iron law of wages,according to which wages tend to stabilize around the subsistence level. Any rise in wage rates above subsistence will cause the working population to increase to the point that heightened competition among the glut of laborers will merely cause their wages to fall back to the subsistence level. As far as value was concerned, Ricardo stated that the value of almost any good was, essentially, a function of the labor needed to produce it. According to his labor theory of value, a clock costing $100 required 10 times as much labor for its production as did a pair of shoes costing $10. Ricardo was also concerned with the subject of international trade, and for that he developed the theory of comparative advantage, still widely accepted among economists. In a now classic illustration, Ricardo explained how it was advantageous for England to produce cloth and Portugal to produce wine, as long as both countries traded freely with each other, even though Portugal might have produced both wine and cloth at a lower cost than England did. Although his publications were often turgidly written, with little of the insight and breadth of knowledge that characterized Adam Smith's work, Ricardo was an enormously influential economic thinker. His rigidly deductive and scientific method of analysis served as a model for subsequent work in economics.
See studies by J. H. Hollander (1910, repr. 1968), O. St. Clair (1957, repr. 1965), and M. Blang (1958, repr. 1973).
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.
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