David Ricardo

He's a great teacher.

I learned a lot from Adam Smith and David Ricardo and John Maynard Keynes, too.

To have learned from Marx doesn't mean you're a slavish repetition that's childish or a caricature, but to avoid reading Marx, is downright stupid.

It makes no sense at all.

It's like all these vague, like jumping off things that assume that you know what's coming.

Well, something I was reflecting on, the passage that struck me that I mentioned to you before was, she writes, silver moonlight bathed the driveway as Mariah Edgeworth's carriage trundled toward David Ricardo's mansion on a dark evening in late 1821.

And as I asked Madeline, how does she know that there was silver moonlight? How does she know that

the carriage

Yeah.

Well, I'm thinking

about the David Ricardo stuff.

Yeah, that I didn't, I decided that we should not focus too much on that because even though I really enjoyed that

Economics today only considers there to be two factors of production, labour and capital or business.

But if you really want to understand the real estate cycle, if you really want to understand that there can actually be a cycle, you have to go back to the original economists, that was David Ricardo and a number of others, who up until about...

I guess about 1880, 1890 until about the First World War, they clearly considered and knew that there were three factors of production, land, labour and capital.

And this is the key thing.

They've completely excluded that from all their economic thinking and their economic forecasts, hence production.

If you're reading some material and these people do not understand about location or value, they will never be able to forecast.

And what I do, what I noticed when I was writing my book and started reading David Ricardo and one or two others, is that those sellers of the big issue, it actually becomes an observable and forecastable behaviour of trying to find the best locations.

Now, after that, You can then introduce, of course, which has been a much more pronounced thing since the Second World War.

It could be clothing, could be steel, if the opportunity costs of production are lower.

Under the theory laid out nearly 200 years ago by British economist David Ricardo, countries could be pretty good at producing something.

He used examples of English textiles and Portuguese wine.

But the country that is marginally better has the comparative advantage and should specialize in that thing.

All of this was a completely different trajectory that changed radically after World War I, because while Europe and the United States were modernizing and streamlining their economies into very low-cost, competitive production.

They didn't create the same kind of an economy in foreign countries because what did Ricardo and all of the British theorists say? Well, if we're going to lower our cost of doing business, we need

low-cost food,

low-cost raw materials.

Well, when people talk about what is classical value theory all about,

what

is surplus value, what is value, the whole ideal of Adam Smith, Ricardo, John Stuart Mill, Marx.

The entire discussion of classical economics was how do we bring prices in line with the actual cost value of production?

John, Mark, you know, you move through history and it's a very male-dominated industry.

But he has this little aside that Ricardo, David Ricardo, obviously one of the most famous economists of all of history, was really good friends with this woman named Mariah Edgeworth, called Mariah at the time, called Maria today.

And she was probably the first woman to think about economics.

And that's the extent of the aside.

Yes.

I think this is probably one of the more interesting chapters of her life, particularly to anyone interested in sort of the formation of economic ideas.

She became very good friends with both Thomas Malthus and David Ricardo during her time.

She used to visit London quite a lot.

This is a big reason economics got nicknamed the dismal science.

In 1817, the stockbroker-turned-MP David Ricardo published On the Principles of Political Economy and Taxation.

It contains what many economists still consider the most counter-intuitive true idea in the field – comparative advantage.

Ricardo's numbers go like this.

Making a unit of cloth takes the labour of 100 men a year in England and 90 in Portugal.

Making a unit of wine takes 120 in England and only 80 in Portugal.

Portugal is better at both, should it still trade.

Ricardo said yes.