Biography of David Ricardo - Research Paper Example

Biography of an Economist Table of Contents Executive Summary Problem Background Economics of the Problem Politics of the Problem Development of the Problem Conclusion Executive Summary: The paper talks about the life and work of David Ricardo who was a fine economist in the 19th century and still has an impact in today’s economics. His economic theories and models were such that are still seen as important and valuable. Some of his major contributions were seen in the theories of labor values, theory of rent and most importantly the theory of comparative advantage. His personal life has also been a great influence in his contribution towards economics and as a member of the parliament. This is because he was disowned from his family which influenced him to start his own business and work for his living. He was very successful and achieved immense fame and earned a lot of wealth that he became the wealthiest economist of all times. Problem: David Ricardo was one of those economists who had achieved two of the rarest attributes at the same time; long lasting fame and tremendous success. He was, by profession, a British Political Economist and as well as a stock trader. In that time, he was one of the most influential classical economists and he was also credited to systemize economics. He had also contributed as the member of the parliament, a businessman i.e. stock broker and loan broker, a speculator and a financier. He had made his personal fortune through his work and achievements. Still, his contribution in the law of comparative advantage is valued which was the argument supporting the free trade in between many countries and to favor the specialization for the individuals. The main arguments that Ricardo provided were that free trade is always beneficial for both the parties even if one is stronger and the other one is weaker or unskilled. It has mutual benefit and the highly resourced countries can provide benefit to the low resourced countries as well. Ricardo made his fortune such that when he died he possessed an estate which was worth $100 million dollars of today. When Ricardo was twenty seven years old, he got excited about economics after reading The Wealth of Nations by Adam Smith. He then wrote his first economics article at the age of thirty seven and later spent the remaining fourteen years of his life as a professional political economist. Ricardo was also one of the early believers of the concept of monetarism as he understood the quantity theory of money very well. But what matters is the background in which Ricardo started his career as an economist and what made him so independent and self-made. He suffered many problems in life because of which he chose his ways himself (Skousen, 2009). Background: Ricardo was born on 19th April, 1772 in London. He was born in a Sephardic Jewish family who had their origins from Portugal and had relocated from the Dutch Republic recently. He was the third of seventeen children and his father was also a successful stockbroker. Ricardo joined his father’s business at the age of 14 and showed an exceptional grasp of economic concepts and affairs. In 1973, Ricardo got married to a Quaker called Priscilla Anne Wilkinson and later converted to Christianity. He was disinherited from his family after his marriage, his father certainly disowned him and his mother never talked to him again. This meant that now Ricardo had to form his own business without the support of his family. Luckily by now he had gained enough knowledge to be able to form his own business and was already reputable in the field. He started his own business as a dealer of the government securities and as a stockbroker. He became rich and successful quite early as per the connections he had made throughout the time of working with his father. He was the member of the stock exchange and continued to win the support of an eminent banking house. After doing so well, he pursued his interest in literature, science, mathematics and chemistry. Ricardo betted against the French victory at the time of the Battle of Waterloo and he invested in the British securities. When he retired at the age of 43 from the Exchange, he had made a fortune of estimated £600,000, after which he changed his residence to Gatcombe Park that was owned by Princess Anne, the Princess Royal. James Mill was a friend of Ricardo and thus he encouraged him towards his political ambitions and economics writings. In his first article that was published in 1810, he wrote in favor of the metallic currency and about the controversy of the Bank of England policy. He retired from business in 1814 and later in 1819 he was elected in the British parliament. Economics of the Problem: His main economic ideas were presented by his theory of rent, labor theory of value and the theory of competitive advantage. His labor theory of value stated that the price of the two goods produced will be determined by the number of labors involved in their production. However, there were some assumptions on which this theory stood, and they were; the two sectors should have the same wage and profit rate, the capital employed is from the wages only and the period of production is the same for both the goods. After a keen analysis, Ricardo himself felt that he had imposed the second and third assumptions quite unrealistically and thus gave two exceptions too. These were that the time period may differ and the processes could use other instruments as capital rather than only wages. Ricardo successfully worked on this theory all his life (Peach, 2003). Ricardo also developed the economic policies for rent, wages and profits. In his work he defined rent as “the difference between the produce obtained by the employment of two equal quantities of capital and labor”. Ricardo modeled this theory to explain that when only one grade of land is being used for cultivation, the rent will not be charged, while if multiple grades of land are being used in cultivation, rent will be charged on those grades that are higher and it will increase as higher as the grades will be. This theory was in order to his belief that economic development is a process where the beneficiary will be the landowners as they would receive the rent in the form of money or product. Ricardo also developed the famous economic theory of comparative advantage in which he favored free trade and talked about it. International trade had started to evolve during his time in the parliament, and that is when he developed this theory. Comparative advantage suggested that a good can be produced at a lower cost than another country to gain comparative advantage over that product. Ricardo further described this theory as being a technique through which more efficient production is created and thus it eases the trading system between countries. Ricardo’s analysis of the comparative advantage theories has continued to be useful for the economists and students today. Politics of the Problem: Many of Ricardo’s theories were criticized and opposed by other economists of that time. But most importantly Ricardo campaigned against the Corn Laws while he was in Parliament and many other government interventions. Ricardo was a strong opponent for protectionism especially for the national economy. His opposition mainly focused on the agricultural issues. His opinion about the British Corn Laws were that the tariffs that are imposed on the agricultural products were meant to show that there is less land from the domestic productive land where agriculture would take place. This eventually meant that the rents would be driven higher. Furthermore, this would lead to the surplus from the rent going towards the feudal lords rather than the industrial capitalists. Ricardo believed that the wealth of the landlords is often spent on luxuries and not on investments. Thus he stated that because of these Corn Laws, the British economy will be stagnated, and should be repelled. Later in 1846, the parliament repelled the Corn Laws (Davis, 1997). Ricardo attempted to make all the things perfect during his time. He wished to resolve some of the ills of the society and which he had been seeing since years while living in it. He believed his actions could resolve these problems within the democratic society. This is why he sat in the parliament and played his role in doing a job he is well recognized for. He took action for all the issues he thought were necessary to consider and made some amusing efforts for the internal policies that were held in the British Empire. Development of Problem: Ricardo developed the economic theories in the 19th century, and despite being opposed and criticized, his theories are largely followed nowadays by economists. Throughout his life, Ricardo has worked for the development of the society economically and to make sure everyone is benefitting from the economics which they carry out in their businesses and trade. He worked hard for the development of trade and suggested several trading policies so that the businesses between countries could become easier and could benefit the national economies of countries. His rent policy also focused mainly on the farmers and landowners related to agriculture. The model of the policy stood on the fact that the land which was productive was meant for more crop production and the market paid the same for the crops of any land, so the farmers tried to grow more crops on the productive land to earn more money (Ricardo, 2004). Ricardo’s minimum wage theory is also still an influential theory. He had always opposed the rapid growth of the population and thus he knew that the higher population would mean higher demand for jobs which would make the level wages decrease. This was because many people would be willing to work at any wage so that they can survive. This theory has also been implemented today when we see at the minimum wage law. In Ricardo’s belief of labor theory of value the value had much to relate with the cost of production. Ricardo had already addressed many of the problems we see in the economic world today. The importance of these theories thus, makes Ricardo an important name even now in the world of economics (Ricardo, 2004). Conclusion: David Ricardo has contributed greatly in the world of economics today and his theories are still valuable for the students and economists. He believed that action is important to apply the changes and just tampering the problem will always take us towards a stagnant society. He created schools of thoughts for economists and has been an important part in the classical economics in the British state (Wood, 1991). He, in fact, outlined the classical system better than anyone else ever had done. He is known to create the Ricardian School and his ‘Neo-Recardian’ research program still exists today. References Davis J. (1997) The life and economics of David Ricardo. Texas: Kluwer Academic Publishers Peach T. (2003) David Ricardo: Crit Response. London: Routledge Ricardo D. (2004) Biographical Miscellany. UK: Liberty Fund Skousen M. (2009) The Making of Modern Economics: The Lives and Ideas of the Great Thinkers. NY: M.E. Sharpe Wood J. (1991) David Ricardo: Critical Assessments. 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