25. THE DOCTRINE OF D. RICARDO

David Ricardo (1771-1823) - English economist.

Ricardo is a supporter of the concept of economic liberalism, which does not allow any state intervention in the economy and involves free enterprise, free trade and other "economic freedoms".

The paper "The beginning of political economy and taxation" he formulated the main task of political economy - determination of the laws governing the distribution of the created product. Value is determined by labor, "the determination of value by labor time is an absolute, universal law" (exceptions - for non-reproducible goods - are works of art, wine of a special taste, the value of which is determined by their rarity).

Salary change (without changing labor productivity) does not affect the price, but only changes the distribution of the value of the created product between the entrepreneur and the worker, i.e., changes the ratio of wages and profits. This is an inverse relationship, so the theory Ricardo called the system of discord and enmity between classes.

Based on the labor theory of value Ricardo created and rent theory, in which the source of rent is not the special bounty of nature, but the labor applied. The cost of agricultural products is determined by labor costs in relatively poor areas, in modern terminology - marginal areas where maximum capital investments are made. The surplus of products obtained from the best areas represents rent, paid to the owner of the land. High rent payments are a consequence of high prices for agricultural products, which forces land of poorer quality into circulation. The theory of rent was a special case of the theory of marginal values, which are the basis of modern microeconomic analysis.

Developing views A. Smith, Ricardo claimed that salary reduced to the cost of the livelihood of the worker and his family. However, unlike Smith he believed that wages were kept within the rigid limits of the physical minimum by virtue of natural law. Here for the views Ricardo influenced by the position Malthus.

D. Ricardo formulated theory of comparative advantage, which regulates, in particular, foreign trade.

He proved that specialization is beneficial even to a country that does not have absolute advantages, provided that it has a comparative advantage in the production of any product. Unlike him Smith proved that a country should specialize in those products where it has an absolute advantage, i.e., the cost of it is less than in other countries.

Ricardo supporter quantity theory of money. He associated the depreciation of money with the result of its excessive issue. The stability of monetary circulation (a prerequisite for the economy) can only be ensured by a monetary system based on gold (gold must be freely exchanged back for banknotes at a fixed rate).

Ricardo considered an ideologue "gold standard".

Author: Tatarnikov E.A.

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