... I agree with you that, when capital is scanty compared with the
means of employing it, from whatever cause arising, profits will be
high. Whether temporarily or permanently must of course depend upon
whether the cause be temporary or permanent. It is, however, very
important to ascertain what the causes are which make capital scanty
compared with the means of employing it, and how far, when ascertained,
they may be considered temporary or permanent.
It is in this inquiry that I am led to believe that the state of the
cultivation of the land is almost the only great permanent cause. There
are other circumstances which are attended with temporary effects of
more or less duration and frequently operate partially on particular
trades. The state of production from the land, compared with the means
necessary to make it produce, operates on all, and is alone lasting in
its effects.
We agree too that effectual demand consists of two elements, the _power_
and the _will_ to purchase; but I think the will is very seldom wanting
where the power exists, for the desire of accumulation will occasion
demand just as effectually as a desire to consume; it will only change
the objects on which the demand will exercise itself. If you think
that, with an increase of capital, men will become indifferent both to
consumption and accumulation, then you are correct in opposing Mr.
Mill's idea[64], that in reference to a nation supply can never exceed
demand; but does not an increase of capital beget an increased
inclination for luxuries of all descriptions? and, though it appears
natural that the desire of accumulation should decrease with an increase
of capital and diminished profits, it appears equally probable that
consumption will increase in the same ratio. Exchanges will be as active
as ever; the objects only will be altered. If demand _appears_ more
active where capital is scarce, it is only because the _power_ to
purchase is comparatively greater. Wherever capital is scanty, the
necessaries of life are cheap, if the country is commonly fertile; and,
as capital and population increase, the necessaries of life rise in
price, and thus is the power of purchasing, though really greater,
comparatively less. In a country with little comparative capital, the
value of the yearly produce may very rapidly increase; and, if it be
said to be in consequence of the greatness of demand, I should contend
that in such country the demand would not be limited in the same degree
by a want of power as in a country abounding in capital, and merely
because provisions would not rise in the same proportion in the two
countries. If half as much corn [again] as usual were produced next
year, a great part of it would undoubtedly be wasted; and the same might
be said of any commodities which we might be ingenious enough to name:
but the real question is this--If money should retain the same value
next year, would any man (if he had it) want the will to spend half as
much again as he now does? and, if he did want the will, would he feel
no inclination to add the increase of his revenue to his capital and
employ it as such? In short, I consider the wants and tastes of mankind
as unlimited. We all wish to add to our enjoyments or to our power.
Consumption adds to our enjoyments, accumulation to our power, and they
equally promote demand.
Mrs. Ricardo and I are going this morning to Cheltenham, which is
eighteen miles distant from us; we shall return to-morrow.
Mr. Smith[65], whom I met at your house, lives about nine miles from
here.
... I hope you recollect that we are not quite twenty-eight miles from
Bath. You and Mrs. Malthus might, I think, give us the pleasure of your
company for a few days during your Christmas vacation[66], and might at
the same time visit your friends; but as you have seen them so lately
you would give us great pleasure if you would give us the whole of your
time. Mrs. Ricardo, who is standing by me, has made me express myself in
a more than usually bungling manner. She unites with me in kind regards
to Mrs. Malthus.
Yours very sincerely,
DAVID RICARDO.