290.: mcculloch to ricardo1[Reply to 285.—Answered by 300] - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 7 Letters 1816-1818 
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.
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mcculloch to ricardo
[Reply to 285.—Answered by 300]
Edinburgh 6 Decr 1818
My Dear Sir
It was only yesterday that I had the honour to receive yours of the 24th ulto—Considering the difficulty and abstract nature of the subject, and the prejudices generally entertained against the founder of any new theory, your work has I think been eminently successful—I feel very much gratified by the intelligence that a second edition is about to be sent to the press; both because it shews that your work has met with that attention from the public which it so well deserves, but which is not always given to unassuming merit, and because it augurs most favourably for the improvement of the science—
The statement in your work of the accuracy of which I am most disposed to doubt, is that in Chapter 15 p 336 regarding the impossibility of improving the condition of a country by diminishing its public debt—In one point of view your statement is certainly correct—But the contracting of a large public debt has other consequences besides the mere loss of the capital borrowed and spent unproductively by the government—By laying the foundation of a pernicious system of gambling and agiotage it enables a few individuals dexterously to avail themselves of the fluctuations in the price of the funds, and to acquire immense fortunes not by the exertion of a steady and persevering industry, but chiefly by dint of superior sagacity in taking advantage of the errors of less fortunate speculators—These fluctuations too, inasmuch as they flatter the confidence which every person has in his own good fortune, combined with the facility of immediately selling out stock, attach an inordinate proportion of the national capital to the trade in the funds,—a trade which cannot possibly be of any great public advantage— A reduction of the national debt would not therefore fall entirely on the bona fide holders of stock, and in so far as it only affected the other individuals to whom I have alluded it could not be reckoned very disadvantageous—
Besides a national bankruptcy would at the worst only cause a bouleversement or overturn of the private fortunes of individuals,—an overturn, I admit, which as it would be productive of very great and general distress, ought, if possible, to be avoided,—but as it would leave the productive capital of the country entire, and as it would also enable almost all those taxes which reduce the profits of stock and check the accumulation of capital to be dispensed with, it cannot I think be disputed that it would, after the first frottement had been got over, be attended by an increasing demand for labour, and by an increase of national wealth—
These hasty remarks will explain my meaning; and if you think there is any force in them, you will perhaps qualify some of the expressions on p 336 —I think the alteration you propose making on p 329 will be a great improvement— Instead of “There are no taxes” etc at the head of p 189, I would beg leave to suggest the adoption of the following paragraph—“Still however it is certain that but for taxation this increase of capital would have been much greater— There are no taxes which have not a tendency to lessen the power to accumulate—All taxes must either fall on capital or revenue—If they encroach on capital, they must proportionably diminish that fund by whose extent the extent of the productive industry of the country must always be regulated; and if they fall on revenue they must either lessen accumulation, or force the contributors to save the amount of the tax by making a corresponding diminution of their former consumption of the necessaries and luxuries of life— Some taxes will produce these effects in a much greater degree than others; but the great evil of taxation is to be found etc”
It occurs to me that you might with advantage limit the number of your references to Mr Buchanan —His work never attracted the smallest attention, neither, in my humble opinion, did it deserve more than it has met with—
I think you ought to extend the preliminary part of your Chapter on Currency and banks—You might in the space of three or four pages engross into it the substance of the first part of your most excellent pamphlet on “an economical currency” —I think you might also enlarge a little on the principle of limitation —I may mention that I have given Mr Jeffrey a review of your pamphlet on Currency, and I presume, though I am not quite certain, it will appear in next number of the Review —
I met with Major Torrens when he was here, and had several conversations with him regarding your theory of value; but as was the case with yourself and the Major, neither of us could make any impression on the other— I have written a short paper in reply to his observations on your theory in the last number of the Edinburgh Magazine, which had it not been for uselessly increasing the cost of this lengthened epistle I would have sent you—I do not think the Major will be inclined to carry on the controversy—He says that the comparative value of commodities is regulated entirely by the quantity of capital expended in their production; but as capital itself consists only of accumulated labour, he is even on his own hypothesis fighting about a straw—
As the Supplement to the Encyclopaedia will be published in the course of a week, perhaps you could contrive to make a reference to my article on corn—This would stamp it with an authority to which it cannot otherwise have any pretensions, and might in other respects be of considerable service to me —
Nothing could afford me greater pleasure than to see you in Edinburgh, and I am sure I may say the same thing of all my friends—In the meantime however I hope to have the honour and gratification of occasionally hearing from you— And
I remain with the greatest respect Yours most faithfully
J. R. McCulloch
David Ricardo Esqre