Front Page Titles (by Subject) RICARDO. - The Works and Life of Walter Bagehot, vol. 7 (Economic Studies and Essays)
The Online Library of Liberty
A project of Liberty Fund, Inc.
RICARDO. - Walter Bagehot, The Works and Life of Walter Bagehot, vol. 7 (Economic Studies and Essays) 
The Works and Life of Walter Bagehot, ed. Mrs. Russell Barrington. The Works in Nine Volumes. The Life in One Volume. (London: Longmans, Green, and Co., 1915). Vol. 7.
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
The true founder of abstract Political Economy is Ricardo. And yet in seeming there was no one less likely to be the founder. He was a practical man of business, who had little education, who was for much of his life closely occupied in a singularly absorbing trade, and who made a fortune in that trade. Just as no one would have expected from Adam Smith, the bookish student, the practical sagacity with which every page of The Wealth of Nations overflows, so no one would have expected from Ricardo, who made a large fortune, the foundation of a science of abstractions. Every one would, on the contrary, have imagined that Adam Smith would have been eminent in the abstractions among which his closet-life would seem to have been spent, and that Ricardo would have been eminent in the rough and rude sense which makes money. But, in fact, Ricardo arrives at his best conclusions by the most delicate and often difficult reasoning, and Adam Smith, as we have seen, at his by an easy and homely sagacity.
There is much in this, as in all such cases, which now is, and probably will always remain, inexplicable; for the most obscure and subtle of causes are those which fix inherited genius. But, just as in Adam Smith’s case, a more exact survey of the circumstances tends to diminish our surprise. The trade in which Ricardo spent his life, and in which he was so successful, is of all trades the most abstract. Perhaps some people may smile when they hear that his money was made on the Stock Exchange, which they believe to be a scene of gambling. But there is no place where the calculations are so fine, or where they are employed on data so impalpable and so little “immersed in matter”. There is a story that some dealer made very many thousand pounds by continued dealings in the shares of some railway, and then on a sudden asked where that railway was. The whole thing had been a series of algebraic quantities to him, which called up no picture, but which affected a profit and loss account. In most kinds of business there is an appeal of some sort to the senses; there are goods in ships or machines; even in banking there is much physical money to be counted. But the Stock Exchange deals in the “debts,” that is the “promises,” of nations, and in the “shares” of undertakings whose value depends on certain future dividends—that is, on certain expectations—and what those expectations are to be, is a matter of nice calculation from the past. These imponderable elements of trade cannot be seen or handled, and the dealing with them trains the mind to a refinement analogous to that of the metaphysician. The ordinary human mind finds a great rest in fixing itself on a concrete object, but neither the metaphysician nor the stock-jobber has any such means of repose. Both must make their minds ache by fixing them intently on what they can never see, and by working out all its important qualities and quantities. A stock-jobber loses money, and in the end is ruined, if he omits any, or miscalculates any. If any man of business is to turn abstract thinker, this is the one who should do so. Any careful reader of Ricardo, who knows anything of such matters, and who watches the anxious penetration with which he follows out rarefied minutiæ, will very often say to himself, “I see well why this man made a fortune on the Stock Exchange”.
For this trade Ricardo had the best of all preparations—the preparation of race. He was a Jew by descent (his father was one by religion), and for ages the Jews have shown a marked excellence in what may be called the “commerce of imperceptibles”. They have no particular superiority in the ordinary branches of trade; an Englishman is quite their equal in dealing with ordinary merchandise, in machine-making, or manufacturing. But the Jews excel on every Bourse in Europe; they—and Christian descendants of their blood—have a pre-eminence there wholly out of proportion to their numbers or even to their wealth. Some part of that preeminence is, no doubt, owing to their peculiar position as a race; for nearly two thousand years they have been a small nation diffused over a vast area; that diffusion has made them the money-lenders for most of the nations with whom they lived; and the exchange of money between country and country is a business of fine calculation, which prepared them for other fine calculations. This long experience has probably developed a natural aptitude, and it would be idle to distinguish what is due to the one in comparison with the other. The fact remains that the Jews have now an inborn facility in applying figures to pure money matters. They want, less than other nations, a visible commodity which they can imagine, if not touch; they follow with greater ease and greater nicety all the minute fractions on which this subtle commerce depends (a task which is a particular torture to most Englishmen), and they make money as the result. The writings of Ricardo are unique in literature, so far as I know, as a representative on paper of the special faculties by which the Jews have grown rich for ages. The works of Spinoza, and many others, have shown the power of the race in dealing with other kinds of abstraction; but I know none but Ricardo’s which can awaken a book-student to a sense of the Jewish genius for the mathematics of money-dealing. His mastery over the abstractions of Political Economy is of a kind almost exactly identical.
The peculiar circumstances of his time also conducted Ricardo to the task for which his mind was most fit. He did not go to Political Economy—Political Economy, so to say, came to him. He lived in the “City” at a time when there was an incessant economic discussion there. He was born in 1772, and had been some years in business in 1797, the year of the celebrated “Bank restriction,” which “restricted” the Bank of England from paying its notes in coin, and which established for the next twenty years in England an inconvertible paper currency. As to this—as to the nature of its effect, and even as to whether it had an effect—there was an enormous amount of controversy. Ricardo could not have helped hearing of it, and after some years took an eager part in it. Probably, if he had not been led in this way to write pamphlets, he would never have written anything at all, or have got the habit of consecutive dealing with difficult topics, which is rarely gained without writing. He had only a common school education, and no special training in such things. But it is the nature of an inconvertible currency to throw the dealings between other countries and the country which has it, into confusion, and to change the price of all its securities. As Ricardo was a jobber on the English Stock Exchange for the whole time during which the notes of the Bank of England were inconvertible, his daily business must have constantly felt the effect.
Having been thus stimulated to write pamphlets on the one great economic subject of his day, Ricardo was naturally led to write them also on the other great one. At the close of the war the English Parliament was afraid that corn would be too cheap; the war had made it dear, and probably when peace came it would cease to be dear. And therefore, in its wisdom, Parliament passed “Corn Laws” to keep it dear. And it would have been difficult for a keen arguer and clear thinker like Ricardo to abstain from proving that Parliament was wrong. And, accordingly, he wrote some essays which would be called “dry and difficult” now, but which were then read very extensively and had much influence.
Political Economy was, indeed, the favourite subject in England from about 1810 to 1840, and this to an extent which the present generation can scarcely comprehend. Indeed, old people are puzzled for an opposite reason; they can hardly understand the comparative disappearance of what was the principal topic in their youth. They mutter, with extreme surprise, “we hardly hear anything now about Political Economy; we used to hear of nothing so much”. And the fundamental cause is the great improvement in the condition of the country. For the thirty years succeeding the peace of 1815 England was always uncomfortable. Trade was bad, employment scarce, and all our industry depressed, fluctuating, and out of heart. So great is the change of times, that what we now call bad trade would then have seemed very good trade, and what we now call good trade would have been too good to be thought of—would have been deemed an inconceivable Elysian and Utopian dream. So long as this misery and discomfort continued, there was a natural curiosity as to the remedy. Business being bad, there was a great interest in the “science of business,” which ought to explain why it was thus bad, and might be able to show how it was to be made good. While the economic condition of countries is bad, men care for Political Economy, which may tell us how it is to be improved; when that condition is improved, Political Economy ceases to have the same popular interest, for it can no longer prescribe anything which helps the people’s life. In no age of England, either before or since, could a practical man of business, like Ricardo, have had so many and such strong influences combining to lead him towards Political Economy as in Ricardo’s own time.
And there was at that time a philosophical fashion which was peculiarly adapted to make him think that the abstract mode of treating the subject which was most suitable to his genius was the right mode. It was the age of “philosophical Radicalism,” a school of philosophy which held that the whole theory of Political Government could be deduced from a few simple axioms of human nature. It assumed certain maxims as to every one’s interest, and as to every one always following his interest, and from thence deduced the universal superiority of one particular form of Government over all others. “Euclid” was its one type of scientific thought, and it believed that type to be, if not always, at least very often, attainable. From a short series of axioms and definitions it believed that a large part of human things, far more than is really possible, could be deduced. The most known to posterity of this school (and probably its founder) was Mr. Bentham, for the special value of his works on jurisprudence has caused his name to survive the general mode of political thinking, which he was so powerful in introducing. But a member of the sect, almost equally influential in his own time, was Mr. James Mill, of whom his son has given us such a graphic picture in his biography. This austere dogmatist thought that the laws of Government and of human happiness might be evolved from some few principles, just as a Calvinistic theologian evolves a whole creed of human salvation from certain others. Mr. Grote, who belonged for the best years of his life to the sect, and whose writings and tone of mind were profoundly tinctured by its teaching, has left us a vivid description of Mr. James Mill, who seems to have influenced him far more than any one else. And an equally vivid picture may still be found in the reminiscences of a few old men, who still linger in London society, and who are fond of recalling the doctrines of their youth, though probably they now no longer believe them. James Mill must have pre-eminently possessed the Socratic gift of instantaneously exciting and permanently impressing the minds of those around him.
I do not know in what manner Ricardo and James Mill became acquainted, except that John Mill says it was through Bentham, who was a rich man, and, though a recluse, made for many years his house a sort of castle. John Mill tells us also that James Mill considered the friendship of Ricardo to have been the most valuable of his whole life. To a genius like Ricardo, with Ricardo’s time and circumstances, the doctrines of James Mill must have come like fire to fuel; they must have stimulated the innate desire to deduce in systematic connection from the fewest possible principles, the truths which he had long been considering disconnectedly. If Ricardo had never seen James Mill he would probably have written many special pamphlets of great value on passing economic problems, but he would probably not have written On the Principles of Political Economy and Taxation, and thus founded an abstract science; it takes a great effort to breathe for long together the “thin air” of abstract reasoning.
It must be remembered that Ricardo was in no high sense an educated man. As far as we know he had not studied any science, and had no large notion of what science was; without encouragement from a better-trained mind he most likely would not have attempted any purely scientific effort. To the end of his days, indeed, he never comprehended what he was doing. He dealt with abstractions without knowing that they were such; he thoroughly believed that he was dealing with real things. He thought that he was considering actual human nature in its actual circumstances, when he was really considering a fictitious nature in fictitious circumstances. And James Mill, his instructor on general subjects, had on this point as little true knowledge as he had himself. James Mill, above all men, believed that you could work out the concrete world of human polity and wealth from a few first truths. He would have shuddered at our modern conception of Political Economy as a convenient series of deductions from assumed axioms which are never quite true, which in many times and countries would be utterly untrue, but which are sufficiently near to the principal conditions of the modern world to make it useful to consider them by themselves. At that time economists indulged in happy visions; they thought the attainment of truth far easier than we have since found it to be. They were engaged in a most valuable preliminary work, one which is essential to the conception of the phenomena of wealth in such an age as this, or in any age in which free industry has made much progress; but after, this preliminary work is finished there is a long and tedious time to be spent in comparing the assumptions we have made in it with the facts which we see, and in adding the corrections which that comparison suggests; and only at the end of this dull task can we leave mere reasoning and come to life and practice.
Little is known of Ricardo’s life, and of that little only one thing is worth mentioning in a sketch like this—that he went into Parliament. He had retired with a large fortune from business comparatively young, not much over forty, as far as I can make out, and the currency and other favourite economic subjects of his were so much under discussion in Parliament, that he was induced to enter it. At present an abstract philosopher, however wealthy, does not often enter Parliament; there is a most toilsome, and to him probably disagreeable, labour to be first undergone—the canvassing a popular constituency. But fifty years ago this was not essential. Ricardo entered Parliament for Portarlington, which is now the smallest borough in Ireland, or indeed, in the whole United Kingdom, and which was then a mere rotten or proprietary borough, and no doubt Ricardo bought his seat of the proprietor. He was well received in the House, and spoke with clearness and effect on his own subjects. He is said to have had in conversation a very happy power of lucid explanation, and he was able to use the same power in a continuous speech to an assembly. His wealth, no doubt, gave him a facility in acquiring respect. Parliament, like every other collection of Englishmen, is much more ready to trust a rich man about money than a poor one.
The most curious characteristic of Ricardo’s political career was his zeal to abolish the means by which he entered Parliament; he was most anxious for a Parliamentary Reform much resembling in principle that of 1832. And in this he agreed with most of the sensible men of his time. The narrowmindedness and the want of capacity with which the Tory party had governed the country since the peace, are now only known to us from history, and are not easily believed by those who have not carefully studied that history. As was the tree, so were its fruits; the Government seemed to be one which must hurt a country, and in fact the country was, if not very unhappy, at any rate most uncomfortable. The best cure seemed to be a change of rulers, by a large addition to the popular element in the Government. And, as we now know, this has been effectual. The country has been far happier under the new system than under the old, and the improvement has been greatly due to the change; we could not have had Free Trade before 1832, and it is Free Trade which more than any other single cause makes us so happy. The change in popular comfort has been greater than Ricardo or than any one of his generation could have imagined. But we have had to pay a good price for it, and one of the items in that price is the exclusion of philosophers from Parliament. Such a thinker as Ricardo, with the unflinching independence which characterised Ricardo, would be impossible in our recent Parliaments. No popular constituency would consent to elect such a man, nor would he consent to ask them.
Very little is now to be learnt of Ricardo’s ordinary life. We know that he had a mind—
And we know little else. A well-authenticated tradition says that he was most apt and ready in the minutest numerical calculations. This might be gathered from his works, and, indeed, any one must be thus apt and ready who thrives on the Stock Exchange. A less authorised story says that he was a careful saver of small sums—“one of those people who would borrow a pamphlet, price sixpence, instead of buying it,” notwithstanding that he was a rich man. We also know, as has been said, that he was very happy in orally explaining his doctrines, and they are by no means easy to explain in that way. He must have been most industrious, for he died at fifty-two; and either the thinking which he did, or the fortune which he made, would be generally esteemed even by laborious men, a sufficient result for so short a life.1
[1 ] [Mr. Bagehot had intended, as the reader will have seen, to give an estimate of J. S. Mill similar to those of Malthus and Ricardo. As he did not carry out this intention, I think it well to give some brief passages from a shorter paper on Mill, written on the occasion of his death, which contain Mr. Bagehot’s general view of Mill’s economic position. These will be found in the Appendix Note B page 284, at the end of this volume.—Editor.]
[Note B—](to Page 235).