Ricardo writes to him from Gatcomb Park on 18th Aug., 1815, thanking him for the copy of the (first edition of the) 'Catechisme de l'Economie Politique,' which he had just sent. Though complimenting him highly on the work, he thinks that Say has not, even yet, with sufficient clearness distinguished Value from Utility. No doubt to have value a commodity must be useful, but it is the difficulty of its production that is the sole measure of its value. 'The wealthiest man is he who has most values, and who is able, by giving them in exchange, to procure himself not the things which he himself and everybody else regard as the most desirable, and which can be had at a low price, but the things that are difficult to produce and consequently dear. A man is rich not by the moderation of his desires, but by the quantity of commodities that he possesses.' Say has also, in Ricardo's opinion, forgotten sometimes that the growth of the capital of a manufacturer cannot be safely estimated in money if we do not allow for the change in the value of money. Ricardo concludes: 'The pleasure which I take in reading and studying good works on political economy has not diminished since I saw you. I should devote all my time to the discussion of points which seem to me to need further elucidation, if I had any talent for composition. However, I have ventured to publish the pamphlet[111] which I sent you, and I should be glad to know your opinion on the doctrine which I maintain in it in relation to the rent of land and the rate of profits, in opposition to Mr. Malthus. I learn from Mr. Mill that several persons in this country do not understand me because I have not explained my views at sufficient length; and he is trying to induce me to undertake an explanation of them from the beginning and at greater length; but I fear that the undertaking is beyond my powers.' (Œuvres Diverses de Say, pp. 409-11. Ricardo wrote in English, but in this and the other cases the editors give only the French.)
Say's answer follows (pp. 411-13), 2nd Dec., 1815: 'Nous nous occupons heureusement vous et moi de choses de tous les temps plûtot que de celles du moment actuel, qui ne sont pas gaies, malgré les fêtes que l'on donne pour faire croire aux peuples qu'ils sont heureux.' Going to the subject of value, he says he did not say Utility was the measure of Value, but 'the value that men attach to a thing is the measure of the utility they find in it;' moreover he had not maintained the Stoical doctrine, 'the fewer wants, the greater wealth,' but had simply said that a man is the richer if all the things he wants (whatever they be) are cheap instead of dear, and would be richest of all if he had abundance of everything without any cost at all. He allows that Ricardo is right in regard to the growth of the manufacturer's capital, and promises to introduce the qualification suggested by Ricardo in his next edition. In the controversy between Malthus and Ricardo he finds it difficult to take a side, for he cannot for his part exclude from the question of profits 'the talent and industrial capacity of the man who brings out the resources of a land or a capital;' the profit inherent merely in land or in capital seems to him unimportant in comparison with the profit due to the source described. But he says he is too timid to insist on his opinion, and will wait for Ricardo's full explanations in the larger work. 'How I envy your lot, to study political economy in your beautiful retreat of Gatcomb Park! I shall never forget the too short moments I passed there, nor the charms of your conversation.'
XXXVI.
My dear Sir,
By facility of production I do not mean to consider the productiveness of the soil only, but the skill, machinery, and labour joined to the natural fertility of the earth. It does not therefore follow that because Otaheite[112] has an abundance of fertile land profits should be there at the highest rate, because the skill and the means of abridging labour may in Europe more than compensate this natural advantage of Otaheite. The question is this: If part of the skill and capital of England were employed in Otaheite to produce 100,000 quarters of corn, would not the persons employing that capital obtain greater profits in Otaheite than they would if they employed the same capital for the same purpose here, and would not rent be lower there than here? You must at any rate allow that the quantity of corn produced with a given quantity of capital, supposing the same skill to be employed, must be greater there than here, or there is no meaning in fertility of soil. You must allow too that in proportion to the fertility of Otaheite and to its extent compared with the population will be the lowness of rent, notwithstanding its abundant rate of produce. I can easily conceive that, with the imperfect tillage the people of Otaheite now give their land, the population may be just sufficiently numerous to require that the whole of their lands should be in cultivation, and consequently that they should bear a rent; but let a hundred Europeans only join them with our improved machinery and perfectly skilled in husbandry, and the immediate consequence would be that three quarters of their lands would for a time become perfectly useless to them, as the quarter might produce them more food than all the inhabitants could possibly consume. Now I ask whether it be possible that three quarters of the land of a country can be suffered to pass from a state of tillage to a state of nature without occasioning a fall in rents? If land is less in demand, must not the rent of it fall? If you say no, there is no truth in the proposition that value depends upon the proportion between supply and demand. Now suppose England in the state in which I have been fancying Otaheite; and she is actually in that state, all or most of her land being in cultivation; and suppose further that there is another country totally unknown to us whose skill and machinery in husbandry as far surpasses ours as ours does that of the Otaheiteans. If a hundred of these persons were to come amongst us with their capital, skill, etc., would not the same consequences follow as I have just stated? Now every improvement in machinery is precisely on a small scale what I have been here supposing on a large scale; and I am quite astonished that you should yet maintain that 'universally where land is limited in quantity, the facility of production upon it will go mainly to rent, and the soil of a country might be of such fertility as to yield sixtyfold instead of eight or ten, and yet the profits of stock be only six per cent. and the wages of labour both nominally and really low.' Land, like everything else, rises or falls in proportion to the demand for it; every improvement which shall enable you to raise the same quantity of produce on a less quantity of land or, which is the same thing, a larger quantity of produce on the same quantity of land cannot increase the demand for land and therefore cannot raise rents.
I do not clearly see the distinction which you think important between productiveness of industry and productiveness of capital. Every machine which abridges labour adds to the productiveness of industry, but it adds also to the productiveness of capital. England with machinery and with a given capital will obtain a greater real net produce than Otaheite with the same capital without machinery, whether it be in manufactures or in the produce of the soil. It will do so because it employs much fewer hands to obtain the same produce. Industry is more productive; so is capital. It appears to me that one is a necessary consequence of the other, and that the opinion which I have advanced and which you are combat[t]ing is that in the progress of society independently of all improvements in skill and machinery the produce of industry constantly diminishes as far as the land is concerned, and consequently capital becomes less productive. That this diminution of produce is beneficial to all owners of land, but that it is so at the expense of manufacturers, amongst which [sic] I include farmers, first by rendering the commodities which they manufacture of less exchangeable value than they before were for corn, and secondly by raising the cost of production by raising the price of labour.
I shall put this letter in the Post Office in London, where I am going to-morrow for a few days. I have been writing, in my unconnected and confused style, my opinions on the profits of the Bank and on the advantages of a paper and nothing but a paper currency. I am too little pleased with it to think of publishing. The whole is too little for a pamphlet. Mr. Grenfell is, I think, anxious that something should be said about the Bank before the meeting of Parliament, and I too wish some able hand would undertake it.
I am always glad to hear that you are preparing for the press; for, though I do not always agree in opinion with you, I am sure that your writings will contribute towards the progress of a science in which I take great interest. I should be more pleased that we did not so materially differ. If I am too theoretical (which I really believe is is the case), you I think are too practical. There are so many combinations and so many operating causes in Political Economy that there is great danger in appealing to experience in favour of a particular doctrine, unless we are sure that all the causes of variation are seen and their effects duly estimated. Mr. Whishaw and Mr. Warburton[113] have been at Mr. Smith's for some time. I have been absent from home unfortunately, and have seen but little of them. I yesterday dined with Mr. Whishaw; he talked of leaving Mr. Smith immediately....
Yours,
David Ricardo.
7th Oct., 1815.