David Ricardo opens his treatise by investigating the concept of value, arguing that the exchangeable value of commodities is determined primarily by the quantity of labour required to produce them, rather than their mere utility. He distinguishes between goods whose supply is strictly limited by scarcity, such as rare art, and those that can be multiplied through human industry. Expanding on this foundation, Ricardo introduces the accumulation of capital and the appropriation of land as critical modifiers of relative value. He demonstrates that variations in wages and profits do not uniformly affect all commodities, particularly when production relies on fixed capital of differing durability.
In the second and third chapters, Ricardo turns to the nature of rent, defining it as the compensation paid to landlords for the original and indestructible powers of the soil. He explains that rent arises inevitably as society grows and increasingly relies on less fertile land to feed its expanding population. Because the price of agricultural produce is regulated by the cost on the least productive land yielding no rent, the rise of rent is a symptom of economic development and demographic pressure rather than a cause of wealth.
Addressing natural and market prices, Ricardo separates the temporary fluctuations caused by shifting supply and demand from the long-term equilibrium of natural prices. Capitalists constantly seek the most profitable employment for their funds, driving a competitive mechanism that aligns market prices with their natural levels over time. This pursuit of profit underpins the dynamics of wages, which Ricardo analyzes through the lens of natural and market rates. The natural price of labor depends on the cost of food and necessaries required to sustain the worker and their family, whereas the market price fluctuates based on supply and demand.
As a society progresses and the cultivation of poorer land increases the cost of food, the natural price of wages tends to rise. This upward pressure on wages inevitably compresses the rate of profit for capitalists. Ricardo meticulously details how agricultural and manufacturing profits are inversely related to wages, asserting that a permanent rise in wages reduces profits rather than driving up absolute commodity prices. He cautions against legislative interference, notably critiquing the poor laws for encouraging population growth disconnected from labor demand and threatening to absorb the nation's net revenue.
Moving to international commerce, Ricardo argues that foreign trade does not inherently raise the general rate of profits unless it reduces the cost of the necessaries consumed by workers. He introduces the principle of comparative advantage, demonstrating that nations benefit by specializing in industries where they hold relative efficiencies, which optimizes the global distribution of capital and labor. The treatise concludes with an extensive analysis of taxation, evaluating how different levies on raw produce, rent, gold, houses, profits, and wages impact the economy. Ricardo contends that taxes ultimately fall either on consumer prices, capitalist profits, or landlord rents, emphasizing that sound fiscal policy must avoid impairing the capital accumulation essential for national prosperity.
