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David Ricardo: Adam Smith
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One generation after the publication of Smith's tome, David Ricardo wrote Principles of Political Economy and Taxation (1817). This book acted, in one sense, as a critical commentary on the Wealth of Nations. Yet in another sense, Ricardo's work gave an entirely new twist to the developing science of political economy.
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Observing the advantageous position of the landlord, the struggle of competing capitalists, and the economic plight of the worker, David Ricardo envisioned an unpromising future for capitalism. To Adam Smith, society appeared balanced and harmonious, but, to Ricardo, society was a bitterly competitive contest. He viewed the worker as little more than an automaton, whose only human expression was an indulgence in sex. Instead of raising the family standard of living when wages rose, the worker produced more children and thereby increased the labor supply, offsetting the tendency for wages to rise as the supply met and exceeded the demand for workers. Thus, the worker was doomed to gain no more than a subsistence level of wages.
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David Ricardo was born in England in 1772. He was a businessman from the age of fourteen. He made a large fortune as a wealthy stockbroker and landholder. In 1799, at the age of 27, Ricardo read Adam Smith's `Wealth of Nations', and for the next ten years he studied economics closely.
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David Ricardo, born in 1772, became interested in economics at the age of 27 after a chance reading of Adam Smith’s The Wealth of Nations (1776). Ricardo did not become a full-time professional economist until he was 41--after he had amassed a fortune as a dealer in government securities.
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To better understand Ricardo’s position, it is important to remember that, as Marx noticed, “in his observations on profits and wages, Ricardo … treats the matter as though the entire capital were laid out directly in wages” (Marx, 1862–3, II, 373). This does not mean that Ricardo is not aware that non-wage capital was used in production: he even inserted a chapter “On Machinery” in the third edition of the Principles. But he often reasons as if only wage capital were employed in production (a misconception originating in Smith). This implies that the amount of labour embodied in the wage rate is not only equal to its value, but is ... equal to the proportion of the total labour necessary to reproduce the wages, and to the proportion of wages in the value of the product: if w is the amount of labour embodied in the wage rate, and L is the number of workers employed in producing the social product, the proportion of the total labour used to reproduce the wages is wL/L, which, for the labour theory of value, is also the proportion of the value of wages in the value of the product. This explains why Ricardo sometimes writes that the rate of profits depends upon the amount of labour embodied in the wage rate (e.g. VIII, 130), sometimes that it depends upon “the proportion of the annual labour of the country devoted to the support of the labourers’ (I, 49), sometimes that it depends on the proportion of the value of wages in the product (I, 125).
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Adam Smith had been careful, Torrens stated, to limit the principle that the quantity of labor measures value to the first and rude state of society; and Ricardo, in going further, had gone wrong. Ricardo admitted that the principle which he had asserted would not hold of capitals possessing unequal degrees of durability, but said they were exceptional cases. They were not the exceptional, but the common cases, replied Torrens, and therefore Ricardo's principles were entirely subverted by them. Even when the capitals possessed equal durability, the labor which they put in motion might be different and unequal; but competition would still bring the value of the products to the same point. Hence, although equal values no doubt emerged when equal capitals set equal quantities of labor in motion, there need be no necessary connection between the two circumstances, and the values might be equal in quite different cases .... It was not, therefore, the quantity of labor that determined exchangeable value; and Ricardo had mistaken "an accidental coincidence for a necessary connexion."
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