On the Principles of Political Economy and Taxation
By David Ricardo
On the Principles of Political Economy and Taxation, was first published in 1817 (London: John Murray, Albemarle-Street), with second and third editions in quick succession.We present Ricardo’s final revision, the third edition, published in 1821, here.The three different editions encompassed several substantive changes in the development of Ricardo’s ideas. A comprehensive, readable comparison of the three editions can be found
Works of David Ricardo, Vol. 1, ed. by Pierro Sraffa with the collaboration of M. H. Dobb, Cambridge: Cambridge University Press, 1951. We are indebted to this fine work and have relied on it to correct occasional typographical misprints in the 1821 edition.Minor editorial modifications in this edition are: removing periods after the roman numerals designating kings and “per cent.” We have also substituted modern £ symbol for the historical
l. and added commas in numbers greater than 1,000.Editor
Library of Economics and Liberty
First Pub. Date
London: John Murray
The text of this edition is in the public domain. Picture of David Ricardo courtesy of The Warren J. Samuels Portrait Collection at Duke University.
- Ch.1, On Value
- Ch.2, On Rent
- Ch.3, On the Rent of Mines
- Ch.4, On Natural and Market Price
- Ch.5, Of Wages
- Ch.6, On Profits
- Ch.7, On Foreign Trade
- Ch.8, On Taxes
- Ch.9, Taxes on Raw Produce
- Ch.10, Taxes on Rent
- Ch.11, Tithes
- Ch.12, Land-Tax
- Ch.13, Taxes on Gold
- Ch.14, Taxes on Houses
- Ch.15, Taxes on Profits
- Ch.16, Taxes on Wages
- Ch.17, Taxes on Other Commodities
- Ch.18, Poor Rates
- Ch.19, Changes in the Channels of Trade
- Ch.20, Value and Riches
- Ch.21, Profits and Interest
- Ch.22, Bounties on Exportation, Importation
- Ch.23, On Bounties on Production
- Ch.24, Adam Smith concerning the Rent of Land
- Ch.25, On Colonial Trade
- Ch.26, On Gross and Net Revenue
- Ch.27, On Currency and Banks
- Ch.28, Comparative Value of Gold, Corn, and Labour
- Ch.29, Taxes Paid by the Producer
- Ch.30, Influence of Demand and Supply on Prices
- Ch.31, On Machinery
- Ch.32, Mr Malthus's Opinion on Rent
Mons. Say greatly magnifies the inconveniences which result if a tax on a manufactured commodity is levied at an early, rather than at a late period of its manufacture. The manufacturers, he observes, through whose hands the commodity may successively pass, must employ greater funds in consequence of having to advance the tax, which is often attended with considerable difficulty to a manufacturer of very limited capital and credit. To this observation no objection can be made.
Another inconvenience on which he dwells is, that in consequence of the advance of the tax, the profits on the advance also must be charged to the consumer, and that this additional tax is one from which the treasury derives no advantage.
In this latter objection I cannot agree with M. Say. The State, we will suppose, wants to raise
immediately £1,000 and levies it on a manufacturer, who will not, for a twelvemonth, be able to charge it to the consumer on his finished commodity. In consequence of such delay, he is obliged to charge for his commodity an additional price, not only of £1,000, the amount of the tax, but probably of £1,100, £100 being for interest on the £1,000 advanced. But in return for this additional £100 paid by the consumer, he has a real benefit, inasmuch as his payment of the tax which Government required immediately, and which he must finally pay, has been postponed for a year; an opportunity, therefore, has been afforded to him of lending to the manufacturer, who had occasion for it, the £1,000 at 10 per cent, or at any other rate of interest which might be agreed upon. Eleven hundred pounds payable at the end of one year, when money is at 10 per cent interest, is of no more value than £1,000 to be paid immediately. If Government delayed receiving the tax for one year till the manufacture of the commodity was completed, it would, perhaps, be obliged to issue an Exchequer bill bearing interest, and it would pay as much for interest as the consumer would save in price, excepting, indeed, that portion of the price which the manufacturer might be enabled in consequence of the tax, to add to his own real gains. If for the interest of the Exchequer bill, Government would have paid 5 per cent, a tax of £50 is saved by not issuing it. If the manufacturer borrowed the additional capital at 5 per cent, and charged the consumer 10 per cent, he also will have gained 5 per cent on his advance over and above his usual profits, so that the manufacturer and Government together gain, or save, precisely the sum which the consumer pays.
M. Simonde, in his excellent work,
De la Richesse Commerciale, following the same line of argument as M. Say, has calculated that a tax of 4,000 francs, paid originally by a manufacturer, whose profits were at the moderate rate of 10 per cent, would, if the commodity manufactured, only passed through the hands of five different persons, be raised to the consumer to the sum of 6,734 francs. This calculation proceeds on the supposition, that he who first advanced the tax, would receive from the next manufacturer 4,400 francs, and he again from the next, 4,840 francs; so that at each step 10 per cent on its value would be added to it. This is to suppose that the value of the tax would be accumulating at compound interest; not at the rate of 10 per cent per annum, but at an absolute rate of 10 per cent at every step of its progress. This opinion of M. de Simonde would be correct, if five years elapsed between the first advance of the tax, and the sale of the taxed commodity to the consumer; but if one year only elapsed, a remuneration of 400 francs, instead of 2,734, would give a profit at the rate of 10 per cent per annum, to all who had contributed to the advance of the tax, whether the commodity had passed through the hands of five manufacturers or fifty.
Say, vol. i. p. 316. See also note to page 78.
Barton, “On the Condition of the Labouring Classes of Society,” p. 16.
It is not easy, I think, to conceive that under any circumstance, an increase in capital should not be followed by an increased demand for labour; the most that can be said is, that the demand will be in a diminishing ratio. Mr. Barton, in the above publication, has, I think, taken a correct view of some of the effects of an increasing amount of fixed capital on the condition of the labouring classes. His Essay contains much valuable information.
[Chapter 6, paragraphs 16-18], where I have endeavoured to shew, that whatever facility or difficulty there may be in the production of corn; wages and profits together will be of the same value. When wages rise, it is always at the expense of profits, and when they fall, profits always rise.
“In the employment of fresh capital upon the land, to provide for the wants of an increasing population, whether this fresh capital is employed in bringing more land under the plough, or improving land already in cultivation, the main question always depends upon the expected returns of this capital; and no part of the gross profits can be diminished, without diminishing the motive to this mode of employing it. Every diminution of price, not fully and immediately balanced by a proportionate fall in all the necessary expenses of a farm, every tax on the land, every tax on farming stock, every tax on the necessary of farmers, will tell in the computation; and if, after all these outgoings are allowed for, the price of the produce will not leave a fair remuneration for the capital employed, according to the general rate of profits, and a rent at least equal to the rent of the land in its former state, no sufficient motive can exist to undertake the projected improvement.” Observations, p. 22.
[Chapter 2, paragraphs 8-11].
M. Say, in his note to the French translation of this work, has endeavoured to shew that there is not at any time land in cultivation which does not pay rent, and having satisfied himself on this point, he concludes that he has overturned all the conclusions which result from that doctrine. He infers, for example, that I am not correct in saying that taxes on corn, and other raw produce, by elevating their price, fall on the consumer, and do not fall on rent. He contends that such taxes must fall on rent. But before M. Say can establish the correctness of this inference, he must also shew that there is not any capital employed on the land for which no rent is paid (see the beginning of this note, and
[Chapter 2, paragraphs 1-2] and
[Chapter 2, paragraphs 14-15] of the present work); now this he has not attempted to do. In no part of his notes has he refuted, or even noticed that important doctrine. By his note to page 182 of the second volume of the French edition, he does not appear to be aware that it has even been advanced.
real price, instead of
cost of production.” It will be seen, from what I have already said, that to me it appears, that in these two instances he has used the term
real price in its true and just acceptation, and that in the former case only it is incorrectly applied.