In Our Time - David Ricardo

Episode Date: March 25, 2021

Melvyn Bragg and guests discuss one of the most influential economists from the age of Adam Smith and Thomas Malthus. Ricardo (1772 -1823) reputedly made his fortune at the Battle of Waterloo, and he made his lasting impact with his ideas on free trade. At a time when nations preferred to be self-sufficient, to produce all their own food and manufacture their own goods, and to find markets for export rather than import, Ricardo argued for free trade even with rivals for the benefit of all. He contended that existing economic policy unduly favoured landlords above all others and needed to change, and that nations would be less likely to go to war with their trading partners if they were more reliant on each other. For the last two hundred years, Ricardo’s Theory of Comparative Advantage in support of free trade has been developed and reinterpreted by generations of economists across the political spectrum.WithMatthew Watson Professor of Political Economy at the University of WarwickHelen Paul Lecturer in Economics and Economic History at the University of SouthamptonAndRichard Whatmore Professor of Modern History at the University of St Andrews and Co-Director of the St Andrews Institute of Intellectual HistoryProducer: Simon Tillotson

BBC Sounds, music, radio, podcasts. Thanks for downloading this episode of In Our Time. There's a reading list to go with it on our website, and you can get news about our programs if you follow us on Twitter at BBC In Our Time. I hope you enjoy the programs. Hello, David Ricardo, 1772 to 1823, made his fortune at the Battle of Waterloo and subsequently made his lasting reputation as an economist. At a time when nations referred to be self-sufficient and export, not import,

he argued for free trade, even with rivals, for the benefit of all. And for the last 200 years, Ricardo's theory of comparative advantage in support of free trade has been developed and reinterpreted by generations of economists across the political spectrum, and it remains a fundamental idea today. When me to discuss David Ricardo and his ideas are Matthew Watson, Professor of Political Economy at the University of Warwick, Richard Watmore, Professor of Modern History at the University of St Andrews, and co-director of the St Andrews Institute of Intellectual History,

and Helen Paul, lecturer in economics and economic history at the University of Southampton. Helen Paul, what was David Riccada's background? Was he born wealthy? No, he wasn't. He was born in London to Safari Jewish family, who had recently come over from the Netherlands and who had been originally Portuguese,

and he essentially didn't get much education, a very formal sort. He went to work for his father. when he was 14. So there wasn't a great deal of welfare. They weren't really from a landed background or anything like that at all. What was his father doing? His father was a stockbroker in London, one of the very few licensed Jewish stockbrokers, because there was a limit on how many Jewish people could be stockbrokers officially. And essentially, this is still the time period when people are working out of coffee houses and things like that. And he seems to have gone in.

David went in to work for his dad, almost as a kind of runner or helper, and learned the business from there. As I understand it, he decided to marry a Quaker, fell in love with a Quaker woman and married her, and rejected his family and left them and cut himself off from them and vice versa.

Well, I think it was more that they cut themselves off from him rather than the other way round. He married Priscilla, who was one of his family's neighbours, and indeed as a Quaker, came from another marginalised group. So he wasn't marrying her to move up the social scale or anything like that.

But because his father wouldn't have anything to do with him professionally, he had to essentially strike out on his own. And his mother apparently never spoke to him again. She was so offended. Did he, he said about making his own living then. How did he say about that? What did he do? He went into the same line of business.

business that he'd been trained to do. He became a stockbroker the way his father had shown him and went into banking, a banking house, and essentially then moved on from there. And of course, at this time period, you have big, big wars being fought, and you need then to have some kind of financial system to fund those wars. And he's involved very much in that line of work. What were the prevailing ideas then about how nations became wealthy in the early 19th century? Well, most people believed in a mercantilist idea that you would export more than you imported, that you would essentially have a protectionist system. And that, of course, would then result in trade wars, which would then become real wars.

Although there had been some people advocating for free trade, the majority of politicians had this very protectionist viewpoint. Can we develop that, Matthew Watson, and bring in the fabulous Battle of Waterloo, which you seem to have betted on the outcome and came out of the Battle of Waterloo, a very rich man. Is that right? Well, there's certainly no doubt that after 1815,

he was significantly rich, almost eye-poppingly rich. But there's competing stories as to exactly how he made, his money out of the Waterloo loans and exactly how he was able to become so rich on the back of the Battle of Waterloo. It's important here, I think, to separate a Ricardo legend from Ricardo biography. Let me start if I can with the urban myth, because this one is much more entertaining. The urban myth surrounds the way in which Ricardo was able to exploit other people's uncertainty over who had won the Battle of Waterloo to temporarily corner the market. in government loans at that time.

The important fact here is that back in 1815, it took four days, four whole days, for the official dispatch from the Duke of Wellington to arrive in London to announce that Napoleon had been defeated. But for those four days, trading in the bonds tied to government war loans continued. It responded to rumours about the war. It responded to the perception

that other traders' rumours about the war were better than their rumours. It responded to rumours about rumours about rumours about the war and so on. The legend then has it that Ricardo had a runner to relay news to him from Waterloo and that this runner got back to London before the official dispatch did. In other words, Ricardo had a knowledge advantage because he knew the outcome of the Battle of Waterloo before anyone else.

Then the legend says that he was able to, through his body language, through the trades that he was doing, he was able to convince everyone else that Britain, lost. A serious fall occurred in the value of the government loans. And then he used the falling value of the loans to set about buying up all the cheap bonds, knowing that they would rebound very quickly when the actual news about the Duke of Wellington's victory. So that's the legend. Now, do you believe it? If not, what's the opposite view? Well, he certainly got richer rather than rich per se after the Battle of Waterloo. He was

already substantially rich. He belonged to a consortium that had bid successfully for a number of war loans in the preceding years. And each of those war loans, as long as your bid was precise, and as long as it was mathematically sound, you were guaranteed to make profits from them. And you were guaranteed also to make big profits from them. So he actually made more money out of the 1813 war loans than he did out of the 1815 war loan. So the Waterloo loans, that was the icing on the cake, really, rather than the source of all of his wealth. He bought a seat in Parliament, Rottenborough in Ireland.

What did you want to do that for? Why was you interested in becoming an MP? Primarily so that he could propound what he described as the new science of political economy. He wanted a seat in Parliament to be able to popularise the economic principles. principles that he was working on. The evidence from his correspondence, particularly with the philosopher James Mill, who was the friend whose encouragement seems to be most important in persuading him to

seek a seat in Parliament, suggests that the primary motivation was his own intellectual crusade. He wanted his ideas to become more widespread. He wanted those ideas and the scientific principles on which they were based to form a greater part of government policy than previously. When he got into Parliament, he had a radical agenda. I mean, he was an abolitionist, not just against the slave trade, but against slavery per se. He wanted to abolish prejudice against Roman Catholics. He wanted there to be a secret balloting. So he got stuck in. He did very much on civil liberties. He would seem to be very much on the side of the radicals in Parliament of the day. You've already given a

list of the sorts of causes that he found it very easy to support. One cause where he seemed more of a moderate than a radical, though, was on parliamentary reform itself. He believed passionately in the principles of the secret ballot, but he was dubious to say the least about the merits of extending the franchise. So possibly a mixed record on parliamentary reform, but on civil liberties, yes, definitely on the side of the radicals. Thank you. Richard Wattmore, what do we need to now About Adam Smith to appreciate David Ricardo. Well, Matthew said that Ricardo's famous for turning political economy into a science. And to understand what that entails, we really have to go back to Adam Smith.

And Adam Smith died in 1790, so we're talking about the following generation that have experienced the French Revolution and the Napoleonic Wars. And the following generation, Ricardo and his great friend Thomas Robert Malthus, are famous for venerating Smith, but also critically appreciating what Smith did. Now, their view of Smith was that he'd been over-optimistic about commercial society. In what way? Its capacity to expand production, so you'd have capital accumulation that would lead to high wages, and it would lead to high profits.

Both Malthus and Ricardo, following Malthus's idea of a possible, limit on human capacity to produce in the form of the population principle. So in other words, the capacity to produce food would not fit with population explosion. And that meant that you had to take steps to limit population potentially. But Smith's important because so much of Ricardo's work is really a reflection on Smith, a commentary on Smith's Great Wealth Nations, obviously the book that was published in 1776 and really creates the science of political economy. But there's more to it than that because Ricardo and to a lesser extent Malthus are accused of altering the nature of political economy and altering it especially in the nature of political economy as a science. So for Smith, political economy is a branch of the science of the statesman or legislator.

In other words, it's concerned with justice, police, revenue and arms. And one way of summarising it very briefly is to say that Smith didn't want religious wars. He's always looking back to the Reformation and he doesn't want religious wars to break out again and lead to domestic war and then international war. And he wants a science of wealth that's going to help people become moderately wealthy and to not be fanatics in life or in politics. Now, Smith thought that you could do that by a broad science, science of legislation, which includes all of these branches, domestic legislation, international legislation. Whereas for Ricardo, it's really about wealth creation and he's accused of narrowing the science of political economy and making it much, much more about wealth than virtue or justice or stopping war. What is his relationship with Malthus? They had a strong relationship.

But Malthus thought it was a risky to have too many people, to have large families. He was against that. Why was he against that? Did he lead to? Well, Malthus thought that the people he called utopians during the French Revolution, he's thinking about the philosophers Condorcet and Godwin, were over-optimistic about the future prospects of changing human nature to make a kind of revolutionary utopia on Earth.

And Malthus comes up with his essay on the principle of population, the first edition, 1798, and then it's revised substantially in 1803. And really, he says that the utopians can't be trusted. They're projectors. They're promising things that they can't deliver. And the most important thing is if you look at the capacity of humans to produce goods, it's limited by the food supply if population is increasing and increasing. And there's a theological element to Malthus's view, which really says,

Well, actually poverty is quite good for people because it makes them virtuous and actually a benevolent God created it this way, so people would be more industrious and they'd be more virtuous. But he's more interested, especially from the second edition onwards, in preventive checks, which really might mean something like delaying marriage. It might mean, obviously, Ricardo accepts the principle of population, but he's much more in favour of birth control, which is another radical element of his philosophy. and they're very close friends. It's really, it's Malthus who promotes Ricardo, after he writes, is tracked on the high price of bullion in 1810. It's Malthus who reviews it, and they become very, very close. And they're forever exchanging letters about the science,

about the doctrine of rent and about all the other elements of political economy that they agree and that they disagree about. Thank you. Helen Paul, in 1817, a couple of years after the end of the Napoleonic War, Ricardo brought out his major work on the... principles of political economy and taxation. Is it possible to give us an overview of that? Yes, certainly. Ricardo had essentially retired from his job as a stockbroker and he had the money to just spend time on his project, which was the principles for short. It was really a response to Adam Smith's wealth of nations because what had happened is Ricardo had come across a copy

of the wealth of nations when he was in Bath and found it in a lending library and he'd decided essentially to write his response to it, which as Richard has said, is an appreciation of Smith, but also a critical reinterpretation as well. And it is the major economic text of its time, essentially taking over from Smith as the, if we might say the prototype textbook as well as a lot of cutting-edge thinking. We can see it maybe as a companion piece to the wealth of nations. Can you, is it possible, it was a massive and important work, is it possible to give the listeners the gist of it? Well, yes, it is a comprehensive overview of various ideas about the economy that Ricardo had.

There's a lot on it about building of a model, a very systematic approach. He has a labour theory of value, a bit like Adam Smith. He brings in some of his great ideas like his comparative advantage ideas, So it covers a wide variety of different topics. The only problem is that Ricardo isn't particularly clear as a writer. So it is from this great work that all of the various Ricardo followers can find almost what they want to find. It's quite a trudge through some of it.

He writes very long sentences, sometimes not very clear what he means. But what keeps it going? What has made it so important and keeps it being so important? So important at the time, continues to be. I suppose because it pulls the economy or the idea of political economy away from its roots in the philosophy or the state building that Richard was talking about and into a newer idea about describing how the economy works in practice. So positive rather than normative building of models and actually seeing how, and Ricardo is quite good at this, seeing how

it's not just the first step, but also the counter-counter moves and the counter-counter moves that matter. He is able to think two steps ahead or three steps ahead as to how a change in one part of the economy or one part of a country's trading relationships will have an effect elsewhere. And it does have these great ideas like, say, comparative advantage that are still being taught to undergraduates today. Richard? The attractiveness of the principles is that it gives an explanation for something that really shocked people, which was why Britain, which was a state that in the 18th century had been predicted was going to really collapse. It had a corrupt economy. Most commercial societies that are empires, if you look at them historically, Carthage, Spain, the Dutch, they rise and they fall very quickly. Britain has got an exploding population. It's a lot of. It's a lot of. It's a lot of. It's a lot of. It's a lot of. It's. got enormous wealth. It's had of the greatest victory in war in its history. And the defeat of Bonaparte is remarkable. And what Ricardo's principles does is really gives a set of explanations for it and a set of reasons why if you keep going on a track that he recommends, then the population is

going to become richer. And Britain has a glorious future. And obviously he recommends that you pay the debt, you get rid of the corn laws, you sort out the currency and make sure that it It's based on gold and you introduce this system of natural liberty. And if you do all that, then the country's got a glorious future. So I think there's this sense of optimism at the time while the country is adjusting out of war. And Ricardo says everything's going to be okay. And Britain can be stable as a manufacturing state rather than something, an agricultural state and one that has to worry about the future so much. So part of it is the optimism.

I think. Can we look at the idea of comparative advantage attributed to Riccada? Can that be summarised? Matthew? Yes, I think it can. It fits nice and clearly into the general theoretical framework that Richard and Helen have already outlined. And hopefully it's relatively easily explained. The key economic principles in operation here are specialisation and trade. The initial Insight is the intuitive one that countries are endowed in different ways economically, and if they choose to specialise in goods that they are particularly endowed to produce cheaply, then they'll be able to produce more of those goods than of any others. Of course, if countries only specialised in producing the goods that they're most well suited to make, they would obviously have a glut of those

goods, and they would also equally obviously have a shortfall in lots of other goods, including many that might be necessary for the maintenance of everyday life. The argument then becomes that countries should specialise in what their best end out economically to produce and then they should trade their surplus stocks in an unrestricted manner with other countries who've also chosen to specialise and trade. His family had come from Portugal and he uses Portugal as a comparison with this country. Can you give listeners a rather more concrete and graphic idea what this meant in terms of terms of those two countries? Yeah, certainly. The model that Ricardo worked with in the

principles is a two-country, two-good model. Portugal and England are the two countries, cloth and wine are the two goods. He inserted some hypothetical numbers into the discussion to show which of the countries was more suited to producing cloth and which of the countries was more suited to producing wine. He thought that Portugal was more suited to producing wine, England to producing cloth. And then the recommendation on the back of that was that the surplus stocks of each

should be traded freely between the two countries. And was that thought to be something that people would take up? Did say, oh, this is a good idea? Or did they say, oh, no, we're not going to trade freely because we don't want to do that. Yes, I think one of the issues is that Adam's, Smith had already proven to anyone's satisfaction that if you had an absolute advantage, if you were just better at making something, then obviously you specialised in that.

And what Ricardo is doing with his so-called magic numbers, the numbers he's got here, is he actually has Portugal being better at producing both of these goods than England, but shows that it still makes sense for them to specialise in trade. And this is something that's counterintuitive. That's where it becomes very important. because he's saying, even if a country is very good at making lots of things, you're still having to give up the production of what you're really, really good at in order to make something that you're merely good at.

And you've got this reason to go to your slower, less efficient neighbour and buy from them to hand over that production to them. And the way he does it is essentially he takes people through his magic numbers. Why do you keep calling them magic numbers? Well, because when he's actually got the numerical exam, sample, you look at them and you work out how long it would take you to produce a unit of cloth and a unit of wine for each country. And in that time period, if you produce just one thing and specialise, then the whole system overall produces more than two units of cloth and two units

of wine. So under the no trade system, there's only two units of cloth, two units of one. And in the new specialisation system, you produce more wine and more cloth. And the reason these are magic numbers is because you have to actually look at the numbers and work through them to actually get that across. And that's the great learning process that we still use with undergraduates today. Richard? Yeah, I think the other wonder about magic numbers is that if you can say, well, this is the objective truth because it's numerically true, then nobody can argue with it. The problem is that it's fine to advocate a system of natural liberty. in a system of free trade in principle, and as Helen said,

that Smith said that, Hume said that, Turgh in France has said that before, but all of these authors historically were interested in what you might call the transition mechanism. So the system of natural liberty and the system of comparative advantage in free trade, it doesn't exist in the present. That's not how states organize themselves. So the big question is, how do you move to a system where that becomes a real estate? And really that's the problem.

That's where Ricardo is silent, whereas Smith and Malthus and historically, lots of other authors are obsessed with, okay, you've got a corrupt empire. Obviously Smith calls it the mercantile system and you need to get rid of it and replace it ideally with a system of natural liberty and free trade with nation states. They might be rich and poor, but they will be trading with one another freely. whereas in reality the big states want to eat up the markets of the little states and obviously you've just had the Congress of Vienna

where Europe has got rid of lots and lots of little states over the period of the Napoleon Awards and it's now a continent dominated by big states and you've got a future where these big states will take over the globe and will exploit lots of little states or weaker states

in other parts of the globe and the reason that they'll do that is because they want eat up the markets because they want to dominate the markets to generate revenue from the markets to pay for the military technology that then pays for war. And really, this is the fundamental problem that Ricardo doesn't really address. And the reason he doesn't address it, there's an interesting answer, which is that he doesn't feel he's been educated. He says time and time again, again, it's been mentioned by Matthew with regard to James Mill. He relies on what he sees are his better educated friends, the utilitarians, Benham, Jeremy Bentham,

the philosopher and James Mill. And he says, well, you do the politics, if you like. And that's had a profound effect on political economy and the history of political economy, because you cut out the politics and you cut out the obsession with war and empire, for example. Matthew. I think it's really important the way that the argument itself is presented. The rhetorical force of the argument in favour of comparative advantage is that it's presented in an algebraic form, as Richard was saying. And because it looks as though it captures purely a mathematical logic, then it becomes much more difficult to argue against. But I think there's also some clear

political encoding within the example that he used. And I think this operates in two distinct ways. Firstly, it looks from the example that will always lead you to the solution that England should specialise in cloth, Portugal should specialize in wine, that Ricardo was making the point that the future for England is in industrial production and the past was in the agricultural sector and that this is a way of politically challenging the landlords in Parliament to continue to make economic policy in a way that favoured the agricultural sector and by implication it favoured them as well. I also think another important part of the political encoding here is that there was actually a treaty in operation for over

a hundred years before Ricardo wrote the principles that governed the trade directly between Portuguese wine and English cloth, the so-called Methuen Treaty. And this was a treaty that led enormously to the enrichment of England at Portugal's expense. So within the real world example that the hypothetical example seems to be modelled on, Even though the algebraic formulation of the hypothetical models seems to suggest that everyone will win out from this, if we look at the actual historical example that it seems to be based on, England was a clear winner.

So maybe he had a parochial audience rather closer to home. Alan Paul, what was Ricardo's place in the world of ideas and society after this time? How famous was the result of this book? Well, he was very famous and he had, of course, eventually becomes this parliamentarian and as well, but he's friends with, as Richard and Matthew have said, all the great and the good, Jeremy Bentham and Malthus, of course, James Mill. He's a very sociable man on top of that. So he's not just in intellectual clubs that Adam Smith had been in in his time, but also he's inviting people to his great house at Gatcombe Park and having all kinds of

dinners and dances and all sorts of things. And he's going out and, if you like, meeting people, meeting the new thinkers. So he has an effect on people that he knows within his circle, but he also has an effect on people who've read his books as well. Can I come in a contradiction here, a contradiction here, he has got problems with landowners in his thinking. Matthew Motton, perhaps you can address this. And yet he is living the life of Raleigh as a massive land. It does look to be a delicious irony, doesn't it, that the individual landowner was opposed to the landowning classes in general. And he certainly said some very sceptical things about the privileged position that landowners held within society. He once said very famously that the interest of the landlord is always opposed to the interest of every other class in the community.

So his economic theory sets up a social structure in which there are three distinct classes, landowners, capitalists and workers, and within that social structure, the landlords are parasitical upon the interests of both of the other classes. So there's a strong line of argument that he builds up through his economic theory and that he allows other people to come to the political conclusion that the power that's held by the landlording classes is not only corrupt, but it's also detrimental to the future of the economy. And he allows other people then to read into his economic theory the political conclusion that the land-owning classes should be relieved

of at least a portion of their power. How did he think the changes he wanted were going to come about? Naturally, by state intervention, how did you think they were going to come about? That's a good question, because if you read the principles, then the role of the state really, amounts to getting the taxes right. Obviously, he thinks you can have a modicum of education. Famously, he doesn't want the poor to be given food in educational establishments. He ridicules reformers like Robert Owen, who are soon going to embrace socialism, their projects like

New Harmony, New Lanark, etc. Where you'd pay workers living together, higher wages, and it would be more of a community. Again, he says that the community of goods is crazy because of self-interest. You know, people are motivated by self-interest and any community of goods, any community that's socialistic will descend into religious war. That's his famous comment on Robert Owen. So the role of the state is actually is limited. He's famous for not worrying about short-term shocks, you know, general gluts, unemployment. He wants to get rid of the poor laws following Malthus. But I think that this, the interesting thing is what Matthews said about the political encoding.

Because if you think about this attack on the landed interest, it's been going on for generations. And the worry is if you attack the landed interest, then you're going to have the French Revolution breaking out. And that's something that Ricardo does worry about. You know, he wants to, he wants to avoid revolution. but he thinks the way of doing it is by having a super successful, productive manufacturing Britain, which really might have short-term problems. But if you have public opinion trying to influence these landed proprietors, then you can get through it.

So his stance is different to the utilitarians, his friends, who call the landed interest, the sinister interest in the state. They call the Church of England a sinister interest in the state, and they blame them for preventing great ideas, you know, the greatest idea, Bentham's Panoptican, for example, penopticum prison or workhouse or educational establishment. They've been stopped, the philosophical radicals argue, because of sinister interests, whereas Ricardo thinks you don't have to worry too much about sinister interests if the economy's functioning as it should be.

Helen Paul, there's an idea known as Ricardian equivalence. Can you tell us about that? Yes, in theory, if Ricardo says, well, if people are rational and they look into the future, if the government offers them a tax reduction, they know that eventually they're going to have to pay more tax later on, so they would save rather than spend. And therefore, he would say that in theory, if that were true, you could try and boost the economy with a tax cut, but it wouldn't work because people could rationally foretell that you'd be asked to pay higher taxes in the future, although Ricardo himself wondered whether that would be true

in practice because people were not necessarily completely rational and forward-looking. But nevertheless, this had some purchase, didn't it? In the equivalent side, his Ricardian equivalence. Yes, certainly. Later economists have named it after him, and it's certainly taught to undergraduates. So it's still an interesting thought when anybody tries to claim that they going to cut taxes and boost the economy, the responses that might work, but not if Ricardian equivalence holds. Matthew Watson, if a nation were to become more wealthy as he wanted following his

ideas, would you mind how that wealth was distributed? So much of his economic theory is about distribution in terms of who takes rewards out of the economy, whether those rewards are deserved. But there's only ever a suggestibility about the methods of redistribute. So it feels as though he was probably on the fence on that particular question. It doesn't mean that there aren't arguments about redistribution within the principles, but you've got to try hard to find them. It takes a little bit of reading in to be able to identify them.

But another issue here is he had to be careful. He was living in a time where to deliberately rock the boat politically would have taken both a great deal of bravery and also a degree of recklessness. The political situation was not particularly friendly to free speech at that time. So you really did have to take care with what you were saying. I'm sure you can read in redistributive arguments into the principles, though, because presumably he wouldn't have worried about the situation that the landlords are created for themselves if he thought that the current distributional settlement should be left exactly as it is. Richard Wartmore, where did the idea of empire fit into Ricardo's world of free trade?

With difficulty is the short answer, because Ricardo doesn't answer the fundamental problem, which was the legacy of the 18th century politically economy to the early 19th century, and that was how a state that Adam Smith had called a mercantile system. You know, Adam Smith wrote that the wealth of nations. to indict the British Empire, and people like Edmund Burke attack merchant, Caesars in India, obviously the famous one being Warren Hastings. And the fact is that this system, corrupt as it was, then becomes super successful at war and at creating empire.

So you might have expected Ricardo to say, well, is Britain, does Britain remain a mercantile system? and in the principles, he really says, well, yes, it does. You know, we've still got the same system. But he doesn't really go into the possibility of getting rid of empire. Again, his utilitarian friends, Jeremy Bentham, talking about emancipating your colonies, liberating Spanish America. They're all in favour of that.

But Ricardo doesn't talk about that. The only hint of it comes in his comments on James Mill, his great friends, history of British India, because this is published. from 1817 in a number of volumes. It's Mill's great work and it's really Mill justifying British intervention in India, not in the form of the East India Company as traditionally experienced. You know, he doesn't like Hastings. He doesn't like Wellington's older brother Wellesley and his activities as Governor General during the French Revolution. But he attacks, Mill attacks Hindu and Muslim civilization in India. And Ricardo really goes along with it. And so the

idea really would be that some states that are civilisations but they're not civilised, they need legislation that represents the good for everybody. And if you have legislation for everybody, it can be imposed on lesser civilizations. And I think that becomes the utilitarian model. And in some ways it's a Ricardian model because he's trying to specify principles of political economy that embody the good for everybody. And if you can do that, then it doesn't really matter. The politics don't matter. The point is to put them into practice. Helen, how did he become influential and who did influence? Well, there are a variety of ways in which he became influential, and probably most obviously because his book becomes the kind of set text for the next generation

of would-be economists. This is just at the beginning of economics being taught as a discipline in Scottish universities, but also in Halebury, which is where Thomas Robert Malthus, of course, Ricardo's great friend, takes the first chair in political economy. And this is where Ricardo's works are being taught. So he really takes over from Smith as being the economist to teach other would-be economists. And as well, he has a lot of influence on the next generation. We've been hearing about the Mill family.

he takes J.S. Mill, who's a young lad at the time, under his wing and encourages him, because J.S. Mill then goes on to be the next generation of economists. And further down the line, we see that John Maynard Keynes was a great admirer of Riccardo's and encouraged his friend Piero Sraffer to write a huge multi-volume biography of Ricardo, and it's that biography as well that again gave Ricardo's reputation a boost. Is it, there's a sense in which he has got something for everyone, Matthew? I think there is, yeah. It's fascinating just how many different ways he can be read

as if he's appealing to more modern sensibilities when, of course, he was just talking about his own time. I think probably the issue here is, goes all the way back to his definition of the overall objective of political economy, which he describes as the attempt to reveal the laws that determine the natural course of rent, profit and wages. And there's very different ways of understanding the word natural in that context. If it's taken to mean free from outside interference, then it's probably going to lead to political claims in favor of a self-regulating market economy.

If it's taken to mean according to the Labor theory of value, which is the way I think that Ricardo probably wanted natural to be understood, then it means making sure that the factor inputs were rewarded in a manner that was directly proportional to the effort that was made within the production process. And this can lead to all sorts of different arguments about government intervention. Government intervention enacted on the principles of justice to make sure that there's fairness within that distribution. What finally, Richard, what more. He'd ask, I don't know, it's 51. From any infection, which developed too much and he died from that.

So it's quite, quite young. What is his main legacy being, Richard, what more? I think Matthew said that really he appealed to all sides. And there's also a point that you could make about philosophical radicalism, which he saw himself increasingly to be part of. He's becoming more of a radical as he gets older with the influence of military. and Bentham. And this is the period when famously Jeremy Bentham gets himself stuffed to turn himself into an auto icon. So he would be venerated by people who would see him as a mythical figure.

And in a sense, the turning of the early dead Ricardo, tragically dead Ricardo into a hero of political economy is something that the philosophical radicals did in the 1820s and the 1830s. Certainly that's what James Mill does and John Ramsey McCulloch. And they turn him into a hero really because they think that the masses aren't intelligent enough to understand political economy in total. So we'll turn this figure into a hero. And I think there's some truth in that. It's also the case that for Marx, Ricardo is venerated because he makes class conflict

to social law. That's what Mark said in the afterward to the second edition of Capital. and then he's really seen to be a figure who everybody has to engage with because there are elements of his doctrines that fit with the left and with the right. And again, we come back to this point by Keynes, who said that it would have been better if Malthus rather than Ricardo had been the hero, had been venerated, because we would be wiser and richer if actually Ricardo hadn't been such a figure in political economy

and actually you might say with regard to Britain and the Empire, it might have been better if they'd lost the Battle of Waterloo and we would have had a form of political economy still engaging with these issues of preventing fanaticism, preventing war and preventing the excesses of empire. Well, that's a good place to come to an end. Thank you very much. Thank you Matthew Watson, Helen Paul and Richard Wattmore.

and to our studio engineer, Jackie Marjoram. Next week, it's the Russia-Japanese War in 2004 to 1905, a huge shock for Russia when Japan gave notice of its new place on the world stage. Thank you for listening. And the In Our Time podcast gets some extra time now with a few minutes of bonus material from Melvin and his guests. So what would you like to add? Helen, would you like to go first?

Yes. I think we could have mentioned Reconna. Viz, which probably sounds a lot more racy than it actually is, which is that Ricardo was very good at building models and having theories, but I think as we've covered, some of those theories don't work in practice, and Shumpeter, who's a great historian of economic thought in his own right, he said, well, this is the vice that Ricardo's has. Sometimes these things are not actually practical.

Something that Matthew said at the start was obviously his defense of free speech, and the fact that he is somebody who had causes, you know, he's one of the founders of the geological society. He doesn't like hunting and shooting, but he loves walking and hiking. And there's a sense with Ricardo, I think he's an interesting character, and one of the reasons he's an interesting character,

is he's a very sociable person, and he's very modest. and this in his letters obviously again which which have been referred to where he says look I just want an easy life I love my family I love conversation I love conviviality and he's really pushed into becoming this political economist this this figure on the public stage and obviously partly he likes it but he still does things like he turns down a directorship of the East India company in a sense you you can see a split personality where part of him, you know, he's embarrassed about his high voice in Parliament and then he managed to cope with that. He was a very nice man and again I think it was just tragic that

he died as young as he did and again the initial reports were that he that it wasn't going to, it wasn't the ear infection wasn't going to be fatal at all, that he'd be back up and running in a couple of days and the fact that he died as he did it, there's a tragedy about it. So this The radical cause, I think, is something that we need to emphasise. You know, he's fascinated by Queen Caroline and the attacks by the establishment on her when she attempts to return to be crowned queen when George the 4th ascends in 1820, and he thinks she's treated dreadfully. So this sense of being a radical in politics,

but having a complicated relationship with direct radical politics is something that I think we could have emphasised more. Matthew? Yeah, I've got one, please. We touched upon Ricardo's abstract methodology, its influence on subsequent economic theory to its detriment, according to Keynes, of course. But I wondered whether we could have unpacked that a little bit further as well. There's some discussion in the academic literature in this regard, and it tends to focus on Ricardo's habit of mind. It situates him in the early stages of career on the stock exchange and ask what he learned. from having to make lightning quick calculations to enable his arbitrage trades to work to his advantage and how that then became the basis of abstract thought. I wonder though whether there's

also a political story to be told here that he did work in a period of time when there was significant restrictions on civil liberties, a number of sedition acts, a number of treachery acts a suspension of habeas corpus act were all introduced in the time that he was writing the various editions of the principles. So I do wonder whether there's anything about the background political context that began to shape the way that he formulated his economic arguments. There were only so many things that you could say and get away with saying in print. and I think that he hid himself at times within his abstractions, and that's always interested me. I think he worries about religion. One of the things his friend Hutch's Troa is somebody who mounts a campaign to prevent the Church of England from being established across India.

And Ricardo says, yes, my goodness, you know, you can't have that. and I don't think he has, he doesn't have faith, he really joins the kind of Unitarian Quaker dissenting communities, but he doesn't want them, you know, as his skepticism with Robert Owen and these, you know, socialist religious schemes. He's really skeptical about all of that. So I think he's somebody who is also against Malthus's emphasis on political economy, potentially as a theodicy. You know, that, he thinks that's crazy. Does this, are they influenced you, we've talked about, we talked a little about how he influenced them.

Malthus, did they influence him? I think they got him to be a slightly better writer. His friends tried to encourage him to write a bit more clearly and also to think, I think Mill Senior told him you need to improve your writing, you've got to think about what comes next, what comes next. And Malthus was a very good stylist in his writing style. Yeah, and one of the nice things about Ricardo is that he's happy to say when he, when he changes his mind.

So obviously the famous example is the third edition of the principles where he changes his mind about machinery and acknowledges that actually it might not be beneficial to the employment of the working poor. And it's something that, again, he's been discussing with his friends over a long period of time. And there's a, we talked about, you know, politically economists as a science and the aspiration to turn it into a science. But when actually you look at his correspondence with Montfuss, with Jean-Baptiste, with Troa, with the political economists who are his friends, they don't really change their position in radical ways. It's not as if you are approaching consensus. You know, they all have their different notions of value and distribution and profit and rent and wages. and it's interesting that they change a bit but not that much. And they have background politics that obviously Matthews referred to several times.

And I think that's the most interesting element of it really. Yeah, I've always had the same thoughts about Ricardo as well and about the engagement with all of these other very famous economic thinkers of the time. That the principles is unlikely to have been written without Mills' encouragement but Ricardo clearly wrote it for himself and as himself rather than something that Mill would have written had it been him undertaking the task. So it is interesting just how close they were as correspondence

this whole group of famous economic theorists but their effect on one another's thinking seems to have been really quite marginal. Well, thank you all very much indeed. In our time with Melvin Bragg is produced by Simon Tillotson Hello Greg Jenner here Series 3 of Radio 4's Top Comedy History Podcast Your Dead to Me is now in full swing

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