96.: ricardo to malthus1[Reply to 95] - 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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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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ricardo to malthus
[Reply to 95]
[London, 8 May 1815]
My dear Sir
I have an account before me of the Capital actually employed on a farm of 200 Acres in Essex. It amounts to £3433. - or about £17 pr. Acre, of which not more than £1100, or £1200 is of that description which is not subject to the same variation of value as the produce of the land itself; for £2200 - consists of the value of the seeds in the ground, the advances for labour,—the horses and live stock &ca. &ca.. If then the money value of the produce from the land should fall, from facility of production, it must ever continue to bear a greater ratio to the whole money value of the capital employed on the land, for there will be a great increase of average produce per acre, whilst the fall in money value will be common to both capital and produce and it cannot therefore be true that rent, profits, and wages, can all really fall at the same time.
The effect of high or low wages on profits has always been distinctly recognized by me;—till the population increases to the proportion which the increased capital can employ, wages will rise, and may absorb a larger portion of the whole produce. But this effect will only take place with an increase of capital, and has nothing to do with new facilities of production. Wages do not depend upon the quantity of a commodity which a day’s labour will produce, and I can not help thinking you quite incorrect when you say that the natural consequence of the facility of production being so increased that a day’s labour will produce four measures of corn, cloth and cotton instead of two measures, will be, that 4 measures of corn cloth and cotton will be worth only the price of a day’s labour instead of 2. It appears to me that if, instead of 4, ten measures could be produced by a day’s labour no rise would take place in wages, no greater portion of corn, cloth or cotton would be given to the labourer unless a portion of the increased produce were employed as capital, and then the rise in wages would be in proportion to the new demand for labour, and not at all in proportion to the increase in the quantity of commodities produced. This increase would be exclusively enjoyed by the owner of stock, and if he consumed in his family the whole increased produce, without augmenting his capital, wages would remain stationary, and not be in any way affected by the increased facility of production.
I cannot agree with your proposition namely [“]That the means of employing capital profitably can never co-exist with an abundant capital and produce and a stationary population, on account of the necessary effect of such a state of things in increasing the real price of labour,” because I consider the rise of wages as by no means a necessary effect of an abundant capital and produce, for it may be accompanied with new facilities in procuring corn, and then wages even if they should rise would not lessen profits, they will only keep them lower than they otherwise would be. In the case which we were considering the other night, if every lady made her own shoes, a part of the capital now employed in making shoes by the shoemakers would be otherwise employed. The same labour would be bestowed in the production of other objects desirable to these lady shoemakers, who would have both the power and the will to purchase them from the savings which would accrue to them by employing their labour productively.—
There is a great difference between [the] common effects of an accumulation of capital, and the employing the same capital more productively. The first is generally attended with a rise of wages and a fall of profits for a time at least,— but the second may exist for an indefinite length of time without producing any such effects. In the case of great improvements in machinery,—capital is liberated for other employments and at the same time the labour necessary for those employments is also liberated,—so that no demand for additional labour will take place unless the increased production in consequence of the improvement should lead to further accumulation of capital, and then the effect on wages is to be ascribed to the accumulation of capital and not to the better employment of the same capital.
If the population were to be stopped whilst accumulation continued the effects which you enumerate would undoubtedly follow, but this would arise from the demand for labour not being adequately supplied,—it would be the effect of accumulation which would operate so powerfully that it would be but slightly checked by the facility of production,—but it would not by any means be the consequence of such facility.
It is true that the rate of profits depends upon the scanty or abundant supply of capital compared with the means of employing it profitably,—and these means will as you say upon the common principles of supply and demand be increased either by a diminution of capital or by an extension of the market for it. Our enquiry is in fact what the causes are of an extension of the market and I hold that the most powerful and the only one which operates permanently, is a reduction in the relative value of food. You appear to me to concede a little respecting demand being regulated by the power of production,—but you are yet very far from yielding all that I demand.
I hope we shall meet this month but I cannot yet say whether I can leave London.
Yrs. very truly