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Susan K

on 31 March 2015

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Transcript of Biography

- potential gains from trade
- protectionism (mercantilism) is unnecessary
- free-trade is good even when one partner holds absolute advantage in production
- countries should specialize in certain class of products as exports but import the rest even if it holds absolute advantage in all product
Major Works
Economic Theories
Significant Events
How Significant Events
Influenced Work
How Ideas were Interpreted/Refuted
Evidence of Theory
in Practice
David Ricardo
David Ricardo
- British political economist
- Born in London, England
April 18, 1772
Didn't go to college
Worked with Father at 14
London Stock Exchange
Disowned for marrying to another religion
- Died on September 11th, 1823
Cause: Ear Infection @ age 51
Single causation theory

Comparative Advantage:
Significant Events
Irish Rebellion 1798
Industrial Revolution 1800s
Napoleonic wars
1803 - 1815
War of 1812
1/5 of the world's landmass
High unemployment rates
gain gold and silver
trade with colonies
trade surplus
Famine (corn laws)
Theory of Rent
Price regulations on wheat
Landlords benefit
Farmers loses
Best Land
broker & financial market speculator
retired in 1814, elected to British parliament 1815
- represented Portarlington
- 47 years old
- held seat for 4 years before his death
1799: inspired by Adam Smith's "The Wealth of Nations"
- first economic article at 37, "Essay on the Influence of a Low Price of Corn on the Profits of Stock" *
- 1817: "Principles of Political Economy and Taxation"
- "Price of Gold" in Morning Chronicles
- "The High Price of Bullion"
"Essay on the Influence of a Low Price of Corn on the Profits of Stock"
"Principles of Political Economy and Taxation"
- took economics to series of theoretical sophistication
- outlined classical system most
"Classical" or "Ricardian"
Slowly replaced
Neo-Ricardian research program
Group 1:
1 day to make 1 painting
1 day to write 1 book
Group 2:
3 days to make 1 painting
1 & 1/2 days to write 1 book
Painting: $100
Book: $80
3x100 + 3x80
= $540
1x100 + 2x80
= $260
4 paintings & 5 books
= 9 production units
6 x 100
= $600
4 x 80
= $320
6 paintings & 4 books
= 10 production units
- gained finance reputation from working with father
- set up his professional career
- stepping stone to economic career
- reading "The Wealth of Nations" sparked economic interest
"The High Price of Bullion, a Proof of the Depreciation of Bank Notes"
- Bullion Report to the British House of Commons
- major contributor to Billion controversy
Bank of England suspended convertibility of notes --> gold
Bullionists & Ricardo argued increase of money supply driven by needs of trade
Comparative Advantage
- Joan Robinson and Piero Sraffa challenged theory of comparative advantage
- critics argued theory is flawed, assumes production is absolute
- gained popular utilization 20 years after ricardo's death
"Trade barriers are necessary"
- Ricardo's in favor of free trade
- Utsa Patnaik argues Ricardo's theory contains logical fallacy
assumes two goods are produced in both countries
countries often trade for goods unreproducible in own country
Lowest Marginal Cost
Wages Theory
Development of Comparative Advantage
disbelief of mercantilism
Use of comparative advantage
Widely used today
high levels of international trade
International Trade Organizations
Price Floors and Ceiling
government sets the price
to "help" a certain group
farmers, students
Franchises and Expansion
Law of diminishing returns
fixed land
increasing workers
(relative cost to the
rest of the land owners & such)
Law of increasing returns to scale
increasing land
increasing workers
the use of franchises
realize the fallacy of
the beginnings of the business cycle
increase in supply of labor
labor is cheap
people leave
labor is expensive
Supply and Demand = Equlibrium
introduced through theory of wages
commonly used for analysis and predictions of prices
worked on developing economic theories
pioneered many widespread theories used today
second founder of modern economics
Full transcript