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Often appears with: value, price, and exchange · taxation, tribute, and revenue · agriculture and the land · labor, wages, and the division of work · famine, scarcity, and plenty · capital, credit, and banking · money, coin, and credit · trade, markets, and merchants · poverty and wealth · public finance and debt · wages and profits · property, inheritance, and title
Usually: argument (113) · detachment (54) · skepticism (53) · censure (12) · letter or document (10) · indignation (8) · curiosity (5) · exhortation (5) · reflection (3) · injustice endured (3)
“Pictures of these broad smiles appear each week, And people in whose voice real feeling rings Say: How they smile! They're happy now, poor things.” Wilfred Owen, Poems · observation
“Men’s fears, solicitudes, cares, labours, and watchings would all perish in the same moment with the value of money; even poverty itself, for the relief of which money seems most necessary, would fall.” Thomas More, Saint, Utopia · observation
“To systematize thought, and give a precision and clearness in which our sex are so deficient, chiefly, I think, because they have so few inducements to test and classify what they receive.” Margaret Fuller, Memoirs of Margaret Fuller Ossoli, Volume I · insight
“…with sole reference to the highest possible profit on the principle that _no hole is so bad but that some poor creature must take it who can pay for nothing better_.” Friedrich Engels, The Condition of the Working-Class in England in 184 · observation
“Competition is the completest expression of the battle of all against all which rules in modern civil society.” Friedrich Engels, The Condition of the Working-Class in England in 184 · insight
“Fine freedom, where the proletarian has no other choice than that of either accepting the conditions which the bourgeoisie offers him, or of starving, of freezing to death, of sleeping naked among the beasts of the forests!” Friedrich Engels, The Condition of the Working-Class in England in 184 · vivid
“The theory of ground-rent is a special English economic matter, and this of necessity because only in England does a mode of production exist by which rent is separated from profit and interest.” Friedrich Engels, Landmarks of Scientific Socialism: "Anti-Duehring" · observation
“Money, however, is a variable commodity; and the rise of wages as well as of commodities, is frequently occasioned by a fall in the value of money.” David Ricardo, On The Principles of Political Economy, and Taxation · insight
“In stating the principles which regulate exchangeable value and price, we should carefully distinguish between those variations which belong to the commodity itself, and those which are occasioned by the variation in the medium in which value is estimated, or price expressed.” David Ricardo, On The Principles of Political Economy, and Taxation · precept
“The rise of rent is always the effect of the increasing wealth of the country, and of the difficulty of providing food for its augmented population. It is a symptom, but it is never a cause of wealth.” David Ricardo, On The Principles of Political Economy, and Taxation · insight
“Thus, then, with every improvement of society, with every increase in its capital, the market wages of labour will rise; but the permanence of their rise will depend on the question, whether the natural price of wages has also risen.” David Ricardo, On The Principles of Political Economy, and Taxation · insight
“Rent then, it appears, always falls on the consumer, and never on the farmer;” David Ricardo, On The Principles of Political Economy, and Taxation · insight
Livy describes Saguntum’s wealth, the origins of its people, Hannibal’s three-pronged assault, the vineae and battering-ram against the walls, and how Hannibal’s thigh wound nearly breaks Carthaginian progress.
the submission of the Carpetani also within a few days. And now all the country beyond the Iberus, excepting that of the Saguntines, was under the power of the Carthaginians. 6. As yet there was no war with the Saguntines, but already, in order to a war, the seeds of dissension were sown between them and their neighbours, particularly the Turetani, with whom when the same person sided who had originated the quarrel,…
Using examples of shoemakers, steam-engines, and hunter versus fisherman, he classifies capital as fixed or circulating and explains how differences in durability and value affect profits and commodity price fluctuations.
same consideration of the various quantities of labour which have been bestowed on those other things, will equally govern the portion of them which will be given for the stockings. To convince ourselves that this is the real foundation of exchangeable value, let us suppose any improvement to be made in the means of abridging labour in any one of the various processes through which the raw cotton must pass, before t…
He argues that when hunting and fishing use equal-valued, equally durable implements and equal labor, relative values are determined solely by labor-time outputs, while wages/profits move together without changing exchange ratios.
they are also subject to fluctuations from a rise of wages, and consequent fall of profits, if the fixed capitals employed be either of unequal value, or of unequal duration. Suppose that in the early stages of society, the bows and arrows of the hunter were of equal value, and of equal durability, with the canoe and implements of the fisherman, both being the produce of the same quantity of labour. Under such circu…
Ricardo treats money as a putative standard but shows that if a commodity’s relative value shifts, it must be due to differing labor required in production, not merely wage changes, which affect both trades similarly.
how much of the variation was to be attributed to a cause which affected the value of fish, and how much to a cause which affected the value of game. Suppose money to be that commodity. If a salmon were worth 1*l.* and a deer 2*l.* one deer would be worth two salmon. But a deer might become of the value of three salmon, for more labour might be required to obtain the deer, or less to get the salmon, or both these ca…
He continues by showing that when wages rise, commodities produced with more circulating capital rise relatively in value versus those using more fixed capital, and he provides numerical comparisons for hunter and fisherman cases.
To replace his circulating capital of 53*l.* with a profit of 4 per cent. 55.12*l.* To replace fixed capital, annually wasted, the present value of an annuity of 18.49*l.* for ten years, when money is at 4 per cent., being 150*l.* 18.49 ----- £73.61 The fisherman would sell his fish …
Ricardo analyzes how the durability of fixed capital affects how wages and profit changes translate into commodity prices, arguing longer-lived machinery causes larger price drops when profits fall.
labour so rose, that 21,153*l.* were required, profits would fall to 4 per cent. and if it rose, so that 21,359*l.* was employed, profits would fall to 3 per cent. But, as no wages would be paid by the owner of the machine, which would last 100 years, when profits fell to 5 per cent. the price of his goods must fall to 1007*l.* 13*s.* 8*d.* viz. 1000*l.* to pay his profits, and 7*l.* 13*s.* 8*d.* to accumulate for 1…
He addresses received doctrines by arguing that when wages rise, competitive pressure prevents machinery prices from staying higher and instead machinery lowers the prices of durable goods compared with wages-only production.
its received doctrines, which maintain that every rise in wages is necessarily transferred to the price of commodities, that it may not be superfluous to elucidate the subject still further. A manufacturer of hats employs a hundred men at an annual expense of 50*l.* each, who produce him commodities of the value of 8000*l.* A machine calculated to last precisely a year, and to do equally well the same work as the 10…
Ricardo summarizes that rising wages need not raise prices in real terms if money’s value is fixed; he distinguishes wage increases driven by money’s fall from those due to real scarcity, affecting profits differently.
of the commodity manufactured. Neither machines nor any other commodities are raised in price, but all commodities which are made by machines fall, and fall in proportion to their durability. It appears, then, that in proportion to the quantity and the durability of the fixed capital employed in any kind of production, the relative prices of those commodities on which such capital is employed, will vary inversely as…
He argues that the true distribution of rent, wages, and profits depends on the quantity of labor required, not absolute output or nominal value in money or commodities, even if total production doubles.
that we are to judge of rent, profit, and wages, and not according to the value at which that produce may be estimated in a medium which is confessedly variable. It is not by the absolute quantity of produce obtained by either class, that we can correctly judge of the rate of profit, rent, and wages, but by the quantity of labour required to obtain that produce. By improvements in machinery and agriculture, the whol…
Ricardo continues that changes in the value of money may alter prices but not the rate of profit, because capital and product prices move with money proportionally, while profits depend on relative proportions.
value, he double the quantity of produce, its value falls one half, and then it will bear the same proportion to the capital which produced it, as it did before. If at the same time that he doubles the quantity of produce by the employment of the same capital, the value of money is by any accident lowered one half, the produce will sell for twice the money value that it did before; but the capital employed to produc…
He begins the chapter on rent, defining rent as payment for the soil’s original and indestructible powers, distinguishing it from capital interest and profit and criticizing popular conflations using Adam Smith examples.
ON RENT. It remains however to be considered, whether the appropriation of land, and the consequent creation of rent, will occasion any variation in the relative value of commodities, independently of the quantity of labour necessary to production. In order to understand this part of the subject, we must inquire into the nature of rent, and the laws by which its rise or fall is regulated. Rent is that portion of the…
Ricardo explains rent’s emergence as population expands and inferior lands are cultivated, using analogies to air and water and giving a three-tier land example to show how rent shifts across qualities.
rent of land, I wish to be understood as speaking of that compensation, which is paid to the owner of land for the use of its original and indestructible powers. On the first settling of a country, in which there is an abundance of rich and fertile land, a very small proportion of which is required to be cultivated for the support of the actual population, or indeed can be cultivated with the capital which the popul…
He continues the three-land example, showing that once worse land is required rent begins on better land, and that advances in productivity on existing land can still create additional rent via the difference between equal capitals.
oblige a country to have recourse to land of a worse quality, to enable it to raise its supply of food, rent, on all the more fertile land, will rise. Thus suppose land--No. 1, 2, 3,--to yield, with an equal employment of capital and labour, a net produce of 100, 90, and 80 quarters of corn. In a new country, where there is an abundance of fertile land compared with the population, and where therefore it is only nec…
Ricardo explains rent as rising only when additional capital yields diminishing returns on land, so later capital pays no rent and rent comes from the gap between outputs.
original tenant refused, some other person would be found willing to give all which exceeded that rate of profit to the owner of the land from which he derived it. In this case, as well as in the other, the capital last employed pays no rent. For the greater productive powers of the first 1000*l.*, fifteen quarters is paid for rent, for the employment of the second 1000*l.* no rent whatever is paid. If a third 1000*…
Ricardo links rising rent to a country’s wealth and population growth under food-supply constraints, then claims wealth can rise even as rent falls, without rent causing wealth.
manufactured, not only by that machinery, but by all the other machinery in the kingdom; and a rent would be paid to all those who possessed the most productive machinery.[7] The rise of rent is always the effect of the increasing wealth of the country, and of the difficulty of providing food for its augmented population. It is a symptom, but it is never a cause of wealth; for wealth often increases most rapidly whi…
He shows agricultural improvements can lower rent by avoiding cultivation of poorer land, and distinguishes improvements that raise land’s powers from those that reduce labour use.
shall have the same effect of diminishing the necessity of cultivating the poorer lands, or of expending the same amount of capital on the cultivation of the more fertile portions. If a million of quarters of corn be necessary for the support of a given population, and it be raised on land of the qualities of No. 1, 2, 3; and if an improvement be afterwards discovered by which it can be raised on No. 1 and 2, withou…
Ricardo uses examples to argue that if improvements equalize returns across capital employed, rent falls, while changes increasing inequality in returns raise rent.
of an improvement to diminish the quantity of labour before required to produce a commodity; and this diminution cannot take place without a fall of its price or relative value. The improvements which increase the productive powers of the land, are such as the more skilful rotation of crops, or the better choice of manure. These improvements absolutely enable us to obtain the same produce from a smaller quantity of …
He defines natural versus market price, arguing market prices fluctuate around natural prices as profits change and capital shifts across employments to equalize returns.
ON NATURAL AND MARKET PRICE. In making labour the foundation of the value of commodities, and the comparative quantity of labour which is necessary to their production, the rule which determines the respective quantities of goods which shall be given in exchange for each other, we must not be supposed to deny the accidental and temporary deviations of the actual or market price of commodities from this, their primar…
Ricardo defines capital as the means of production and argues that whether capital grows with or without rising value changes the natural and market wages differently, affecting labourers’ welfare over time.
may produce the same effect; and thus if the increase of capital be gradual and constant, the demand for labour may give a continued stimulus to an increase of people. Capital is that part of the wealth of a country, which is employed in production, and consists of food, clothing, tools, raw material, machinery, &c. necessary to give effect to labour. Capital may increase in quantity at the same time that its value…
He claims wages tend to fall with rising labour supply when demand lags, but in practice commodity prices rise with the cost of subsistence, so money wages rise though real wages may not, reducing profits.
regulated only by the supply and demand of labourers; but we must not forget, that wages are also regulated by the prices of the commodities on which they are expended. As population increases, these necessaries will be constantly rising in price, because more labour will be necessary to produce them. If, then, the money wages of labour should fall, whilst every commodity on which the wages of labour were expended r…
Using a numerical example, Ricardo argues that when wheat prices rise, labourers receive higher money wages but reduced corn wages, making workers worse off in real terms while profits and rental shares shift.
When at 4*l.* 10*s.*, three quarters of wheat would cost £13.10 and other things 12 ----- 25.10 When at 4*l.* 16*s.*, three qrs. of wheat £14.8 Other things 12 ---- 26.8 When at 5.2.10*l.* three quarters of wheat would cost £15.8.6. Other things 12 …
Transitioning to profits, Ricardo argues that changes in corn prices tied to labour difficulty raise wages and therefore reduce profits, using the distribution of output between wages, rents, and profits to explain persistent profit variation.
ON PROFITS. The profits of stock in different employments, having been shewn to bear a proportion to each other, and to have a tendency to vary all in the same degree and in the same direction, it remains for us to consider what is the cause of the permanent variations in the rate of profit, and the consequent permanent alterations in the rate of interest. We have seen that the price[10] of corn is regulated by the…
He explains that while corn’s money price rises under worse land, total revenue on “no rent” land stays constant, so higher wage costs from higher wheat prices necessarily lower the farmer’s profit.
the price of raw produce, and therefore their profits still conform to the profits of the manufacturer. As this proposition is important, I will endeavour still further to elucidate it. We have shewn that in early stages of society, both the landlord's and the labourer's share of the *value* of the produce of the earth, would be but small; and that it would increase in proportion to the progress of wealth, and the d…
Ricardo argues that as the price of corn rises and wages rise, farmers retain the same total money value for their output after rent, so rent absorbs the increase and profits don’t rise.
I think it is clearly demonstrated that a rise in the price of corn, which increases the money wages of the labourer, diminishes the money value of the farmer's profits. But the case of the farmer of the old and better land will be in no way different; he also will have increased wages to pay, and will never retain more of the value of the produce, however high may be its price, than 720*l.* to be divided between hi…
He explains that farmers, while not paying rent directly, prefer low rent and wages because higher corn prices force higher wage payments out of a fixed total, reducing profit rates.
manufactures, and if both are obliged to pay a greater value in wages, can any point be more clearly established than that profits must fall, with a rise of wages? The farmer then, although he pays no part of his landlord's rent, that being always regulated by the price of produce, and invariably falling on the consumers, has however a very decided interest in keeping rent low, or rather in keeping the natural price…
Ricardo distinguishes price rises from higher wages: many goods rise with wheat because more labor goes into raw materials, not because labor is paid more, and he claims money wages won’t fall while necessities rise.
the second he would have a profit only of 445*l.* 15*s.*, on an increased capital, and therefore his profits would conform to the altered rate of those of the farmer. There are few commodities which are not more or less affected in their price by the rise of raw produce, because some raw material from the land enters into the composition of most commodities. Cotton goods, linen, and cloth, will all rise in price wit…
He argues that while specific industries may temporarily enjoy higher profits when demand spikes, competition and supply restore market prices, and a general fall in profits comes from rising wages.
not that affect profits? certainly not: for nothing can affect profits but a rise in wages; silks and velvets are not consumed by the labourer, and therefore cannot raise wages. It is to be understood that I am speaking of profits generally. I have already remarked that the market price of a commodity may exceed its natural or necessary price, as it may be produced in less abundance than the new demand for it requir…
Ricardo projects an extreme scenario where very high corn prices eventually leave no profit, with nearly all national income going to landlords, tithes, and taxes after workers consume fixed necessaries.
permanently larger profits, will find himself obliged to be satisfied with the diminished rate which is the inevitable consequence of the rise of wages, produced by the rise of necessaries. The natural tendency of profits then is to fall; for, in the progress of society and wealth, the additional quantity of food required is obtained by the sacrifice of more and more labour. This tendency, this gravitation as it wer…
He adds that long before profits hit zero there’s little incentive to accumulate, and the profit rate falls faster than his arithmetic because the value of farmers’ own stock also rises, aiding some trades unequally.
increase which would be the consequence of the increased value of the raw material from which they are made, and which would of course further increase wages, and lower profits. I have already said, that long before this state of prices was become permanent, there would be no motive for accumulation; for no one accumulates but with a view to make his accumulation productive, and it is only when so employed that it o…
Ricardo argues that accumulation requires both more physical output and higher total value because new land is harder to produce, and in large economies landlords gain while profits fall and laborers’ real condition worsens.
6 per cent., 66,000*l.* or a diminution of 4000*l.* will be received by the owners of stock, although the whole amount of stock will be increased from 1,000,000*l.* to 1,100,000*l.* There can, however, be no accumulation of capital, so long as stock yields any profit at all, without its yielding not only an increase of produce, but an increase of value. By employing 100,000*l.* additional capital, no part of the for…
He claims that even when output rises, a larger share of value after rent goes to wages rather than profits once poor land is cultivated or capital is extended on existing land, due to limits on land productivity.
real gainers would be the landlords; they would receive higher rents, first, because produce would be of a higher value, and secondly, because they would have a greatly increased proportion. Although a greater value is produced, a greater proportion of what remains of that value, after paying rent, is consumed by the producers, and it is this, and this alone, which regulates profits. Whilst the land yields abundantl…
Ricardo restates that profits depend on the labor needed to produce necessaries on land that yields no rent, contrasting countries by fertility and food import policy, and maintaining high wages reduce employers’ real profits.
value of a smaller proportion will be devoted to profits. This will necessarily be rendered permanent by the laws of nature, which have limited the productive powers of the land. Thus we again arrive at the same conclusion which we have before attempted to establish:--that in all countries, and at all times, profits depend on the quantity of labour requisite to provide necessaries for the labourers, on that land or …
In a discussion of foreign trade, he argues that trade increases the quantity of commodities and enjoyment, but not a country’s total value in the long run, since profits depend on general levels and tend to normalize.
ON FOREIGN TRADE. No extension of foreign trade will immediately increase the amount of value in a country, although it will very powerfully contribute to increase the mass of commodities, and therefore the sum of enjoyments. As the value of all foreign goods is measured by the quantity of the produce of our land and labour, which is given in exchange for them, we should have no greater value, if by the discovery of…
Ricardo argues that if foreign prices change or imports expand, capital reallocates across sectors, so profits of “favoured” trades tend to return to the general level and prices cannot permanently rise.
profits will be brought about by the general rise of profits; and I am of opinion, that the profits of the favoured trade will speedily subside to the general level. For, first, I deny that less capital will necessarily be devoted to the growth of corn, to the manufacture of cloth, hats, shoes, &c., unless the demand for these commodities be diminished; and if so, their price will not rise. In the purchase of foreig…
He explains capital accumulation can come from higher revenue or lower consumption, using an example of increased merchant profits and savings, and compares machinery and cheap imports as routes to saving.
which were before exported, or any others for which they had an inclination. The capital required for their production would be supplied by the capital liberated from the foreign trade. There are two ways in which capital may be accumulated: it may be saved either in consequence of increased revenue, or of diminished consumption. If my profits are raised from 1000*l.* to 1200*l.* while my expenditure continues the s…
Ricardo argues profits rise only when wages fall, which requires cheaper necessities for labor; he claims foreign trade and machinery raise saving and output but only lift profits if imports cut wage-costs.
artificial advantages it is adapted, and by their exchanging them for the commodities of other countries, as that they should be augmented by a rise in the rate of profits. It has been my endeavour to shew throughout this work, that the rate of profits can never be increased but by a fall in wages, and that there can be no permanent fall of wages but in consequence of a fall of the necessaries on which wages are exp…
Ricardo distinguishes “low value of money” from “high value of corn,” explaining how rises in corn prices can come from either falling money or rising corn, with different effects on wages, profits, and exchange.
occasions a disturbance of the equilibrium of money, it does so by depriving the country in which it is imposed of some of the advantages attending skill, industry, and climate. It has been my endeavour carefully to distinguish between a low value of money, and a high value of corn, or any other commodity with which money may be compared. These have been generally considered as meaning the same thing; but it is evid…
Ricardo explains how taxes on raw produce raise the cost of producing corn, pushing up its price, and he argues such taxes are paid by consumers via higher prices, while also raising wages and lowering profits.
TAXES ON RAW PRODUCE. Having in a former part of this work established, I hope satisfactorily, the principle, that the price of corn is regulated by the cost of its production on that land exclusively, or rather with that capital exclusively, which pays no rent, it will follow that whatever may increase the cost of production will increase the price; whatever may reduce it, will lower the price. The necessity of cul…
Using a three-tract land example, Ricardo shows how a per-quarter corn tax increases corn prices, concentrates the burden on worse land, and reduces corn rent, while lowering laborers’ real flexibility through higher wages and consumer costs.
Now if the price of corn were 4*l.* per quarter, the money rent of No. 1 would be 80*l.*, and that of No. 2, 40*l.* Suppose a tax of 8*s.* per quarter to be imposed on corn; then the price would rise to 4*l.* 8*s.*; and if the landlords obtained the same corn rent as before, the rent of No. 1 would be 88*l.*, and that of No. 2, 44*l.* But they would not obtain the same corn rent; the tax would fall heavier on No. 1 …
He argues that taxation involves a choice of evils: if it doesn’t hit profits it hits expenditure, and he compares profit-based versus expenditure-based taxes, noting the limits on shifting taxation when countries are insulated.
an income of the same value, but he will not have the same command of labour, nor of an equal quantity of materials on which such labour can be exercised. If a country is insulated from all others, having no commerce with any of its neighbours, it can in no way shift any portion of its taxes from itself. A portion of the produce of its land and labour will be devoted to the service of the state; and I cannot but thi…
In a section on taxes on rent, Ricardo argues such taxes fall wholly on landlords because rent depends on land quality differentials; he also distinguishes buildings/fixtures payments from true land rent.
TAXES ON RENT. A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every other quality. Three sorts of land, No. 1, 2, and 3, are in cultivation, and yi…
He criticizes Adam Smith’s view of who ultimately bears a direct tax on wages, quoting Smith’s argument that manufacturers and farmers pass it on, while Ricardo shifts the incidence to profits.
but not a necessary, nor a peculiar consequence of a tax on wages, that though wages would rise, they would not rise by a sum precisely equal to the tax. Adam Smith, as we have seen, has fully allowed that the effect of a tax on wages would be to raise wages by a sum at least equal to the tax, and would be finally, if not immediately, paid by the employer of labour. Thus far we fully agree; but we essentially differ…
Considering a society of landlords, manufacturers, farmers, and labourers, Ricardo argues that if manufacturers can raise prices to cover wage taxes, circular demand among manufacturers prevents them from bearing the tax, leaving landlords unable to shoulder it alone.
diminished rent; but that the additional wages paid by manufacturers will occasion a rise in the price of manufactured goods, and will therefore fall on the consumers of those commodities. Now suppose a society to consist of landlords, manufacturers, farmers, and labourers. The labourers, it is agreed, would be recompensed for the tax;--but by whom?--who would pay that portion which did not fall on the landlords?--t…
Ricardo says Adam Smith errs by assuming farmers’ wage-tax payments must reduce rent, and he concludes that any tax raising wages effectively becomes a tax on the profits of stock, not landlords.
labourer, as well as those of his employers, will be curtailed by the tax; and not by this tax particularly, but by any other which should raise an equal amount. The error of Adam Smith proceeds in the first place from supposing, that all taxes paid by the farmer must necessarily fall on the landlord, in the shape of a deduction from rent. On this subject I have explained myself most fully, and I trust that it has b…
Ricardo rejects Smith’s claims that taxes on necessities necessarily raise all manufacturing prices and that final payments can be repeatedly accumulated, arguing instead that taxes on the poor mainly reduce profits of stock.
condemned on such grounds; and moreover, even if the opinion that they would have such an effect were well founded, they would be in no degree injurious on that account. It is undoubtedly true, that "taxes upon luxuries have no tendency to raise the price of any other commodities, except that of the commodities taxed;" but it is not true, that "taxes upon necessaries, by raising the wages of labour, necessarily tend…
Ricardo argues that a good tax system raises no more than what enters the state treasury, condemning taxes that are effectively “repeated and accumulated” and that wrongly shift burdens between the poor and the rich.
no more than the whole amount of the tax; and it is not in the nature of things, that "the tax should be repeated and accumulated four or five times." A system of taxation may be defective; more may be raised from the people, than what finds its way into the coffers of the state, as a part, in consequence of its effect on prices, may possibly be received by those, who are benefited by the peculiar mode in which taxe…
Ricardo claims that whether taxes come from revenue or capital they reduce a country’s taxable commodities, and that taxation’s indirect effects can raise wages, lower profits, and disrupt natural price relations.
was only increased by the difference between the profits obtained in the business in which the capital was newly engaged, and those obtained in that from which it was withdrawn. Whether taxes be taken from revenue or capital, they diminish the taxable commodities of the state. If I cease to expend 100*l.* on wine, because by paying a tax of that amount I have enabled Government to expend 100*l.* instead of expending…
Ricardo maintains that heavier nominal taxation often reduces the taxed “produce” because people have subjective consumption thresholds; countries with large national debts face heightened risk that taxation meets diminishing returns.
wine, by giving up the use of it. The income of the country may be undiminished, and yet the state may be unable to raise a shilling by the tax. Whatever habit has rendered delightful, will be relinquished with reluctance, and will continue to be consumed notwithstanding a very heavy tax; but this reluctance has its limits, and experience every day demonstrates that an increase in the nominal amount of taxation, oft…
Ricardo explains monopoly pricing versus normal production pricing: raw produce is generally not a monopoly because sellers compete, while rare goods can be priced by consumers’ willingness to pay and land rents.
but assuredly there are limits to the price, which in the form of perpetual taxation, individuals will submit to pay for the privilege merely of living in their native country. When a commodity is at a monopoly price, it is at the very highest price at which the consumers are willing to purchase it. Commodities are only at a monopoly price, when by no possible device their quantity can be augmented; and when therefo…
He refutes James Buchanan’s claim that corn is always a monopoly rent-yielding product; Ricardo argues that as long as some land yields no rent, production costs determine corn price.
with a lower rate of profits, than that obtained by other capitalists, and, therefore, his only alternative will be to obtain a reduction of rent, or to quit his employment. Mr. Buchanan considers corn and raw produce as at a monopoly price, because they yield a rent: all commodities which yield a rent, he supposes must be at a monopoly price; and thence he infers, that all taxes on raw produce would fall on the lan…
Ricardo discusses how taxes on barley-derived products affect rent and profits, arguing that when barley is not at a monopoly price, malt taxes shift payment to consumers, while some monopoly-like taxes fall on vineyard rents.
I take of the subject of the tax on malt, and every other tax on raw produce, that I cannot refrain from offering it to the attention of the reader. "The rent and profits of barley land must always be nearly equal to those of other equally fertile, and equally well cultivated land. If they were less, some part of the barley land would soon be turned to some other purpose; and if they were greater, more land would so…
Ricardo critiques Mr. Buchanan’s view that malt taxation burdens consumers but barley taxation burdens landlords, and he says Buchanan’s position conflicts with Buchanan’s earlier claim about bread taxes.
just as much a monopoly price as that of sugar; they both yield a rent, and the market price of both has equally lost all connexion with the original cost." It appears then to be the opinion of Mr. Buchanan, that a tax on malt would raise the price of malt, but that a tax on the barley from which malt is made, would not raise the price of barley; and therefore, if malt is taxed, the tax will be paid by the consumer;…
Replying to M. Say, Ricardo argues that if a tax cuts net land produce without raising prices, farmers could not cover profits, so the tax must ultimately fall on consumers rather than being absorbed by rent changes alone.
cannot reimburse himself in the smallest degree, prove the error of those who maintain, in opposition to the economists, that all taxes fall ultimately on the consumer."--Vol. ii. p. 338. If the tax "took away half, or even three-fourths of the net produce of the land," and the price of produce did not rise, how could those farmers obtain the usual profits of stock who paid very moderate rents, having that quality o…
Ricardo explains the “poor rate” as a tax that may fall on consumers, stock profits, or land rent depending on how it affects farmers versus manufacturers, and he links its impact to whether farmers can raise raw-produce prices.
POOR RATES. We have seen that taxes on raw produce, and on the profits of the farmer, will fall on the consumer of raw produce; since unless he had the power of remunerating himself by an increase of price, the tax would reduce his profits below the general level of profits, and would urge him to remove his capital to some other trade. We have seen too that he could not, by deducting it from his rent, transfer the t…
Using poor-rate assessments, Ricardo argues the rate is based on the annual value of land (not actual rent paid), so it is initially borne by tenants/consumers through reduced returns on improvements and only later can shift to landlords.
his landlord; it is proportioned to the annual value of his land, whether that annual value be given to it by the capital of the landlord or of the tenant. If two farmers rented land of two different qualities in the same parish, the one paying a rent of 100*l.* per annum for 50 acres of the most fertile land, and the other the same sum of 100*l.* for 1000 acres of the least fertile land, they would pay the same amo…
Ricardo adds that poor rates often hit farmers more than manufacturers under existing rules, enabling farmers to raise raw-produce prices; in an advancing economy some burdens are shared, but in stationary contexts landlords bear more later.
but the relative fall of profits, which prevents capital from being employed in any particular trade: it is the difference of profit which sends capital from one employment to another. It must be acknowledged however, that in the actual state of the poor rates, a much larger amount falls on the farmer than on the manufacturer, in proportion to their respective profits; the farmer being rated according to the actual …
Ricardo argues that even if some agricultural investments can’t be withdrawn, other capital can be sold or redeployed, and if it truly couldn’t, a fall in corn prices would still change rent, wages, and profits while leaving national production largely unchanged.
more corn by growing it on land for which he paid no rent, than by manufacturing a commodity with which he purchased it, its price could not be under 4*l.* It has, however, been said that capital cannot be withdrawn from the land; that it takes the form of expenses, which cannot be recovered, such as manuring, fencing, draining, &c., which are necessarily inseparable from the land. This is in some degree true; but t…
Ricardo treats accumulation and profits: profits won’t permanently fall from more capital unless wages rise; he argues demand is limited by production and discusses when universal glut or falling profits could occur.
EFFECTS OF ACCUMULATION ON PROFITS AND INTEREST. From the account which has been given of the profits of stock, it will appear, that no accumulation of capital will permanently lower profits, unless there be some permanent cause for the rise of wages. If the funds for the maintenance of labour were doubled, trebled, or quadrupled, there would not long be any difficulty in procuring the requisite number of hands, to …
He adds that money is only a medium—productions are bought by other productions—so broad demand can expand with output; profit changes depend mainly on wage rises.
If he employed his 10,000*l.* productively, his effectual demand would be for food, clothing, and raw material, which might set new labourers to work; but still it would be demand.[34] Productions are always bought by productions, money is only the medium by which the exchange is effected. Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital…
In discussing export bounties on corn, Ricardo argues that bounties lower foreign prices and encourage agriculture, but do not permanently raise home prices; natural prices and normal profits reassert themselves.
BOUNTIES ON EXPORTATION, AND PROHIBITIONS OF IMPORTATION. A bounty on the exportation of corn tends to lower its price to the foreign consumer, but it has no permanent effect on its price in the home market. Suppose that to afford the usual and general profits of stock, the price of corn should in England be 4*l.* per quarter; it could not then be exported to foreign countries where it sold for 3*l.* 15*s.* per qua…