Most economists, at least most trained in the days when the history of economic thought was still a part of the graduate curriculum, know of the great debate that took place in the decade following the end of the Napoleonic wars between Reverend Thomas Robert Malthus and David Ricardo over the possibility of a “general glut” (chronic depression). Malthus believed there could be, indeed there was, a permanent glut of saving, and as a result, chronically high unemployment. The solution was public works. Ricardo thought that there could be temporary departures from full employment, but that in the end market forces would produce a return to full employment. It is an old debate, but one that has never completely disappeared. Our image of Ricardo in this debate is unflattering: blinded by his faith in Laissez Faire, and relying on abstract reasoning based on Say's law, Ricardo held that a general glut was impossible, even though England was in the midst of one! In contrast, Malthus got the facts right but was unable to win the argument against Ricardo's superior debating skills. It is a charming story, one calculated to appeal to academics: Ricardo, the former stockbroker and Member of Parliament, was the abstract reasoner, and wrong; Malthus, the clergyman and professor, was the empiricist, and right. Our impression of Ricardo's role in this debate derives mainly from Keynes, who criticized Ricardo and praised Malthus in the General Theory and in his biographical essay on Malthus. Many other economists, however, have joined in the attack. Even George Stigler (“Sraffa's Ricardo.” American Economic Review 43 [1953]: 586–99, p. 596.), although in some ways an admirer, criticized Ricardo's mistaken predictions that prosperity would come soon.

Timothy Davis has looked closely at the macrohistory of the period over which Ricardo and Malthus were disputing, and concluded that Ricardo had a firm grasp of the facts and offered a reasonable interpretation. Indeed, Davis comes close to standing the traditional view on its head. Ricardo's complaint with Malthus was not so much with Malthus's reasoning as with Malthus's grasp of the facts: the economy had never been in a general glut before and was not in one now. Ricardo did not deny that there were some hard times in the years following Waterloo, but he interpreted them as the result of temporary shocks from which the economy could and did recover. Three shocks were particularly important: the end of the wartime mobilization; the collapse of foreign demand for British exports in 1819; and the monetary policy followed by the Bank of England after the Resumption Act was passed in 1819.

Ricardo believed that the end of the Napoleonic wars would force a difficult readjustment on the economy, and so it proved. There was a sharp recession, but the recovery began in 1817 and press reports suggest that the economy was close to full employment by 1818. The resumption of specie payments is another case in which Ricardo has been blamed for being a rigid ideologue, but where Davis's research suggests otherwise. England had been on a fiat standard during the war. Ricardo's advice, which in the end was followed, was for the Bank of England to resume specie payments in gold at the prewar parity. Such advice could be the result of unthinking orthodoxy. Ricardo, however, recognized that important tradeoffs were involved. At one point he favored a return to silver rather than gold, but reversed himself when he concluded that the mechanization of silver mining promised excessive inflation. Ricardo thought that resumption at par had definite advantages—for one thing it would encourage investment—but he thought that devaluation would be warranted if resumption at par would require a substantial deflation. In the end he advised resumption at par because he thought that the required deflation was less than 5 percent. The danger that Ricardo foresaw, a danger that seems to have been realized according to Davis, is that the Bank of England would push the deflation too far.

Davis shows that throughout the period Ricardo paid close attention to the qualitative information available in the private press and in the reports issued by the government, and to the quantitative data, scanty as it was. Ricardo, for example, attempted to infer changes in income from changes in tax revenues. Davis has dug out many interesting time series from the Parliamentary papers, series that Ricardo probably knew, on monetary variables, prices, bankruptcies, international trade and finance, and public finance, and includes them in appendices. As an economic historian I would like to have seen more charts and tables of individual variables and more attempts to relate one series to another. Still, as far as I can tell from some preliminary experiments, the Ricardo-Davis description of the business cycle is accurate. The sawtooth pattern they describe emerges in imports, Bank of England private deposits, and several other variables. Perhaps the Malthusian view of the period as chronically depressed cannot be definitively rejected on the basis of the data we have—there are, as far as I know, no reliable estimates of unemployment, let alone discouraged workers, and so on—but there can be no doubt that Ricardo's reading of the available data was sensible. Davis has done a superb job of combining history of thought and economic history. We should have more studies like it.