Money, Banks and Finance in Economic Thought

Samuelsonian legends about Ricardo’s finances lack historical evidence

Parys Wilfried, University of Antwerp

In the many pages Samuelson wrote on Ricardo, he did not focus only on economic theories, but he also discussed Ricardo’s personal investments in the real world of finance. In this context I use the expression “Samuelsonian legends” for two reasons. First, not only Samuelson, but numerous other authors present similar tales on Ricardo’s finances Second, some widespread stories often lack historical evidence. My paper first sketches the special position of Ricardo at the Stock Exchange in the early 19th century, because understanding the nature of Britain’s financial system is necessary to understand how Ricardo became the richest economist of the 19th century. Then I consider three legends supported by Samuelson. Legend 1 reports that Ricardo put pressure on his friend Malthus before the Battle of Waterloo, that Ricardo urged Malthus to buy British bonds and to go to the limit in holding them. Samuelson suggests an extreme difference in risk aversion between Malthus, who sold hastily before the Battle, and Ricardo, who held on until he enjoyed maximum profits after the Battle. Legend 2 criticises Ricardo’s ethics. Samuelson mentions that Ricardo had an observer near the battlefield. So very early Ricardo in London did know the outcome, and then started selling British bonds in a conspicuous way. Ricardo’s reputation induced many others to sell, and this depressed prices even further. Then suddenly Ricardo reversed course, bought huge quantities at low prices, and made his biggest coup ever. Samuelson insinuates that Ricardo’s use of insider information, spreading of false rumours, and market manipulation, would lead to litigations in the present millennium. Legend 3 claims that this market manipulation was crucial in building Ricardo’s fortune and that thanks to his Waterloo profits Ricardo could retire from active trading. Some commentators make the even stronger claim that Ricardo‘s position became untenable and that after Waterloo his withdrawal from the Stock Exchange was inevitable. Samuelson refers vaguely to Sraffa for historical evidence, but neither the eleven volumes of Sraffa’s Ricardo edition nor the more than two hundred Ricardo files in the Sraffa archives in Cambridge provide evidence for Samuelson’s legends. After looking at such archival material, and at the statistics of British bond prices, and at the origin of some unreliable financial narratives about Ricardo and Waterloo, I conclude that the legends above often lack sufficient historical evidence, and that several parts are misleading.

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Keywords: Ricardo, personal finance, Waterloo, Malthus, Samuelson, Sraffa

Paper file