Chapter XXXV: Book I (1)

[230] “Each of those different branches of trade, however, is not only advantageous, but necessary and unavoidable, when the course of things, without any constraint or violence, naturally introduces it,” says he, after giving an exposition of the respective advantages of the various forms of economic activity. (_Wealth of Nations_, Book II, chap. 5; Cannan, vol. i, p. 352.)

[231] _Wealth of Nations_, Book IV, chap. 2; Cannan, vol. i, p. 419.

[232] _Ibid._, Book IV, chap. 1; vol. i, p. 422.

[233] _Ibid._, Book IV, chap. 3, part ii; vol. i, pp. 457-458.

[234] _Principles of Political Economy_, Book III, chap. 17.

[235] _Wealth of Nations_, Book IV, chap. 8; Cannan, vol. ii, p. 159.

[236] It is true that in Book IV, chap. 3, part 2, he declares: “In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it.” (Cannan, vol. i, p. 458.)

[237] Speaking of duties on corn, he writes: “To prohibit by a perpetual law the importation of foreign corn and cattle, is in reality to enact, that the population and industry of the country shall at no time exceed what the true produce of its own soil can maintain.” (_Ibid._, Book IV, chap. 2; vol. i, p. 427.) He always views the question from the standpoint of increased population and labour, and not from that of the consumer.

[238] _Ibid._, Book II, chap. 5. Cf. Book IV, chap. 1.

[239] _Wealth of Nations_, Book IV, chap. 2, in fine; Cannan, vol. i, p. 435.

[240] The “Navigation Laws” is a generic term for a number of laws, the most famous of them dating from the time of Cromwell. Their immediate object was the destruction of the Dutch fleet, and English commerce was organised with a view to securing this. There is no doubt but that they contributed very considerably to the development of English maritime power.

[241] _Ibid._, Book IV, chap. 2; vol. i, p. 429.

[242] But “when there is no probability that any such repeal can be procured it seems a bad method of compensating the injury done to certain classes of our people, to do another injury ourselves, not only to those classes, but to almost all the other classes of them.” (_Ibid._, Book IV, chap. 2; vol. i, p. 433.)

[243] The discussion of these various cases is to be found towards the end of chap. 2 of Book IV.

[244] This system is expounded in Book V, chap 2, part ii, art. 5.

[245] In the preface to his translation, 1821 ed., p. lxix.

[246] Rae, _Life of Smith_, p. 103. The author of this famous phrase is not known.

[247] J. B. Say, _Traité_, 1st ed., p. 240.

[248] Mantoux, _La Révolution industrielle_, p. 83. M. Halévy gives expression to a similar idea in his _La Jeunesse de Bentham_, p. 193 (Paris, 1901).

[249] So called in honour of the leading English representative, Lord Eden.

[250] In 1778, 1784, 1786, 1789.

[251] 1791, 1793, 1796.

[252] Professor Kraus, writing in 1796, declared that no book published since the days of the New Testament would effect so many welcome changes when it became thoroughly known (J. Rae, p. 360). By the beginning of the nineteenth century its influence had become predominant. All the Prussian statesmen who aided Stein in the preparation and execution of those important reforms that gave birth to modern Prussia were thoroughly versed in Smith’s doctrines, and the Prussian tariff of 1821 is the first European tariff in which they are deliberately applied. (Cf. Roscher, _Geschichte der Nationalökonomik in Deutschland_.)

[253] In his introduction to the _Traité_, 1st ed. (The phrase was deleted in the 6th ed.)

[254] J. B. Say, _Traité_, 1st ed., introduction, p. xxxiii.

[255] He was born at Lyons on January 5, 1767. After a visit to England he entered the employment of an assurance company, and took part as a volunteer in the campaign of 1792. From 1794 to 1800 he edited a review entitled _Décade philosophique, littéraire et politique, par une Société de Républicains_. He was nominated a member of the Tribunate in 1799. After the publication of his _Traité_, the First Consul, having failed to obtain a promise that the financial proposals outlined in the first edition would be eliminated in the second, dismissed him from the Tribunate, offering him the post of director of the _Droits réunis_ as compensation. Say, who disapproved of the new _régime_, refused, and set up a cotton factory at Auchy-les-Hesdins in the Pas-de-Calais. He realised his capital in 1813, returned to Paris, and in 1814 published a second edition of his treatise. In 1816 he delivered a course of lectures on political economy at the Athénée, probably the first course given in France. These lectures were published in 1817 in his _Catéchisme d’Économie politique_. In 1819 the Restoration Government appointed him to give a course on “Industrial Economy” (the term “Political Economy” was too terrible). In 1831 he was made Professor of Political Economy in the Collège de France. He died in 1832. His _Cours complet d’Économie politique_ was published, in six volumes, in 1828-29.

[256] Cf. a letter to Louis Say in 1827 (_Œuvres diverses_, p. 545).

[257] Garnier’s translation of Adam Smith, 1802, vol. v, p. 283.

[258] _Traité_, 1803 ed., p. 39.

[259] _Ibid._, p. 21. Later on he employs the more comprehensive term “natural agents.”

[260] _Traité_, 1803 ed., Book I, chaps. 42 and 43. By “industry” Say understands every kind of labour. Cf. 6th ed., pp. 70 _et seq._

[261] Malthus still appeared hostile to the doctrine of immaterial products, but Lauderdale, Tooke, McCulloch, and Senior accepted it, and it seemed definitely fixed when Stuart Mill confined the word “product” to material products only. For Tooke’s view see his letter to J. B. Say in the _Œuvres diverses_ of the latter.

[262] _Traité_, Book I, chap. 2. Is it not strange that Say should have failed to apply this idea to commerce? He regards the latter as productive because it creates exchangeable values. Nevertheless he criticises Condillac for having said that mere exchange of goods increases wealth because it increases the utility of objects. This is because Say is perpetually mixing up utility and exchange value, a confusion that leads him into many serious mistakes.

[263] _Traité_, 6th ed., p. 6. The word “laws” does not appear in the first edition. Say merely speaks of general principles. It is found for the first time in the edition of 1814: “General facts or, if one wishes to call principles by that name, general laws” (p. xxix).

[264] Correspondence with Malthus, in _Œuvres diverses_, p. 466.

[265] _Traité_, Introd., 1st ed., p. ix; 6th ed., p. 13.

[266] _Ibid._, 1st ed., Book I, p. 404.

[267] There is no need for exaggeration, however, and no need to regard Say as totally indifferent to suffering and misery. He declares, _e.g._, that “for many homes both in town and country life is one long privation,” and that thrift in general “implies, not the curtailment of useless commodities, such as expediency and humanity would welcome, but a diminution of the real needs of life, which is a standing condemnation of the economic system of many Governments.” (_Traité_, 1st ed., vol. i, pp. 97-98; 6th ed., p. 116.)

[268] _Traité_, 6th ed., p. 403.

[269] _Ibid._, 1st ed., vol. i, p. 48.

[270] _Ibid._, 5th ed., vol. i, p. 67.

[271] Critical examination of McCulloch’s treatise (1825), in _Œuvres diverses_, pp. 274-275.

[272] _Traité_, 6th ed., p. 349.

[273] “Rent,” he says, “doubtless is partly interest on capital buried in the soil, for there are few properties which do not owe something to improvements made in them. But their total value is seldom due to this alone. It might be if the land were fertile but lacked the necessary facilities for cultivation. But this is never the case in civilised countries.” (Critical examination of McCulloch’s treatise (1825), in _Œuvres diverses_, p. 277.)

[274] _Traité_, 1st ed., p. 154.

[275] “The theory of heat and of weight and the study of the inclined plane have placed the whole of nature at the disposal of mankind. In the same way the theory of exchange and of markets will change the whole policy of the world.” (_Ibid._, 6th ed., p. 51.)

[276] _Traité_, 1st ed., vol. ii, p. 175.

[277] _Ibid._, p. 179.

[278] _Ibid._, p. 178.

[279] “One kind of product would seldom be more plentiful than another and goods would seldom be too many if everyone were given complete freedom.” Too much stress has possibly been laid on the phrase “Certain products are superabundant just because others are wanting,” and it has been taken as implying that even partial over-production is an impossibility. A note inserted on the next page helps to clear up the matter and to prevent misunderstanding. “The argument of the chapter,” says he, “is not that partial over-production is impossible, but merely that the production of one thing creates the demand for another.” He certainly seems unfaithful to his own position in the letters he wrote to Malthus, in which he tries to defend his own point of view by saying that “production implies producing goods that are demanded,” and that consequently if there is any excessive production it is not the fault of production as such and cannot be regarded as _over-production_. In greater conformity with his own views and much nearer the truth is his reply to an article by Sismondi published in 1824 in the _Revue encyclopédique_ under the title _Sur la Balance des Consommations avec les Productions_ (_Œuvres diverses_, p. 250). His statements vary from one edition to another, and anything more unstable than Say’s views on this question would be difficult to imagine. The formula “Products exchange for products” is so general that it includes everything, but means nothing at all; for what is money, after all, if it is not a product?

[280] Letters to Malthus (_Œuvres diverses_, p. 466).

[281] Malthus, _Principles of Political Economy_, Book II, chap. 1, sect. 9.

[282] _Sur la Balance des Consommations avec les Productions_, p. 252.

[283] _Ibid._, p. 251.

[284] Dühring, _Kritische Geschichte der Nationalökonomie und des Sozialismus_, 2nd ed., 1875, p. 165. For the other side of the question one may profitably peruse the interesting study of Say contributed by M. Allix to the _Revue d’Économie politique_, 1910 (pp. 303-341), and the _Revue d’Histoire des Doctrines_, 1911, p. 321.

[285] Stanley Jevons (_Theory of Political Economy_, 3rd ed., 1888) has recognised in too absolute a fashion, perhaps, the superiority of the French economists over Ricardo. “The true doctrine may be more or less clearly traced through the writings of a succession of great French economists, from Condillac, Baudeau, and Le Trosne, through J. B. Say, Destutt de Tracy, Storch, and others, down to Bastiat and Courcelle-Seneuil. The conclusion to which I am ever more clearly coming is that the only hope of attaining a true system of economics is to fling aside, once and for ever, the mazy and preposterous assumptions of the Ricardian School.” (Preface, p. xlix.)

[286] “The people must comprehend that they are themselves the cause of their own poverty.” (Malthus, p. 458.) Doubtless this is the reason why M. Halévy, among others, in his book _Le Radicalisme philosophique_, remarks that Ricardo, Malthus, and their disciples were regarded as the exponents of optimism and quietism. But in what sense were they optimists? Of course they believed that the existing economic order is the best possible, and that it would be impossible to change it for a better. That may be. But we prefer to think of them as “contented pessimists.”

[287] “Every reader of candour must acknowledge that the practical design uppermost in the mind of the writer, with whatever want of judgment it may have been executed, is to improve the condition and increase the happiness of the lower classes of society.” It is with this declaration that Malthus brings his book on population to a close.

[288] Miss Edgeworth, a contemporary of Ricardo, states in her letters that political economy was so much the fashion that distinguished ladies before engaging a governess for their children inquired about her competence to teach political economy.

[289] _Conversations on Political Economy_, by Mrs. Marcet (1816). _Illustrations of Political Economy_, by Miss Martineau (9 vols., containing thirty stories, 1832-34).

[290] Thomas Robert Malthus was born in 1766. His father, a country gentleman, was a man of learning and a friend of most of the philosophers of his time, especially Hume, and, it also seems, J. J. Rousseau. He was the youngest son of the family, and was intended for the Church and given an excellent education. After leaving Cambridge he took a living in the country, but in 1807 was appointed professor at a college founded by the East India Company at Haileybury, in Hertfordshire, where he remained until his death in 1834. He married when thirty-nine years of age, and had three sons and a daughter.

Malthus was a young unmarried clergyman living in a small country parish when, at the age of thirty-two, he in 1798 published anonymously his famous _Essay on the Principle of Population as it affects the Future Improvement of Society_. His critics were legion. In order to devote more study to the subject, he took a three years’ tour (1799-1802) on the Continent—avoiding France, because France at this period was anything but inviting to an Englishman. In 1803 he published—under his own name this time—a second edition, much modified and amplified, and with a slightly different title: _An Essay on the Principle of Population, or a View of its Past and Present Effects on Human Happiness_. Four other editions were published during his lifetime.

We must not forget his other works, although they were all eclipsed by his earliest effort. These were: The _Principles of Political Economy considered with a View to their Practical Application_ (1820); _A Series of Short Studies dealing with the Corn Laws_ (1814-15); _On Rent_ (1815); _The Poor Law_ (1817); and finally his _Definitions in Political Economy_ (1827).

[291] See Stangeland, _Pre-Malthusian Doctrines_ (New York, 1904).

[292] Godwin, _Political Justice_, Book VIII, chap. 7 (reprinted, London, 1890).

[293] “Man doubtless will never become immortal, but it is possible that the span of human life may be indefinitely prolonged.”

[294] Chap. 8 is entitled “The Error of Thinking that the Danger resulting from Population is Remote.” “There are few States in which there is not a constant effort in the population to increase beyond the means of subsistence. This constant effort as constantly tends to subject the lower classes of society to distress, and to prevent any great permanent amelioration of their condition.” (P. 10.)

[295] If two children were the normal issue of every marriage, population would evidently diminish, for all the children will not reach the marriageable age. Of those that do all will not become parents. Experience seems to show that with a birth-rate of less than three per family population does not increase, or if it does grow at all it is almost imperceptibly. This is the case in France, where on an average there are 2·70 births to every marriage.

To justify multiplying by two, Malthus regards a family of six as being a normal one. Of the six, two will die before attaining marriageable age, or will remain celibates, so that we are left with four, who will in turn become parents, and so we have the series 2, 4, etc.

[296] The statement that population doubles every twenty-five years might appear to be confirmed by the growth of population in the United States. It is curious to find that the population there during the nineteenth century conforms exactly to Malthus’s formula. In 1800 it was 5 millions. Doubling four times (4 periods of 25 years = 100) gives us a population of 80 millions, which is actually the figure for 1905, five years after the end of the century. But of course this is pure chance, the increase resulting from immigration rather than a rising birth-rate.

[297] It was in this connection that Malthus penned those famous words which have been so frequently brought up against him, although they were omitted from a later edition. “A man who is born into a world already possessed, if he cannot get subsistence from his parents on whom he has a just demand, and if the society do not want his labour, has no claim of _right_ to the smallest portion of food, and, in fact, has no business to be where he is. At Nature’s mighty feast there is no vacant cover for him. She tells him to be gone.…” On the other hand, let us remember his services in reorganising public assistance in England in 1832.

[298] “The effect of anything like a promiscuous intercourse which prevents the birth of children is evidently to weaken the best affections of the heart and in a very marked manner to degrade the female character. And any other intercourse would, without improper arts, bring as many children into the society as marriage, with a much greater probability of their becoming a burden to it.” (P. 450.)

[299] “These considerations show that the nature of chastity is not, as some have supposed, a forced produce of artificial society; but that it has the most real and solid foundation in nature and reason; being apparently the only virtuous means of avoiding the vice and misery which result so often from the principle of population.” (P. 450.)

He also notes that this virtue has usually been especially commended to women, but that “there is no reason for supposing that the violation of the laws of chastity are not equally dishonourable for both sexes.” Malthus evidently believed in one moral law for both sexes.

Consequently whenever the reverend gentleman is reproached with encouraging blasphemy, a point upon which he is particularly sensitive—for example, when it is pointed out that God’s injunction to man was to increase and multiply—he has no difficulty in showing that if procreation is the will of Providence, chastity is dictated by Christianity, and that the glorious work of chastity is to aid Providence in keeping even the balance of life.

[300] “Of the other branch of the preventive check, which comes under the head of vice, though its effect appears to have been very considerable, yet upon the whole its operation seems to have been inferior to the positive checks.” (P. 140.)

“I have said what I conceive to be strictly true, that it is our duty to defer marriage till we can feed our children; and that it is also our duty not to indulge ourselves in vicious gratifications; but I have never said that I expected either, much less both, of these duties to be completely fulfilled. In this and a number of other cases, it may happen that the violation of one of two duties will enable a man to perform the other with greater facility.… The moralist is still bound to inculcate the practice of both duties, and each individual must be left to act as his conscience shall dictate.” (P. 560.)

[301] “I should be extremely sorry to say anything which could either directly or remotely be construed unfavourably to the cause of virtue; but I certainly cannot think that the vices which relate to the sex are the only vices which are to be considered in a moral question.” (P. 462.) Malthus omits to mention the particular vice which he has in mind. “I have not the slightest hesitation in saying that the prudential check [note the word—no longer “moral restraint”] to marriage is better than premature mortality.” (P. 560.) We are far removed from the first edition, where there is no mention of a third alternative between chastity and vice.

[302] “Abject poverty is a state the most unfavourable to chastity that can well be conceived.… There is a degree of squalid poverty in which if a girl was brought up I should say that her being really modest at twenty was an absolute miracle.” (P. 464.) And elsewhere he writes: “I maintain that the diminution of the vice which results from poverty would afford a sufficient compensation for any other evil that might follow.”

[303] These figures only give the values expressed in money by capitalising them at the market rate of interest, which gives a rather fictitious result. It does not warrant the belief that an American citizen of to-day, however much his consumption may have increased, is any better off than his ancestors.

[304] These differ, again, from the desire for marriage, which is influenced by other considerations. French people marry in order to have a home, but a desire for a home and a desire for love or for children are very different things.

[305] “By a son a man obtains victory over all people; by a son’s son he enjoys immortality; and afterwards by the son of that grandson he reaches the solar abode.” “The son delivers his father from hell.” “A son of a Brahmin if he performs virtuous acts redeems from sin his ten ancestors.” (P. 105.)

This is Manu’s law, which Malthus quotes in support of his contention. But he failed to see that as soon as one begins to doubt Manu’s teaching the argument is the other way. One of the reasons why sterility was considered a dishonour by Jewish women was that each of them secretly hoped that she might become the mother of the promised Messiah. But when the Jews ceased to hope for the Deliverer that was to come, then the incentive to childbirth was gone.

[306] Neo-Malthusianism dates from the publication of Dr. Drysdale’s book, _Elements of Social Science_, in 1854, but the Malthusian League came into existence only in 1877. During the last few years the movement seems to have taken hold everywhere, especially in France, where we would least have expected it.

[307] He categorically declares that “we must suppose the general prevalence of such prudential habits among the poor as would prevent them from marrying when the actual price of labour joined to what they might have saved in their single state would not give them the prospect of being able to support a wife and five or six children without assistance.” (P. 536.) Marriage seems prohibited to every worker whose wages are not enough to keep eight persons, which practically would mean that no workman could marry.

[308] “I have been accused of proposing a law to prohibit the poor from marrying. This is not true.… I am, indeed, most decidedly of opinion that any positive law to limit the age of marriage would be both unjust and immoral.” (P. 357.)

[309] It is worth while recalling the passage to which we have already incidentally drawn attention: “The poor are themselves the cause of their own poverty.” (P. 458.)

[310] His views concerning charity are exceedingly interesting, and are directly connected with his theory of population. This was the practical question about which he was most concerned, and his influence in this direction has been very considerable. He showed himself an uncompromising opponent of the English Poor Law as it then existed. Speaking of the famous 43rd of Elizabeth, he declares that one of its clauses is “as arrogant and as absurd as if it had enacted that two ears of wheat should in future grow where one only had grown before. Canute, when he commanded the waves not to wet his princely foot, did not in reality assume a greater power over the laws of nature.” Since public assistance cannot create wealth, it cannot either keep alive a single pauper. “It may at first appear strange, but I believe it is true, that I cannot by means of money raise the condition of a poor man … without proportionally depressing others in the same class.” But it may be pointed out that although charity cannot beget wealth it does transfer a certain portion of wealth from the pockets of the rich to fill the mouths of the hungry poor. The consumption of the one is increased just as much as the other’s is decreased.

Not only does he condemn charity in the way of almsgiving, but also the practice of giving work for charity’s sake. He admits an exception in the case of education, of which everybody can partake without making anyone else the poorer. Such arguments would seem to imply the prohibition of all charity, whether public or private, and as a matter of fact he demands the gradual abolition of the Poor Laws and of every kind of systematic assistance which offers to the poor any kind of help upon which they can always reckon. But he recognises the “good results of private charity, discriminately and occasionally exercised.” Though he failed to remove the Poor Laws, the effect of his teaching is clearly seen in the Poor Law Amendment Act of 1834.

Malthus’s doctrine is just the reverse of the social teaching on the question in France at the present time. There you have an attempt to substitute solidarity for Christian charity. That means that the poor should be able to demand assistance, not as a gift, but as a right, and that the place of individual or private charity should be taken by a public institution with a view to giving effect to this. His teaching concerning the preventive obstacle has been so thoroughly taken to heart that there is not much fear of legal assistance resulting in a growth of population.

[311] It is not proved, however, that such were Malthus’s views. Private property, at least peasant proprietorship, acts as a stimulus to population. And it is very curious to think that he should have taken his illustration from France, where the multiplication of small farms is considered one of the causes of the falling birth-rate. “At all times the number of small farmers and proprietors in France was great, and though such a state of things is by no means favourable to the clear surplus produce or disposable wealth of a nation, yet sometimes it is not unfavourable to the absolute produce, and it has always a strong tendency to encourage population.” And again: “Even in France, with all her advantages of situation and climate, the tendency of population is so great and the want of foresight among the lower classes so remarkable.…” Godwin and Young express similar opinions. The latter is quoted by Malthus: “The predominant evil of the kingdom is the having so great a population that she can neither employ nor feed it.” (P. 509.)

Marriage, Malthus thought, had a restraining influence upon population. He admits that the simplest and most natural obstacle is to oblige every father to rear his own children. He also admits that the shame which the mother of a bastard and her child have to endure is a matter of social necessity. He does not approve of forcing the man who has betrayed a woman to marry, but he declares that seduction ought to be seriously punished. This is the view commonly adopted to-day, but it was very novel then.

[312] There are some sociologists who, like Malthus, would seek an explanation both of depopulation and of over-population in biological causes. Fourier and Doubleday, for example, are among the number. Doubleday, who wrote forty years before Malthus, believed that fecundity varied inversely with subsistence, and that this acted as a kind of natural check upon the growth of population. There are others, again, who think that reproductive capacity varies inversely with intellectual activity. Both explanations seem to suggest a kind of opposition between the development of the individual and the progress of the race which is very suggestive. But their views have not gained many adherents. If they are ever proved, which is not very likely, the prospect is not an attractive one. It would mean that those nations and classes who have risen to a position of ease through their superior culture would disappear, while the poorer, uncultured masses would continue to increase.

[313] David Ricardo was descended from a Jewish family originally domiciled in Holland. He was born in 1772 in London, where his father had settled as a stockbroker. He entered business at an early age, and soon became thoroughly conversant with the intricacies of banking and exchange. On the occasion of his marriage he changed his religion, and thus incurred the displeasure of his family. Setting up as a broker on his own account, he was not long in amassing a huge fortune, estimated at about £2,000,000—an enormous sum for those days.

Naturally enough, his earliest interest in economics centred round banking questions. The French wars had caused a depreciation in the value of the bank-note, and this aroused the interest not only of the specialists, but also of the public. His first essay, published in 1810, when he was thirty-eight years of age, was entitled _The High Price of Bullion a Proof of the Depreciation of Bank-notes_. It was soon followed by other studies dealing with banks and with the credit system. But these short polemical efforts gave scarcely any indication of the great attention which he was bestowing upon the principles of the science. His interest was primarily personal, for it appears that he had no intention of publishing anything on the subject. In 1817, however, the results were seen in a volume entitled _The Principles of Political Economy_. Ricardo the business man could hardly have guessed that it would shake the capitalistic edifice to its very foundations.

In 1819 he was elected a member of the House of Commons, but he was as indifferent a speaker as he was a writer. He was always listened to, however, with the greatest respect. “I have twice attempted to speak,” he writes, “but I proceeded in the most embarrassed manner: and I have no hope of conquering the alarm with which I am assailed the moment I hear the sound of my own voice.” In 1821 he founded the Political Economy Club, the earliest of those numerous societies for the study of economic subjects which have since been established in every country. In 1822 he published a work on _Protection to Agriculture_. The following year he died, at the comparatively early age of fifty-one.

Since his death all his writings have been carefully collected, and his correspondence with the chief economists of his day, with Malthus, McCulloch, and Say, published. The correspondence is extremely important for an understanding of his doctrines.

[314] Letter to McCulloch, July 13, 1820, quoted by H. Denis, vol. ii, p. 171.

[315] In his correspondence with McCulloch, under date December 18, 1819, he writes: “I am not satisfied with the explanation which I have given of the principles which regulate value. I wish a more able pen would undertake it.”

In a letter to Malthus written on August 15, 1820, speaking of his own theory of value and of McCulloch’s, he despairingly adds: “Both of us have failed.” See Halévy, _Le Radicalisme philosophique_, and Hector Denis, _op. cit._

[316] Smith had likened industry to a household with two children—wages and profits; agriculture to a household with three—wages, profits, and rent.

[317] _An Inquiry into the Nature and Progress of Rent_ (1815).

[318] It is necessary to remember, however, that the old theory survived and appears here under the very name of Ricardo, for he was unsuccessful in freeing himself altogether from its influence. He defines rent as “that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.” He continually refers to these powers of the soil, which are described as “natural,” “primitive,” “indestructible,” _i.e._ as independent of all labour.

[319] “Nothing is more common than to hear of the advantages which the land possesses over every other source of useful produce on account of the surplus which it yields in the form of rent. Yet when land is most abundant, when most productive and most fertile, it yields no rent, and it is only when its powers decay … that rent appears.” (_Principles_, ed. Gonner, p. 52.)

[320] “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.” (_Ibid._, p. 53, note.)

“The comparative scarcity of the most fertile lands is the cause of rent.” (_Ibid._, p. 395.)

Adam Smith had already offered this as an explanation in the case of the products of the mine, but he failed to see that arable land is really nothing but a sort of mine.

[321] To-day we simply say that it is determined by increased demand. But this is quite contrary to Ricardo’s views, for in his opinion it is labour and not demand that creates value.

[322] “The value of corn is regulated by the quantity of labour bestowed on its production on that quality of land [or with that portion of capital] which pays no rent.” (_Principles_, ed. Gonner, p. 51.)

[323] The illustration as given by Ricardo is somewhat more complicated.

[324] “When land of an inferior quality is taken into cultivation the exchangeable value of raw produce will rise because more labour is required to produce it.” (_Ibid._, p. 49.)

[325] See Cannan’s delightful volume _The Theories of Production and Distribution_, p. 150, where the average decennial price works out as follows:

s. d.

1770-1779 45 0
1780-1789 45 9
1790-1799 55 11
1800-1809 82 2
1810-1813 106 2

[326] The number of Enclosure Acts which Parliament, acting with the sanction of public opinion, passed during the latter part of the eighteenth and the beginning of the nineteenth centuries increased very rapidly. Between 1700 and 1845 no fewer than 3835 such Acts were passed, involving the enclosure of 7,622,664 acres, most of it common land. Not until 1845 do we find a change either in the attitude of public opinion or in the action of Parliament.

[327] It is not quite clear whether the high price of corn is due to the cultivation of new lands or whether this high price is the cause of the cultivation of new lands. The second interpretation appears to us to be the most natural, but it involves the abandonment of the Ricardian theory.

[328] Some critics, _e.g._ Fontenay, Bastiat’s disciple, suggested that land No. 4 might very well become No. 1, if, instead of being employed in the cultivation of corn, an intelligent husbandman were to put it to viticulture or rose-growing. But this is to beg the question. The law of rent implies products of the same kind, for it is this identity of quality that enables them to be sold at the same price. If bad corn-land could become good rose-growing ground, then of course it would take its place among rose-growing areas, yielding rent as soon as less fertile lands were employed for the same purpose.

[329] Turgot, _Observations sur un Mémoire de M. de Saint-Péravy_ (_Œuvres_, vol. i, p. 420). “It can never be imagined that a doubling of expenditure would result in doubling the product.… It is more than probable that by gradually increasing the expenditure up to the point where nothing would be gained on the return, such items would successively become less fruitful. The earth’s fertility resembles a spring that is being pressed downwards by the addition of successive weights. If the weight is small and the spring not very flexible, the first attempts will leave no results. But when the weight is enough to overcome the first resistance then it will give to the pressure. After yielding a certain amount it will again begin to resist the extra force put upon it, and weights that formerly would have caused a depression of an inch or more will now scarcely move it by a hair’s breadth. And so the effect of additional weights will gradually diminish.

“The comparison is not very exact, but it is near enough to enable us to understand that when the earth is producing nearly all it can, a great deal of expense is necessary to obtain very little more produce.”

Turgot, with his usual perspicacity, has noted a fact which the Classical writers generally failed to perceive, namely, that at the beginning of the process of cultivation there may be a period when the return shows no signs of diminishing.

[330] We must note the fact that the law of diminishing returns was already implied in the second of the famous progressions given by Malthus, for an arithmetical progression that shows an increase of one every twenty-five years implies an addition slower than the growth of the series itself, _i.e._ slower than the movement of time. Let us take land that yields one; in twenty-five years it will yield two, an increase of 100 per cent. But this is only the first step. At the end of another twenty-five years it will yield three, the increase being always one. But the increase from two to three means an increase of only 50 per cent., from three to four of only 33 per cent., and so on to 25 per cent. and 20 per cent. When the hundredth place has been reached, the increase will only be 1 per cent., and it will continue to fall farther, only more slowly.

[331] Ricardo gives a slightly different explanation. “If with a capital of £1000 a tenant obtains 100 quarters of wheat from his land, and by the employment of a second capital of £1000 he obtains a further return of eighty-five, his landlord would have the power at the expiration of his lease of obliging him to pay fifteen quarters, or an equivalent value for additional rent, for there cannot be two rates of profit.” (_Principles_, ed. Gonner, p. 48.) He means to say that if profits fall because new capital is less productive than old, rent must necessarily appear, because by definition rent is what remains of the produce after deducting profits and wages. This explanation closely resembles that one given by West in his _Application of Capital to Land_, published in 1815, and Ricardo was not above acknowledging his indebtedness to West.

[332] Shortly afterwards a German landowner published a book dealing with just that side of the problem of rent which had been neglected by Ricardo, namely, the influence of distance from a market upon cultivation and the price of products. We are referring to Thünen, who in his book _Der Isolerte Staat_ (vol. i, 1826) draws a picture of a town surrounded by a belt of land, and shows how cultivation will be distributed in concentric zones around that centre, and how the kind of cultivation adopted will be a function of the distance.

[333] But the honour of discovering this law, which is so important for an understanding of exchange value, does not belong entirely to Ricardo. Forty years before a humble Scotch farmer named Anderson had observed the phenomenon and given a very satisfactory analysis of it in his book _Observations on the Means of Exciting a Spirit of National Industry_ (1777). “Now as the expense of cultivating the least fertile soil is as great or greater than that of the most fertile field, it necessarily follows that if an equal quantity of corn, the produce of each field, can be sold at the same price, the profit on cultivating the most fertile soil must be much greater than that of cultivating the other, and as this continues to decrease as the sterility increases, it must at length happen that the expense of cultivating some of the inferior soils will equal the values of the whole produce.” (Quoted by Jevons, _Theory of Political Economy_, p. 229.) Anderson’s name was forgotten until quite recently, when it attracted a certain amount of attention among the pioneers of Ricardo. Ricardo himself does not seem to be aware of his existence; at least he never quotes him. The only two writers mentioned by Ricardo are Malthus and West.

[334] “In speaking, however, of labour as being the foundation of all value, and the relative quantity of labour as almost exclusively determining the relative value of commodities, I must not be supposed to be inattentive to the different qualities of labour.” (_Principles_, ed. Gonner, p. 15.)

[335] Hume had already pointed out the objection to this view. Cf. p. 64, footnote.

[336] “If fixed capital be not of a durable nature it will require a great quantity of labour annually to keep it in its original state of efficiency, but the labour so bestowed may be considered as really expended on the commodity manufactured, which must bear a value in proportion to such labour.” (_Principles_, ed. Gonner, p. 32.)

[337] In a note on Section VI, chap. 1, he adds: “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.” (_Ibid._, p. 39.)

[338] Still we must note that Ricardo and Karl Marx, like everyone who has tried to base a theory of value upon labour, tacitly assume the operation of the law of demand and supply in order that their theories may fit in with the facts.

[339] But how was it that he never realised that land at least in any given country, and indeed for that matter over the whole world, is simply a kind of wealth “of which no labour could increase the quantity”?

[340] “The dealings between the landlord and the public are not like dealings in trade, whereby both the seller and the buyer may equally be said to gain, but the loss is wholly on one side and the gain wholly on the other.” (_Principles_, ed. Gonner, p. 322.) And so when a proprietor sells corn to a consumer it is not of the nature of an ordinary bargain where both parties gain something. The consumer gets nothing in return for what he gives, _i.e._ for what he gives over and above what it has cost to produce the corn. To get nothing in return for something given is the kind of transaction that generally goes by the name of theft.

Ricardo soon finds a reply to the comfortable doctrine of Smith, that the interests of the landlords are nowhere opposed to those of the rest of the community. “The interest of the landlord is always opposed to that of the consumer and manufacturer. Corn can be permanently at an advanced price only because additional labour is necessary to produce it, because its cost of production is increased. It is therefore for the interest of the landlord that the cost attending the production of corn should be increased. This, however, is not the interest of the consumer.… Neither is it the interest of the manufacturer that corn should be at a high price, for the high price of corn will occasion high wages, but will not raise the price of his commodity.” (_Ibid._, p. 322.)

[341] “Wealth increases most rapidly in those countries where the disposable land is most fertile, where importation is least restricted, and where, through agricultural improvements, productions can be multiplied without any increase in the proportional quantity of labour, and where consequently the progress of rent is slow.” (_Principles_, ed. Gonner, p. 54.) The contrast between fertile lands, free exchange, and the development of agricultural science on the one hand, and the growth of rent on the other, is very strikingly brought out in this paragraph.

[342] “Rent does not and cannot enter in the least degree as a component part of its price.” (_Ibid._, p. 55.) And he adds: “The clearly understanding of this principle is, I am persuaded, of the utmost importance to the science of political economy.” It is true that Smith, writing long before this time, had declared that the “high rate of rent is the effect of price,” but he does not seem to have attached any great importance to the remark.

[343] Ricardo wisely admits the possibility of confiscating this rent by means of taxation, the reason for this being that “a tax on rent would affect rent only, it would fall wholly on landlords and could not be shifted to any class of consumers.” (_Principles_, ed. Gonner, p. 154.) And the argument which he advances in proof of this, namely, that the tax could not be shifted, seems to indicate that this particular kind of revenue is not quite as intangible as that of some other classes in society. But his advocacy is somewhat restrained, for, as he points out, it would be unjust to put all the burden of taxation upon the shoulders of one class of the community. Rent is often the property of people who, after years of toil, have invested their earnings in land. The original injustice, if any, would thus be got rid of in the process of selling the land. This might be a sufficient reason for indemnifying the expropriated, but it is not enough to condemn expropriation altogether.

[344] “Malthus and Ricardo have both proved false prophets and mistaken apostles. The much-vaunted Ricardian law is a pure myth.” (Article by M. de Foville on _Les Variations de la Valeur du Sol en Angleterre au XIXe Siècle_, in _L’Économiste français_, March 21, 1908.)

[345] Mr. Robert Thompson, in a paper read before the Royal Statistical Society on December 17, 1907, has shown how the average rent per acre, valued at 11s. 2d. in 1801-5, reached the figure of 20s. in 1841-45, and despite the abolition of protection continued to rise up to 1872-77, when it reached a maximum of 29s. 4d. It then continued to fall until it reached the present amount of 20s. The present figure is double what it was in Ricardo’s time, but considerable deductions are necessary in view of the improvements made in the character of the soil. Thompson, after making these deductions, puts the amount at 15s. 5d., leaving just 4s. 7d. for rent pure and simple. The 11s. for rent at the beginning of the century covered something besides economic rent. Considerable deductions are again necessary, but the amount of capital employed in agriculture was much less then.

One seems justified in saying that in England and even in France and other Protective countries the land has lost both in revenue and value during the last quarter of the nineteenth century almost all that it had gained from the time of Ricardo up till then. But is the recoil sufficient to justify Foville’s description of Ricardo’s vaunted law as a pure myth? We think not. It has the experience of seventy-five years behind it and of twenty-five years against it, that is all. Anyone who would predict a further fall in rent would certainly be running the risk of becoming a false prophet.

[346] “The condition of the labourer will generally decline, and that of the landlord will always be improved.” (_Principles_, ed. Gonner, p. 79.)

[347] “It generally happens, indeed, that when a stimulus has been given to population an effect is produced beyond what the case requires.… The increased wages are not always immediately expended on food, but are first made to contribute to the other enjoyments of the labourer. His improved condition, however, induces and enables him to marry.” (_Principles_, ed. Gonner, p. 95.)

[348] “Every suggestion which does not tend to the reduction in number of the working people is useless, to say the least of it. All legislative interference must be pernicious.” (Quoted by Graham Wallas, _Life of Francis Place_. Place was the author of a book on population which appeared in 1822.)

[349] This is a fundamental distinction upon which Ricardo is always insisting. The greater or smaller quantity of labour employed in the production of corn bears no necessary relation to the worker’s wages. The one is merely a question of production, the other of distribution. The one is the task, the other the reward. But some might ask if the Ricardian theory of value does not state that the value of the product is determined by the quantity of labour necessary for its production, that this value will be subsequently divided between capitalist and worker, and that the greater this quantity the greater will be the share of each. Labour’s share may increase, but not the labourer’s, for we must not forget that when the price of corn goes up from 10s. to 20s. it is because the cultivation of poorer lands requires twice the number of labourers demanded by the better kind of land. Besides, it would be a strange thing to pay a man more as the work becomes less remunerative. All that one could hope for would be that the workers under the new conditions might be able to retain their old standard of life—that is, might be able to purchase the same quantity of bread despite the rise in price.

[350] “Thus, then, I have endeavoured to show that a rise of wages would invariably lower profits.”

“Thus in every case … profits are lowered … by a rise of wages.”

On the inexactness of the term “high rate of profits” as a synonym for a proportionally larger share of the produce see note, p. 162.

[351] Ricardo does not deny this. Indeed, he lays stress upon the fact that he is arguing on the assumption that the value produced remains the same. “I have therefore made no allowance for the increasing price of the other necessaries, besides food of the labourer; an increase which would be the consequence of the increased value of the raw materials from which they are made, and which would of course further increase wages and lower profits.”

[352] But this only means a rise in the nominal or money wage. It does not mean that the worker gets more corn; he only gets the same amount as before, because the price of corn has gone up and it makes no difference whether the man is paid in money or in kind.

[353] “For as soon as wages should be equal to the whole receipts of the farmer, there must be an end of accumulation: for no capital can then yield any profit whatever, and no additional labour can be demanded, and consequently population will have reached its highest point.” (_Principles_, ed. Gonner, p. 67.)

[354] When speaking of a reduction of capital’s share Ricardo frequently employs the phrase “a lowering of the rate of profits,” or “a fall in the rate of profits.” A fall in the rate is not necessarily synonymous with a reduction of capital’s share, however. The rate of profit simply implies a certain proportion between revenue and capital—5 per cent., for example; there is no suggestion of comparison between the quantities drawn by capitalist and workers respectively. Doubtless we must admit that when the rate of profit is diminished, _ceteris paribus_, the part drawn by capital relatively to labour’s share also diminishes, but it is clear that if the quantity of capital employed in any industry were to be doubled, or the product halved, capital, even at the rate of 3 instead of 5 per cent., would be drawing a more considerable share and leaving labour with less. Bastiat, as we shall have to note, made the same mistake.

[355] In a letter to Malthus, December 18, 1814, he admits with a sigh of regret that even if a belt of fertile land were added to this island of ours profits would still keep up. Free Trade has added the illimitable zone of fertile land which Ricardo dreamed of, with the result that both profits and rents have fallen.

In his essay _On Protection to Agriculture_ (1822) he shows how Protection, by forcing the cultivation of less fertile lands at home, raises the price of corn and increases rents; and his demand was not for free importation, but for a reduction of the duty to 10s. a quarter.

[356] See _An Inquiry into the Nature and Progress of Rent_.

[357] Cf. this unexpected remark to which H. Denis has recently drawn attention: “It is evidently impossible for any Government to let things just take their natural course.” (Malthus, introduction to the _Principles_.)

[358] “Gold and silver having been chosen for the general medium of circulation, they are by the competition of commerce distributed in such proportions among the different countries of the world as to accommodate themselves to the natural traffic which would take place if no such metals existed and the trade between countries were purely a trade of barter.”

[359] Ricardo also points out that “if, which is a much stronger case, we agreed to pay a subsidy to a foreign Power, money would not be exported whilst there were any goods which could more cheaply discharge the payment.” (McCulloch’s edition, p. 269.) As a matter of fact, the European Powers who were leagued against Napoleon were subsidised in this fashion, the exports exceeding the imports by many millions. The indemnity of 5 milliards of francs paid by France to Germany affords another illustration of the same truth.

[360] Ricardo’s works, McCulloch’s edition, p. 287.

[361] Ricardo’s works, McCulloch’s edition, p. 404.

[362] _Ibid._, p. 349.

[363] S. and B. Webb, _History of Trade Unionism_, p. 54.