This book introduces the theory of comparative advantage. According to Ricardo’s Theory, even if a country produces everything more efficiently than another country, it would reap gains from specializing in what it was best at producing and trading it with other nations. Ricardo believed that wages should be left to free competition, so there are no restrictions on the importation of agricultural products from abroad. The benefits of comparative advantage are both distributional and related to improved real income. Within Ricardo’s theory distributional effects included that foreign trade could not directly affect profits because profits respond only changes to the level of wages. The effects on income are always beneficial because foreign trade does not affect value.
ABOUT THE AUTHOR David Ricardo
David Ricardo was born, of Jewish parents, on 18 April 1772. His interest in economics developed rather late, at the age of 29 after reading Adam Smith's The wealth of Nations. Ricardo's subsequent friendship with two of the leading economists at that time – James Mill and T.R. Malthus- further stimulated his interest in the science of economics. Besides The Principles of Political Economy and Taxation, Ricardo published four monographs/pamphlets: (1) The High Price of Bullion: A Proof of the Depreciation of Bank Notes (1810); (2) Reply to Mr. Bosanquets Practical Observations on the Report of the Bullion Committee (1811); (3) An Essay on the Influence of a Law Price of Corn on the Profits of Stock (1815); and (4) Proposals for an Economical and Secure Currency (1816). Ricardo was a member of the British Parliament and he was much respected because of his eminence as an economist. Ricardian economics dominated mainstream economic thinking in England for almost the whole of 19th Century. As John Maynard Keynes put it in his General Theory (1936), Ricardo “conquered England as completely as the Holy Inquisition conquered Spain.”
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