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Source: This essay first appeared in the journal Literature of Liberty: A Review of Contemporary Liberal Thought, Vol. II, no. 3, July/September 1979 published by the Cato Institute (1978-1979)
and the Institute for Humane Studies (1980-1982) under the
editorial direction of Leonard P. Liggio.
Although the editorials were unsigned, they were probably written by
the Editor Leonard P. Liggio or the Managing Editor John V. Cody. It is republished with thanks
to the original copyright holders.
David Ricardo (1772-1823)
David Ricardo (1772-1823) made an unexpected contribution to
liberty. A successful broker in government bonds, always interested in
intellectual and scientific studies, but unaccustomed to research and
writing, Ricardo's essays and books were an advancement of liberty
which could not have been predicted. Once published, Ricardo's thought
became one of the foundations for nineteenth century intellectual
activity. Joseph Schumpeter believed that Ricardo, building on Richard
Cantillon and Adam Smith, had created an impressive instrument of
Note 1. Joseph Schumpeter, History of Economic Analysis,
(New York, Oxford University Press, 1954).
Ricardo felt that he had drawn from the contributions of
Turgot, Stewart, Smith, Say, Sismondi "and others".1
Among the others were Thomas Malthus and James Mill.
Note 2. Robert Ekelund and Robert Hebert, A History of Economic Theory
and Method, (New York, McGraw-Hill, 1975).
Thomas Malthus and Ricardo were acquainted for a dozen years, yet they were
in fundamental disagreement on methodology.2
Malthus's emphasis on insufficient aggregate demand (underconsumption theory)
was contrary to one of the central principles of economics, Say's Law of Markets.
By contrast, James Mill and Ricardo enjoyed an identity of method and principles.
Mill persuaded Ricardo to read such major thinkers as John Locke, David Hume,
and John Millar (Adam Smith's pupil) and to write his major works in political
economy. Mill himself had been a student in Edinburgh of the Smithian Dugald
Stewart, and transmitted Stewart's approach to Ricardo.
Note 3. Elie Halévy, The Growth of Philosophical Radicalism.
Part III (London, Faber and Faber, 1928).
Ricardo felt himself
a member of the liberal school of Bentham and Mill, and acted in public as
a practical spokesman for that school after he entered parliament for an Irish
borough in 1819.3
During David Ricardo's lifetime England experienced the completion
of the wrenching transformation from an agricultural to a growing
industrial society—the Industrial Revolution. Much anxiety was
expressed whether the country could sustain over time the level of
prosperity which industrial growth was providing. Ricardo's writing
sought to provide correct answers from political economy to these
problems. In addition, the almost quarter century of war placed a great
strain on English society. Taxation and government loans siphoned off
huge amounts of monies that otherwise would have gone into productive
investments: the small householder was compelled to pay taxes and the
great financier was lured to invest in government securities rather
than industry. The government's recourse to indirect taxation through
the inflationary issuing of paper money
created still further economic dislocation.
Indeed, addressing these dislocations, Ricardo's earliest economic contributions in 1809 (Three Letters on the Price of Gold)
were critiques of inflation and paper money. As one of the most
successful, and shrewdest men in the money market, Ricardo brought to
the subject detailed knowledge of the nature of money and the
consequences of government intervention in money through central bank
expansion of money. His rigorous objections to paper money systems laid
the foundation for sound monetary policy for a century. Today, a half
century of disquieting experience with the volatile monetary system has
reawakened interest in the economic principles Ricardo espoused.