Letters of David Ricardo to Thomas Robert Malthus : 1810-1823

LETTERS OF DAVID RICARDO TO THOMAS ROBERT MALTHUS 1. 81 O -1 823 EDITED BY JAMES BONAR, M.A. OXFORD, LL.D. GLASGOW AT THE CLARENDON PRESS 1887 [ All rights resertea ] CO1TENTS. I. PREFACE 2. OUTLINE OF SUBJECTS 3. LETTERS I TO LXXXVIII 4. CHRONICLE 5. INDEX P A GE VI1 XIX . I-240 241 245 PREFACE. THE following Letters are printed for the first time from the original manuscripts, kindly lent for the purpose by Colonel Malthus, C.B. The representatives of Ricardo have been good enough to make search for the corresponding letters of Malthus, but without success. The Collection covers the whole period of the friendship of the two men. What is of purely private interest (a very small portion) has, as a rule, been omitted. There is seldom any obscurity in the text ; the handwriting of Ricardo is clear and good. The earlier letters have no envelopes. The breaking of the seal has frequently torn a page, and destroyed a word or two. In two cases we have nothing but the fragment of a letter. But fortunately the bulk of the series has reached us in a complete state. These Letters were evidently known to Empson and MacCulloch, whose references to them are quoted in their proper place. Other letters of Ricardo, as well as his speeches in Parliament, are quoted here and there when they illustrate the text or fill up a gap. The Correspondence with J. B. Say is given at some length, as it is probably little known to English readers. The Outline of Subjects will be found to contain only a bare sketch of the main positions taken up by Ricardo against Malthus in these Letters. It could not fairly be expanded into an account of both sides of the argument, for, when we are within hearing of only one of the disputants, we cannot with fairness believe ourselves to have the whole case before us. We cannot accept his statement of the terms of the discussion, for, though he had every desire to be just to his opponent, his cast of mind was so different that he can hardly be thought to have entered into his opponent's views with perfect sympathy 1. 1 Cf. Letter LXXX, p. 200, cf. 236, etc. viii  Prefa e. These Letters indeed show on almost every page how completely the two economists differed in their point of view. Beginning in a deep mutual respect, their acquaintance with each other grew into a very close intimacy ; but it was the friendship of two men entirely unlike in mental character. Ricardo admits that he had been deeply impressed by the Essay on Population (p. 107), but thinks that Malthus is apt to miss the true subject of political economy, the inquiry into the distribution of wealth, and to confine himself to production, of which nothing can be made (pp. 111, 1i5) ; Malthus seems to his friend to have too strong a practical bias (p. 9 6) ; instead of reflecting on the general principles that determine (for example) the Foreign Exchanges, he tries to get light from Jamaica merchants and City bullion dealers (p. 3, cf. T. 2) ; he buries himself in temporary causes and effects instead of looking to permanent ones (p. 127); he gains his point by a definition instead of an argument (p. 237) and, perhaps through the same practical bias, he is too much absorbed in questions of his own College (p. 125), and not eager enough for political reform (pp. 151, 172). Malthus, Cambridge Wrangler and Haileybury Professor, was free from any academical bias in favour of abstract thinking ; he had in fact little of the typical University man except his love of boating (p. 158). Ricardo, a selfmade and largely a self-educated man 1 (though he had neither the pride of the first nor the vanity of the second), had no traditions that were not mercantile, and made a large fortune on the Stock Exchange'. But, in his thinking, he was under no slavery to details ; he was even conscious of a strong theoretical bias (p. 96). He was fonder of ` imagining strong cases ' to elucidate a principle, than of adducing actual incidents to establish it (pp. 164, 167). The very narrowness of his programme enabled him (as later it enabled Cobden and his school) to seem to exhaust all the See the obituary notice in Annual Register 1823, which appears ( on comparison with MacCulloch's Preface to liicardo's Works, p. xxxii) to have been written by James Mill. See also Prof. Lain' Life of James Mill, p. 21o. He left £7oo,000. Gent. Mag. 1823. Preface.  ix difficulties of the subject, and dispose of them by plain straightforward proofs. Malthus, who had a less acute logical understanding, but saw more clearly the real breadth and complexity of the subject, seemed often more faltering, and less consistent with himself. Ricardo agreed with his friend in looking, on the whole, at the bright side of things, and forecasting prosperity for England even in the dark days of Luddites and Six Acts ( pp. 1 39, 141). They were, both of them, unready writers, partly from deference to each other's criticism (pp. 20, 23, 11 7, I25, 1 55, 1 59, 2o7),—partly, in Ricardo's case, from awkwardness in composition, where he was always, in his own opinion, the worse man of the two (pp. 104, I o8, 145, 208),—partly because the obscurity of the subject was felt by them to be inconsistent with dogmatic certainty (pp. 111, 176, 181). But they are free in their criticism ; they never dream of allowing it to affect their good temper (pp. 175, 24o), and they are never afraid to confess mistakes ( pp. 20, 184, 207, 231, etc.). Personally, they agreed in enjoying society and travel, in loving ' law and order' and hating ` a row' (pp. 64, 208), and in being nowhere so happy as in their family circle, in Ricardo's case a patriarchally large one (p.146). The robust health of Malthus was not shared by his friend (p. 14o), but the latter had more of the qualities of a public man, and in the House of Commons he was by no means a silent member. Their range of interests was perhaps equally wide, though Ricardo's bent was to natural science as Malthus' to mathematics. In politics they were both in favour of Parliamentary Reform. Francis Place', writing in 1832 to a correspondent who had reproached Political Economists with hostility to reform, says that the study tends almost necessarily to political enlightenment, and points to Malthus, Mill, Ricardo, and others in confirmation. ` Mr. Malthus ' (he says) ' was an aristocratic parson when he first published his Essay on Population ... but in going Letter to George Rogers, i ith Jan. 1832, in the ` Place' Collection, British Museum. x  PY4facc. on with his work and being obliged to study political economy, his prejudices gave way before principles, and he became the advocate so far as he dared of good government. His work contains irrefragable arguments for universal suffrage, which cannot be overlooked, but must be applied by every reader who understands the subject ; and there are also in his work other indications of what you and I should call liberal principles 1 .' For myself, Place adds, I have been ` a plain Republican for forty years ;' James Mill is ` as bad as myself.' As to Ricardo : ` He was one of the most enlightened of reformers I ever knew ;- he was a man who never concealed his opinions.' There is no doubt, from all the evidence, what these opinions were. Ricardo advocated a widely extended suffrage, frequent parliaments, and especially secret voting. In his speeches in the House of Commons, which are more than a hundred in number, from the first on the 25th March, 1819, to the last on the 4th July, 1823, he speaks his mind plainly not only on the Bank, the Sinking Fund, the currency, agriculture, the Poor Law, and the tariff, but on the reform of Parliament, retrenchment, freedom of the press and right of public meeting. His oratory seems in many respects to have resembled that of Cobden. • The arguments were given with plain directness without elegance of diction ; and they were brought home by matter-of-fact similes from every-day life or commercial experience. We know from Brougham that his manner of speaking was earnest, modest, genial, frank, and unaffected ; and, as he only spoke on what be knew, he was always heard with attention 2 , though his sentiments were unpalatable and he was usually in a hopeless minority. The political philosophy of Malthus is described by the present editor at sonie length in ` Malthus and his Work,' Book III. 2 Brougham's testimony is the more valuable because he is by no means a disciple or admirer of Ricardo as an Economist. ' Statesmen of the Time of George II.I,' vol. ii, pp. 166 seq. For other authorities on the subject see Joseph Garnier's life of Ricardo in Diet. de l' Econ. Polit., and Rain's Life of Jas. Mill. P reface. Bentham claimed to be the spiritual grandfather of Ricardo 1 , and Ricardo may have got his first thoughts on Politics from him and Mill, as on Economics from Adam Smith ; he may also have caught from Bentham his habit of reasoning abstractly. But the arguments he uses on behalf of his political opinions are such as to leave the impression that he reached his politics through his political economy, the former being only the latter from a different point of view. He seems to construct his notion of a free government on the lines of his notion of a free trade. When he takes the unpopular side in the case of the Carliles 2 , imprisoned for blasphemous libel, he is not unfairly described by Wilberforce as simply ' carrying into more weighty matters those principles of free trade which he has so successfully expounded' in other cases. His interest in popular education seems to spring from the desire that our people may be rightly equipped for industrial competition. He attends a City dinner to the Spanish Minister at a time when the European Powers are threatening Spain, and appeals to the principle of Non-Intervention thus anticipating the Manchester School and applying laissez faire on the large scale. He applies the same principles perhaps too abstractly in the case of the Spitalfield Acts'', which made the wages of the silkweavers to be fixed by the Justices instead of by the ` higgling of the market,' and in the case of the Truck System 5 , or payment of wages in kind ; but there was much to justify his hostility to the first, and there was Robert Owen's successful use of something very like the Truck system in New Lanark to excuse his defence of the second. He had a statesman's willingness to accept part where he could not get the whole, and to welcome a compromise rather than no progress at all. He would not abolish the Corn Laws at a stroke, but would prepare our agriculturists for the change by lessening the duty on imports year by year till nothing was left but 1 os. See note to Letter XXI.  " March 26, 1823. 3 Speech of March 18, 1823.  4 May 21. 1823, etc.  5 June 17, 1822. xi xviii  PYcf rCP. Malthus has left a clear statement of the points at issue between Ricardo and himself: in the Quarterly Review for January, 1824. He contended against Ricardo that (i) Quantity of Labour is not the chief cause of Value, but (2) ` Supply and Demand' are more truly so described, while (3) Competition of Capital, and not fertility of the soil, determines the rate of profits. Eut, in regard to the first, he hardly gives Ricardo sufficient credit for his large concessions. In regard to the second, he does not realize that supply and demand are vague terms which can only be made definite by a theory of value itself. In regard to the third position, if fertility of soil be translated productiveness of the staple industry, Ricardo's view seems nearer the truth than his own. The inadequacy of the whole discussion on this third head is largely clue to the fact that economists had not then been pushed by Socialism into a thorough investigation of Profits and Interest. They were content to borrow these ideas from every-day commercial life, and treat them as given ultimate facts needing no explanation. They therefore never fully accomplished the very first task of Political Economy, to state the facts as they are, and analyse into its fundamental laws the existing industrial system of modern nations. Still less did they fulfil its second task, to estimate the relation of the industrial system to the larger social and political body in which it lives and moves and has its being. The peculiar wants and motives of an individual people, changing, as they do, with the growth of civilization, must be viewed in their effects upon the production and distribution of the national wealth, if the truth about the latter is to be fully known. It is because the older economists did not attempt this that their discussions, carried on even by their most eminent representative men, seem to later readers superficial and unreal. Eut in their Economics, as in their Politics, they had their own work and not ours to do ; and we must not blame them for not answering questions that have only very recently occurred to ourselves. OUTLINE OF SUBJECTS. Iv only two cases do the letters of this collection form groups that have a subject of their own not discussed at any length in the other letters. Letters I to XIV are the only ones that discuss at any length the influence of the Depreciation of the Currency on the Foreign Exchanges. Letters LXXVIII to LXXXVIII are the only ones that so discuss the Measure of Value. After these the nearest approach to continuity is perhaps in Letters LXXI to LXXVII, when Over-production is the chief subject. But the discussion of Rent, Wages and Profits is not conducted by chapters as in a book ; it follows the course of conversations which were not recorded, and obeys suggestions that are given in replies lost to us. We cannot hope to make the propositions on these three heads fall into a consecutive logical series. The following analysis of the letters is not meant to be exhaustive. Ricardo's opinions on the Bank of England (XXXV, etc.) and on the East India College (XL, etc.), for example, will not be found in it. It is simply a statement of the chief economical arguments. In the early letters the correspondence turns chiefly on matters made prominent at the time (1810 seq.) by the Bullion Committee and Ricardo's own pamphlet, ` The High Price of Gold Bullion.' Though this pamphlet did not appear in its separate form till early in 1810, the matter of it had been published by Ricardo in a series of letters to the ` Morning Chronicle' beginning in September, 1809. These' letters brought their author into public notice, and they seem to have led Malthus to seek his acquaintance. The earliest letters (of which Letter I in this collection was clearly not the first of the whole correspondence) were naturally on the subjects that first brought the two men together. Ricardo's main positions as against Malthus are as follows :- 1. The amount of the currency of a nation is determined for it not simply by its size and population but by the b 2 xx  Outline of Subjects. nature and extent of its trading transactions ; and yet, when these elements are given, the currency of one nation will stand to the currency of another in some ascertainable normal proportion, to alter which is to alter the relative value of the currencies affected (VI, VII, X). 2. Such events as a bad harvest, a change in articles of consumption or the transmission of a subsidy abroad, will, by altering the relative value of our currency, produce effects on the exchanges which, apart from their own specific remedy, are permanent, not transitory (I, VII, X). 3. An increase in the amount of gold and silver in a country will lead to an increased use of these metals for general purposes rather than to a proportionate fall in their value, there (II, III). 4. An increase in the value of a nation's exports and imports may involve no increase of its wealth or its capital, but may be due to a mere change from one set of articles of consumption to another, or to a carrying trade with foreign capital (IV). 5. In any case, such an increase is not the cause, but the effect of a change in the currency; it is a sign that money is going from where it is cheap to where it is dear (IV, VI, IX, cf. XII and XVII), and the Exchanges are an accurate measure of the difference (VII). 6. There has certainly been an increase of wealth in our own country in recent years, but it has not necessarily been accompanied with an increased rate of profits (V, cf. XX). In Letters XV to XXI the following are the chief propositions :- I. Restrictions on the importation of corn by keeping up the price of necessaries have a tendency to lower profits (XV), unless, indeed, they are followed by a great reduction of capital (XVI, XVII). 2. The only cause of permanently high or low profits is the facility of procuring necessaries, for on that mainly depends the rate of wages (XVI, XVIII, XIX, XX, XXI, cf. V, and for qualification LXXIX, LXXX). 3. Other causes, such as bad harvests, new taxation, changes in demand, or excessive accumulation, are merely temporary (XX, XXI. Cf. Ricardo's Pol. Econ. and Tax., ch. vi. ` On Profits ). '^. Outline of Subjects.  xxi 4. Improvements in agriculture or machinery by increasing productiveness permanently increase profits (XX, cf. V and XXIII). To these may be added- 5. Consumption and accumulation equally promote demand, and are both of them ineradicable tendencies of our nature, the one adding to our enjoyments, the other to our power (XIX). 6. Accumulation increases not only production, but consumption (XXI). 7. It is worth while to establish the truth of a principle, even if we cannot establish its utility (XXI). In Letters XXIII to LXVIII, and in LXXVIII to LXXX, the positions are as follows :-- i. By importing cheap foreign corn the public saves the whole difference in price (XXIII, XXIV). 2. It must be allowed that the prices of articles, besides varying with the amount of necessary labour bestowed on them, vary with the value of their raw material (XXV). 3. Apart from changes in the currency, a rise in the price of corn and a fall in the corn wages of labour, would be a contradiction (XXVI). 4. It follows from the principle of Population that the rate, as distinguished from the amount, of agricultural production, grows not greater, but less, when the increase of population drives agriculture to the cultivation of poorer soils (XXVII, XXVIII, cf. XLIX). 5. This means that the whole cost in corn will be greater in proportion to the whole produce of corn, and, though the whole cost in money may be less in proportion to the whole produce in money, the rate of profits from farming will fall (XXIX), 6. A tax on home corn raises prices twice over, and should be accompanied by a countervailing duty, not necessary in other cases (XXIX). 7. In order of time, the increased price of corn comes first, and the costly cultivation second, but this increase of farmers' profits may be due to a fall in general profits that is itself caused by the increased price of corn (XXIX). 8. The progress of wealth has a tendency to lower profits and increase rent (XXIX). 9. Mere increase in quantity of corn will not prevent xxii  Outline of Subjects. increase in price if the numbers of consumers have increased in equal or greater proportion. So it will be one day in America (XXX). 10. A rise in the price of corn will not be followed by a rise in the price of other commodities, but by a fall in profits (XXXI, XXXIV, XXXV). 11. An addition of rich land to our island would reduce the price of corn by reducing the cost of raising the total supply of corn ; and it would not raise the value of manufactured goods (XXXII). 12. High prices, whether caused by depreciation of money or by difficulty of production, are not a public benefit ; in the first case, they are a cause of distress, especially to the working classes ; in the second, they are a sign but not a cause of prosperity (XXXIII, XXXIV). 13. Facility of production includes skill and appliances as well as fertility of soil, and in that sense, when suddenly introduced in a fertile country, it would for some time extinguish rent (XXXVI). 14. There is no real distinction between productiveness of industry and productiveness of capital ; and in the progress of society both of them will diminish, and rents will increase (XXXVI). 15. Wages do not rise when labour is productive unless the productiveness of the labour gives rise to a new capital that demands new labour (XXXVII). 16. There can be no such demand for new labour unless there is a reduction in the value of food (XXXVII). 17. The only permanent cause of diminished demand for capital is the increased price of food (XXXVIII). 18. Low prices are not necessarily a discouragement to production (XXXIX).  1 19. The need of cultivating less productive soils is the cause of higher nominal and lower real wages (XLII), and it is the only cause in constant and permanent operation (XLVIII, cf. LXIX). 20. Profits depend on wages ; wages on the supply and demand of labour, and on the cost of the labourers' necessaries (XLIX). 21. Profits will therefore rise if the last are easily produced, unless through stationariness of population demand for labour has increased (L). Oa tlilte of S ubj ects.  xxiii 22. In two lands with equal capital and equal population, but with different fertility of soil, profits would differ in favour of the more fertile (L). 23. The rate of interest is no sure indication of the rate of profits ; and a low rate of interest may co-exist with a low rate of wages and a high rate of profits (LXIII). 24. Profits cannot be said to depend on ` the proportion which capital bears to labour,' for, where profits were lowest, most capital would be needed to produce a given return, and, where highest, least, in proportion (LI). 25. By a rise in the value of money it is possible (though not probable) that a reduced cost of labour, materials, and machinery might be followed by an increase instead of a reduction, in their money value (LXIII). 26. A dearth may increase profits and wealth by making labour cheap (LXIII). 27. Free trade in corn may increase the amount of profits more than a policy of Restriction may increase the amount of Rents (LX VII, cf. LXX). 28. Rent is always a transfer, and never a creation of wealth (LIII, LXVIII). 29. There cannot be two rates of profit at the same time in the same country (LXXVIII), nor under free trade could there be a very different rate in different countries, the cost of necessaries and therefore the rate of wages being brought nearly to a level, allowance being made for differences between one country and another in regard to the standard of living (LXXIX). It seems impossible that under free trade a fertile country, unless agriculture were its sole and only industry, and its capital were small, would long continue to sell its corn at the high prices of its less favoured rivals ; the prices would fall to cost price (LXXX). In Letter LXV, and in Letters LXIX to LXXVII, the positions are as follows :- i I. Natural Price should not be described as depending, like Market Price, on Supply and Demand, for it can never permanently fall below or rise above the expenses of production (LXV). 2. A universal over-production is impossible (LXXII, LXXVII), and a glut of particular articles may be cured by a cessation in the production of those articles (LXXII) ; a ` superior genius ' might so lay out our capital even now, that all might be prosperous (LXXIII). xxiv  Outline of Subjects. 3. It is not demand, but supply, which regulates value, and supply is itself determined by comparative cost of production (LXXIII, LXXIV). 4. If all labour and capital were devoted to production of necessaries, there might then be an over-supply or general glut, of them ; but in no other case is such a glut possible (LXXIV, LXXVII). 5. Over-production tends to cure itself by destroying profits, and thereby removing the producer's motive for production. But production could not go on when this point had been reached, and therefore the over-production could not last (LXXVI). 6. The remedy would be not the greater consumption of non-producers, but the payment of lower wages, which means the securing of higher profits by the producers. When wages are excessive, the labourers are the unproductive consumers, and the employers who pay them are thereby causing instead of curing the over-production (LXXVI, LXXVII). 7. A diminished demand for labour may mean, not the employment of fewer men, but the payment of lower wages (LXXVII). In Letters LXXVIII to LXXXVIII the positions are :- I. It is better to take, as a Measure of Value, some foreign commodity [like gold], the cost of producing which is nearly invariable, than to estimate either by the amount of labour or by the amount of corn or of other goods generally that will be purchased by the article measured (LXXVII, LXXVIII). 2. There is nothing in the said labour which fits it to be a better measure of value than anything else ; but, on the contrary, to use it as a measure is to involve ourselves in paradoxes (LXXXIII, LXXXV to LXXXVIII). 3. There cannot be an absolute or universal measure of value, for there is no uniformity in the conditions under which commodities are produced, the time taken and the proportion and durability of the capital employed being, for example, very different (LXXXIV). LETTERS OF DAVID RICARDO TO THOMAS ROBERT MALTHUS. T. MY DEAR SIR,  STOCK EXCHANGE, 25th Feb., 181o. I HAVE just time, after a very busy day, to tell you that I will endeavour to get Mr. Mushet 1 to meet you at my house at breakfast on Sunday morning. At any rate I shall expect you, and, if Mushet is engaged, I shall be able to tell you whether he will meet us on Monday or Tuesday in the City. He is exceedingly obliging, and would I am sure not mind trouble if he could contribute to throw light on the subject of exchanges, yet I think he will not be inclined to publish anything under his own name as he gave great offence to the higher powers on a former occasion. You have clearly stated the point of difference now between us ; I think we never so well understood each other before. There are some causes which operate on the exchange which are in their nature of transitory duration ; there are others which have a more permanent character. If we agree that a change of taste in one country for the commodities of the other,  and the transmission of a subsidy will produce certain effects on the exchange,—the only question between us is as to their 1 Robert Mushet of the Mint. He published ' An Enquiry into the Effects produced on the National Currency and Rates of Exchange by the Bank Restriction Bill' in this very year 181o. B 2  Letters of Ricardo to Malthus. duration. I am of opinion that they will operate for a very considerable time and that in fact recourse is not had to bullion but as a last resort. I cannot believe that you give a correct account of' your habits of application any more than you did of your memory when I last saw you. From all my observations I should have been led to the very opposite conclusions from those which you have formed ; and I believe most of your friends would be of my opinion. When you have once fairly begun, I expect that you will advance at a giant's pace. I beg you to remember me kindly to Mrs. Malthus. I am, my dear Sir, Yours very truly, DAVID RICARDO. II. MY DEAR SIR, STOCK EXCHANGE, 22 March, I S i o. Mrs. Ricardo is expecting Mrs. Malthus to accompany her on Friday next to Knyvett's concert, and will, I am sure, be very much disappointed at the information which I am to give her that she will not be able to accompany you to town. I will not however quite give up all hopes of seeing her. You must positively not think of leaving us before Tuesday. I have engaged several of your friends to meet you at dinner on Monday, and I not only advance my own claims but those of Mr. Wishaw 1 , Mr. Sharp 2 , Mr. Tennant3, and Mr. Dumont 4. John Whishaw, of Lincoln's Inn, the editor of Mungo Park's `Life and Travels' (1815, etc.) : see Edin. Rev., Feb. IS15 ; Brougham's Statesmen in Time of George III,' ed. 1855, i. 369. 2 Richard Sharp, called ' Conversation Sharp,' author of ' Letters and Essays in Prose and Verse' (IS3 4 1, member of the Bullion Committee. a Probably Smithson Tennant, the chemist. 4 P. E. L. Dumont of Geneva, the friend of Mirabeau and Romilly, best known as the admirer of Bentham, whose works he brought out in French as Quantity and Value.  3 I have been making enquiries concerning a bullion merchant. I find that the trade is mostly carried on by a class of people not particularly scrupulous in their modes of getting money, and I am told that they would not be very communicative, particularly on the subject of their expoH8. There are however some well-informed merchants who know a great deal of the trade without themselves being actively engaged in it, to whom I hope I shall be able to introduce you. I do not admit that if you were to double the medium of exchange it would fall to half its former value, not even if you were also to double the quantity of metal which was the standard of such medium. The consumption would increase in consequence of its diminished value, and the fall of its value would be regulated precisely by the same law as the fall in the value of indigo, sugar, or coffee. Mr. Mushet will dine with us on Sunday. What do you think of Mr. Vansittart's financial talents ? Yours very truly, DAVID RICARDO. NoTF.—Speaking in the House of Commons on Agricultural Distress, on May 7, I 8 2 2, Ricardo gives an illustration which bears on some points in the foregoing and following letters : ` Suppose my own case. I a m possessed of a considerable quantity of land, the whole unburthened with a single debt. Now according to the honourable member (Mr. Attwood) I and the tenants on that land would have only been injured to the amount of the increase which the change in the value of money has made in the burthen of taxation; but we are in point of fact injured much more.' " The superabundant supply' has caused a sinking in the value of corn greater than in proportion to the additional quantity itself. To understand why, take the case of a commodity introduced for the first time, say a particular kind of superfine cloth : ` If 10,000 yards of this cloth a labour of love. See Bentham's Works, ed. Bowing, vol. x. pp. 184-5. Like Whishaw, Sharp, and Tennant, he was a member of the ` King of Clubs.' See following letter. B 2 1 o  Letters of Ricardo /o Malthus. particular article ; consequently there has been an increased demand for it and an augmented supply. This new use has made every man a dealer in bullion ; he buys it to sell it again, and the general competition of all these dealers will as surely, and as strictly, regulate its value in every country, as the competition of the same or other dealers will regulate the value of all other commodities. I have your sanction for calling every purchaser of commodities a dealer in bullion ; and, though in the language of commercial men the sellers of money are in all cases called purchasers, it is not on that account less true that they are sellers of one commodity and purchasers of another. The nature of corn was not changed by the discovery that a new use might be made of it by fermentation and distillation; and, if we should hereafter discover that it might be used for a hundred other purposes, contributing to the comforts and enjoyments of mankind, the demand for it would increase, and its price would in the first instance be considerably augmented ; but this would be the only change it would undergo ; it would continue to be imported and exported by the same rules as every other commodity. I have no doubt that on this point we should not differ ; it remains therefore for you to show why the new uses, to which gold has been applied in consequence of its being adopted as the money of the world, should exempt it from the general law of competition, and why it should not certainly and invariably (invariably only as that term is applied to other commodities) seek the most advantageous market. It is probable that the word `redundancy' has not been happily chosen by me to express the impression made on my mind of the cause of an unfavourable balance of trade ; but on looking over the article in the Review' I find that you use it precisely in the sense in which I wish to convey my meaning, for you admit that a relatively redundant ' Fdinb. Review, Feb. 'Su. See ' Malthus and his Work,' p. 285. Redundant Currency. currency may be, and frequently is, a cause of an unfavourable balance of trade ; but you contend that it is not the only cause. Now I, so understanding the word, contend that it is the invariable cause. This relative redundancy may be produced as well by diminution of goods as by an actual increase of money (or which is the same thing by an increased economy in the use of it) in one country ; or by an increased quantity of goods or by a diminished amount of money in another. In either of these cases a redundancy of money is produced as effectually as if the mines had become more productive. I do not deny that temporary fluctuations do occur in the value of the precious metals ; on the contrary I maintain that those fluctuations never cease ; but I attribute them all to one cause, namely a redundancy of the currency produced in one of the ways above mentioned, and not to the demand for particular commodities. These demands are in my opinion regulated by the relative state of the currency; they are not causes but effects. You appear to me not sufficiently to consider the circumstances [which] induce one country to contract a debt to another. [In] all the cases you bring forward you always suppose the [debit already contracted, forgetting that I uniformly contend that it is the relative state of the currency which is the motive to the contract itself. The corn, I say, will not be bought unless money be relatively redundant ; you answer me by supposing it already bought and the question to be only concerning the payment. A merchant will not contract a debt for corn to a foreign country unless he is fully convinced that he shall obtain for that corn more money than he contracts to pay for it, and, if the commerce of the two countries were limited to these transactions, it would as satisfactorily prove to me that money was redundant in one country as that corn was redundant in the other. It would prove too that nothing but money was redundant. If indeed sugar were exported TI I2  Letters of Ricardo to Malthus. by some other merchant, the debt for corn would be paid without the exportation of money, and I should say that sugar was the redundant commodity; and the exportation of sugar, the more redundant commodity, by diminishing the aggregate amount of commodities, would raise the value of money, so that in a short time money would, if corn continued to be imported and sugar exported, no longer be redundant even as compared with corn. Your observation is just, concerning the extra expenses attending the exportation of bulky commodities ; but in all these discussions we must suppose these expenses to make part of the price of the commodity; our comparison is made on the prices at which the importer could afford to sell them, and those prices necessarily include expenses of every sort. I do not think that the knowledge of the computed exchange of Jamaica would throw any light on the subject in dispute 1• I will, however, endeavour to learn every particular concerning it, and hope to be able on Saturday next to pay you a visit in Hertfordshire, when we will further discuss these seeming difficulties. I am, dear Sir, with great respect, Your obedient Servant, DAVID RICARDO. THROGMORTON STREET, 18th June, 181I. VII.2 DEAR SIR, I have been so much engaged since I had the pleasure of receiving your letter that I have not had an opportunity of answering it till this evening. The information which you are desirous of obtaining respecting the premium on bills in Jamaica from the year ' Some information on that point had been given by Mr. Thomas Hughan, a West Indian merchant, before the Bullion Committee (Evidence, pp. 55-61). 2 Franked by Richard Sharp. Defini tion of Redundant.  i 1808 to the present period, I will endeavour to procure, but, as these transactions all take place in Jamaica, and as the merchants here are frequently not acquainted with the prices at which the bills remitted to them are negociated, I am not sure that I shall be successful. I very much regret that there is so little probability of our finally agreeing on the subject which has lately engaged our attention. The definition which you give of the word redundant,' as applied to the currency, is not satisfactory to me. Though it should be allowed that the rise in the price of one commodity, in the case of a scarcity of corn, should be e accompanied with a fall in the prices of all others, why should a redundancy of currency be impossible under such circumstances ? The currency must, I apprehend, be considered as a whole, and as such must be compared with the whole of the commodities which it circulates. If then it be in a greater proportion to commodities after than before the scarce harvest, whilst no such alteration has taken place in the proportions between money and commodities abroad, it appears to me that no . expression can more correctly describe such a state of things than a ` relative redundancy of currency.' Under these circumstances not only money but every other commodity would become comparatively cheap as compared with corn, and would therefore be exported in return for the corn which would be in demand in this country. By relative redundance then I mean, relative cheapness, and the exportation of the commodity I deem, in all ordinary cases, the proof of such cheapness. Indeed, from one who allows that the amount of money employed in any country is regulated by its value, and might therefore be comparatively redundant though it consisted only of a million, or deficient though it amounted to a hundred millions, I should not have expected any difference of opinion on the comparative cheapness of money being the only satisfactory ^ J r 4  Letters of Ricardo lo Malthus. proof of its redundance. If however I thought that the difference between us was as to the correct use of a word, I should immediately yield the point in dispute, but I am persuaded that we do not agree in the principle. You are of opinion that a bad harvest will raise the price of corn, but will lower in some degree the prices of other commodities. Whether it would or would not do so is not material ; but, if your opinion is correct, then I say there would be no exportation of money, because money would not be the cheapest exportable commodity. If, before the deficient harvest, money was at the same value in any two countries, that is to say all their exportable commodities without exception were at the same prices in both, then, according to your view of the question, after the scarcity the prices of all commodities would fall in the country where such scarcity occurred. Whilst then the prices were unequal in the two countries, commodities only would be exported in exchange for corn, and there would be no question between us, because we differ as to the cause of the exportation of money. You have indeed said that there may be a glut of commodities in the foreign market. What ! a glut of commodities with a dearer price ! impossible,—these two circumstances are incompatible. If the price of any commodity had been £20 in both countries and in consequence of the bad harvest it had been lowered to £15 in one of them, there could not be a glut of that commodity in the other country till it had there also fallen to :1215. Not only must the price of one commodity fall in the foreign market, but the prices of all (because you suppose them all to have fallen in England) before money could be exported in exchange, for corn, and then I would allow that money would be exported, but even then it would be so only because it was more cheap on the whole, as compared with commodities in the exporting country, and this I contend is Depreciation measured by Exchanges.  I 5 the proof of its relative redundance. You maintain that money is rendered cheap by a bad harvest as compared with corn only, but with all other commodities it is dearer than before,—and then, what appears to me very inconsistent, you insist that this commodity thus rendered scarce and dear will be exported, though, before it had increased in value, it had no tendency to leave us, whilst too there are commo.dities which have undergone an opposite change, which from being dearer have become cheaper, and which will nevertheless be obstinately retained by us. This is a mode of reasoning which I cannot reconcile. With respect to the other point, namely, that the exchange accurately measures the depreciation of the currency 1 , I cannot but humbly retain that opinion notwithstanding the high authorities against me. I do not mean to contend that a convulsed state of the exchange, such as would be caused by a subsidy granted to a foreign power, would accurately measure the value of the currency, because a demand for bi ll s arising from such a cause would not be in consequence of the natural commerce of the country. Such a demand would therefore have the effect of forcing the exports of commodities by means of the bounty which the exchange would afford. After the subsidy was paid the exchange would again accurately express the value of the currency. The same effects would follow, as in the case of a subsidy, from the foreign expenditure of Government. These have a natural tendency to create an unfavourable exchange, yet if the demand for bills is regular it is surprising how this bounty on exportation will be reduced by the competition amongst the exporters of commodities. I am of opinion that in the ordinary course of affairs, if, from any of the circumstances so often mentioned, there should be a slight alteration in the value of the currencies of any two countries, it 1 See note to Letter XII. 1 6  Letters of Ricardo fo Malthus. will speedily be communicated to the exchange ; and, if such a state of things should permanently continue, the exchange has no tendency to correct itself. The fact however appears to be that there is no degree of permanence in the proportions between the currencies and the commodities of nations,—they are subject to constant fluctuations always approaching an absolute level but never really finding it. I hope I have not wearied you with the defence which I have endeavoured to make for the opinions which I have imbibed. I assure you that I am not obstinately attached to any system, but am ready to relinquish any views I may have taken as soon as I am satisfied that they are incorrect. I shall not fail attentively to consider the chapters in Sir J. Steuart's work which you have mentioned'. I hope before the summer is over to pay you a visit at Hertford. I am, dear Sir, Yours very sincerely, DAVID RICARDO. NEW GROVE, MILE END, I7 July, 181t. DEAR SIR,  VIII. I hoped long ere this to have had the pleasure of seeing you in London. I am anxious for an opportunity of introducing Mrs. Malthus and Mrs. Ricardo to each other, and I shall certainly claim the half promise which Mrs. Malthus made me on that subject when I experienced your hospitality at Hertford. We have few engagements, and have a bed always at your disposal, so that I shall hope on your very first visit to London you will favour me by occupying it. 1 The passages were probably the first three or four chapters of the third book of Sir Jas. Steuart's ` Inquiry into the Principles of Political Economy' (Ist ed. 1767), more especially ch. iii, ` Is the loss which the course of exchange marks upon the trade of Great Britain with France real or apparent?' Ricardo as a n A ZLfhoY.  i 7 A. friend of mine has been writing on the subject of bullion. I take the liberty . of sending you the MS 1 . If you could look over it and give me your opinion of it you will much oblige me. He would be induced to prepare it for the press if he thought that the mode in which the argument is put is more likely to silence our adversaries and convince those who are not our adversaries than the mode in which it has been put by any other person. Should you be so engaged that you cannot devote your attention to it at the present time, use no ceremony with. me, but return the MS. by the coach, directed to me at No. 16 Throgmorton Street. With best respects to Mrs. Malthus, I am, dear Sir, Yours very truly, DAVID RICARDO. STOCK EXCHANGE, 17th OCt., I8ii. Ix, DEAR SIR,  THROGMORTON STREET, 2212d Oct., 1 81 I. I am exceedingly obliged to you for the trouble which you have taken in looking over the papers which I sent you, and for the remarks which you have made upon them. Notwithstanding your uttering encouragement I think I shall not have sufficient confidence again to address the public ;—the object which I had in view is completely attained,—the public attention has been awakened, and the discussion is now in the most able hands. I regret, however, that you cannot bring yourself to subscribe to my doctrine respecting the exchange being influenced by no other causes but by the relation which the amount of currency bears to the uses for which it is required in the 1 Ricardo's `Appendix to the fourth edition of his tract on the ' High Price of Gold Bullion.' This Appendix embodies most of the opinions set forth in these early letters. See his works (ed. McCulloch) pp. 291 seq. Cf. ` Malthus and his work,' p. 287. C r 8  Letters of Ricardo lo Ma/Mils. different nations of the earth. This may proceed from your interpreting my proposition somewhat too rigidly. I wish to prove that if nations truly understood their own interest they would never export money from one country to another but on account of comparative redundancy. I assume indeed that nations in their commercial transactions are so alive to their advantage and profit, particularly in the present improved state of the division of employments and abundance of capital, that in point of fact money never does move but when it is advantageous both to the country which sends and the country that receives that it should do so. The first point to be considered is, what is the interest of countries in the case supposed ? The second what is their practice ? Now it is obvious that I need not be greatly solicitous about this latter point ; it is sufficient for my purpose if I can clearly demonstrate that the interest of the public is as I have stated it 1 . It would be no answer to me to say that men were ignorant of the best and cheapest mode of conducting their business and paying their debts, because that is a question of fact not of science, and might be urged against almost every proposition in Political Economy. It rests with you therefore to prove that a case can exist where it may become the interest of a nation to pay a debt by the transmission of money rather than in any other mode, when money is not the cheapest exportable commodity,—when money (taking into account all expenses which may attend the exportation of different commodities as well as money) will not purchase more goods abroad than it will at home. You appear to me to have repeatedly admitted that it is the relative prices of commodities which regulates their exportation. Is it not 1 ` It is self-interest which regulates all the speculations of trade; and, where that can be clearly and satisfactorily ascertained, we should not know where to stop if we admitted any other rule of action.' Appendix to ` High Price of Bullion ' (Works, p. 292). Interest and Practice of Nations.  r 9 then as certain that money will go to that country where the major part of goods are cheap, as that goods will go to any other country where the major part are dear ? I say the major part, because if the cheapness of one half of the exportable commodities be balanced by the dearness of the other half, in both countries, it is obvious that the commerce of such countries will be confined to the exchange of goods only. When you say that money will go abroad to pay a debt or a subsidy, or to buy corn, although it be not superabundant, but at the same time admit that [it] will speedily return and be exchanged for goods, you ap[pear to me] to concede all for which I contend, namely, that [it will] be the interest of both countries, when money is not superabundant in the one owing the debt, that the expense of exporting the money should be spared, because it will be followed by another useless expense,—sending it back again. If in any country there exists a dearness of importable commodities and no corresponding cheapness of exportable commodities, money in such country is above its natural 9: level and must infallibly be exported in payment of the dear commodities,—but what does this state of things indicate but an excess of currency, and it may surely be correctly said that money is exported to restore the level not to destroy it. I ought to apologise for again troubling you with my opinions, but you have drawn me into it. I shall be happy to renew our conversation on these disputed points as soon as you can make it convenient to visit us in London, and I trust it will not be long before Mrs. Malthus and you will favour us with your company. On some future day I shall have great pleasure in again visiting you at Hertford. I ani, dear Sir, Yours very truly, DAVID RICARDO. u^ ^ 26  Leiters of Ricardo lo Malthus. favourable exchange which may not be corrected by a diminution in the amount of the currency, and I consider this to afford a proof that the currency must be redundant for a time at least. Whilst the exchange is unfavourable it is always accompanied, though not always caused, by an excess of currency. With best respects to Mrs. Malthus, I am, my dear Sir, Yours most truly, D NID RICARDO. . . . As I was about leaving the city I received Mr. Thornton's answer. He is engaged on Wednesday and Thursday, and has fixed on Monday for our meeting, but he wishes us to meet at his house as there is to be a debate in the House of Lords on the Bullion question, and he is not sure that his presence may not be necessary in the Commons. I will settle this point with him, and if you do not hear from me I shall expect you at my house on Monday, if you do not agree to come on Saturday evening. NOTE.  Thomas Tooke, in his `History of Prices and of the State of the Circulation from 1839 to 1847' (publ. 1848) í , refers to this dispute between Ricardo and Malthus, on the relation of the currency to the balance of trade, and quotes long extracts from the article of Malthus in the Edinburgh Review, where (as in this correspondence 2 ) Malthus maintains that the precious metals are continually used in payments made by one country to another even if, till that moment, the currencies of both have been at their usual level. The view of Ricardo is that nothing but the state of the currency can influence the foreign exchanges. As late as 184o statesmen clung to the idea that the Directors of the Bank of England could only operate on the exchanges by increasing or diminishing the circulation 3 . Tooke (followed later by Newmarch, hardly a less authority) sides with Malthus, and thinks that Part III. ch. i. § 5 : ' On the Opinions of the Bullion Committee on the Phenomena of the Circulation in 1809-1811,' pp. Ioo -i See especially Letters IV and VI.  s Tooke, Hist. of Prices, p. 359. Ultra-Bulliouists. Ricardo's reply to him, in the Appendix to the Tract on Bullion, is ` little more than a repetition in varied forms of expression, according to the phraseology peculiar to the theory in question, of the axiom that gold will not be exported unless it is cheaper than another commodity, assuming consequently the fact to have been that all commodities were at that time dearer in this country than they were abroad, and relatively to gold;'—whereas it appears 1 that between 1809 and 1811 the hulk of commodities were at a far higher price (measured in gold) on the Continent than in England ; the ` continental system' had forced vast stores of goods to lie unsaleable in England for want of physical ability, on the part of the merchants of them, to land them on the Continent, though they did their best to smuggle them by way of Heligoland or Turkey into Germany and the door of Portugal was ajar. Coffee was unsaleable in England at 6c1. the pound, and at the same time it was fetching 4s. or 5s. on the Continent. Napoleon used to look at the English price current, and, if he found gold dear and coffee cheap in England, he was satisfied that his Berlin and Milan decrees were well carried out, while the English saw only another proof that the Bank was extending its issues overmuch. Tooke and Malthus agreed that the difference between the market price and the mint price of gold bullion was the full measure of the depreciation of the currency; but the ultra-bullionists ' would not stop there. Tooke, like Ricardo on another occasion (see Letter XLII), had to ` write a book to convince' them, namely his ` Thoughts and Details on the High and Low Prices of the last Thirty years,' (1823). XIII. MY DEAR SIR, LONDON , 30t7a Dec., 1813. I have been amusing myself for one or two evenings in calculating the exchanges, price of gold, etc., at Amsterdam, and I enclose the result of my labour. I have every reason to believe that my calculations are correct,—though 2 7 As was shown also in ` Letters on the Corn Laws,' by H. B. T. (J. Deacon Hume.) London, 1834. 2 8  L etters of Ricardo lo Malthus. I am somewhat puzzled at the profit which there appears to be on the importation of gold from Amsterdam, if the prices there be quoted correct [sic]. If the difference were the other way, we might ascribe it to the money of Holland not being so good as it ought to be by the mint regulations ; but in the present instance for guilders, as good as they are coined, gold can be bought 91 per cent. cheaper than in London. I am told that gold which cannot be exported has sunk considerably in price although gold that may be exported keeps its price. I fully expect that foreign gold will be lower. We have had a continuance of foggy weather ever since Monday. We are obliged to burn candles during the day, and at night it is with the greatest difficulty we can find our way to our homes. I hope you are more fortunate and breathe a clearer atmosphere. We shall expect you in Brook Street on your next visit to London. Have the goodness to write the day before you come. With best wishes to Mrs. Malthus, I am, dear Sir, Yours very truly, DAVID RICARDO. [TABLES ENCLOSED IN LETTER XII.] Columns 11 and 12 will show on inspection whether silver be passing from London to Amsterdam or from Amsterdam to London. Suppose the price of silver in London to be 6s. 7d. and the exchange with Amsterdam 288. Against 6$. 7d. in column II the par of exchange is 29 . 41 in column 12 ; consequently being at 28 it is unfavourable to Amsterdam, and silver can be exported from Amsterdam to London with a profit of 5 per cent. Exchange with Holland. If under the same circumstances the exchange had been 3 1, silver could have been exported to Amsterdam with a profit of 5 per cent. Columns 8, 9 and 10 will show from which country gold may be profitably exported. Suppose the price of gold in. Amsterdam to be 16 per cent. premium, the agio 3 per cent., the exchange with London 31, and the price of gold in London £5 ios., from which country would gold be exported and with what profit ? Against 16 per cent. in column i the par of exchange in column 8 is 39 . 64, and against L5 1 os. the price of gold in London in column 9 the multiplier . 708 stands in column 10. 39.64 multiplied by . 708 gives 28 . 06 as the par for bank notes ; therefore, when the exchange is at 31, it is unfavourable to Holland, and gold may be exported from thence with a profit of 102 per cent. nearly. Or thus : an oz. of standard gold, when the marc could be bought at 16 per cent. premium at Amsterdam, would cost 154.3 Flemish shillings banco, when the agio was 3 per cent., which reduced into English money at 31 [Flemish] shillings per X sterling will give ,E4 19s. 64d. But it will sell in London for £5 ios. which is a profit of 104- per cent. nearly. 2 9 1  2  31 4 5 6 = Price of geld at ;1 msterdam, Premium on f. 333 per marc. Value of a marc in current guilders. Corresponding price of an oz. of standard gold in London. Corresponding price of aux oz, of standard silver in London. Value of an oz. of standard gold in Flemish current shillings. - Value of an oz. of standard gold in Flemish Italic() shillings. Agio 3 p. c. Par f. J55 JJ3J £  s.  d. 6S•oo pence 137  133 I p. c. prem.  358.55 67.32  138.4  134.3 2  „ 3  >> 362.10 365.65 66.67  139.8  ,  13^•7 66.02  1 4 1 '3  137.2 4  >> 369.2o 65.38  142 . 5  138.6 5 372.75 64.76 1 43 • 9  139.5 6  „ 376.3o 64.15 141.3  141.I 7 379.85 63.55 146.6  14 2•5 8  „ 383.40 62.96 1 4 8  ^  143.9 9  „ 386.95 62.39 1 49 . 3  145• 3 389.37 3 17 10; 62 150.3  146.0 Io 390.50 3 1S  I 150.7  146.3 II 394.05 3 IS IO 152•1  ^  147.6 12  397.6o „ 3 19 15 3 . 5  149.0 13  „  401.15 4 °  3 1 5 4.8  15o•3 14  404.70 4  0 1I; 156.2 151•7 15  4o8.25 4  1  5 15 7 .5 152.9 16 411.80 4  2  4z 1 5 8 • 9  154.3 17 415.35 4  3  °z 160.3 1L 5.6 18  „ 4i8.9° 4  3  9 161.7 157.0 19  ,,  422.45 20  426 4  4  5 i 4  5  2 16 3 .1 16 4 . 5 158.3 15 9 .6 2I ,,  429.55 4  5 1Ói 165.5 161.0 Leiters of Ricardo fo Malíhus. 1 When the price of gold in Holland is above 10 p.c. premium, and the mint in England is open to the public, silver will be the standard in London. Consequently its market and mint prices will agree, and gold will be above the mint price. When under To p.c., silver will be above the mint price, and gold will be the standard. When the price of gold in Holland was above 9 p.c. premium, the English £ sterling would be estimated in silver and therefore the par of exchange would invariably continue 38.61 currency ; and 37 . 4 8 Banco if the agio were 3 p.c. The agio is variable, but is supposed to be constant in this table for the purpose of calculation. A mare weight = 3798 grains troy. A marc is divided into 512o ousel' a, 200 onsen a of pure silver in a guilder. Gold and silver are sold by tile mare in Holland perfectly pure l'. British standard-gold II fine, 1 alloy; silver 11 . 2 fine, IS dwts. alloy. a The word is indistinct. b The gold mark is meant. See Adam Smith's account of the Bank of Amsterdam in Wealth of Nations,' 1V. iii. p. 212 n. (McCulloch's ed.), Exchange with Holland. i J 7 8 9 10 11 12 Real par of exchange in Flemish Real par of exchange in mish Banco Flemish When the price of gold The bullion Price of standard silver in Par of exchange with current shillings  £ per in London par must be London in Amsterdam shillings per £ sterling in gold. sterling in gold, Agio 3 p. c, in beak Ilotes is multiplied by bank notes per oz. in Banco. Agio 3 p, c. £  s.  d. s.  d. 35 .2o 34.17 ( i. )  35 . 55 34.51 4  o  o .973 5  2 37.48 ( 2. )  35 . 9 0 34.85 4  I  o .961 5  3 36.88 (3.)  36.25 35.19 4  2  o .949 5  436.6o (4 . )  36.61 35.54 4  3  0 .938 5  5 35.75 (5 . )  36.95 35.87 4  4  0 •927 5  6 35.21 ( 6. )  37.31 36.22 4  5  0 •916 5  7 3468 (7 . )  37.66 36.56 4  6  o.905 5  8 34.17 (8.)  38.01 36.90 4  7  0 .895 5  9 33.67 (9.)  38.36 37.24 4  8  o .885 5 Io 33.19 ...  38.61 37.48 (1o.)  38.71 37.58 4  9  0 .875 5  11 32.72 (11.)  39.06 37.92 4 io  o .865 6  o 32.27 (12.)  39.62 33.27 4 ii  o .856 6  I 31.84 ( 1 3 . )  39.77 38.62 4 1 3  0 .838 6  2 31.42 ( 1 4 . )  4 0.12 38.96 4 1 5  o .82o 6  3 30.98 ( 1 5 . )  40 . 48 39.30 4 1 7  o .803 6  4 30.58 (16.)  40.83 39.64 4 1 9  0 .786 6  5 30.17 ( 1 7 . )  41 . 18 39.98 5  o  0 .779 6  6 29.79 (is.)  4 1.5 4 40.32 5  2  0 •764 6  7 29.41 ( 1 9 . )  4 1.8 9 4o.67 5  4  0 .749 6  8 29.04 (20.)  4 2.2 4 41.02 5  6  o .735 6  9 28.69 (21.)  4 2. 59 41.36 5  8  o .721 6 io z8•33 5 Io  o •7o8 6  11 27.99 7  0 27.66 7  1 27.32 7  2 27.02 7  3 26.71 7  426.40 7  5 26.11 7  6 23.82 J2  LelleYs of Ricardo fo Ma//hits. XIV. MY DEAR SIR, Having finished a table for the Hamburgh exchanges, similar to that which I have already sent you for Holland, I thought you might like to have a copy of it 1 . in this as well as in the other the result is not quite satisfactory ; for example, at the present time I believe the exchange with Hamburgh is quoted 28s. and the price of dollars 6s. r icd. By the table it appears that with [such] a price of dollars the exchange at par would be 25s. ; consequently it is now unfavourable to Hamburgh 12 per cent., which appears to me to be excessively high. In fact, under the present circumstances, there can be no intercourse with Hamburgh, and the quotation must be only nominal. Mrs. Ricardo acid I leave London to-morrow early for Bradford ; from thence we intend going to Gatcomb and expect to be in town again on Thursday. I hope we shall soon see you. With best wishes to Mrs. Malthus, I am, dear Sir, Yours very truly, DAVID RICARDO. A good commentary on these Tables and on the whole of these early letters will be found in the Evidences of the Witnesses examined before the Bullion Committee (181o). 2 His favourite country-seat, in Gloucestershire. LONDON, I Jan., 1814. Price of a ducat or 53 grains of tine gold in marks banco. Price of an oz. of standard gold in Flemish shillings banco. Par of exchange with London in Flemish shillings banco per £ sterling of gold. Corresponding price of an oz. of standard sil ver in Loudon in pence. Corresponding price of an oz. of standard gold in London in L, etc. When the price of gold iii London bank-notes is per oz. The bullion par of exchange must be multiplied by When the price of dollars in London is per oz. The par of exchange in silver is £  s.  d. , s.  d. 5.39 5 . 45 119.33 120.66 30.60 30.94 70.97 70.19 4  o  o 4  I  o .973 .961 4 112 5 35.08 34.22 5.51 12I.99 31 • 28 69.43 4  2  0 .949 5  22 33.39 5.57 5 .6 3 5.69 5-75 5.81 123.32 124.65 12 5.98 1 27.31 128.64 31 • 63 31.97 32.33 32.68 33.03 68.68 67.95 67.23 66.53 65.84 4  3  o 4  4  o 4  5  o 4  6  o 4  7  0 • 938 • 927 .916 •9°5 .895 5  4 5  5z 5  8 ' 2 5 Io 32.61 31.87 31.15 30.47 29.82 '7"; ti Ñ co 5 . 87 129.96 33.37 65.17 4  8  o .885 I I Z 29.19 5 . 93 5 . 99 131•9 132.6 2 33•72 34.07 64.51 63.86 4  9  o 4 Io  o.875 •865 6  1 6  22 28.59 28.02 ti 6.0 5 133.95 34.42 63.23 4 II  o •856 6  4 27.46 6.11 135.28 34.76 62.61 4 1 3  o .838 6  52 26.93 6.17 6.2 3 6 .2 9 6. 35 136.61 137.92 139.25 140.57 35.08 35.42 35.76 36.11 62 3.893 3'931 3.968 4'0O5 4 15  o 4 1 7  o 4 1 9  o 5  o  o •820 • 803 .796 .779 6 6  s I 6 I0 2 6 I1 2 26.42 25.93 25.46 25 6.41 6. 47 141.89 143.21 36.45 36.79 4.043 4.081 5  2  0 5  4  o • 764 .749 7  I 7  2 24.55 24.13 Gó 6. 53 144.54 37.14 4.119 5  6  o •735 6. 5 9 1 4 5.86 3 7.48 4.157 5  8  o .721 6.65 147.19 37.83 4.195 5 Io  o .708 6.71 148.51 38.18 4.233 6. 77 149•84 38.52 4.270 6.8 3 151.17 38.87 4.308 6.89 152.50 39.22 4.346 N.B.-3 marks are equal to S Flemish shillings banco. When dollars are 48. ii;d., standard is 21d. more. When 6s. id., 3d. more. When 7s., 3p. more. 34  Letters of Ricardo to Malthus. XV [Addressed to Penr[h]yn Arms, Bangor, North Wales.] DEAR SIR,  LONDON, 26 June, 1814. MY .... I cannot partake of your doubts respecting the effects of restrictions on the importation of corn in tending to lower the rate of interest. The rise of the price or rather the value of corn without any augmentation of capital must necessarily diminish the demand for other things even if the prices of those commodities did not rise with the price of corn, which they would (tho' slowly) certainly do. With the same capital there would be less production and less demand. Demand has no other limits but the want of power of paying for the commodities demanded. Everything which tends to diminish production tends to diminish this power. The rate of profits and of interest must depend on the proportion of production to the consumption necessary to such production,—this again essentially depends upon the cheapness of provisions, which is after all, whatever intervals we may be willing to allow, the great regulator of the wages of labour. Nothing can tend more effectually to diminish the demand abroad for our manufactures than to refuse to import corn and other commodities which we [had] usually taken in exchange for such manufactures. If we rigorously refused to import any [foreign] commodity whatever, I firmly believe that we should soon cease to export any commodity, even if we made gold an exception to the general rule. Our money would stand at a higher level than in other countries, but there aro limits beyond which it could not go. All trade is at last a trade of barter, and no nation will long buy unless it can also sell,—nor will it long sell if it will not also buy. If by adopting such policy [sic] a country were to enhance the value of the raw materials which it consumed, Proie'cizo7z and Raie of I n ieYesi.  35 of which corn is the principal, it would thereby lower the rate of interest. If otherwise, it might be deprived of many luxuries and many comforts, or might enjoy them in less abundance, but the rate of interest would not fall. This is a repetition, you will say, of the old story, and I might have spared you the trouble of reading at 200 miles distance what I had so often stated to you as my opinion before ; but you have set me off, and must now abide the consequences. I never was more convinced of any proposition in Political Economy than that restrictions on importation of corn in an importing country have a tendency to lower profits. Remember me kindly to Mrs. Malthus. Yours very truly, DAVID RICARDO. XVI. GATCOMB PARK, NEAR MINCHIN HAMPTON, GLOUCESTERSHIRE, 25th July, 1814. MY DEAR SIR, I am writing to you from Gatcomb, where I arrived with S  as my companion yesterday afternoon. To enable me to quit London at the time I did I was obliged. to bestow an unusual degree of attention to business of all sorts, and, though I had written a letter to you in answer to your last before I left Brook Street, I was so dissatisfied with it that I could not resolve to send it. I shall, I fear, succeed no better now, but you shall have it whatever it may be, as, if I defer writing any longer, you may have quitted Bangor before my letter arrives there 1 . It appears to me that you have changed the proposition on which we first appeared to differ. The proposition advanced by you, if I recollect right, was that restrictions on the importation of corn would not lower the rate of profits and interest,- 1 This actually happened; and the letter is re-addressed first to 'Aylesbury' and then to ' Hayleybury'. 4 2  Letters of Ricardo lo Malthus. to demand is greater in the former country. I think it must necessarily be so in all countries which are móst rapidly increasing in riches, for from whence do riches come but from production preponderating over consumption ? Profits are sometimes high when corn is scarce and dear ; but this arises from the stimulus which the high prices give to industry. If the population could immediately accommodate itself to the scanty supply, no such effects would follow ; and in fact they only continue till time has gradually equalised them. I sometimes suspect that we do not attach the same meaning to the word ` demand.' If corn rises in price, [you] perhaps attribute it to a greater demand. I should [attribute it to] a greater competition. The demand cannot, I think, be said to increase if the quantity consumed be diminished, although much more money may be required to purchase the smaller than the larger quantity. If it were to be asked what the demand was for port-wine in England in the years 1813 and 1814, and it were to be answered that in the first year she had imported 5000 pipes, and in the next 4500, should we not all agree that the demand was greater in 1813 ? Yet it might be true that double the quantity of money was paid for the 4500 pipes. Have you read the report of the Lord[s] Committee on the Corn question ? It discloses some important facts ; but how ignorant the persons giving evidence appear to be of the subject as a matter of science ! The Editor's remarks too are very unworthy of his paper. . . . With best compliments to Mrs. Malthus, I am, yours truly, DAVID RICARDO. NoTE.—The ` Editor ' was Lord Hardwicke, who moved for the Committee moth June, 1814, and presented its report to the House on 23rd Nov. 1814. See Hansard, under date Feb. 17, 1815, p. 796 NaluYe of De m a nd. Ann. Register 1815, Gen. Hist. p. 13o. The reports were ` ordered to be printed' 25th July, 1814. The first was on a single sheet, and was simply a complaint that the Committee could not take evidence ; the second reported that they had heard evidence, but thought that before any certain conclusions could be reached the inquiry must go on further. There is a copiously annotated copy of them in the ` Place ' Collection in the British Museum. XIX. MY DEAR SIR,  G APCOMB PAIu , i6 Sept., 1814, . I agree with you that, when capital is scanty compared with the means of employing it, from whatever cause arising, profits will be high. Whether temporarily or permanently must of course depend upon whether the cause be temporary or permanent. It is, however, very important to ascertain what the causes are which make capital scanty compared with the means of employing it, and how far, when ascertained, they may be considered temporary or permanent. It is in this inquiry that I am led to believe that the state of the cultivation of the land is almost the only great permanent cause. There are other circumstances which are attended with temporary effects of more or less duration and frequently operate partially on particular trades. The state of production from the land, compared with the means necessary to make it produce, operates on all, and is alone lasting in its effects. We agree too that effectual demand consists of two elements, the power and the will to purchase ; but I think the will is very seldom wanting where the power exists, for the desire of accumulation will occasion demand just as effectually as a desire to consume ; it will only change the objects on which the demand will exercise itself. If you 43 44  Letters of Ricardo to Malthus. think that, with an increase of capital, men will become indifferent both to consumption and accumulation, then you are correct in opposing Mr. Mill's idea', that in reference to a nation supply can never exceed demand; but does not an increase of capital beget an increased inclination for luxuries of all descriptions ? and, though it appears natural that the desire of accumulation should decrease with an increase of capital and diminished profits, it appears equally probable that consumption will increase in the same ratio. Exchanges will be as active as ever ; the objects only will be altered. If demand appears more active where capital is scarce, it is only because the power to purchase is comparatively greater. Wherever capital is scanty, the necessaries of life are cheap, if the country is commonly fertile ; and, as capital and population increase, the necessaries of life rise in price, and thus is the power of purchasing, though really greater, comparatively less. In a country with little comparative capital, the value of the yearly produce may very rapidly increase ; and, if it be said to be in consequence of the greatness of demand, I should contend that in such country the demand would not be limited in the same degree by a want of power as in a country abounding in capital, and merely because provisions would not rise in the same proportion in the two countries. If half as much corn [again] as usual were produced next year, a great part of it would undoubtedly be wasted ; and the same might be said of any commodities which we might be ingenious enough ' Announced as early as 18(27 in the reply to Spence (` Commerce Defended '). Ilicarclo's friendship with James Mill seems to have begun about the year 1811: ` With an estimate of his [Ricardo's] value in the cause of mankind, which to most men would appear to be mere extravagance, I have the recollection of a dozen years of the most delightful intercourse, during the greater part of which time he had hardly a thought or purpose, respecting either public or his private affairs, in which I was not his confidant and adviser.' Letter of J as. Mill to MacCulloch, 19th Sept. 1823 (Bain's Life of Jas. Mill, p. 209). Waltz's Unli»ai í^cl. to name : but the real question is this-- If money should retain the same value next year, would any man (if he had it) want the will to spend half as much again as he now does ? and, if he did want the will, would he feel no inclination to add the increase of his revenue to his capital and employ it as such ? In short, I consider the wants and tastes of mankind as unlimited. We all wish to add to our enjoyments or to our power. Consumption adds to our enjoyments, accumulation to our power, and they equally promote demand. Mrs. Ricardo and I are going this morning to Cheltenham, which is eighteen miles distant from us ; we shall return to-morrow. Mr. Smith 1 , whom I met at your house, lives about nine miles from here. . . . I hope you recollect that we are not quite twentyeight miles from Bath. You and Mrs. Malthus might, I think, give us the pleasure of your company for a few days during your Christmas vacation and might at the same time visit your friends ; but as you have seen them so lately you would give us great pleasure if you would give us the whole of your time. Mrs. Ricardo, who is standing by me, has made me express myself in a more than usually bungling manner. She unites with me in kind regards to Mrs. Malthus. Yours very sincerely, DAVID RICARDO. XX, MY DEAR SIR,  GATCOMB PARK, 23n1 Oct., 1814. On the day that you were writing your last letter to me, I was travelling to London with Mrs. Ricardo, 1 Thomas Smith of Easton Grey. His naine is ou the list of subscribers to Hone's Testimonial, 1818. 2 Malthus was in the habit of spending his Christmas with his wife's relations at St. Catherine's near Bath, and it was in one of these visits that he died there, 183 4 . See Malthus and his Work, P . 415. 45 L elleYs of Ricardo lo Malilaus. where my business detained me a little more than a week. On my return your letter was delivered to me. I am sorry that you cannot make it convenient to pay us a visit at Christmas. I shall however depend on your not allowing any common occurrence to prevent you and Mrs. Malthus from favouring 1 us with your company during your next summer vacation. I hope you will not repent having set me the example of using a larger sized paper. If you are tired with my long letter, you only will be to blame for it. It does not appear to me that we very materially differ in our ideas of the effects of the facility or difficulty of procuring food on the profits of stock. You say that I ` seem to think that the state of production from the land compared with the means necessary to make it produce is almost the sole cause which regulates the profit of stock and the means of advantageously employing capital.' This is a correct statement of my opinion, and not, as you have said in another part of your letter and which essentially differs from it, ` that it is the quantify of produce compared with the expense of production that determines profits.' You, instead of allowing the facility of obtaining food to be almost the sole cause of high profits, think it may be safely said to be the main cause, and also a difficulty of acquiring food the main cause of low profits. There appears to me to be very little difference in these statements. You infer that my doctrine is not correct because improvements may take place in agriculture or manufactures, because new leases may not be granted precisely at the time of the rise in the price of raw produce, and because the price of labour may not rise without delay in the same proportion. But improvements in agriculture or in machinery which shall facilitate or augment production will according to my proposition increase profits because ` it will augment production compared with the means ' Here and elsewhere spelt ' favoring '• 46 Prices and Profits.  47 necessary to that production.' The same may be said of the wages of labour not rising in the same proportion as the price of produce. As for old leases affecting the question, you will observe that in calculating the profits made by agriculture we must estimate leases at the value which they bear at the time of the calculation and not at the value agreed upon at an antecedent period. If the question were concerning the profits of a manufactory or distillery for example, we should calculate such profits according to the then value of barley, although a few individual distillers might have been so fortunate as to purchase their barley when it was 25 per cent cheaper. These points then are expressly allowed for in my proposition, and are by no means at variance with it. You add to your statement [']that in the interval between the two extremes (of high profits and low profits caused by facility or difficulty of procuring food) considerable variations may take place, and that practically no country was ever in such a state as not to admit of increase of profits on the land for a period of some duration, from the advanced price of raw produce.' I agree that variations will take place because the means of obtaining produce are not always equally expensive ; and, if they should be, the produce itself may become more valuable, and in either case profits will vary. But even during these temporary variations the great cause, namely the accumulation of capital, may be paving the way for permanently diminished profits. It appears to me important to ascertain what the causes are which may occasion a rise in the price of raw produce, because the effects of a rise, on profits, may be diametrically opposite. A rise in the price of raw produce may be occasioned by a gradual accumulation of capital, which by creating new demands for labour may give a stimulus to population and consequently promote the cultivation or improvement of inferior lands ; 48  Letters -of Ricardo to Ifalthzus. but this will not cause profits to rise but to fall, because not only will the rate of wages rise, but more labourers will be employed without affording a proportional return of raw produce. The whole value of the wages paid will be greater compared with the whole value of the raw produce obtained. A rise of raw produce may proceed from one or more bad seasons, which will undoubtedly increase profits because the price of produce would rise considerably more than in the proportion of the deficient quantity, and would therefore be much ahead of the price [.pie] of production. An advanced price of raw produce may also proceed from a fall in the value of currency, which would raise the price of produce, for a time, more than it would wages, and would therefore raise profits. Both these you will allow are temporary causes, no way affecting the principle itself but merely disturbing it in its progress. Restrictions on importation of raw produce may cause a rise in its price which will be permanent or temporary according as the bad policy which dictated the restrictive law may be permanent or temporary. In the first instance profits will be raised ; but they will ultimately fall below their former level. From what I have said it will appear that I am of opinion that a permanent rise in the rate of profits on land is never preceded by a rise but by a fall in the price • of raw produce ; and, though profits may be raised by a rise of the price of produce, they will generally ultimately settle at a rate lower than that from which they started. The converse of this, as it regards low prices of produce, I hold to be equally true. I should be glad to have your sentiments on this point. There may be other causes of high price, which do not at present occur to me. I allow that no country ever was or can be in such a situation as not to admit of increase of profits on the land, because there is no country which is not liable to lose Accaimulrztion of Capital or waste part of its capital ; there is no country which is not liable to bad seasons, to depreciated currency, to a real fall in the value of the precious metals, and to other accidents which will, some permanently and some temporarily, raise profits. You observe that in rich countries profits are often much higher, and in poor countries much lower than according to my theory, to which I reply that profits are very much reduced in the poor country by enormous wages ; the wages themselves may be considered as part of the profits of stock, and are frequently the foundation of new capital. In rich countries wages are low, too low for the comforts of the labourers ; too large a portion of the gross produce is retained by the owner of stock and is reckoned as profit. I am not aware that I have underrated the effect of the wants and tastes of mankind on profits ; they frequently occasion large profits on particular commodities for short periods, but they do not, I think, often operate on general profits, because they do not often influence the growth of raw produce. Adam Smith, in Book V, ch. i, p. 134 1 , concisely expresses what appears to me correct, of the effects of demand on the price of commodities. I go much further than you in ascribing effects to the wants and tastes of mankind ; I believe them to be unlimited. Give men but the means of purchasing, and their wants are insatiable. Mr. Mill's theory is built on this assumption. It does not attempt to say what the proportions will be to one another of the commodities which will be produced in consequence of the accumulation of capital, but presumes that those commodities only will, be produced which will be suited to the wants and tastes of mankind, because none other will be demanded. The very term `accumulation of capital' supposes a power somewhere to employ more labour ; it supposes the total 1 Ed. 5th (1789), In McCulloch's ed. (1863), pp. 33 6 , 337• See quotation at end of letter. 49 E 50  Letters of Ricardo to Malthus. income of the society to be increased, and therefore to create a demand for more food and more commodities. You ask ` whether we can furnish to persons of the same incomes a great additional quantity of commodities without lowering the price so much compared with the price of production as to destroy the effective demand for such a supply, and consequently to check its continuance to the same extent.' We answer this is not our case ; we are speaking of larger incomes, not of the same incomes ; and instead of anticipating a fall in the price of commodities we should expect a rise, because the fall of profits which generally follows accumulation is in consequence of the increase in the price of production, compared with the price of produce, although they would both undoubtedly rise. You appear to think, indeed you say, ` that you know no other cause for the fall of profits which generally takes place from accumulation than that the price of produce falls compared with the expense of production, or in other words, that the lee/ire demand is diminished ; ' and by what follows you seem to infer that commodities will not only be relatively lower but really lower ; and this is in fact the foundation of our difference with regard to the theory of Mr. Mill. You will by this time feel that you have enough if not too much. Yours truly, DAVID RICARDO. NOTE.—The passage of the Wealth of Nations is as follows :- The East India Company represented in very strong terms what had been at this time [17 3 0] the miserable effects, as they thought them, of this competition [between themselves and the Old East India Company and private traders]. In India, they said, it raised the price of goods so high that they were not worth bu y ing ; and in England, by overstocking the market, it sunk their Vprice so low that no profit could be made by them. That by a more Competition. plentiful supply, to the great advantage and conveniency of the public, it must have reduced very much the price of India goods in the English market cannot well be doubted ; but that it should have raised very much their price in the Indian market seems not very probable, as all the extraordinary demand which that competition could occasion must have been but as a drop of water in the immense ocean of Indian commerce. The increase of demand, besides, though in the beginning it may sometimes raise the price of goods, never fails to lower it in the long run. It encourages production, and thereby increases the competition of the producers, who, in order to undersell one another, have recourse to new divisions of labour and new improvements of art, which might never otherwise have been thought of. The miserable effects of which the company complained were the cheapness of consumption and the encouragement given to production : precisely the two effects which it is the great business of political economy to promote.' XXI. MY DEAR SIR,  GxTCOJlB PARS, is Dec., 7814. Since I received your last letter I have been unexpectedly called from home, besides having had friends staying with me, which have prevented me from writing sooner. I have been twice to Bath and once to Cheltenham, and have also been as far as Devonshire, to the old Abbey which Mr. Bentham at present inhabits. I accompanied M. Say, the author of Économie Politique, on a visit to him and Mr. Mill 2 ;—and, had it not been for the incessant rain, we should have had a very pleasant excursion. M. Say came to me here from London at the request of Mr. Mill, who wished us to be acquainted with each other. He intends seeing you before he quits this 1 See note at end of this letter. 2 Mill had permanently taken up his abode with Bentham there in the summer of this year (1814). His biographer gives a long description of the house (Life of Jas. Mill, pp. 129 seq). It is in the valley of the Axe, four miles from Chard, on the borders of Devonshire and Somerset. 5 1 E 58  L etie?.'s of Ricardo lo Ma/illus. 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. 1 S 15. Post Office mark, Feb. 6.] MY DEAR SIR, I have now read with great attention your essay on the rise and progress of Rent 1 , 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 1 An Inquiry into the Nature and Progress of Rent and the principles by which it is regulated.' 1515. Doc/rime of Rem'. as connected with rent, but with many other difficult points, such as taxation, etc., etc. I cannot, however, help regretting that you did not consicder 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 1• 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 1 In the original, ' trade' has been written first and then struck out in favour of ' stock.' 59 6o  Letters of Ricardo to Malthus. 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 regard 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 i 4s. Ever yours, DAVID RICARDO. X. XI Y. MY DEAR SIR,  Ioth Feb., 18155. 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'. "An An Essay on the Influence of a Low Price of Corn on the Profits of Stock, chewing the inexpediency of Restrictions on Importation, with Remarks on Mr. Malthus's two last Publications,' 1815. Ricardo's Works (McCulloch), pp. 367-39o. Rent and Profit.  6 i In the case of the Scotch farmers who made such large profits on their capital during the latter part of their leases 1, 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 2 , 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' 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 1 Cf. c Nature and Progress of Rent,' p. 3o, note. 2 `Rent,' pp. 21, 34 . In the latter, Malthus says it wou ld return only the common profits of stock with little or no rent.' Cf. ib. p. 36. ` Grounds of an Opinion.' See note on Letter XXII, p. 56. 62  Letters of Ricardo to Malthus. 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 clear, 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 1, 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 2 , 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. MY DEAR SIR,  LONDON, 9th March, 1815. My acquaintance lies so little amongst political economists that I have very few opportunities of knowing ' Probably the passage in Book II, ch. y , quoted by Ricardo in Pol. Econ. ch. ii (on Rent), p. 39 foot (McCulloch's ed. of Works). It contains the Physiocratie paradox that in manufactures nature does nothing, man does all ; in agriculture nature does nearly all and man very little. 2 Ricardo's opinion, expressed frequently and emphatically afterwards in the House of Commons, and most fully on paper in his article on the Sinking Fund written for the Encycl. Brit., was that no safeguards could prevent the Sinking Fund from being appropriated by a needy government, and that it was therefore from the point of view of the public interest a mere snare and delusion. A Concession. 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 1 . 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 2 has handled both him 1 Cf. Ricardo's Pol. Econ., ch. vi. 65 (ed. McCulloch). 2 In his `Letter to Samuel Whitbread, Esq., M.P.; being a Sequel to Considerations on Protection of Brit. Agriculture, with Remarks on the Publications of a Fellow of University College, and Mr. Ricardo, and Mr. Torrens.' 6 ^ J 64  Letters of Ricardo lo Malthus. 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 1 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 2 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[1] 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. Dated 25th Feb. 1815. He discusses West in a long ` Note,' and the two others in a longer ` Appendix.' Ricardo (whose tract on ' The Influence of a Low Price of Corn on the profits of Stock' he has just read) has, he says, ' little practical knowledge,' but brings forward ` truisms mixed with vagaries, clothed in the technical cant of political economy.' Torrens does not escape much more easily. 1 The New Corn Law, prohibiting importation when the home price of wheat should be under 80.s. a quarter. Possibly William Phillips, F.R.S., F.G.S., the Quaker and eminent mineralogist and geologist, member of the Geological Society. Born 1773, died 1828. Ricardo in early life was himself devoted to geological study. Taxation and Prices.  65 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. XXVT.1 MY DEAR SIR,  UPPER BROOK STREET, 14 11Iare1, IS 15. I have read Mr. Torrens' pamphlet 2 and think it on the whole a very able performance. I differ with him in most of his views in chap. z, 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  I think he is an adversary worthy . of your pen, 1 Part of this letter (5th sentence to 8th) is quoted by Empson, Edinb. Review, Jan. 18 37, P . 499• a ` Essay on the External Corn Trade,' 1815, Part II, ch. ii : ` Is the general principle' of free trade liable to limitations in the case of a country more heavily taxed than other growing countries ?' (To which Torrens answers : No), ch. iii. Should there be limitations where an artificial range of prices has been created by continued protection? (To which he answers : No, but the re-introduction of free trade should be gradual.) It was probably on such subjects as Tithes and Taxation that he differed most from Ricardo. On the whole, Torrens stands rigidly by Adam Smith as against his successors, especially Malthus. See Note to Letter XXIX. Malthus did not carry out his intention. Though there are occasional references in his later books to Torrens' ` Production of Wealth,' there seems to be nothing like a reply to the strictures in this ` Essay.'. F 66  Letters of Ricardo to Malthus. 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 I of its production increase. If 500o quarters of gross produce cost 2500 quarters for the expenses of wages, etc., and t o,000 quarters cost double, or 5000 quarters, the exchangeable value of corn would be the same ; but, if the 10,000 quarters cost 55oo quarters for the expenses of wages, etc., then the price would rise r o 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., Here as elsewhere spelt in the old fashion ' expellees.' Pri ce of Co rn.  67 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 1 , or rather it has been taken from my office. If I can get another, it shall]] 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 [foil speaking of Mr. Jacob's pamphlet with so much [praise 2 ] as you did when Mr. Basevi 3 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. lY VII. MY DEAR SIR,  LoIDON, 17 March, 1815. If your statement 4 was correct, this extravagant consequence would follow from it : That in proportion as 1 Probably one of the two he published on the Currency in 181 2 and 1813 respectively. 2 MS. hopelessly torn. 3 The name appears as Baswi in Ricardo's letters to Say. Even in Ricardo's clear handwriting Basevi and Baswi would be hardly distinguishable. Probably the statement given at the beginning of next letter. F 2 74  L etter s of Ricardo to Malthus. creases 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 (es$ 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 Profits lowered by High Price of Corn. 75 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 1 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 2 his book was spoken of the other day with great approbation. Mr. Blake 3 and Mr. Greenough 4 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 1 See the Note at the end of this letter. 2 Ricardo was one of the original members of the Geological Society. See McCulloch's ed. of his Works, p. xvii. Blake, probably William Blake, author of ' Observations on the principles which regulate the course of Exchange and on the present depreciated state of the Currency,' 181o. 4 Probably G. B. Greenough, F.R.S., F.S.L., and President of the Geological Society, who wrote on Geology, 1819. 76  Letters of Ricardo to Ma/thus. 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, D1 vID RLCARDO. NoTE.—Robert Torrens, the soldier economist, began his literary career with ` The Economist Refuted ' (18o8), 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 i 8 i o–i i, 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' (pub/. 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 ' (i 8 2 I) . See ` Malthus and his Work,' pp. 2 65-6 . Compare also Note to Letter XLIV. The Grealer Surplus fhe Greczter Re^zí. 77 XXX.. MY DEAR SIR,  LONDON, 4 April, 1815. 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 fariner 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 78  Letters of Ricardo lo  laws. 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. Corn Prices and General Prices. XXXI. MY DEAR SIR,  LONDON, 17 April, 1815. 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 1 , 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 commodi- 1 They were only foreign in the sense of being articles, not only manufactured in this country but also imported from abroad, e. g. soap (under a heavy duty) from France, Italy, and Spain. 79 Letters of Ricardo to Malthus. ties 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 E256, to pay the annual wages of his labourers ; consequently his profits would be in the proportion of .€25 to .Too of wages, for 256: 64 :: zoo : 25. Now, suppose corn to rise to R4 10$., wages would vary only Tos. 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 Too. 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 £7 T, which is to the whole expense of 1 3 6o as L.T9.7 to Rico. £zoo capital or expenses on the old land will yield £32 Rion capital or expenses on the new land „  51Li y•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 1 os. 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 in- Depreciation.  8 creased, 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 1 , 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. Juice 12, 1822, Ricardo 1 Probably William Smyth, Professor of Modern History at Cambridge, friend of Mackintosh and Horner. 8 2  Lei ters of Ricardo fo Malthus. 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. 181 I, had used it in the first sense. (See pp. 34 1 , 35 6 , 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 0823), 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) ; (1. c. p. 8.) XXXII. MY DEAR SIR,  LONDON, 21 April, 1815. 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 and you had met pur- 1 Dr. Alexander Crombie, schoolmaster, theologian, and economist, had published in the Pamphleteer, vol. x, in 1813, a ` Letter to David Ricardo, containing an analysis of his pamphlet on the Depreciation of Bank Notes.' About a year after the date of this letter he wrote ` Letters on the Agricultural Interest.' When Torrens did not get his inspiration from "Adam Smith he seems to have got it from Dr. Cro nbie, for whom he had profound respect. See Torrens' Essay on Money and Paper Currency, 1812, and Essay on External Corn Trade (Preface), '815. Profits from Land and lilanufachures. posely 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 fi•oai man? factures,'--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 ^ ^ J G 2 90  Letters of Ricardo fo Malthus. 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 l ; 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 1 Cf. Eicar do's Pol. Econ. and Tax. ch. vi, Profits. 7. B. Say.  91 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 1, in the title page of which your name is mentioned. Ever yours, DAVID RICARDO. ... Have you seen Monsieur Say's [Catee]hisme d'Economie Politique ? He has softened but not [expung]ed the objectionable ctionable definitions. NoTE.—Correspondence between Ricardo and J. B. Say is given in the ` (Euvres 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 17 9 2, 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 lie made the acquaintance of Necker, Madame cle Stael, and Benjamin Constant. He came back to France (to Auchy, Pas de Calais) to spin cotton, retiring with a moderate fortune in 181 3 . After the Peace he was sent by Government to report on the economical condition of England. He was Probably ' An Address to the Nation on the relative importance of Agriculture and Manufactures, with remarks on the doctrines of DIr. Malthus,' 181, 9 2  Letters of Ricardo to Malthus. 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 i 8th 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 us e ful, 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 1 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 heureusement vous et moi (le choses de tous les temps 1 High Price of Corn, 1815. Facility of Production.  93 plútot 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.' X XXVI. 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 1 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 1 Spelt throughout Othaeite.' 94  Letters of Ricardo to Mal/1 ms. employing that capital obtain greater profits in Otaheite than they would if they employed the same capital for the saine 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 sane 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 conceire 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. Nov 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 saine consequences follow as I have just Producíivelzess of Ca l iíal. 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 saine 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 acids to the productiveness of industry, but it acids 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 coinbat[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 95 9  Leiters of Ricardo lo Malthus. the commodities which they manufacture of less exchangeabl e 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' 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, 7 th Oct., 1815.  DAVID RICARDO. 1 Probably Henry Warburton, mentioned e. g. in Personal Life of Geo. Grote, p. 75. In a MS. letter from Joseph Hume to Francis Place, 19th Oct., 1839 (in the Place Collection), he refers to Mr. Warburton as a friend of Place who had been too much neglected by the Whigs in office. Wages and Profits.  97 XXXVII. [Not dated or headed, but fastened to preceding.] MT DEAR SIR,  [Oct. 1815 ?] 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 1 , of which not more than £z 1 oo or £1200 is of that description which is not subject to the same variation of value as the produce of the land itself, for p 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 1 In Arthur Young's Farmer's Calendar, 1815, p. boj, £io are said to be the average capital needed for stocking a farm in 1814, and £15 are counted high. H 98  Letters of Ricardo to Malthus. labour instead of 2. It appears to me that, if, instead of 4, z o 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 coexist 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 Accumulation and Improvements. 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. 99 H 2 i o6  Let/ers of Rica r do to Malthus. XLI. ^r  IS DE DEARSIn,  GATCOMB PAR, 2 .7 arz., r8í6. M Your two letters have both reached me, and I am very sorry to find that I shall not have the pleasure of seeing you at Gatcomb this vacation. I left London, as you supposed, the day after the Bank Court. I should have considered it fortunate if whilst I was there I had met you. My house in Brook Street is not yet in a state to receive us ; nor will it be this season, unless we consent to go in it with the walls unpapered and unpainted, conditions to which we shall agree. It will be we are told in a habitable state by the latter end of the month, at which time we shall probably quit Gatcomb. As you have not given me the pleasure of your company here, and as I wish to speak to Murray concerning my book and to consult some Parliamentary papers which I have not got here, I intend taking a trip to town the beginning of next week. Do you think I shall have any chance of meeting you there ? Remember that a letter will always find me at or follow me from the Stock Exchange'. It is exceedingly provoking that you should have been so much interrupted by college affairs as not to have made more progress with your new chapters. I shall regret your thinking it necessary to abridge or leave out anything which you may have to say connected with the subject, and particularly if you should so determine, because more time will otherwise be required before you can publish. The question of bounties and restrictions is exceedingly important, and, unless you have already given your present opinions on that subject elsewhere, or mean to do so, it ought to form part of the present work; and a little delay in the publication is not very important. 1 The Post Office London Directory of the time gives Ricardo's full City address as 4 Shorter's Court, Throgmorton Street. The advice was taken. The Essay on Population.  107 The edition which I have of your work is the first, and it is many years since I read it. When you wrote to me that you were looking over the chapters on the Agricultural and Manufacturing systems with a view to make some alterations in them, I looked into those chapters and saw a great deal in them which differed from the opinions I have formed on that part of the subject. At your house I observed that in a subsequent edition you had altered some of the passages to which I particularly objected, and in the chapters as you are now writing them it appeared to me that there was only a slight trace of the difference we have often discussed. The general impression which I retain of the book is excellent. The doctrines appeared so clear and so satisfactorily laid down that they excited an interest in me inferior only to that produced by Adam Smith's celebrated work'. I remember mentioning to you, and I believe you told me that you had altered it in the following editions, that I thought you argued in some places as if the poor rates had no effect in increasing the quantity of food to be distributed,—that I thought you were bound to admit that the poor laws would increase the demand and consequently the supply. This admission does not weaken the grand point to be proved. As for the difference between us on Profits, of which you speak in your letter, you have not, I think, stated it correctly. You say that my opinion is ` that general profits never fall from a general fall of prices compared with labour, but from a general rise of labour compared with prices.' I will not acknowledge this to be my proposition. I think that corn and labour are the variable commodities, and that other things neither rise nor fall but from difficulty or facility of production or from some cause particularly affecting the value of money, and that no alteration Which gave him his first stimulus to economical study when he read it at Bath in 1799. See McCulloch's ed. of Wks., pp. xvii, xviii. 1 oS  Letters of Ricardo to Malthus. of price proceeding from these causes affect[s] general profits,—allowing always some effect for cheapness of the raw material. . . Yours very truly, DAVID RICARDO. XLII. MY DEAR SIR,  LONDON, roil y Jan., i816. I arrived in town yesterday and found your letter at the Stock Exchange. It is very uncertain whether I shall leave London to-morrow evening or Monday evening. I am desirous of getting home on many accounts, but I may not be able to accomplish the business for which I came so soon as I expected, and, if I do not get it done by to-morrow it will in all probability detain me till Monday. Thus then it is still uncertain whether we are to meet, and I do not exactly know how to make you acquainted with my movements. I will, however, let Mr. Murray know if I leave town to-morrow, and, if you are in the neighbourhood of Russell Square, by sending to No. 8, Montague Street (Mr. Basevi's), you will be sure to know. In the City, at the Stock Exchange, any of my brothers will inform you about me. If I should not be gone, will you do me the favour of dining with me on Friday at Mr. Basevi's ? His dinner hour is six o'clock, and he begs me to say that he shall be much flattered by your favouring him with your company. I was in hopes of finding you in London and of having the benefit of your opinion of my book 1 in its present state, before I sent it to be printed. That advantage I must now forego, because. I am desirous of getting it out before the meeting of Parliament, and have before experienced the inconvenience of too much hurry. I cannot think it inconsistent to suppose that the money 1 See note at end of this letter. Economical a n d Secure Currency.  I 09 price of labour may rise when it is necessary to cultivate poorer land, whilst the real price may at the same time fall. Two opposite causes are influencing the price of labour, one the enhanced price of some of the things on which wages are expended, the other the fewer enjoyments which the labourer will have the power to command. You think these may balance each other, or rather that the latter will prevail ; I on the contrary think the former the most powerful in its effects. I must write a book to convince you. I am glad you are not going to cut your next edition short. Very truly yours, DAVID RICARDO. NoTE.—The MS. referred to in this letter was probably the pamphlet on ` Economical and Secure Currency,' which internal evidence would show to have been printed not earlier than Feb., i 8 r 6. Ricardo, as appears from Letter XL, had already submitted the MS. to James Mill. In the fragment of a letter to Mill (quoted in Bain's ' Life of Mill,' p. 15 3 , and dated Jan., i 816) he writes : ' Fill eight pages in the Appendix, will that be too much?' Professor Bain thinks this must refer to the `Principles of Political Economy and Taxation ' (I817). But that work has no Appendix; and there seems no reason why it should not refer to the ` Economical and Secure Currency' (1816), which has one. The 'Resolutions proposed concerning the Bank of England by Mr. Grenfell,' and those proposed by Mr. Mellish, together, cover seven pages of that Appendix in the original edition ; and Ricardo in the fragment quoted had probably been saying, that these Resolutions, if he printed them, would fill nearly eight pages, etc. XLIII. MY DEAR SIR,  LONDON, 7 Feb., i816. I arrived in town yesterday, with the whole of my numerous family. We are already as comfortably settled in Brook Street as under all circumstances we can expect, and I 1 o  Letters of Ricardo fo  Nits. I hasten to inform you that we have a bed ready for you, which I hope you will very soon occupy. I have forgotten on which Saturday in the month you meet at the King of Clubs, but conclude from your last meeting that it is the second. If so, you will probably be in town to-morrow or Friday, when I shall hope that you will lodge at our house and give us as much of your company as your numerous friends will allow you to do. You have probably ere this seen my book 1 . I have been reading it in its present dress, and very much lament that I make no progress in the very difficult art of composition. I believe that ought to be my study before I intrude any more of my crude notions on the public. It is said that the Bank have made some agreement with Government, but what it is is not exactly known. They talk of the Bank advancing to Government six millions at four per cent., besides continuing the loan of three millions without interest. We shall not, however, be long in suspense on this subject, as a general court of proprietors is to be held to-morrow, when the directors will make some communication to the proprietors to ask for their vote to sanction their agreement. They will ask for this without giving them any information either respecting their savings, their profits, or the amount of public deposits. Is not this a ridiculous piece of mockery, and an insult to our common sense ? I hope there may be a few independent proprietors present who may call for information, or who may at least demand a ballot, for which purpose nine only are necessary 2. You would be surprised at the abjectness of the city men, and - the great influence which the directors have in consequence of their power of discounting bills. I am persuaded many of the proprietors would vote very differently at a ballot, to what they would by a show of hands. ` Economical and Secure Currency.' See note to previous letter. 2 Cf. ` Econ. and Secure Currenc y ,' Wks., pp . 433, 434. Relative Importance of Economical Probltms. I I z I have not thought much on our old subject my difficulty is in so presenting it to the minds of others as to make them fall into the same chain of thinking as myself. If I could overcome the obstacles in the way of giving a clear insight into the original law of relative or exchangeable value, I should have gained half the battle... . Very truly yours, DAVID RICARDO. XLIV. [On the back of this are jotted figures and lists of books in Malthus' handwriting.] MY DEAR SIR,  LONDON, 23rd Feb., i 816. I beg to remind you that the first Saturday in the next month is to-morrow se'n-night, on which day or a few days before it, I hope to have the pleasure of seeing you in Brook Street. We have a bed always at your service, and I wish you would make the rule invariable to take up your lodging with us whenever you visit London. I hope you have quite determined to extend your new edition to another volume, and that you are now making great progress in it. I wish much to see a regular and connected statement of your opinions on what I deem the most difficult and perhaps the most important topic of political economy, namely, the progress of a country in wealth, and the laws by which the increasing produce is distributed. Have you seen Torrens' Letter to Lord Liverpool' ? He appears to me to have adopted all my views respecting profits and rent ; and, in some conversation which I had with him a few days ago, he unequivocally avowed that he was now of my opinion, that the price of labour, arising from a difficulty in procuring food, did not affect the prices 1 Letter to the Earl of Liverpool on Agriculture, 1816. I I 2  Letter s of Ricardo to Malthus. of commodities. He confessed that his former view on that subject was erroneous. I should be glad to see all the arguments in favour of my view of the question clearly and ably stated. I should not wonder if Torrens undertook it. The sale of my last pamphlet has far exceeded its merits. Murray is printing a second edition 1 . I had no idea that the subject was of much interest to the public, but it seems that they are curious about the amount of the Bank treasure. In the House of Commons the defence of the contracts with the Bank was very little satisfactory ; they endeavoured to fix the attention of the House on what the public had got and saved by the operations of the Bank ; they seemed to think that all the rest belonged of right to the Bank. Will Ministers be able to carry the Income Tax 2? Very truly yours, DAVID RICARDO. NoTE.—Torrens carne nearest to fulfilment of the above forecast in his ` Essay on the Production of Wealth' (1821), which was announced as ` a general treatise upon Political Economy, combining with the principles of Adam Smith so much of the more recent doctrines as may be conformable to truth and embodying the whole into one consentaneous system.' (Pref. p. v.) But he thinks out the subject vigorously for himself ; and, though in all his later books he extols Ricardo above all his contemporaries, he finds frequent occasion to differ from him. Indeed he occasionally claims that Ricardo is the borrower, and lie the lender. Ricardo, for example, is indebted to him (he says) for the doctrine that, when a nation has great advantage in one production but a much greater advantage in another, it will confine itself to producing the latter, and will even import the former (Ricardo, Works, pp. 76, 77 ; cf. Torrens, Preface to Essay on External Corn Trade, p. vii). Yet the doctrine lias always passed as Ricardian par 1 The edition reprinted in Wks., ed. McCulloch, pp. 391 seq. s The question was whether the Income Tax, being a war tax, was to cease with the war. The Ministry were forced to yield. Haileybury College.  I I j excellence (see e. g. Cairnes, Leading Principles of Political Economy, Part III. cli. i. p. 371, and Logical Method, p. 81), and we should not guess, from Letter XLVII for example, that Ricardo was the convert. The Preface to the ` Production of Wealth' ends with the prediction that in twenty years' time there would be unanimity amongst Economists on all fundamental principles. XLV. MY DEAR SIR, LONDON, 5 March, 1816 . The public papers have ere this informed you of the result of yesterday's ballot at the India House ; Mr. Jackson's motion was lost by a majority of twenty-one or twenty-two. Mr. Jackson, in his reply, said everything of you that your most partial friends could wish ; and indeed the general tone of his speech, yesterday, was much more moderate than that by which he introduced his motion. Mr. Bosanquet's 1 comments on some passages in your pamphlet 2 lead me to think that he must have misunderstood you, as I conceive that it was not your intention by recommending the directors to appoint more young men than there were vacant writerships, that the unsuccessful candidates should be finally and irrecoverably dismissed from all. chance of going out to India 3 . I imagine that it was your intention to let them be again competitors for one of the prizes of the following year, and therefore that the punishment of their neglect would rather be a delay in their appointment than an absolute dismission. Mr. Bosanquet appeared to me to argue on the latter supposition. Mr. Elphinstone 4 spoke very kindly and very handsomely of the professors ; yet I thought that he was by far 1 Not Chas. Bosanquet who wrote on the Bullion Report, but Jacob Bosanquet, a Director of the East India Company. 2 Letter to Lord Grenville occasioned by his observations on E. India Co.'s education of Civil Servants, 1813. 3 See Malthus and his Work, p. 424. 4 Hon. Wm. F. Elphinstone, a Director of the East India Company. I I I4  Letters of Ricardo to Malthus. the most formidable opponent of the College as at present constituted, and the one that I should have been least able to answer. His speech was short, but from the moderation of his language it produced, I think, a considerable effect, and gave great courage to Mr. Jackson's party. I hope this subject will not be again revived, or, rather, I hope that the proficiency of the young men, and the absence of all turbulence, will satisfy every one of the impolicy of interfering with the establishment. I am sorry to be under the necessity of putting off my visit to you, but I shall not be able to be with you on Saturday 1 .... We are going .. into Gloucestershire, so that I must defer my visit to you to some more favourable opportunity. Perhaps you may be in London to the King of Clubs. If so, pray come to us. I wanted to show you my observations 2 on your pamphlets before they go to the printers. If I do not see you on Friday, I shall send them by the coach in a few days. As they are the last article in my very poor performance, the printer will probably not want them till my return 3 . When you have read them, pray send them with your observations to Brook Street by the coach. . . Very truly yours, DAVID RICARDO. XLVI. MY DEAR SIR,  LONDON, 24th April, 1816. It is not too soon to remind you that Mrs. Ricardo and I expect to have the pleasure of Mrs. Malthus' and your company at our house on your visit to London in the next week. I hope it will be early in the week, and that 1 Written without a capital, as the days of the week usually are in these letters. 2 From the description which follows, this must be the last section (` Mr. Malthus's opinions on Rent ') in ` Political Economy and Taxation,' 1817. From Letters LII, LIII, it is clear that the printer had to wait for the whole MS. much longer than was at first intended. Slow * Progress in Writing.  115 you will not be in so great a hurry to get home as you usually are. On the Monday, after your club meeting, I shall ask a few of your and my friends to meet you at dinner, and on Sunday or any other clay perhaps Warburton and Mill will take a family meal with us. I have just received an invitation from Mr. Blake to dine with him on Friday the 3rd May, and I have taken upon myself to let you know from him that he hopes you will favour him with your company on that day. You will I trust be also agreeable to this arrangement. I hope you have made better use of your time than I have done of mine, and that you are making rapid advances with the different works which you have in hand. I have done nothing since I saw you as I have been obliged to go very often into the city, and after leaving off for a day or two I have the greatest disinclination to commence work again. I may continue to amuse myself with my speculations, but I do not think I shall ever proceed further. Obstacles almost invincible oppose themselves to my progress, and I find the greatest difficulty to avoid confusion in the most simple of my statements. Have you seen Torrens' letters to the Earl of Lauderdale in the ` Sun ? ' I think he has published five. They are chiefly on the subject of currency, and are ingenious, though I think they support some very incorrect doctrines. They are signed with his name. Horner, I understand, will oppose the continuance of the restriction bill ; he does not deny now the fall in the value of gold and silver since the termination of the war. There cannot be a better opportunity than the present for the Bank to recommence payments in specie. Silver is actually under the mint price. The change is surprising [and has been] brought about in a very unexpected [manner]. . . Very truly yours, DAVID RICARDO. I 2 I 2?  Letters of Ricardo to Malthus. creased at a very rapid rate, and labourers at a slow rate, in which case profits would fall and not rise. Under these very peculiar circumstances of higher money wages with a lower price of necessaries, the wages of labour would be in an unusual state, and would shortly revert to the old standard, when profits would feel the benefit. All I mean to contend for is that profits depend on wages, wages under common circumstances on the price of food and necessaries, and the price of food and necessaries on the fertility of the last cultivated land. In all cases it is perhaps true that rent will depend upon the demand compared with the supply of good land, and wages on the demand compared with the supply of labour, if it be allowed that the price of necessaries influence[s] the demand and supply of labour. I do not quite understand the expression that profits depend on the demand compared with the supply of capital. What would you say of two countries in [which] there are precisely equal capitals, where wages [are] also equal, and where the population is precisely in the same number. Would the demand compared with the supply of capital be the same in both ? If you say they would, I ask whether their rate of profits would be the same under any other supposition but that of their land being exactly of the same degree of fertility ? To me it appears quite probable that the ordinary and usual rate of profits might in one be zo and in the other only 15 per cent., or in any other proportions. . . Believe me, Ever yours, DAVID RICARDO. Real and Money Wages. LI. MY DEAR SIR,  LONDON, 14th Oct., 1816. My stay in London will not be prolonged beyond Friday next. I hope it will be convenient to you to come up before. On Thursday I shall be disengaged and will meet you at any place in London that may best suit you, unless you will dine with me at my brother's at Bow. His house is small, and I fear he has not, now we are with him, a spare bed to offer, and you may not like to travel so far at night. If so, let us meet in the city and get our dinner there. The money wages of labour are, I apprehend, generally regulated by facility of production. With an abundant production too I think that a less proportion of the whole will be given to the landlords, and more will remain for the other two classes, of capitalists and labourers; but of this increased quantity a greater proportion will be given to capitalists and a less proportion to labourers. Now, though what you call the real wages of labour L (but which I think a wrong term) will increase, the money wages will fall. But this will not be the case with profits ; what you would call real profits would increase, but so would also money profits. Under the circumstances then that I have supposed, the rate of profits would rise though money wages would fall. The difference between us is this. I say that with every facility or difficulty of production, of the quantity of necessaries, that is to be divided between profits and wages, different proportions will be given to each, and that money will accurately show those proportions. You appear to me 1 See Malthus, Pol. Econ. (182o), p. 241 : ` The real wages of labour consist of their value, estimated in the necessaries, conveniences, and luxuries of life.' The 2nd ed. (1836) acids, ` which the money wages of the labourer enable him to purchase' (p. 217). In ` Definitions' (1827) he says ` command' instead of ' purchase,' (p. 239). I2 j I24.  Letters of Ricardo to Malthus. to think that profits do not depend on the division of the produce, and that money wages may as often rise with facility of production as fall. You state the real question fairly; it is, ' What is the main cause which determines the rate of profits under all the varying degrees of productiveness ? ' You do not appear to me [to] solve the question when you answer ` that it is the proportion which capital bears to labour.' In a rich country where profits are low, and where a great portion of produce is paid to the landlords for rent, the proportion of labour to capital will be the greatest, and yet according to your theory it should be the least. You will not, I think, deny that in a country where labour is high a manufacturer would employ more capital to produce the same commodities than what he would do in a country where wages were low, and there also would profits be low; that is to say, profits are high where capital bears a large proportion to labour, and low where labour bears a large proportion to capital. I am writing amidst the noise of the Stock Exchange, and very much fear that I shall be more than usually incomprehensible. Ever yours, DAYID RICARDO. LII. MY DEAR SIR,  GATCOMB PARK, 3rd Jan., ISI,. A long time has elapsed since I had the pleasure of seeing you, during which time I have often intended writing, as I did not hear from you ; but my natural indolence prevailed, and I have procrastinated it till now. I had some faint hopes that you might be in the neighbouring county this vacation, in which case I should have hoped to Ricardo al work.  12 5 prevail on you to pass a short time here ; but I learnt from Mr. Binda, who is on a visit to Mr. Smith, that he had met with you at Holland House, and that it was not probable you would go far from home. I had previously enquired about you of our young neighbour George Clerk ; he, however, could only tell me you were well ; he knew nothing about your intended movements. By an advertisement in the public papers I perceive that you have been occupied in writing about your College 1, which I regret, as I believe the task was not very agreeable to you, and as it may have prevented you from proceeding with other works in which I imagine you are more interested. I should be glad to hear that everything you think defective in the College was remedied, and that it was placed on such a footing as to require only the ordinary routine of your attention. I have been occasionally employed, since we met, in putting my thoughts on paper, on the subjects which have often passed under our discussion. I have encountered the usual obstacles from difficulties of composition ; but I have resolutely persevered till I have committed everything to paper that was floating in my mind. There are a few points on which there is a shadow of difference between my present and my past opinions ; but they are not those on which we could not agree. I hope I shall succeed in putting my MS. in some tolerable order, as on that will depend whether I shall again appear before the public. What I have hitherto done is rather a statement of my own opinions than an attempt at the refutation of the opinions of others. Lately, however, I have been looking over Adam Smith, Say, aíld Buchanan, and where I have seen passages in their works contrary to the principles I hold to be correct I have noticed them, and shall perhaps make them the subject of some comment. 1 ' Statements respecting the East India College,' etc., 1817. I 6  Letters of Ricardo lo Malaius. I fear I shall not have the satisfaction of receiving your acquiescence to my doctrines, particularly as I have reverted to my former views respecting taxes on raw produce. Whatever may be correct on that subject, surely Adam Smith is wrong, as there are various passages in his book inconsistent with each other. We shall, I hope, soon meet and renew our discussions on some of these difficult natters. I shall be in London on Friday next, and hope to see you in Brook Street as our inmate, as soon after that day as business or inclination may draw you to London. I want to hear your opinion of the measures lately adopted for the relief of the poor'. I am not one of those who think that the raising of funds for the purpose of employing the poor is a very efficacious mode of relief, as it diverts those funds from other employments which would be equally if not more productive to the community. That part of the capital which employs the poor on the roads, for example, cannot fail to employ men somewhere, and I believe every interference is prejudicial. . . Believe me, Ever yours, DAVID RICARDO. LIII. MY DEAR SIR,  UPPER BROOK STREET, LONDON, 24 Jan., 181 7 I have read your pamphlet 2 with great pleasure, and am very much satisfied with your arguments in favour of a college in preference to a school for the education of the young men destined to manage the complicated affairs 1 See the long and interesting Report of Select Committee of House of Commons on the Poor Laws. Ann. Reg. 1817, Chron. pp. 263-302. Cf. Ann. Reg. 1816, Chron. pp. 151 and 345. Statements respecting the East India College,' 1817. Immediate and Temporary Effects of Changes. 1 2 of our Indian Empire. The testimonies from India in favour of the young men sent from the College, as compared with those who went out to India before the establishment of the College make powerfully for you, and do not appear to have been answered by your opponents. I observe by the papers that the discussion on this subject will be renewed at the India House on the 6th February, at which time I conclude that you will be in London. If so, I hope you will make my house your headquarters. Mr. Murray promised to send copies of your book to the gentlemen you directed me to mention to him. It appears to me that one great cause of our difference in opinion on the subjects which we have so often discussed is that you have always in your mind the immediate and temporary effects of particular changes, whereas I put these immediate and temporary effects quite aside, and fix my whole attention on the permanent state of things which will result from them. Perhaps you estimate these temporary effects too highly, whilst I am too much disposed to undervalue them. To manage the subject quite right, they should be carefully distinguished and mentioned, and the due effects ascribed to each. I have been reading again your three last pamphlets on rent and corn, and cannot help thinking there is some ambiguity in the language. The word [sic', ` high price of raw produce,' is calculated to produce a different impression on your reader from what you mean. Your first and third causes of high price appear to me to be directly at variance with each other. The first is the fertility of land, the third the scarcity of fertile land. The second cause too, I think, never operates 1. There is one passage in particular which expresses fully my opinions. I have not the book by me, and cannot refer you to the 1 Rent, p. 8. The second is the fact that the necessaries of life create their own demand by leading to an increase of population, I 2 8  Letters of Ricardo lo Malthus. page, but it begins, ` I have no hesitation in stating that independently of irregularities in the currency,' etc. It is in the essay on Rent 1. Surely Buchanan is right and your comment 2 wrong ; rent is not a creation but a transfer of wealth. It is the necessary consequence of rent being the effect and not the cause of high price Say and I would say that by turning revenue into capital we shall obtain both an increased supply and an increased demand ; but, if the same capital be so created, I do not approve of its present application; and taking it out of the hands of those who know best how to employ it, to encourage industry of a different kind and under the superintendence of those who know nothing of the wants and demands of mankind, and blindly produce cloth or stockings of which we have already too much, or improve roads which nobody wishes to travel. . . Very truly yours, DAVID RICARDO. LIV. MY DEAR SIR, I am not in the least acquainted with the subject on which your papers 4 treat, but that is no reason why I should not mention what appears to me defective. In page 8 5 you add á to the births for probable omissions, and i z for deaths ; but you do not tell your reader why these proportions are 1P. 40. 2 Ibid., p. 15. 3 The comments in this letter occur at greater length in the last chapter of Ricardo's Pol. Econ. and Ta g .': `Mr. Malthus's opinions on Rent' (ist ed., 1817), McC. ed., pp. 243 seq. Additions to the Fourth and Former Editions of an Essay on the Principle of Population,' etc., 1817. 5 Should be p. 17. Tables of Molfalifj'. taken rather _than 4 or }, nor can I discover on what grounds those numbers are chosen. You sometimes take averages from the known facts of certain years ; but your averages are formed on an arithmetical ratio while your application is to a geometrical series. I submit whether this is correct. If, as you say in page 14 1 , births are to burials as 47 to 3 0, and the mortality as i to 47, the addition to the population would be little more than ^ '^ instead of 1T .1 3 -, for out of every 1410 persons 3o would die and 47 would be born, and consequently there would be an increase of 17 ; but 1410 divided by 17 is 82 . 94, or 83 nearly ; and therefore, if 1410 gives an increase of 17, 9,287,000 will give an increase of 111,970, or 1,119,700 in ten years, which will raise the population 9,287,000 + 1,11 9.700 ^ 10,406,700 instead of 10,483,000 2. In page 16 3 the mortality is supposed to be as before, I in 47, and the births to the population as I to 291, and the population to be 9,287,000. This latter sum divided by 291 gives 314,813 the annual number of births, and divided by 47 gives 197,595 the annual number of deaths ; deduct one from the other ([ 97,595 from 3 14,813) gives 117,218 for the annual increase, which in ten years would be 1,17 2,1 80, which added to the former population of 9,287,000 gives 10,459,180 instead of 10,531,000. I have marked in pages 35 and 36 some very trifling errors. These are all I can discover with the facts which are before me. Ever truly yours, DAVID RICARDO. 8 Feb., 1817. ' P. 2I. 2 Io,488,000 is the figure given by Malthus, 1. c. p. 18. Should be p. 21. Ricardo may have had a proof before him. I2 9 K 1 3 0  Letters of Ricardo to Malthus. LV. MY DEAR SIR,  LONDON, 21 Feb., 1817. I am very sorry that you were prevented from being in London yesterday. I fully expected to see you, as I thought the subject of debate at the India House was of too much interest not to make you desirous of hearing it. Mr. Grant' was, I assure you, a warm advocate in the cause of the College. He spake admirably and with great effect, improving in energy and eloquence as he proceeded. He did justice to the various qualifications of the professors for the responsible situations which they filled, and I believe left nothing unsaid which might assist the cause which he so ably defended. I thought him very severe on Randle Jackson, who will find it difficult to answer some parts of his speech. In the Times the report of what he said is very correct, as far as it goes ; but it is necessarily a very abbreviated statement. Mr. Kinnaird 2 began by speaking in the most respectful manner of you, and indeed in terms of great eulogy, but afterwards I think absurdly dwelt on your being an interested party and an advocate for the college, and imitated Mr. Jackson in his irony on those whom he first declared were highly deserving of respect. In what manner could we have any correct account of the college and its concerns but from an interested party ? Who could speak of its management, attainments, and discipline, but those who were acquainted with it ? He, however, gave up the only strong grounds they had (if they had been true) for inquiring into the affairs of the college, for he said that he had no idea that there was more immorality and profligacy in the East India College than in any other seminary ; 1 Charles Grant, M.P., later Lord Glenelg. He was a Director in the preceding year (1816). 2 Hon. Douglas J. W. Kinnaird. Haileybury College.  I ; I neither did he say anything of a want of proficiency in the students ; but his main argument was built on the general principle that a supply of intellectual attainments will as surely follow an effectual demand for it, as the supply of any material commodity will follow effectual demand. Mr. Grant, I should mention, supported a directly contrary principle. Mr. Kinnaird dwelt very much on the compulsion under which parents were of sending their children to this particular institution. He seemed to me to adopt Mr. Mill's view of the subject, and his argument would have been quite as applicable to all colleges if parents were compelled to send their children to them. He passed over the compulsion under which parents were to send their children to college, who wished to bring them up to the church, etc. In a few minutes' conversation which I had with him after the debate I urged this objection, and he answered that they had a choice among a large number of colleges, whereas in your case they were confined to this one. He finished by assuring me that my friend had a bad cause, that it could not be defended and must fall. Mr. Impey's speech was badly timed ; he should not have immediately followed Mr. Grant, for he could not then say anything new, nor could he repeat anything that had been said half as well as Mr. Grant had said it before. The debate will be renewed on Tuesday. If you should come up, I shall expect you in Brook Street. If I do not see you, and you are disengaged on the Saturday evening following, I shall be glad to pass a day with you, commencing my visit at that time. . . . Very truly yours, DAVID RICARDO. K 2 2 3 4  Leiters of Ricardo to Ma/thus. pick up grains of gold on the sea-shore, 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 quantity 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 quantity 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 quantity of cattle and implements and a hundred quarters of wheat,—that he expends this wheat in supporting a certain quantity of labour, and that the result is i -to quarters of wheat and an increase of one-tenth also in his cattle and implements ; would not his profits be To per cent. whatever might be the price of labour the following year ? If the i i o quarters could command no more labour than the too 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 Experience of Farmer a n d Labou r e r . 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 L too, he would have 10 per cent. profit if the value of his produce was RI z o. 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 £IIo than when they had Rioo, 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 quantity of labour must be of the same value, because they will always cost in their production the same quantity of labour with the addition of the profits upon that labour.' I confess that I cannot see the connection of 235 236  Letters of Ricardo to Malthus. 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 quantity 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 quantity of wheat ? Certainly not, but to two different quantities, 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 mea- . To Measure of A bsolufe Value.  237 sure is the r1c 1 t11i/ion 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 that 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. 2 38  Letters of Ricardo to Malthus. LXXX VIII 1. DEAR MALTHUS,  GATCOMB PARK, 31 Aug., 1823. MY 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 circumstances the man's height is not variable, and it is to those circumstances that I always refer. You say of my measure, and say truly, that if all commodities were produced under the same circumstances 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 circumstances. If then under certain circumstances mine is a perfect measure, and yours is always a perfect one, under those circumstances 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' 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 1 Franked by himself.  2 W. of N., I. vi. 23, I. Labo u r an A rbitraJ y Alea sure,  239 say, I have so ; but not because it would not do everything which you assert your's will do, but because I am not secure of its invariability. Shrimps are worth L i o 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 They have gained a value of Li. 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 L i o, subsequently L i i? 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 quantity 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 quantity 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. Put 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 240  Letters of Ricardo to Malthus. 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, DAY ID RICARDO. NoTE.—Ricardo died at Gatcomb on 1 ith 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 -ti as 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 1. James Mill 2, 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. 1 Rdin, Rev., Jan. 18 37, P . 499 .  2 Life, pp. 209-213. 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 Association. Murder of Perceval (May). Liverpool, Premier. Williams' murders in Hatcliff 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. Lützen, 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. R Chronicle: 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. Incometax rejected. Agitation about Civil List. Cobbett's cheap Political Register.' Spa Fields. Luddite outbreaks. Petition of London Corporation. Continued fall of general prices. 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.). Biographic Literaria,' ` Revolt of Islam,' ` Lalla Rookh.' Committee on Sinecures. Suspension of Habeas Corpus. Derby Insurrection. Blanketeers. Attack on Regent. Death of Princess Charlotte. Hone's Trials. Fair Harvest. Rise in general prices. 1818. Letters LXV to LXVIII (Aug.).—Mackintosh at Halleybury. Ricardo Sheriff of Gloucestershire. Death of Romilly. Childe Harold,' III, IV. Congress of Aix-la-Chapelle. Secret Committees on disaffection. Act of Indemnity. Poor Law Bill. Scotch Borough Reform. Debates on Resumption of Cash payments. Royal Marriages. Renewal of Alien Act. General Election (June, July). Manchester strike. Fair harvest. Increased general imports and fall of general prices. 1819. Letters LXIX and LXX (Nov.).—Malthus F.R.S. Bi= 242 Bad Chronicle. cardo M.P. for Portarlington. Act for Resumption of' Cash payments. The ' Radicals.' Factory Act. Poor Law Amendment. Penal Law Amendment.. Peterloo massacre. The Six Acts. Fall in Cotton. Trade healthier. Fair harvest. 1820. Letters LXXI to LXXV (Nov.).—Malthus' ` Political Economy.' Malthus' visit to France. Ricardo's ` Funding System.' ` The Cenci.' Death of George III. Insurrection in Spain. Congress of Troppau. General Election. Queen Caroline. Cato Street Conspiracy. Political trials. Reform movement. Popular Education. Penal law amendment. Good harvest. Low prices of corn. Agricultural distress. 1821. Letters LXXVI to LXXXI (Nov.).—Foundation of Political Economy Club. Death of Keats. King's Coronation, and Visit to Ireland. De facto Resumption of cash payments. Interference with the Press. ` Bridge Street Gang.' Coalition of Liverpool ministry with the Grenvilles. Retirement of Sidmouth. Insurrection in Greece. Death of Napoleon. Large harvest, poor in quality. Fall in wheat. Low general prices. 1822. Letter LXXXII (Dec.).—Ricardo's ` Protection to Agriculture.' Ricardo's visit to Italy and Switzerland. Death of Shelley. New Marriage Act. New Corn Law. Wellesley in Ireland. Suicide of Castlereagh. Canning at the Foreign Office. Wellington at Verona. Ashantee War. Dispute with - U nited States about Oregon territory. Habeas Corpus suspended in Ireland. Good harvest. Low corn prices. Large importations of wheat from Iceland. General prosperity. Agricultural distress. 1823. Letters LXXXIII to LXXXVIII (31st Aug.).—Malthus' Measure of Value,' and article on Tooke. Maltl.us Associate of Royal Society of Literatui e. Ricardo's ` National Bank' (written). Death of Ricardo, 11th Sept. Essays of Elia. Byron in Greece. Burmese War. French invasion of Spain. Recognition of South American Independence. Huskisson at Board of Trade. Amendment of Navigation Laws. Canning's Jamaica circular. Catholic Association. Poor harvest, but medium pi ices of corn. Low general prices. Increased general imports. 243 R 2 250 In d ex. of labour and capital impossible, 174. Reform, views of Ricardo and Malthus, Pref. ix, 55, 151, 152, 163, 169. Relief Works, 126, 128. Rent, Malthus' tract on, 58 ; always a transfer not a creation of wealth, 59, 1 55 ; neglected by Say, 181 ; other references, passim,. Restrictions on Corn trade. See Corn. Resumption of cash payments by the Bank, 115, 15o, 167. ` Retrograde Capital,' 39. Ricardo, David, character and habits. See Pref. viii seq. ; Corn pamphlet, 6 4 ; Bullion pamphlet, 21, 72 ; Appendix to ditto, 7, 17, 18, 23 27, 72, 10 9 ; cf. Outl. xix ; Sinking Fund, 55, 62, 157, i6o ; ` Political Economy and Taxation,' 114, 132, 135, (2nd ed.) 166, 170, 175, 176, 18o, 184, 206 ; ` Economical and Secure Currency,' Too, 10 3 , 110 ; other MSS., 178, 228 ; Sale and popularity of works, 112, 166 ; converts, 169, 173; walks with Mill, 150; patriarch, 146 ; optimism, 72, 183; diffidence, 157, 158, 181, 200; a poor master of language,' 176, cf. Pref. ix ; travels in France, &c., 136, 2 ; profits on Stock Exchange, 85, 1 4 7 ; fear of dogmatism, 1 49, 1 74 ; appearance of paradox, 145 ; misunderstood, 178, 179, 212; Sheriff of Gloucestershire, 1 47, 149, 151, 155 ; M.P. for Portarlington, 152, 154 ; Death, 240 ; Letters not in this collection, 157, 184; public services, 167; speeches referred to, passim, quoted, Pref. xv, 3, 4, 160, 162, 22I. Ricardo, David, son of above, 41, 87. - Mortimer, 41. - Osman, 4 1 , 1 37, 191. Rogers, George, Pref. ix. Roget, Dr., 141. Romilly, `Sir Samuel, 3, 140, 141, 152. Rush, American Minister, 156. S. Saving, ` excessive,' 38, 39, 188. Say, J. B., Letters to Ricardo ; Notes to XXXV, LXIV, LXX, LXXV, LXXXI ; Letters to Malthus, 169, 173, 178, 181 ; other references, Pref. vii, 5 1 , 53, 82, 91 ; (` travaillez toujours'), 105, 12 5, 1 45, 154, 173, 192 ; severely characterised, 178, 179. - Horace, 91. - Louis, 211. Scarlett, Mr., 6. Scotch Farmers, 61. `Scotsman' newspaper, 146, 168, 184. ` Services,' Say's doctrine of, 170, 1i4, 181, 209. Sharp, Richard, 2, 25, , 149, 151. Silver, as a standard, Io1 ; under mint price, 115 ; over ditto, 24. Sinking Fund,Ricardo's article in Encyclopædia Britannica, see Ricardo. Sismondi, 210, 211. Smith, Adam, on Indian trade quoted, 50. Other references, passim. - Robert and Sydney, 6. - Thos., of Gloucestershire, 45, 54, 116, 118, 125, 138, 1 4 0 , 1 73, 214. Smyth, Wm., 81, 82, 83, 1 39, 149. Social wealth, 182. Spain, New, 138. Spence, William, 44, 76. Stael, Baron de, 210, 211; Madame de, 91, 210. Stagnation, not overproduction but derangement, 189, 191. Standard of living, 138, 197. Steuart, Sir Jas., 16, 144. Stocks, up and down in war times, 85 ; Stockholders sufferers, 62. Subsidies, 1, 15, 88 ; effect on Exchanges, 15, 20 seq. ; relation to price of corn, 88. ` Sun' newspaper, 115. Superabundant supply,' 3, and whole of note to II. Superior genius,' 174. Supply, in relation to demand, '73- 175, &c. See Demand. Index. 2 51 T. Tables, exchange with Hamburgh, 2 4, 33 ; with Holland, 28-31. Taxation, relation to Rent, 59, 65; not a cause of dear corn, 64 ; too little considered by Economists, 164 ; taxation and altered value of money, 3 ; Say's views on English, 1 74, 179• Tennant, Smithson, 2. Theoretical and practical bias, 96 ; theory and experience, 78. Thornton, Henry, 25, 26. ` Times' newspaper, 13o. Tithes, 65, 171. Tooke, Thomas, 26, 27, 81, 82, 184, 191, 212. Torrens, Robert, 63, 6 4, 65, 75 ; life, 76, 79, 81, 82, 9o, III, 112, 115, 116, 133, 149, 168, 17o, 182, 195, 208. Tracy, Destutt de, 211. `Traveller' newspaper, 168. `Trienniality,' 55. U. Ultra-Bullionists, 27. Utility and Truth of propositions, 53, but cf. 182 ; Utility and Value, 92, 93, 1 73, 174, 179, 182, 183. V. Value, real and nominal, 7 ; of currency, 82 ; doctrine of Value a cardinal point in Ricardo's system, 149 ; how viewed by Malthus, 171, 175 ; and by Say, 92, 93, 1 73, 181, 209 ; Measure of Value, 148; Ricardo's doctrine modified, 139 ; Quantity and Value, 3 seq., 53. See also Measure. Vansittart, Nicholas, 3, 5. Verbal disputes in Political Economy,' 192, cf. 165. W. Wages, foundation of capital, 49 ; do not depend on day's produce, 97 ; in proportion not to the produce but to the demand for labour, 98 ; 123 ; too high and too low, 186, 188 ; depends on facility of obtaining necessaries, 34 ; effect of high wages on prices, 39 ; wages low in 1817, 142; remedy for low wages, 166. Wants of men unlimited, 34, 45, 49 effects of changing wants and tastes, I , 3 8 , 49, 53. 'War, effects on trade, 8, 9, 39, 72, 84 ; Peninsular, loo. Warburton, Henry, 96, 115, 117, 139, 1 4 0 , 1 49, 172' Wealth, as abundance, 211 ; proper sense, 153 ; natural and social, 182. Wellington, Duke of, 84, 87. West, Edward, 63. Western, Mr., 213. Westminster Election, 152. Wetenhall, tables, 9, 24, 6o. Whishaw (or Wishaw), John, 2, 83, 11S, 1 3 8 , 1 39, 1 4 8 , 149, 163. Whitbread, Samuel, 63, 84. Wilberforce, William, Pref. xi, 89. Woolaston, Dr., 139. Workmen, combinations, 144. Y. Young, Arthur, 97. THE END.