Letters of David Ricardo to Thomas Robert Malthus, 1810-1823 Part 22

I am sorry you could not spare a few days for a visit to us; if you will come to Gatcomb before we go to town, I shall be very glad to see you.

I have been writing a few pages in favour of my project of a National Bank[274], with a view to prove that the nation would lose nothing in profits by abolishing the Bank of England, and that the sole effect of the change would be to transfer a part of the profits of the bank to the national treasury....

Yours ever, DAVID RICARDO.

NOTE.--Arguments very similar to those of this letter have been used against Malthus by Julius Pierstorff, in his book on 'Die Lehre vom Unternehmergewinn' (Berlin, 1875), where the views of Malthus and Ricardo are compared with one another. There is, however, shrewder criticism of Ricardo's whole doctrine in Bohm Bawerk's 'Geschichte und Kritik der Kapital-Zins-Theorien,' Innsbruck, 1884. A neat _reductio ad absurdum_ of the view, held more or less explicitly by MacCulloch and others, that cost is enough to explain value, is given by Bohm Bawerk in his 'Grundzuge der Theorie des wirthschaftlichen Guterwerths' (Jena, 1886, p. 72), in a pa.s.sage of which this is the conclusion: 'To explain the value of a commodity by its cost is to explain it by the value of the means of its production. But how have the latter their value? Logically we must answer from _their_ cost, in other words from the means of production a degree farther back, and so on backwards. Now, clearly, if we pursue this regress, we either arrive at commodities which are not themselves 'produced,' e.g. land and labour, and our explanation of all value by cost has failed us; or else we explain even these sophistically as being in a sense 'products,' and owing their value to their cost, e.g. the labour as owing its value to the cost of the labourer's subsistence, and in this case we are bound to go farther back and explain the value of the means of subsistence by _their_ cost, i.e. the labour that produced them; and we reason endlessly in a circle.'

Lx.x.xVII[275].

GATCOMB PARK, MINCHINHAMPTON, _15th Aug., 1823_.

MY DEAR MALTHUS,

It is a prudent step in you to withdraw your concession, for I am sure that your theory could not stand with it. You find fault with my measure of value, you say, because it varies with the varying profits of other commodities. This is, I acknowledge, an imperfection in it when used to measure other commodities in which there enters more or less of profits than enters into my measure; but you do not appear to see that against your measure the same objection holds good, for your measure contains no profits at all, and therefore never can be an accurate measure of value for commodities which do contain profits. If I had no other arguments to offer against your measure, this which I am going to mention _when used to you_ would be fatal to it. You say that my measure cannot measure commodities produced by labour alone. Granted; but, if it be true, how can your measure measure commodities produced with labour and profits united? You might just as well say that three times two are six and that twice three are not six, or that a foot measure was a good measure for a yard but a yard was not a good measure for a foot. If your measure will measure my commodity accurately, mine must do the same by yours.

These are identical propositions, and I confess I see no answer that can be made to me. The fact really is that no accurate measure of absolute value can be found. No one doubts the desirableness of having one; but all we can ever hope to get is one tolerably well calculated to measure the greatest number of commodities, and therefore I should have no hesitation in admitting your measure to be the best, under all circ.u.mstances, if you could show that the greatest number of commodities were produced by labour alone without the intervention of capital. On the other hand, if a greater number of commodities are produced under the circ.u.mstances which I suppose to attend the production of the commodity which I choose for my measure, then mine would be the best measure. You will understand that in either case I suppose a degree of arbitrariness in the selection, and I only contend that it would be best employed in selecting mine.

When you say that my great mistake is in considering commodities made up of labour alone and not of labour and profits, I think the error is yours, not mine, for that is precisely what you do; you measure commodities by labour alone, which have both labour and profits in them.

You surely will not say that my money, produced by labour and capital, and by which I propose to measure other things, omits profits. Yours does; what profits are there in shrimps or in gold picked up by daily labour, on account of the labourer, on the sea-sh.o.r.e? How much more justly then might this accusation be brought against you!

You object to me that I am inconsistent in wishing to leave the consideration of the value of money here and in India out of the question, when speaking of the value of labour and of commodities in this country and in India. I, you say, to leave out the consideration of the value of the precious metals, who have proposed a measure formed of them! There is nothing inconsistent in this. In examining your proposition which rejects my measure and adopts another, I must try it by your doctrines and not by mine which you reject. A conclusion founded on my premises might be a just one, but, if you dispute my premises and subst.i.tute others, the conclusion may no longer be the same; and in examining your doctrines I must attend only to the conclusions to which your premises would lead me. You ask: 'Would you really say that cloth and muslin were not dear in India where they cost four or five times as much labour as in England?' You know I would not, because I estimate value by the quant.i.ty of labour worked up in a commodity; but by the cost in labour of cloth and muslin in India you do not mean the quant.i.ty of labour actually employed on their production, but the quant.i.ty which the finished commodity can command in exchange. The difference between us is this; you say a commodity is dear because it will command a great quant.i.ty of labour, I say it is only dear when a great quant.i.ty has been bestowed on its production. In India a commodity may be produced with twenty days' labour, and may command thirty days' labour. In England it may be produced by twenty-five days' labour and command only twenty-nine. According to you this commodity is dearer in India, according to me it is dearer in England.

Now here is my objection against your measure as a general measure of value, that, notwithstanding more labour may be bestowed on a commodity, it may fall in value estimated in your measure; it may exchange for a less quant.i.ty of labour. This is impossible when you apply your measure legitimately to those objects only which it is calculated to measure.

Would it be possible, for example, to apply more labour to the production of shrimps or to pick up grains of gold on the sea-sh.o.r.e, and yet to sell those commodities for less labour than before? Certainly not; but it would be quite possible to bestow more labour on the making of a piece of cloth, and yet for cloth to exchange for a less quant.i.ty of labour than before. This is another argument in my mind conclusive against the expediency of adopting your measure.

I repeat once more that the same trade precisely would go on between India and Europe, as far as regards commodities, if no such thing as money made of gold and silver existed in the world. All commodities would in that case as well as now command a much larger quant.i.ty of labour in India than in England; and, if we wanted to know how much more, either of those commodities, as well as money, would enable us to ascertain. The same thing which makes money of a low value in England makes many other commodities of a low value there; and the political economist in accounting for the low value of one accounts at the same time for the low value of the others. I do not object to accounting for the low value of gold in particular countries; but I say it is not material to an enquiry into a general measure of value, particularly if it be itself objected to as forming any element in that measure.

Suppose a farmer to have a certain quant.i.ty of cattle and implements and a hundred quarters of wheat,--that he expends this wheat in supporting a certain quant.i.ty of labour, and that the result is 110 quarters of wheat and an increase of one-tenth also in his cattle and implements; would not his profits be 10 per cent. whatever might be the price of labour the following year? If the 110 quarters could command no more labour than the 100 quarters could command before, he would, according to you, have made no profits; and you are right if we admit that yours is a correct measure of value; he would have a profit in kind but no profit in value. If wheat was the measure of value, he would have a profit in kind, and the same profit in value. If money was the correct measure of value and he commenced with 100, he would have 10 per cent. profit if the value of his produce was 110. All these results leave the question of a measure of value undecided, and prove nothing but the convenience, in your estimation, of adopting one in preference to another. The labourer, however, who lived by his labour would find it difficult to be persuaded that his labour was of the same value at two periods, in one of which he had abundance of food and clothing, and in another he was absolutely starving for want. What he might think would certainly not affect the philosophy of the question; but it would be at least as good a reason against the measure you propose as that of the farmer in favour of it, when he found that he had no profits because he had no greater command of labour, although he might have more corn or more money. You call every increase of value nominal which is not an increase in the measure you propose. I do not object to your doing so; but those who do not agree with you in the propriety of adopting this measure may argue very consistently in saying they are possessed of more value when they have 110 than when they had 100, although the larger sum may not when it is realized command so much labour as the smaller sum did before, because they not only admit but contend that labour may rise and fall in value, and therefore in respect to labour he may be poorer, although he possesses a greater value.

I have said that the value of most commodities is made up of labour and profits. If this be so, you observe, 'it is as clear as the sun that the variable wages which command the same quant.i.ty of labour must be of the same value, _because_ they will always cost in their production the same quant.i.ty of labour with the addition of the profits upon that labour.' I confess that I cannot see the connection of this conclusion with the premises. Whether you divide a commodity in eight, seven, or six divisions, it will always be divided into two portions, variable portions, but always two. If the division be in eight, the portions may be six and two, five and three, four and four, seven and one. If seven, they may be six and one, five and two, four and three, and so on. Now this is my admission. What we want to know is what the number of those divisions are, or what the value of the commodity is, whether eight, seven, or six? And have I come a bit nearer to this knowledge by admitting that whatever the value may be it will be divided between two persons? Whatever you give to the labourer is made up of labour and profits, and therefore the value of labour is constant! This is your proposition. To me it wants every quality of clearness. I find that at one time I give a man ten bushels of wheat for the same quant.i.ty of his labour for which at another time I give him eight bushels. Wheat, according to you, falls in the proportion of ten to eight. I ask why?

And your answer is, because 'as the positive value of the labour worked up in the wages increases, the positive value of the profits (the other component part of their whole value) diminishes exactly in the same degree.' Now does this positive value refer to the same quant.i.ty of wheat? Certainly not, but to two different quant.i.ties, to ten bushels at one time, to eight at another. You add: 'If these two propositions[']

(namely the one I have just mentioned and the invariability of labour as a measure of value) 'can properly be considered as having no connection with each other, I must have quite lost myself on these subjects, and can hardly hope to show the connection by anything which I can say further[']. I hope you do not suspect me of shutting my eyes against conviction; but, if this proposition is so very clear as it is to you, I cannot account for my want of power to understand it. I still think that the invariability of your measure is the _definition_ with which you set out, and not the _conclusion_ to which you arrive by any legitimate argument. My complaint against you is that you claim to have given us an accurate measure of value, and I object to your claim, not that I have succeeded and you have failed, but that we have both failed, that there is not and cannot be an accurate measure of value, and that the [most th]at any man can do is to find out a measure of value applicable in a great many cases, and not very far deviating from accuracy in many others. This is all I have pretended to do, or now pretend to have done; and, if you advanced no higher claims, I would be more humble; but I cannot allow that you have succeeded in the great object you aimed at.

In answering you I am really using those weapons by which alone you say you can be defeated, and which are I confess equally applicable to your measure and to mine, I mean the argument of the non-existence of any measure of absolute value. There is no such thing; your measure as well as mine will measure variations arising from more or less labour being required to produce commodities, but the difficulty is respecting the varying proportions which go to labour and profits. The alteration in these proportions alters the relative value of things in the degree that more or less of labour or profit enters into them; and for these variations there has never been, and I think never will be, any perfect measure of value.

I have lost no time in answering your letter, for I am just now warm in the subject, and cannot do better than disburthen myself on paper.

Ever, my dear Malthus, Truly yours, DAVID RICARDO.

Lx.x.xVIII[276].

GATCOMB PARK, _31 Aug., 1823_.

MY DEAR MALTHUS,

I have only a few words more to say on the subject of value, and I have done. You cannot avail yourself of the argument that a foot may measure the variable height of a man, although the variable height of a man cannot truly measure the foot, because you have agreed that under certain circ.u.mstances the man's height is not variable, and it is to those circ.u.mstances that I always refer. You say of my measure, and say truly, that if all commodities were produced under the same circ.u.mstances of time, etc., as itself, it would be a perfect measure, and you say further that it is now a perfect measure for all commodities produced under such circ.u.mstances. If then under certain circ.u.mstances mine is a perfect measure, and yours is always a perfect one, under those circ.u.mstances certain commodities ought to vary in these two measures just in the same degree. Do they so? Certainly not, then one of the measures must be imperfect. If they are both perfect mine ought to measure yours as well as yours mine.

There is no impropriety in your saying with Adam Smith[277] that 'labour will measure not only that part of the whole value of the commodity which resolves itself into labour, but also that which resolves itself into profit,' because it is the fact. But is not this true also of any variable measure you could fix on? Is it not true of iron, copper, lead, cloth, corn, etc., etc.? The question is about an invariable measure of value, and your proof of invariability is that it will measure profits as well as labour, which every variable measure will also do.

I have acknowledged that my measure is inaccurate, you say, I have so; but not because it would not do everything which you a.s.sert your's will do, but because I am not secure of its invariability. Shrimps are worth 10 in my money;--it becomes necessary, we will suppose, in order to improve the shrimps to keep them one year when profits are 10 per cent.; shrimps at the end of that time will be worth 11. They have gained a value of 1. Now where is the difference whether you value them in labour and say that at the first period they are worth ten days' labour and subsequently eleven, or say that at the first period they are worth 10, subsequently 11?

I am not sure that your language is accurate when you say that 'labour is the real advance in kind, and profits may be correctly estimated upon the advances whatever they may be.' A farmer's capital consists of raw produce, and his real advances in kind are raw produce. His advances are worth and can command a certain quant.i.ty of labour undoubtedly, and his profits are nothing unless the produce he obtains will command more if he estimates both advances and profits in labour, but so it is in any other commodity in which he may value his advances and returns. Does it signify whether it be labour or any other thing, provided there be no reason to suspect that it has altered in value? I know that you will say that provided his produce is sure to command a certain quant.i.ty of labour he is sure of being able to reproduce, not so if he estimates in any other thing, because that thing and labour may have undergone a great relative alteration. But may not the real alteration be in the value of labour, and, if he act on the presumption of its remaining at its then rate, may he not be wofully mistaken, and be a loser instead of a gainer? Your argument always supposes labour to be of an uniform value, and if we yielded that point to you there would be no question between us. A manufacturer who uniformly used no other measure of value than that which you recommend would be as infallibly liable to great disappointments as he is now exposed to in the vulgar variable medium in which he is accustomed to estimate value.

And now, my dear Malthus, I have done. Like other disputants, after much discussion we each retain our own opinions. These discussions, however, never influence our friendship; I should not like you more than I do if you agreed in opinion with me.

Pray give Mrs. Ricardo's and my kind regards to Mrs. Malthus.

Yours truly, DAVID RICARDO.

NOTE.--Ricardo died at Gatcomb on 11th Sept., 1823, of an abscess in the head, which caused great suffering. He was buried in the vault of a church at Huish, near Chippenham, Wilts; and his friend Joseph Hume was among the mourners. As he was only fifty-one years of age, his death was a great shock to his friends and caused something like dismay among his disciples. 'I never loved anybody out of my own family so much. Our interchange of opinions was so unreserved, and the object after which we were both enquiring was so entirely the truth and nothing else, that I cannot but think we sooner or later must have agreed.' So said Malthus, in Empson's hearing[278].

James Mill[279], albeit unused to the melting mood, was overwhelmed with grief, and in a letter to MacCulloch, 19th Sept., 1823, writes of the closing scenes with much tenderness of feeling.

CHRONICLE.

1809. Ricardo's letters in 'Morning Chronicle' ('High Price of Bullion'). Quarterly Review founded. Corunna (Jan.), Talavera, Wagram, Walcheren. Continuance of Orders in Council and Berlin Decrees.

Perceval, Premier. King's Jubilee. O. P. riots. Bad harvest. Rise in wheat. Fall in other articles.

1810. Letters I (25th Feb.) to V (Aug.).--Lines of Torres Vedras, Busaco. Bullion Committee (report, 8th June). Burdett and Parliamentary privilege. Fair harvest. Commercial and Agricultural Depression. Many failures. South American market overstocked. Trade with United States re-opened.

1811. Letters VI to X (Dec.).--Ricardo's 'Reply to Bosanquet,' Malthus'

article on 'Depreciation.' 'Curse of Kehama.' Fuentes Onoro, Albuera.

Napoleon's estrangement from Russia. Virtual close of George III's reign. Questions of Regency. Castlereagh and Sidmouth in the Government.

Poor harvest and high prices of wheat. Lord King's letter to his tenants. Currency debates in Parliament. Government loan to Merchants.

Slight revival of trade. Stoppage of trade with United States.

1812. Letters XI and XII (Dec.).--'Childe Harold,' I and II. Ciudad Rodrigo, Badajoz, Salamanca. Moscow Campaign. Repeal of Orders in Council (June). War with United States. Catholic a.s.sociation. Murder of Perceval (May). Liverpool, Premier. Williams' murders in Ratcliff Highway. Depression of trade. Luddite outbreaks. Cold and wet summer.

High price of corn.

1813. Letter XIII (Dec.).--Malthus' 'Letter to Lord Grenville.' Southey, Laureate. Vittoria, S. Sebastian. Lutzen, Katzbach, Dresden, Leipzig.

Affairs of Princess Charlotte. Joanna Southcote. Prosecutions for seditious libel. Removal of Company's monopoly of East India trade. Good harvest. Rise in Colonial produce.

1814. Letters XIV to XXI (Dec.).--Malthus' 'Observations on the Corn Laws.' 'Waverley.' 'The Excursion.' Treaty of Chaumont. Abdication of Napoleon (April). First Treaty of Paris. Congress at Vienna. Capture of Washington. Peace of Ghent (Dec.). Trial of Cochrane. Burning of Custom House (Feb.). Introduction of Corn Bill. Repeal of Corn Bounty. Relapse in prices of Colonial produce. Indifferent harvest. Medium prices of corn.

1815. Letters XXII to XL (Dec.).--Ricardo's 'Influence of Low Price of Corn.' Malthus' 'Grounds for an Opinion,' and 'Rent.' Napoleon in France (March). Treaty of Vienna. Waterloo. Second Treaty of Paris (Nov.). Bad Season. New Corn Law. Luddite outbreaks. Low Corn prices. Low general prices.

1816. Letters XLI to LI (Oct.).--Ricardo's 'Economical and Secure Currency.' Bombardment of Algiers. War taxation kept up. Adoption of Gold standard by Act of Parliament. Income-tax rejected. Agitation about Civil List. Cobbett's cheap 'Political Register.' Spa Fields. Luddite outbreaks. Pet.i.tion of London Corporation. Continued fall of general prices. Bad harvest. Rise in Corn.

1817. Letters LII to LXIV (Dec.).--Ricardo's 'Political Economy and Taxation.' Malthus' 'Statements respecting the East-India College.'

Malthus' visit to Ireland. Ricardo's to Flanders, Germany, and France.

Death of Horner (8th Feb.). 'Biographia Literaria,' 'Revolt of Islam,'