The Online Library of Liberty

A project of Liberty Fund, Inc.

• Abbreviations
• 437.: Ricardo to Trower1[reply to 435.—ANSWERED By 445]
• 438.: Mill to Ricardo1[answered By 441]
• 439.: Ricardo to Mcculloch1[answered By 474]
• 440.: Malthus to Ricardo1[answered By 442]
• 441.: Ricardo to Mill1[reply to 438.—ANSWERED By 448]
• 442.: Ricardo to Malthus1[reply to 440.—ANSWERED By 443]
• 443.: Malthus to Ricardo1[reply to 442.—ANSWERED By 444]
• 444.: Ricardo to Malthus1[reply to 443.—ANSWERED By 455]
• 445.: Trower to Ricardo1[reply to 437.—ANSWERED By 447]
• 446.: Say to Ricardo1[reply to 430.—ANSWERED By 488]
• 447.: Ricardo to Trower1[reply to 445.—ANSWERED By 456]
• 448.: Mill to Ricardo1[reply to 441.—ANSWERED By 449]
• 449.: Ricardo to Mill2[reply to 448.—ANSWERED By 450]
• 450.: Mill to Ricardo2[reply to 449.—ANSWERED By 453]
• 450a.: Place to Ricardo1[answered By 451]
• 451.: Ricardo to Place1[reply to 450a]
• 452.: Ricardo to Murray1
• 453.: Ricardo to Mill1[reply to 450]
• 454.: Ricardo to Malthus1[answered By 455]
• 455.: Malthus to Ricardo3[reply to 444 & 454.—ANSWERED By 458]
• 456.: Trower to Ricardo2[reply to 447.—ANSWERED By 461]
• 457.: Ricardo to Wheatley1
• 458.: Ricardo to Malthus1[reply to 455.—ANSWERED By 459]
• 459.: Malthus to Ricardo1[reply to 458.—ANSWERED By 460]
• 460.: Ricardo to Malthus1[reply to 459.—ANSWERED By 462]
• 461.: Ricardo to Trower1[reply to 456.—ANSWERED By 466]
• 462.: Malthus to Ricardo2[reply to 460.—ANSWERED By 463]
• 463.: Ricardo to Malthus1[reply to 462.—ANSWERED By 467]
• 464.: Ricardo to Mill1[answered By 469]
• 465.: Tooke to Ricardo1
• 466.: Trower to Ricardo3[reply to 461.—ANSWERED By 471]
• 467.: Malthus to Ricardo2[reply to 463.—ANSWERED By 468]
• 468.: Ricardo to Malthus1[reply to 467]
• 469.: Mill to Ricardo2[reply to 464.—ANSWERED By 470]
• 470.: Ricardo to Mill2[reply to 469]
• 471.: Ricardo to Trower2[reply to 466.—ANSWERED By 478]
• 472.: Ricardo to Mcculloch 2
• 473.: Ricardo to Mill1
• [enclosure: Ricardo’s Notes On Mill’s Elements of Political Economy]
• 474.: Mcculloch to Ricardo2[reply to 436 & 439.—ANSWERED By 476]
• 475.: Maria Edgeworth to Ricardo2
• 476.: Ricardo to Mcculloch1[reply to 474.—ANSWERED By 479]
• 477.: Maria Edgeworth to Ricardo1
• 478.: Trower to Ricardo2[reply to 471.—ANSWERED By 481]
• 479.: Mcculloch to Ricardo2[reply to 476.—ANSWERED By 483]
• 480.: Mcculloch to Ricardo1[answered By 483]
• 481.: Ricardo to Trower1[reply to 478]
• 482.: Ricardo to Sinclair1
• 483.: Ricardo to Mcculloch2[reply to 479 & 480.—ANSWERED By 484]
• 484.: Mcculloch to Ricardo3[reply to 483.—ANSWERED By 486]
• 485.: Mcculloch to Ricardo1[answered By 486 & 491]
• 486.: Ricardo to Mcculloch1[reply to 484 & 485.—ANSWERED By 495]
• 487.: Ricardo to Trower1
• 488.: Ricardo to Say1[reply to 446.—ANSWERED By 496]
• 489.: Ricardo to Foster2
• 490.: Ricardo to Trower1
• 491.: Ricardo to Mcculloch2[reply to 485.—ANSWERED By 495]
• 492.: Ricardo to Trower2
• 493.: Ricardo to Hodgson1
• 494.: Ricardo to Mcculloch1
• 495.: Mcculloch to Ricardo1[reply to 486 & 491.—ANSWERED By 497]
• 496.: Say to Ricardo2[reply to 488]
• 497.: Ricardo to Mcculloch3[reply to 495]
• 498.: Say to Ricardo1
• 499.: Ricardo to Trower1
• 500.: Ricardo to [cowell]1
• 501.: Ricardo to Trower1
• 502.: Ricardo to Maria Edgeworth1[answered By 510]
• 503.: Mcculloch to Ricardo1[answered By 504]
• 504.: Ricardo to Mcculloch2[reply to 503]
• 505.: Ricardo to Mill1
• 506.: Ricardo to Mill1
• 507.: Ricardo to Mill1
• 508.: Ricardo to Mill1
• 509.: Ricardo to Mill1
• 510.: Maria Edgeworth to Ricardo2[reply to 502.—ANSWERED By 511]
• 511.: Ricardo to Maria Edgeworth1[reply to 510.—ANSWERED By 514]
• 512.: Ricardo to Trower1
• 513.: Ricardo to Malthus3
• 514.: Maria Edgeworth to Ricardo2[reply to 511.—ANSWERED By 515]
• 515.: Ricardo to Maria Edgeworth1[reply to 514]
• 516.: Ricardo to Mill1
• 517.: Ricardo to Trower1
• 518.: Mcculloch to Ricardo1[answered By 520]
• 519.: Maria Edgeworth to Ricardo2extract of a Letter From Paris
• 520.: Ricardo to Mcculloch1[reply to 518]
• 521.: Ricardo to Goldsmid2
• 522.: Ricardo to Mill1
• 523.: Ricardo to Malthus3
• 524.: Ricardo to Mcculloch2[answered By 526]
• 525.: Ricardo to Grote1
• 526.: Mcculloch to Ricardo1[reply to 524]
• 527.: Trower to Ricardo3[answered By 533]
• 528.: Ricardo to Maria Edgeworth1
• 529.: Ricardo to Malthus1
• 530.: Ricardo to Mcculloch1[answered By 541]
• Blake to Mcculloch1
• 531.: Ricardo to Malthus1[answered By 532]
• 532.: Malthus to Ricardo2[reply to 531.—ANSWERED By 536]
• 533.: Ricardo to Trower2[reply to 527.—ANSWERED By 547]
• 534.: Trower to Ricardo2[answered By 535]
• 535.: Ricardo to Trower1[reply to 534.—ANSWERED By 547]
• 536.: Ricardo to Malthus1[reply to 532.—ANSWERED By 540]
• 537.: Ricardo to Mill1[answered By 539]
• 538.: Ricardo to Mcculloch1[answered By 541]
• 539.: Mill to Ricardo3[reply to 537.—ANSWERED By 548]
• 540.: Malthus to Ricardo1[reply to 536.—ANSWERED By 542]
• 541.: Mcculloch to Ricardo1[reply to 530 & 538.—ANSWERED By 543 & 544]
• 542.: Ricardo to Malthus1[reply to 540.—ANSWERED By 545]
• 543.: Ricardo to Mcculloch1[reply to 541]
• 544.: Ricardo to Mcculloch1[reply to 541.—ANSWERED By 546]
• 545.: Malthus to Ricardo1[reply to 542.—ANSWERED By 550]
• 546.: Mcculloch to Ricardo1[reply to 544]
• 547.: Trower to Ricardo1[reply to 533 & 535.—ANSWERED By 549]
• 548.: Ricardo to Mill1[reply to 539]
• 549.: Ricardo to Trower1[reply to 547.—ANSWERED By 551]
• 550.: Ricardo to Malthus1[reply to 545]
• 551.: Trower to Ricardo1[reply to 549.—ANSWERED By 553]
• 552.: Ricardo to Mill1
• 553.: A. Austin to Trower1[reply to 551]
• 544.: A. Austin to Trower2
• 555.: Mill to Mcculloch1

546.

m^cculloch to ricardo1
[Reply to 544]

Edinburgh 24 Augt 1823

My Dear Sir

In so far as you differ in opinion with me on the vexata questio of value, I think the difference principally hinges on the interpretation we are to give to the word profit—Whether is the additional value we get back in exchange for a capital we have employed in production a compensation for time, or for our forbearance in not having consumed the capital immediately, or is it a positive additional value resulting from the employment of the capital and not dependent on time? If we agree in our answers to this question I think we shall agree in our opinions on value—Now, I think that profit is not a compensation for time, but a positive additional value; and I think so for the reason that if I keep a cask of wine a twelvemonth in which an effect is to be produced I shall get a profit; whereas were I to keep a cask which had already arrived at maturity and in which no effect was to be produced for a hundred years I should get no profit whatever—Suppose I have two capitals one a thousand pounds worth of wine, and the other nine hundred pounds worth of leather and £100 of money; if I throw the one into a cellar and give the other to a shoemaker at the end of a year I should have an equivalent value perhaps £1100 worth of wine and £1100 worth of shoes—Now, if the increased value of my capitals be the effect of the change that has been operating on them, and that it is so is certain from the fact that if I had either got back the leather and money or the wine in the state they were at the commencement of the year they would not have been worth one farthing more, am I not entitled to say that this increased value has been given to them by the operation of agents which it cost equal capitals to set in motion and furnish with materials whereon to exert themselves, and that consequently both shoes and wine are the result of equal quantities of labour? I admit that I should be wholly unable to measure the increased value given to the leather or the wine by a consideration of the effect produced; but the essential point is to know that this increased value is not a compensation for time but the result of a change operated by agents which it has cost equal quantities of labour or capital to set in motion—If I am right in this position I think I shall have made a pretty decisive step towards the establishment of the principle for which I am contending: and to shew that I am not right, you must shew that profits are a compensation for time, and not the value of the work performed by an agent set in motion by capital or labour—

Now with respect to the measure of profits—If I employ capitals in the building of houses, in the manufacture of cloth, or in commerce, I should be equally at a loss how to estimate the increased value or profit I am to get from them as if I had employed them in the production of wine—All that I should know was that the increased value, whatever it might be, was the result of labour: but to get a measure of that increased value I should be obliged to refer to agriculture—This is a branch of industry which must be carried on; and if the value of the various outgoings of the farmer be, as they always may be, reduced into corn, he is able by comparing these with his harvest to learn the precise additional value or profit that he obtains—It is by this profit that the profit of every other business will be regulated; and when 100 quarters employed on the worst land yields 110 quarters I shall know that £100 employed for an equal period in the production of wine will yield £110—My theory, therefore, is shortly this:—Profits are not a compensation for time but the value of an effect or operation; to produce this effect you must employ capital or labour, the effect being necessarily always equal when equally powerful agents, that is, equal capitals, are employed: and to measure the value of this effect or operation we are to refer for a standard to that branch of industry which must always be carried on, and whose profits can be determined by actual measurement—

You will observe how well this theory harmonises with your theory of profits; and this agreement is no slight presumption in its favour—

What you say about a piece of cloth and a pipe of wine seems to me to involve a fallacy—The piece of cloth is made, but the wine is not made—If the wine were made no effect would be produced by keeping it, and it would just as much as the cloth preserve the same value whatever might be the fluctuation of profits—

Neither does your objections, originating in the fluctuations to which capitals are liable, apply to my theory—If I were seeking a standard to measure values at distant periods they would apply and would be decisive; but this is no part of my object—I am only endeavouring to ascertain the circumstances which determine the comparative values of the commodities in the same market—The question agitated between you and Malthus is totally different—it is, what are the circumstances necessary to give invariability of value to any commodity?—This is a question which I believe is quite insoluble, but at any rate it does not come within the scope of my inquiries—I leave it to be settled by my masters—Before entering on this transcendental part of Pol Economy I must be more sure than I am at present of the elements; and before I attempt to get a measure of the value of cloth and wine in the reign of Augustus and George IV, I must obtain a measure of their value in the same market—

My opinions and those of Torrens differ materially—Torrens does not consider the labour of a man and the labour of a machine, or of the coals that are put on a fire in the same point of view: Now, whether right or wrong I consider them as exactly the same; and it is because I so consider them that I reckon it improper to make the distinction that he has done between immediate labour and the labour of capital—

I shall write you shortly on some points connected with Taxation, but I am sure you will be well pleased that I now close this long letter—I am with the greatest respect and esteem

Yours ever sincerely

J. R. M^cCulloch

[1 ]Addressed: ‘David Ricardo Esq M.P. / Gatcomb Park / Minchinhampton / Gloucestershire’. Edinburgh postmark, 25 Aug. 1823.

MS in R.P.—The greater part of this letter was incorporated, with slight changes, in the leading article of the Scotsman, 21 Feb. 1824, under the title ‘Principles which determine the Exchangeable Value of Commodities and the Rate of Profit’.