I arrived in London this morning and found your kind letter, which I
ought to have answered immediately, as you could not otherwise know
whether I accepted your kind invitation, before the time that you might
expect me. The truth is I forgot the day of the week, and was not aware
till I got home that we were so near Saturday. I very much regret that I
shall not be able to avail myself of Mrs. Malthus' and your kindness, as
I have engagements here which will prevent me from leaving town till I
return to Gatcomb.
You mistake me if you suppose me to say that under no circumstances of
facility of production profits could fall. What I say is that profits
will rise when wages fall, and, as one of the main causes of the fall of
wages is cheap food and necessaries, it is _probable_ that with facility
of production, or cheap food and necessaries, profits would rise. At the
very time that the labour of a certain number of men may produce on such
land as pays no rent 1100 instead of 1000 quarters of corn, and when
corn falls in consequence from L5 to L4 10_s._ per quarter, the money as
well as the corn wages of labour _may_ rise, for capital _may_ have
increased at a very rapid rate, and labourers at a slow rate, in which
case profits would fall and not rise. Under these very peculiar
circumstances of higher money wages with a lower price of necessaries,
the wages of labour would be in an unusual state, and would shortly
revert to the old standard, when profits would feel the benefit. All I
mean to contend for is that profits depend on wages, wages under common
circumstances on the price of food and necessaries, and the price of
food and necessaries on the fertility of the last cultivated land. In
all cases it is perhaps true that rent will depend upon the demand
compared with the supply of good land, and wages on the demand compared
with the supply of labour, if it be allowed that the price of
necessaries influence[s] the demand and supply of labour.
I do not quite understand the expression that profits depend on the
demand compared with the supply of capital. What would you say of two
countries in [which] there are precisely equal capitals, where wages
[are] also equal, and where the population is precisely in the same
number. Would the demand compared with the supply of capital be the same
in both? If you say they would, I ask whether their rate of profits
would be the same under any other supposition but that of their land
being exactly of the same degree of fertility? To me it appears quite
probable that the ordinary and usual rate of profits might in one be 20
and in the other only 15 per cent., or in any other proportions....
Believe me,
Ever yours,
DAVID RICARDO.