By Don Curren
The word “dream” is an ambiguous one.
Like most important words, it conveys a whole complex of related but different meanings.
Aside from its most basic denotation - the bizarre, unreal “experiences” we have while asleep - it can also refer to visions or conceptions people have that are ennobling and aspirational - or misleading and delusional.
The subtitle of Nat Dyer’s 2025 book Ricardo’s Dream makes it clear he believes Ricardo’s vision falls into the latter category: “How Economists Forgot the Real World and Led Us Astray.”
And that is the gist of Dyer’s intriguing book: Ricardo’s idea that essential economic truths could be captured in rigorous, simplified mathematical models tilted the entire discipline in the wrong direction.
Ricardo’s penchant for abstraction set economics on a course of focusing on mathematical models rather than observing the messy complexities of humans interacting in society, Dyer argues.
“David Ricardo is only one of many thinkers in history - from the mathematician Euclid in Ancient Greece to the ‘new classical’ economist Robert Lucas in our time - who have inspried the belief that logical abstractions or equations can capture lasting truth about the human social world,” Dyer writes.
‘“Ricardo is unique, however, in giving us two intellectual traditions that have been hugely influential in the last half century,” he writes.
They are “the most influential theory of international trade ever written” and “economics’ method of creating simple, abstract, numerical models to explain the social world.”
Dyer writes in some detail about Ricardo’s analysis of the trade in cloth and wine between Portugal and England, which encapsulates his theory of international trade, and the simple arithmetics he uses to demonstrate that it makes sense for Portugal to trade some of its wine for English cloth despite the fact that it makes both cloth and wine more cheaply than England can.
The same component of Ricardo’s thinking also epitomizes, for Dyer, his tendency to reduce economic analysis to abstract mathematical models.
So Dyer devotes considerable attention to demonstrating that Ricardo’s analysis ignores the complex political and economic realities that surrounded and enabled the trading arrangement between the two nations.
“Ricardo’s wine and cloth example is clearly a hypothetical model that leaves out vast areas of the real-world to focus more clearly on what are claimed to be essential elements,” he writes.
The gist of the book is an argument that arriving at policy solutions for complex, real-world problems based on mathematical models that include a raft of simplifying assumptions is highly problematic.
Ricardo’s vision is a dream in the sense of being an illusion, and a deceptive and dangerous one at that.
Dyer is not alone in this view.
One of the most interesting aspects of his book is that several high-profile economic thinkers have pushed back against Ricardo’s approach.
In fact, there has been a continuing struggle between those who embrace Ricardo’s approach and those who disagree with it.
Among the latter camp is the high-profile Austrian-American economist and historian of economic thought Joseph Schumpeter, who coined the phrase “the Ricardian Vice” to describe his approach.
Dyer’s book recounts how economics bounced back and forth between whole-heartedly embracing Ricardo’s approach and questioning it; alongside Schumpeter, Dyer cites John Kenneth Galbraith and John Maynard Keynes as influential economists who were uneasy with extreme degrees of mathematical abstraction in their discipline.
In the last several decades, Dyer argues, it has been in the ascendant, and he attributes that largely to the influence of Milton Friedman and his allies.
“In 1953 - the year before Schumpeter’s concert of the Ricardian Vice appeared - Friedman published the most influential paper of the twentieth century on how to do economics,” Dyer writes.
“Friedman argued that because some simplification is essential, the assumptions of a theory are never going to reflect the real world. It was necessary and scientific, he therefore argued, to create ‘a hypothetical and highly simplified world containing only the forces that the hypothesis asserts to be important’,” he writes.
More recently, Dyer writes, there has been an encouraging resurgence in more empirical approaches to economics. He cites the work of Thomas Piketty and the “behavioural economics” school inspired by the work of Daniel Kahneman as examples.
If this makes Ricardo’s Dream sound like a rather abstract, epistemological read, it isn’t.
Dyer is careful not to commit the Ricardian Vice himself. His book is very empirical. It’s full of fascinating biographical details about Ricardo and other influential figures in economics, and lots of engaging history.
His point is a serious and important one, but it’s presented through a compelling narrative that abounds with interesting facts.
That makes Dyer’s book an engaging and entertaining read, as well as important and illuminating one.
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