great thinkers, great ideas

206 Economic Theory: An Introduction

public monopolies, are those monopolies which the public good

require. Public water supplies, roads, and other utilities which

the private sector cannot economically provide are considered

necessary. 3) Legal monopolies are those operations which exist

by virtue of the ownership of patents, copyrights, and trade­

marks. 4) Artificial, or illegal monopolies are those combina­

tions of forces which conspire to raise prices by collusion. Smith

considered artificial monopolies as dangerous as government

interference. He once said, cynically, that whenever people of

the same trade meet, “the conversation ends in a conspiracy

against the public.” The government should step in, break up the

conspiracy and step out again.

Thus, Adam Smith sees society as self-regulating through the

interaction of self-interest and competition. Society is constantly

improving, but the process is a long term evolution which will

permit no tampering. The market must be left alone. In this

process the consumer is the king and the monopoly (or govern­

ment) the enemy. He saw order, design and purpose in society

and believed that the process of laissez-faire economics would

lead to real wealth. He created the first major systematic treatise

of economic theory and still is the major philosopher of free

enterprise capitalism.

David Ricardo (1772-1823)

David Ricardo was born in London on April 19, 1772. His
father was a Jewish banker, who, when David married a Quaker,
disowned him. Left to make his own way in the world, he quickly
became a very successful stockbroker and amassed a consider­
able fortune. He became a rich man before he had reached the age
of thirty. His Principles of Political Economy and Taxation,
published in 1817, was his major work.
In the preface of his Principles Ricardo stated the three major
aims of his text: first “to determine the laws which regulate...
distribution” between the proprietor of land, the owner of stock
or capital necessary for its cultivation, and the laborers by whose
industry it is cultivated;” second, “to understand the effect of the
progress of wealth on profits and wages;” and third, “to trace
satisfactorily the influence of taxation on different classes.”
Specifically, the Principles was a treatise on Britain’s growth
prospects.