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• An Essay On the Influence of a Low Price of Corn On the Profits of Stock 1815
• Proposals For an Economical and Secure Currency 1816
• Section I: In the Medium of Circulation—cause of Uniformity Is Cause of Goodness
• Section II: Use of a Standard Commodity—objections to It Considered
• Section III: The Standard, Its Imperfections—variations Below Without Allowance of the Countervailing Variations Above the Standard, Their Effects— Correspondence With the Standard the Rule For Paper Money
• Section IV: An Expedient to Bring the English Currency As Near As Possible to Perfection
• Section V: A Practice Which Creates a Great Mass of Mercantile Inconvenience— Remedy Proposed
• Section VI: The Public Services of the Bank Excessively Overpaid—remedy Proposed
• Section VII: Bank Profits and Savings—misapplication—proposed Remedy
• Appendix
• Funding System an Article In the Supplement to the Fourth, Fifth and Sixth Editions of the Encyclopaedia Britannica 1820
• On Protection to Agriculture 1822
• Introduction
• Section I: On Remunerating Price
• Section II: On the Influence of a Rise of Wages On the Price of Corn
• Section III: On the Effects of Taxes Imposed On a Particular Commodity
• Section IV: On the Effect of Abundant Crops On the Price of Corn
• Section V: On the Effect Produced On the Price of Corn By Mr. Peel’s Bill For Restoring the Ancient Standard
• Section VI: On the Effects of a Low Value of Corn On the Rate of Profits
• Section VII: Under a System of Protecting Duties Established With a View to Give the Monopoly of the Home Market to the Home Grower of Corn, Prices Cannot Be Otherwise Than Fluctuating
• Section VIII: On the Project of Advancing Money On Loan, to Speculators In Corn, At a Low Interest
• Section IX: Can the Present State of Agricultural Distress Be Attributed to Taxation?
• Conclusion
• Appendix (a.): At a Court of Directors At the Bank. On Thursday 20th May 1819.
• Plan For the Establishment of a National Bank
• Notes From Ricardo’s Manuscripts 1818–1823
• Fragments On Torrens Concerning Value 1818
• Note On Fragments On Torrens
• (a 1): [ricardo On Torrens]
• (a 2): [torrens On Ricardo]
• (b): [an Entry In Ricardo’s Commonplace Book]
• A Note On Prices and Taxation 1821
• On Blake’s ‘observations On the Effects Produced By the Expenditure of Government’ 1823
• Note On the Papers On Blake
• [notes On Blake’s ‘observations On the Effects Produced By the Expenditure of Government’ 1823 With Blake’s Replies]
• [an Unfinished Review of Blake’s ‘observations On … the Expenditure of Government’ 1823]
• Absolute Value and Exchangeable Value 1823
• Appendix
• The ‘ingenious Calculator’
• Bullion Report.

section ii

Use of a standard commodity—objections to it considered

During the late discussions on the bullion question, it was most justly contended, that a currency, to be perfect, should be absolutely invariable in value.

But it was said too, that ours had become such a currency, by the Bank restriction bill; for by that bill we had wisely discarded gold and silver as the standard of our money; and in fact that a pound note did not and ought not to vary with a given quantity of gold, more than with a given quantity of any other commodity. This idea of a currency without a specific standard was, I believe, first advanced by Sir James Steuart,*1 but no one has yet been able to offer any test by which we could ascertain the uniformity in the value of a money so constituted. Those who supported this opinion did not see, that such a currency, instead of being invariable, was subject to the greatest variations,—that the only use of a standard is to regulate the quantity, and by the quantity the value of the currency—and that without a standard it would be exposed to all the fluctuations to which the ignorance or the interests of the issuers might subject it.

It has indeed been said that we might judge of its value by its relation, not to one, but to the mass of commodities. If it should be conceded, which it cannot be, that the issuers of paper money would be willing to regulate the amount of their circulation by such a test, they would have no means of so doing; for when we consider that commodities are continually varying in value, as compared with each other; and that when such variation takes place, it is impossible to ascertain which commodity has increased, which diminished in value, it must be allowed that such a test would be of no use whatever.

Some commodities are rising in value, from the effects of taxation, from the scarcity of the raw material of which they are made, or from any other cause which increases the difficulty of production. Others again are falling, from improvements in machinery, from the better division of labour, and the improved skill of the workman; from the greater abundance of the raw material, and generally from greater facility of production. To determine the value of a currency by the test proposed, it would be necessary to compare it successively with the thousands of commodities which are circulating in the community, allowing to each all the effects which may have been produced upon its value by the above causes. To do this is evidently impossible.

To suppose that such a test would be of use in practice, arises from a misconception of the difference between price and value.

The price of a commodity is its exchangeable value in money only.

The value of a commodity is estimated by the quantity of other things generally for which it will exchange.

The price of a commodity may rise while its value falls, and vice versa. A hat may rise from twenty to thirty shillings in price, but thirty shillings may not procure so much tea, sugar, coffee, and all other things, as twenty shillings did before, consequently a hat cannot procure so much. The hat, then, has fallen in value, though it has increased in price.

Nothing is so easy to ascertain as a variation of price, nothing so difficult as a variation of value; indeed, without an invariable measure of value, and none such exists, it is impossible to ascertain it with any certainty or precision.

A hat may exchange for less of tea, sugar, and coffee, than before, but, at the same time, it may exchange for more of hardware, shoes, stockings, &c. and the difference of the comparative value of these commodities may either arise from a stationary value of one, and a rise, though in different degrees, of the other two; or a stationary value in one, and a fall in the value of the other two; or they may have all varied at the same time.

If we say that value should be measured by the enjoyments which the exchange of the commodity can procure for its owner, we are still as much at a loss as ever to estimate value, because two persons may derive very different degrees of enjoyment from the possession of the same commodity. In the above instance, a hat would appear to have fallen in value to him whose enjoyments consisted in tea, coffee and sugar; while it would appear to have risen in value to him who preferred shoes, stockings, and hardware.

Commodities generally, then, can never become a standard to regulate the quantity and value of money; and although some inconveniences attend the standard which we have adopted, namely, gold and silver, from the variations to which they are subject as commodities, these are trivial, indeed, compared to those which we should have to bear, if we adopted the plan recommended.

When gold, silver, and almost all other commodities, were raised in price, during the last twenty years, instead of ascribing any part of this rise to the fall of the paper currency, the supporters of an abstract currency had always some good reason at hand for the alteration in price. Gold and silver rose because they were scarce, and were in great demand to pay the immense armies which were then embodied. All other commodities rose because they were taxed either directly or indirectly, or because from a succession of bad seasons, and the difficulties of importation, corn had risen considerably in value; which, according to their theory, must necessarily raise the price of commodities. According to them, the only things which were unalterable in value were bank notes; which were, therefore, eminently well calculated to measure the value of all other things.

If the rise had been 100 per cent., it might equally have been denied that the currency had any thing to do with it, and it might equally have been ascribed to the same causes. The argument is certainly a safe one, because it cannot be disproved. When two commodities vary in relative value, it is impossible with certainty to say, whether the one rises, or the other falls; so that, if we adopted a currency without a standard, there is no degree of depreciation to which it might not be carried. The depreciation could not admit of proof, as it might always be affirmed that commodities had risen in value, and that money had not fallen.

[* ]The writings of Sir James Steuart on the subject of coin and money are full of instruction, and it appears surprising that he could have adopted the above opinion, which is so directly at variance with the general principles he endeavoured to establish.

[1 ]An Inquiry into the Principles of Political Oeconomy, London, 1767, Book III, ch. i, ‘Of Money of Accompt’.