Ricardo, David

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Ricardo, David

(1772–1823) an English economist who, in his Principles of Political Economy and Taxation (1817), argued that the value of products is determined by the amount of labour needed to produce them and developed a theory of distribution to explain how this value is shared between major classes in society (see LABOUR THEORY OF VALUE). Ricardo suggested that however prosperous the economy, wages could never rise above subsistence level. As workers became more prosperous, they would have more children and, as these children grew up, this additional labour supply would force wages down: an ‘iron law of wages’.

Ricardo argued that capitalists would not benefit much from economic progress either, since competition would keep their prices down and wage payments would cut into their profits. He regarded landlords as being the only real beneficiaries from economic progress since, with a finite amount of arable land and a growing population to feed, the landlords’ rental income would grow and the value of their land would rise. Rising rents would raise the cost of food produced and workers would need larger wages to pay for food, eroding capitalists’ profits. Ricardo's theories were used by the emerging industrialists to fight for free trade and an end to high tariffs on imported grain so as to lower food prices and keep wages low. See also ECONOMIC RENT.