... With best compliments to Mrs. Malthus,
I am, yours truly,
David Ricardo.
Note.—The 'Editor' was Lord Hardwicke, who moved for the Committee 10th June, 1814, and presented its report to the House on 23rd Nov. 1814. See Hansard, under date Feb. 17, 1815, p. 796; Ann. Register 1815, Gen. Hist. p. 130. The reports were 'ordered to be printed' 25th July, 1814. The first was on a single sheet, and was simply a complaint that the Committee could not take evidence; the second reported that they had heard evidence, but thought that before any certain conclusions could be reached the inquiry must go on further. There is a copiously annotated copy of them in the 'Place' Collection in the British Museum.
XIX.
Gatcomb Park, 16 Sept., 1814.
My dear Sir,
... 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.