On The Principles of Political Economy and Taxation

But alas, the price we pay for these occasional flashes of wit is high. While Adam Smith, the man, had a tendency to get lost in thought and wander off into the wilderness, he somewhat restrained this propensity when he put pen to paper. But Ricardo has not the self-con How to say it? But Ricardo has not the self-control. His major work's organizational scheme is infuriating. Most of the chapter about value is actually about profits and wages.

Much of the chapter on rent is about value. Much of the chapter about wages is actually about rent. And in all this repetition, in discussions that are so abstract that they never alight upon empirical examples, there is nonetheless a great deal of contradiction! In Ricardo's initial definition of "rent", he explicitly excepts the coal or treasure sitting in mines from the category of "land", noting instead that these should be considered commodities and their value deriving from the effort necessary to discover and remove them.

But then twenty pages later we find him, in a chapter titled "On the Rent of Mines," seemingly having forgotten that same point, and treating the contents of mine as a kind of land.

Indeed, Ricardo is always best when he quotes Smith or Say and then refutes their argument, because in using the words of others he clarifies his own exposition and is forced to precision. Moreover, the work has an unmistakably polemical thrust. Scholars talk as though this book was a work of pure science, but in the actual text Ricardo's intent is unmistakable.

On the Principles of Political Economy and Taxation | work by Ricardo | theranchhands.com

His aim is to see both the Corn Laws and the Poor Laws repealed, and to win esteem for the merchant and the investor at the expense of the landowner. His definitions, and the conclusions he derives from them, betray this partisan engagement. But for all that, Ricardo's intelligence is evident on nearly every page. The work is palpably the product of years of close thinking and rethinking about elusive and interconnected phenomena.

Every chapter invites us to an exhausting intellectual exercise. It is understandable that Ricardo's work became not only influential, but influential in nearly every direction, because although one can use it as the basis for the conservative argument Ricardo intends, its implications point in other directions as well. Oct 03, Abram Dorrough rated it really liked it. The idea that specialization in trade makes all parties better off, regardless of the absolute endowments or productivity of all trading parties, has made the world as interconnected and wealthy as it is today.

Indeed, the book was published in My, how the world has changed in years. Mar 04, Xander rated it did not like it. This is a terrible, long-winding and boring book. The treatise is a comment on Smith and in lesser degree Jean Baptiste Say and it is in this antagonism that Ricardo's position becomes clear. Ricardo advocates free trade, since every country or economy should produce what they produce best, according to land, skill and other environmental fac This is a terrible, long-winding and boring book.

Ricardo advocates free trade, since every country or economy should produce what they produce best, according to land, skill and other environmental factors.

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So for example, even though England might produce better wines and cloth than Portugal, it pays both economies to produce what they're best at: Portugal produces wines and England produces cloth, they exchange these goods and both are better off than they would be if they both produced both types of commodity. This is, in short, what modern day economists call the law of comparative advantage. But how do we know what the exchange value of commodities is?

Well, according to Ricardo there's no absolute exchange value. The most stable means of exchange is gold - supposing that the production costs of gold coins remains stable, something which is not as rigid as Ricardo supposes. All commodities can be compared to gold and hence gold is the medium by which to value the commodities.

But whence derives the value of commodities in gold? According to Ricardo the value of commodities is determined by the costs of production, more specifically the labour costs that are necessary to produce these commodities. And how are these labour costs determined? Uhm, well they're determined by the necessary costs labourers have to make to subsist: It follows from this that, according to Ricardo at least, the labourer is the metaphorical fool.

The costs the labourer has to make to subsist - food, drink, clothing, shelter - are rather stable and hence the labourer is dependent on population growth. If the population grows, the demand for food as an example will increase, while the agircultural production doesn't necessarily increase or is rather limited. This means food will become more expensive, so the labourer has to cut down on food, or starve or both - after a short time and population will decline, leading to lesser demand for food and hence to lower prices of food.

One can see that Ricardo is heavily influenced by Thomas Malthus's theory of population checks: But labour costs - or wages - aren't the only component of the economy. There's also profits - without profit capitalism wouldn't work and capital always seeks the most profitable means of production. It follows from the above mentioned facts that - again, according to Malthus - the higher the means of subsistence are, the higher the wages will be or else labourers wouldn't work , and consequently the lower the profits for the capitalist are.

High wages equal low profits. Now that we know the antagonism between labourer and capitalist - it isn't a miracle that Karl Marx was heavily influenced by Ricardo! The Corn Laws were initiated by the British government to protect the home grown production of corn against imports from abroad by applying tariffs. According to Ricardo, this artificially created British monopoly on the production of corn led to lower rents and hence to less production of corn.

Less corn means higher prices, higher corn prices means higher wages, higher wages means less profit - in other words: Ricardo dresses this capitalistic theory in ethical motives: The British poor were not only hurt by their government with the Corn Laws, but even more so by the Poor Laws. These laws were instituted by the government to garantuee the labourer a bare minimum of subsistence. If he or she couldn't find work, he or she could go their parish and ask for help. This help meant forced labour in a workhouse in exchange for the bare minimum of food, cloth and shelter.

According to Ricardo, this system was destroying the labour market by artificially creating higher wages.

Labourers had something to fall back on so wages had to be relatively higher than before, leading - again - to less profit for capital. Again, it is a serious question how sincere Ricardo is when dressing his economic arguments in ethical language. Garantueeing a bare minimum of subsistence for the poor leads to Let's do away with the workhouse - it's better for the poor to starve to death, since this will lead to a decreased population and hence to lower food prices. Ricardo, the liberal and free trade promoter that he was, saw the Corn Laws and the Poor Laws as a means of taxing the capitalist not the landlord, mind you!

This would lead, inevitably, to the destruction of the capitalist class - all of Britain would end up as one class - the poor - because of good intentions of the government. This, of course, is ridiculous, and disproved with hindsight. It sometimes, at least pays to pay labourers more, since they then can buy your products, meaning a larger business. Men like Henri Ford saw this practical significant fact, while principled economists like Ricardo were clinging to their theories. A large part of the book is devoted to Ricardo's views on taxes, but this can be summarized rather easily.

Ricardo sees taxes as not really disturbing international trade since this is governed by bills of exchange and gold and is a staunch advoce of taxing consumers to spread taxation equally. For this last point he gives obscure arguments: It is better to decrease consumptive than productive capital, since productive capital is used to put labourer to work.

There's truth in this view, yet it is too simplistic. There are numerous problems involved in taxing consumers and leaving capital relatively un-taxed, but the more principled one is the following. You can only make money with money. This means that the capitalist has the means to perpetually increase his or her property by investing it and making profits. This leads to the accumulation of wealth, over generations, in the hands of a few individuals and families - especially when inheritance is left un-taxed.

Adam Smith, not really a socialist one would argue, already warns against the forming of monopolies. And besides the danger of monopolies, how liberal or meritocratic is it to be born in wealth and be able to do anything that your fellow human beings aren't able to do, without this having anything to do with your own merits.

If you understand these points, there's no need to read this book - especially since it's a terrible book to read. Ricardo isn't a gifted writer and it's hard to get through the chapters with all the repetition and abstract reasoning. I consider myself a liberal, but I am not convinced and actually a little bit shaken by cold, rational calculations to let the poor suffer in order for the restoration of economic balance.

I believe Ricardo even says somewhere in the book can't remember the exact chapter and passage that, even though it is inhuman to witness, it's better for the population to let poor people starve. Government intervention will only make things worse, since the problems arise from unbalance in the economy too much population growth, too high wages.

I think economic principles are important to understand the economy better, and even to guide policy. But we shouldn't look away from suffering human beings just because it suits our theories better. I think a price can be asked to pay by the community to help people in distress. And since we live in a democracy, let the voters decide partly how much this price will be.

On The Principles of Political Economy, and Taxation by David Ricardo

There's also a major problem with rational analyses of the economy. First, human beings aren't rational decision makers, so one of the assumptions of this rational economic approach is plain wrong. Second, and more importantly, rational economics leaves out selectively a lot of important factors in life. For example, sociological studies clearly show that higher inequalities of income strongly correlate with higher rates of crime, higer rates of disease and poverty, lesser well-being of large masses, etc.

So, from a perspective of political economy the ambition of people like Ricardo it can be just as rational to apply progressive income taxes and taxation of capital and inheritance, if this leads to a society in which average well-being, health and safety are higher than before. These are political goals that can be democratically legitimated and hence are just as rational as excluding these 'soft' factors from your theories.

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It is strange that economists like Ricardo, who were so closely affiliated with utilitarians like Jeremy Bentham and John Stuart Mill, were so blind to these 'soft' factors. Utilitarians strive for the greatest happiness of the greatest number, so it isn't really obvious to me that the economic disadvantages of workhouses on taxation of capital weigh heavily against the social and political advantages of a happier and healthier society. One can dispute, of course, whether workhouses really were a better alternative for the poor than starvation, but the point is that utilitarianism is - at least in principle - inclusive towards 'soft' parts of the economy, so it's strange that brilliant men like Ricardo couldn't make the connection.

One suspects Marx was partly right in viewing the bourgeousie as a hindrance to a more equal society: Again, when reading Ricardo's arguments on things like the Poor Laws and Corn Laws, I cannot help but suspect that he dresses his cold opportunistic arguments in ethical language, to make it seem he cares for the poor, while he really cares for his own class. A final remark on my own part: I believe Ricardo, and after him Marx, were the last ones to fully advocate the labour theory of value.

On the Principles of Political Economy and Taxation

Economists nowadays believe that the value of commodities isn't related to the costs of production, but purely to the law of supply and demand. This is, inherently, an irrational process, since human beings are, almost by definition, irrational. This explains the many crises and speculative bubbles: I'm no economist, so please take my comments with a grain of salt and refute me on my misstaken assumptions.

Mar 20, Kristina Vukovic rated it it was amazing. Ricardo believes in the Labor Theory of Value, which hurts his analysis. The value of something is subjective. Just because a lot of work went into producing something does not mean other people will value it more than some thing which required less labor to produce. He is also wrong about rent. The increase in productivity due to mechanization lowers the production costs and thus also the real prices of commodities. Whereas the landowning class and capitalists benefit from the lower prices, workers in contrast do not reap such benefit from the lower prices if capitalists reduce the wage fund in order to finance the expensive machinery, causing technological unemployment among workers.

In this case, Ricardo points out, wages are forced down by competition among workers, and the introduction of new machines can lead to an over-all decline in the well-being of the working class. From Wikipedia, the free encyclopedia. An automated process has detected links on this page on the local or global blacklist. If the links are appropriate you may request whitelisting by following these instructions ; otherwise consider removing or replacing them with more appropriate links. To hide this tag, set the "invisible" field to "true" List of blacklisted links: Retrieved from " https: Classical economics books books in economics British books in the United Kingdom Political economy Economics and finance book stubs.

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