An Essay on the Influence of a low Price of Corn on the Profits of Stock; shewing the Inexpediency of Restrictions on Importation: With Remarks on Mr Malthus' Two Last Publications: "An Inquiry into the Nature and Progress of Rent;" and "The Grounds of an Opinion on the Policy of restricting the Importation of Foreign Corn" 

By David Ricardo, Esq. 
London: Printed for John Murray, Albemarle Street, 1815

INTRODUCTION 
In treating on the subject of the profits of capital, it is necessary to consider the princples which regulate the rise and fall of rent; as rent and profits, it will be seen, have a very intimate connexion with each other. The principles which regulate rent are briefly stated in the following pages, and differ in a very slight degree from those which have been so fully and so ably developed by Mr Malthus in his late excellent publication, to which I am very much indebted. The consideration of those principles, together with those which regulate the profit of stock, have convinced me of the policy of leaving the importation of corn unrestricted by law. From the general principle set forth in al Mr Malthus's publications, I am persuaded that he holds the same opinion as far as profit and wealth are concerned with the question; -- but, viewing, as he does, the danger as formidable of depending on foreign supply for a large portion of our food, he considers it wise, on the whole, to restrict importation. Not participating with him in those fears, and perhaps estimating the advantages of a cheap price of corn at a higher value, I have come to a different conclusion. Some of the objections urged in his last publication, -- "Grounds of an Opinion," &c. I have endeavoured to answer; they appear to me unconnected with the political danger he apprehends, and to be inconsistent with the general doctrines of the advantages of a free trade, which he has himself, by his writings, so ably contributed to establish. 

ON THE INFLUENCE, &c. 
Mr Malthus very correctly defines, "the rent of land to be that portion of the value of the whole produce which remains to the owner, 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 of the profits of agricultural stock at the time being." 
Whenever, then, the usual and ordinary rate of the profits of agricultural stock, and all the outgoings belonging to the cultivation of land, are together equal to the value of the whole produce, there can be no rent. And when the whole produce is only equal in value to the outgoings necessary to cultivation, there can neither be rent nor profit. 
In the first settling of a country rich in fertile land, and which may be had by any one who chooses to take it, the whole produce, after deducting the outgoings belonging to cultivation, will be the profits of capital, and will belong to the owner of such capital, without any deduction whatever for rent.
Thus, if the capital employed by an individual on such land were of the value of two hundred quarters of wheat, of which half consisted of fixed capital, such as buildings, implements, &c. and the other half of circulating capital, -- if, after replacing the fixed and circulating capital, the value of the remaining produce were one hundred quarters of wheat, or of equal value with one hundred quarters of wheat, the neat profit to the owner of capital would be fifty per cent or one hundred profit on two hundred capital. 
For a period of some duration, the profits of agricultural stock might continue at the same rate, because land equally fertile, and equally well situated, might be abundant, and therefore, might be cultivated on the same advantageous terms, in proportion as the capital of the first, and subsequent settlers augmented. 
Profits might even increase, because the population increasing, at a more rapid rate than capital, wages might fall; and instead of the value of one hundred quarters of wheat being necessary for the circulating capital, ninety only might be required: in which case, the profits of stock would rise from fifty to fifty-seven per cent. 
Profits might also increase, because improvements might take place in agriculture, or in the implements of husbandry, which would augment the produce with the same cost of production. 
If wages rose, or a worse system of agriculture were practised, profits would again fall. 
These are circumstances which are more or less at all times in operation -- they may retard or accelerate the natural effects of the progress of wealth, by rising or lowering profits -- by increasing or diminishing the supply of food, with the employment of the same capital on the land.(1*) 
We will, however, suppose that no improvements take place in agriculture, and that capital and population advance in the proper proportion, so that the real wages of labour, continue uniformly the same; -- that we may know what peculiar effects are to be ascribed to the growth of capital, the increase of population, and the extension of cultivation, to the more remote, and less fertile land. 
In this state of society, when the profits on agricultural stock, by the supposition, are fifty per cent the profits on all other capital, employed either in the rude manufactures, common to such a stage of society, or in foreign commerce, as the means of procuring in exchange for raw produce, those commodities which may be in demand, will be also, fifty per cent.(2*) If the profits on capital employed in trade were more than fifty per cent capital would be withdrawn from the land to be employed in trade. If they were less, capital would be taken from trade to agriculture. 
After all the fertile land in the immediate neighbourhood of the first settlers were cultivated, if capital and population increased, more food would be required, and it could only be procured from land not so advantageously situated. Supposing then the land to be equally fertile, the necessity of employing more labourers, horses, &c. to carry the produce from the place where it was grown, to the place where it was to be consumed, although no alteration were to take place in the wages of labour, would make it necessary that more capital should be permanently employed to obtain the same produce. Suppose this addition to be of the value of ten quarters of wheat, the whole capital employed on the new land would be two hundred and ten, to obtain the same return as on the old; and, consequently the profits of stock would fall from fifty to forty-three per cent or ninety on two hundred and ten.(3*) 
On the land first cultivated, the return would be the same as before, namely, fifty per cent or one hundred quarters of wheat; but, the general profits of stock being regulated by the profits made on the least profitable employment of capital on agriculture, a division of the one hundred quarters would take place, forty-three per cent or eighty-six quarters would constitute the profit of stock, and seven per cent or fourteen, quarters, would constitute rent. And that such a division must take place is evident, when we consider that the owner of the capital of the value of two hundred and ten quarters of wheat would obtain precisely the same profit, whether he cultivated the distant land, or paid the first settler fourteen quarters for rent. 
In this stage, the profits on, all capital employed in trade would fall to forty-three per cent. 
If, in the further progress of population and wealth, the produce of more land were required to obtain the same return, it might be necessary to employ, either on account of distance, or the worse qualIty of land, the value of two hundred and twenty quarters of wheat, the profits of stock would then fall to thirty-six per cent or eighty on two hundred and twenty, and the rent of the first land would rise to twenty-eight quarters of wheat, and on the second portion of land cultivated, rent would now commence, and would amount to fourteen quarters. 
The profits on all trading capital would also fall to thirty-six per cent. 
Thus by bringing successively land of a worse quality, or less favourably situated into cultivation, rent would rise on the land previously cultivated, and precisely in the same degree would profits fall; and if the smallness of profits do not check accumulation, there are hardly any limits to the rise of rent, and the fall of profit. 
If instead of employing capital at a distance on new land, an additional capital of the value of two hundred and ten quarters of wheat be employed on the first land cultivated, and its return were in like manner forty-three per cent or ninety on two hundred and ten; the produce of fifty per cent on the first capital, would be divided in the same manner as before forty-three per cent or eighty-six quarters would constitute profit, and fourteen quarters rent. 
If two hundred and twenty quarters were employed in addition with the same result as before, the first capItal would afford a rent of twenty-eight; and the second of fourteen quarters, and the profits on the whole capital of six hundred and thirty quarters would be equal, and would amount to thirty-six per cent. 
Supposing that the nature of man was so altered, that he required double the quantity of food that is now necessary for his subsistence, and consequently, that the expenses of cultivation were very greatly increased. Under such circumstances the knowledge and capital of an old society employed on fresh and fertile land in a new country would leave a much less surplus produce; consequently, the profits of stock could never be so high. But accumulation, though slower in its progress, might still go on, and rent would begin just as before, when more distant or less fertile land were cultivated. 
The natural limit to population would of course be much earlier, and rent could never rise to the height to which it may now do; because, in the nature of things, land of the same poor quality would never be brought into cultivation; -- nor could the same amount of capital be employed on the better land with any adequate return of profit.(4*) 
The following table is constructed on the supposition, that the first portion of land yields one hundred quarters profit on a capital of two hundred quarters; the second portion, ninety quarters on two hundred and ten, according to the foregoing calculations.(5*) It will be seen that during the progress of a country the whole produce raised on its land will Increase, and for a certain time that part of the produce which belongs to the profits of stock, as well as that part which belongs to rent will increase; but that at a later period, every accumulation of capital will be attended with an absolute, as well as a proportionate diminution of profits, -- though rents will uniformly increase. A less revenue, it will be seen, will be enjoyed by the owner of stock, when one thousand three hundred and fifty quarters are employed on the different qualities of land, than when one thousand one hundred were employed. In the former case the whole profits will be only two hundred and seventy, in the latter two hundred and seventy five; and when one thousand six hundred and ten are employed, profits will fall to two hundred and forty-one and a half.(6*) 
This is a view of the effects of accumulation which is exceedingly curious, and has, I believe, never before been noticed. 
It will be seen by the table, that, in a progressive country, rent is not only absolutely increasing, but that it is also increasing in its ratio to the capital employed on the land; thus when four hundred and ten was the whole capital employed, the landlord obtained three and a half per cent; when one thousand one hundred-thirteen and a quarter per cent; and when one thousand eight hundred and eighty-sixteen and a half per cent. The landlord not only obtains a greater produce, but a larger share. 
TABLE, shewing the Progress of Rent and Profit under an assumed Augmentation of Capital Capital estimated to quarters of wheat [200, 210, 220, 230, 240, 250, 260, 270] Profit per cent [50, 43, 36, 30, 25, 20, 15, 11] Neat produce to quarters of wheat after paying the cost of production on each capital. [100, 90, 80, 70, 60, 50, 40, 30] Profit of 1st portion of land in quarters of wheat. [100, 86, 72, 60, 50, 40, 30, 22] Rent of 1st portion of land in quarters of wheat. [none, 14, 28, 40, 50, 60, 70, 78] Profit of 2nd portion of land in quarters of wheat. [ - ,90, 76, 63, 52 1/2, 42, 31 1/2, 23] Rent of 2nd portion of land in quarters of wheat. [ - , none, 14, 27, 37 1/2, 48, 58 1/2, 67] Profit of 3rd portion of land in quarters of wheat. [ - , - , 80, 66, 55, 44, 33, 24] Rent of 3rd portion of land in quarters of wheat. [ - , - , none, 14, 25 36, 47, 56] Profit of 4th portion of land in quarters of wheat. [ - , - , - , 70, 57 1/2, 46, 34 1/2, 25.3] Rent of 4th portion of land in quarters of wheat. [ - , - , - , none, 12 1/2, 24, 35 1/2, 44.7] Profit of 5th portion of land in quarters of wheat. [ - , - , - , - , 60, 48, 36, 26.4] Rent of 5th portion of land in quarters of wheat. [ - , - , - , - , none, 12, 24, 33.6] Profit of 6th portion of land in quarters of wheat. [ - , - , - , - , - , 50, 37 1/2, 27 1/2] Rent of 6th portion of land in quarters of wheat. [ - , - , - , - , - , none, 12 1/2, 22 1/2] Profit of 7th portion of land in quarters of wheat. [ - , - , - , - , - , - , 40, 27.6] Rent of 7th portion of land in quarters of wheat. [ - , - , - , - , - , - , none, 12.4] Profit of 8th portion of land in quarters of wheat. [ - , - , - , - , - , - , - , 29.7] 1st period, 2nd ditto, 3rd ditto, 4th ditto, 5th ditto, 6th ditto, 7th ditto, 8th ditto When the whole capital employed is [200, 410, 630, 860, 1100, 1350, 1610, 1880] Whole amount of rent received by landlords to quarters of wheat [none, 14, 42, 81, 125, 180, 248 1/2, 314 1/2] Whole amount of profits to quarters received by owners of stock [100, 176, 228, 259, 175, 270, 241 1/2, 205 1/2] Profits per cent on the whole capital [50, 43, 36, 30, 25, 20, 15, 11] Rent per cent on the whole capital [ - , 3 1/2, 6 3/4, 9 1/3, 11 1/2, 13 1/4, 15 1/2, 16 1/3] Total produce to quarters of wheat, after paying the cost of production [ 100, 190, 270, 340, 400, 450, 490, 520] 
Rent(7*) then is in all cases a portion of the profits previously obtained on the land. It is never a new creation of revenue, but always part of a revenue already created. 
Profits of stock fall only, because land equally well adapted to produce food cannot be procured; and the degree of the fall of profits, and the rise of rents, depends wholly on the increased expense of production: 
If, therefore, in the progress of countries in wealth and population, new portions of fertile land could be added to such countries, with every increase of capital, profits would never fall, nor rents rise.(8*) 
If the money price of corn, and the wages of labour, did not vary in price in the least degree, during the progress of the country in wealth and population, still profits would fall and rents would rise; because more labourers would be employed on the more distant or less fertile land, in order to obtain the same supply of raw produce; and therefore the cost of production would have increased, whilst the value of the produce continued the same. 
But the price of corn, and of all other raw produce, has been invariably observed to rise as a nation became wealthy, and was obliged to have recourse to poorer lands for the production of part of its food; and very little consideration will convince us, that such is the effect which would naturally be expected to take place under such circumstances. 
The exchangeable value of all commodities, rises as the difficulties of their production increase. If then new difficulties occur in the production of corn, from more labour being necessary, whilst no more labour is required to produce gold, silver, cloth, linen, &c. the exchangeable value of corn will necessarily rise, as compared with those things. On the contrary, facilities in the production of corn, or of any other commodity of whatever kind, which shall afford the same produce with less labour, will lower its exchangeable value.(9*) Thus we see that improvements in agriculture, or in the implements of husbandry, lower the exchangeable value of corn;(10*) improvements in the machinery connected with the manufacture of cotton, lower the exchangeable value of cotton goods; and improvements in mining, or the discovery of new and more abundant mines of the precious metals, lower the value of gold and silver, or which is the same thing, raises the price of all other commodities. Wherever competition can have its full effect, and the production of the commodity be not limited by nature, as in the case with some wines, the difficulty or facility of their production will ultimately regulate their exchangeable value.(11*) The sole effect then of the process of wealth on prices, independently of all improvements, either in agriculture or manufactures, appears to be to raise the price of raw produce and of labour, leaving all other commodities at their original prices, and to lower general profits In consequence of the general rise of wages. 
This fact is of more importance than at first sight appears, as it relates to the interest of the landlord, and the other parts of the community. Not only is the situation of the landlord improved, (by the increasing difficulty of procuring food, in consequence of accumulation) by Obtaining an increased quantity of the produce of the land, but also by the increased exchangeable value of that quantity. If his rent be increased from fourteen to twenty-eight quarters, it would be more than doubled, because he would be able to command more than double the quantity of Commodities, in exchange for the twenty-eight quarters. As rents are agreed for, and paid in money, he would, under the circumstances supposed, receive more than double of his former money rent. 
In like manner, if rent fell, the landlord would suffer two losses; he would be a loser of that portion of the raw produce which constituted his additional rent; and further, he would be a loser by the depreciation in the real or exchangeable value of the raw produce in which, or in the value of which, his remaining rent would be paid.(12*) 
As the revenue of the farmer is realized in raw produce, or in the value of raw produce, he is interested, as well as the landlord, in its high exchangeable value, but a low price of produce may be compensated to him by a great additional quantity. 
It follows then, that the interest of the landlord is always opposed to the interest of every other class in the community. His situation is never so prosperous, as when food is scarce and dear: whereas, all other persons are greatly benefited by procuring food cheap. High rent and low profits, for they invariably accompany each other, ought never to be the subject of complaint, if they are the effect of the natural course of things. 
They are the most unequivocal proofs of wealth and prosperity, and of an abundant population, compared with the fertility of the soil. The general profits of stock depend wholly on the profits of the last portion of capital employed on the land; if, therefore, landlords were to relinquish the whole of their rents, they would neither raise the general profits of stock, nor lower the price of corn to the consumer. It would have no other effect, as Mr Malthus has observed, than to enable those farmers, whose lands now pay a rent, to live like gentlemen, and they would have to expend that portion of the general revenue, which now falls to the share of the landlord. 
A nation is rich, not according to the abundance of its money, nor to the high money value at which its commodities circulate, but according to the abundance of its commodities, contributing to its comforts and enjoyments. Although this is a proposition, from which few would dissent, many look with the greatest alarm at the prospect of the diminution of their money revenue, though such reduced revenue should have so Improved in exchangeable value, as to procure considerably more of all the necessaries and luxuries of life.
If then, the principles here stated as governing rent and profit be correct, general profits on capital, can only be raised by a fall in the exchangeable value of food, and which fall can only arise from three causes: 
1st. The fall of the real wages of labour, which shall enable the farmer to bring a greater excess of produce to market. 
2d. Improvements in agriculture, or in the implements of husbandry, which shall also increase the excess of produce. 
3dly. The discovery of new markets, from whence corn may be imported at a cheaper price than It can be grown for at home. 
The first of these causes is more or less permanent, according as the price from which wages fall, is more or less near that remuneration for labour, which is necessary to the actual subsistence of the labourer. 
The rise or fall of wages is common to all states of society, whether it be the stationary, the advancing, or the retrograde state. In the stationary state, it is regulated wholly by the increase or falling off of the population. in the advancing state, it depends on whether the capital or the population advance, at the more rapid course. In the retrograde state, it depends on whether population or capital decrease with the greater rapidity. 
As experience demonstrates that capital and population alternately take the lead, and wages in consequence are liberal or scanty, nothing can be positively laid down, respecting profits, as far as wages are concerned. 
But I think it may be most satisfactorily proved, that in every society advancing in wealth and population, independently of the effect produced by liberal or scanty wages, general profits must fall, unless there be improvements in agriculture, or corn can be imported at a cheaper price. 
It seems the necessary result of the principles which have been stated to regulate the progress of rent. 
This principle will, however, not be readily admitted by those who ascribe to the extension of commerce, and discovery of new markets, where our commodities can be sold dearer, and foreign commodities can be bought cheaper, the progress of profits, without any reference whatever to the state of the land, and the rate of profit obtained on the last portions of capital employed upon it. Nothing is more common than to hear it asserted, that profits on agriculture no more regulate the profits of commerce, than that the profits of commerce regulate the profits on agriculture. It is contended, that they alternately take the lead; and, if the profits of commerce rise, which it is said they do, when new markets are discovered, the profits of agriculture will also rise; for it is admitted, that if they did not do so, capital would be withdraw from the land to be employed in the more profitable trade. But if the principles respecting the progress of rent be correct, it is evident, that with the same population and capital, whilst none of the agricultural capital is withdrawn from the cultivation of the land, agricultural profits cannot rise, nor can rent fall: either then it must be contended, which is at variance with all the principles of political economy, that the profits on commercial capital will rise considerably, whilst the profits on agricultural capital suffer no alteration, or, that under such circumstances, the profits on commerce will not rise.(13*) 
It is this latter opinion which I consider as the true one. I do not deny that the first discoverer of a new and better market may, for a time, before competition operates, obtain unusual profits. He may either sell the commodities he exports at a higher price than those who are ignorant of the new market, or he may purchase the commodities imported at a cheaper price. Whilst he, or a few more exclusively follow this trade, their profits will be above the level of general profits. But it is of the general rate of profit that we are speaking, and not of the profits of a few individuals; and I cannot doubt that, in proportion as such trade shall be generally known and followed, there will be such a fall in the price of the foreign commodity in the importing country, in consequence of its increased abundance, and the greater facility with which it is procured, that its sale will afford only the common rate of profits -- that so far from the high profits obtained by the few who first engaged in the new trade elevating the general rate of profits -- those profits will themselves sink to the ordinary level. 
The effects are precisely similar to those which follow from the use of improved machinery at home. Whilst the use of the machine is confined to one, or a very few manufacturers, they may obtain unusual profits, because they are enabled to sell their commodities at a price much above the cost of production -- but as soon as the machine becomes general to the whole trade, the price of the commodities will sink to the actual cost of production, leaving only the usual and ordinary profits. 
During the period of capital moving from one employment to another, the profits on that to which capital is flowing will be relatively high, but will continue so no longer than till the requisite capital is obtained. 
There are two ways in which a country may be benefited by trade -- one by the increase of the general rate of profits, which, according to my opinion, can never take place but in consequence of cheap food, which is beneficial only to those who derive a revenue from the employment of their capital, either as farmers, manufacturers, merchants, or capitalists, lending their money at interest -- the other by the abundance of commodities, and by a fall in their exchangeable value, in which the whole community participate. In the first case, the revenue of the country is augmented -- in the second the same revenue becomes efficient in procuring a greater amount of the necessaries and luxuries of life. 
It is in this latter mode only (14*) that nations are benefited by the extension of commerce, by the division of labour in manufactures, and by the discovery of machinery, -- they all augment the amount of commodities, and contribute very much to the ease and happiness of mankind; but, they have no effect on the rate of profits, because they do not augment the produce compared with the cost of production on the land, and it is impossible that all other profits should rise whilst the profits on land are either stationary, or retrograde. 
Profits then depend on the price, or rather on the value of food. Every thing which gives facility to the production of food, however scarce, or however abundant commodities may become, will raise the rate of profits, whilst on the contrary, every thing which shall augment the cost of production without augmenting the quantity of food,(15*) will, under every circumstance, lower the general rate of profits. The facility of obtaining food is beneficial in two ways to the owners of capital, it at the same time raises profits and increases the amount of consumable commodities. The facility in obtaining all other things, only increases the amount of commodities. 
If, then, the power of purchasing cheap food be of such great importance, and if the importation of corn will tend to reduce its price, arguments almost unanswerable respecting the danger of dependence on foreign countries for a portion of our food, for in no other view will the question bear an argument, ought to be brought forward to induce us to restrict importation, and thereby forcibly to detain capital in an employment which it would otherwise leave for one much more advantageous. 
If the legislature were at once to adopt a decisive policy with regard to the trade in corn -- if it were to allow a permanently free trade, and did not with every variation of price, alternately restrict and encourage importation, we should undoubtedly be a regularly importing country. We should be so in consequence of the superiority of our wealth and population, compared to the fertility of our soil over our neighbours. It is only when a country is comparatively wealthy, when all its fertile land is in a state of high cultivation, and that it is obliged to have recourse to its inferior lands to obtain the food necessary for its population; or when it is originally without the advantages of a fertile soil, that it can become profitable to import corn.(16*) 
It is, then, the dangers of dependence on foreign supply for any considerable quantity of our food, which can alone be opposed to the many advantages which, circumstanced as we are, would attend the importation of corn. These dangers do not admit of being very correctly estimated, they are in some degree, matters of opinion and cannot like the advantages on the other side, be reduced to accurate calculation. They are generally stated to be two -- 1st, that in the case of war a combination of the continental powers, or the influence of our principal enemy, might deprive us of our accustomed supply -- 2dly, that when bad seasons occurred abroad, the exporting countries would have, and would exercise, the power of withholding the quantity usually exported to make up for their own deficient supply.(17*) 
If we became a regularly importing country, and foreigners could confidently rely on the demand of our market, much more land would be cultivated in the corn counties with a view to exportation. When we consider the value of even a few weeks consumption of corn in England, no interruption could be given to the export trade, if the continent supplied us with any considerable quantity of corn, without the most extensively ruinous commercial distress -- distress which no sovereign, or combination of sovereigns, would be willing to inflict on their people; and, if willing, it would be a measure to which probably no people would submit. It was the endeavour of Buonaparte to prevent the exportation of the raw produce of Russia, more than [any] other cause which produced the astonishing efforts of the people of that county against the most powerful force perhaps ever assembled to subjugate a nation. 
The immense capital which would be employed on the land, could not be withdrawn suddenly, and under such circumstances, without immense loss; besides which, the glut of corn in their markets, which would affect their whole supply, and lower its value beyond calculation; the failure of those returns, which are essential in all commercial adventures, would occasion a scene of wide spreading ruin, which if a country would patiently endure, would render it unfit to wage war with any prospect of success. We have all witnessed the distress in this country, and we have all heard of the still greater distress in Ireland, from a fall in the price of corn, at a time too when it is acknowledged that our own crop has been deficient; when importation has been regulated by price, and when we have not experienced any of the effects of a glut. Of what nature would that distress have been if the price of corn had fallen to a half a quarter, or an eighth part of the present price. For the effects of plenty or scarcity, in the price of corn, are incalculably greater than in proportion to the increase or deficiency of quantity. These then, are the inconveniencies which the exporting countries would have to endure.