You, I think, agree with Mr. Torrens that a rise in the price of corn
will be followed by a rise in the price of home commodities; but your
theory requires that there should be no rise in the price of those
commodities on which the wages of labour are expended, for, if they rose
in the same proportion as corn, there could be no fall in the corn wages
of labour. Is it not, however, very improbable that all manufactures
should rise at home, and yet that those on which [the wages of] labour
are expended should not rise? Is not the price of soap, candles, etc.,
though foreign commodities[102], necessarily affected by the rise in the
price of those home goods which are given in exchange for them. Mr.
Torrens' theory, however, on this part of the subject appears to me
defective, as I think that the price of commodities will be very
slightly affected either by a rise or fall in the price of corn. If so,
every rise in the price of corn must affect profits on manufactures; and
it is impossible that agricultural profits can materially deviate from
them. I will, however, suppose that you and Mr. Torrens are correct, and
that commodities do rise in price with every increased price of corn.
The value of fixed capital as well as of circulating capital employed on
the land will then rise also; and, although the money value of the
produce should be increased on the old land, it will still bear the same
proportion to the money value of the capital employed; and, as this
produce will be divided in different proportions between the landlord
and the farmer, the rate of profits of the latter will fall. For the
purpose of examining the effects, let us suppose that all commodities
rise, with the rise of the price of corn, excepting those only on which
the wages of labour are expended, and that in consequence the corn wages
of labour fall. Suppose the price of corn L4, and that on the old land
the labour of eight men was necessary to raise eighty quarters of corn,
that no rent was paid, and that each labourer had eight quarters
annually for his wages, of which one half was expended on commodities.
The gain of the farmer, when the price was L4, would be L64 or sixteen
quarters, and, besides his fixed capital, horses, seed, etc., he would
require the value of sixty-four quarters, or L256, to pay the annual
wages of his labourers; consequently his profits would be in the
proportion of L25 to L100 of wages, for 256:64::100:25. Now, suppose
corn to rise to L4 10_s._, wages would vary only 10_s._ on four
quarters, and consequently would rise to L34 annually per man, or L272
on the old land; but the eighty quarters of corn would sell for L360,
leaving a produce of L88 to be divided between farmer and landlord; and
88 would be to 272 as 32 to 100.
But on the new land the labour of eight men and a half might be required
to obtain eighty quarters or L360; the labour of eight-and-a-half men
would cost, at L34 each, L289; consequently the profit would be L71,
which is to the whole expense of L360 as L19.7 to L100.
L100 capital or expenses on the old land will yield L32
L100 capital or expenses on the new land " " L19.7.
--------
Rent L[1]2.3.
It appears then that the profit on new land, which regulates the profit
on all other land, would be 19.7 per cent. when the price of corn was L4
10_s._ It was 25 per cent. when the price was L4.
If indeed under the same circumstances we had supposed the price of corn
to rise to L6, then profits would be increased, and would be much more
than 25 per cent.; but some adequate cause must be shown for [such]
rise, and it cannot be arbitrarily assumed. Your theory supposes too
what is impossible, that the demand for manufactures [could] increase in
the same proportion as the demand for [corn] at the very time that more
men are employed on the land to obtain a less proportion of produce. The
whole appears to me a labyrinth of difficulties; one is no sooner got
over than another presents itself, and so on in endless succession. Let
me entreat you to give my simple doctrine fair consideration, and you
must allow that it accounts for all the phenomena in an easy natural
manner.
I yesterday met Mr. Smyth[103], your friend, and Mr. Torrens at Mr.
Phillips'. I passed a very pleasant day. Mr. Smyth was exceedingly
agreeable. I like him very much. The corn question was occasionally
introduced, and I had an opportunity of stating some of my objections to
Mr. Torrens' theory. I have no reason to think that I convinced him. I
defended the use of the word depreciation in the sense [in] which you
had used it; and I believe I had every one with me. I fancy that his
arguments in his book on currency are founded on the sense in which he
uses the word. We spoke on the other points of difference between him
and you. Mr. Smyth, Mr. Phillips, and Mr. Torrens have agreed to dine
with me on Wednesday, which has induced me to write to you a day or two
sooner than I otherwise should have done that I might express my wish
that you would join us. If you will, we will dine as late as you please.
There will be a bed at your service, and I need not say that you will
add considerably to my pleasure.
Yours very truly,
DAVID RICARDO.
NOTE.--In many of his speeches, e.g. June 12, 1822, Ricardo refers
to the ambiguity of the word 'depreciation'. He himself always uses
it to indicate that the currency had fallen below its own standard,
as e.g. when coins are clipped. Others used it of a change in the
_value_ of the currency as purchasing a larger or a smaller quantity
of goods. A currency might be depreciated in the first sense when it
was actually, through counteracting causes, the opposite (or
appreciated) in the second. Malthus, in Edinburgh Review, Feb. 1811,
had used it in the first sense. (See pp. 341, 356, 365.) Torrens, in
his 'Essay on Money,' 1812, had used it in the second. (See pp. 98,
99.) The word 'appreciation' occurs in Tooke's 'High and Low Prices'
(1823), Part I. p. 76. Tooke himself distinguishes depreciation of
the Currency (the first of the above senses) from depreciation of
Money (the second of them); (l. c. p. 8.)