137.: malthus to ricardo3[Reply to 130 & 132] - 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.
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
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.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
malthus to ricardo
[Reply to 130 & 132]
Oct 30 
My dear Sir
I conclude you are by this time returned to Gatcomb. I was sorry you could not come down to us for a day, as one can get over more ground in conversation than in a letter. You know I am always inclined to acknowledge the authority of experience, and I cannot help thinking that in the point to which you refer experience is against you. I allow most readily that the country did send the bullion, although it had none in circulation, but the demand for it and the sending it under these circumstances, certainly produced very great fluctuations in its value: and what I mean to say is, that if the whole currency by being proportionably diminished had been made to experience the same fluctuations, the mercantile world [would] have been extremely distressed. I do not believe that any thing like the same fluctuations in the value of the precious metals took place during the course of the war at Hamburgh Amsterdam or in France. If you recollect in some of our inquiries it appeared that the price of gold was at times considerably above ten per cent higher here than at Hamburgh,—at one time I think above fifteen. I do not mean my observation to apply to your system as paying in bullion instead of coin; but to every system in which a sudden demand may come upon a country, possessing altogether but a small quantity of the precious metals.
I have always allowed that the progress of capital and population, while they can go on together, uninterrupted by the difficulty of procuring subsistence, is absolutely unlimited; but I most distinctly deny that the demand for capital is unlimited, with a limited population; and this appears to me to be the proposition that you maintain. You seem to argue quite upon different principles in reference to land and profits. You say that the demand for capital will enlarge at the same rate as the supply; and yet think that a moderate supply of land or what is equivalent to it, of produce, will have an effect for a very considerable time in lowering rents. What can you possibly mean by the improvements in farming going to the Landlord in a thousand years? Few of these improvements have doubled the produce, and five and twenty or fifty years would proportion the population to them, and double the rents, while profits would be left as they were before notwithstanding this increased facility of production. When before the revolutionary war, the rate of interest was below 4 per cent and profits in proportion, might it not be said that almost all previous improvements in machinery had gone to the land. You say that if half the land will yield the same produce rents will fall? Upon the same principle, if half the capital will yield the same produce, why should not profits fall? Where could the remaining half find employment? You will say perhaps that though some difficulty might be found at first, yet after a time the demand would be proportioned to the supply; that is you ask for an interval with regard to profits, and yet with regard to rents you say “we are speaking of immediate, not ultimate effects.” You allow that profits may rise on the land if population increases faster than produce, and fall, if produce increases faster than population, but surely in every case where a great facility of production suddenly takes place, produce may be said to increase faster than population. Without an increase of population in this case profits must fall; and after a proportionate increase of population, the facility of production will go to the land. I am still firmly of opinion therefore that “Universally where land is limited in quantity the facility of production upon it will go mainly to rent,” and I cannot help thinking that your doctrine of the indefinite demand for capital without reference to a proportionate increase of population, is an assumption, directly in the teeth of the great principle of Supply and demand, and uniformly contradicted by experience. The rent of land depends upon its productiveness, combined with the demand for it. Given the productiveness the rent varies as the demand; and given the demand the rent varies as the productiveness. In the same manner profits, depend upon the productiveness of industry, and the demand for capital. To neglect the consideration of demand in either case, is equally erroneous. I am quite surprised that you [do] not see the great difference between the productiveness of industry, and of capital. You may as well say that a capital machine which every body might have for little or nothing would necessarily yield high profits.
Pray do you not think that the currency on the whole is at present diminished