"Volume 7 is the second volume of four volumes comprising the collection of letters found within The Works and Correspondence of David Ricardo. It spans the years of Ricardo's life from 1816 to 1818. This period of Ricardo's life saw the development and initial defense of his most influential work On the Principles of Political Economy and Taxation.
The exchange of ideas found within this volume of letters helped shape and refine Ricardo's thoughts on the allocation of money between capitalists, landowners, and agricultural workers. The researcher will find, among these letters, useful criticisms of Ricardo, elucidations to and from Ricardo, and general ovations and concurrences. The majority of the correspondence is with noted writers with whom Ricardo shared an intellectual give-and-take on many topics of the time. Among the many luminaries found within this volume are James Mill, T. R. Malthus, and Jean-Baptiste Say."
RICARDO TO MALTHUS
Gatcomb Park 2 Jany. 1816
My dear Sir
Your two letters have both reached me, and I am very sorry to find that I shall not have the pleasure of seeing you at Gatcomb this vacation.
The edition which I have of your work is the first, and it is many years since I read it. When you wrote to me that you were looking over the chapters on the Agricultural and Manufacturing systems, with a view to make some alterations in them, I looked into those chapters and saw a great deal in them which differed from the opinions I have formed on that part of the subject.
…As for the difference between us on Profits of which you speak in your letter, —you have not I think stated it correctly. You say that my opinion is “that General Profits never fall from a general fall of prices compared with labour, but from a general rise of labour compared with prices.” I will not acknowledge this to be my proposition. I think that corn and labour are the variable commodities, and that other things neither rise nor fall but from difficulty or facility of production, or from some cause particularly affecting the value of money,—and that no alteration of price proceeding from these causes affect general profits;— allowing always some effect for cheapness of the raw material.
Mrs. Ricardo joins with me in kind regards to Mrs. Malthus.
David Ricardo (1772-1823) was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill.
Ricardo’s father, a successful stockbroker, introduced him to the Stock Exchange at the formative age of fourteen. During his career in finance, he amassed a personal fortune, which allowed him to retire at the age of forty-two. Thereafter, he pursued a political career and further developed his economic ideas and policy proposals. A man of very little formal education, Ricardo arguably became, with the exception of Adam Smith, the most influential political economist of all time.
Ricardo was the first economist to make extensive use of deductive reasoning and arithmetical models to illustrate the anticipated reactions to juxtaposed market forces and responsive human action. His modes of analysis have become identified with economics as an academic discipline.
Like Smith, Ricardo believed that minimal government intervention best served an economy. His contributions to economics are numerous and include the theory of “hard money” to hedge inflation, the law of diminishing returns, developed along with his close friend the classical economist T. R. Malthus, and the labor theory of value.
One of Ricardo’s most significant contributions to economics is the law of comparative advantage as applied to international commerce, which grew out of Adam Smith’s division of labor and has become the central argument for free trade and open markets. It implies that countries best serve themselves when they trade with other countries abiding by their respective scales of efficiency. Besides being the most efficient method of international commerce, the comparative-advantage mode of trade also encourages international stability through multilateral business interests and global interdependencies. As Frédéric Bastiat, the French journalist and politician, wrote, “If goods do not cross borders, armies will.”
Throughout the years, several economists have elaborated on fundamental Ricardo themes and developed compelling theorems. Using Ricardo’s assertions about the interrelationships among capital, labor, output, and investment, the Nobel laureate F. A. Hayek posed the Ricardo effect, a retort to John Maynard Keynes’s accelerator principle. Robert Barro of Harvard University used Ricardo’s equivalence theorem to argue that the distinction between government taxing its citizens or deficit spending on credit is inconsequential to the long-term aggregate economy. Gordon Tullock, one of the founders of the public choice school, built upon Ricardo’s rent theory to explain his “rent-seeking” phenomenon, which illuminates the inequitable and monopolistic distribution of excessive gains derived through discriminate government subsidies.