A Sephardic family in the City
David Ricardo was born in London on April 18, 1772, the third surviving child of a family that would eventually number seventeen children. His parents were Sephardic Jews of Portuguese descent. His father, Abraham Israel Ricardo, came from a family that had moved from Livorno to Amsterdam, where they were prominent in the Jewish community, and he had been a stockbroker on the Amsterdam exchange before settling in London. Naturalised in 1771, Abraham soon obtained one of the twelve brokerships in the City of London then reserved for Jews. David’s mother, Abigail, came from the Delvalle family, tobacco and snuff merchants who had long been settled in England.
The boy had a traditional Jewish upbringing. Between about the ages of eleven and thirteen he was sent to Amsterdam, where he is reported to have attended the community’s respected Talmud Torah school. He had no university education, but his family’s wealth paid for tutors, and in 1786, at fourteen, he went to work beside his father on the Stock Exchange, learning the trade of buying and selling government securities.
A marriage outside the faith
At twenty-one Ricardo fell in love with Priscilla Anne Wilkinson, a Quaker, and in December 1793 he eloped with her. Marrying out of the faith was a grave breach in the tight-knit Sephardic community of London. His father disowned him; his family mourned him as if he had died; and his mother, it is said, never spoke to him again. Ricardo himself became a Unitarian.
Cut off from his father’s support, he had to make his own way. Several members of the Stock Exchange who had come to respect his ability, including the banking house of Lubbock and Forster, backed him, and he set up in business on his own. The breach with his father eased in later years: Abraham’s will left his son a token bequest “in token of forgiveness.” David and Priscilla had eight children.
A fortune made in wartime
Ricardo’s career coincided with more than two decades of war against revolutionary and Napoleonic France, which Britain financed by borrowing on an unprecedented scale. He became one of the most successful dealers in government stock of his generation and a leading contractor for government loans, bidding with partners to take up whole issues of new debt and sell them on to investors.
In June 1815, days before the Battle of Waterloo, he was among the successful bidders for a large government loan, and the British victory brought him substantial profits. A popular legend, repeated in an 1823 newspaper obituary and later by the economist Paul Samuelson, holds that he made more than a million pounds by speculating on the battle’s outcome; historians regard that story as exaggerated, noting that he sold much of his holding before news of the victory reached London. He was already a very rich man. Around 1815 he began withdrawing from the Stock Exchange and investing in land, buying the Gatcombe Park estate in Gloucestershire, and he served as High Sheriff of the county in 1818–19. At his death his fortune was estimated at between £675,000 and £775,000.
From Adam Smith to the bullion controversy
In 1799 the twenty-seven-year-old broker read of Adam Smith’s The Wealth of Nations. He was captivated, and from then on political economy became his consuming interest. A decade later, in 1809, he published his first economic writing, letters to the Morning Chronicle on the price of gold, followed in 1810 by the pamphlet The High Price of Bullion, a Proof of the Depreciation of Bank Notes.
Britain had suspended the convertibility of banknotes into gold in 1797, and prices had risen. Ricardo argued that the cause was simple: the Bank of England had issued too much paper money. It was an early and influential statement of what economists now call the quantity theory of money, and it made his name in the so-called bullion controversy. His friendships with the philosopher James Mill, who urged him to write, with Jeremy Bentham, and above all with Thomas Malthus, with whom he carried on a long and affectionate argument by letter, drew him into the centre of British intellectual life.
He went on to propose practical reforms. His plan for resuming cash payments suggested that the Bank of England should redeem its notes not in coins but in gold bars, so that the country could return to a sound currency while economising on precious metal. In later writings he argued that the power to issue money was too dangerous to leave in the hands of a private bank, but equally, as he put it, that it should not be entrusted to the State itself. The questions he asked about who should control the money supply, and how to protect it from political abuse, anticipated debates about central-bank independence that continue today.
The Principles
In 1815 Ricardo published an Essay on the Influence of a Low Price of Corn on the Profits of Stock, arguing against the Corn Laws that protected British landowners from cheap imported grain. Two years later came his masterpiece, On the Principles of Political Economy and Taxation (1817). Where Smith had written expansively, Ricardo reasoned abstractly, building simplified models to isolate how the economy’s income was divided between landlords, capitalists and workers.
His theory of rent held that as a growing population forced farmers onto poorer land, the owners of better land would capture the difference in productivity as rent. Protecting grain prices, therefore, enriched landlords at the expense of everyone else, squeezing profits and slowing growth. He refined Smith’s labour theory of value, arguing that the relative value of goods depends on the quantity of labour needed to produce them, an idea later taken up, to very different ends, by Karl Marx.
Ricardo and Malthus disagreed on much, above all on whether an economy could suffer a general glut, too little demand for all the goods it produced. Malthus thought it could; Ricardo, following the French economist Jean-Baptiste Say, thought not. Their correspondence, which lasted until Ricardo’s death, is one of the great intellectual exchanges in the history of economics, conducted with unfailing warmth on both sides.
Comparative advantage
The idea for which Ricardo is best remembered appears in the seventh chapter of the Principles, “On Foreign Trade.” He imagined England and Portugal producing cloth and wine. In England, cloth might require the labour of 100 men for a year and wine the labour of 120; in Portugal, wine might require 80 men and cloth 90. Portugal is better at producing both goods, yet, Ricardo showed, both countries gain if Portugal specialises in wine and England in cloth, and they trade. What matters is not absolute but comparative advantage: each country should produce what it gives up least to make.
The insight is counter-intuitive and enormously powerful. It remains the foundation of the economic case for free trade, taught in every introductory economics course, and it underlay the eventual repeal of the Corn Laws in 1846 and the long era of British free trade that followed.
Member of Parliament
In 1818, as part of the terms of a £25,000 loan to the indebted Lord Portarlington, Ricardo bought for £4,000 the parliamentary seat of Portarlington, a pocket borough in Ireland with only a handful of electors. He took his seat on February 20, 1819, and never visited his constituents. In the House of Commons he was a respected if sometimes isolated voice, colleagues called him a “theorist”, speaking on currency, the national debt and trade.
On monetary questions he often sided with the government, and he gave evidence to the parliamentary committees that prepared Britain’s return to gold convertibility, completed in 1821. Some of his ideas were too bold for the House: an 1819 proposal to pay off the national debt with a one-off tax on property was coolly received. His speeches were nonetheless listened to with respect, for he was known to speak from conviction rather than interest, a landowner who attacked the Corn Laws that protected landowners like himself.
He voted for free trade, for moderate parliamentary reform, for criminal law reform and for Catholic relief, and he called for an inquiry into the Peterloo massacre of 1819. Though he had left Judaism, he supported religious toleration and the removal of civil disabilities, writing in 1823 that he hoped prejudice against the Jews would fade. He has been described as Ireland’s first Jewish-born member of Parliament.
Sudden death
In 1822 Ricardo travelled on the continent and in Amsterdam sought out his Dutch relatives, among them his nephew, the poet Isaac da Costa. The following summer an ear infection spread and turned to septicaemia, and he died at Gatcombe Park on September 11, 1823, aged only fifty-one. He was buried in the churchyard of St Nicholas, Hardenhuish, near Chippenham in Wiltshire. Priscilla and seven of their children survived him; two sons, Osman and David, later sat in Parliament.
Legacy
Ricardo’s working life as an economist lasted barely fourteen years, yet he did more than anyone except Adam Smith to create economics as a discipline. His abstract, model-building method became the template for the field; his theories of rent, money and comparative advantage are still taught; and economists still speak of “Ricardian equivalence” and the “Ricardian” model of trade. Both free-trade liberals and their socialist critics claimed his ideas.
He was also a remarkable figure in Anglo-Jewish history: the son of a Sephardic immigrant broker who left the community through marriage, yet who rose from the trading floors of the City to the House of Commons, and whose ideas continue to shape the global economy two centuries after his death.
Sources & further reading
David Ricardo, Wikipedia · David Ricardo, Concise Encyclopedia of Economics, Econlib · Ricardo, David (1772–1823), Selected biographies, Carleton University · David Ricardo, Ireland’s first Jewish MP, Patrick Comerford · On the Principles of Political Economy and Taxation, ch. 7, Econlib · Researched from the sources above and checked against them. Spotted an error? Tell us.
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