THOMAS ROBERT MALTHUS. (continued 2)

M. Say, in the new edition of his book, p. 99, vol. i, supports, I think, the very [same] doctrine that demand is regulated by production. Demand [is] always an exchange of one commodity for another. The shoemaker when he exchanges his shoes for bread has an effective demand for bread, as well as the baker has an effective demand for shoes,—and, although it is clear that the shoemaker's demand for bread must be limited by his wants, yet whilst he has shoes to offer in exchange he will have an effective demand for other things,—and if his shoes are not in demand it shows that he has not been governed by the just principles of trade, and that he has not used his capital and his labour in the manufacture of the commodity required by the society,—more caution will enable him to correct his error in his future production. Accumulation necessarily increases production and as necessarily increases consumption. Accumulation of produce, if properly selected, may always be accumulation of capital, and it cannot fail to be worth more than it cost, estimated in corn or labour,—and this I think would be true although all our soldiers, sailors, and menial servants were employed in productive labour. It appears to me that the consideration of money value may be the foundation of our difference on this point.

I must leave room for a request which I hope you will not refuse. I dined a little while ago at Mr. Smith's, whom I first met at your house. Mrs. Smith told me that she had a collection of the handwriting of a great number of men who had distinguished themselves by their writings, and she wished that I would give her a letter of yours to add to her collection. Knowing that I had many which would not discredit you, I assented; but after I came home I thought I had no right to do it without your consent—which I hope you will not refuse. I should be sorry to disappoint her, and should really cut a poor figure in making my apologies if I did; yet, as my opinion, that I should not do it without your consent, is confirmed by Mrs. Ricardo, I must falter out my excuses if you are inexorable. With kind regards to Mrs. Malthus,

I am, ever yours truly, David Ricardo.

Note.—Of Ricardo, Bentham used to say: 'I was the spiritual father of Mill, and Mill was the spiritual father of Ricardo; so that Ricardo was my spiritual grandson. I was often tête à tête with Ricardo. He would borrow a sixpenny book instead of buying it. There was an épanchement between us. We used to walk together in Hyde Park, and he reported to me what passed in the House of Commons. He had several times intended to quote the 'Fragment'; but his courage failed him as he told me. In Ricardo's book on rent there is a want of logic. I wanted him to correct it on these principles; but he was not conscious of it, and Mill was not desirous. He confounded cost with value. Considering our intercourse it was natural he should give me a copy of his book;—the devil a bit!' (Life by Bowring in Works, vol. x. p. 498.) Then follows a letter to Ricardo, in which Bentham compliments him on his political progress: 'I told Burdett you had got down to trienniality, and were wavering between that and annuality, where I could not help flattering myself you would fix,—also, in respect of extent, down to householders, for which, though I should prefer universality on account of its simplicity and unexclusiveness, I myself should be glad to compound.' The suggestion of stinginess made by Bentham in the passage quoted is sufficiently rebutted by Bentham's own biographer, who tells us Ricardo was one of those who guaranteed the funds for Bentham's Chrestomathic School (Bentham, Works, x. p. 484), and by James Mill (Biography, p. 191), when he speaks of Ricardo's unwillingness to accept payment for his article (Sinking Fund) in the Encyclopædia Britannica on the grounds that, first, it was not worth payment, second, payment was no part of his inducement to write it.

The influence of Bentham on Ricardo's general ways of thinking is discussed elsewhere. In economical theory (if we judge Bentham by his 'Manual of Political Economy,' which was written some years before this time, though not published in England till long afterwards) there was no more than a general agreement between the two men.

XXII.[71]

Gatcomb Park, 13 Jan., 1815.

My dear Sir,

I am pleased to learn that you are busy writing with a view to immediate publication[72]. The public pay a most flattering attention to anything from your pen, and you are not fulfilling your duty to society if you do not avail yourself of this disposition to endeavour[73] to remove the cloud of ignorance and prejudice, which everywhere exists on the subjects which have particularly engaged your time and reflection. I hope your notes on Adam Smith are in great forwardness, and that they will soon follow the smaller publications which you are now preparing. I expect that they will not only be very useful in giving correct notions to the public, but also in calling the attention of those who are well informed in the science of political economy to many points which have hitherto escaped their consideration.

I cannot help thinking that Lord Lauderdale was mistaken (and I believe you hold the same opinion as him), in supposing the farmer to lie under any particular disadvantage from not having the monopoly of the home market, whilst so many other trades were enjoying that benefit. You will agree that the monopoly of the home market is eventually of no great advantage to the trade on which it is conferred. It is true that it raises the price of the commodity by shutting out foreign competition, but this is equally injurious to all consumers, and presses no more on the farmer than on other trades. If monopolies tend to raise the price of labour, the inconvenience must be suffered by all who employ labour, and will therefore not be particularly injurious to the farmer or landlord. If all the monopolies of the home market were immediately abolished, there would be at least as much disposition to import corn:—if so they do not interfere with the natural course of the corn trade. Lord Lauderdale, with his opinion of the effect of monopolies, is, I think, quite consistent in recommending a duty on the importation of corn.

I thought you maintained that the high or low profits on commerce were totally independent of the amount of capital which might be employed on the land, consequently that high profits might continue as long as commerce was prosperous, whether that was for twenty or for a hundred years. I now understand you to say, that the profits of commerce may take the lead, and may regulate the profits of agriculture for a period of some duration, possibly for twenty years.

I have always allowed that under certain circumstances profits on agriculture might be diverted from their regular course for short periods, so that we only appear to differ with respect to the duration of such profits; instead of twenty years I should limit it to about four or five.

If with the same labour we could obtain double the quantity of tin from the mines in Cornwall, after prices had found the[ir l]evel, would the value of the whole mass of commodities be increased in England? Should we obtain the same quantity of deals from Norway in exchange for a given quantity of tin as we now do? Although the mass of commodities both in the markets of Norway and in those of England would increase by the greater abundance of tin, or of some other commodity, if the labour employed in procuring tin were diverted to other objects, yet the estimated value of all their commodities in corn, money, or any article but tin, would, it appears to me, continue unaltered. It is sufficient that deals can be purchased cheaper in Norway than elsewhere to determine a portion of foreign trade to that quarter, although it should yield no more profits than those of other trades.

On the supposition which you have made of a great foreign demand for our raw produce, there can be no question that more capital would be employed on the land, and I think profits would fall. Such a demand cannot exist in the present situation of the world. Raw produce is always imported into the relatively rich country, and never exported from it, but on occasions of dearth or famine. I have no doubt that, if the free importation of corn is allowed into this country, inasmuch as it will direct foreign capital to foreign land, it will tend to lower foreign profits, and if all the earth were cultivated with equal skill up to the same standard, the rate of profits would be everywhere the same, though the superior industry and ingenuity of particular countries might secure to them a greater abundance of other commodities....

Your club meets, I think, on the 28th.... Pray take a bed at our house....

Truly yours, David Ricardo.

XXIII.

[Headed by Malthus in pencil, Feb. 1815. Post Office mark, Feb. 6.]

My dear Sir,

I have now read with great attention your essay on the rise and progress of Rent[74], with a view of selecting every passage which might afford us subject for future discussion. It is no praise to say that all the leading principles in it meet with my perfect assent, and that I consider it as containing many original views which are not only important as connected with rent, but with many other difficult points, such as taxation, etc., etc.

I cannot, however, help regretting that you did not consider separately the relations of rent with the profits of stock and the wages of labour. By treating of the joint effect of the two latter on rent you have, I think, not made the subject so clear as it might have been made.

There are some parts in the essay with which I cannot agree. One of these is the effects of improvements, whether in the practice of agriculture or in the implements of husbandry, on rent. They appear to me in their immediate effects to be beneficial to the farmer only and not to the landlord. All the augmented produce obtained, or the saving in obtaining the same quantity of produce is, I think, wholly to the advantage of the farmer, and that the landlord only benefits remotely from it, as it may encourage accumulation and the cultivation of poorer lands. I think too that rents are in no case a creation of wealth; they are always a part of the wealth already created, and are enjoyed necessarily, but not on that account less beneficially to the public interest, at the expense of the profits of stock[75].

Viewing rents in this light, it follows that I must withdraw the concession which I was inclined to make when you first started the question 'whether, in importing corn at a cheaper price than we could grow it, the whole difference of price was saved, or whether some abatement should not be made from the advantage for the loss of rent?' as I now decide[d]ly think that the whole difference of price would be gained without any deduction whatever. The arguments then of those who contend for a free trade in corn remain in their original full force, as rents are always withdrawn from the profits of stock. I will try, if I have a little leisure, to put my thoughts on this subject on paper, and shall attempt to show that the effects of a tax and of rent are very different as far as regards importation. It may be economical to grow corn if its price is raised merely by taxation, as by importing it a part of the tax would be wholly lost to the country [import]ing it. No such consideration should influence us [with regar]d to rent being lost.

I differ, as you know, as to the effects of taxation on the growth of produce. You appear to me not quite consistent in admitting, as you unequivocally do, that the last portion of land cultivated yields nothing more than the profits of stock, no rent, and yet to maintain that taxes on necessaries or on raw produce fall on the landlord and not on the consumer.

... I have paid Wettenhall £2 8s. for two years' lists, but it has since occurred to me that I paid him and you paid me for one year, and therefore that only one year can be due to him. If so, let me know, that I may get back £1 4s.

Ever yours, David Ricardo.

XXIV.

10th Feb., 1815.

My dear Sir,

I shall accept your kind invitation, and intend being with you on Saturday evening at the usual time. We can then talk over the points on which we differ. I will bring with me the papers on which I have been busy since you left London, and in which my objections are more fully stated than can be done in the compass of a letter[76].

In the case of the Scotch farmers who made such large profits on their capital during the latter part of their leases[77], they appear to me to have been enjoying rent, arising not from improvements in agriculture, but from poorer land being taken into cultivation. If their leases had expired sooner, rent would have been increased long before on those farmers. It would be desirable to know what the rent on those farms was when the lease was originally granted, or rather what proportion it bore to the capital then employed and what the proportion of rent is to the capital now employed.

The effects of monopoly cannot, I think, be felt till no more land can be advantageously cultivated. You have yourself said, and I very much admire the passage[78], that the last portion of capital employed on the land yields only the common profits of stock, and does not afford any rent. If so, corn, like everything else, is regulated in its price by the cost of production, and every other portion of capital employed on the land is reduced to the same level of profits only because no more capital can be employed with more advantage, and all which it anywhere yields more is rent and not profit.

I have read the Appendix[79] also with great attention, and cannot help thinking that you have quite thrown off the character of impartiality to which, in the Observations, I thought you fairly entitled. You are avowedly for restrictions on importation; of that I do not complain. It is not easy to estimate justly the dangers to which we may be exposed. Those who are for an open trade in corn may underrate them, and it is possible that you may overrate them. It is a most difficult point to calculate these dangers at their fair value; but in an economical view, although you have here and there allowed that we might be benefited by importing cheap rather than by growing dear, you point out many inconveniences which we should suffer from the loss of agricultural capital and from other causes, which would make it appear as if even economically you thought we ought to import corn,—such is the approbation with which you quote from Adam Smith of [sic] the benefits of agriculture over commerce in increasing production[80], and which I cannot help thinking is at variance with all your general doctrines.

Your observations on the advantages (and therefore on the injustice to other classes) which the stockholder would reap from a low price of corn are, I think, very correct; but I do not think these objections should stand in the way of the general good. They, the stockholders, have at different periods suffered much, and, if the sinking fund be now appropriated to other services[81], another striking injustice will be added to the long list. I meant to write only a few lines and have filled a long letter....

Yours very truly, David Ricardo.

XXV.

London, 9th March, 1815.

My dear Sir,

My acquaintance lies so little amongst political economists that I have very few opportunities of knowing whether what you consider as my peculiar opinions have any supporters, or indeed are read or attended to. As for my own judgment on the subject, it is perhaps too partial to merit attention; but after my best efforts not to be biassed in favour of my own opinions, I continue to think them correct.

I would indeed rather modify what I said concerning the stationary state of the prices of commodities under all the variations of the price of corn, either from wealth on the one hand or the importation from foreign countries or improvements in agriculture on the other. I made no allowance for the altered value of the raw material in all manufactured goods[82]. They would, I think, be subject to a variation in price not on account of increased or diminished wages, but on account of the rise or fall in the price of the raw produce which enters into their composition, and which in some commodities cannot be inconsiderable. It is a matter of mortification to me that my execution has been so faulty; I was too much in a hurry, and have not made my meaning intelligible even to those who are familiar with such subjects, much less to those who skim over these matters.

Since I have seen you I received a note from Mr. Edward West, who is the author writing under the title of a Fellow of University College; he speaks in favour of my opinions of course, because they are very similar to his own. I have read his book with attention, and I find that his views agree very much with my own. He is a barrister, a young man, and appears very fond of the study of political economy. Mr. Brougham has, I think he said, promised to introduce him to you. Mr. Jacob[83] has handled both him and me rather roughly; but he will not condescend to argue with us. I shall be very easy if he is the most formidable opponent that is to attack me, for he seems totally ignorant of the scientific part of the subject.

The opposition to the bill[84] is more formidable than I expected, but they appear so determined in the House of Commons, that I suppose it will finally pass. I regret that the people should have proceeded to acts of riots and outrage. I am too much a friend to good order to wish to succeed through such means, besides that I am persuaded that they hurt rather than promote the object which they and I have in view.

I wish you could have dined with me on Saturday. I expect Mr. Phillips[85] and Mr. Dumont; it would be a very agreeable surprise to me if you should join our party. Perhaps you may be inclined to come to London and wil[l] take a bed in Brook Street. Do if you can [and] do not think it necessary to write on purpose to say you cannot. I shall fully depend on your staying with us when you come to the next club.

Sir F. Burdett and some others think that the high price of our corn is owing to enormous taxation, and that it ought not nor cannot fall without oppression to the landholders till our debt is diminished. If I could convince myself that any part of the price of corn was owing to taxation, I should be in favour of a protecting duty to that amount. But, if he were right, the high price would not be accompanied by high rents or by the cultivation of inferior lands. These I consider as unequivocal marks of the high price being caused by wealth and a scarcity of fertile land. Indeed my theory leads me to think that no taxes but those directly on the land or on its produce would raise the price of corn, and even such taxes would have no effect if all exportable commodities were taxed in the same degree, for a tax on exportable commodities in a country which imports corn does not act very differently from a duty on the importation of corn. Kind regards to Mrs. Malthus.

Ever yours, David Ricardo.

XXVI.[86]

Upper Brook Street, 14 March, 1815.

My dear Sir,

I have read Mr. Torrens' pamphlet[87] and think it on the whole a very able performance. I differ with him in most of his views in chap. 2, part 2, with many of the 3rd chap., and with a few in the remainder of the work. I am glad to hear that you are going to make some observations on it[88]. I think he is an adversary worthy of your pen, and the friends of truth cannot fail to profit by the discussion. With regard to any remarks on my opinions, you must be governed by your own discretion. If those opinions are wrong, I should like to see them refuted, but, thinking as I do that they are in all essential points founded on correct principles, I ask for no mercy. I do not care how severely they are attacked; there is nothing you could say of them which would hurt me, if what you said did not express contempt, and that I know you do not feel for me. Act therefore towards me as if I were a perfect stranger, and notice me or not as you think best.

I cannot hesitate in agreeing with you that, if from a rise in the relative value of corn less is paid for fixed capital and wages, more of the produce must remain for the landlord and farmer together; this is indeed self-evident, but is really not the matter in dispute between us, and I cannot help thinking that you overlook some of the circumstances most important connected with the question. My opinion is that corn can only permanently rise in its exchangeable value when the real expenses[89] of its production increase. If 5000 quarters of gross produce cost 2500 quarters for the expenses of wages, etc., and 10,000 quarters cost double, or 5000 quarters, the exchangeable value of corn would be the same; but, if the 10,000 quarters cost 5500 quarters for the expenses of wages, etc., then the price would rise 10 p.c., because such would be the amount of the increased expenses. A rise of the price of corn and a fall in the corn price of labour is [sic] in my opinion incompatible, unless it be owing to something in the currency; and it is not necessary to enquire here what effects that would produce. Observe that I do not question that each individual labourer may receive a less corn price of labour, because I believe that would be the case, but I question whether the whole corn amount of wages, etc., paid for the cultivation of the land can be diminished with an increase of the exchangeable value of corn. If no more labourers were employed and the price of corn rose, your proposition could not be disputed; but the cause of the rise of the price of corn is solely on account of the increased expense of production.

I have lost Lord Lauderdale's pamphlet[90], or rather it has been taken from my office. If I can get another, it sha[ll] accompany this. The improvement[s] in agriculture I believe have had more effect in kee[ping] down r[ents] than we have ever imagined. On my theory they fully account for rents being no higher; on yours they would tell the other way.

I meant to reproach you when I saw you [for[91]] speaking of Mr. Jacob's pamphlet with so much [praise[91]] as you did when Mr. Basevi[92] asked your opinion of it. I am glad you allow he is very deficient in scientific knowledge.

You will see by what I have said that a rise in the price of corn is always in my opinion accompanied by a less material surplus produce; but it may be of equal value as compared with other things. Of this produce the landlord gets so large a share that in spite of the rise of produce the situation of the farmer is constantly getting worse.

Yours very truly, David Ricardo.

XXVII.

London, 17 March, 1815.

My dear Sir,

If your statement[93] was correct, this extravagant consequence would follow from it: That in proportion as population increased and worse land was brought under cultivation, the proportion of produce to the corn expenses of procuring it would increase. If we now had twenty millions of quarters with an expense of five millions of quarters, we should when we expended ten millions of quarters obtain more than forty[94], notwithstanding that in the latter period many more than double the quantity of hands were employed in cultivation in consequence of the poorer quality of the land. If this be true, the principle of population is false, because the more you increase the people, the greater surplus of abundance will appear. Your statement is however very ingenious, and carries a great deal of plausibility with it; but I think you err in supposing it possible that the proportion of the whole corn expenditure to the produce obtained can fall, with an increase of the price of corn. The two are incompatible; either the whole corn expenses of production will be increased or not. If they be, the price of corn will rise; but, if they be not, I can see no reason for a rise in the price of corn. I admit that it is only the last portion of capital employed on the land which will be attended with an increased corn expense; but, unless it renders the whole produce together at an increased expense, the price of produce will not rise. Suppose the produce of the country ten millions of quarters with the price at £4 per quarter, the number of labourers employed two-and-a-half millions, each receiving two quarters of corn annually as wages. Suppose too that the population increases and five millions of quarters more are required, but that it cannot be obtained with less labour than that of two millions of men. If we suppose the price to increase in proportion to the number of men employed, it will rise to £4 16s., because to raise ten millions of quarters an average of three millions of men would be now required instead of two-and-a-half millions. Suppose now each man to consume one quarter annually for food and to exchange the remainder for other necessaries. Fourteen bushels will be sufficient wages for him[95]; the expenditure of corn for wages will then be for fifteen millions of produce 7.875.000, and for ten millions 5.250.000. Before, it was only five millions; consequently the proportion of surplus produce has diminished.

In making this calculation I have very much favoured your view of the question, because the price of corn would not, I think, rise in proportion to the greater number of men employed but to the greater amount of wages paid; it would not therefore rise to £4 16s., but to £4 4s., because as 5 : 5¼ : : £4 : £4 4s. But, if the price was only £4 4s., more corn would be required by the labourer than fourteen bushels, that calculation being founded on a greater exchangeable value of corn. It appears too that your statement if true does not account for the less proportion of the population now emp[loyed upon] the land, because you always suppose more men to [be employed] but at less corn wages. It can never happen, I think, that profits can fall and encourage the cultivation of poor [land in] the manner assumed in my table without a rise in the price of corn. It is by the rise of the price of corn that all other profits are regulated to agricultural profits. If the price of corn remained low, money wages would not rise, and general profits could not fall. If it be true that capital has become more and more productive on the land, it can, I think, only be accounted for on the supposition that great improvements have taken place in agriculture, and that wages have been kept moderate by the improvements in those manufactures which supply the poor with the necessaries on which a part of their wages are expended.

What a dreadful change in our political horizon has occurred within a few days[96]! Will it be possible to remain at peace if Bonaparte establishes himself as sovereign of France? The prospect is very gloomy.

... Ever yours, David Ricardo.

XXVIII.

London, 21 March, 1815.

My Dear Sir,

On no subject that we have been lately discussing have we so materially differed as on the one now occupying our attention. Your position, if established, would, I think, overturn both your theory of rent and population, for I understand you to maintain that the higher the price of corn rises, in consequence of more men being employed on the poorer land, the greater will be, not only the surplus produce after paying the labourers, but the ratio of that surplus produce to the whole capital employed on the land. If this be true there is no check to the increase of population, and food can be increased in a ratio exceeding that at which mankind increase. Your statement requires that with every additional labourer not only an equal increase but a greater increase of surplus produce should be obtained. More labourers may then be employed without limit, and rent and profit together must not only increase, but increase in a geometrical progression. I am sure I am correct in thus stating your proposition, because if as you say the whole corn expense of production per quarter will be diminished with every rise of price, the surplus must increase in a geometrical ratio with the capital employed. If you meant only that the surplus produce would increase with every accumulation of capital on the land, though in a diminishing ratio to the capital employed on the land, that is not only advanced, but strenuously maintained as the groundwork of my theory, and is the basis also on which my table is formed. You have misapprehended a passage in my last letter. I certainly never said, nor ever thought, that any good reason could be given for an increased number of men being required to produce precisely the same quantity of corn from precisely the same land. What I said was that, if at one period the number of labourers required to produce ten millions of quarters of corn was two-and-a-half millions of men, and at another, in consequence of increased demand, fifteen millions of quarters could not be produced with a portion of worse land at a less cost of labour than that of four-and-a-half millions, at this latter period a production of ten millions would require three millions of men, because fifteen is to four-and-a-half as ten to three, and if we supposed the price of corn under such circumstances to increase in the proportion of 2½ to 3, a supposition much more favourable to your view of the question than we should be obliged to concede, yet that it would not support the conclusions to which you arrive, but, on the contrary, would prove my theory to be the correct one. If the calculation had been made, as you think would have been more correct, on an increase from ten millions to ten-and-a-half millions, the result would have been the same, but we should be puzzled with the decimals or fractions which must be employed on such a supposition. I agree with you 'that the natural price of corn depends entirely upon the price of the last addition, and it does not matter whether with regard to the old land a capital yields 50 per cent. rent and profit or 20 per cent. In either case the price of corn on such land has nothing to do with the cost of production.' I do not see how the admission of this fact can assist your argument, which relates only to the ratio of the surplus produce to the whole capital employed.

I cannot conceive by what argument you could shew that it might be possible that the addition of another labourer on the land would not pay his expenses, although not more than a quarter of the population were employed upon the land. Allowing, as I most fully do, that no pressure can destroy rents, yet as the last portions of capital employed on the land pay no rent, it is to me inconceivable that there would be no inducement to employ more labourers whilst their average production should be three times more food than they could themselves consume. If the whole of this surplus, after maintaining in the most frugal manner the owners of stock, were absorbed by the landlords as rent, they would increase their revenue, and employ more labourers on the land, if any among them saved any part of his income and lent it at the common rate of interest. I am sorry you do not come to town for the next club.

Yours truly, David Ricardo.

XXIX.

London, 27th March, 1815.

My dear Sir,

No particular event which I recollect ever occasioned so great a gloom as the late lamentable reverse. At present we have the most dismal forebodings of war and its consequences on our finances; the truth is our courage is not screwed up to the proper pitch; like everything else, we shall be easy under our new situation in another fortnight. I am glad, however, to turn my attention to other subjects.

I have observed in the bullion pamphlet[97] that many who say they consider money only as a commodity, and subject to the same laws of variation in value from demand and supply as other commodities, seldom proceed far in their reasoning about money without showing that they really consider money as something peculiar, varying from causes totally different from those which affect other commodities. Do you not fall into this error when you say, 'In the first place all depends upon the relation between corn and other commodities, and, as labour and corn enter into the prices of all commodities, the difference between corn and other commodities cannot possibly increase in any proportion to the increase in the money price of corn'? If money be a commodity does [sic] not corn and labour enter into its price or value? And, if they do, why should not money vary as compared with corn and labour by the same law as all other commodities do? As far as this question regards the importation of corn, you are much more interested than I am in maintaining the uniform value of commodities, because if the rise of the price of corn and labour will as you contend raise the price of our commodities, this is an additional reason why we should not impose restrictions on the importation of corn, as it will subject us to a decided disadvantage in our competition with foreigners for the sale of our commodities.

Not however to dwell on this very essential point, I agree with you that a rise in the price of corn occasions a different distribution of the produce from the old land. It does this by lowering profits. Instead of a manufacturer having it in his power to maintain a servant or mechanic who may contribute to his enjoyment, that power will be transferred to the landlord, and this will arise from the lower corn value of manufactured goods. Indeed I see no limit to the fall of the corn value of goods but the impossibility of manufacturing them with any the least return of profit, and this will not happen till the landlord has appropriated to himself in the form of rent nearly the whole surplus produce of the land. It appears to me that the progress of wealth, whilst it increases accumulation, has a natural tendency to produce this effect and is as certain as the principle of gravitation.

You have, I think, totally changed your proposition. You before contended that, in consequence of increasing wealth and the cultivation of poorer land, the whole corn cost of production on the land would bear a less proportion to the whole corn produce; but now you say that the money cost of production on the land will bear a less proportion to the money value of the whole produce. Between these propositions there is a very material difference, as the latter might be true at the very time that the former was false. To admit what you now contend for would not affect my theory, as, though it would prove that the landlord and tenant (together) got more money revenue, or, if you will, a greater proportion of money revenue as compared to the money capital employed, yet the tenant might and I think would get a less proportion, and therefore the rate of profits would fall. Such a state of price [sic] is quite compatible with a greater proportion of men, as compared with the produce obtained, being employed on the land; but it is wholly irreconcileable with the net corn produce bearing a larger proportion to the gross corn produce, which was the principle before contended for. I agree with you that the increased price of corn in the order of things is rather a cause than a consequence of a greater than the usual number of men being employed to obtain the same quantity of produce from new land, because profits from such an employment of capital may be higher than other profits; but this difference of profit may be owing to a general fall in the rate of profits on other concerns rather than to the actual elevation of the profits on land; and I am of opinion that a rise in the price of corn always lowers general profits by increasing wages. I can in no way satisfy myself that general profits can rise with a rising price of corn and fall with falling prices, unless they are raised or lowered by diminishing or increasing wages, and then they can be but of short duration. In the ordinary course of things, as a high price of corn attends a state of progression, wages of labour will be really high, and profits cannot rise because of wages being low.

I am decidedly of opinion that Torrens[98] has treated you unjustly in his remarks in the preface of his book. If I recollect, you acknowledged an alteration in your opinion respecting the corn laws, since you wrote your essay on population, in your 'Observations on the Corn Laws.' I think too that you have always held the opinion you now do that the difference between the value of gold and paper was partly owing to the rise of the value of gold. Is not his criticism very much strained as to the use of the word depreciation? But, if he be right in all, the instances are much too few to justify his severe observation. At the Geological Club[99] his book was spoken of the other day with great approbation. Mr. Blake[100] and Mr. Greenough[101] think that he has exhausted the subject, and that his arguments cannot be controverted. I should think that he is very generally read. 'If I would lay a tax on foreign corn,' you ask, 'on account of a tax on our own, does not the same principle apply to the indirect taxes that raise the price of labour?' I think not, because a tax on corn will raise the price of corn twice, once on account of the tax, and a second time on account of the rise of wages; but, as this second rise is common to all things in which labour enters, and will be corrected by a new value of money, it will not be of long duration. The indirect taxes which only raise the wages of labour produce, I think, the same effects as the second rise in the price of corn, of which I have just been speaking. Whenever a tax bore with unequal effect on the land, when it did not affect labour bestowed in other employments, a countervailing duty on importation should, I think, be also imposed. I fear I cannot be with you on Saturday. If you do not hear from me by Wednesday's post, conclude that I cannot leave home....

Ever yours, David Ricardo.

Note.—Robert Torrens, the soldier economist, began his literary career with 'The Economist Refuted' (1808), in answer to William Spence, who in 1807 tried to persuade his countrymen that Napoleon's blockade mattered little to them, Britain being 'independent of commerce.' In the winter of 1810-11, Torrens was Major Commandant of the Royal Marines, doing garrison duty on the island of Anholt in the Kattegat. The frost gave him time to re-read his Adam Smith and write his 'Essay on Money and Paper Currency' (publ. 1812). In his 'Essay on the External Corn Trade' (see above, page 65), Torrens characterizes the writings of Malthus as suggestive and candid and full of 'facts,' but ill-reasoned and inconsistent. Mr. Malthus, he says, scarcely ever embraced a principle which he did not subsequently abandon; his Essay on Population was a plagiarism from Wallace; and he refuted it himself by introducing the influence of Moral Restraint; in regard to Corn Bounties and in regard to the Currency, his later writings have contradicted his earlier. (Pref. pp. viii. to xii.) Torrens compared the Political Economy of Malthus with that of Ricardo, greatly to the advantage of the latter, in his 'Production of Wealth' (1821). See 'Malthus and his Work,' pp. 265-6. Compare also Note to Letter XLIV.

XXX.

London, 4 April, 1815.

My dear Sir,

You think that my theory of a diminishing rate of profit in consequence of being obliged to cultivate poorer lands is affected by my admission that there will be a greater quantity of surplus produce and a greater money value from the old land. This would be true if any part of either the additional quantity or additional value belonged to the owner of stock. You, however, expressly say that this additional value or quantity 'will remain to the farmer and landlord.['] Before my theory is affected it must be shown that the whole will not remain with the landlord, as, if the farmer gets no share of it, his rate of profits cannot be raised.

I agree with you that, when the exchangeable value of corn rises, 'the whole quantity of corn in the country will exchange for a greater number of coats than before, and consequently that there will be both the power and will to purchase, with the raw produce of the country, a greater quantity of manufactured and foreign commodities.' In a progressive country I can easily conceive this power and will to be doubled or trebled, as well as the commodities on which they are exercised; but this admission does not affect the question of profits. There may be a great demand for home and foreign commodities without their price being permanently raised, as no new difficulties may attend their production. When America becomes populous and wealthy in the same proportion as the most wealthy country of Europe, will not her corn exchange at a higher value both for money and commodities, although it will have much increased in quantity? Will not all foreign and home commodities in America be double or treble their present amount, yet will not the profits of stock be less there than they now are? On this question I could not have thought that the slightest doubt could exist; all theory, all experience is in favour of this opinion.

Whilst the labour of ten persons employed on land paying no rent can produce one hundred quarters of wheat, it appears to me possible and probable that one-third more labour might profitably be employed on that land, not indeed in producing only one hundred quarters of wheat, but an additional quantity more than the additional labourers would consume. Whilst the labour of ten men can produce one hundred quarters of wheat, it is difficult to suppose profits only ten per cent., and more difficult to conceive that many more men might not be profitably employed in increasing the produce off such land. In theory, land which yields no rent, according to your supposition, would have more and more capital profitably expended on it, whilst the additional quantity of produce obtained exceeded [the] quantity paid to the additional labourers. Capital [might] be so expended, whilst the profits of stock gave any return, not ten per cent. but one per cent. or a half per cent.

No doubt money varies more slowly than other commodities for the reason you mention; nevertheless its value, like every other foreign commodity, depends on the labour and expense of bringing it to market.

I expect some friends to dine with me on Saturday, and on Monday I am engaged out to dinner; yet, if the weather is tolerably fine, I will be with you by the time you leave chapel on Sunday, but I must get home next day. If this is not quite convenient, pray let me know.

Ever yours, David Ricardo.

XXXI.

London, 17 April, 1815.

My dear Sir,

You, I think, agree with Mr. Torrens that a rise in the price of corn will be followed by a rise in the price of home commodities; but your theory requires that there should be no rise in the price of those commodities on which the wages of labour are expended, for, if they rose in the same proportion as corn, there could be no fall in the corn wages of labour. Is it not, however, very improbable that all manufactures should rise at home, and yet that those on which [the wages of] labour are expended should not rise? Is not the price of soap, candles, etc., though foreign commodities[102], necessarily affected by the rise in the price of those home goods which are given in exchange for them. Mr. Torrens' theory, however, on this part of the subject appears to me defective, as I think that the price of commodities will be very slightly affected either by a rise or fall in the price of corn. If so, every rise in the price of corn must affect profits on manufactures; and it is impossible that agricultural profits can materially deviate from them. I will, however, suppose that you and Mr. Torrens are correct, and that commodities do rise in price with every increased price of corn. The value of fixed capital as well as of circulating capital employed on the land will then rise also; and, although the money value of the produce should be increased on the old land, it will still bear the same proportion to the money value of the capital employed; and, as this produce will be divided in different proportions between the landlord and the farmer, the rate of profits of the latter will fall. For the purpose of examining the effects, let us suppose that all commodities rise, with the rise of the price of corn, excepting those only on which the wages of labour are expended, and that in consequence the corn wages of labour fall. Suppose the price of corn £4, and that on the old land the labour of eight men was necessary to raise eighty quarters of corn, that no rent was paid, and that each labourer had eight quarters annually for his wages, of which one half was expended on commodities. The gain of the farmer, when the price was £4, would be £64 or sixteen quarters, and, besides his fixed capital, horses, seed, etc., he would require the value of sixty-four quarters, or £256, to pay the annual wages of his labourers; consequently his profits would be in the proportion of £25 to £100 of wages, for 256:64::100:25. Now, suppose corn to rise to £4 10s., wages would vary only 10s. on four quarters, and consequently would rise to £34 annually per man, or £272 on the old land; but the eighty quarters of corn would sell for £360, leaving a produce of £88 to be divided between farmer and landlord; and 88 would be to 272 as 32 to 100.

But on the new land the labour of eight men and a half might be required to obtain eighty quarters or £360; the labour of eight-and-a-half men would cost, at £34 each, £289; consequently the profit would be £71, which is to the whole expense of £360 as £19·7 to £100.

£100 capital or expenses on the old land will yield£32

£100 capital or expenses on the new land " "£19·7.

———

Rent £[1]2·3.

It appears then that the profit on new land, which regulates the profit on all other land, would be 19·7 per cent. when the price of corn was £4 10s. It was 25 per cent. when the price was £4.

If indeed under the same circumstances we had supposed the price of corn to rise to £6, then profits would be increased, and would be much more than 25 per cent.; but some adequate cause must be shown for [such] rise, and it cannot be arbitrarily assumed. Your theory supposes too what is impossible, that the demand for manufactures [could] increase in the same proportion as the demand for [corn] at the very time that more men are employed on the land to obtain a less proportion of produce. The whole appears to me a labyrinth of difficulties; one is no sooner got over than another presents itself, and so on in endless succession. Let me entreat you to give my simple doctrine fair consideration, and you must allow that it accounts for all the phenomena in an easy natural manner.

I yesterday met Mr. Smyth[103], your friend, and Mr. Torrens at Mr. Phillips'. I passed a very pleasant day. Mr. Smyth was exceedingly agreeable. I like him very much. The corn question was occasionally introduced, and I had an opportunity of stating some of my objections to Mr. Torrens' theory. I have no reason to think that I convinced him. I defended the use of the word depreciation in the sense [in] which you had used it; and I believe I had every one with me. I fancy that his arguments in his book on currency are founded on the sense in which he uses the word. We spoke on the other points of difference between him and you. Mr. Smyth, Mr. Phillips, and Mr. Torrens have agreed to dine with me on Wednesday, which has induced me to write to you a day or two sooner than I otherwise should have done that I might express my wish that you would join us. If you will, we will dine as late as you please. There will be a bed at your service, and I need not say that you will add considerably to my pleasure.

Yours very truly, David Ricardo.

Note.—In many of his speeches, e.g. June 12, 1822, Ricardo refers to the ambiguity of the word 'depreciation'. He himself always uses it to indicate that the currency had fallen below its own standard, as e.g. when coins are clipped. Others used it of a change in the value of the currency as purchasing a larger or a smaller quantity of goods. A currency might be depreciated in the first sense when it was actually, through counteracting causes, the opposite (or appreciated) in the second. Malthus, in Edinburgh Review, Feb. 1811, had used it in the first sense. (See pp. 341, 356, 365.) Torrens, in his 'Essay on Money,' 1812, had used it in the second. (See pp. 98, 99.) The word 'appreciation' occurs in Tooke's 'High and Low Prices' (1823), Part I. p. 76. Tooke himself distinguishes depreciation of the Currency (the first of the above senses) from depreciation of Money (the second of them); (l. c. p. 8.)

XXXII.

London, 21 April, 1815.

My dear Sir,

I was sorry you could not join our party on Wednesday. Mr. Smyth has left a pleasing impression on the minds of all those who met him, and I had every reason to confirm me in the favourable opinion which I had formed of him at our first meeting. Mr. Torrens is a very gentlemanly man. He had sent me his book on bullion before he came, and I fear that too much of the conversation was bestowed on the differences between his opinion and mine on the subject of paper currency and the exchanges. The latter he does not appear to me correctly to understand. I insisted on the consistency of your former and present opinions on the bullion question, and asked him from whence he had derived his knowledge of your views on that subject. He said that Dr. Crombie[104] and you had met purposely to discuss the question, and from him he had understood that you ascribed the whole effects on the price of bullion to the abundance of paper. He, as well as Monsieur Say, finds it difficult to support his opinions and answer objections in conversation—he says all such discussions should be carried on in writing....

On Saturday I shall meet you at the King of Clubs, to which I am invited by Mr. Whishaw, and on Sunday I wish you and Mrs. Malthus will oblige Mrs. Ricardo and me with your company to dinner. If you can I will ask Mr. Whishaw and Mr. Smyth to meet you. Perhaps too you will breakfast with me on Saturday or Sunday morning.

It appears to me that my table is applicable to all cases in which the relative price of corn rises from more labour being required to produce it, and under no other circumstances can there be a rise, however great the demand may be, unless commodities fall in value from less labour being required for their production. It is not probable that the relative price of corn will fall so low with an abundant capital in the country as when capital was very limited, but, if it could, the same effects on profits and on rent would follow, as it would demonstrate that land only of the best quality was in cultivation. You agree with me that if a large tract of rich land were added to the Island it would restore the state contemplated in my table. Though we agree in the conclusion we differ materially in our opinion of the means by which it would be brought about. You think that 'before any fall of price had taken place capital would be removing fast from the old land, and from manufactures,'—I think that capital would go from the old land to manufactures, because a given quantity of food only being required, that quantity could be raised on the rich land added to the Island with much less capital than was employed on the old, and consequently all the surplus would go to [manu]factures to procure other enjoyments for the so[ciety[105]], and profits on the land would rise at the expense of the rent of the landlord, whilst the cheaper price of corn would raise the profits on all manufacturing capital. I confess it appears to me impossible that under the circumstances you have supposed the relative value of corn would fall, not from the facility of procuring it, but from a rise in the value of manufactures. You suppose that corn would remain at the same price whilst manufactures rose in price,—I on the contrary think that the price of manufactures would continue nearly stationary, whilst the price of corn would fall. Is not this the natural consequence of more capital being employed on manufactures and less on agriculture? Have you not too uniformly supported the opinion that a fall in the price of corn will occasion a fall in the price of commodities? If they act on each other as you think, but to which I do not agree, how can manufactures rise in price with a stationary price of corn? I should have thought that on your principles such an effect would be deemed impossible.

Ever truly yours, David Ricardo.

XXXIII.

(Addressed to Claverton House, near Bath.)

Upper Brook Street, 27th June, 1815.

My dear Sir,

I have been for two or three days at Tunbridge Wells, and have been agreeably surprised to-day on my arrival in London, to hear of the great events which are taking place in France in consequence of the great victory obtained by the Duke of Wellington and his brave army over Bonaparte. With the deposition of Bonaparte I hope there may be no other obstacles to peace, and that we may at length be rewarded for the blood and treasure which we have expended with a long period of tranquil[l]ity, which I have no doubt will also prove a long period of prosperity. I think with Mr. Whitbread[106] that great credit is due to ministers for the energy which they have displayed in the prosecution of this contest. Having determined on war, their preparations have been on such a scale as to give from the commencement the best hopes of success, and we appear at last to have adopted the wise policy of making one grand effort in preference to a series of puny efforts, each just sufficient to keep the contest alive without making the least advance to its ultimate object.

The effect on the price of Omnium has been no more than what might have been expected. I am sorry that you have not profited by the rise. As for myself, I have all my stock, by which I mean I have all my money[,] invested in Stock; and this is as great an advantage as ever I expect or wish to make by a rise. I have been a considerable gainer by the loan[107]; in the first place by replacing the stock which I had sold before the contract with the minister [sic] at a much lower price, secondly by a moderate gain on such part of the loan as I ventured to take over and above my stock. This portion I sold at a premium of from 3 to 5 per cent., and I have every reason to be well contented. Perhaps no loan was ever more generally profitable to the Stock Exchange.

Now for a little of our old subject. It appears to me that there are two causes which may cause a rise of prices, one the depreciation of money, the other the difficulty of producing. The latter can in no case be advantageous to a society. It is always a sign of prosperity but never the cause of it. Depreciation of money may be beneficial, because it generally favours that class who are disposed to accumulate, but I should say that it augmented riches by diminishing happiness, that it was advantageous only by occasioning a great pressure on the labouring classes and on those who lived on fixed incomes. You and I concur in this opinion, for you say you are convinced that there are unobserved advantages attending the high price of corn and labour 'when not arising solely from difficulty of production,' [by] which I think you imply that no such advantages attend high prices if attended with difficulty of production.

This opinion is, however, a little at variance with that which you have long been supporting, for you have said that the high price of corn and labour in this country at this time was an advantage, although it is universally allowed that that high price is mainly owing to difficulty of production. The farmers and shopkeepers may suffer very general distress from a sudden and general fall of prices; but I hold that this would be no criterion by which to judge of the general or permanent prosperity of a country.

The accounts in which I am at present engaged will I fear keep me in London till the very latter end of July. I shall very much regret if you quit Bath without my seeing you. I quite depended on having a visit from you at Gatcomb this year, and I yet hope that it may be accomplished. I shall certainly leave London the very earliest day possible.

The price of labour in America appears to me enormously high as compared with the price of wheat; but we should not fail to remember how very low the exchangeable value of wheat is there, and how much of it must be given for the manufactured necessaries and comforts of life....

Ever truly yours, David Ricardo.

XXXIV.

Gatcomb Park, 30 July, 1815.

My dear Sir,

I bore with great patience the fatigues of the last fortnight in London, in the hope that on my arrival at Gatcomb I should have the pleasure of your company for a few days previously to your return to London. It was a great disappointment to me to learn that you would be travelling to London the very day after I quitted it, and I see little prospect of having a visit from you here for some time to come, as your convenience or inclination will probably lead you to a different part of the country next year.

I most cordially join with you in the wish that the victory of the Duke of Wellington will be the means of giving Europe some permanent repose. There appears every probability that it will be attended with that happy effect, and I should hope that the late stormy times will afford instruction both to sovereigns and people, and will secure the world from the evils of anarchy as well as from those of tyranny and despotism.

David's ill health has induced us to take him from the Charterhouse....

Mr. Clerk, a neighbour of mine here in Gloucestershire and who is brother to the East India Director of that name, has just sent his son George to the East India College, and knowing my intimacy with you has called upon me to request me to write to you on behalf of his son, that in case he may st[and] in need of any friendly advice or assistance you [would have] the goodness to give it to him. I hope [I] am not taking too great a liberty in asking you to comply with his father's wishes.

The immense concerns in business which I have lately had on my mind had nearly banished all consideration of subjects connected with political economy from it. Those concerns are now settled, but they have given me incessant work in arranging and balancing my accounts ever since I have been here. I recur now, however, with pleasure to corn, labour, and bullion. A really high price of corn is always an evil; in this opinion I think you would concur, because it is always occasioned by difficulty of production. I know of no other cause, and you allow difficulty of production not to be desirable in itself. In our own case the high bullion price of corn is not wholly owing to the barrenness of the land to be taken into cultivation, but from whatever cause it has arisen it cannot, I think, have enabled us to grant greater subsidies than we should otherwise have done, for subsidies as well as all services performed for us are paid for by the produce of the land and labour of the people of England. It surely is a palpable contradiction to say that our power of commanding services is increased, whilst our productions with which those services are paid are diminished. The principle may be true when confined to a few commodities of which we either have a monop[o]ly or peculiar facilities in the production of them, but as a general preposition it appears to me to be at variance with the best established doctrines.

If a free trade in corn were allowed with America I should not expect that the prices would differ more, here and there, than the expenses and profits of sending it;—as it is I am surprised the price should be so high. A high money price of wages is I think quite natural.

Ever yours, David Ricardo.

XXXV.

Gatcomb Park, 10th Sept., 1815.

My dear Sir,

Nothing could be more unlucky than our missing each other as we did this year. I should think there would be no obstacle to our leaving town a little earlier next year, when I hope we shall at length have the pleasure of seeing Mrs. Malthus and you at Gatcomb.

It is the general remark in our part of the country that a finer season was never remembered. The rain, of which we have certainly had a deficiency, has generally come at night, and the days which have followed have been beautiful. The temptation to enjoy it has been so great that I have been incessantly out with some one or other of my friends who have been staying with me, either riding or walking, which makes such inroads on my time that I find I have much less leisure here for reading and study than I have in London. Before I came here I often saw Mr. Grenfell[108], who is very warm on the subject of the Bank and the advantageous bargains which it has always made with government, as well for the management of the national debt, the composition which it has hitherto paid for stamps, as for the compensation which government has received in the way of loan for enormous average deposits left with the Bank. I am quite of his opinion, and indeed I go much further; I think the Bank an unnecessary establishment, getting rich by those profits which fairly belong to the public. I cannot help considering the issuing of paper money as a privilege which belongs exclusively to the State; I regard it as a sort of seignorage, and I am convinced, if the principles of currency were rightly understood, that commissioners might be appointed, independent of all ministerial control, who should be the sole issuers of paper money,—by which I think a profit of from two to three millions might be secured to the public, at the same time that we should be protected from the abuses of the country banks, who are the cause of much mischief all over the kingdom. These commissioners should also have the management of the public debt, and should act as bankers to all the different public departments. They might invest the eleven millions which is the average of public deposits in Exchequer Bills, a part of which might be sold whenever occasion required. This of course (at least all of it) could not be effected till the expiration of the Bank Charter in 1833; but it is never too soon to give due consideration to important principles, which might be recognized, though not yet acted on. In looking over the papers which have from time to time been laid before Parliament, I think it might clearly be proved that the profits of the bank have been enormous. I should think they must have a hoard nearly equal to their capital. By their charter they are bound to make an annual division of their profits and to lay a statement of their accounts before the proprietors; but they appear to set all law at defiance. I always enjoy any attack upon the Bank, and [if I] had sufficient courage I would be a party to it.

Though I have been thinking on this subject lately, I am not less interested about our old subject, of the advantages or disadvantages of high prices for raw produce. If I agreed with Mr. Torrens that such high prices were accompanied with a rise in the prices of commodities, and, if I thought that such rise would not preclude the usual exchanges with foreign countries, I should of course agree with you that with such general high prices we should command a greater quantity of foreign commodities in exchange for a given quantity of ours; but I cannot admit in the first place that commodities would rise because corn rose[109]; and, secondly, if they did so rise there are but very few which we could sell in equal quantity at the advanced price to foreigners; and, if we sold less to them, we could buy less of them, and thus would our general commerce suffer. I can see great advantages attending low general prices but none in high prices. On this subject we are not likely to agree. I hope you are diligently employed and that early in the year we shall see something new from your pen. I have some curiosity to see a pamphlet just advertised[110], in the title page of which your name is mentioned.

Ever yours, David Ricardo.

... Have you seen Monsieur Say's [Catec]hisme d'Economie Politique? He has softened but not [expung]ed the objectionable definitions.

Note.—Correspondence between Ricardo and J. B. Say is given in the 'Œuvres Diverses' of the latter, published after his death (Guillaumin, 1848), with notes by Ch. Comte, Daire, and Horace Say. J. B. Say (born 1767) was the son of a Lyons merchant, of Huguenot origin. When a boy, he was sent with his brother Horace to learn business in London, where he was struck, amongst other things, by the fact that his Croydon landlord built up one of the two windows of his lodgings to escape window tax. Having gained familiarity with the English language and English ways he returned to France in 1789 and entered the employment of a Life Insurance Company, the manager of which (Clavière) lent him a copy of the 'Wealth of Nations,' not yet translated into French. The reading of it made him an economist for life, as it did for Ricardo ten years later. After serving in the revolutionary army in 1792, he left commerce for journalism. His chief book, Le Traité de l'Economie Politique, appeared in 1803. Too independent to please Napoleon, he was forced to quit his new profession for his old; and his commercial travelling landed him eventually at Geneva, where he made the acquaintance of Necker, Madame de Stael, and Benjamin Constant. He came back to France (to Auchy, Pas de Calais) to spin cotton, retiring with a moderate fortune in 1813. After the Peace he was sent by Government to report on the economical condition of England. He was cordially received by Ricardo, Bentham, and other economists; and on his return to Paris narrated with pride to his audiences at the Conservatoire des Arts et Metiers that the Glasgow professors had made him sit in the chair of Adam Smith. After an active life of teaching and writing, he died in Paris, 15th November, 1832.

Ricardo writes to him from Gatcomb Park on 18th Aug., 1815, thanking him for the copy of the (first edition of the) 'Catechisme de l'Economie Politique,' which he had just sent. Though complimenting him highly on the work, he thinks that Say has not, even yet, with sufficient clearness distinguished Value from Utility. No doubt to have value a commodity must be useful, but it is the difficulty of its production that is the sole measure of its value. 'The wealthiest man is he who has most values, and who is able, by giving them in exchange, to procure himself not the things which he himself and everybody else regard as the most desirable, and which can be had at a low price, but the things that are difficult to produce and consequently dear. A man is rich not by the moderation of his desires, but by the quantity of commodities that he possesses.' Say has also, in Ricardo's opinion, forgotten sometimes that the growth of the capital of a manufacturer cannot be safely estimated in money if we do not allow for the change in the value of money. Ricardo concludes: 'The pleasure which I take in reading and studying good works on political economy has not diminished since I saw you. I should devote all my time to the discussion of points which seem to me to need further elucidation, if I had any talent for composition. However, I have ventured to publish the pamphlet[111] which I sent you, and I should be glad to know your opinion on the doctrine which I maintain in it in relation to the rent of land and the rate of profits, in opposition to Mr. Malthus. I learn from Mr. Mill that several persons in this country do not understand me because I have not explained my views at sufficient length; and he is trying to induce me to undertake an explanation of them from the beginning and at greater length; but I fear that the undertaking is beyond my powers.' (Œuvres Diverses de Say, pp. 409-11. Ricardo wrote in English, but in this and the other cases the editors give only the French.)

Say's answer follows (pp. 411-13), 2nd Dec., 1815: 'Nous nous occupons heureusement vous et moi de choses de tous les temps plûtot que de celles du moment actuel, qui ne sont pas gaies, malgré les fêtes que l'on donne pour faire croire aux peuples qu'ils sont heureux.' Going to the subject of value, he says he did not say Utility was the measure of Value, but 'the value that men attach to a thing is the measure of the utility they find in it;' moreover he had not maintained the Stoical doctrine, 'the fewer wants, the greater wealth,' but had simply said that a man is the richer if all the things he wants (whatever they be) are cheap instead of dear, and would be richest of all if he had abundance of everything without any cost at all. He allows that Ricardo is right in regard to the growth of the manufacturer's capital, and promises to introduce the qualification suggested by Ricardo in his next edition. In the controversy between Malthus and Ricardo he finds it difficult to take a side, for he cannot for his part exclude from the question of profits 'the talent and industrial capacity of the man who brings out the resources of a land or a capital;' the profit inherent merely in land or in capital seems to him unimportant in comparison with the profit due to the source described. But he says he is too timid to insist on his opinion, and will wait for Ricardo's full explanations in the larger work. 'How I envy your lot, to study political economy in your beautiful retreat of Gatcomb Park! I shall never forget the too short moments I passed there, nor the charms of your conversation.'

XXXVI.

My dear Sir,

By facility of production I do not mean to consider the productiveness of the soil only, but the skill, machinery, and labour joined to the natural fertility of the earth. It does not therefore follow that because Otaheite[112] has an abundance of fertile land profits should be there at the highest rate, because the skill and the means of abridging labour may in Europe more than compensate this natural advantage of Otaheite. The question is this: If part of the skill and capital of England were employed in Otaheite to produce 100,000 quarters of corn, would not the persons employing that capital obtain greater profits in Otaheite than they would if they employed the same capital for the same purpose here, and would not rent be lower there than here? You must at any rate allow that the quantity of corn produced with a given quantity of capital, supposing the same skill to be employed, must be greater there than here, or there is no meaning in fertility of soil. You must allow too that in proportion to the fertility of Otaheite and to its extent compared with the population will be the lowness of rent, notwithstanding its abundant rate of produce. I can easily conceive that, with the imperfect tillage the people of Otaheite now give their land, the population may be just sufficiently numerous to require that the whole of their lands should be in cultivation, and consequently that they should bear a rent; but let a hundred Europeans only join them with our improved machinery and perfectly skilled in husbandry, and the immediate consequence would be that three quarters of their lands would for a time become perfectly useless to them, as the quarter might produce them more food than all the inhabitants could possibly consume. Now I ask whether it be possible that three quarters of the land of a country can be suffered to pass from a state of tillage to a state of nature without occasioning a fall in rents? If land is less in demand, must not the rent of it fall? If you say no, there is no truth in the proposition that value depends upon the proportion between supply and demand. Now suppose England in the state in which I have been fancying Otaheite; and she is actually in that state, all or most of her land being in cultivation; and suppose further that there is another country totally unknown to us whose skill and machinery in husbandry as far surpasses ours as ours does that of the Otaheiteans. If a hundred of these persons were to come amongst us with their capital, skill, etc., would not the same consequences follow as I have just stated? Now every improvement in machinery is precisely on a small scale what I have been here supposing on a large scale; and I am quite astonished that you should yet maintain that 'universally where land is limited in quantity, the facility of production upon it will go mainly to rent, and the soil of a country might be of such fertility as to yield sixtyfold instead of eight or ten, and yet the profits of stock be only six per cent. and the wages of labour both nominally and really low.' Land, like everything else, rises or falls in proportion to the demand for it; every improvement which shall enable you to raise the same quantity of produce on a less quantity of land or, which is the same thing, a larger quantity of produce on the same quantity of land cannot increase the demand for land and therefore cannot raise rents.

I do not clearly see the distinction which you think important between productiveness of industry and productiveness of capital. Every machine which abridges labour adds to the productiveness of industry, but it adds also to the productiveness of capital. England with machinery and with a given capital will obtain a greater real net produce than Otaheite with the same capital without machinery, whether it be in manufactures or in the produce of the soil. It will do so because it employs much fewer hands to obtain the same produce. Industry is more productive; so is capital. It appears to me that one is a necessary consequence of the other, and that the opinion which I have advanced and which you are combat[t]ing is that in the progress of society independently of all improvements in skill and machinery the produce of industry constantly diminishes as far as the land is concerned, and consequently capital becomes less productive. That this diminution of produce is beneficial to all owners of land, but that it is so at the expense of manufacturers, amongst which [sic] I include farmers, first by rendering the commodities which they manufacture of less exchangeable value than they before were for corn, and secondly by raising the cost of production by raising the price of labour.

I shall put this letter in the Post Office in London, where I am going to-morrow for a few days. I have been writing, in my unconnected and confused style, my opinions on the profits of the Bank and on the advantages of a paper and nothing but a paper currency. I am too little pleased with it to think of publishing. The whole is too little for a pamphlet. Mr. Grenfell is, I think, anxious that something should be said about the Bank before the meeting of Parliament, and I too wish some able hand would undertake it.

I am always glad to hear that you are preparing for the press; for, though I do not always agree in opinion with you, I am sure that your writings will contribute towards the progress of a science in which I take great interest. I should be more pleased that we did not so materially differ. If I am too theoretical (which I really believe is is the case), you I think are too practical. There are so many combinations and so many operating causes in Political Economy that there is great danger in appealing to experience in favour of a particular doctrine, unless we are sure that all the causes of variation are seen and their effects duly estimated. Mr. Whishaw and Mr. Warburton[113] have been at Mr. Smith's for some time. I have been absent from home unfortunately, and have seen but little of them. I yesterday dined with Mr. Whishaw; he talked of leaving Mr. Smith immediately....

Yours, David Ricardo.

7th Oct., 1815.

XXXVII.

[Not dated or headed, but fastened to preceding.]

[Oct. 1815?]

My dear Sir,

I have an account before me of the capital actually employed on a farm of 200 acres in Essex. It amounts to £3433 or about £17 per acre[114], of which not more than £1100 or £1200 is of that description which is not subject to the same variation of value as the produce of the land itself, for £2200 consists of the value of the seeds in the ground, the advances for labour, the horses and live stock, etc. etc. If then the money value of the produce from the land should fall from facility of production it must ever continue to bear a greater ratio to the whole money value of the capital employed on the land, for there will be a great increase of average produce per acre, whilst the fall in money value will be common to both capital and produce, and it cannot therefore be true that rent, profits, and wages can all really fall at the same time.

The effect of high or low wages on profits has always been distinctly recognized by me:—till the population increases to the proportion which the increased capital can employ, wages will rise, and may absorb a larger portion of the whole produce. But this effect will only take place with an increase of capital, and has nothing to do with new facilities of production. Wages do not depend upon the quantity of a commodity which a day's labour will produce, and I cannot help thinking you quite incorrect when you say that the natural consequence of the facility of production being so increased that a day's labour will produce 4 measures of corn, cloth and cotton instead of 2 measures, will be that 4 measures of corn, cloth and cotton will be worth only the price of a day's labour instead of 2. It appears to me that, if, instead of 4, 10 measures could be produced by a day's labour, no rise would take place in wages, no greater portion of corn, cloth or cotton would be given to the labourer, unless a portion of the increased produce were employed as capital, and then the rise in wages would be in proportion to the new demand for labour, and not at all in proportion to the increase in the quantity of commodities produced. This increase would be exclusively enjoyed by the owner of stock, and, if he consumed in his family the whole increased produce, without augmenting his capital, wages would remain stationary, and not be in any way affected by the increased facility of production.

I cannot agree with your proposition, namely, [']That the means of employing capital profitably can never co-exist with an abundant capital and produce and a stationary population, on account of the necessary effect of such a state of things in increasing the real price of labour,' because I consider the rise of wages as by no means a necessary effect of an abundant capital and produce, for it may be accompanied with new facilities in procuring corn, and then wages even if they should rise would not lessen profits, they will only keep them lower than they otherwise would be. In the case which we were considering the other night, if every lady made her own shoes, a part of the capital now employed in making shoes by the shoemakers would be otherwise employed. The same labour would be bestowed in the production of other objects desirable to these lady shoemakers, who would have both the power and the will to purchase them from the savings which would accrue to them by employing their labour productively. There is a great difference between [the] common effects of an accumulation of capital, and the employing the same capital more productively. The first is generally attended with a rise of wages and a fall of profits for a time at least,—but the second may exist for an indefinite length of time without producing any such effects. In the case of great improvements in machinery,—capital is liberated for other employments and at the same time the labour necessary for those employments is also liberated,—so that no demand for additional labour will take place unless the increased production in consequence of the improvement should lead to further accumulation of capital, and then the effect on wages is to be ascribed to the accumulation of capital and not to the better employment of the same capital. If the population were to be stopped whilst accumulation continued the effects which you enumerate would undoubtedly follow, but this would arise from the demand for labour not being adequately supplied,—it would be the effect of accumulation which would operate so powerfully that it would be but slightly checked by the facility of production, but it would not by any means be the consequence of such facility.

It is true that the rate of profits depends upon the scanty or abundant supply of capital compared with the means of employing it profitably,—and these means will as you say upon the common principles of supply and demand be increased either by a diminution of capital or by an extension of the market for it. Our inquiry is in fact what the causes are of an extension of the market, and I hold that the most powerful, and the only one which operates permanently, is a reduction in the relative value of food. You appear to me to concede a little respecting demand being regulated by the power of production,—but you are yet very far from yielding all that I demand. I hope we shall meet this month, but I cannot yet say whether I can leave London.

Yours very truly, D. Ricardo.

XXXVIII.

London, 17 Oct., 1815.

My dear Sir,

Mrs. Ricardo and I are sorry that Mrs. Malthus will be prevented from accompanying you when you pay us a visit at Gatcomb. We should have been very happy to have shown her some of the beauties of our county. When you come, perhaps you will bring your gun with you. Though I am no sportsman myself, I will endeavour to procure you the best sport that my influence can command.

I am very much obliged to you for the attention which you have given to my MS.[115] I am fully aware of the deficiency in the style and arrangement; those are faults which I shall never conquer. I will however use my best endeavours to elevate it to the very low standard to which you compare it[116]. It would be unpardonable to write worse with more practice.

I expected that you would not quite agree with my plan of abolishing the metals from circulation; but the grounds on which you object to it may I think be answered, and then your objections would I hope be removed. You fear that without a metallic circulation we could not on an emergency supply a large sum of bullion for the exigencies of the State. The fact is however against you, for we have supplied large sums when the metals have been absolutely banished from circulation. This has been the case during the whole Peninsular War. If indeed on my system the Bank could keep a less quantity of bullion in their coffers to answer the demands of the public, the objection would be well founded; but the only difference would be that in one case their hoards would consist wholly of coined gold and silver, and in the other they would consist of the uncoined metals; but, on both systems, if the Bank paid their notes on demand the currency must be equally reduced in quantity, if gold and silver should become more valuable. That argument then may be used against a currency convertible at all, into specie or bullion, but does not apply to one more than the other. I think with you that on the whole silver would be a better standard than gold, particularly if paper only were used. All objections against its greater bulk would be removed.

I find I did misapprehend your illustration respecting profits from Otaheite; but our difference is still very serious. I most distinctly allow that any causes which tend to make capital less in demand will lower profits; but I contend that there are no causes which will for any length of time make capital less in demand, however abundant it may become, but a comparatively high price of food and labour,—that profits do not necessarily fall with the increase of the quantity of capital, because the demand for capital is infinite and [is] governed by the same law as population itself. They are both checked by the rise in the price of food and the consequent increase in the value of labour. If there were no such rise, what could prevent population and capital from increasing without limit? I acknowledge the effects of the great principle of supply and demand in every instance; but in this it appears to me that the demand will enlarge at the same rate as the supply if there be no difficulty on the score of food and raw produce. Fertility is, as you justly observe, the essence of high rents; and low rents are the necessary result of barrenness however scarce corn may be. I agree with you too that, in a country limited to 100,000 acres, all of the richest conceivable quantity, yet peopled and capital'd up to the utmost limits of its produce, the profits of stock and the wages of labour would both be very low, although the quantity of produce yielded by a given capital including rent might be 100 per cent.; but I ask, if by any miracle the produce of that land could at once be doubled, would rents then continue as high as before, or could they possibly rise? We are speaking of the immediate not the ultimate effects. The improvements in skill and machinery may in 1000 years go to the landlord, but for 900 they will remain with the tenant.

Yours very truly, David Ricardo.

I have been so busy and am yet so busy that I cannot return to Gatcomb till Friday.

XXXIX.

London, 17 Oct. 1815.

My dear Sir,

My letter was sent to the post before I received yours of yesterday's date. The parcel you sent me has reached me safe. I am sorry you had so much trouble about it.

My views respecting the Bank are entirely prospective. The last return of bank notes in circulation was, I think, larger than any that preceded it. I have not the paper in London, but I think the circulation of bank notes then amounted (1815) to 28,000,000 or more[117].

It is dangerous to listen to reports respecting briskness or slackness of trade. It is I believe certain that the revenue has been uncommonly productive the last quarter, which is no indication of diminished trade. As you allow that the loss of the sellers is the gain of the buyers, you appear to me to attribute effects much too great to the fall of raw produce which has lately taken place. It does not follow that, because prices are low, production will be discouraged. If money were to fall very much in value whilst a country was making great advances in prosperity, would not production be encouraged, notwithstanding a fall of prices?

That profits may rise on the land, if population increases faster than capital, I am not disposed to deny; but this will be a partial rise of profits on a particular trade, for a limited time, and is very different from a general rise of profits on trade in general. This admission does not affect my principle.

Ever truly yours, David Ricardo.

I ought to apologise for writing to you twice in one day.

XL.

Gatcomb Park, 24th Dec., 1815.

My dear Sir,

I write to remind you that the time is come at which you once gave me hope almost to certainty that I should have the pleasure of seeing you here; and even when I last saw you you promised, if you could make it convenient, to come and pass a part of your vacation with me. The weather is beautiful, and my desire to see you as ardent as ever. Come then and inhale the pure atmosphere of our hills, and be under no fear that your visit will retard any object to which your attention may now be devoted, for you shall be free to write, study, or read, as many hours in the day as you please, unmolested by any one's intrusion.

My lost MS.[118] is recovered. Mr. Mill recommends its publication, but advises me to write an introduction, and to divide it into sections. I had almost resolved to throw it aside, but I have been again at work upon it, and, though I cannot put it in any shape to please me, it is I think rather better than when you saw it; and the probability at present is that I shall venture to publish it.

I attended the Bank Court the other day. I had no intention whatever of speaking; but some very bad reasoning on the other side and a total deviation from the question called me up, and I spoke for five or ten minutes with considerable inward agitation, but without committing any glaring blunder. My speaking is like my writing too much compressed. I am too apt to crowd a great deal of difficult matter into so short a space as to be incomprehensible to the generality of readers. The Chronicle, I see, has reported what he thought or heard I said, but he has imputed to me what I neither felt nor uttered. Allusions were made to the Bullion question, and it was said that it had been prophesied that, if the Bank directors were corrupt, they might with the power they had of issuing paper occasion the greatest public distress; no such distress, however, had been experienced. I observed in reply that the goodness of the system was not proved by the distress not having occurred,—that the speaker had been only paying a compliment to the integrity of the directors, in which no one in the court was more ready to join than myself,—but, if the directors had been corrupt, I still thought that they had been armed with the power of doing mischief. Though I was ready to declare my confidence in the integrity of the directors, there were many parts of their system of which I could not approve, etc. etc. This is very different from the report in the Chronicle; but I understand that the reporters were most carefully excluded from the court.