16.: ricardo to malthus 2[Reply to 15.—Answered by 17] - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 6 Letters 1810-1815 
The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 6 Letters 1810-1815.
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ricardo to malthus
[Reply to 15.—Answered by 17]
I have been so much engaged since I had the pleasure of receiving your letter that I have not had an opportunity of answering it till this evening.
The information which you are desirous of obtaining respecting the premium on bills in Jamaica from the year 1808 to the present period, I will endeavor to procure, but, as these transactions all take place in Jamaica, and as the merchants here are frequently not acquainted with the prices at which the bills remitted to them are negociated, I am not sure that I shall be successful.
I very much regret that there is so little probability of our finally agreeing on the subject which has lately engaged our attention. The definition which you give of the word redundant, as applied to the currency, is not satisfactory to me. Though it should be allowed that the rise in the price of one commodity, in the case of a scarcity of corn, should be accompanied with a fall in the prices of all others, why should a redundancy of currency be impossible under such circumstances? The currency must, I apprehend, be considered as a whole and as such must be compared with the whole of the commodities which it circulates. If then it be in a greater proportion to commodities after than before the scarce harvest, whilst no such alteration has taken place in the proportions between money and commodities abroad, it appears to me that no expression can more correctly describe such a state of things than a “relative redundancy of currency”. Under these circumstances not only money but every other commodity would become comparatively cheap as compared with corn, and would therefore be exported in return for the corn which would be in demand in this country. By relative redundance then I mean, relative cheapness, and the exportation of the commodity I deem, in all ordinary cases, the proof of such cheapness. Indeed from one who allows that the amount of money employed in any country is regulated by its value, and might, therefore, be comparatively redundant though it consisted only of a million, or deficient though it amounted to 100 millions, I should not have expected any difference of opinion on the comparative cheapness of money being the only satisfactory proof of its redundance. If however I thought that the difference between us was as to the correct use of a word, I should immediately yield the point in dispute, but I am persuaded that we do not agree in the principle. You are of opinion that a bad harvest will raise the price of corn, but will lower in some degree the prices of other commodities. Whether it would or would not do so is not material; but if your opinion is correct then I say there would be no exportation of money because money would not be the cheapest exportable commodity. If before the deficient harvest money was at the same value in any two countries, that is to say all their exportable commodities without exception were at the same prices in both, then, according to your view of the question, after the scarcity the prices of all commodities would fall in the country where such scarcity occurred. Whilst then the prices were unequal in the two countries commodities only would be exported in exchange for corn, and there would be no question between us, because we differ as to the cause of the exportation of money. You have indeed said that there may be a glut of commodities in the foreign market. What! a glut of commodities with a dearer price! impossible,—these two circumstances are incompatible. If the price of any commodity had been £20 in both countries and in consequence of the bad harvest it had been lowered to £15 in one of them, there could not be a glut of that commodity in the other country till it had there also fallen to £15. Not only must the price of one commodity fall in the foreign market, but the prices of all (because you suppose them all to have fallen in England) before money could be exported in exchange for corn, and then I would allow that money would be exported, but even then it would be so only because it was more cheap on the whole, as compared with commodities, in the exporting country, and this I contend is the proof of its relative redundance.
You maintain that money is rendered cheap by a bad harvest as compared with corn only, but with all other commodities it is dearer than before,—and then what appears to me very inconsistent you insist that this commodity thus rendered scarce and dear will be exported, though before it had increased in value, it had no tendency to leave us, whilst too there are commodities which have undergone an opposite change, which from being dearer have become cheaper, and which will nevertheless be obstinately retained by us. This is a mode of reasoning which I cannot reconcile.
With respect to the other point, namely, that the exchange accurately measures the depreciation of the currency, I cannot but humbly retain that opinion notwithstanding the high authorities against me. I do not mean to contend that a convulsed state of the exchange, such as would be caused by a subsidy granted to a foreign power, would accurately measure the value of the currency, because a demand for bills arising from such a cause would not be in consequence of the natural commerce of the country. Such a demand would therefore have the effect of forcing the exports of commodities by means of the bounty which the exchange would afford. After the subsidy was paid the exchange would again accurately express the value of the currency. The same effects would follow, as in the case of a subsidy, from the foreign expenditure of Government. These have a natural tendency to create an unfavourable exchange, yet if the demand for bills is regular it is surprising how this bounty on exportation will be reduced by the competition amongst the exporters of commodities. I am of opinion that in the ordinary course of affairs, if from any of the circumstances so often mentioned, there should be a slight alteration in the value of the currencies of any two countries it will speedily be communicated to the exchange and if such a state of things should permanently continue the exchange has no tendency to correct itself. The fact however appears to be that there is no degree of permanence in the proportions between the currencies and the commodities of nations,—they are subject to constant fluctuations always approaching an absolute level but never really finding it. I hope I have not wearied you with the defence which I have endeavored to make for the opinions which I have imbibed. I assure you that I am not obstinately attached to any system but am ready to relinquish any views I may have taken as soon as I am satisfied that they are incorrect. I shall not fail attentively to consider the chapters in Sir J. Steuart’s work which you have mentioned. I hope before the summer is over to pay you a visit at Hertford.
I am Dear Sir Yours very sincerely
New Grove Mile end 17 th. July 1811