Who was David Ricardo
David Ricardo (1772-1823) was a classical British economist best known for his theory on wages and profit, labor theory of value, theory of comparative advantage, and theory of rents. David Ricardo and several other economists also simultaneously and independently discovered the law of diminishing marginal returns. His most well-known work is the Principles of Political Economy and Taxation (1817).
BREAKING DOWN David Ricardo
Born in England in 1772, one of 17 children, David Ricardo had accumulated a sizable estate worth approximately £1 million at the time despite being disinherited by his Sephardic Jewish family after marrying outside his religion. His wealth came from his success with a business he started that dealt government securities. After retiring at age 42, he served as a member of Parliament. Influenced by Adam Smith, Ricardo held company with other leading thinkers such as James Mill, Jeremy Bentham and Thomas Malthus. In his Essay on the Influence of a Low Price of Corn on the Profits of Stock (1815) Ricardo conceptualized the law of diminishing returns with respect to labor and capital.
Example of Comparative Advantage
Also, among the notable ideas that Ricardo introduced in Principles of Political Economy and Taxation was the theory of comparative advantage, which argued that countries should specialize in production of goods in which they not only have an absolute advantage but also a relative advantage over other countries in order to promote benefits of international trade. For example, a mutual trade benefit would be realized between China and the U.K. from China specializing in production of porcelain and tea and the U.K. concentrating on machine parts. Ricardo is prominently associated with the net benefits of free trade and detriment of protectionist policies. Ricardo's theory of comparative advantage produced offshoots and critiques that are discussed to this day.