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DAVID RICARDO:

4
 DAVID RICARDO [1772-1823], BRITISH
   CLASSICAL ECONOMIST
 

þ APOSTLE OF CAPITAL ACCUMULATION:

     þ GROWTH OF CAPITAL = GREAT SOURCE OF ECONOMIC
       EXPANSION.

     þ ALL ECONOMIC POLICY --> SHOULD BE DIRECTED
       TO EXPANDING IT.
 

þ ECONOMIC FREEDOM --> WAY TO MAXIMIZE PROFITS -->
  PROFITS SOURCE OF INVESTMENT CAPITAL.

þ COMPETITIVE ECONOMY --> LEADS TO PROFIT-
  MAXIMIZING INVESTMENTS.

þ ADVOCATED GOVN. POLICIES THAT BENEFITTED BUSINESS
  --> MAX ECONOMIC GROWTH.

þ A MILLIONAIRE RADICAL, HE ADVOCATED:

     þ REFORMS IN BANKING & CURRENCY
     þ POOR RELIEF
     þ TARIFFS
     þ FREEDOM OF PRESS & SPEECH
 

þ AUTHOR OF THE INFLUENTIAL BOOK PRINCIPLES OF
POLITICAL ECONOMY AND TAXATION.

þ 1815 --> GREAT DEBATE IN ENGLAND --> TO PRESERVE
ENGLAND'S AGRICULTURAL WAY OF LIFE OR NOT?

þ THE CORN LAWS --> THE IMPORT OF WHEAT INTO
ENGLAND

     þ WHEAT & OTHER GRAINS = "CORN"
     þ VS. "INDIAN CORN" OR "MAIZE"
 

5
 DAVID RICARDO [1772-1823]
 

þ ENGLISH LAWS --> TO PROMOTE DOMESTIC AGRI WITHOUT
  CAUSING MAJOR INCREASES IN PRICE OF FOOD.

     þ WHEN WHEAT PRICES FELL IN ENGLAND, TARIFFS
       RAISED ON WHEAT IMPORTS TO KEEP OUT FOREIGN
       GRAIN THAT WAS DEPRESSING DOMESTIC PRICES,
       HURTING DOMESTIC FARMERS.

     þ WHEN DOMESTIC PRICE OF WHEAT ROSE ABOVE
       CERTAIN LEVEL, IMPORT DUTIES REDUCED,
       KEEPING LID ON DOMESTIC PRICES.
 

þ AFTER WARS WITH FRENCH, WHEAT PRICES FELL &
  FARMERS CLAMORED FOR HIGHER DUTIES, FEARING RUIN.

     þ SOUND AGRI NEEDED FOR BR DEFENSE & NAT.
       VIGOR.

     þ REVIVAL OF PHYSIOCRACY.
 

þ BUT BUSINESS INTERESTS OPPOSED TO TARIFF
  INCREASES --> RAISE FOOD PRICES --> FORCE WAGES
  UPWARD --> REDUCED PROFITS--> DECREASED EXPORTS -
  -> RUIN FOR ENGLISH INDUSTRY.

þ BUSINESS INTERESTS SAID ENGLAND'S FUTURE LAY WITH
  INDUSTRIAL EXPANSION, NOT AGRI.

þ BUS. INTERESTS DEMANDED REPEAL OF CORN LAWS.
 

6
 DAVID RICARDO [1772-1823] [C]
 

þ RICARDO ON BUSINESS SIDE OF ARGUMENT:
 

þ LAND OWNERS, NOT FARMERS, CHIEF BENEFICIARY OF
  HIGHER WHEAT PRICES.
 

þ HIGHER PRICES --> CULTIVATION IN OTHERWISE
UNPROFITABLE AREAS --> RENTS WOULD BE RAISED IN
OLDER AREAS --> MORE NAT. INCOME TO LANDOWNERS -->
THIS PARASITIC GP WOULD USE INCOME FOR LUXURY
EXPENDITURES --> NOT FOR PRODUCTIVE INVESTMENT.
 

þ ENLARGE CULTIVATION WOULD DRAW CAPITAL & LABOR
AWAY FROM INDUSTRY, HINDERING INDUSTRY.
 

þ HIGHER FOOD PRICES ---> HIGHER WAGES --> HIGHER
MFGG COSTS --> REDUCED ENGLISH EXPORTS --> REDUCED
OUTPUT FOR ENGLISH MFGG.
 

þ ALSO, REDUCED PROFITS FOR MFGG --> SLOWER CAPITAL
ACCUMULATION & ECON EXPANSION.
 

þ IN SUM, RICARDO OPPOSED CORN LAWS, BUT NOT THEIR
COMPLETE REPEAL.

7
 RICARDO'S THEORY OF ECONOMIC GROWTH

þ RICARDO DEVELOPED THEORETICAL MODEL OF THE
  ECONOMY --> DEVELOPED A GENERAL THEORY OF
  ECONOMIC GROWTH.
 

þ IN EARLY STAGES OF NATION'S GROWTH, POP. SMALL &
  ONLY SMALL PORTION OF LAND CULTIVATED.
 

þ RENT PAID TO LANDOWNERS ONLY SMALL PART OF NAT.
  INCOME, PROFITS TO FARMERS LARGE PART.
 

þ PROFITS PLOWED BACK INTO INDUST DEVELOPMT -->
  GREATER DEMAND FOR LABOR --> POP GROWTH --> WHILE
  WAGES REMAIN AT SUBSIST. LEVEL.
 

þ POP GROWTH --> EXPANSION OF CULTIVATED AREAS -->
  RAISE FOOD PRICES TO COVER HIGHER COSTS OF
  GROWING ON LESS FERTILE AREAS.
 

þ HIGHER FOOD PRICES --> LANDOWNERS RAISE RENTS IN
  OLDER CULTIVATED AREAS.

þ ALSO, HIGHER FOOD PRICES --> EMPLOYERS PAY HIGHER
  MONEY WAGES  --> COST OF MFGG GOODS UP --> REDUCE
  MFGG PROFITS --> REDUCED WEALTH FOR EXPANSION &
  REDUCED INCENTIVE TO INVEST --> CAPITAL
  ACCUMULATION SLOWING --> ECON GROWTH SLOWING -->
  HALTING OF GROWTH AFTER MANY DECADES.
 

8
 RICARDO'S THEORY OF ECONOMIC GROWTH
 

þ AT THIS MATURE STAGE, POP LARGE, CULTIVATION
  EXTENDED, INDUSTRY DEVELOPED, PRODUCTION HIGH -->
  BUT CAPITAL ACCUMULATION ADEQUATE ONLY FOR
  REPLACEMENT OF CAPITAL, NOT FURTHER EXPANSION.
 

þ RICARDO BELIEVED THAT ECONOMY, IF LEFT ALONE,
  WOULD ACHIEVE MAX. GROWTH POSSIBLE:

     þ BUSINESS SHOULD BE FREED OF ALL RESTRICTIONS
       THAT MIGHT REDUCE ABILITY TO MAX PROFITS.

     þ RIGHT OR WRONG, RICARDO'S THEORY WAS ON THE
       SIDE OF THE COMING RULERS OF THE SOCIAL
       ORDER, BUSINESS INTERESTS.

9
 RICARDO AND THE INTERNATIONAL ECONOMY
 

þ RICARDO SHOWED THAT INTERNATIONAL SPECIALIZATION
  WAS ADVANTAGEOUS TO ALL NATIONS.

þ DR ALSO SHOWED THAT TARIFFS TO PROTECT DOMESTIC
  PRODUCERS INJURED THE NATION IMPOSING THEM.

þ FREE TRADE WAS ROAD TO ECONOMIC WELL BEING -->
  DOMESTICALLY & INTERNATIONALLY.
 

þ DR: THE LAW OF COMPARATIVE ADVANTAGE:

     þ IF IT COSTS LESS TO PRODUCE COST IN ENGLAND
       THAN IT DOES TO PRODUCE WHEAT -- COMPARED
       WITH COSTS IN OTHER COUNTRIES -- PAYS FOR
       ENGLISH TO SHIFT TO CLOTH MFGG, EXPORT
       CLOTH, & IMPORT WHEAT FROM OTHER COUNTRIES.
 

     þ ENGLISH WORKER --> 1 DAY TO MAKE YD OF CLOTH
                      --> 2 DAYS TO GROW BUSHEL OF
                           WHEAT.

     þ THUS, A BUSHEL OF WHEAT COSTS 2X YD OF
       CLOTH.
 

     þ FRENCH WORKER --> 1 DAY TO MAKE YD OF CLOTH
                     --> 1 DAY TO MAKE BUSHEL OF
                         WHEAT.

     þ CONCLUSION: ENGLAND SHOULD MAKE CLOTH (1
       DAYS LABOR), EXPORT TO FR, TRADE IT 1 FOR 1
       FOR WHEAT, IMPORT THE WHEAT BACK TO ENGLAND.

     þ IN THIS WAY, ENGLISH WILL GET FOR ONE DAY'S
       LABOR, THE WHEAT IT WOULD OTHERWISE TAKE 2
       DAYS TO PRODUCE.
 

10
 RICARDO AND THE INTERNATIONAL ECONOMY
  [C]

þ FR WOULD ALSO GAIN: THEY PRODUCE WHEAT, , SHIP TO
  ENGLAND, , TRADE ONE BUSHEL FOR 2 YDS OF CLOTH,
  AND SHIP CLOTH BACK TO FR.

þ BOTH SIDES BENEFIT FROM THIS SPECIALIZATION &
FREE    EXCHANGE.

þ ENGLAND WOULD PRODUCE & EXPORT MUCH CLOTH, BUT
  OUTPUT OF WHEAT WOULD BE SMALL. THE OPPOSITE IN
  FR.
 

 RICARDO SAW WHOLE WORLD MOVING TOWARD
   GREATER WEALTH
 

þ DR SAID THAT IN FULLY DEVELOPED ECONOMY, THAT THE
  RETURN TO CAPITAL WAS LOW --> ONLY REPLACEMENT OF
  WORN-OUT CAPITAL EQUIPMENT.
 

þ AS RETURN TO CAPITAL FELL IN ENGLAND, ENGLISH
  INVESTORS WOULD SEEK HIGHER RETURNS BY INVESTING
  IN LESS WELL DEVELOPED COUNTRIES ABROAD.
 

þ CAPITAL EXPORTS FROM MATURE ECONOMIES WOULD FLOW
  QUICKLY TO NEWLY DEVELOPING COUNTRIES, WHO WOULD
  BE BROUGHT TO HIGHER LEVELS OF PRODUCTION &
  WEALTH.

þ THUS, CLASSICAL ECONOMISTS SUCH AS DR SAW THE
  WHOLE WORLD GRADUALLY MOVING TOWARDS OPULENCE.

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