Public Debt and the Economics of David Ricardo

Abstract

Ricardo’s analyses of resource allocation and economic growth have been subject to much scholarly debate, which has been outlined in the introductory chapter of this study. And his work on the public debt, neglected relative to other topics he addressed, has not been used to its full advantage to resolve this debate. This chapter examines the relationship between Ricardo’s views on public debt and his economic analysis, to show that each serves to illuminate the other. One cannot fully comprehend Ricardo on public debt unless one recognizes that his position is derived from his analyses of allocation and growth. Likewise, to dismiss his writings and speeches on the public debt as peripheral to the main body of his work is to neglect a rich source of material whereby we can expand our understanding of the nature of his economic analysis.

Political Economy, when the simple principles of it are once understood, is only useful, as it directs Governments to right measures in taxation. We very soon arrive at the knowledge that Agriculture, Commerce, and Manufactures flourish best when left without interference on the part of Government, but the necessity which the state has for money to defray the expences of its functions, imposes on it the obligation to raise taxes, and thus interference becomes absolutely necessary. It is here then that the most perfect knowledge of the science is required.David Ricardo (12 November 1819), 1951, VIII, p. 133