David Ricardo was a successful Stockbroker. He earned a fortune and retired as a country gentlemen and served in Parliament for some years. He read A. Smith at the age of 27, and was taken with economic issues. He was also a contemporary of T.R. Malthus, Jeremy Bentham, and so on.

Ricardo and Malthus subsequently became fast friends. Despite their disagreements, Malthus once commented that he never loved anyone outside his family as much as he did Ricardo. Despite this, and the popularity of Malthus' theory of population, Ricardo subsequently became the foremost spokesman on economics in the late 18th, early 19th centuries.

Ricardo believed that the principle problem of Political Economy was the laws governing the distribution of income. Ricardo developed a theoretical model to analyze the policy of the Corn laws. The Corn laws imposed tariffs on the importation of agricultural products, thereby raising the price of agricultural products domestically. They represent the struggle between the landlord interests and the manufacturing interests over economic policy and the control of Parliament.

1. Assumptions 
1. Say's law--supply creates its own demand, and whatever is saved is invested (accumulated).
2. Labor theory of value, prices are proportional to the quantities of embodied labor.
3. Agriculture is labor intensive, manufacturing is capital intensive.
4. Land is fixed and differs in fertility
5. three classes 

2. Short-run Implications: 
1. The corn laws increase the price of agricultural products. This in turn makes profitable the cultivation of marginal (inferior) land.
2. This increases competition for more fertile lands, bidding up rents.
3. The increase in rents reduces profits, and the profit rate (profits/wages)
4. The decline in profits leads to a decrease in saving, which in turn hurts investment (accumulation) (Say's law)
5. Economic growth slows.
6. Policy recommendation: Laissez faire. Eliminate the corn laws, thereby redistributing income to the capitalists and facilitating economic growth. Ricardo believed that the interestd of the capitalists are coincident with the interests of society, whereas the interests of the landlords are contrary to the interests of society.
7. Income distribution (relations in distribution) is a way to influence capital accumulation (and relations in production). This suggests that in some sense relations in production and distribution are independent. Distribution is used to influence production, but not the reverese.

 

3. Long-run implications: 
1. As the population grows and increasingly marginal land is cultivated, Ricardo believed that rents would increase. Eventually, this squeezes profits such that profits fall to zero.
2. At this point, society enters the stationary state, the point of no accumulation and no growth. Capitalism ceases.
3. Ricardo was pessimistic about the future, but believed that society could be ameliorated in the short run.