Econlib

The Library

Other Sites

 Front Page arrow Titles (by Subject) arrow 233.: ricardo to malthus1[Reply to 231.—Answered by 237] - The Works and Correspondence of David Ricardo, Vol. 7 Letters 1816-1818

Return to Title Page for The Works and Correspondence of David Ricardo, Vol. 7 Letters 1816-1818

Search this Title:

233.: ricardo to malthus1[Reply to 231.—Answered by 237] - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 7 Letters 1816-1818 [1816]

Edition used:

The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 7 Letters 1816-1818.

Part of: The Works and Correspondence of David Ricardo, 11 vols (Sraffa ed.)

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.


233.

ricardo to malthus1
[Reply to 231.—Answered by 237]

Gatcomb Park 21 Oct. 1817

My dear Sir

I hope we shall be more fortunate in meeting when I again visit London.

You think that the low price of labour which has lately prevailed, contradicts my theory of profits depending on wages, because the rate of interest is at the same time very low. If interest and profits invariably moved in the same degree, and in the same direction, my theory might be plausibly opposed, but I consider this as by no means the case. Although interest is undoubtedly ultimately regulated by profits, rising when they are high, and falling when they are low, yet there are considerable intervals during which a low rate of interest is compatible with a high rate of profit, and this generally occurs when capital is moving from the employments of war to those of peace. If goods do not vary in price, and the cost of manufacturing them falls, it is self evident that profits must rise, and if goods do fall in price generally, then it is not the value of goods or of labour which falls, but the value of the medium in which they are paid which rises, and then my theory does not require any rise of profits—they may even fall.

You ask me if I can shew you the fallacy of the following statement. “Capital is wholly employed in the purchase of materials and machinery and the maintenance of labour. If from any cause whatever materials, machinery and the maintenance of the labourer, and his wages, fall considerably in money value is it possible that the same amount of monied capital can be employed in the country?” I answer that it is possible but by no means probable. Suppose the mines were to produce a diminished quantity of the precious metals, at the same time that materials and machinery were greatly increased in quantity; might not the increased aggregate quantity of materials and machinery be of a greater money value than before, altho each particular portion should be at a less? Might we not by importation appropriate to ourselves a larger proportion of the mass of money distributed amongst all the countries of the world? I cannot doubt the possibility of the case.

In your argument about the stimulus of increased value, and the effects of demand and supply on future wealth, you do not really differ from my views on this subject so much as you suppose, for I make profits and wealth to depend on the real cheapness of labour, and so do you, for you say that the evils of a dearth will often be more than counteracted as it regards wealth by the great stimulus which it may give to industry. I say the same, for I contend that the evils of a dearth fall exclusively on the labouring classes, that they perform frequently more labour not only without receiving the same allowance of food and necessaries, but often without receiving the same value for wages or the same recompence in money whilst every thing is dearer. When this happens profits which always depend on the value of labour must necessarily rise.

I thought I had written1 to you about the additional matter in your excellent work, although I had not given it all the examination I intended. I read it as I was travelling, and noticed the pages wherever I saw the shadow of a difference between us that I might look at the passages again when I got home and give them my best consideration.2 On my passing through London when I returned from France I looked for your book, as I expected you had sent me a copy, which I think you kindly told me you would do,—but Mrs. Ricardo had jumbled that, and many other books in a wardrobe, and it could not be got at till I went to town. I have it now here, and have been reading all the new matter again, and am surprised at the little that I can discover with the utmost ingenuity to differ from.3

In every part you are exceedingly clear, and time only is wanted to carry conviction to every mind. The chief difference between us is whether food or population precedes. I could almost agree with the statement of the question in page 47 of 3 vol which I think is in strict conformity with Sir J. Steuart’s opinion.1 —In speaking of the fall of wages you only once mention corn wages but must always mean corn wages and not money wages. In the note to page 438 of the 3 vol.2 you agree to my doctrine but I think in pages 446, 456, and 457 you forget the admission you had before made.

497. You agree with Smith that the monopoly of the Colony Trade raises profits.3 502 is in my opinion wrong and inconsistent with 438.4 I differ a little from your views in 506.5 You do not always appear to me to admit that the tendency of the poor laws is to increase the quantity of food to be divided, but assume in some places that the same quantity is to be divided among a larger number. I can neither agree with Adam Smith nor with you in 326.6

328 A maximum tends to discourage future production an undue increase of wages, or poor laws, tend to promote it.1 360 A fall in the price of commodities and a rise in the value of money are spoken of as the same thing.2 361 A diminution of production is another way of expressing an abatement of demand.3 371 A combination among the workmen would increase the amount of money to be divided amongst the labouring class.4 These you will observe are slight objections and I make them that I may preserve my consistency. They would not be understood by the mass of readers but to you who are acquainted with my peculiar views, if you please, they need no explanation.—

Kind regards to Mrs. Malthus.

Ever Yrs.

David Ricardo

[1 ]Addressed: ‘Revd. T. R Malthus / East India College / Hertford’. MS at Albury.—Letters to Malthus, LXIII.

[1 ]Replaces ‘spoken’. See letter202.

[2 ]The MS here and in three other places contains asterisks which mark two sentences quoted by Empson in Edinburgh Review, Jan. 1837, p. 495; they do not refer to footnotes by Ricardo, as has been assumed in Letters to Malthus, pp. 143–4.

[3 ]Ricardo when travelling had probably been reading the copy entrusted to him by Malthus for Say (see above, p. 168, n. 3). His own copy of the Essay on Population, 5th ed., 1817, is preserved in the library at Gatcombe and contains, in the second half of vol. ii, a series of pencil marks and numbers on the margins, which probably refer to notes written by Ricardo on separate sheets, which are lost. These marks have been used for determining, in the footnotes to this letter, the passages criticised.

[1 ]Malthus grants that ‘nothing is more usual than for the population to increase at certain periods faster than food’. But then, he adds, ‘it must be recollected that the great relative increase of population absolutely implies a previous increase of food at some time or other greater than the lowest wants of the people.’

[2 ]Should be second vol., in which this and all the subsequent references are to be found. The note referred to runs: ‘A rise, which is occasioned exclusively by the increased quantity of labour which may be required in the progress of society to raise a given quantity of corn on the last land taken into cultivation, must of course be peculiar to raw produce, and will not be communicated to those commodities, in the production of which there is no increase of labour.’

[3 ]An opinion controverted by Ricardo, above, I, 344.

[4 ]On pp. 501–2 Malthus says that, if the ports had been kept open after 1815, in case of a new war the price of wheat would again have risen, and subsequently fallen; and ‘the monied incomes of the landholders and industrious classes of society’ would have risen and fallen ‘nearly in proportion’ to the price of wheat; forp. 438 see note 2 above.

[5 ]Although Malthus is certain that ‘in reference to the interests of Europe in general the most perfect freedom of trade...would be the most advantageous’, yet he thinks that ‘in reference to the interests of a particular state, a restriction upon the importation of foreign corn may sometimes be advantageous’.

[6 ]‘Dr. Smith has clearly shown, that the natural tendency of a year of scarcity is either to throw a number of labourers out of employment, or to oblige them to work for less than they did before, from the inability of masters to employ the same number at the same price.’

[1 ]Malthus says that the two proposals, to fix a maximum price of provisions, and to proportion the price of labour to the price of provisions, ‘are very nearly of the same nature,...both tend directly to famine.’

[2 ]For Ricardo’s distinction, see above, I, 63–4.

[3 ]Malthus says ‘the specific evil of taxation consists in the check which it gives to production, rather than the diminution which it occasions in demand.’

[4 ]According to Malthus the combinations of ‘artificers and manufacturers’ are ‘not only illegal, but irrational and ineffectual’, because if wages in any branch of trade are forcibly kept up this ‘must have the effect of throwing so many out of employment, as to make the expense of their support fully equal to the gain acquired by the higher wages, and thus render these higher wages in reference to the whole body perfectly futile.’