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 II.—

Of the limiting Principle of Profits.

It has been stated in the preceding section, that the varying rate of profits depends upon the causes which alter the proportion between the value of the advances necessary to production, and the value of the produce obtained.

The two main causes which affect these proportions, are, the productiveness, or unproductiveness of the last capitals employed upon the land, by which a smaller, or a greater proportion of the value of the produce is capable of supporting the labourers employed. This may be called the limiting principle of profits. And, secondly, the varying value of the produce of the same quantity of labour occasioned by the accidental or ordinary state of the demand and supply, by which a greater or smaller proportion of that produce falls to the share of the labourers employed. This may be called the regulating principle of profits, this second cause is constantly modifying the first, but it will be desirable to consider them separately.

If then we suppose the first cause to operate singly, and the corn wages of the individual labourer to be always the same, the whole skill in agriculture remained unchanged, and there were no taxes nor any means of obtaining corn from foreign countries, the rate of profits must regularly fall, as the society advanced, and as it became necessary to resort to inferior machines which required more labour to put in action.

It would signify little, in this case, whether the last land taken into cultivation for food had yielded a rent in its uncultivated state. It is certain that the landlord would not allow it to be cultivated, unless he could, at the least, obtain the same rent for it as before. This must be considered as an absolute condition on the worst lands taken into cultivation in an improved country. After this payment was made, the remainder of the produce would be divided almost entirely between the capitalists and the labourers, and it is evident that if the number of labourers necessary to obtain a given produce were continually increasing, and the corn wages of each labourer remained the same, the portion destined to the payment of labour would be continually encroaching upon the portion destined to the payment of profits; and the rate of profits would of course continue regularly diminishing till, from the want of power or will to save, the progress of accumulation had ceased.

In this case, and supposing an equal demand for all the parts of the same produce,* it is obvious that the profits of capital in agriculture would be in proportion to the fertility of the last land taken into cultivation, or to the amount of the produce obtained by a given quantity of labour. And as profits in the same country tend to an equality, the general rate of profits would follow the same course.

But a moment’s consideration will shew us, that the supposition here made of a constant uniformity in the corn wages of labour is not only contrary to the actual state of things, but involves a contradiction.

The progress of population is almost exclusively regulated by the quantity of the necessaries of life actually awarded to the labourer; and if from the first he had no more than sufficient to keep up the actual population, the labouring classes could not increase, nor would there be any occasion for the progressive cultivation of poorer land. On the other hand, if the corn wages of labour were such as to admit of and encourage a considerable increase of population, and yet were always to remain the same, it would involve the contradiction of a continued increase of population at the same rate after the accumulation of capital, and the means of supporting such an increase had entirely ceased.

We cannot then make the supposition of a natural and constant rate of corn wages. And if we cannot fix the wages of labour estimated in necessaries, they must evidently vary with the progress of the funds destined for the maintenance of labour, compared with the supply of labour.

We may, however, if we please, suppose a uniform progress of capital and population, by which is not meant in the present case the same rate of progress permanently, which is impossible; but a uniform progress towards the greatest practicable amount, without temporary accelerations or retardations. And before we proceed to the actual state of things, it may be curious to consider in what manner profits would be affected under these circumstances.

At the commencement of the cultivation of a fertile country by civilized colonists, and while rich land was in great plenty, a small portion only of the value of the produce would be paid in the form of rent. The productiveness of labour being great, if nearly the whole were divided between wages and profits, the labourers might obtain a large quantity of produce, while a sufficient proportion of the whole might be left to yield large profits, and wages and profits would both be high at the same time.*

As the society continued to increase, if the territory were limited, or the soil of different qualities, it is quite obvious that the productive powers of labour as applied to the cultivation of land must gradually diminish; and as a given quantity of labour would yield a smaller and smaller return, there would evidently be a less and less produce to be divided between labour and profits.

If, as the powers of labour diminished, the physical wants of the labourer were also to diminish in the same proportion, then the same share of the whole produce might be left to the capitalist, and the rate of profits would not necessarily fall. But the physical wants of the labourer remain always the same; and though in the progress of society, from the increasing scarcity of provisions compared with labour, these wants are in general less fully supplied, and the corn wages of labour gradually fall; yet it is clear that there is a limit, and probably at no great distance, which cannot be passed. The command of a certain quantity of food is absolutely necessary to the labourer in order to support himself, and such a family as will maintain merely a stationary population. Consequently, if poorer lands which required more labour were successively taken into cultivation, it would not be possible for the corn wages of each individual labourer to be diminished in proportion to the diminished produce; a greater proportion of the whole would necessarily go to pay the wages of labour; and the rate of profits would continue regularly falling till the accumulation of capital had ceased.

Such would be the necessary course of profits and wages in the progressive accumulation of capital, as applied to the progressive cultivation of new and less fertile land, or the further improvement of what had before been cultivated; and on the supposition here made, the rates both of profits and of corn wages would be highest at first, and would regularly and gradually diminish together, till they both came to a stand at the same period, and the demand for an increase of produce ceased to be effective.

In the mean time, it will be asked, what becomes of the profits of capital employed in manufactures and commerce, a species of industry not like that employed upon the land, where the productive powers of labour necessarily diminish; but where these powers not only do not necessarily diminish, but very often greatly increase?

In the cultivation of land, the cause of the necessary diminution of profits is the diminution in the quantity of produce obtained by the same quantity of labour. In manufactures and commerce, it is the fall in the exchangeable value of the same amount of produce.

The labour required to produce corn, has a constant tendency to increase from inevitable physical causes, while the labour required to produce manufactures and articles of commerce sometimes greatly diminishes, sometimes remains stationary, and at all events increases much slower than the labour required to produce corn. When, therefore, profits fall in agriculture it becomes obviously more advantageous to employ capital in manufactures and commerce than on the land; and capital will in consequence be so employed till a fall has taken place in manufactures and commercial products from their comparative abundance. But it has been shown that the value of the same quantity of labour will always remain the same; and it is evident, that if the products fall in value, while the quantity of the labour, or the value of the capital required to produce them, remain the same, profits must fall. It is farther evident, that this fall must necessarily go on, till profits in manufactures and commerce have been reduced nearly to a level with those in agriculture. And thus it appears that in the progress of improvement, as poorer and poorer land is taken into cultivation, the general rate of profits must be limited by the powers of the soil last cultivated. If the last land taken into cultivation will only yield a certain excess of value above the lowest value of the capital necessary to produce it, it is obvious that profits, generally, cannot possibly be higher than this excess will allow. In the ascending scale, this is a barrier which cannot be passed. But limitation is essentially different from regulation. In the descending scale, while the land is still fertile profits may be lower in any degree. There is here no controlling necessity which determines the rate of profits; and below the highest limit which the actual state of the land will allow, ample scope is left for the operation of the regulating principle.

[* ] It is necessary to qualify the position in this way, because, with regard to the main products of agriculture, it might easily happen that all the parts were not of the same value. If a farmer cultivated his lands by means of domestics living in his house whom he found in food and clothing, his advances might always be nearly the same in quantity and of the same high value in use; but in the case of a glut from the shutting up of an accustomed market, or a season of unusul abundance, a part of the crop might be of no value either in use or exchange, and his profits could by no means be determined, by the excess of the quantity produced, above the advances necessary to produce it, as before shewn, page 264.

[* ] The reader will recollect that wages always refer to quantity, unless otherwise particularly expressed, and profits to proportion.