David Ricardo – First Principle
David Ricardo died on September 23, 1823 after a short illness. Until his sudden death, he struggled with a solid foundation of the first principle with which he started his Principles[1]:
The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labour which is necessary for its production, and not on the greater or less compensation which is paid for that labour.
While some of his admirers of the first hour had already chosen a path away from this principle, this website honors the bicentennial anniversary of Ricardo’s death with two articles to illustrate the correctness of his first principle.
The first article A Reappraisal of Ricardo’s Principles – On measuring technical change shows how we can measure actual changes in the direct and indirect labour necessary to produce one or another commodity. Measuring technical change is illustrated with an Excel file showing how to perform this measurement.
The second article Draft of Equilibrium – In pursuit of efficient production shows how firms could use the market mechanism to produce as efficiently as possible. Their search results in market prices that, in accordance with Ricardo’s first principle, correspond to the direct and indirect labour required for the production of their commodities.
The buttons below give access to both articles with accessories as well as to papers that further illustrate the importance of Ricardo’s first principle.
For those interested in how the idea of measuring technical change has developed over time, the Note to “On Absolute Value and the Value in Exchange of Commodities”, written 50 years ago, has been translated into English. The left button below will take you to a page with more information where you can download the note.
The right button opens a page where you can download an article that describes the development in your writer’s thinking from a broader perspective.
This website refers to two old theses that underlined the correctness of Ricardo’s first principle. However, that was not their only goal. Based on that principle, they provided an impetus for a broader theory that, as far as capital formation is concerned, was inspired by Eugen von Böhm-Bawerk. The last button opens a page with an introduction to an article to be downloaded that indicates some main points.
[1] D. Ricardo, On the Principles of Political Economy and Taxation, Volume I of ‘The Works and Correspondence of David Ricardo’, ed. by P. Sraffa, Cambridge, 1951, p. 11.