On The Principles of Political Economy and Taxation
London: John Murray, Albemarle-Street,
by David Ricardo, 1817
(third edition 1821)

Chapter 32

Mr Malthus's Opinion on Rent

Although the nature of rent has in the former pages of this work been treated on at some length; yet I consider myself bound to notice some opinions on the subject, which appear to me erroneous, and which are the more important, as they are found in the writings of one, to whom, of all men of the present day, some branches of economical science are the most indebted. Of Mr Malthus's Essay on Population, I am happy in the opportunity here afforded me of expressing my admiration. The assaults of the opponents of this great work have only served to prove its strength; and I am persuaded that its just reputation will spread with the cultivation of that science of which it is so eminent an ornament. Mr Malthus, too, has satisfactorily explained the principles of rent, and shewed that it rises or falls in proportion to the relative advantages, either of fertility or situation, of the different lands in cultivation, and has thereby thrown much light on many difficult points connected with the subject of rent, which were before either unknown, or very imperfectly understood; yet he appears to me to have fallen into some errors, which his authority makes it the more necessary, whilst his characteristic candour renders it less unpleasing to notice. One of these errors lies in supposing rent to be a clear gain and a new creation of riches.

I do not assent to all the opinions of Mr Buchanan concerning rent; but with those expressed in the following passage, quoted from his work by Mr Malthus, I fully agree; and, therefore, I must dissent from Mr Malthus's comment on them.

'In this view it (rent) can form no general addition to the stock of the community, as the neat surplus in question is nothing more than a revenue transferred from one class to another; and from, the mere circumstance of its thus changing hands, it is clear that no fund can arise, out of which to pay taxes. The revenue which pays for the produce of the land, exists already in the hands of those who purchase that produce; and, if the price of subsistence were lower, it would still remain in their hands, where it would be just as available for taxation as when, by a higher price, it is transferred to the landed proprietor.'

After various observations on the difference between raw produce and manufactured commodities, Mr Malthus asks, 'Is it possible then, with M. de Sismondi, to regard rent as the sole produce of labour, which has a value purely nominal, and the mere result of that augmentation of price which a seller obtains in consequence of a peculiar privilege; or, with Mr Buchanan, to consider it as no addition to the national wealth, but merely a transfer of value, advantageous only to the landlords, and proportionably injurious to the consumers?'(69*)

I have already expressed my opinion on this subject in treating of rent, and have now only further to add, that rent is a creation of value, as I understand that word, but not a creation of wealth. If the price of corn, from the difficulty of producing any portion of it, should rise from £4 to £5 per quarter, a million of quarters will be of the value of £5,000,000 instead of £4,000,000, and as this corn will exchange not only for more money, but for more of every other commodity, the possessors will have a greater amount of value; and as no one else will, in consequence, have a less, the society altogether will be possessed of greater value, and in that sense rent is a creation of value. But this value is so far nominal, that it adds nothing to the wealth, that is to say, the necessaries, conveniences, and enjoyments of the society. We should have precisely the same quantity, and no more of commodities, and the same million quarters of corn as before; but the effect of its being rated at £5 per quarter, instead of £4, would be to transfer a portion of the value of the corn and commodities from their former possessors to the landlords. Rent then is a creation of value, but not a creation of wealth; it adds nothing to the resources of a country, it does not enable it to maintain fleets and armies; for the country would have a greater disposable fund if its land were of a better quality, and it could employ the same capital without generating a rent.

It must then be admitted that Mr Sismondi and Mr Buchanan, for both their opinions are substantially the same, were correct, when they considered rent as a value purely nominal, and as forming no addition to the national wealth, but merely as a transfer of value, advantageous only to the landlords, and proportionably injurious to the consumer.

In another part of Mr Malthus's 'Inquiry' he observes, 'that the immediate cause of rent is obviously the excess of price above the cost of production at which raw produce sells in the market;' and in another place he says, 'that the causes of the high price of raw produce may be stated to be three:

'First, and mainly, that quality of the earth, by which it can be made to yield a greater portion of the necessaries of life than is required for the maintenance of the persons employed on the land.

'2dly. That quality peculiar to the necessaries of life, of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced.

'And 3dly. The comparative scarcity of the most fertile land.' In speaking of the high price of corn, Mr Malthus evidently does not mean the price per quarter or per bushel, but rather the excess of price for which the whole produce will sell, above the cost of its production, including always in the term 'cost of its production,' profits as well as wages. One hundred and fifty quarters of corn at £3 10s. per quarter, would yield a larger rent to the landlord than 100 quarters at £4, provided the cost of production were in both cases the same.

High price, if the expression be used in this sense, cannot then be called a cause of rent; it cannot be said 'that the immediate cause of rent is obviously the excess of price above the cost of production, at which raw produce sells in the market,' for that excess is itself rent. Rent, Mr Malthus has defined to be 'that portion of the value of the whole produce which remains to the owner of the land, after all the outgoings belonging to its cultivation, of whatever kind, have been paid, including the profits of the capital employed, estimated according to the usual and ordinary rate ofthe profits of agricultural stock at the time being.' Now whatever sum this excess may sell for, is money rent; it is what Mr Malthus means by 'the excess of price above the cost of production at which raw produce sells in the market;' and, therefore, in an inquiry into the causes which may elevate the price of raw produce, compared with the cost of production, we are inquiring into the causes which may elevate rent.

In reference to the first cause which Mr Malthus has assigned for the rise of rent, namely, 'that quality of the earth by which it can be made to yield a greater portion of the necessaries of life than is required for the maintenance of the persons employed on the land,' he makes the following observations: 'We still want to know why the consumption and supply are such as to make the price so greatly exceed the cost of production, and the main cause is evidently the fertility of the earth in producing the necessaries of life. Diminish this plenty, diminish the fertility of the soil, and the excess will diminish; diminish it still further, and it will disappear.' True, the excess of necessaries will diminish and disappear, but that is not the question. The question is, whether the excess of their price above the cost of their production will diminish and disappear, for it is on this that money rent depends. Is Mr Malthus warranted in his inference, that because the excess of quantity will diminish and disappear, therefore 'the cause of the high price of the necessaries of life above the cost of production is to be found in their abundance, rather than in their scarcity; and is not only essentially different from the high price occasioned by artificial monopolies, but from the high price of those peculiar products of the earth, not connected with food, which may be called natural and necessary monopolies?'

Are there no circumstances under which the fertility of the land, and the plenty of its produce may be diminished, without occasioning a diminished excess of its price above the cost of production, that is to say, a diminished rent? If there are, Mr Malthus's proposition is much too universal; for he appears to me to state it as a general principle, true under all circumstances, that rent will rise with the increased fertility of the land, and will fall with its diminished fertility.

Mr Malthus would undoubtedly be right, if, of any given farm, in proportion as the land yielded abundantly, a greater share of the whole produce were paid to the landlord; but the contrary is the fact: when no other but the most fertile land is in cultivation, the landlord has the smallest proportion of the whole produce, as well as the smallest value, and it is only when inferior lands are required to feed an augmenting population, that both the landlord's share of the whole produce, and the value he receives, progressively increase.

Suppose that the demand is for a million of quarters of corn, and that they are the produce of the land actually in cultivation. Now, suppose the fertility of all the land to be so diminished, that the very same lands will yield only 900,000 quarters. The demand being for a million quarters, the price of corn would rise, and recourse must necessarily be had to land of an inferior quality sooner than if the superior land had continued to produce a million of quarters. But it is this necessity of taking inferior land into cultivation which is the cause of the rise of rent, and will elevate it, although the quantity of corn received by the landlord, be reduced in quantity. Rent, it must be remembered, is not in proportion to the absolute fertility of the land in cultivation, but in proportion to its relative fertility. Whatever cause may drive capital to inferior land, must elevate rent on the superior land; the cause of rent being, as stated by Mr Malthus in his third proposition, 'the comparative scarcity of the most fertile land.' The price of corn will naturally rise with the difficulty of producing the last portions of it, and the value of the whole quantity produced on a particular farm will be increased, although its quantity be diminished; but as the cost of production will not increase on the more fertile land, as wages and profits taken together will continue always of the same value,(70*) it is evident that the excess of price above the cost of production, or, in other words, rent must rise with the diminished fertility of the land, unless it is counteracted by a great reduction of capital, population, and demand. It does not appear then, that Mr Malthus's proposition is correct: rent does not immediately and necessarily rise or fall with the increased or diminished fertility of the land; but its increased fertility renders it capable of paying at some future time an augmented rent. Land possessed of very little fertility can never bear any rent; land of moderate fertility may be made, as population increases, to bear a moderate rent; and land of great fertility a high rent; but it is one thing to be able to bear a high rent, and another thing actually to pay it. Rent may be lower in a country where lands are exceedingly fertile than in a country where they yield a moderate return, it being in proportion rather to relative than absolute fertility - to the value of the produce, and not to its abundance.(71*)

Mr Malthus supposes that the rent on land yielding those peculiar products of the earth which may be called natural and necessary monopolies, is regulated by a principle essentially different from that which regulates the rent of land that yields the necessaries of life. He think that it is the scarcity of the products of the first which is the cause of a high rent, but that it is the abundance of the latter, which produces the same effect.

This distinction does not appear to me to be well founded; for you would as surely raise the rent of land yielding scarce wines, as the rent of corn land, by increasing the abundance of its produce, if, at the same time, the demand for this peculiar commodity increased; and without a similar increase of demand, an abundant supply of corn would lower instead of raise the rent of corn land. Whatever the nature of the land may be, high rent must depend on the high price of the produce; but, given the high price, rent must be high in proportion to abundance and not to scarcity.

We are under no necessity of producing permanently any greater quantity of a commodity than that which is demanded. If by accident any greater quantity were produced, it would fall below its natural price, and therefore would not pay the cost of production, including in that cost the usual and ordinary profits of stock: thus the supply would be checked till it conformed to the demand, and the market price rose to the natural price.

Mr Malthus appears to me to be too much inclined to think that population is only increased by the previous provision of food - 'that it is food that creates its own demand,' - that it is by first providing food, that encouragement is given to marriage, instead of considering that the general progress of population is affected by the increase of capital, the consequent demand for labour, and the rise of wages; and that the production of food is but the effect of that demand.

It is by giving the workman more money, or any other commodity in which wages are paid, and which has not fallen in value, that his situation is improved. The increase of population, and the increase of food will generally be the effect, but not the necessary effect of high wages. The amended condition of the labourer, in consequence of the increased value which is paid him, does not necessarily oblige him to marry and take upon himself the charge of a family - he will, in all probability, employ a portion of his increased wages in furnishing himself abundantly with food and necessaries, - but with the remainder he may, if it please him, purchase any commodities that may contribute to his enjoyments - chairs, tables, and hardware; or better clothes, sugar, and tobacco. His increased wages then will be attended with no other effect than an increased demand for some of those commodities; and as the race of labourers will not be materially increased, his wages will continue permanently high. But although this might be the consequence of high wages, yet so great are the delights of domestic society, that in practice it is invariably found that an increase of population follows the amended condition of the labourer; and it is only because it does so, that, with the trifling exception already mentioned, a new and increased demand arises for food. This demand then is the effect of an increase of capital and population, but not the cause it is only because the expenditure of the people takes this direction, that the market price of necessaries exceeds the natural price, and that the quantity of food required is produced; and it is because the number of people is increased, that wages again fall.

What motive can a farmer have to produce more corn than is actually demanded, when the consequence would be a depression of its market price below its natural price, and consequently a privation to him of a portion of his profits, by reducing them below the general rate? 'If,' says Mr Malthus, 'the necessaries of life, the most important products of land, had not the proper of creating an increase of demand proportioned to their increased quantity, such increased quantity would occasion a fall in their exchangeable value.(72*) However abundant might be the produce of the country, its population might remain stationary; and this abundance without a proportionate demand, and with a very high corn price of labour, which would naturally take place under these circumstances, might reduce the price of raw produce like the price of manufactures, to the cost of production.'

Might reduce the price of raw produce to the cost of production. Is it ever for any length of time either above or below this price? Does not Mr Malthus himself, state it never to be so? 'I hope,' he says, 'to be excused for dwelling a little, and presenting to the reader, in various forms, the doctrine, that corn, in reference to the quantity actually produced, is sold at its necessary price, like manufactures, because I consider it as a truth of the highest importance, which has been overlooked by the economists, by Adam Smith, and all those writers, who have represented raw produce as selling always at a monopoly price.'

'Every extensive country may thus be considered as possessing a gradation of machines for the production of corn and raw materials, including in this gradation not only all the various qualities of poor land, of which every territory has generally an abundance, but the inferior machinery which may be said to be employed when good land is further and further forced for additional produce. As the price of raw produce continues to rise, these inferior machines are successively called into action; and as the price of raw produce continues to fall, they are successively thrown out of action. The illustration here used, serves to shew, at once, the necessity of the actual price of corn to the actual produce, and the different effect which would attend a great reduction in the price of any particular manufacture, and a great reduction in the price of raw produce.'(73*)

How are these passages to be reconciled to that which affirms, that if the necessaries of life had not the property of creating an increase of demand proportioned to their increased quantity, the abundant quantity produced would then, and then only, reduce the price of raw produce to the cost of production? If corn is never under its natural price, it is never more abundant than the actual population require it to be for their own consumption; no store can be laid up for the consumption of others; it can never then by its cheapness and abundance be a stimulus to population. In proportion as corn can be produced cheaply, the increased wages of the labourers will have more power to maintain families. In America, population increases rapidly, because food can be produced at a cheap price, and not because an abundant supply has been previously provided. In Europe population increases comparatively slowly, because food cannot be produced at a cheap value. In the usual and ordinary course of things, the demand for all commodities precedes their supply. By saying, that corn would, like manufactures, sink to its price of production, if it could not raise up demanders, Mr Malthus cannot mean that all rent would be absorbed; for he has himself justly remarked, that if all rent were given up by the landlords, corn would not fall in price; rent being the effect, and not the cause of high price, and there being always one quality of land in cultivation which pays no rent whatever, the corn from which replaces by its price, only wages and profits.

In the following passage, Mr Malthus has given an able exposition of the causes of the rise in the price of raw produce in rich and progressive countries, in every word of which I concur; but it appears to me to be at variance with some of the propositions maintained by him in his Essay on Rent. 'I have no hesitation in stating, that, independently of the irregularities in the currency of a country, and other temporary and accidental circumstances, the cause of the high comparative money price of corn is its high comparative real price, or the greater quantity of capital and labour which must be employed to produce it; and that the reasons why the real price of corn is higher, and continually rising in countries which are already rich, and still advancing in prosperity and population, is to be found in the necessity of resorting constantly to poorer land, to machines which require a greater expenditure to work them, and which consequently occasion each fresh addition to the raw produce of the country to be purchased at a greater cost; in short, it is to be found in the important truth, that corn in a progressive country, is sold at a price necessary to yield the actual supply; and that, as this supply becomes more and more difficult, the price rises in proportion.'

The real price of a commodity is here properly stated to depend on the greater or less quantity of labour and capital (that is, accumulated labour) which must be employed to produce it. Real price does not, as some have contended, depend on money value; nor, as others have said, on value relatively to corn, labour, or any other commodity taken singly, or to all commodities collectively; but, as Mr Malthus justly says, 'on the greater (or less) quantity of capital and labour which must be employed to produce it.'

Among the causes of the rise of rent, Mr Malthus mentions, 'such an increase of population as will lower the wages of labour.' But if, as the wages of labour fall, the profits of stock rise, and they be together always of the same value,(74*) no fall of wages can raise rent, for it will neither diminish the portion, nor the value of the portion of the produce which will be allotted to the farmer and labourer together; and, therefore, will not leave a larger portion, nor a larger value for the landlord. In proportion as less is appropriated for wages, more will be appropriated for profits, and vice versâ. This division will be settled by the farmer and his labourers, without any interference of the landlord; and, indeed, it is a matter in which he can have no interest, otherwise than as one division may be more favourable than another, to new accumulations, and to a further demand for land. If wages fell, profits, and not rent, would rise. If wages rose, profits, and not rent, would fall. The rise of rent and wages, and the fall of profits, are generally the inevitable effects of the same cause - the increasing demand for food, the increased quantity of labour required to produce it, and its consequently high price. If the landlord were to forego his whole rent, the labourers would not be in the least benefited. If it were possible for the labourers to give up their whole wages, the landlords would derive no advantage from such a circumstance; but in both cases the farmer would receive and retain all which they relinquish. It has been my endeavour to shew in this work, that a fall of wages would have no other effect than to raise profits. Every rise of profits is favourable to the accumulation of capital, and to the further increase of population, and therefore would, in all probability, ultimately lead to an increase of rent.

Another cause of the rise of rent, according to Mr Malthus, is 'such agricultural improvements, or such increase of exertions, as will diminish the number of labourers necessary to produce a given effect.' To this passage I have the same objection that I had against that which speaks of the increased fertility of land being the cause of an immediate rise of rent. Both the improvement in agriculture, and the superior fertility will give to the land a capability of bearing at some future period a higher rent, because with the same price of food there will be a great additional quantity. but till the increase of population be in the same proportion, the additional quantity of food would not be required, and, therefore, rents would be lowered and not raised. The quantity that could under the then existing circumstances be consumed, could be furnished either with fewer hands, or with a less quantity of land, the price of raw produce would fall, and capital would be withdrawn from the land.(75*) Nothing can raise rent, but a demand for new land of an inferior quality, or some cause which shall occasion an alteration in the relative fertility of the land already under cultivation.(76*) Improvements in agriculture, and in the division of labour, are common to all land; they increase the absolute quantity of raw produce obtained from each, but probably do not much disturb the relative proportions which before existed between them.

Mr Malthus has justly commented on the error of Dr Smith's argument, that corn is of so peculiar a nature, that its production cannot be encouraged by the same means that the production of all other commodities is encouraged. He observes, 'It is by no means intended to deny the powerful influence of the price of corn upon the price of labour, on an average of a considerable number of years; but that this influence is not such as to prevent the movement of capital to, or from the land, which is the precise point in question, will be made sufficiently evident, by a short inquiry into the manner in which labour is paid, and brought into the market, and by a consideration of the consequences to which the assumption of Adam Smith's proposition would inevitably lead.'(77*) Mr Malthus then proceeds to shew, that demand and high price will as effectually encourage the production of raw produce, as the demand and high price of any other commodity will encourage its production. In this view it will be seen, from what I have said of the effects of bounties, that I entirely concur. I have noticed the passage from Mr Malthus's 'Observations on the Corn Laws,' for the purpose of shewing in what a different sense the term real price is used here, and in his other pamphlet, entitled 'Grounds of an Opinion', &c. In this passage Mr Malthus tells us, that, it is clearly an increase of real price alone which can encourage the production of corn,' and, by real price, he evidently means the increase in its value relatively to all other things; or, in other words, the rise in its market above its natural price, or the cost of its production. If by real price this is what is meant, although I do not admit the propriety of thus naming it, Mr Malthus's opinion is undoubtedly correct; it is the rise in the market price of corn which alone encourages its production; for it may be laid down as a principle uniformly true, that the only great encouragement to the increased production of a commodity, is its market value exceeding its natural or necessary value.

But this is not the meaning which Mr Malthus, on other occasions, attaches to the term, real price. In the Essay on Rent, Mr Malthus says, by 'the real growing price of corn, I mean the real quantity of labour and capital, which has been employed to produce the last additions which have been made to the national produce.' In another part he states 'the cause of the high comparative real price of corn to be the greater quantity of capital and labour, which must be employed to produce it.'(78*) Suppose that in the foregoing passage we were to substitute this definition of real price, would it not then run thus? - 'It is clearly the increase in the quantity of labour and capital which must be employed to produce corn, which alone can encourage its production.' This would be to say, that it is clearly the rise in the natural or necessary price of corn, which encourages its production - a proposition which could not be maintained. It is not the price at which corn can be produced, that has any influence on the quantity produced, but the price at which it can be sold. It is in proportion to the degree of the difference of its price above or below the cost of production, that capital is attracted to, or repelled from the land. If that excess be such as to give to capital so employed, a greater than the general profit of stock, capital will go to the land; if less, it will be withdrawn from it.

It is not, then, by an alteration in the real price of corn that its production is encouraged, but by an alteration in its market price. It is not 'because a greater quantity of capital and labour must be employed to produce it,' (Mr Malthus's just definition of real price,) that more capital and labour are attracted to the land, but because the market price rises above this its real price, and, notwithstanding the increased charge, makes the cultivation of land the more profitable employment of capital.

Nothing can be more just than the following observations of Mr Malthus, on Adam Smith's standard of value. 'Adam Smith was evidently led into this train of argument, from his habit of considering labour as the standard measure of value, and corn as the measure of labour. But that corn is a very inaccurate measure of labour, the history of our own country will amply demonstrate; where labour, compared with corn, will be found to have experienced very great and striVing variations, not only from year to year, but from century to century; and for ten, twenty, and thirty years together. And that neither labour nor any other commodity can be an accurate measure of real value in exchange, is now considered as one of the most incontrovertible doctrines of political economy; and, indeed, follows from the very definition of value in exchange.'

If neither corn nor labour are accurate measures of real value in exchange, which they clearly are not, what other commodity is? - certainly none. If, then, the expression, real price of commodities, have any meaning, it must be that which Mr Malthus has stated in the Essay on Rent - it must be measured by the proportionate quantity of capital and labour necessary to produce them.

In Mr Malthus's 'Inquiry into the Nature of Rent,' he says, 'that, independently of irregularities in the currency of a country, and other temporary and accidental circumstances, the cause of the high comparative money price of corn, is its high comparative real price, or the greater quantity of capital and labour which must be employed to produce it.'(79*)

This, I apprehend, is the correct account of all permanent variations in price, whether of corn or of any other commodity. A commodity can only permanently rise in price, either because a greater quantity of capital and labour must be employed to produce it, or because money has fallen in value; and, on the contrary, it can only fall in price, either because a less quantity of capital and labour may be employed to produce it, or because money has risen in value.

A variation arising from the latter of these alternatives, an altered value of money, is common at once to all commodities; but a variation arising from the former cause, is confined to the particular commodity requiring more or less labour in its production. By allowing the free importation of corn, or by improvements in agriculture, raw produce would fall; but the price of no other commodity would be affected, except in proportion to the fall in the real value, or cost of production, of the raw produce, which entered into its composition.

Mr Malthus, having acknowledged this principle, cannot, I think, consistently maintain that the whole money value of all the commodities in the country must sink exactly in proportion to the fall in the price of corn. If the corn consumed in the count were of the value of ten millions per annum, and the manufactured and foreign commodities consumed were of the value of twenty millions, making altogether thirty millions, it would not be admissible to infer that the annual expenditure was reduced to 15 millions, because corn had fallen 50 per cent, or from 10 to 5 millions.

The value of the raw produce which entered into the composition of these manufactures might not, for example, exceed 20 per cent of their whole value, and, therefore, the fall in the value of manufactured commodities, instead of being from 20 to 10 millions, would be only from 20 to 18 millions; and after the fall in the price of corn of 50 per cent, the whole amount of the annual expenditure, instead of falling from 30 to 15 millions, would fall from 30 to 23 millions.(80*)

This, I say, would be their value, if you supposed it possible, that with such a cheap price of corn, no more corn and commodities would be consumed; but as all those who had employed capital in the production of corn on those lands which would no longer be cultivated, could employ it in the production of manufactured goods; and only a part of those manufactured goods would be given in exchange for foreign corn, as on any other supposition no advantage would be gained by importation, and low prices; we should have the additional value of all that quantity of manufactured goods which were so produced, and not exported to add to the above value, so that the real diminution, even in money value, of all the commodities in the country, corn included, would be equal only to the loss of the landlords, by the reduction of their rents, while the quantity of objects of enjoyment would be greatly increased.

Instead of thus considering the effect of a fall in the value of raw produce; as Mr Malthus was bound to do by his previous admission; he considers it as precisely the same thing as a rise of 100 per cent in the value of money, and, therefore, argues as if all commodities would sink to half their former price.

'During the twenty years beginning with 1794,' he says, 'and ending with 1813, the average price of British corn per quarter was about eighty-three shillings; during the ten years ending with 1813, ninety-two shillings; and during the last five years of the twenty, one hundred and eight shillings. In the course of these twenty years, the Government borrowed near five hundred millions of real capital; for which, on a rough average, exclusive of the sinking fund, it engaged to pay about five per cent. But if corn should fall to fifty shillings a quarter, and other commodities in proportion, instead of an interest of about five per cent, the Government would really pay an interest of seven, eight, nine, and for the last two hundred millions, ten per cent.

'To this extraordinary generosity towards the stockholders, I should be disposed to make no kind of objection, if it were not necessary to consider by whom it is to be paid; and a moment's reflection will shew us, that it can only be paid by the industrious classes of society, and the landlords; that is, by all those whose nominal income will vary with the variations in the measure of value. The nominal revenues of this part of the society, compared with the average of the last five years, will be diminished one half, and out of this nominally reduced income, they will have to pay the same nominal amount of taxes.'(81*)

In the first place, I think, I have already shewn, that even the value of the gross income of the whole country will not be diminished in the proportion for which Mr Malthus here contends; it would not follow, that because corn fell fifty per cent, each man's gross income would be reduced fifty per cent in value;(82*) his net income might be actually increased in value.

In the second place, I think the reader will agree with me, that the increased charge, if admitted, would not fall exclusively, on the landlords and the industrious classes of society: 'the stockholder, by his expenditure, contributes his share to the support of the public burdens in the same way as the other classes of society. If, then, money became really more valuable, although he would receive a greater value, he would also pay a greater value in taxes, and, therefore, it cannot be true that the whole addition to the real value of the interest would be paid by 'the landlords and the industrious classes.'

The whole argument, however, of Mr Malthus, is built on an infirm basis: it supposes, because the gross income of the country is diminished, that, therefore, the net income must also be diminished, in the same proportion. It has been one of the objects of this work to shew, that with every fall in the real value of necessaries, the wages of labour would fall, and that the profits of stock would rise - in other words, that of any given annual value a less portion would be paid to the labouring class, and a larger portion to those whose funds employed this class. Suppose the value of the commodities produced in a particular manufacture to be £1,000, and to be divided between the master and his labourers, in the proportion of £800 to labourers, and £200 to the master; if the value of these commodities should fall to £900, and £100 be saved from the wages of labour, in consequence of the fall of necessaries, the net income of the masters would be in no degree impaired, and, therefore, he could with just as much facility pay the same amount of taxes, after, as before the reduction of price.(83*)

It is of importance to distinguish clearly between gross revenue and net revenue, for it is from the net revenue of a society that all taxes must be paid. Suppose that all the commodities in the country, all the corn, raw produce, manufactured goods, &c. which could be brought to market in the course of the year, were of the value of 20 millions, and that in order to obtain this value, the labour of a certain number of men was necessary, and that the absolute necessaries of these labourers required an expenditure of 10 millions. I should say that the gross revenue of such society was 20 millions, and its net revenue 10 millions. It does not follow from this supposition, that the labourers should receive only 10 millions for their labour; they might receive 12, 14, or 15 millions, and in that case they would have 2, 4, or 5 millions of the net income. The rest would be divided between landlords and capitalists; but the whole net income would not exceed 10 millions. Suppose such a society paid 2 millions in taxes, its net income would be reduced to 8 millions.

Suppose now money to become more valuable by one-tenth, all commodities would fall, and the price of labour would fall, because the absolute necessaries of the labourer formed a part of those commodities, consequently the gross income would be reduced to 18 millions, and the net income to 9 millions. If the taxes fell in the same proportion, and, instead of 2 millions, £1,800,000 only were raised, the net income would be further reduced to £7,200,000, precisely of the same value as the 8 millions were before, and therefore the society would neither be losers nor gainers by such an event.

But suppose that after the rise of money, 2 millions were raised for taxes as before, the society would be poorer by £200,000 per annum, their taxes would be really raised one-ninth. To alter the money value of commodities, by altering the value of money, and yet to raise the same money amount by taxes, is then undoubtedly to increase the burthens of society. But suppose of the 10 millions net revenue, the landlords received five millions as rent, and that by facility of production, or by the importation of corn, the necessary cost of that article in labour was reduced 1 million, rent would fall 1 million, and the prices of the mass of commodities would also fall to the same amount, but the net revenue would be just as great as before; the gross income would, it is true, be only 10 millions, and the necessary expenditure to obtain it 9 millions, but the net income would be 10 millions. Now suppose 2 millions raised in taxes on this diminished gross income, would the society altogether be richer or poorer? Richer, certainly; for after the payment of their taxes, they would have, as before, a clear income of 8 million to bestow on the purchase of commodities, which had increased in quantity, and fallen in price, in the proportion of 20 to 19; not only then could the same taxation be endured, but greater, and yet the mass of the people be better provided with conveniences and necessaries.

If the net income of the society, after paying the same money taxation, be as great as before, and the class of landholders lose I million from a fall of rent, the other productive classes must have increased money incomes, notwithstanding the fall of prices. The capitalist will then be doubly benefited; the corn and butcher's meat consumed by himself and his family will be reduced in price; and the wages of his menial servants, of his gardeners, and labourers of all descriptions, will be also lowered. His horses and cattle will cost less, and be supported at a less expense. All the commodities in which raw produce enters at a principal part of their value, will fall. This aggregate amount of savings, made on the expenditure of income, at the same time that his money income is increased, will then be doubly beneficial to him, and will enable him not only to add to his enjoyments, but to bear additional taxes, if they should be required: his additional consumption of taxed commodities will much more than make up for the diminished demand of landlords, consequent on the reduction of their rents. The same observations apply to farmers and traders of every description.

But it may be said, that the capitalist's income will not be increased; that the million deducted from the landlord's rent, will be paid in additional wages to labourers! Be it so; this will make no difference in the argument: the situation of the society will be improved, and they will be able to bear the same money burthens with greater facility than before; it will only prove what is still more desirable, that the situation of another class, and by far the most important class in society, is the one which is chiefly benefited by the new distribution. All that they receive more than 9 millions, forms part of the net income of the country, and it cannot be expended without adding to its revenue, its happiness, or its power. Distribute then the net income as you please. Give a little more to one class, and a little less to another, yet you do not thereby diminish it; a greater amount of commodities will be still produced with the same labour, although the amount of the gross money value of such commodities will be diminished; but the net money income of the country, that fund from which taxes are paid and enjoyments procured, would be much more adequate, than before, to maintain the actual population, to afford it enjoyments and luxuries, and to support any given amount of taxation.

That the stockholder is benefited by a great fall in the value of corn, cannot be doubted; but if no one else be injured, that is no reason why corn should be made dear.. for the gains of the stockholder are national gains, and increase, as all other gains do, the real wealth and power of the country. If they are unjustly benefited, let the degree in which they are so, be accurately ascertained, and then it is for the legislature to devise a remedy; but no policy can be more unwise than to shut ourselves out from the great advantages arising from cheap corn, and abundant productions, merely because the stockholder would have an undue proportion of the increase.

To regulate the dividends on stock by the money value of corn, has never yet been attempted. If justice and good faith required such a regulation, a great debt is due to the old stockholders; for they have been receiving the same money dividends for more than a century, although corn has, perhaps, been doubled or trebled in price.(84*)

But it is a great mistake to suppose, that the situation of the stockholder will be more improved than that of the farmer, the manufacturer, and the other capitalists of the country; it will, in fact, be less improved.

The stockholder will undoubtedly receive the same money dividend, while not only the price of raw produce, and labour fell, but the prices of many other things into which raw produce entered as a component part. This, however, is an advantage, as I have just stated, which he would enjoy in common with all other persons who had the same money incomes to expend: his money income would not be increased; that of the farmer, manufacturer and other employers of labour would, and consequently they would be doubly benefited.

It may be said, that although it may be true that capitalists would be benefited by a rise of profits, in consequence of a fall of wages, yet that their incomes would be diminished by the fall in the money value of their commodities. What is to lower them? Not any alteration in the value of money, for nothing has been supposed to occur to alter the value of money. Not any diminution in the quantity of labour necessary to produce their commodities, for no such cause has operated, and if it did operate, would not lower money profits, though it might lower money prices. But the raw produce of which commodities are made, is supposed to have fallen in price, and, therefore, commodities will fall on that account. True, they will fall, but their fall will not be attended with any diminution in the money income of the producer. If he sell his commodity for less money, it is only because one of the materials from which it is made has fallen in value. If the clothier sell his cloth for £900 instead of £1,000, his income will not be less, if the wool from which it is made, has declined £100 in value.

Mr Malthus says, 'It is true, that the last additions to the agricultural produce of an improving country, are not attended with a large proportion of rent; and it is precisely this circumstance that may make it answer to a rich country to import some of its corn, if it can be secure of obtaining an equable supply. But in all cases the importation of foreign corn must fail to answer nationally, if it is not so much cheaper than the corn that can be grown at home, as to equal both the profits and the rent of the grain which it displaces.' Grounds, &c. p. 36.

In this observation Mr Malthus is quite correct; but imported corn must be always so much cheaper than the corn that can be grown at home, 'as to equal both the profits and the rent of the grain which it displaces.' If it were not, no advantage to any one could be obtained by importing it.

As rent is the effect of the high price of corn, the loss of rent is the effect of a low price. Foreign corn never enters into competition with such home corn as affords a rent; the fall of price invariably affects the landlord till the whole of his rent is absorbed; - if it fall still more, the price will not afford even the common profits of stock; capital will then quit the land for some other employment, and the corn, which was before grown upon it, will then, and not till then, be imported. From the loss of rent, there will be a loss of value, of estimated money value, but, there will be a gain of wealth. The amount of the raw produce and other productions together will be increased; from the greater facility with which they are produced, they will, though augmented in quantity, be diminished in value.

Two men employ equal capitals - one in agriculture, the other in manufactures. That in agriculture produces a net annual value of £1,200 of which £1,000 is retained for profit, and £200 is paid for rent; the other in manufactures produces only an annual value of £1,000. Suppose that by importation, the same quantity of corn which cost £1,200 can be obtained for commodities which cost £950, and that, in consequence, the capital employed in agriculture is diverted to manufactures, where it can produce a value of £1,000, the net revenue of the country will be of less value, it will be reduced from £2,200 to £2,000; but there will not only be the same quantity of commodities and corn for its own consumption, but also as much addition to that quantity as £50 would purchase, the difference between the value at which its manufactures were sold to the foreign country, and the value of the corn which was purchased from it.

Now this is precisely the question respecting the advantage of importing, or growing corn; it never can be imported till the quantity obtained from abroad by the employment of a given capital exceeds the quantity which the same capital will enable us to grow at home, - exceeds not only that quantity which falls to the share of the farmer, but also that which is paid as rent to the landlord.

Mr Malthus says, 'It has been justly observed by Adam Smith, that no equal quantity of productive labour employed in manufactures can ever occasion so great a reproduction as in agriculture.' If Adam Smith speaks of value, he is correct; but if he speaks of riches, which is the important point, he is mistaken; for he has himself defined riches to consist of the necessaries, conveniences, and enjoyments of human life. One set of necessaries and conveniences admits of no comparison with another set; value in use cannot be measured by any known standard; it is differently estimated by different persons.