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

David Ricardo · 1810-1823 (letters within the correspondence) primary

passage 69 of 172 · book to convince' them, namely his 'Thoughts and Details on the High (43/68)

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in brief

In an undated but likely October 1815 letter, Ricardo uses an Essex farm accounting example to argue that if produce prices fall from improved production, rent and profits cannot all really fall together.

MY DEAR SIR,

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[114], of which not more than £1100 or £1200 is of that description which is not subject to the same variation of value as the produce of the land itself, for £2200 consists of the value of the seeds in the ground, the advances for labour, the horses and live stock, etc. etc. If then the money value of the produce from the land should fall from facility of production it must ever continue to bear a greater ratio to the whole money value of the capital employed on the land, for there will be a great increase of average produce per acre, whilst the fall in money value will be common to both capital and produce, and it cannot therefore be true that rent, profits, and wages can all really fall at the same time.

The effect of high or low wages on profits has always been distinctly recognized by me:--till the population increases to the proportion which the increased capital can employ, wages will rise, and may absorb a larger portion of the whole produce. But this effect will only take place with an increase of capital, and has nothing to do with new facilities of production. Wages do not depend upon the 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 labour instead of 2. It appears to me that, if, instead of 4, 10 measures could be produced by a day's labour, no rise would take place in wages, no greater portion of corn, cloth or cotton would be given to the labourer, unless a portion of the increased produce were employed as capital, and then the rise in wages would be in proportion to the new demand for labour, and not at all in proportion to the increase in the 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.

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topics: public finance and debt · value, price, and exchange · wages, profit, and rent

Letters of David Ricardo to Thomas Robert Malthus, 1810-1823 · David Ricardo · 1810–1823