DAVID RICARDO I. INTRODUCTION A.

Historical Background The Corn Laws After the Napoleonic Wars, as retaliation to the rest of the continent, England prohibited the importation of all forms of grain from the rest of Europe (this is referred to as The Corn Laws). The effect was the constant increases in the domestic prices of grain in England. Scarcity was of course the obvious cause and this encouraged domestic farmers and landlords to increase their output. Because of this, even agricultural lands that were considered merely secondary in fertility were utilized. And of course, the output of these was not as much as the first quality tracts of land. To maximize these lands, more of the other agricultural inputs were used, raising costs. Both options lead to the rising of the grains domestic prices. For the landlords, the effect of the Corn Laws was gainful since they could already charge rent for the idle lands that used to be deemed useless for agricultural activity. This sector was in favor of the Corn Laws. Businessmen were wary of the Corn Laws because they were forced to increase wages of all workers in order to adjust with subsistence levels. David Ricardo would have the chance to address Parliament clamoring for the end of the Corn Laws. II. The Ricardian System A. Labor Theory of Value Ricardo believed that labor was the ultimate measurement of a products value. Adam Smith recognized that labor was the primary measurement of value for less capital-intensive economies but for Ricardo, all other factors of production paled to the impact of labor on the valuation of goods. But some goods value can be dictated by its scarcity alone and these are those with a supply that is impossible to increase B. The Stationary State Ricardo described the future as bleak should free trade and other liberal economic policies NOT be passed. His intention of describing a depressing future was to convince Parliament and his other readers of the importance of the elements of free trade. 1. What is this bleak future Ricardo described? Domestic prices would be so high that income distribution would also be unfair. Increases in rents lead to very high incomes for only one sector, while the rest of society would have to adjust to high prices. Increasing population would lead to a higher demand for food and this will lead to extending farming to less fertile lands, and in turn will lead to higher food prices. High food prices will force businessmen to pay their workers more, resulting in lower profits. It is explicit that only those who own the best lands who will benefit from a protected economy in the long run.