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A NOTE ON PRICES AND TAXATION 1821 - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 4 Pamphlets and Papers 1815-1823 
The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 4 Pamphlets and Papers 1815-1823.
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First published by Cambridge University Press in 1951. Copyright 1951, 1952, 1955, 1973 by the Royal Economic Society. This edition of The Works and Correspondence of David Ricardo is published by Liberty Fund, Inc., under license from the Royal Economic Society.
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A NOTE ON PRICES AND TAXATION 1821
The MS consists of a single half-sheet, one side of which is in Ricardo’s handwriting. At the bottom of it Trower writes ‘turn over’, and on the back of it he adds his own comments. The MS was found among Trower’s papers and later passed into Dr. Bonar’s possession. It was printed in Appendix B to Letters of Ricardo to Trower, edited by Bonar and Hollander, 1899.
[A Note on Prices and Taxation]
A B and C each lay out £100 pr. Ann m. in Corn, when its price is 40/ pr. quarter, they each buy 50 quarters. But Government imposes a tax of 10/- pr. quarter on corn, and consequently the price of corn rises from 40 to 50 shillings, and the whole 150 quarters consumed will cost £375, instead of £300. In consequence however of the additional price, A, B, and C, can each, only purchase 40 quarters, instead of 50;—and therefore they will together purchase 120 quarters instead of 150. There will remain 30 quarters to be disposed of[,] which will be purchased by Government at the market price of 50/- and therefore for £75. This sum of £75 is precisely the sum which Government has raised by the tax of 10/- on 150 quarters, I think therefore I have shewn that although it is true that 150 quarters of corn will be disposed of for £375 instead of for £300 no additional quantity of money will be required for the purpose of purchasing it.—
No additional money is required to purchase it, because although more money is paid for the corn in consequence of the Tax, yet the cost of production of the corn, its natural price, is not increased. And the seller of the corn pays over to Government the extra price he receives in consequence of the Tax. This money, so paid to Government, is given to other persons, by whom that portion of the Corn is purchased, which used to be bought by the tax payers before the Tax was imposed.
So that the same £300 purchases the Corn whose price is raised by the Tax to £375. And it is enabled to do this in consequence of the increased ratio of its circulation, which the imposition of the tax occasions. Before the tax was imposed the 300 purchased 150 quarters of Corn for 300, now it first purchases 120 quarters @ 50/- amounting to 300; and then afterwards, that portion of it which was paid for the tax, vzt. 75, purchases the remaining 30 quarters @ 50/- amounting to 75. So that that portion circulates twice where before the Tax was imposed it only circulated once.
Thus the only effect of the Tax is to take from the payers of it the power of purchasing 30 quarters of Corn, and to transfer that power to other persons; and this is effected by causing the money to pass through the hands of the seller of the Corn to Government and from Government to these other persons. The increase in the ratio of circulation is equal to the amount of the Tax—vzt. 25 p Ct.