David Ricardo was a person who achieved both tremendous success and David Ricardo was a person who achieved both tremendous success and lasting fame. After his family disinherited him for marrying outside his lasting fame. After his family disinherited him for marrying outside his Jewish faith, Ricardo made a fortune as a stockbroker and loan broker. Jewish faith, Ricardo made a fortune as a stockbroker and loan broker. When he died, his estate was worth more than $100 million.  When he died, his estate was worth more than $100 million.  

Ricardo first gained notice among economists over the “bullion Ricardo first gained notice among economists over the “bullion controversy.” In 1809 he wrote that England’s inflation was the result of controversy.” In 1809 he wrote that England’s inflation was the result of the Bank of England’s propensity to issue excess banknotes. In short, the Bank of England’s propensity to issue excess banknotes. In short, Ricardo was an early believer in the quantity theory of money, or what is Ricardo was an early believer in the quantity theory of money, or what is known today as monetarism.known today as monetarism.

In his In his Essay on the Influence of a Low Price of Corn on the Profits of Essay on the Influence of a Low Price of Corn on the Profits of StockStock, Ricardo articulated what came to be known as the law of , Ricardo articulated what came to be known as the law of diminishing marginal returns. One of the most famous laws of diminishing marginal returns. One of the most famous laws of economics, it holds that as more and more resources are combined in economics, it holds that as more and more resources are combined in production with a fixed resource—for example, as more labor and production with a fixed resource—for example, as more labor and machinery are used on a fixed amount of land—the additions to output machinery are used on a fixed amount of land—the additions to output will diminish.will diminish.

Ricardo also opposed the protectionist Corn Laws, which restricted Ricardo also opposed the protectionist Corn Laws, which restricted imports of wheat. In arguing for free trade, Ricardo formulated the idea imports of wheat. In arguing for free trade, Ricardo formulated the idea of comparative costs, an idea that is the main basis for most economists’ of comparative costs, an idea that is the main basis for most economists’ belief in free trade today. The idea is that a country that trades for belief in free trade today. The idea is that a country that trades for products it can get at lower cost from another country is better off than products it can get at lower cost from another country is better off than if it had made the products at home.if it had made the products at home.

  

 

CLASSICAL THOUGHT-

Stressed economic freedom promoting ideas like laissez-faire and free

competition

“If a commodity were in no way useful, - in other words, if it could in no way contribute to our

gratification, - it would be destitute of exchangeable value, however scarce it might be, or whatever

quantity of labor might be necessary to procure it.”