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Sep 1, 1979

Editorial: David Ricardo

“Today, a half century of disquieting experience with the volatile monetary system has reawakened interest in the economic principles Ricardo espoused.”

David Ricardo (1772–1823) made an unexpected contribution to liberty. A successful broker in government bonds, always interested in intellectual and scientific studies, but unaccustomed to research and writing, Ricardo’s essays and books were an advancement of liberty which could not have been predicted. Once published, Ricardo’s thought became one of the foundations for nineteenth century intellectual activity. Joseph Schumpeter believed that Ricardo, building on Richard Cantillon and Adam Smith, had created an impressive instrument of analysis. Ricardo felt that he had drawn from the contributions of Turgot, Stewart, Smith, Say, Sismondi “and others” (History of Economic Analysis, New York, Oxford University Press, 1954). Among the others were Thomas Malthus and James Mill.

Thomas Malthus and Ricardo were acquainted for a dozen years, yet they were in fundamental disagreement on methodology (cf. Robert Ekelund and Robert Hebert, A History of Economic Theory and Method, New York, McGraw-Hill, 1975). Similarly, Malthus’s emphasis on insufficient aggregate demand (underconsumption theory) was contrary to one of the central principles of economics, Say’s Law of Markets. By contrast, James Mill and Ricardo enjoyed an identity of method and principles. Mill persuaded Ricardo to read such major thinkers as John Locke, David Hume, and John Millar (Adam Smith’s pupil) and to write his major works in political economy. Mill himself had been a student in Edinburgh of the Smithian Dugald Stewart, and transmitted Stewart’s approach to Ricardo. Ricardo felt himself a member of the liberal school of Bentham and Mill, and acted in public as a practical spokesman for that school after he entered parliament for an Irish borough in 1819 (cf. Elie Halévy, The Growth of Philosophical Radicalism. Part III. London, Faber and Faber, 1928).

During David Ricardo’s lifetime England experienced the completion of the wrenching transformation from an agricultural to a growing industrial society—the Industrial Revolution. Much anxiety was expressed whether the country could sustain over time the level of prosperity which industrial growth was providing. Ricardo’s writing sought to provide correct answers from political economy to these problems. In addition, the almost quarter century of war placed a great strain on English society. Taxation and government loans siphoned off huge amounts of monies that otherwise would have gone into productive investments: the small householder was compelled to pay taxes and the great financier was lured to invest in [4] government securities rather than industry. The government’s recourse to indirect taxation through the inflationary issuing of paper money created still further economic dislocation.

Indeed, addressing these dislocations, Ricardo’s earliest economic contributions in 1809 (Three Letters on the Price of Gold) were critiques of inflation and paper money. As one of the most successful, and shrewdest men in the money market, Ricardo brought to the subject detailed knowledge of the nature of money and the consequences of government intervention in money through central bank expansion of money. His rigorous objections to paper money systems laid the foundation for sound monetary policy for a century. Today, a half century of disquieting experience with the volatile monetary system has reawakened interest in the economic principles Ricardo espoused.

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Sir Herbert Butterfield died in late July, 1979. Sir Herbert, long a pre-eminent expositor of the history of ideas and of historiography, especially in diplomatic history, exerted a major influence on Anglo-American scholarship. At Cambridge University Butterfield created the groundwork for historical research free of the bias in favor of government policies (cf. “Official History,” Kenneth S. Templeton, Jr., ed., The Politicization of Society, Indianapolis, Liberty Press, 1979). Butterfield sensed in the modern state and its historians a reversion to a new type of paganism which assumed “the primeval thesis: ‘We are the righteous ones and the enemy are wicked’.” From his perspective “official history” imagined that:

masses of men on the one side have freely opted for wickedness, while on the other side there is a completely righteous party, whose virtue is superior to conditioning circumstances. The reasons for suspecting such a diagram of the situation are greatly multiplied if the ethical judgement is entangled with a political one—if, for example, the wickedness is charged against a rival political party, or imputed to another nation just at the moment when, for reasons of poor politics, that nation is due to stand as the potential enemy in any case.

Sir Herbert was kind enough to write favorably about Literature of Liberty; unfortunately, his death prevented his writing a bibliographical essay on Lord Acton for the Literature of Liberty. For an intimation of his approach to Acton, one might wish to consult his Lord Acton (Historical Association General Series, 9, 1948) and “Acton: His Training, Methods and Intellectual System,” (in A.O. Sarkissian, ed., Studies in Diplomatic History and Historiography, London: Longmans, 1961). A starting point for appreciating Sir Herbert’s own historical contributions to the study of liberty would be William J. McGill’s “Herbert Butterfield and the Idea of Liberty,” The South Atlantic Quarterly 70 (Winter 1971): pp. 1–12.