The Context of David Ricardo's Economic Thought
📌 David Ricardo, born in 1772, was a businessman turned self-taught economist whose major work is *The Principles of Political Economy and Taxation* (1817).
🏭 Ricardo witnessed the definitive consolidation of industrial capitalism in England, succeeding the feudal system following the Industrial Revolution's explosion in the late 18th century.
⚙️ The Industrial Revolution, driven by innovations like the steam engine (invented in 1769), shifted production from manual manufacturing to great industry based on iron, carbon, and steam.

Social Relations During Industrialization
👥 Society was structured around three classes: the peasant (worker), the capitalist (manufacturer), and the landowner.
📜 Between 1760 and 1840, England's Enclosure Acts forced peasants off communal lands, leading to mass expulsion to cities as small producers lacked resources to comply with new laws.
🏭 This created a large, impoverished workforce (proletariat) with only their labor power to sell, favoring capitalists who gained access to cheap labor, including women and children working long, miserable hours.

Ricardian Theory of Value and Price
💰 Ricardo addressed Adam Smith's question about price determination by identifying two value sources: the necessary work for production and scarcity (supply/demand relationship).
🛠️ For reproducible goods (like clothing), value is primarily governed by the amount of work incorporated; market forces only cause temporary price fluctuations around this natural value.
💎 For non-reproducible goods (like rare vintage wine), value is determined solely by scarcity, independent of production work.

Theory of Income Distribution (Rent, Wages, Profit)
📜 Ricardo's most original contribution is his theory of income distribution among workers, capitalists, and landowners.
🌍 Differential Land Rent: As population grows, less fertile lands must be exploited. The price of the commodity (e.g., wheat) is set by the cost of production on these *least fertile* lands. Owners of *more fertile* lands earn an extra income (differential rent) based on the difference in labor hours required.
🔻 Wages: Wages tend to settle at the minimum subsistence level determined by the cost of food and necessities; increases are temporary as higher living standards lead to population growth, increasing labor competition and pushing wages back down.
📉 Profit: As agricultural prices rise (due to necessity of using poorer land), wages increase, causing capitalist profits to fall, provided the income of landowners remains high due to protectionist policies.

Free Trade and Comparative Advantage
🛑 Ricardo opposed protectionist barriers (like the Corn Laws in England) because they artificially kept land income high, harming industrialists.
🤝 He proposed free trade to import cheaper grain from the New World, which would lower food prices, stabilize wages, and allow industrial profits to grow.
🌍 Comparative Advantage Theory: Countries should specialize in producing goods where they have a relative efficiency (comparative advantage) and trade for others. This international division of labor guarantees the greatest well-being for all involved.
🇦🇷 For Argentina, this meant specializing in agricultural goods (like soy) and importing manufactured products, fitting the agro-exporter model supported by foreign investment for infrastructure like ports and railways.

Key Points & Insights
➡️ Ricardo’s theory suggests that the interests of landowners are opposed to the general interest of society because rising differential rent starves industrial profit growth.
➡️ For Manuel (the entrepreneur), the principle of comparative advantage assures that specializing in soy production in Argentina, despite using less fertile land than José's, will be successful because the international price is set by the cost on *less productive* lands globally.
➡️ The historical victory of the bourgeoisie over landowners in 1831 (abolition of grain import taxes) signaled a shift favoring industrial capital accumulation over landed aristocracy's income.

📸 Video summarized with SummaryTube.com on Oct 06, 2025, 22:41 UTC