An Essay on Profits [0]
An Essay on Profits
by David Ricardo
1815
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