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• Abbreviations
• 300.: Ricardo to Mcculloch1[reply to 290 & 299]
• 301.: Ricardo to Murray1
• 302.: Ricardo to Mill1[answered By 303]
• 303.: Mill to Ricardo2[reply to 298 & 302]
• 304.: Trower to Ricardo1[reply to 295.—ANSWERED By 307]
• 305.: Ricardo to Place2
• 306.: Sharp to Ricardo2
• 307.: Ricardo to Trower2[reply to 304]
• 308.: Ricardo to Mcculloch1[answered By 309]
• 309.: Mcculloch to Ricardo1[reply to 308.—ANSWERED By 310]
• 310.: Ricardo to Mcculloch1[reply to 309.—ANSWERED By 314]
• 311.: Trower to Ricardo1[answered By 312]
• 312.: Ricardo to Trower1[reply to 311]
• 313.: Ricardo to Trower2
• 314.: Mcculloch to Ricardo4[reply to 310.—ANSWERED By 315]
• 315.: Ricardo to Mcculloch3[reply to 314]
• 316.: Trower to Ricardo1[answered By 317]
• 317.: Ricardo to Trower1[reply to 316]
• 318.: Ricardo to Mill2[answered By 319]
• 319.: Mill to Ricardo1[reply to 318]
• 320.: Mill to Ricardo1
• 321.: Ricardo to Mill4[answered By 322]
• 322.: Mill to Ricardo3[reply to 321.—ANSWERED By 323]
• 323.: Ricardo to Mill1[reply to 322.—ANSWERED By 325]
• 324.: Malthus to Ricardo2[answered By 328]
• 325.: Mill to Ricardo4[reply to 323.—ANSWERED By 329]
• 326.: Ricardo to Place1
• 327.: Trower to Ricardo3[answered By 330]
• 328.: Ricardo to Malthus1[reply to 324.—ANSWERED By 338]
• 329.: Ricardo to Mill2[reply to 325.—ANSWERED By 332 & 337]
• 330.: Ricardo to Trower1[reply to 327.—ANSWERED By 339]
• 331.: Mcculloch to Ricardo1[answered By 333]
• 332.: Mill to Ricardo2[reply to 329]
• 333.: Ricardo to Mcculloch1[reply to 331.—ANSWERED By 344]
• 334.: Brown to Ricardo1[answered By 336]
• 335.: Brown to Ricardo1[answered By 336]
• 336.: Ricardo to Brown1[reply to 334 & 335]
• 337.: Mill to Ricardo1[reply to 329]
• 338.: Malthus to Ricardo1[reply to 328.—ANSWERED By 345]
• 339.: Trower to Ricardo3[reply to 330.—ANSWERED By 346]
• 340.: Bentham to Ricardo1
• 341.: Ricardo to Place2
• 342.: Place to Ricardo1[answered By 343]
• 343.: Ricardo to Place1[reply to 342]
• 344.: Mcculloch to Ricardo2[reply to 333.—ANSWERED By 349]
• 345.: Ricardo to Malthus2[reply to 338]
• 346.: Ricardo to Trower2[reply to 339]
• 347.: Say to Ricardo1[answered By 352]
• 348.: Mcculloch to Ricardo1[answered By 349]
• 349.: Ricardo to Mcculloch1[reply to 344 & 348]
• 350.: Ricardo to Heathfield1
• 351.: Ricardo to Trower1
• 352.: Ricardo to Say1[reply to 347.—ANSWERED By 356]
• 353.: Lord Grenville to Ricardo2
• 354.: Ricardo to Trower1
• 355.: Ricardo to Mcculloch1[answered By 358]
• 356.: Say to Ricardo1[reply to 352]
• 357.: Ricardo to Trower1
• 358.: Mcculloch to Ricardo1[reply to 355.—ANSWERED By 359]
• 359.: Ricardo to Mcculloch1[reply to 358.—ANSWERED By 360]
• 360.: Mcculloch to Ricardo1[reply to 359.—ANSWERED By 361]
• 361.: Ricardo to Mcculloch1[reply to 360—answered By 366]
• 362.: Ricardo to Mcculloch2[answered By 366]
• 363.: Ricardo to Malthus2
• 364.: Ricardo to Sinclair1
• 365.: Ricardo to Napier1
• 366.: Mcculloch to Ricardo3[reply to 361 & 362.—ANSWERED By 368]
• 367.: Ricardo to Bentham2
• 368.: Ricardo to Mcculloch3[reply to 366.—ANSWERED By 372]
• 369.: Bentham to Ricardo5
• 370.: Ricardo to Mill3
• 371.: Trower to Ricardo3[answered By 373]
• 372.: Mcculloch to Ricardo1[reply to 368.—ANSWERED By 375]
• 373.: Ricardo to Trower1[reply to 371.—ANSWERED By 376]
• 374.: Ricardo to Mill2
• 375.: Ricardo to Mcculloch2[reply to 372.—ANSWERED By 377]
• 376.: Trower to Ricardo1[reply to 373—answered By 380]
• 377.: Mcculloch to Ricardo1[reply to 375.—ANSWERED By 381]
• 378.: Malthus to Ricardo1[answered By 379]
• 379.: Ricardo to Malthus2[reply to 378.—ANSWERED By 388]
• 380.: Ricardo to Trower2[reply to 376.—ANSWERED By 384]
• 381.: Ricardo to Mcculloch1[reply to 377]
• 382.: Mill to Ricardo1[answered By 383]
• 383.: Ricardo to Mill1[reply to 382]
• 384.: Trower to Ricardo1[reply to 380.—ANSWERED By 387]
• 385.: Mill to Ricardo2[answered By 386]
• 386.: Ricardo to Mill1[reply to 385.—ANSWERED By 389]
• 387.: Ricardo to Trower1[reply to 384.—ANSWERED By 390]
• 388.: Malthus to Ricardo1[reply to 379.—ANSWERED By 392]
• 389.: Mill to Ricardo1[reply to 386.—ANSWERED By 394]
• 390.: Trower to Ricardo1[reply to 387.—ANSWERED By 391]
• 391.: Ricardo to Trower1[reply to 390.—ANSWERED By 397]
• 392.: Ricardo to Malthus1[reply to 388.—ANSWERED By 395]
• 393.: Say to Ricardo1[answered By 430]
• 394.: Ricardo to Mill1[reply to 389.—ANSWERED By 398]
• 395.: Malthus to Ricardo1[reply to 392.—ANSWERED By 402]
• 396.: Grenfell to Ricardo1
• 397.: Trower to Ricardo4[reply to 391.—ANSWERED By 403]
• 398.: Mill to Ricardo2[reply to 394.—ANSWERED By 400]
• 399.: Mill to Ricardo2[answered By 400]
• 400.: Ricardo to Mill3[reply to 398 & 399]
• 401.: Ricardo to Mccullochcculloch3[answered By 406]
• 402.: Ricardo to Malthus1[reply to 395.—ANSWERED By 404]
• 403.: Ricardo to Trower1[reply to 397.—ANSWERED By 410]
• 404.: Malthus to Ricardo1[reply to 402.—ANSWERED By 405]
• 405.: Ricardo to Malthus1[reply to 404.—ANSWERED By 408]
• 406.: Mcculloch to Ricardo1[reply to 401.—ANSWERED By 407]
• 407.: Ricardo to Mccullochcculloch1[reply to 406.—ANSWERED By 412]
• 408.: Malthus to Ricardo1[reply to 405]
• 409.: Ricardo to Mcculloch3[answered By 412]
• 410.: Trower to Ricardo2[reply to 403.—ANSWERED By 415]
• 411.: Malthus to Ricardo2
• 412.: Mcculloch to Ricardo1[reply to 407 & 409.—ANSWERED By 416]
• 413.: Mill to Ricardo3[answered By 414]
• 414.: Ricardo to Mill2[reply to 413]
• 415.: Ricardo to Trower1[reply to 410.—ANSWERED By 419]
• 416.: Ricardo to Mcculloch2[reply to 412.—ANSWERED By 417]
• 417.: Mcculloch to Ricardo2[reply to 416.—ANSWERED By 418]
• 418.: Ricardo to Mcculloch1[reply to 417.—ANSWERED By 421]
• 419.: Trower to Ricardo1[reply to 415.—ANSWERED By 420]
• 420.: Ricardo to Trower1[reply to 419]
• 421.: Mcculloch to Ricardo1[reply to 418.—ANSWERED By 422]
• 422.: Ricardo to Mcculloch1[reply to 421.—ANSWERED By 424]
• 423.: Trower to Ricardo3[answered By 426]
• 424.: Mcculloch to Ricardo1[reply to 422.—ANSWERED By 428]
• 425.: Tooke to Ricardo3
• 426.: Ricardo to Trower1[reply to 423]
• 427.: Tooke to Ricardo2
• 428.: Ricardo to Mcculloch1[reply to 424.—ANSWERED By 431]
• Malthus to Sismondi1
• 429.: Mcculloch to Ricardo1
• 430.: Ricardo to Say2[reply to 393.—ANSWERED By 446]
• 431.: Mcculloch to Ricardo2[reply to 428.—ANSWERED By 433]
• 432.: Ricardo to Sinclair1
• 433.: Ricardo to Mcculloch2[reply to 431.—ANSWERED By 434]
• 434.: Mcculloch to Ricardo1[reply to 433.—ANSWERED By 436]
• 435.: Trower to Ricardo1[answered By 437]
• 436.: Ricardo to Mcculloch1[reply to 434.—ANSWERED By 474]

341.

ricardo to place2

Gatcomb Park, Minchinhampton 1 Nov^r. 1819

Dear Sir

My object, as well as yours, is the discovery of truth, and therefore there is no occasion for apology on either side, for freely commenting on each other’s opinions.

You say, that you do make a distinction between a Sink^g. Fund provided by taxes, and a Sinking Fund borrowed, but that in both cases there is nothing but delusion. “To a S F borrowed,” you say, “that there has been no other kind since 1793.” Now I cannot agree1 to this; I wish to ask whether during a portion of the time from 1793 to the present day, there was not, in consequence of that which you deem an unfounded and delusive name, less debt contracted than there would have been if no such name had existed. Twenty millions for example were required for the extraordinary expences of 1796. Besides a million a year for interest, 200000 p^r. Ann^m. were also provided, by taxes, for what was improperly called Sinking Fund. Suppose this to go on for several years, say ten years is it not true that we shall, at the end of those years, be less in debt, than if we had continued our expenditure of twenty millions, and had provided only one million per ann^m. for interest? It is demonstrable that the difference of our debt would be precisely equal to the sum which £200000 p^r. Ann^m. for ten years, another 200000 for nine years, another for eight years, and so on, would amount to, at compound interest, in ten years, and therefore in comparing these two modes of providing for expenditure together, it conveys no erroneous idea, to say, that we shall owe less in one case than the other, by all the amount of the sinking fund, and its accumulations. Strictly speaking there is no fund, for there can be no fund, and no accumulation, while we are in debt. All that is received2 is applied to the payment of debt, or to prevent the contracting of it, but still it is correct to say that the difference between A and B is equal to all the accumulations which a fund of any named amount would yield in a given time. Now suppose the S. F. to be borrowed every year, then indeed you may justly say that the whole is a delusion, for it may be demonstrated that with a given expenditure you will be just as much in debt at the end of 10, or any other number of years, without, as with a sinking fund. Is there not a very marked difference between the effects of one or other of these sinking funds, yet your language would lead us to suppose there was none, for you say “that neither in the one case nor in the other is there any thing but delusion.” Suppose Mr. Pitt’s plan to have always been fairly acted upon, and I should ask any of its supporters what benefit we had derived from it in diminishing or in preventing the accumulation of debt, would he not be correct if he shewed me the amount of stock standing in the names of the commissioners, and told me that but for the operation of the Sinking Fund the nation would really have owed that amount in addition to the unredeemed debt. How then can you call the whole a delusion? I say that the delusion is in ministers not having performed what they promised—they did not provide what they have always called a sinking fund from the taxes, but have for the last few years not only borrowed the sinking fund on the loans which they have created, but have not even provided the interest for them, and therefore it has become necessary to take the interest from the sinking fund.—I hope now I have made myself understood; I concede to you that there is no real fund, nor can there be, while we are in debt, but that no delusion will arise from considering the Sinking fund as a real fund, if we wish merely to make a comparison between the actual state of our debt, with a certain provision to check its accumulation, and its state if no such provision were made.

You deny that Mr. Vansittart took any thing from the S F when he made his arrangements in 1813, you say “there was nothing to take.” We will suppose a country to owe 20 mill^s. p^r. Ann^m., and to consent to pay 25 millions p^r. Ann^m. It pays the 5 millions with the intention of arriving at a term when it shall not be called upon to pay any thing, or in other words it prefers paying 25 millions p^r. Ann^m. for a limited number of years to paying 20 millions p^r. Ann^m. for ever. With the 5 millions p^r. Ann^m. payments of capital are to be made, but without affording any relief to the country which is always to pay 25 millions, till the whole debt is paid. The first year 20 millions are paid to the public, and 5 millions to the Commissioners;—the second year 19,750,000 to the public, and 5,250,000 to the Commissioners; and so from year to year the payments to the public diminish, while those to the Commiss^rs. increase. Suppose that at the end of a certain number of years, 7 millions only are annually paid to the public, 18 millions to the Commissioners; and suppose at this time the minister requires a loan of 20 millions. If he provides 1 million from the taxes, for the interest of this loan, he will pay annually for interest and sinking fund on debt 26 instead of 25 millions, and though the debt will increase, the sinking fund will not diminish, but suppose he does not so provide the million for interest, he will only pay 25 millions p^r. Ann^m.: instead however of paying as before 7 millions for interest, and 18 millions to the commissioners, he must now pay 8 millions for interest, and 17 millions to the commissioners; and if foreseeing that he shall want loans of an equal amount for several years to come he should obtain an act of Parliament allowing him to reduce the payment to the commissioners to 11 millions, and increase that to the public, by the creation of new debt, to 14 millions, will he not have made a substantial inroad on the plan for the payment of debt? This is what Mr. Vansittart has done, and yet you say, “Nothing was in fact taken, nothing could be taken, because there was nothing to take.”

If you say so because strictly speaking there is no fund, I will not dispute the matter, for it is in fact a dispute about words. But you observe that it is not a dispute about words, what then do we differ about? If we have not the means of paying off our debt so quickly as we otherwise should do, or if we cannot check its increase so effectually in consequence of the new arrangement proposed by Mr. Vansittart, then I say he has taken something, and not nothing. Call it S F, or call it what you please, he has diminished the necessity for laying on new taxes, but he has done so, by accelerating the increase of debt.

“A S F from taxes can only exist when the taxes produce more money than the1 current expenses of the Government consumes, and this has never been the case in any one instance since 1793, so there has been no sinking fund from taxes.” This is in other words saying “I call nothing a sinking fund which does not actually diminish debt.” My idea of a sinking fund is not so strict as yours,—it is a fund which holds out a fair prospect of one day being effective to the diminution and the annihilation of debt. If we had a surplus of permanent revenue above permanent expenditure of 20 millions, and for one year only expended more than our permanent income you would say that we had no sinking fund that particular year—I should on the contrary contend that inasmuch as we had 20/m p^r. Ann^m. for ever to set against one single years expenditure of 21/m we had a very substantial and a very efficient fund. “If we had lent out a sum at compound interest, notwithstanding our continual borrowing, we should have a real sinking fund and might in time pay off our debts, but this we have never done, and never can do.” That we have not lately done it I agree, but why the thing is impossible, except from the bad faith of ministers or parliament I can not see.

What reason do you give why we can not do it? “because we can not create stock with the produce of the taxes” but the commissioners can appropriate the interest on stock already created with the produce of the taxes, and this will be attended with precisely the same effects as if they had lent the money at compound interest. If you admit which you unequivocally do that if we lent out a sum at compound interest notwithstanding our continual borrowing, we should have a real sinking fund and might in time pay off our debts, you must admit that an equal fund given to the commissioners to purchase stock in the market with the power of appropriating the dividends on the stock purchased to the making of new purchases, would be equally efficacious. You must withdraw your first admission or you must be prepared to yield the second—it is impossible consistently to maintain one of these propositions and to refuse one’s assent to the other.

I am Dear Sir Truly Yours

David Ricardo

Be so good as to shew this letter to Mr. Mill that he may judge between us.

[2 ]Addressed: ‘Mr. Place / Charing Cross / London’. Franked by Ricardo ‘November two 1819’.

MS in British Museum (Place Papers), Add. 27,836, fols. 113–16. (A series of reference-marks on the margins of the original MS correspond to sixteen Notes written by Place in reply to this letter, ib. fols. 119–20; they are not published.)—Economic Journal, June 1893, pp. 289–92; Letters to Trower, XXIX.

Place had read the MS of Ricardo’s article Funding System and made certain criticisms, of which some account is given by Mill in letter 337 above; Ricardo replied to the criticisms in a letter which is wanting; Place wrote a lengthy answer, of which a draft, endorsed ‘Sinking fund observations on Mr. Ricardo’s letter sent to Gatcomb. Oct. 30. 1819’, is in British Museum, Add. MSS 27,836, fols. 111–12 (unpublished; quotations from it will be found in the present letter, which is a reply to Place’s observations).

[1 ]Replaces ‘Now supposing that I agree’.

[2 ]‘All that is received’ replaces ‘The fund’.

[1 ]‘amount’ is del. here.