David Ricardo (1772-1823), an English banker, was also an important early economist.
His best known argument was that wages "naturally" tend toward a minimum level
corresponding to the subsistence needs of the workers. The attraction of this idea for
factory owners is evident. It also influenced Marx in his early pessimistic views about the
possibility of workers benefiting from capitalism. Ricardo's views on the "labor theory of
value" were also important in Marx's economic thought.
From David Ricardo,
On the Principles of Political Economy and Taxation
Chapter 1, Section 7
Money, being a variable commodity, the rise of money-wages will be frequently
occasioned by a fall in the value of money. A rise of wages from this cause will, indeed,
be invariably accompanied by a rise in the price of commodities; but in such cases, it will
be found that labour and all commodities have not varied in regard to each other, and that
the variation has been confined to money.
Money, from its being a commodity obtained from a foreign country, from its being the
general medium of exchange between all civilized countries, and from its being also
distributed among those countries in proportions which are ever changing with every
improvement in commerce and machinery, and with every increasing difficulty of
obtaining food and necessaries for an increasing population, is subject to incessant
variations. In stating the principles which regulate exchangeable value and price, we
should carefully distinguish between those variations which belong to the commodity
itself, and those which are occasioned by a variation in the medium in which value is
estimated, or price expressed.
A rise in wages, from an alteration in the value of money, produces a general effect on
price, and for that reason it produces no real effect whatever on profits. On the contrary, a
rise of wages, from the circumstance of the labourer being more liberally rewarded, or
from a difficulty of procuring the necessaries on which wages are expended, does not,
except in some instances, produce the effect of raising price, but has a great effect in
lowering profits. In the one case, no greater proportion of the annual labour of the
country is devoted to the support of the labourers; in the other case, a larger portion is so
Chapter 5, “Of Wages”
Labour, like all other things which are purchased and sold, and which may be increased
or diminished in quantity, has its natural and its market price. The natural price of labour
is that price which is necessary to enable the labourers, one with another, to subsist and to
perpetuate their race, without either increase or diminution.
The power of the labourer to support himself, and the family which may be necessary to