The Online Library of Liberty

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• Advertisement to the Second Edition.
• Memoir of Robert Malthus.
• Principles of Political Economy.
• Introduction.
• Book I
• Chapter I.: Of the Definitions of Wealth and of Productive Labour.
• Section I.—: On the Definitions of Wealth.
• Section II.—: On Productive Labour.
• Chapter II.: On the Nature, Causes, and Measures of Value.
• Section I.—: On the Different Sorts of Value.
• Section II.—: Of Demand and Supply As They Affect Exchangeable Value.
• Section III.—: Of the Cost of Production As Affected By the Demand and Supply, and On the Mode of Representing Demand.
• Section IV.—: Of the Labour Which Has Been Employed On a Commodity Considered As a Measure of Its Exchangeable Value.
• Section V.—: Of the Labour Which a Commodity Will Command, Considered As a Measure of Value In Exchange.
• Section VI.—: On the Practical Application of the Measure of Value, and Its General Use and Advantages.
• Section VII.—: On the Variations In the Value of Money In the Same, and Different Countries.
• Chapter III.: Of the Rent of Land.
• Section I.—: Of the Nature and Causes of Rent.
• Section II.—: On the Necessary Separation of the Rent of Land From the Profits of the Cultivator and the Wages of the Labourer.
• Section III.—: Of the Causes Which Tend to Raise Rents In the Ordinary Progress of Civilized and Improved Societies.
• Section IV.—: Of the Causes Which Tend to Lower Rents.
• Section V.—: On the Dependance of the Actual Quantity of Produce Obtained From the Land, Upon the Existing Prices of Produce, and Existing Rents, Under the Same Agricultural Skill and the Same Value of Money.
• Section VI.—: Of the Connexion Between Great Comparative Wealth, and a High Comparative Price of Raw Produce.
• Section VII.—: On the Causes Which May Mislead the Landlord In Letting His Lands, to the Injury Both of Himself and the Country.
• Section VIII.—: On the Strict and Necessary Connection of the Interests of the Landlord and of the State.
• Section IX.—: General Remarks On the Surplus Produce of the Land.
• Chapter IV.: Of the Wages of Labour.
• Section I.—: On the Definition of the Wages of Labour, and Their Dependance Upon Supply and Demand.
• Section II.—: Of the Causes Which Principally Affect the Habits of the Labouring Classes.
• Section III.—: Of the Causes Which Principally Influence the Demand For Labour, and the Increase of the Population.
• Section IV.—: A Review of the Corn Wages of Labour From the Reign of Edward III.
• Section V.—: On the Conclusions to Be Drawn From the Preceding Review of the Prices of Corn and Labour During the Five Last Centuries.
• Chapter V.: Of the Profits of Capital.
• Section I.—: Of the Nature of Profits, and the Mode In Which They Are Estimated.
• Section II.—: Of the Limiting Principle of Profits.
• Section III.—: Of the Regulating Principle of Profits.
• Section IV.—: Of Profits As Affected By the Causes Practically In Operation.
• Section V. —: Remarks On Mr. Ricardo’s Theory of Profits.
• Chapter VI.: Of the Distinction Between Wealth and Value.
• Book II.
• Chapter I.: On the Progress of Wealth.
• Section I.—: Statement of the Particular Object of Inquiry.
• Section II.—: Of the Increase of Population Considered As a Stimulus to the Continued Increase of Wealth.
• Section III.—: Of Accumulation, Or the Saving From Revenue to Add to Capital, Considered As a Stimulus to the Increase of Wealth.
• Section IV.—: Of the Fertility of the Soil, Considered As a Stimulus to the Continued Increase of Wealth.
• Section V.—: Of Inventions to Save Labour, Considered As a Stimulus to the Continued Increase of Wealth.
• Section VI.—: Of the Necessity of a Union of the Powers of Production With the Means of Distribution, In Order to Ensure a Continued Increase of Wealth.
• Section VII.—: Of the Distribution Occasioned By the Division of Landed Property Considered As the Means of Increasing the Exchangeable Value of the Whole Produce.
• Section VIII.—: Of the Distribution Occasioned By Commerce, Internal and External, Considered As the Means of Increasing the Exchangeable Value of Produce.
• Section IX.—: Of the Distribution Occasioned By Personal Services and Unproductive Consumers, Considered As the Means of Increasing the Exchangeable Value of the Whole Produce.
• Section X.—: Application of Some of the Preceding Principles to the Distresses of the Labouring Classes Since 1815, With General Observations.

Section VI.—

Of the Connexion between great comparative Wealth, and a high comparative Price of raw Produce.

Adam Smith has very clearly explained in what manner the progress of wealth and improvement tends to raise the price of cattle, poultry, the materials of clothing and lodging, the most useful minerals, &c. compared with corn; but he has not entered into the explanation of the natural causes which tend to determine the price of corn. He has left the reader indeed to conclude, that he considers the price of corn as determined only by the state of the mines, which at the time supply the circulating medium of the commercial world.* But this is a cause, which, though it may account for the high or low price of corn in reference to the whole of the commercial world, cannot account for the differences in its price, in different countries, or as compared with certain classes of commodities in the same country.

I entirely agree with Adam Smith, that it is of great use to inquire into the causes of high price, as from the result of such inquiries it may turn out, that the very circumstance of which we complain, may be the necessary consequence and the most certain sign of increasing wealth and prosperity. But of all inquiries of this kind, none surely can be so important, or so generally interesting, as an inquiry into the causes which affect the price of corn, and occasion the differences in this price so observable in different countries.

The two principal causes of these effects are—

1. A difference in the value of the precious metals in different countries, in whatever way such difference may have arisen.

2. A difference in the elementary cost of producing a given quantity of corn.

The principal causes of the differences in the value of money in different countries have been already stated, in the last section of the preceding chapter; and it is certain that they occasion the greatest portion of that inequality in the price of corn which is the most striking and prominent. More than three-fourths of the prodigious difference between the price of corn in Bengal and England is occasioned by the difference in the value of money in the two countries; and far the greater part of the high price of corn in this country, compared with its price in most of the states of Europe, is occasioned in the same way. If the profits of stock in Flanders be nearly the same as in England (which I believe is the case), and the corn wages of labour rather lower than higher, it follows necessarily that the elementary cost of producing corn is nearly the same in both countries, and that the higher money price of corn in England is occasioned by the lower value of money, and not by the increased quantity of labour and other conditions of supply required to produce corn.

The second cause of the high comparative price of corn is the greater elementary cost of its production. If we could suppose the value of money, or the money wages of standard labour, to be the same in all countries, then the cause of the higher money price of corn in one country compared with another, would be the greater quantity of labour, and other conditions of the supply required to produce it; and the reason why the price of corn would be high and tend to rise in countries already rich, and still advancing in prosperity and population, would be to be found in the necessity of resorting to poorer land, without proportional improvements in agriculture, that is, to machines which would require a greater expenditure to work them; and which consequently occasion each fresh addition to the raw produce of the country to be purchased at a greater cost—in short it would be found in the important truth that corn in a progressive country is sold at the price necessary to yield the actual supply, and that as this supply becomes more difficult the price must rise in proportion. On the supposition which we have made of the value of money being the same in different countries, the price of corn would rise without being followed by a rise in the money price of labour.

The prices of corn in different countries, as determined by the two causes above mentioned, must of course be affected by every circumstance in each country that affects either the value of money, or the elementary cost of producing corn, such as the prosperity of foreign commerce, improvements in the modes of cultivation; the saving of labour on the land, direct and indirect taxation; and particularly the importations of foreign corn. The latter cause, indeed, may do away, in a considerable degree, the usual effects of great wealth on the price of corn; and this wealth will then shew itself in a different form.

Let us suppose seven or eight large countries not very distant from each other, and not very differently situated with regard to the mines; and further, that neither their soils nor their skill in agriculture are essentially unlike; that there are no taxes; and that every trade is free, except the trade in corn. Let us now suppose one of them very greatly to increase in capital and manufacturing skill above the rest, and to become much more rich and populous without increased skill in agriculture. I should say, that this comparative increase of riches could not take place, without a comparative increase in the prices of corn and labour; and that such increase of prices would, under the circumstances supposed, be the natural sign and necessary consequence, of the increased wealth and population of the country in question.

Let us now suppose the same countries to have the most perfect freedom of intercourse in corn, and the expenses of freight, &c. to be quite inconsiderable: And let us still suppose one of them to increase very greatly above the rest, in manufacturing capital and skill, in wealth and population: I should then say, that as the importation of corn would prevent any great difference in the prices of corn and labour, it would prevent any great difference in the amount of capital laid out upon the land, and the quantity of corn obtained from it; that consequently, the great increase of wealth could not take place without a great importation of corn from other nations; and that this importation, under the circumstances supposed, would be the natural sign and necessary consequence of the increased wealth and population of the country in question.

These I consider as the two alternatives necessarily belonging to a great comparative increase of wealth; and the supposition here made will, with proper allowances, apply to the general state of Europe.

In most countries the expenses attending the carriage of corn are considerable. They form a natural barrier to importation; and even the country, which habitually depends upon foreign corn, must have the price of its food higher than the general level. Practically, also, the prices of raw produce in the different countries of Europe are variously modified by different soils, different degrees of taxation, and different degrees of improvement in the science of agriculture. But the principles laid down are the general principles on the subject; and in applying them to any particular case, the particular circumstances of such case must always be taken into the consideration.

With regard to improvements in agriculture, which in similar soils is the great cause which retards the advance of price under an increase of produce; although they are sometimes most powerful, and of very considerable duration, we know from experience that they have not been sufficient to balance the effects of applying to poorer land, or inferior machines. Corn is obtained with less labour in the United States of America than in any European country. In this respect, raw produce is essentially different from manufactures.

The elementary cost of manufactures, or the quantity of labour and other conditions of the supply necessary to produce a given quantity of them, has a constant tendency to diminish; while the quantity of labour and other conditions of the supply necessary to procure the last addition which has been made to the raw produce of a rich and advancing country, has a constant tendency to increase.

We see in consequence, from the combined operation of the two causes, which have been stated in this section, that in spite of continued improvements in agriculture, the price of corn is generally the highest in the richest countries; while notwithstanding the high prices of corn and labour, the prices of many manufactures still continue lower than in poorer countries.

I cannot then agree with Adam Smith, in thinking that the low value of gold and silver is no proof of the wealth and flourishing state of the country where it takes place. Nothing of course can be inferred from it, taken absolutely, as such high price may depend merely upon the abundance of the mines; but taken relatively to other commodities and in comparison with the state of other countries at no great distance, and connected with each other, much may be inferred from it. If we are to estimate the value of the precious metals in different countries by the measure which he has himself proposed, it appears to me that whether we consider the first or second cause which has been referred to in this section, there are few more certain signs of wealth than the high average price of raw produce. If the value of money were the same in all countries, then, independently of importation and improvements in agriculture, the wealth and population of similar countries, though not the condition of the labouring classes, would be proportioned to the high price of their corn. And in the actual state of things, with great differences in the value of money, arising from the incidental causes above noticed, as those countries not possessed of mines where the money prices of corn and labour are high must have had very flourishing manufactures, or an abundance of raw products fitted for exportation, such countries will generally be found either rich, or in the way rapidly to become rich.

It is of importance to ascertain this point; that we may not complain of one of the most certain proofs of the prosperous condition of a country.

[* ] B. I. ch. v. p. 53, 6th ed.