Lecture Notes on Political Economy and David Ricardo

Introduction

• Lecturer: David
• Topic: David Ricardo's The Principles of Political Economy and Taxation
• Previous Topics: Adam Smith's The Wealth of Nations
• Upcoming Topics: Karl Marx
• **Main Focus: ** Ricardo's critique and expansion on classical political economy, especially concerning value, labor, rent, and the dynamics between different societal classes.

Preface

• Three Broad Classes of Society:
  • Landowners (earn rent)
  • Capitalists (own stock, machinery)
  • Workers (earn wages)
• Political Economy: Science of these classes and their interactions.
• Concept of Capital:
  • Broader than money
  • Includes tools, raw materials, machinery
  • Employed in production

Chapter 1: On Value

• Definition of Value:
  • Related to labor
  • Determined by the relative quantity of labor necessary for its production
• Types of Value:
  • Use Value: Amount of labor saved through use
  • Exchange Value: What can be earned through its trade
• Labor:
  • Determines value but is subjective and variable
  • Influenced by scarcity, demand, and personal preference
• Challenges in Determining Value:
  • Variability in labor and other metrics (e.g., gold, corn)
  • No perfect standard of measurement

Chapter 2: On Rent

• Critique of Adam Smith:
  • Rent is not just derived from profits
• Ricardo's Theory:
  • Rent arises from differential fertility of land
  • Most fertile land generates rent because it earns more profit
  • Rent is determined by the difference in profitability between lands of varying fertility
• Price Determination:
  • Determined by the least fertile land in use
• Effect of Technological Advancements:
  • Can decrease rent by making less fertile land more productive

Chapter 3: Rent of Mines

• Similarity to Land Rent:
  • Determined by difficulty of extraction
  • Value determined by labor required to extract and market resources

Chapter 4: Natural vs. Market Price

• Natural Price:
  • Equilibrium price of supply and demand
• Market Price:
  • Current trading price
• Influence of Trends:
  • Can temporarily skew market prices

Chapter 5: Wages

• Value of Wages:
  • Affected by supply/demand and price of goods
• Natural Price of Labor:
  • Price needed to sustain workers
• Market Price of Labor:
  • Adjusts based on inflation and cost of living changes
• Wages and the Economy:
  • Should ideally reflect the cost of necessary living standards
• Critique on Government Regulation:
  • Opposes wage regulation but supports reproduction regulation

Miscellaneous

• Value as Relational:
  • Determined by relationships between commodities
• Challenge of Subjectivity:
  • Value is subjective, variable based on context and time

Conclusion

• Next Topics:
  • Chapter 6 on Profits
• Engagement Encouraged:
  • Feedback, corrections, and discussions

These notes cover the key points and main ideas presented in the lecture on David Ricardo's political economy, focusing on his theories of value, rent, and wages, and how they critique and expand upon previous economic thought.