The Online Library of Liberty

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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 iv

On the effect of Abundant Crops on the Price of Corn

In a former section I2 have endeavoured to shew, that the price of corn, to be remunerative, must pay all the charges of its production, including in those charges the ordinary profits of the stock employed. It is, in fact, by these conditions being fulfilled, that the supply, on an average of years, is regulated. If the price obtained be less than remunerative, profits will be depressed, or will entirely disappear. If it be more than remunerative, profits will be high. In the first case, capital will be withdrawn from the land, and the supply will gradually conform to the demand. In the second case, capital will be attracted to the land, and the supply will be increased. But, notwithstanding this tendency of the supply of corn to conform itself to the demand, at prices which shall be remunerative, it is impossible to calculate accurately on the effects of the seasons. Sometimes, for a few years successively, crops will be abundant; at other times they will, for an equal period, be scanty and insufficient. When the quantity of corn at market, from a succession of good crops, is abundant, it falls in price, not in the same proportion as the quantity exceeds the ordinary demand, but very considerably more. The demand for corn, with a given population, must necessarily be limited; and, although it may be, and undoubtedly is, true, that when it is abundant and cheap, the quantity consumed will be increased, yet it is equally certain, that its aggregate value will be diminished. Suppose 14 millions of quarters of wheat to be the ordinary demand of England, and that, from a very abundant season, 21 millions is produced. If the remunerative price were 3l. per quarter, and the value of the 14 millions of quarters 42,000,000l., there cannot be the least doubt, that the 21 millions of quarters would be of very considerably less value than 42,000,000l. No principle can be better established, than that a small excess of quantity operates very powerfully on price. This is true of all commodities; but of none can it be so certainly asserted as of corn, which forms the principal article of the food of the people. The principle, I believe, has never been denied by those who have turned their attention to this subject. Some, indeed, have attempted to estimate the fall of price which would take place, under the supposition of the surplus bearing different proportions to the average quantity. Such calculations, however, must be very deceptious, as no general rule can be laid down for the variations of price in proportion to quantity. It would be different in different countries; it must essentially depend on the wealth or poverty of the country, and on its means of holding over the superfluous quantity to a future season. It must depend, too, on the opinions formed of the probability of the future supply being adequate or otherwise to the future demand. This, however, is, I think, certain, that the aggregate value of an abundant crop will always be considerably less than the aggregate value of an average one; and that the aggregate value of a very limited crop will be considerably greater than that of an average crop. If 100,000 loaves were sold every day in London, and the supply should all at once be reduced to 50,000 per day, can any one doubt but that the price of each loaf would be considerably more than doubled? The rich would continue to consume precisely the same number of loaves, although the price was tripled or quadrupled. If, on the other hand, 200,000 loaves, instead of 100,000, were daily exposed for sale, could they be disposed of without a fall of price, far exceeding the proportion of the excess of quantity? Why is water without value, but because of its abundance? If corn were equally plenty, it would have no greater value, whatever quantity of labour might have been bestowed on its production.

In proof of the correctness of this view, I may refer to the prices of wheat in this country in different seasons of plenty, when it will be seen that, notwithstanding we were in a degree relieved by exportation, yet, from the abundance of crops, corn has been known to fall 50 per cent. in three years. Now to what can this be imputed but to excess of quantity? The document which follows is copied from Mr. Tooke’s evidence before the committee of 1821.

Because it has been said, that abundance may be prejudicial to the interests of the producers, it has been objected that the new doctrine on this subject is, that the bounty of Providence may become a curse to a country; but this is essentially changing the proposition. No one has said that abundance is injurious to a country, but that it frequently is so to the producers of the abundant commodity. If what they raised was all destined for their own consumption, abundance never could be hurtful to them; but if, in consequence of the plenty of corn, the quantity with which they go to market to furnish themselves with other things is very much reduced in value, they are deprived of the means of obtaining their usual enjoyments; they have, in fact, an abundance of a commodity of little exchangeable value. If we lived in one of Mr. Owen’s parallelograms, and enjoyed all our productions in common, then no one could suffer in consequence of abundance, but as long as society is constituted as it now is, abundance will often be injurious to producers, and scarcity beneficial to them.

[2 ]Eds. 1–2 ‘we’ in place of ‘I’.