Note 104 — Chapter II

Ricardo (Principles of Political Economy, chap. vi. in Works, p. 65) says, ‘whatever increases wages, necessarily reduces profits.’ And in chap. xv. p. 122, ‘whatever raises the wages of labour, lowers the profits of stock.’ In several other places he makes the same assertion, very much to the discomfort of the ordinary reader, who knows that in the United States, for instance, wages and profits are both high. But the ambiguity is in the language, not in the thought; and in these and similar passages Ricardo by wages meant cost of labour, in which sense the proposition is quite accurate. If by wages we mean the reward of labour, then there is no relation between wages and profits; for when rent is low, both of them may be high, as is the case in the United States. That this was the view of Ricardo is evident from the following passage: ‘Profits, it cannot be too often repeated, depend on wages; not on nominal but real wages; not on the number of pounds that may be annually paid to the labourer, but on the number of days' work necessary to obtain those pounds.’ Political Economy, chap. vii., Ricardo's Works, p. 82. Compare Mill's Principles of Political Economy, vol. i. p. 509, vol. ii. p. 225.