The Ricardian vice refers to abstract modelbuilding and mathematical formulas with unrealistic assumptions. In simpler terms, the Ricardian vice is the tendency for economists to make and test theories that aren't troubled by the complexities of reality, resulting in theories that are mathematically beautiful but largely useless for practical applications. The Ricardian vice is prevalent in economics and is named after David Ricardo, one of the first economists to bring mathematical rigor to the discipline.
David Ricardo came up with many useful theories and laws that defended free trade and sound monetary policies, including them the law of comparative advantage and the law of diminishing returns. As time passed, however, Ricardo depended more and more on modelbuilding and large (sometimes erroneous) assumptions to achieve the results he wished.
For example, Ricardo focused on the distribution of income rather than the growth of economic activity to "prove" that everyone but landlords was doomed to subsistence wages. He also spent time seeking an ironclad measure of value, trying to link it to the cost of labor while calculating out any benefits of machine labor. Even in his law of diminishing returns, Ricardo simplified all agricultural crops into one field all farmed with the same technique and having an equal yield on all sections. Adding to these already sizable assumptions, he factored the cost of wages as being equal to the subsistence level that he believed to be unavoidable. While it yielded a result that showed that tariffs harm the domestic economy, it oversimplified the case.
Even today, many economic models mathematically remove, simplify, or fix dynamic components like competition with an arbitrary value. While these exercises in pure deductive reasoning can yield useful clues about how things might work, they need to be held against the way things actually work to have any value.
For more insight, read How Influential Economists Changed Our History.

Why do economists build assumptions into their economic models?
When you look at an introductory textbook for microeconomics, it seems as though economists live in a world that barely resembles ... Read Full Answer >> 
What assumptions are made when conducting a ttest?
The common assumptions made when doing a ttest include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >> 
What are some of the more common types of regressions investors can use?
The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >> 
What types of assets lower portfolio variance?
Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >> 
When is it better to use systematic over simple random sampling?
Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >> 
What are some common financial sampling methods?
There are two areas in finance where sampling is very important: hypothesis testing and auditing. The type of sampling methods ... Read Full Answer >>

Mutual Funds & ETFs
ETF Analysis: PowerShares S&P 500 Low Volatility
Find out about the PowerShares S&P 500 Low Volatility ETF, and learn detailed information about this fund that provides exposure to lowvolatility stocks. 
Mutual Funds & ETFs
ETF Analysis: SPDR Barclays Short Term Corp Bd
Learn about the SPDR Barclays ShortTerm Corporate Bond ETF, and explore detailed analysis of the exchangetraded fund tracking U.S. shortterm corporate bonds. 
Mutual Funds & ETFs
ETF Analysis: Vanguard IntermediateTerm Bond
Find out about the Vanguard IntermediateTerm Bond ETF, and delve into detailed analysis of this fund that invests in investmentgrade intermediateterm bonds. 
Investing Basics
How AQR Places Bets Against Beta
Learn how the bet against beta strategy is used by a large hedge fund to profit from a pricing anomaly in the stock market caused by high stock prices. 
Term
What are Metrics?
Metrics are tools that measure a company’s performance. 
Term
Estimating with Subjective Probability
Subjective probability is someone’s estimation that an event will occur. 
Economics
Explaining Kurtosis
Kurtosis describes the distribution of data around an average. 
Fundamental Analysis
Calculating FreeFloat Methodology
Freefloat methodology is used to calculate the total market capitalization of an index’s underlying companies. 
Trading Systems & Software
Top Skills Of The Best Quant Traders
Lured by high salaries and perks of quant trading? Find out what skills and traits you need to become a quant trader. 
Investing
Why High Yield Still Has A Role To Play
An asset class of this bull market has been high yield debt, as many searching for income in a lowrate world have turned to these higheryielding bonds.

Compound Annual Growth Rate  CAGR
The Compound Annual Growth Rate (CAGR) is the mean annual growth ... 
Altman ZScore
The output of a creditstrength test that gauges a publicly traded ... 
MeanVariance Analysis
The process of weighing risk against expected return. Mean variance ... 
Systematic Sampling
A type of probability sampling method in which sample members ... 
Variance
The spread between numbers in a data set, measuring Variance ... 
Leptokurtic
A statistical distribution where the points along the Xaxis ...