Letters of David Ricardo to Thomas Robert Malthus, 1810-1823 Part 9

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 circ.u.mstances 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 quant.i.ty of food only being required, that quant.i.ty 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 circ.u.mstances 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.

x.x.xIII.

(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 cla.s.s who are disposed to acc.u.mulate, but I should say that it augmented riches by diminis.h.i.+ng happiness, that it was advantageous only by occasioning a great pressure on the labouring cla.s.ses and on those who lived on fixed incomes. You and I concur in this opinion, for you say you are convinced that there are un.o.bserved 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.

x.x.xIV.

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 Gloucesters.h.i.+re 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 a.s.sistance 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.

x.x.xV.

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. .h.i.therto 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 h.o.a.rd 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 quant.i.ty of foreign commodities in exchange for a given quant.i.ty 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 quant.i.ty 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 t.i.tle 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 'Oeuvres 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 (Claviere) 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 Traite 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 quant.i.ty 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.' (Oeuvres 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 heureus.e.m.e.nt vous et moi de choses de tous les temps plutot que de celles du moment actuel, qui ne sont pas gaies, malgre les fetes 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 pa.s.sed there, nor the charms of your conversation.'

x.x.xVI.

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 quant.i.ty of corn produced with a given quant.i.ty 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 pa.s.s 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 surpa.s.ses 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 quant.i.ty, 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 quant.i.ty of produce on a less quant.i.ty of land or, which is the same thing, a larger quant.i.ty of produce on the same quant.i.ty 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 publis.h.i.+ng. 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._