SUPPLEMENT TO VOLUME IV
Notes on ‘A Reply to Mr. Say’s Letters to Mr. Malthus’
[These are marginal notes written by Ricardo on his own copy of the anonymous pamphlet, A Reply to Mr. Say’s Letters to Mr. Malthus on the Subject of the Stagnation of Trade, London, J. M. Richardson, 1820, pp. iv, 60. This Reply was published in the autumn of 1820, Say’s pamphlet having reached England early in September. Ricardo’s copy is inscribed, ‘David Ricardo EsqreM.P. with the Authors respects’; but the author has not been identified. Ricardo’s notes do not go beyond the first 30 pages.
These Notes have only recently come to light, and their discovery is due to Mr John Spraos. The annotated copy of the pamphlet is in the Hodgson Economic Collection in the Edinburgh University Library; it is bound in a volume with other economic tracts, but none of these others seems to have come from Ricardo’s library, and several are of dates subsequent to his death. It is not known how it came to be in the Hodgson collection. Acknowledgement is due to Mr Spraos and to the Librarian of Edinburgh University Library for making it available.
Short extracts or summaries of passages from the pamphlet have been prefixed in smaller type to each of Ricardo’s Notes.]
[p. 12–13] ‘Mr. Say’s position, then, is much too general: it assumes the point on which its truth depends; it takes for granted that there will be an increase of value wherever there is an increase of quantity, for on no other supposition is it true that we shall buy more in proportion as we produce more. This leads me to observe, that, in all our reasonings respecting quantity and value, we must be careful to distinguish between an increase of quantity resulting from machinery, or a better division of labour, and more skilful distribution of the same capital, and an increase arising from the employment of additional capital. In neither case can we command more labour, unless there be an increase of value’.
What is h[ere] meant by [an] increase [of] value. If value is m[ea]sured by [the] power of [com]manding labour, th[en the] assertion i[s, we] cannot com[mand] more labou[r] unless w[ages] comman[d] more la[bour]
[p. 17] ‘Since, however, it is a matter of general experience and notoriety, that commodities of all kinds do frequently sell below their cost, and that this great evil has, of late years, been almost universal, the main question for our consideration is, to what causes is this to be attributed? Is it the fault of Taxation? or is it the consequence of our system of Poor Laws? or is it that the Corn Bill forces us to cultivate too poor a soil? (which is Mr. Ricardo’s supposition.)’
Where h[as] Mr. Rica[rdo] made a[ny] such supp[osition?]
[p. 17–18] ‘Or are we to...conclude that when they are selling below their cost of production, it indicates an excess of supply as compared with the demand, or, in other words, an abundance of capital in proportion to revenue?’
[W]hat is meant by an abundance of capital in [pr]oportion to revenue? It means high wages or it [m]eans nothing. But high wages are high revenue to [t]he labourers and lead as certainly to demand, as the [hi]gh reve[nue] of the capitalist.
[p. 18–19] ‘With respect to the third cause, so strongly insisted upon by Mr. Ricardo,—the cultivation of poor land, it is sufficient to observe that during the war, still poorer soils were in a state of profitable cultivation, a circumstance which is quite at variance with his theory.’
This is a very proper answer to Mr. Ricardo if he had ever advanced the proposition stated, but he denies ever having done so.
[p. 19–20] In regard to Mr. Say’s view of the case, that commodities are exchanged for commodities, ‘it seems very natural to infer that an abundance of some, indicates a deficiency of others.’ [What follows is in a footnote, some words of which are underlined by Ricardo.] ‘If we ask the holders of the abundant commodities what they want, they will tell us money; if we further ask what they mean to do with the money, they will answer us, it is to purchase food, clothing, and materials for the purposes of reproduction. Are then food, clothing, and materials deficient? By no means: but it does not suit the producers of these articles to exchange them for those abundant commodities,* although it might very well suit the holders of the abundant commodities to exchange them for food and clothing. It is not the mere production of a commodity that enables it to afford a market to others. There must be some previous demand for it in the actual state of society.’
* But what does it suit them to exchange them for? If you answer, nothing; then they have produced without an object. If you name any thing, that is [the thing which the others] ought to have produced to [exchange for food and clothing.]
[p. 20–21] The system of Mr. Say is founded in error, ‘and this error consists in representing capitals as forming reciprocally markets for each other. It is not, however, true that capital affords a market to capital; for all commodities and the capital they represent are ultimately destined to be exchanged for revenue. The demand which capital makes for them is only intermediate and temporary, but never final or ultimate.’ Whatever commodity we take, ‘we shall find it matters not through how many hands it has passed, or what changes it has undergone, it must ultimately be exchanged for revenue, or the labour and capital employed in its production will be thrown away.’
Is it true that all commodities and the capit[als] they represent are ultimately destined to be exchan[ged] for revenue? The farmer who obtains 1000 qrs. of co[rn] expends a part of it in reproduction—that part never exc[hanges for revenue either to him] or to the whole society. He [sows] it in the ground or he bestows it on his workmen but with a view to its being replaced with a profit. The clothier who exchanges his cloth with a foreign country for raw materials and the instruments of future production does the same.
[p. 21–22] ‘Whenever then a commodity is offering in the market below its cost, we say the supply exceeds the demand, or, in other words, the portion of revenue offered in exchange for it is less than the capital employed in its production; and when the mass of commodities in the market are selling below their natural price, it is a sign that the whole revenue offered in exchange for them is less than the capital employed to produce them.’
It can never be true that all commodities sell for less than they cost—if they did there could be no profits on capital and no interest for money. It may be true of some commodities and all I have ever said is t[ha]t it ca[nno]t be true of all—there cannot be an [...]
[p. 22–23] ‘Mr. Say and Mr. Ricardo appear to me to have fallen into a great error, when they affirm that parsimony does not diminish demand. Parsimony, whilst it increases capital, diminishes revenue, and consequently narrows and contracts that final and ultimate demand upon which all other demand depends.’
Parsimony does not diminish revenue it only transfers it to another class. No other evil c[an] arise from parsimony than a fall of profits which [...]
[p. 23, consecutive to the preceding] ‘These eminent writers have reasoned thus: Whether, say they, income be employed reproductively as a new capital, or unproductively as revenue, it equally creates demand: but had they perceived that the former species of demand is wholly subservient to the latter, is limited by it, and must ultimately terminate in it, they would have acknowledged that all conversions of revenue into capital tend to increase the supply of commodities in proportion to the demand for them.’
If labourers could be obtained in the required abundance accumulation might go on profitably for ever, but the supply of labour is sometimes not so rapid as the increase of capital and at others it is limited by the difficulty of procuring food.
[p. 24, n.] ‘Permanent improvements in manufactures are a benefit to the community generally. They do not give the manufacturer the power of commanding more labour or other commodities than he could before; but permanent improvements in agriculture are a benefit to the proprietor or producer: they enable him to command a greater quantity of labour and of other commodities. The reason is, that the exchangeable value of manufactures is in proportion to their cost of production; but it is the peculiar property of food that its value* is in proportion not to the labour it has cost, but to that which it can maintain, according to the rate at which it is usually maintained in the existing state of society’.
* This is true if by value is meant the power of commanding labour, but this is taking that for granted which is the subject of the dispute.
[p. 25] ‘Whatever is added to capital is taken from revenue; and it follows, that the less that is taken from it the larger will the revenue remain, and the greater will be the demand.’
This is a great error it supposes that a reven[ue] saved does not give as great a stimulus to demand, as a revenue expended as such.
[p. 26, n.] ‘Mr. Ricardo has thrown very great light on the question of profits; but I cannot agree with him, that the rate of profit is wholly* dependent on the fertility of the worst soil in cultivation’.
* I have not said so, I have said it depends on wages, and wages depend mainly on the fertility of the worst land in cultivation.
[p. 27–28] ‘Mr. Say (p. 15, 16,) in combating Mr. Sismondi’s reasoning, says, that English goods sell under their value in Italy, because there is not enough Italian produce to give in exchange for them, which evinces a want of capital in Italy. But the fact is, Italian produce is so abundant in London, that a great deal of it has been selling, and is still selling, below its cost, and such as yields any profit affords so little, that a very small addition to the quantity would sink that also below the cost of production. The same is true of the Indian trade: English goods are selling at a loss in Bengal, and Indian goods at a loss in London; and this state of things too has been universally reciprocal, a fact which is totally inexplicable to Mr. Say’s theory.’
I am as much dissatisfied as the author with M. Say’s defence of the principle which both he and I maintain to be true.
Titles (by Subject) 
