of their paper currency and the volume of lending. This created a climate of inflation. Ricardo said that inflation affected foreign exchange rates and the flow of gold. The Bullion Committee was appointed by the House of Commons in 1819: it confirmed Ricardo's views and recommended the repeal of the Bank Restriction Act.

In 1814, at the age of 42, Ricardo retired from business and took up residence at Gatcombe Park in Gloucestershire, where he had extensive landholdings. In 1819 he became MP for Portarlington. He did not speak often but his free-trade views were received with respect, although they opposed the economic thinking of the day. Parliament was made up of landowners who wished to maintain the Corn Laws to protect their profits.

Ricardo made friends with a number of eminent men, among whom were the philosopher and economist James Mill, the Utilitarian philosopher Jeremy Bentham and Thomas Malthus, best known for his pamphlet, Principles of Population published in 1798 (text here). Ricardo accepted Malthus' ideas on population growth. In 1815 another controversy arose over the Corn Laws, when the government passed new legislation that was intended to raise the duties on imported wheat. In 1815 Ricardo responded to the Corn Laws by publishing his Essay on the Influence of a Low Price of Corn on the Profits of Stock, in which he argued that raising the duties on imported grain had the effect of increasing the price of corn and hence increasing the incomes of landowners and the aristocracy at the expense of the working classes and the rising industrial class. He said that the abolition of the Corn Laws would help to distribute the national income towards the more productive groups in society.

In 1817, Ricardo published Principles of Political Economy and Taxation in which he analysed the the distribution of money among the landlords, workers, and owners of capital. He found the relative domestic values of commodities were dominated by the quantities of labour required in their production, rent being eliminated from the costs of production. He concluded that profits vary inversely with wages, which move with the cost of necessaries, and that rent tends to increase as population grows, rising as the costs of cultivation rise. He was concerned about the population growing too rapidly, in case it depressed wages to the subsistence level, reduce profits and checked capital formation.

Illness forced Ricardo to retire from Parliament in 1823 and he died on 11 September at Gatcombe Park. He was 51.

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