David Ricardo

David Ricardo (1772—1823) was a devotee in England of classical economics. Ricardo was inspired by Adam Smith's "The Wealth of Nations."

In 1817 Ricardo wrote "The Principles of Political Economy and Taxation" (1817), in which he argued for an "iron law of wages" whereby wages would always be near the minimum or subsistence level. He also argued that the value of any good was almost entirely dependent on the labor necessary to produce it. For example, shoes that cost $50 would require 5 times as much labor for its production as did a watch costing $10. These theories were wrong and later used by opponents of free enterprise in order to argue for government intervention.

Ricardo is most famous for developing the theory of comparative advantage. He explained that it was advantageous for England to produce cloth and Portugal to produce wine even though Portugal might have produced both wine and cloth at a lower cost than England did, as long as there was free trade between the two countries.

Ricardo used a rigid scientific approach to his work, although he lacked the breadth and insights of Adam Smith.