ABSTRACT

This chapter focuses on the original logic of David Ricardo's specie-flow mechanism. Ricardo describes the situation in which the value of precious metals is identical in different countries as equilibrium in the international economy. The chapter examines what the identical value of precious metals in different countries means. It expresses that, according to Ricardo, the value of precious metals indicates their purchasing power, the reciprocal of the general level of prices. The chapter explores that according to Ricardo, equilibrium in the international economy is a situation in which the most advantageous international division of labor is realized from the perspective of use value corresponding to the international difference in productivity, and the mechanism through which such equilibrium is achieved is the specie flow mechanism. International division of labor corresponding to the changes in productivity among countries will be established through the adjustment process in which the value of money in each country changes through the international flow of gold.