54.: malthus to ricardo1[Reply to 53.—Answered by 55] - 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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malthus to ricardo
[Reply to 53.—Answered by 55]
E I Coll August 5th 1814
My dear Sir,
Your letter reached me here the day before yesterday, after being missent to Aylesbury from Bangor. I was in Town almost immediately after my return from Wales, and called in Brook Street with the hope of seeing you before you left Town. Mrs. Ricardo, whom I had the pleasure of finding at home told me of your expedition with Sylla; and I was very glad to hear from her, and to find it confirmed in your letter that your retirement quite answers to you. Indeed I always thought that you would be able to employ yourself agreeably in the country, and would not often regret the bustle and stimulus of the Stock Exchange. By the by I found on calling at Hoares that you had paid in 50£ to my account. I am much indebted to you for the trouble you have taken for me, and indeed almost feel as if you had presented me with 50£, as I fear it was taken from what would otherwise have been your own. I am surprised that omnium should have fallen so, and can’t help thinking that it will rise before the end of the year, though I will not venture to become an active speculator on the subject. The fall in the price of gold and the rise of the exchanges seem to be going on notwithstanding the increase of Bank of England notes. I think it however not improbable that the whole circulation may have diminished in spite of this issue, owing to the alarm among the Country banks. The present state of things tends to confirm me more and more in my old notions.
With regard to our present question, I am not aware that I have in any degree changed the proposition; because I do not say that restrictions upon the importation of foreign corn will raise profits, if they are attended with a diminution of capital. But I say that they must necessarily be attended with a diminution of capital, and therefore that they must tend to raise rather than lower profits. You seem to think that there is no necessary connection between restrictions upon importation, and a reduction of capital. I think on the contrary that there is an absolutely necessary connection, and that it is precisely owing to this connection that profits do not fall. If the capitalist in the Cotton or Woollen manufacture be obliged to pay more for the labour which he employs, owing to restrictions upon importation, he will not be able to work up the same quantity of goods with his capital; the goods will in consequence rise in price, and his profits, from the general scarcity of capital, will be increased.
You say yourself most justly that profits will augment under a diminution of capital and produce, if demand tho’ diminished does not diminish so rapidly as capital and produce; but this is exactly what happens in all cases of diminution of capital, and shews that what you say in another place cannot be quite correct namely, “that effective demand cannot augment or long continue stationary with a diminishing capital.” The whole amount of demand will from advanced prices diminish of course, but the proportion of demand to the supply which is always the main point in question, as determining prices and profits, may continue to increase as it does in all countries the capital of which is retrograde. In such countries the effective demand compared with the supply is permanently great, and the profits of stock very high. If the nominal price of corn be doubled, and the nominal amount of capital employed, be not quite doubled which you seem to allow might be the case, instead of saying “how is it possible to conceive that the rate of profits will not be diminished” I should say how is it possible to conceive that it should not be increased? In no case of production, is the produce exactly of the same nature as the capital advanced. Consequently we can never properly refer to a material rate of produce, independent of demand, and of the abundance or scarcity of capital. The more I reflect on the subject, the more firmly I feel convinced, that it is the state of capital, or the general profits of stock and interest of money, which determines the particular profit upon the land and that it is not the particular profits or rate of produce upon the land which datermines the general profits of stock and the interest of money. A slight fall in the real price of labour, which according to general principles ought to take place on any diminution of capital, or what comes to the same thing, a rise in the price of produce without a proportionate rise of labour, a most natural and frequent occurrence, will allow of great variations in the rate of produce on land, and easily make up for some increase of difficulty in procuring corn.
The question we are at present discussing involves some very fundamental points in political Economy, and I wish we could settle it satisfactorily.
My objection to taxes upon necessaries compared with taxes on luxuries and income taxes on the higher classes of society, is, that they must diminish capital and produce, though I dont think they would diminish profits and interest.
Remember me kindly to your fair companion.
Ever truly Yours
T R Malthus