It is true the case[236] in my book is stated to be temporary, and in my opinion it can only be temporary because it cannot exist when the population has increased with the demand for people. When we meet we must agree upon the meaning to be attached to 'a neat surplus from the land'; it may mean the whole material produce after deducting from it what is absolutely necessary to feed the men who obtained it, or it may mean the value of the produce which falls to the share of the capitalist, or to the share of the capitalist and landlord together. If the first be neat surplus it is equally so whether given to labourers, capitalists, or landlords. If the second it may fall short of giving as great a value to the capitalist as he expended in obtaining it, and therefore for him there would be no neat produce. This term neat produce is used ambiguously in your book, and is made the ground of an observation on something [which I s]aid about neat and gross produce. The observation is [just] or not just, according to the meaning attached to the term neat produce; but more of this when we meet.
Knowing as I do how much we are influenced by taking a particular view of a subject, and how difficult it is to destroy a train of ideas which have long followed each other in the mind, I will not say I am right about the effects of unproductive demand, and therefore it is possible that five years hence I may think as you do on the subject, but at present I do not see the least probability of such a change, for every renewed consideration of the question confirms me in the opinion which I have long held.
Ever truly yours,
David Ricardo.
Note.—On the 8th May, 1821, Ricardo writes to J. B. Say from London (Say, Œuvres Diverses, p. 416), acknowledging receipt of Say's 'Letters to Malthus,' and sending him an early copy of the 3rd edition of his 'Pol. Econ. and Tax.' He finds fault again with Say's use of the word Value. He adopts Say's doctrine of 'productive services'; but 'rent being the effect and not the cause of the rise of prices, I submit afresh to you the question whether it is not well to leave rent out of account when we are estimating the comparative value of the productions of the soil. Suppose that I have before me two loaves, the one from the best land in the country, a land yielding three or four pounds sterling per acre, the other from a land rented at about three or four shillings. The two are precisely of the same quality and the same price. You would say that the price of the one is largely a payment for the service of the soil, while it gives little profit for the capital and the labour that have made that land produce. This is incontestable; but what consequence can you draw from it for our practical guidance? What we want to know is the general law which regulates the value of bread relatively to the value of all other things; and I believe that we shall find that one of those loaves, the one that comes from the land that pays little or no rent, determines the value of the whole of the bread; consequently its value, compared with that of all other things, depends on the quantity of labour employed in its production, comparatively with the quantity of labour employed in every other production. Your book (the Traité) would have gained much if you had considered the laws of rent and profits more deeply: 'Adam Smith was certainly wrong in supposing that the rate of profits depends on the amount of accumulated capitals without regard to the population, and the means of providing for it.' In other points I agree with your book and with the greater part of your 'Letters to Malthus.' 'Mr. Malthus and I see each other frequently, without convincing one another. I am glad to be able to inform you that economical science is more and more studied by the youth of this country. We have recently formed a club of political economists, in which we are proud to include Messrs. Torrens, Malthus, and Mill. Many others besides are actively maintaining the principles of free trade, though their names are not so well known to the public.'
In his reply (Paris, 19th July, 1821) Say points out that Ricardo neglects the distinction between 'natural wealth' and 'social wealth,' or he would agree more than he does with Say in his view of value. 'Value in use,' if it means anything, means utility pure and simple, and we may leave out the 'value.' But utility may be gratuitously presented to us by nature, or added by our labour and outlay. We measure the new utility thus added, not as you say by the quantity of labour it costs us, but by the different quantities of another product which are given for it (for the new utility not for the nature-given utility) by others. For instance, a pound of iron is perhaps 2000 times less valuable than a pound of gold, though the utility of the iron may be equal, if not superior, to that of the gold; and the reason is that nearly all the utility of the iron is a gratuitous gift of nature to us. I neglect, therefore, the distinction of value in use and value in exchange deliberately, for I think Political Economy has to do only with the latter. As to the two loaves, the phenomenon you speak of is due, first, to the appropriation of land, apart from which such produce of the soil as was got without labour would cost nothing to anybody,—second, taking things as they are, to the fact that progress in production essentially consists in the substitution of nature's gratuitous services for our own costly ones—our ideal being the complete displacement of the latter by the former, which would make us all 'richer than David Ricardo.' Again, I consider that the determining causes of value include the causes that influence demand as well as supply, the cost to the demander of the productive services he offers in exchange, and not only the cost in labour of the article supplied. I am glad to hear of your Club. 'What I desire above all is that such economical principles as are not abstract, but are only the frank exposition of facts and their consequences, should be diffused among all classes of citizens. We have need not of controversialists expert in syllogistic weapons, but of practical economists; and all that is wanted, for that, is notions accessible to plain common sense, which I fear we repel by our too abstract reasonings.' If you admit strangers, I should be glad to be a member. He adds in a postscript that his eulogies (in the letters to Malthus) of the Essay on Population have been taken by some English writers as ironical; and he would like Ricardo to tell Malthus this is not so; he considers the position of the Essay impregnable, and has a genuine esteem for the author (Œuvres Diverses, pp. 418-22). Say was of opinion that the time had not yet come for setting up a dogmatic orthodoxy in economical doctrines; and he begins the above letter by saying to Ricardo:—'I see in your book a new proof that the subjects of political economy are prodigiously complicated, for, though you and I are both seeking the truth in good faith, yet after devoting whole years to sounding the depths of its fundamental questions we find several points on which we do not agree. It is well we are agreed on the essential point, the possibility of the progress of man in wealth and happiness, as well as on the means needful to that end. We reach the same conclusions, though sometimes in different ways' (p. 418).
LXXVI[237].
[Addressed to St. Catherine's, Bath.]
Gatcomb Park, Minchinhampton, 9 July, 1821.
My dear Sir,