David Ricardo Flashcards
What were the Corn Laws?
In 1815, the Corn Laws which applied sliding duties on the importation of grain. The lower the domestic price fell, the higher the imported duty applied, essentially a floor was established to keep low-price grain permanently out of the market, and preserve the incomes of landlords. Lasted until 1846
What did Ricardo see as the ‘surplus of society’?
Ricardo saw the landlord as the unequal benefactor of the division of labour. The worker worked and was paid a wage and the capitalist received profit from the market. The landowner benefitted from the soil and his income – rent- was neither held by competition or the population. The landlord gained at everyone’s expense.
What is the principle of Ricardian Rent?
The value of rent on land is determined by its relative fertility and location advantages. As population and economic activity expand, the demand for agricultural products increases, leading to the cultivation of less fertile land. Therefore, the rent of more fertile land increases, benefitting the landowner - especially if wages remain fixed across the industry
What were the Poor Laws?
The Poor Laws had their origins in Elizabethan England. Each parish was tasked with supporting the poor by placing them in workhouses, which theoretically would encourage them to work hard to support themselves, take them off the street and reduce the cost of looking after them. The parish could raise taxes to support the system at any time.
What was Ricardo’s position on the Poor Laws?
The increased number of poor subsisting through this system will need to be supported by increasing taxation and rates, which will diminish overall wealth, capital accumulation and drain national wealth in the long-term.
Such laws ultimately create economic and social dependency, discouraging self-reliance, and threatening the overall prosperity of society.
Ricardo suggests their gradual abolition, with an emphasis on promoting independence and prudence among the poor to avoid overwhelming the economy with unsustainable public support.
What does Ricardo see as the difference between the natural price and market price of labour?
The natural price of labour/natural wage is the subsistence or minimum income level needed for workers to support themselves and their family.
The market price of labour is determined by demand/supply in the market; when labour supply exceeds demand, market wages fall below the natural price.
How was Ricardo responding to Adam Smith?
He saw himself improving on Smith’s work and the method departs from Smith’s broader sociological-historical analysis and focused moreso on brevity and theoretical ‘deductive method’.
Ricardo expounded on Smith’s free trade, originating the idea of comparative advantage.
How would Ricardo influence Karl Marx?
Marx was heavily influenced by Ricardo’s analysis of value, labor, and surplus. While Marx argued that surplus value was the basis of capitalist exploitation, Ricardo’s conception of rent, distribution, and the impact of capitalism on workers laid foundational concepts for Marx’s own theory of economic class conflict.
How would Ricardo influence Arthur Lewis?
Ricardo deduced that if wages rose too far above subsistence levels it would be at the expense of employers’ profits, which would impair accumulation, investment and national growth.
Lewis drew on this theory for his dual-sector model.
