62.: malthus to ricardo1[Reply to 60.—Answered by 64] - 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 60.—Answered by 64]
E. I. Coll. Oct. 9th 1814.
My dear Sir,
We are very much obliged to you and Mrs. Ricardo for your kind invitation to Gatcomb Park at our Xmas vacation, but I fear it will not be in our power to accept it. If we go from home we can hardly avoid going into Surrey; but we have latterly come to the resolution not to make distant excursions more than once a year, and I believe therefore we shall confine ourselves to Hayleybury and London. Our best chance of seeing Gatcomb and particularly of seeing it in beauty will be during some summer vacation in our way to or from our friends near Bath. Perhaps next summer we may be in that part of the world, and it will be a great additional pleasure, in our excursion, to be able to pay you a visit.
I do not write so soon after receiving your letter as I should perhaps feel inclined, for fear of occupying too much of your time, as well as my own. But I think that a letter now and then on these subjects will do us no harm, and perhaps may be the means of settling some important points relating to the metaphysics of Political Economy.
You seem to think that the state of production from the land, compared with the means necessary to make it produce, is almost the sole cause which regulates the profits of stock, and the means of advantageously employing capital. After what I have written on the subject of food and population I can hardly be supposed not to allow a very great effect to so very great a cause. But unless it could be shewn that no improvements were ever to take place either in agriculture or manufactures, and that upon a rise in the price of raw produce, new leases would be immediately granted, new taxes levied, and that the price of labour and of every other commodity both foreign and domestic would rise without delay exactly in proportion, the doctrine is evidently not correct in practice. And as these contemporaneous effects are in my opinion not only improbable but impossible, it would be quite useless to lay much stress upon it even as a theoretical groundwork. It appears to me that nearly all which can be safely advanced respecting the dependence of profits on the state of the land is, that the facility of acquiring food, and particularly the possession of a great quantity of good land is the main cause of high profits, and of a rapid increase of capital population and demand, and that the difficulty of acquiring food is the main cause of low profits, and the ultimate check to the indefinite extension of capital population and demand. But that in the interval between the two extremes, considerable variations may take place; and that practically no country was ever in such a state as not to admit of increase of profits on the land, for a period of some duration, from the advanced price of raw produce.
The Profits of stock, or the means of employing capital advantageously may be said to be accurately equal to the price of produce, minus the expence of production. And consequently whenever the price of produce keeps a head of the price of production the profits of stock must rise. And this has unquestionably been the case on the land in this country during the last 20 years. It is not the quantity of produce compared with the expence of production that determines profits, (which I think is your proposition) but the exchangeable value or money price of that produce, compared with the money expence of production. And the exchangeable value of produce is not of course always proportioned to its quantity. In poor countries of rich land the profits of stock are in general not nearly so high as they ought to be according to your theory; and in rich countries of middling land and of an increasing commerce, they are often much higher. In stating the cause of high profits you seem to me to consider almost exclusively the expence of production, without attending sufficiently to the price of produce, and greatly to underrate the wants and tastes of mankind in affecting prices, and consequently in affecting the means of profitably em[ploying] capital.
What is it I would ask that enables the foreign merchant to sell the tea sugar and tobacco which he imports at a higher price than the manufactures which he has sent out in exchange for them. Solely their being better suited to the wants and tastes of society. There is no greater power to purchase them, but there is a greater will. And the final cause of the wealth which the country derives from these commodities, and of the means of profitably employing capital in their importation, is the existence of a taste for them. It is in considering merely of the proportions of commodities to one another, and not of their proportions to the wants and tastes of mankind that the error of Mr. Mill, in my opinion, consists.
I cannot by any means agree with you in your observation that “the desire of accumulation will occasion demand just as effectually as a desire to consume[”] and that “consumption and accumulation equally promote demand.” I confess indeed that I know no other cause for the fall of profits which I believe you will allow generally takes place from accumulation than that the price of produce falls compared with the expence of production, or in other words that the effective demand is diminished. For this is how I understand the term effective demand, and this I think is the interpretation of it given by Adam Smith. And according to this interpretation, that is upon the supposition that a greater effective demand means a greater excess of the price of produce above the expence of production, you would surely allow that the effective demand would always be greatest when the quantity of capital was comparatively the smallest, or the profits of stock highest.
The true question relative to Mr. Mill’s proposition is not whether a man would like to spend half as much again; but whether you can furnish to persons of the same incomes a great additional quantity of commodities without lowering their price so much compared with the price of production as to destroy the effective demand for such a supply, and consequently to check its continuance to the same extent.
The principal difficulties on the present question appear to me to arise from the very different effects of an increase, or diminution of capital on the land, and in manufactures and commerce; particularly with regard to price, occasioned by the different nature of the instruments employed, one set naturally growing worse, and the other generally growing better. But I have no room for more, so adieu.
Ever truly Yours,
T. R. Malthus