David Ricardo (1817)

On The Principles of Political Economy and Taxation


1. Chapter XV, part i. "Des Débouchés' contains, in particular, some very important principles, which I believe were first explained by this distinguished writer.

2. Book i, chap. 5.

3. 'But though labour be the real measure of the exchangeable value of all commodities,it is not that by which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's hard work, than in two hours easy business; or, in an hour's application to a trade which it costs ten years' labour to learn, than in a month's industry at an ordinary and obvious employment. But it is not easy to find any accurate measure, either of hardship or ingenuity. In exchanging, indeed, the different productions of different sorts of labour for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality, which though not exact, is sufficient for carrying on the business of common life.' -- Wealth of Nations, book i, chap 10. [actually it is book i, chap v.]

4. Wealth of Nations, book i, chap. 10.

5. A division not essential, and in which the line of demarcation cannot be accurately drawn.

6. We here see why it is that old countries are constantly impelled to employ machinery, and new countries to employ labour. With every difficulty of providing for the maintenance of men, labour necessarily rises, and with every rise in the price of labour, new temptations are offered to the use of machinery. This difficulty of providing for the maintenance of men is in constant operation in old countries, in new ones a very great increase in the population may take place without the least rise in the wages of labour. It may be as easy to provide for the 7th, 8th, and 9th million of men as for the 2d, 3d, and 4th.

7. Mr Malthus remarks on this doctrine, "We have the power indeed, arbitrarily to call the labour which has been employed upon a commodity its real value, but in so doing, we use words in a different sense from that in which they are customarily used; we confound at once the very important distinction between cost and value; and render it almost impossible to explain with clearness, the main stimulus to the production of wealth, which in fact depends upon this distinction.'

Mr Malthus appears to think that it is a part of my doctrine, that the cost and value of a thing should be the same; -- it is, if he means by cost, 'cost of production' including profits. In the above passage, this is what he does not mean, and therefore he has not clearly understood me.

8. "The earth, as we have already seen, is not the only agent of nature which has a productive power; but it is the only one, or nearly so, that one set of men take to themselves, to the exclusion of others; and of which, consequently, they can appropriate the benefits. The waters of rivers, and of the sea, by the power which they have of giving movement to our machines, carrying our boats, nourishing our fish, have also a productive power; the wind which turns our mills, and even the heat of the sun, work for us; but happily no one has yet been able to say, the 'the wind and the sun are mine, and the service which they render must be paid for.'" -- Economie Politique, by J.B. Say, vol. ii. p. 124.

9. Has not M. Say forgotten, in the following passage, that it is the cost of production which ultimately regulates price? "The produce of labour employed on the land has this peculiar property, that it does not become more dear by becoming more scarce, because population always diminishes at the same time that food diminishes, and consequently the quantity of these products demanded, diminishes at the same time as the quantity supplied. Besides, it is not observed that corn is more dear in those places where there is plenty of uncultivated land, than in completely cultivated countries. England and France were much more imperfectly cultivated in the middle ages than they are now; they produced much less raw produce: nevertheless from all we can judge by a comparison with the value of other things, corn was not sold at a dearer price. If the produce was less, so was the population; the weakness of the demand compensated the feebleness of the supply." vol. ii. 338. M. Say being impressed with the opinion that the price of commodities is regulated by the price of labour, and justly supposing that charitable institutions of all sorts tend to increase the population beyond what it otherwise would be, and therefore to lower wages, says, "I suspect that the cheapness of the goods, which come from England, is partly caused by the numerous charitable institutions which exist in that country." vol. ii. 277. This is a consistent opinion in one who maintains that wages regulate price.

10. "In agriculture too," says Adam Smith, "nature labours along with man; and though her labour costs no expense, its produce has its value, as well as that of the most expensive workman." The labour of nature is paid, not because she does much, but because she does little. In proportion as she becomes niggardly in her gifts, she exacts a greater price for her work. Where she is munificently beneficient, she always works gratis. "The labouring cattle employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owner's profits, but of a much greater value. over and above the capital of the farmer and all its profits, they regularly occasion the reproduction of the rent of the landlord. This rent may be considered as the produce of those powers of nature, the use of which the landlord lends to the farmer. It is greater or smaller according to the supposed extent of those powers, or in other words, according to the supposed natural or improved fertility of the land. It is the work of nature which remains, after deducting or compensating every thing which can be regarded as the work of man. It is seldom less than a fourth, and frequently more than a third of the whole produce. No equal quantity of productive labour employed in manufactures, can ever occasion so great a reproduction. In them nature does nothing, man does all; and the reproduction must always be in proportion to the strength of the agents that occasion it. The capital employed in agriculture, therefore, not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures, but in proportion too, to the quantity of the productive labour which it employs, it adds a much greater value to the annual produce of the land and labour of the country, to the real wealth and revenue of its inhabitants. Of all the ways in which a capital can be employed, it is by far the most advantageous to the society." Book II, chapter v. p. 15.

Does nature nothing man in manufactures? Are the powers of wind and water, which move our machinery, and assist navigation, nothing? The pressure of the atmosphere and the elasticity of steam, which enable us to work the most stupendous engines -- are they not the gifts of nature? to say nothing of the effects of the matter of heat in softening and melting metals, of the decomposition of the atmosphere in the process of dyeing and fermentation. There is not a manufacture which can be mentioned, in which nature does not give her assistance to man, and give it too, generously and gratuitously.

In remarking on the passage which I have copied from Adam Smith, Mr Buchanan observes, "I have endeavoured to show, in the observations on productive and unproductive labour, contained in the fourth volume, that agriculture adds no more to the national stock than any other sort of industry. In dwelling on the reproduction of rent as so great an advantage to society, Dr Smith does not reflect that rent is the effect of high price, and that what the landlord gains in this way, he gains at the expense of the community at large. There is no absolute gain to the society by the reproduction of rent; it is only one class profiting at the expense of another class. The notion of agriculture yielding a produce, and a rent in consequence, because nature concurs with human industry in the process of cultivation, is a mere fancy. It is not from the produce, but from the price at which the produce is sold, that the rent is derived; and this price is got not because nature assists in the production, but because it is the price which suits the consumption to the supply."

11. The clearly understanding this principle is, I am persuaded, of the utmost importance to the science of political economy.

12. I hope I am not understood as undervaluing the importance of all sorts of improvements in agriculture to landlords -- their immediate effect is to lower rent; but as they give a great stimulus to population, and at the same time enable us to cultivate poorer lands, with less labour, they are ultimately of immense advantage to landlords. A period however must elapse, during which they are positively injurious to him.

13. To make this obvious, and to show the degrees in which corn and money rent will vary, let us suppose that the labour of ten men will, on land of a certain quality, obtain 180 quarters of wheat, and its value to be £4 per quarter, or £720; and that the labour of ten additional men will, on the same or any other land, produce only 170 quarters in addition; wheat would rise from £4 to £4 4s. 8d. for 170: 180: £4 4s. 8d.; or, as in the production of 170 quarters, the labour of ten men is necessary in one case, and only of 9.44 in the other, the rise would be as 9.44 to 10, or as £4 to £4 4s. 8d. If 10 men be further employed, and the return be

160, the price will rise to £4 10s. 0d.
150, the price will rise to £4 16s. 0d.
140, the price will rise to £4 2s. 10d.

Now if no rent was paid for the land which yielded 180 quarters, when corn was at £4 per quarter, the value of 10 quarters would be paid as rent when only 170 could be procured, which at £4 4s. 8d. would be £42 7s. 6d.

20 qrs. when160 were produced, which at£4 10 0 would be  £90 0 0
30 qrs. ... 150 ....£4 16 0 ...£144 0 0
40 qrs. ...140 ....£5 2 10 ...205 13 4

Corn rent would increase in the proportion of {100, 200, 300, 400} and money rent in the proportion of {100, 212, 340, 485}

14. "The shelter and the clothing which are indispensable in one country may be no way necessary in another; and a labourer in Hindostan may continue to work with perfect vigour, though receiving, as his natural wages, only such a supply of covering as would be insufficient to preserve a labourer in Russia from perishing. Even in countries situated in the same climate, different habits of living will often occasion variations in the natural price of labour, as considerable as those which are produced by natural causes." -- p. 68. An Essay on the External Corn Trade, by Robert Torrens, Esq.

The whole of this subject is most ably illustrated by Colonel Torrens.

15. With Mr Buchanan in the following passage, if it refers to temporary states of misery, I so far agree, that 'the great evil of the labourer's condition is poverty, arising either from a scarcity of food or of work; and in all countries, laws without number have been enacted for his relief. But there are miseries in the social state which legislation cannot relieve; and it is useful therefore to know its limits, that we many not, by aiming at what is impracticable, miss the good which is really in our power.' Buchanan, page 61.

16. The progress of knowledge manifested upon this subject in the House of Commons since 1796, has happily not been very small, as may be seen by contrasting the late report of the committee on the poor laws, and the following sentiments of Mr Pitt, in that year.

"Let us," said he, "make relief in cases where there are a number of children a matter or right and honour, instead of a ground of opprobrium and contempt. This will make a large family a blessing, and not a curse; and this will draw a proper line of distinction between those who are able to provide for themselves by their labour, and those who after having enriched their country with a number of children, have a claim upon the assistance for support." -- Hansard's Parliamentary History, vol. 32, page 710.

17. The reader is desired to bear in mind, that for the purpose of making the subject more clear, I consider money to be invariable in value, and therefore every variation of price to be referable to an alteration in the value of the commodity.

18. The reader is aware, that we are leaving out of our consideration the accidental variations arising from bad and good seasons, or from the demand increasing or diminishing by any sudden effect on the state of population. We are speaking of the natural and constant, not the accidental and fluctuating price of corn.

19. See Adam Smith, book i, chap. 9.

20. It will appear then, that a country possessing very considerable advantages in machinery and skill, and which may therefore be enabled to manufacture commodities with much less labour than her neighbours, may, in return for such commodities, import a portion of the corn required for its consumption, even if its land were more fertile, and corn could be grown with less labour than in the country from which it was imported. Two men can both make shoes and hats, and one is superior to the other in both employments; but in making hats, he can only exceed his competitor by one-fifth or 20 per cent, and in making shoes he can excel him by one-third or 33 per cent; -- will it not be for the interest of both, that the superior man should employ himself exclusively in making shoes, and the inferior man in making hats?

21. It must be understood that all the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduce, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to capital, is consumed by productive instead of unproductive labourers. There can be no greater error than in suppossing that capital is increased by non-consumption. If the price of labour should rise so high, that notwithstanding the increase of capital, no more could be employed, I should say that such increase of capital would be still unproductively consumed.

22. It may be doubted whether commodities raised in price, merely by taxation, would require any more money for their circulation. I believe they would not.

23. 18 Quarters at £4 8s. 10 2/3d.

24. 9 Quarters at £4 8s. 10 2/3d.

25. Book v., chap. ii.

26. That the profits of the farmer only should be taxed, and not the profits of any other capitalist, would be highly beneficial to landlords. It would, in fact, be a tax on the consumers of raw produce, partly for the benefit of the State, and partly for the benefit of landlords.

27. On further consideration, I doubt whether any more money would be required to circulate the same quantity of commodities, if their prices be raised by taxation, and not by difficulty of production. Suppose 100,000 quarters of corn to be sold in a certain district, and in a certain time, at £4 per quarter, and that in consequence of a direct tax of 8s. per quarter, corn rises to £4 8s., the same quantity of money, I think, and no more, would be required to circulate this corn at the increased price. If I before purchased 11 quarters at £4, and in consequence of the tax am obliged to reduce my consumption to 10 quarters, I shall not require more money, for in all cases I shall pay £44 for my corn. The public would, in fact, consume one-eleventh less, and this quantity would be consumed by Government. The money necessary to purchase it, would be derived from the 8s. per quarter, to be received from the farmers in the shape of a tax, but the amount levied would at the same time be paid to them for their corn; therefore the tax is in fact a tax in kind, and does not make it necessary that any more money should be used, or, if any, so little, that the quantity may be safely neglected.

28. M. Say appears to have imbibed the general opinion on this subject. Speaking of corn, he says, 'thence it results, that its price influences the price of all other commodities. A farmer, a manufacturer, or a merchant, employs a certain number of workmen, who all have occasion to consume a certain quantity of corn. If the price of corn rises, he is obliged to raise, in an equal proportion, the price of his productions.' Vol. i. p. 255.

29. So far from this being true, they would scarcely affect the landlords and stockholder.

30. M. Say says, that 'the tax added to the price of a commodity, raises its price. Every increase in the price of a commodity, necessarily reduces the number of those who are able to purchase it, or at least the quantity they will consume of it.' This is by no means a necessary consequence. I do not believe, that if bread were taxed, the consumption of bread would be diminished, more than if cloth, wine or soap were taxed.

31. The following remark of the same author appears to me equally erroneous: "When a high duty is laid on cotton, the production of all those goods of which cotton is the basis is diminished. If the total value added to cotton in its various manufactures, in a particular country, amounted to 100 millions of francs per annum, and the effect of the tax was, to diminish the consumption one half, than the tax would deprive that country every year of 50 millions of francs, in addition to the sum received by Government." Vol. ii, p. 314.

32. It is observed by M. Say, 'that a manufacturer is not enabled to make the consumer pay the whole tax levied on his commodity, because its increased price will diminish its consumption.' Should this be the case, should the consumption be diminished, will not the supply also speedily be diminished? Why should the manufacturer continue in the trade, if his profits are below the general level? M. Say appears here also to have forgotten the doctrine which he elsewhere supports, 'that the cost of production determines the price, below which commodities cannot fall for any length of time, because production would be then either suspended or diminished.' -- Vol. ii. p. 26.

33. 'Melon says, that the debts of a nation are debts due from the right hand to the left, by which the body is not weakened. It is true that the general wealth is not diminished by the payment of the interest on arrears of the debt: The dividends are a value which passes from the hand of the contributer to the national creditor: whether it be the national creditor or the contributor who accumulates or consume it, is, I agreed, of little importance to the society; but the principal of the debt -- what has become of that? It exists no more. The consumption which has followed the loan has annihilated a capital which will never yield any further revenue. The society is deprived not of the amount of interest, since that passes from one hand to the other, but of the revenue from a destroyed capital. This capital, if it had been employed productively by him who lent it to the State, would equally have yielded him an income, but that income would have been derived from a real production, and would not have been furnished from the pocket of a fellow citizen.' -- Say, vol. ii, p. 357. This is both conceived and expressed in the true spirit of the science.

34. 'Credit, in general, is good, as it allows capitals to leave those hands where they are not usefully employed, to pass into those where they will be made productive: it diverts a capital from an employment useful only to the capitalist, such as an investment in the public funds, to make it productive in the hands of industry. It facilitates the employments of all capitals, and leaves none unemployed.' -- Economie Politique, p. 463. 2 Vol. 4th Edition -- This must be an oversight of M. Say. The capital of the stockholder can never be made productive -- it is, in fact, no capital. If he were to sell his stock, and employ the capital he obtained for it, productively, he could only do so by detaching the capital of the buyer of his stock from a productive employment.

35. 'Manufacturing industry increases its produce in proportion to the demand, and the price falls; but the produce of land cannot be so increased; and a high price is still necessary to prevent the consumption from exceeding the supply.' Buchanan, vol. iv, p. 40. Is it possible that Mr Buchanan can seriously assert, that the produce of the land cannot be increased, if the demand increases?

36. I wish the word 'Profit' had been omitted. Dr Smith must suppose the profits of the tenants of these precious vineyards to be above the general rate of profits. If they were not, they would not pay the tax, unless they could shift it either to the landlord or consumer.

37. Vol. iii, p. 355.

38. In a former part of this work, I have noticed the difference between rent, properly so called, and the remuneration paid to the landlord under the name, for the advantages which the expenditure of his capital has procured to his tenant; but I did not perhaps sufficiently distinguish the difference which would arise from the different modes in which this capital might be applied. As a part of this capital, when once expended in the improvement of a firm, is inseparably amalgamated with the land, and tends to increase its productive powers, the remuneration paid to the landlord for its use is strictly of the nature of rent, and is subject to all the laws of rent. Whether the improvement be made at the expense of the landlord or the tenant, it will not be undertaken in the first instance, unless there is a strong probability that the return will at least be equal to the profit that can be made by the disposition of any other equal capital; but when once made, the return obtained will ever after be wholly of the nature of rent, and will be subject by the variations of rent. Some of these expenses, however, only give advantages to the land for a limited period, and do not add permanently to its productive powers: being bestowed on buildings, and other perishable improvements, they require to be constantly renewed, and therefore do not obtain for the landlord any permanent addition to his real rent.

39. 'Commerce enables us to obtain a commodity in the place where it is to be found, and to convey it to another where it is to be consumed; it therefore gives us the power of increasing the value of the commodity, by the whole difference between its price in the first of these places, and its price in the second.' M. Say, p. 458, vol. ii. True, but how is this additional value given to it? By adding to the cost of production, first, the expenses of conveyence; secondly, the profit on the advance of capital made by the merchant. The commodity is only more valuable, for the same reasons that every other commodity may become more valuable, because more labour is expended on its production and conveyance, before it is purchased by the consumer. This must not be mentioned as one of the advantages of commerce. When the subject is more closely examined, it will be found that the whole benefits of commerce resolve themselves into the means which it gives us of acquiring, not more valuable objects, but more useful ones.

40. In the last volume to the supplement of the Encyclopaedia Britannica, article 'Corn Laws and Trade' are the following excellent suggestions and observations: "If we shall at any future period, think of retracting our steps, in order to give time to withdraw capital from the cultivation of our poor soils, and to invest it in more lucrative employments, a gradually diminishing scale of duties may be adopted. The price at which foreign grain should be admitted duty free, may be made to decrease from 80s. its present limit, by 4s. or 5s. per quarter annually, till it reaches 50s. when the ports could safely be thrown open, and the restrictive system be for ever abolished. When this happy event shall have taken place, it will be no longer necessary to force nature. The capital and enterprise of the country will be turned into those departments of industry in which our physical situation, national character, or political institutions, fit us to excel. The corn of Poland, and the raw cotton of Carolina, will be exchanged for the wares of Birmingham, and the muslins of Glasgow. The genuine commercial spirit, that which permanently secures the property of nations, is altogether inconsistent with the dark and shallow policy of monopoly. The nations of the earth are like provinces of the same kingdom -- a free and unfettered intercourse is alike productive of general and of local advantage.' The whole article is well worthy of attention; it is very instructive, is ably written, and shews that the author is completely master of the subject.

41. Whatever capital becomes fixed on the land, must necessarily be the landlord's, and not the tenants, at the expiration of the lease. Whatever compensation the landlord may receive for this capital, on re-letting his land, will appear in the form of rent; but no rent will be paid, if, with a given capital, more corn can be obtained from abroad, than can be grown on this land at home. If the circumstances of the society should require corn to be imported, and 1,000 quarters can be obtained by the employment of a given capital, and if this land, with the employment of the same capital, will yield 1,100 quarters, 100 quarters will necessarily go to rent; but if 1,200 can be got from abroad, then this land will go out of circulation, for it will not then yield even the general rate of profit. But this is no disadvantage, however great the capital may have been, that had been expended on the land. Such capital is spent with a view to augment the produce -- that, it should be remembered, is the end; of what importance then can it be to the society, whether half its capital be sunk in value, or even annihiliated, if they obtain a greater annual quantity of production? Those who deplore the loss of capital in this case, are for sacrificing the end to the means.

42. Among the most able of the publications, on the impolicy of restricting the Importation of Corn, may be classed Major Torrens' Essay on the External Corn Trade. His arguments appear to me to be unanswered, and to be unanswerable.

43. Adam Smith says, 'that the difference between the real and the nominal price of commodities and labour, is not a matter of mere speculation, but may sometimes be of considerable use in practice.' I agree with him; but the real price of labour and commodities, is no more to be ascertained by their price in goods, Adam Smith's real measure, than by their price in gold and silver, his nominal measure. The labourer is only paid a really high price for his labour, when his wages will purchase the produce of a great deal of labour.

44. In vol. i, p. 108, M. Say infers, that silver is now of the same value, as in the reign of Louis XIV, 'because the same quantity of silver will buy the same quantity of corn.'

45. Elemens d'Idelogie, vol. iv, p. 99. -- In this work M. de Tracy has given a useful and an able treatise on the general principles of Political Economy, and I am sorry to be obliged to add, that he supports, by his authority, the definitions which M. Say has given of the words 'value', 'riches', and 'utility'.

46. 'The first man who knew how to soften metals by fire, is not the creator of the value which that process adds to the melted metal. That value is the result of the physical action of fire added to the industry and capital of those who availed themselves of this knowledge.'

'From this error Smith has drawn this false result, that the value of all productions represents the recent or former labour of man, or, in other words, that riches are nothing else but accumulated labour; from which, by a second consequence equally false, labour is the sole measure of riches, or of the value of productions.' The inference with which M. Say concludes are his own, and not Dr Smith's; they are correct if no distinction be made between value and riches, and in this passage M. Say makes none; but though Adam Smith, who defined riches to consists in the abundance of necessaries, conveniences and enjoyments of human life, would have allowed that machines and natural agents might very greatly add to the riches of a country, he would not have allowed that they add any thing to the value of those riches.

47. Adam Smith speaks of Holland, as affording an instance of the fall of profits from the accumulation of capital, and from every employment being consequently overcharged. 'The Government there borrow at a 2 per cent, and private people of good credit, at 3 per cent.' But it should be remembered, that Holland was obliged to import almost all the corn which she consumed, and by imposing heavy taxes on the necessaries of the labourer, she further raised the wages of labour. These facts will sufficiently account for the low rate of profits and interest in Holland.

48. Is the following quite consistent with M. Say's principle? 'The more disposable capitals are abundant in proportion to the extent of employment for them, the more will the rate of interest on loans of capital fall.' -- Vol. ii. p. 108. If capital to any extent can be employed by a country, how can it be said to be abundant, compared with the extent of employment for it?

49. Adam Smith says, that "When the produce of any particular branch of industry exceeds that the demand of the country requires, the surplus must be sent abroad, and exchanged for something for which there is a demand at home. Without such exportation, a part of the productive labour of the country must cease, and the value of its annual produce diminish. The land and labour of Great Britain produce generally more corn, woollens, and hardware, than the demand of the home market requires. The surplus part of them, therefore, must be sent abroad, and exchanged for something for which there is a demand at home. It is only by means of such exportation, that this surplus can acquire a value sufficient to compensate the labour and expense of producing it." One would be led to think by the above passage, that Adam Smith concluded we were under some necessity of producing a surplus of corn, woollen goods, and hardware, and that the capital which produced them could not be otherwise employed. It is, however, always a matter of choice in what way a capital shall be employed, and therefore there can never, for any length of time be a surplus of any commodity; for if there were, it would fall below its natural price, and capital would be removed to some more profitable employment. No writer has more satisfactorily and ably shewn that Dr Smith, the tendency of capital to move from employments in which the goods produced do not repay by their price the whole expenses, including the ordinary profits, of producing and bringing them to market.

50. 'All kinds of public loans', observes M. Say, 'are attended with the inconvenience of withdrawing capital, or portions of capital, from productive employments, to devote them to consumption; and when they take place in a country, the Government of which does not inspire much confidence, they have the further inconvenience of raising the interest of capital. Who would lend at 5 per cent per annum to agriculture, to manufacturers and to commerce, when a borrower may be found ready to pay an interest of 7 or 8 per cent? That sort of income, which is called profit of stock, would rise then at the expense of the consumer. Consumption would be reduce, by the rise in the price of produce; and the other productive services would be less in demand, less well paid. The whole nation, capitalists excepted, would be the sufferers from such a state of things.' To the question: 'who would lend money to farmers, manufacturers, and merchants, at 5 per cent per annum, when another borrower, having little credit, would give 7 or 8?' I reply, that every prudent and reasonable man would. Because the rate of interest is 7 or 8 per cent there, where the lender runs extraordinary risk, is this any reason that it should be equally high in those places where they are secured from such risks? M. Say allows, that the rate of interest depends on the rate of profits; but it does not therefore follow, that the rate of profits depends on the rate of interest. One is the cause, the other the effect, and it is impossible for any circumstances to make them change places.

51. In another place he says, that 'whatever extension of the foreign market can be occasioned by the bounty, must, in every particular year, be altogether at the expense of the home market; at every bushel of corn which is exported by means of the bounty, and which would not have been exported without the bounty, would have remained in the home market to increase the consumption, and to lower the price of that commodity. The corn bounty, it is to be observed, as well as every other bounty upon exportation, imposes two different taxes upon the people; first, the tax which they are obliged to contribute, in order to pay the bounty; and secondly, the tax which arises from the advanced price of the commodity in the home market, and which, as the whole body of the people are purchases of corn, must, in this particular commodity, be paid by the whole body of the people. In this particular commodity, therefore, the second tax is by much the heaviest of the two.' 'For every five shillings, therefore, which they contribute to the payment of the first tax, they must contribute six pounds four shillings to the payment of the second.' 'The extraordinary exportation of corn, therefore, occasioned by the bounty, not only in every particular year diminishes the home, just as much as it extends the foreign market and consumption; but, by restraining the population and industry of the country, its final tendency is to stunt and restrain the gradual extension of the home market, and thereby in the long run, rather to diminish than to augment the whole market and consumption of corn.'

52. The same opinion is held by M. Say. -- Vol ii, p. 335.

53. See Chapter on Rent.

54. M. Say supposes the advantage of the manufacturers at home to be more than temporary. "A government which absolutely prohibits the importation of certain foreign goods, establishes a monopoly in favour of those who produce such commodities at home, against those who consume them; in other words, those at home who produce them having the exclusive privilege of selling them, may elevate their price above the natural price; and the consumers at home, not being able to obtain them elsewhere, are obliged to purchase them at a higher price." vol. i, p. 201.

But how can they permanently support the market price of their goods above the natural price, when every one of their fellow citizens is free to enter into the trade? They are guaranteed against foreign, but not against home competition. The real evil arising to the country from such monopolies, if they can be called by that name, lies, not in raising the market price of such goods, but in raising their real and natural price. By increasing the cost of production, a portion of the labour of the country is less productively employed.

55. "A freedom of trade is alone wanted to guarantee a country like Britain, abounding in all the varied products of industry, in merchandise suited to the wants of every society, from the possibility of a scarcity. The nations of the earth are not condemned to throw the dice to determine which of them shall submit to famine. There is always abundance of food in the world. To enjoy a constant plenty, we have only to lay aside our prohibitions and restrictions, and cease to counteract the benevolent wisdom of Providence." Article, 'Corn Laws and Trade' Supplement to Encyclopaedia Britainnica.

56. Are not the following passages contradictory to the one above quoted? 'Besides, that home trade, though less noticed, (because it is in a variety of hands) is the most considerable, it is also the most profitable. The commodities exchanged in that trade are necessarily the productions of the same country.' Vol. i. p. 84.

'The English Government has not observed, that he most profitable sales are those which a country makes to itself, because they cannot take place, without two values being produced by the nation; the value which is sold, and the value with which the purchase is made.' vol. i, p.221.

I shall, in the 26th chapter, examine the soundness of this opinion.

57. See p. 175.

58. M. Say is of the same opinion with Adam Smith: 'The most productive employment of capital, for the country in general, after that on the land, is that of manufactures and of home trade; because it puts in activity an industry of which the profits are gained in the country, while those capitals which are employed in foreign commerce, make the industry and lands of all countries to be productive, without distinction.

'The employment of capital the least favourable to a nation, is that of carrying the produce of one foreign country to another.' Say, vol. ii, p. 130.

59. Perhaps this is expressed too strongly, as more is generally allotted to the labourer under the name of wages, that the absolute necessary expenses of production. In that case a part of the net produce of the country is received by the labourer, and may be saved or expended by him; or it may enable him to contribute to the defence of the country.

60. M. Say has totally misunderstood me in supposing that I have considered as nothing, the happiness of so many human beings. I think the text sufficiently shews that I was confining my remarks to the particular grounds on which Adam Smith had rested it.

61. 'It is fortunate that the natural course of things draws capital, not to those employments where the greatest profits are made, but to those where the operation is most profitable to the community.' -- vol. ii, p. 122. M. Say has not told us what those employments are, which, while they are the most profitable to the individual, are not the most profitable to the State. If countries with limited capitals, but with abundance of fertile land, do not early engage in foreign trade, the reason is, because it is less profitable to individuals, and therefore also less profitable to the State.

62. Whatever I say of gold coin, is equally applicable to silver coin; but it is not necessary to mention both on every occasion.

63. This, and the following paragraphs, to the close of the bracket, p. 355, is extracted from a Pamphlet entitled 'Proposals for an Economical and Secure Currency' published by the author in the year 1816,

64. The price of £3 17s. here mentioned,is, of course, an arbitrary price. There might be good reason, perhaps, for fixing it either a little above, or a little below. In naming £3 17s. I wish only to elucidate the principle. The price ought to be so fixed as to make it the interest of the seller of gold rather to sell it to the Bank, than to carry it to the Mint to be coined. The same remark applies to the specified quantity of twenty ounces. There might be good reason for making it ten or thirty.

65. It has lately been contended in parliament by Lord Lauderdale, that, with the existing Mint regulation, the Bank could not pay their notes in specie, because the relative value of the two metals is such, that it would be for the interest of all debtors to pay their debts with silver and not with gold coin, while the law gives a power to all the creditors of the Bank to demand gold in exchange for Bank notes. This gold, his Lordship thinks, could be profitably exported, and if so, he contends that the Bank, to keep a supply, will be obliged to buy gold constantly at a premium, and sell it at par. If every other debtor could pay in silver, Lord Lauderdale would be right; but he cannot do so if this debt exceed 40s. This, then, would limit the amount of silver coin in circulation, (if Government had not reserved to itself the power to stop the coinage of that metal whenever they might think it expedient,) because if too much silver were coined, it would sink in relative value to gold, and no man would accept it in payment for a debt exceeding 40 shillings, unless a compensation were made for its lower value. To pay a debt of £100, one hundred sovereigns, or Bank notes to the amount of £100 would be necessary, but £105, in silver coin might be required, if there were too much silver in circulation. There are, then, two checks against an excessive quantity of silver coin; first, the direct check which Government may at any time interpose to prevent more from being coined; secondly, no motive of interest would lead any one to take silver to the Mint, if he might do so, for if it were coined,it would not pass current at its Mint, but only at its market value.

66. 'If, with the quantity of gold and silver which actually exists, these metals only served for the manufacture of utensils and ornaments, they would be abundant,and would be much cheaper than they are at present; in other words, in exchanging them for any other species of goods, we should be obliged to give proportionally a greater quantity of them. But as a large quantity of these metals is used for money, and as this portion is used for no other purpose, there remains less to be employed in furniture and jewellery; now this scarcity adds to their value.' -- Say, vol. i, p. 316. See also note to page 78

67. An Inquiry into the Nature and Origin of Public Wealth, page 13.

68. 'The demand for labour depends on the increasing of circulating, and not of fixed capital. Were it true that the proportion between these two sorts of capital is the same at all times, and in all countries, then, indeed, it follows that the number of labourers employed is in proportion to the wealth of the State. But such a position has not the semblance of probability. As arts are cultivated, and civilization is extended, fixed capital bears a larger and larger proportion to circulating capital. The amount of fixed capital employed in the production of a piece of British muslin is at least a hundred, probably a thousand times greater than that employed in the production of a similar piece of Indian muslin. And the proportion of circulating capital employed is a hundred or a thousand times less. It is easy to conceive that, under certain circumstances, the whole of the annual savings of an industrious people might be added to fixed capital, in which case they would have no effect in increasing the demand for labour.' Barton, 'On the Condition of the Labouring Classes of Society'. p. 16.

It is not easy, I think, to conceive that under any circumstance, an increase in capital should not be followed by an increased demand for labour; the most that can be said is, that the demand will be in a diminishing ratio. Mr Barton, in the above publication, has, I think, taken a correct view of some of the effects of an increasing amount of fixed capital on the condition of the labouring classes. His Essay contains much value information.

69. An Inquiry into the Nature and Progress of Rent. p. 15.

70. See page 134, where I have endeavoured to shew, that whatever facility or difficulty there may be in the production of corn; wages and profits together will be of the same value. When wages rise, it is always at the expense of profits, and when they fall, profits always rise.

71. Mr Malthus has observed in a late publication, that I have misunderstood him in this passage, as he did not mean to say, that rent immediately and necessarily rises and falls with the increased or diminished fertility of the land. If so, I certainly did misunderstand him. Mr Malthus's words are, 'Diminish this plenty, diminish the fertility of the soil, and the excess (rent) will diminish; diminish it still further, and it will disappear.' Mr Malthus does not state his proposition conditionally, but absolutely. I contended against what I understood him to maintain, that a diminution of the fertility of the soil was incompatible with an increase of rent.'

72. Of what increased quantity does Mr Malthus speak? Who is to produce it? Who can have any motive to produce it, before any demand exists for an additional quantity?

73. Inquiry, &c. 'In all progressive countries, the average price of corn is never higher than what is necessary to continue the average increase of produce.' Observations, p. 21.

'In the employment of fresh capital upon the land, to provide for the wants of an increasing population, whether this fresh capital is employed in bringing more land under the plough, or improving land already in cultivation, the main question always depends upon the expected returns of this capital; and no part of the gross profits can be diminished, without diminishing the motive to this mode of employing it. Every diminution of price, not fully and immediately balanced by a proportionate fall in all the necessary expenses of a farm, every tax on the land, every tax on farming stock, every tax on the necessary of farmers, will tell in the computation; and if, after all these outgoings are allowed for, the price of the produce will not leave a fair remuneration for the capital employed, according to the general rate of profits, and a rent at least equal to the rent of the land in its former state, no sufficient motive can exist to undertake the projected improvement.' Observations, p. 22.

74. See page 134.

75. See p. 102, &c.

76. It is not necessary to state, on every occasion, but it must be always understood, that the same result will follow, as far as regards the price of raw produce and the rise of rent, whether an additional capital of a given amount, be employed on new land, for which no rent is paid, or on land already in cultivation, if the produce obtained from both be precisely the same in quantity. See p. 96.

M. Say, in his note to the French translation of this work, has endeavoured to shew that there is not at any time land in cultivation which does not pay rent, and having satisfied himself on this point, he concludes that he has overturned all the conclusions which result from that doctrine. He infers, for example, that I am not correct in saying that taxes on corn, and other raw produce, by elevating their price, fall on the consumer, and do not fall on rent. He contends that such taxes must fall on rent. But before M. Say can establish the correctness of this inference, he must also shew that there is not any capital employed on the land for which no rent is paid (see the beginning of this note, and pages 91 and 97 of the present work); now this he has not attempted to do. In no part of his notes has he refuted, or even noticed that important doctrine. By his note to page 182 of the second volume of the French edition, he does not appear to be aware that it has even been advanced.

77. Observations on the Corn Laws, p. 4.

78. Upon shewing this passage to Mr Malthus, at the time when these papers were going to press, he observed, 'that in these two instances he had inadvertently used the term real price, instead of cost of production.' It will be seen, from what I have already said, that to me it appears, that in these two instances he has used the term real price in its true and just acceptation, and that in the former case only it is incorrectly applied.

79. Page 40.

80. Manufactures, indeed, could not fall in any such proportion, because, under the circumstances supposed, there would be a new distribution of the precious metals among the different countries. Our cheap commodities would be exported in exchange for corn and gold, till the accumulation of gold should lower its value, and raise the money price of commodities.

81. The Grounds of an Opinion, &c. page 36.

82. Mr Malthus, in another part of the same work, supposes commodities to vary 25 or 20 per cent when corn varies 33 1/3.

83. Of net produce and gross produce, M. Say speaks as follows: 'The whole value produced is the gross produce; this value, after deducting from it the cost of production, is the net produce.' vol ii. p. 491. There can then be no net produce, because the cost of production, according to M. Say, consists of rent, wages, and profits. In page 508, he says, 'The value of a product, the value of a productive service, the value of the cost of production, are all then similar values, whenever things are left to their natural course.' Take a whole from a whole, and nothing remains.

84. Mr McCulloch, in an able publication, has very strongly contended for the justice of making the dividends on the national debt conform to the reduced value of corn. He is in favour of a free trade in corn, but he thinks it should be accompanied by a reduction of interest to the national creditor.