Ricardo - On the Principles of Political Economy and Taxation

Ricardo- On the Principles of Political Economy and Taxation

Introduction

David Ricardo was one of the most famous economists of all times . During his time , i .e . in the early 19th century he laid down several theories and principles which became the basis of many modern-day economic theories and practices . His most famous work is titled as Principles of Political Economy and Taxation ' which was published in 1817

In this piece of work he defined some economic measures and words in his own terms , these has been refined and updated with time

however to give it more meaning and make it useful in the modern era . In this book he discussed the following principles and terms

Labor Theory of Value

Value as defined by Ricardo in this theory is the amount of labor and other resources used to manufacture a product , the more the resources used the higher will be the value to the product , each unit of resources adds value to the product and sends it to the next stage of production which adds more value to the product , this process goes on until all the resources have performed their part and completed the manufacture of the product . The more time a product takes to manufacture or the more resources required the higher will be the value to that product . Ricardo believed that the value of a product is directly related to the amount of labor required to manufacture that product . The term `labor ' here includes other resources as well such as capital (machines , tools , equipments etc . and enterprise (investment in a business etc ) associated in the manufacturing of the product apart from the human factor of production or the labor used in the production process

Relationship between landowners , laborers and manufacturers /entrepreneurs

This relationship illustrates how the interactions between these three affect the value of the product and its price . Rent is defined as the amount of money or compensation paid for the use of a piece of land (say agricultural land . The better the piece of land will be the higher will be the compensation or rent paid for it `better ' in this context can be defined as land which is more productive , has more capital , equipment tools , machinery , labor or other such resources which determine the quantity as well as the quality of the produce . The more these resources are available the greater will be the amount of produce , apart from that the level of technology or the skills of the labor involved is also a crucial factor in determining the value of a product . The more productive the land is , the higher the skills of the labor or the efficiency of the machine and equipment the less time will they take to manufacture a product which means a relatively lower value will be to it . Similarly , if the land is less productive , or the labor is unskilled or the machines , equipment , tools etc . have lower productivity and efficiency then these resources will...