Letters of David Ricardo to Thomas Robert Malthus, 1810-1823. David Ricardo
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).
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 (LXVII, 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:—
1. 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).
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:—
1. 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.
I.
Stock Exchange, 25th Feb., 1810.
My dear Sir,
I have just time, after a very busy day, to tell you that I will endeavour to get Mr. Mushet[28] 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 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.
Stock Exchange, 22 March, 1810.
My dear Sir,
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[29], Mr. Sharp[30], Mr. Tennant[31], and Mr. Dumont[32].
I have been making enquiries concerning