Mill and Ricardo: The genesis of comparative advantage

Abstract

Britain suspended the gold standard in its war with France in 1797. This led to an inflation controversy that created Ricardo the economist. He entered the discussion in 1809 arguing that the inflation was caused by too much paper money. His impressive argument attracted the attention of James Mill and Thomas Malthus who both became life-long friends and correspondents. In its early days economics was unsettled with vague terms and loose reasoning. James Mill, impressed with Ricardo’s logical mind and brilliance, convinced him to write a book to settle the issues. It was during the writing of this book in 1816 that Ricardo discovered comparative advantage. I tell the story.