Others by David Ricardo

The writing of "Principles of Political Economy and Taxation"

Ricardo was first of all a financial genius. At the age of 14, Ricardo was engaged in the securities trading business. At the age of 26, Ricardo started independent business with a capital of 800 pounds. By the time he retired at the age of 42, his assets reached 1.6 million pounds. This figure made him the richest man at the time. However, like business wizards such as Cantillon and Keynes, future generations admire them not because of their speculation legends, but because of their pioneering contributions to the development of economics. What really makes Ricardo legendary is that this first-class thinker in the history of economic doctrine, "The formal education he received was the poorest education a great economist could receive. In this way, his achievements as an economic thinker It must be attributed to genius."

In 1799, while recuperating at a hot spring resort, Ricardo accidentally read "The Wealth of Nations". He "liked it so much that he wanted to gain research experience." This was the reason why Ricardo became interested in economics. start. After that, Ricardo often read the Edinburgh Review, which advocated free trade and was edited by James Mill. In 1808, Mill published "The Protection of Commerce" expounding his free trade proposition, which Ricardo greatly praised. By this time, Mill was already an influential historian and logician. "Ricardo deeply admired Mill, and was especially envious that Mill received the formal education he lacked." Ricardo took the initiative to get acquainted with him and became a close friend. After that, Ricardo and Mill often held discussions and corresponded with each other on hot issues at the time, and Ricardo's knowledge and research abilities were cultivated and improved.

In 1815, during the debate over the existence of the Corn Laws, Ricardo published a pamphlet "On the Influence of Low-priced Cereals on Capital Profits", calling for free trade in cereals and the import of low-priced cereals. , to lower wages, increase profits, and promote the development of capitalism. The publication of "On the Impact of Low Price Grain on Capital Profits" caused a certain social response. Mill believed that Ricardo was already the best economic thinker at that time and should also become the best economics writer, so he urged Ricardo to expand and revise the pamphlet. Ricardo was reluctant at first because he lacked confidence in his writing ability. "Mr. Mill wanted me to rewrite the whole thing." "I'm afraid I'm not qualified for this job." But I honestly say that this is probably beyond my ability. "I find that the greatest difficulty is that confusion cannot be avoided in the simplest narrative." At this time, Mill assumed the responsibility of a teacher, and he said to Ricardo. Encouragement: "Because you are already the best thinker of political economy, so I am determined to make you the best writer." "It was precisely because of Mill's encouragement and help that Ricardo eliminated his doubts about himself from an economic small "I have doubts about the author's ability to develop into a writer of the entire Principles of Political Economy." Ricardo's confidence increased: "In order to fulfill my long-cherished wish, I must make this attempt within a year or two, after repeated revisions. Finally, I may be able to write something that can be understood." Faced with difficulties in writing, Ricardo sometimes slacked off and even revealed his "old tone of pessimism and despair" again. At this time, Mill urged him like a stern teacher. , you must "dedicate yourself to the study of political economy" and "start writing the book you want to write immediately without hesitation for an hour..." Mill not only provided spiritual support and constant supervision and encouragement to Ricardo's writing, but also focused on writing methods. Detailed guidance will be provided on technical aspects such as structural arrangement and argument presentation. Mill's encouragement and guidance continued throughout the entire process of Ricardo's writing. In 1817, "Principles of Political Economy and Taxation" was finally completed and published. It was Mill's selfless dedication that promoted the publication of this book with important epochal significance in the history of political economics. It can even be said that without Mill, there would be no Ricardo's "Principles of Political Economy and Taxation". John Mill's comment was not exaggerated: "If it had not been for my father's sincere request and enthusiastic encouragement, I am afraid this book would never have been published, or never written."

Ricardo and Malthus: On Enemies and Friends

Ricardo and Malthus (Thomas Robert Malthus 1766-1834) are two thinkers with obvious contrasts in origin, experience, personality and ideological views.

Malthus was born in an upper-class landed aristocratic society, and his father had extensive contacts with celebrities in the intellectual circles of the time, such as Hume and Rousseau; while Ricardo was born in a Jewish immigrant family that was wealthy but lacked social status, and his father seemed to be a profit-seeking speculator. Malthus was well-read as a boy and entered Cambridge University; while Ricardo never received a systematic formal education. Malthus was a professional scholar; Ricardo was a securities broker. Malthus lived an unremarkable life as a teacher; while Ricardo not only had a successful career in securities management, but also served as a member of parliament. Malthus lived an academic career all his life, but he cared about reality; while Ricardo was a businessman, but became a theoretician. Malthus was never wealthy; Ricardo's personal fortune was ￡1.6 million.

Malthus became famous earlier than Ricardo. Due to the publication of "The Principle of Population", Malthus was already a well-known economist in England when Ricardo was conducting economic research. Ricardo was very impressed by Malthus's population theory. "The theory it expounds is so clear and satisfying that it aroused my interest. This is a masterpiece second only to Adam Smith." In the debate on the issue of bank notes at that time, Ricardo wrote in 1810 and 18 In 1811, he published two papers, "The High Price of Gold Is a Verification of the Devaluation of Bank Notes" and "A Reply to Mr. Bozankert's Actual Perceptions of the Report of the Gold Price Commission", which attracted the attention of Malthus. In order to reach an agreement with Ricardo on relevant issues and avoid unnecessary lawsuits, Malthus took the initiative to get acquainted with Ricardo.

Due to the sharp opposition in theoretical views, Ricardo and Malthus' debates on grain trade, value theory, business cycle theory, etc. started in full swing after they got acquainted and continued until Ricardo's death. In February 1815, Malthus, who stood as a landowner, published "A Study of the Nature and Development of Land Rent and the Principles of Its Governing" and "A Study of Opinions on the Policy of Restricting the Importation of Corn from Foreign Countries", which laid a solid foundation for the implementation of the Corn Laws and the government's To defend raising the grain price limit; as a defender of bourgeois interests, Ricardo published "On the Influence of Low Cereal Prices on Capital Profits", which violently refuted Malthus's views (as mentioned before, it was to refute Malthus's The publication of this paper led to the writing and publication of Ricardo's "Principles of Political Economy and Taxation"). After Malthus published "Principles of Political Economy" in 1820, Ricardo spared no effort to spend 220 pages excerpting the flaws in Malthus's arguments; Malthus firmly believed that such fallacies were also deeply rooted in Ricardo's works. In the year before Ricardo's death, they had been arguing over major theoretical issues and wrote many long letters to discuss and argue with each other.

In the relationship between Ricardo and Malthus, life-long enemies are accompanied by another relationship - life-long friends. After Malthus "took the liberty of introducing himself" to Ricardo in June 1811, they not only continued to correspond and exchange ideas for more than ten years, but also visited each other frequently. Ricardo not only helped Malthus earn investment income through his own securities operations, but also left Malthus a living expenses before his death. Just as their enduring debate as opponents had a lasting impact, their enduring friendship is a legend in the history of ideas. After Ricardo's death, Malthus said affectionately: "Except for my own family, I have never loved anyone so much."

Academic Friendship, Academic Criticism and Academic Development

In In the first half of the story of James Mill and Ricardo, we saw the process of a talented student growing into a first-class economist under the encouragement, supervision and guidance of a selfless teacher. The friendship between Mill and Ricardo is based on their common belief in economic freedom and their common pursuit of truth. In this story, we see the impact of academic friendship on academic Promotion of progress. However, in the further development of this story, when the role relationship between Ricardo and Mill changes, what we see is the shackles of academic worship on academic development.

The publication of "Principles of Political Economy and Taxation" made Ricardo a first-class economist and the master of the academic group with him as the core. At this time, the relationship between Mill and Ricardo changed. It developed from a teacher-student relationship with Ricardo as a student and Mill as a teacher to a disciple relationship with Ricardo as a mentor and Mill and others as disciples. Mill claimed that he and McCulloch were the two and only two true believers of Ricardo.

In order to spread Ricardo's ideas, Mill published "Principles of Political Economy" in 1821, which for the first time systematically expounded Ricardo's theory.

The academic worship of Ricardo hindered Mill's scientific exploration and pursuit of truth. There are two contradictions in the Ricardian system that it cannot overcome: the contradiction between the labor theory of value and the exchange of labor and capital; and the contradiction between the labor theory of value and the equal amount of profits obtained by the same amount of capital. In the 1820s, the Ricardo system was violently attacked by Malthus and Bailey. After Ricardo's death, as a firm believer and successor of Ricardo's theory, with deep feelings for Ricardo and his theory, Mill took on the responsibility of defending Ricardo's theory. However, a defense based on faith rather than science is destined to lack strength. Giving up on science is actually choosing to fail. In the explanation of the first contradiction, Mill confused labor and labor force, actually canceling the labor theory of value that Ricardo had always insisted on; while in the explanation of the second contradiction, Mill's theory of new wine and old wine The explanation eventually became a joke in the history of doctrine. Mill's explanation did not resolve the contradictions of the Ricardo system at all. Instead, it vulgarized Ricardo's theory and ultimately led to the disintegration of the Ricardo system.

Due to their different worldviews, Malthus and Ricardo had different understandings of several important issues. However, based on their common belief in truth and science, they can be honest and not be deceived when discussing issues, and not be captured by emotions. According to Malthus: "We discuss issues of interest together for the sake of truth and no other ideas." The love for truth actually transcends personal narrow emotions. Maria Edgeworth, a contemporary writer, said in her diary, "Together they (Ricardo and Malthus) searched for the truth, and when they found it, they rejoiced wildly, regardless of who discovered it first." It was their dedication to science and truth that enabled them to maintain a pure and deep friendship amidst a lifetime of sharp debates. This is the kind of friendship only open-minded thinkers can have. In his last letter to Malthus before his death, Ricardo said: "Now, dear Malthus, I am finished. Like other disputants, after many debates, we still maintain our respective opinions. However, these debates have not affected our opinions in the least. Friendship, even if you agree with my point of view, I will not love you more than I do now.”

In fact, academic criticism based on scientific spirit is also an important force for academic progress. In the process of writing "Principles of Political Economy and Taxation", Ricardo constantly discussed with Malthus and improved his views and writing through constant debates with Malthus. It was also through the debate with Malthus that Ricardo wrote "Absolute Value" in his final work "Absolute Value". and Relative Value", the distinction between value and exchange value was clearly understood. Summary

The textile trade frictions between China and the United States and China and Europe show that when Ricardo’s comparative advantage theory is extended to the development strategy of a big country like China, fatal flaws appear. China's real advantage lies in its huge domestic market. Only when potential markets such as the central and western regions and northeastern China are continuously developed, can China's employment problem fundamentally find a way out.

The textile trade war highlights the misunderstandings of Ricardo’s theory

Ricardo’s theory can be illustrated with a simple example: In a family, a housewife can educate and raise herself better than a nanny. However, since she works outside the home and earns 10 yuan per hour, and the nanny earns 1 yuan per hour, then the most economically reasonable arrangement is: the housewife works outside the home and gets a salary of 10 yuan per hour, using One yuan is given to the nanny, so the family can get a surplus of 9 yuan. Although a housewife is better than a nanny in both educating her children and working outside the home, she has the greatest relative benefits by working outside the home. This is her comparative advantage. In the same way, for two countries, each country should focus on producing its most efficient product, even though one country may have an absolute advantage in two products at the same time. This is the so-called "theory of comparative advantage." Today's mainstream thinking on economic development believes that conducting trade in the international field and allowing each country to give full play to its comparative advantages is the most effective path to economic development. This is a simple extension of the comparative advantage theory in development economics.

But we cannot but see that the neat and perfect theory of comparative advantage is being challenged by complex realities.

The frictions in textile trade between China, the United States, and China in 2013 best revealed the misunderstandings of Ricardian theory as a development strategy.

According to official claims, China's textile industry has employed nearly 20 million people, while the textile industries in the United States and Europe have employed only a few hundred thousand people at best. According to the theory of comparative advantage, the United States and Europe should give up their production capabilities in the textile industry and give them to developing countries like China to take full advantage of the latter's cheap labor (both a relative comparative advantage and an absolute advantage). ). But the problem lies precisely in the small industries of hundreds of thousands of people in developed countries.

First, if Europe and the United States abandon the textile industry, hundreds of thousands of industrial workers will face huge job transformation challenges, allowing these workers to move from the textile industry to high-tech industries or other European and American countries. In industries with comparative advantages, training and relocation costs are much higher than the annual salary income of workers in these industries. Second, the political ability of these hundreds of thousands of workers is huge. Westerners often say that all political issues are local issues (all politics are local). These hundreds of thousands of people can use their local political energy to lobby local legislators, and then use the political abilities and political capital of these legislators to put pressure on their own government officials to impose restrictions on Chinese textiles. Therefore, the essence of the textile trade war is actually a war for employment, a political contest between hundreds of thousands of European and American textile workers and nearly 20 million Chinese textile workers. In this kind of political contest, it is difficult for China, as a rich exporter of cheap labor, to completely win - even though our government officials have a high degree of professional knowledge and skills, because the main battlefield of this game is not China, nor the WTO, but In areas where the textile industry is relatively concentrated in Europe and the United States.

However, the problem does not stop there. The employment of 20 million people is only a small part of China's more than 300 million rural labor force that has not been transferred and the tens of millions of new labor force added every year. If a developing country like China expects to continue to expand the export of products based on cheap labor to solve the employment problem, the path will be extremely difficult. This is not a purely international economic issue, but an international political issue. As a rising political power, China plays a multi-dimensional role in international politics. This means that we cannot use up all our international political capital on trade issues. We have many equally important or even more important ones. International political goals need to be promoted, such as guiding the reform of the permanent members of the United Nations, consultations with neighboring countries on territorial resources and other issues, the reunification of the motherland, etc.

Further analysis shows that textile trade also highlights another more difficult problem: many statistics show that the profit margin earned by China on textile exports is far less than 10%. In fact, more than 70% of the world's textile imports and exports are controlled by a few companies headquartered in Hong Kong. Therefore, in the so-called "Made in China" game, China only gets part of the labor force and an extremely poor share of profits. , such a development is obviously not conducive to the product upgrading of China's textile industry and the improvement of long-term international competitiveness.

Two fatal flaws determine that China should bid farewell to Ricardo

It can be seen that the comparative advantage theory pioneered by David Ricardo is almost impeccable from the perspective of economic theory , but if it is extended to the development strategy, especially the development strategy of a big country like China, there will be fatal flaws.

First, it comes from the difficulties of international politics. When David Ricardo held high the banner of free trade and advocated the repeal of the Corn Law, which protected the interests of the landlord class, he mainly faced the forces opposed to free trade in the UK. Today, developing countries are fighting for free trade. problems faced by developed countries. Although developing countries account for an absolute majority both in terms of number of countries and in terms of population, and developed countries account for a minority, the market capacity of these few countries is far greater than that of developing countries. Therefore, a small number of countries have a negative impact on the majority of countries. On the contrary, they have an advantage when it comes to negotiation issues. Considering the complex international environment and the pressure from certain domestic strata, it is obviously unrealistic for developing countries to expect developed countries to continuously open their markets and continuously give up industries that are no longer competitive.

Second, Ricardo’s theory did not take into account the potential advantages of a large country like China.

As a big country, China's real advantage lies in its huge and potential domestic market. In 2013, China's huge domestic market was far from fully developed, and relatively economically backward regions such as the central, western and northeastern regions contained huge markets. Only when this part of the market is continuously developed can Chinese enterprises continue to develop more smoothly and become world-class large enterprises. Only in this way can China's employment problem be fundamentally solved. One of the main representatives of British bourgeois classical political economics and the completer of British bourgeois classical political economics. In his early days, Ricardo was a securities broker on the exchange. Later, he was influenced by Adam Smith's "An Inquiry into the Nature and Causes of the Wealth of Nations", which inspired his interest in economic research. His research areas mainly included money and prices. , and has also done some research on tax issues. Ricardo's main economic masterpiece was "Principles of Political Economy and Taxation" completed in 1817, which expounded his tax theory. In 1819, he was elected as a member of the House of Commons, strongly advocating parliamentary reform and advocating free trade. Ricardo inherited and Developing Smith's liberal economic theory, he believed that limiting the scope of national activities and reducing tax burdens were the best ways to grow the economy. Representative of British classical political economy. Born into a Jewish family, his father was a stock exchange broker. At the age of 12, he went to a Dutch business school to study, and at the age of 14, he followed his father in securities trading. In 1793, he independently carried out securities trading activities. At the age of 25, he had a fortune of 2 million pounds, and then studied mathematics and physics. After reading Adam Smith's "The Wealth of Nations" in 1799, he began to study economic issues and participated in discussions on the price of gold and the Corn Laws at that time. In 1817, he published "Principles of Political Economy and Taxation" and was elected as a member of the House of Commons in 1819.