David Ricardo - The Law of Diminishing Returns and the Principle of Comparative Advantage

David Ricardo (1772-1823) was the son of a wealthy Dutch Jew who had migrated to England and acquired a great fortune on the stock market. Ricardo was the third of seventeen children and was trained for the stock-brokerage business at the age of fourteen. At the age of twenty-one and under the influence of his new Quaker wife, Ricardo left the Jewish faith to become a Unitarian. Ricardo soon after, and independent of his father, entered the stock market and invested funds loaned to him by bankers who trusted him. Over his fairly short life of fifty-one years which ended due to an ear infection, Ricardo accumulated a substantial amount of wealth that was much greater than his father's.

Although Ricardo was considered the most rigorous theoretician of the classical economists, and, along with Adam Smith, a founder of classical economic thought, he studied economics merely as a hobby. He did not get interested in the study of economics until the age of twenty-seven when he came across Smith's Wealth of Nations. His first publication was a letter to a newspaper relating to some currency problems. It wasn't until two years before his death that he published his book The Principles of Political Economy and Taxation (1821).

Interestingly, David Ricardo advocated ideas and policies that were in direct opposition to his very own personal interests. For example, although he invested two-thirds of his wealth gained on the stock market into real estate and mortgages, Ricardo supported theories that would literally ruin landowners.

Thomas Malthus and David Ricardo lived and wrote about the same time period. As previously mentioned, their time frame was one of intense social conflict as the industrial revolution in Britain resulted in widespread suffering of the working class. Malthus was a champion of the landowners or rentier class which dominated the membership and control of the British Parliament. Ricardo, on the other hand, was a strong defender of the capitalists and big business. One of the primary concerns for policy makers during this time regarded a debate over profits from agriculture land versus the profit making potentials coming from industrial production. Interestingly, with the exception of an adversarial disagreement over various economic principles, especially the Corn Laws, Malthus and Ricardo were basically friends.