Letters of David Ricardo to Thomas Robert Malthus, 1810-1823 Part 10

x.x.xVII.

[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 Ess.e.x. 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 quant.i.ty 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 quant.i.ty 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 acc.u.mulation 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 acc.u.mulation of capital, and then the effect on wages is to be ascribed to the acc.u.mulation of capital and not to the better employment of the same capital. If the population were to be stopped whilst acc.u.mulation 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 acc.u.mulation 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.

x.x.xVIII.

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 quant.i.ty 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 h.o.a.rds 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 quant.i.ty, 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 ill.u.s.tration 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 quant.i.ty 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 quant.i.ty, 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 quant.i.ty 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.

x.x.xIX.

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 pa.s.s 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 r.e.t.a.r.d 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 s.p.a.ce 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.

I hope the business at the college has been settled to your satisfaction, and that the result of the late unpleasant disturbance[119] will give you some security against its recurrence in future.

I conclude that you have quite finished writing the alterations and amendments which you projected for the new edition of your book[120].

When I last saw you I think you had made considerable progress, and therefore it is probable that you may be already in the press. What point will next engage your attention? For I hope, as M. Say says, that you will 'travaillez toujours' [_sic_]....

Ever yours, DAVID RICARDO.

[Fragment. Within this year, or earlier. See Letter XL]

[I began] by a.s.suring you that I was not going to weary you with a repet.i.tion of my hundred times told tale, and I am ashamed to see that I have filled four sides with nothing else. There are some other points on which I shall make some remarks when I have the pleasure of seeing you.

If you should come to town, will you do me the favour to call at the Stock Exchange, unless my house should not be much out of your way. I recommend your calling there because I am just about deserting Brook Street for some time. Mrs. Ricardo and all the family are going to Ramsgate to-morrow morning, and she will not consent to let me remain at home by myself, so that when I am in London I shall be chiefly with my brother at Bow; now and then I shall pa.s.s a night at home. My business is so uncertain that I cannot at all foresee what portion of the next two or three months I shall be able to spend at the sea side. It is probable that I shall be so much in town that I shall be found by you at the Stock Exchange....

Yours most truly, DAVID RICARDO.

XLI.