Causes of a combination took place among the proprietors of Nos. 1,2, Nature and 3, 4, and 5, to withhold a portion of their produce from mar- Rent. ket; and that in consequence of this, or any other cause, the price of corn is raised ever so little above the expense of its production on No. 5; in that case, it is obvious that soils of the very next degree of fertility, or that that portion of No. 6, which, in point of productive power, differs extremely little from No. 5, would be instantly brought under cultivation; and the increased supply would infallibly sink prices to the level that would just afford the average rate of profit, and no more, to the cultivators of No. 5, or of the poorest soils which the supply of the effectual demand renders it necessary to cultivate. It is quite the same thing, therefore, in so far as price is concerned, whether a country is appropriated or not. When it is appropriated, prices are kept down to their lowest limit by the competition of the landlords. And it is by the self same principle,-the cost of producing that portion of the necessary supply raised in the most un· favourable circumstances, that the price of raw produce is determined in England and France as it is determined in New Holland and Illinois. for a Rise Price in the But then it is said, that this reasoning involves a contradic- Does not action, that it accounts both for a rise and a fall of price in the count both same way, or by an extension of cultivation! In point of fact, and Fall of however, it does no such thing.* The market price of corn same way. will always be low where it is cheaply produced, as in Poland; and it will occasionally be low where it costs a great deal to produce it, when a redundant supply is brought to market, as is the case in England at this moment. Suppose, as before, that the effectual demand for corn in Great Britain is at present such as will just enable lands of the fifth degree of fertility to be cultivated; but that, owing to variable harvests, to injudicious en *Our author's unwillingness to acknowledge the influence of demand and supply upon price, deprives him here of the simple and true solution of this apparent inconsistency, and forces him into vague and inconclusive language. Among the peculiarities which attend corn or other agricultural products this is one, that while its price wavers from year to year with a much wider oscillation than the products of any other species of labour, its average price from century to century varies only by a gradual and slow advance. The former of these is the market price determinable simply by demand and supply, and the reason of its wider variations is to be found in the necessity of its use. Men cannot, as in other articles, put a restraint upon their inclinations, and do without it; their power to adopt a substitute is extremely limited, and thus the necessity of a general distribution causes its price to rise strictly in proportion to the diminution of the supply. The latter of these, or the natural price, is the cost of production, which consequently rises as the product is obtained from soils of inferior fertility. It is not correct, however, to speak of the cultivation of inferior soils as the cause of this higher price, it is not their actual cultivation, but the necessity of cultivating them that determines it. The price is raised before the inferior soil is brought into cultivation, and would rise still higher, but for such extension of agriculture. A rise in price is determined by the deficiency of the supply as compared with the demand; a fall of price is determined by a surplus, and the average price is determined by the costs of production on the poorest soil in cultivation, or by the returns of the last capital laid out on lands. See Malthus, ch. 3 sect. 5, 6, and 10. Edinburgh Review, No. LIX. art. 2.-E. Causes of Rent. Nature and couragement held out by the Legislature, to the ardour of speculation, to the miscalculation of farmers, or to any other cause, lands of the sixth degree of fertility have been cultivated; the increased quantity of produce that must thus be thrown on the market will plainly depress prices to such an extent, that, instead of yielding average profits to the cultivators of No. 6, they will not yield them to the cultivators of No. 5. But they will yield more to the cultivators of No. 5 than to those of No. 6; the latter, therefore, will be first driven from their business; and when they have retired, prices will rise, not indeed to such a height as to enable No. 6 to be cultivated, but so high as to enable the cultivators of No. 5 to continue their business; that is, as we have already shown, to the precise sum that will enable the raisers of the last portion of the produce necessary to supply the effectual demand to obtain the common and average rate of profit. Should the demand, instead of continuing stationary, increase so that it could not be supplied without cultivating Nos. 6 and 7, the price will have to rise in proportion to the increased expense of cultivating them. But to whatever extent the demand might increase, still, if such an improvement were made in agriculture, or in the art of raising corn, as would enable the supply to be obtained from No. 1 only, the price would necessarily and infallibly fall to the precise sum that paid the expenses of its cultivators, and rent would entirely disappear. Distinction between Agriculture, Manufactures, and This analysis of the nature and causes of rent discovers an important and fundamental distinction between agricultural and commercial and manufacturing industry. In manufactures, the Commerce. worst machinery is first set in motion, and every day its powers are improved by new inventions; and it is rendered capable of yielding a greater amount of produce with the same expense. And as no limits can be assigned to the quantity of improved machinery that may be introduced-as a million of steam-engines may be constructed for the same, or rather for a less, proportional expense than would be required for the construction of Tendency of one-the competition of capitalists never fails to reduce the price of manufactured commodities to the sum which the least expensive method of production necessarily requires for their production. Manufactu red Products to fall in Price, Tendency of In agriculture, on the contrary, the best machinery, that, is, Agricultural the best soils, are first brought under cultivation, and recourse is rise in Price. afterward had to inferior soils, requiring a greater expenditure Products to of capital and labour to produce the same supplies. The improvements in the construction of farming implements, and meliorations in agricultural management, which occasionally occur in the progress of society, really reduce the price of raw produce, and, by making less capital yield the same supplies, have a tendency to reduce rent. But, the fall of price which is permanent in manufactures, is only temporary in agriculture. A fall in the price of raw produce, by enabling every class to obtain greater quantities than before, in exchange for their products or their labour, raises the rate of profit, and leads, of course, to an increased accumulation of capital. But the industry of a nation being always in proportion to the amount of its capital, this accumulation necessarily leads to a greater demand for labour, to higher wages, to an increased population, and, consequently, to a Causes of further demand for raw produce and an extended cultivation. Nature and Agricultural improvements check for a while the necessity of ente having recourse to inferior soils and the rise of rents; but the check can only be temporary. The stimulus which they, at the same time, give to population, and the natural tendency of mankind to increase beyond the means of subsistence, is sure, in the end, to raise prices, and by forcing recourse to poor lands, to raise rents. chines, en different Mr. Malthus has, in illustrating this important distinction be- Earth comtween agricultural and manufacturing industry, set the doctrine Malthus to a of rent in a clear and striking point of view. "The earth," he series of Maobserves, "has been sometimes compared to a vast machine, dowed with presented by nature to man for the production of food and raw Productive materials; but to make the resemblance more just, as far as they Pewers. admit of comparison, we should consider the soil as a present to man of a great number of machines, all susceptible of continued improvement by the application of capital to them, but yet of very different original qualities and powers. This great inequality in the powers of the machinery employed in procuring raw produce, forms one of the most remarkable features which distinguishes the machinery of the land from the machinery employed in manufactures. "When a machine in manufactures is invented, which will produce more finished work with less labour and capital than before, if there be no patent, or as soon as the patent is over, a sufficient number of such machines may be made to supply the whole demand, and to supersede entirely the use of all the old machinery. The natural consequence is, that the price is reduced to the price of production from the best machinery, and if the price were to be depressed lower, the whole of the commodity would be withdrawn from the market.* "The machines which produce corn and raw materials, on the contrary, are the gifts of nature, not the works of man; and we find by experience that these gifts have very different qualities and powers. The most fertile lands of a country, those which, like the best machinery in manufactures, yield the greatest products with the least labour and capital, are never found sufficient to supply the effective demand of an increasing population. The price of raw produce, therefore, naturally rises till it becomes sufficiently high to pay the cost of raising it with inferior machines, and by a more expensive process; and, as there cannot be two prices for corn of the same quality, all the other machines, the working of which requires less capital compared with the produce, must yield rents in proportion to their goodness.t * As this is not the fact in any case, that "the whole of the commodity is withdrawn from the market," it would be better to add the explanatory clause, "or such proportion of it as would be sufficient by producing competition among the buyers to elevate the price to the costs of production."-E. + This analysis of rent, which traces it to the diminishing productive powers of the soils successively brought into cultivation, completely overthrows the very basis upon which the system of the French economists rested, and from which all their practical deductions were drawn. Instead of Rent being as they regarded it, a surplus yield, arising from the bounty of nature, and exalting in the scale of productiveness agricultural labour Nature and Causes of Rent. "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 large 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 show 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. "I have no hesitation, then, in affirming that the reason 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 is sold at the price necessary to yield the actual supply; and that, as the production of this supply becomes more and more difficult, the price rises in proportion. "I hope to be excused for having dwelt so long, and presented 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 entirely overlooked by the economists, by Dr. Smith, and all those writers who have represented raw produce as selling always at a monopoly price."(Inquiry into the Nature and Progress of Rent, p. 37.) It appears, therefore, that in the earliest stages of society, and when only the best lands are cultivated, no rent is ever paid. The landlords, as such, do not begin to share in the produce of the soil until it becomes necessary to cultivate lands of an inferior degree of fertility, or to apply capital to the superior lands with a diminishing return. Whenever this is the case, rent begins to be paid; and it continues to increase according as cultivation is extended over poorer soils; and diminishes according as these poorer soils are thrown out of cultivation. Rent, therefore, depends exclusively on the extension of tillage. It is high where tillage is widely extended over inferior lands; and low above all its other forms, this proves it to be the result of the opposite principle, viz.-that while in other operations of natural agents as wind, fire, steam, the bounty of nature is equal and unlimited, in land alone, it is various and bounded. That rent originates from this peculiarity is evident, because it requires only a similar limitation of quantity or variety of power in the other natural agents immediately to effect its introduction into them also. If we suppose, for instance, the steam engines first made to appropriate a higher or more perfect form of the natural agent employed in them, than those subsequently erected, it is clear that the earlier engines like the superior soil, would command a rent grounded on this distinction, which would begin to be paid as soon as the demands of society for the products resulting from their use, required the introduction of those of inferior power.-E. Causes of where it is confined to the superior descriptions only. But in Nature and no case does rent ever enter into price. For, the produce rais- Rent. ed on the poorest lands, or with the capital last applied to the cultivation of the soil, regulates the price of all the rest; and this produce never yields any surplus above the common and. average rate of profit. It being thus established that the circumstance of land being appropriated, and rent paid to the landlords, cannot affect the price of commodities, or make any difference whatever on the principle which regulates their exchangeable value in the earliest stages of society, we proceed, in the next place, to inquire into the effects of the accumulation and employment of capital, and of the rise and fall of wages on the value of commodities.* SECT. IV. Effect of the Accumulation and Employment of Capital, and of Fluctuations in the Rate of Wages on Exchangeable Value.t regulated by of immediate It will be remembered, that the comparative quantities of la- value of bour required to produce commodities, and to bring them to Commodities market, formed, in the early ages of society, and before capital the amount was accumulated, the principle by which their comparative or Labour and exchangeable value was regulated. But capital is nothing more of Capital expended in than the accumulated produce of anterior labour; and when it their Prois employed in the production of commodoties, their value must duction. * The section now ended deserves to be thoroughly studied by the student. It contains the elucidation of a fundamental principle of society, and may be considered one of the main pillars upon which the science now rests. In practical importance it yields to that which identifies private interest with public prosperity, and free trade with mutual benefit; but as a fundamental law in the analysis of public wealth, there is perhaps none of equal importance; the profits of capital and the rate of wages, and consequently the accumulation of wealth and the state of population, are all greatly modified if not directly regulated by the laws which it imposes. Its discovery or rather its elucidation is the great glory of the school of Ricardo, and unquestionably the greatest advance which has been made in Political Economy since the time of Adam Smith. It may be said indeed to have given a new aspect to the analytical part of the science, and to have opened to the student a new field of inquiry. In prosecuting it, however, he must take care lest he be misled by the simplicity and beauty of the. analysis into a disregard of other operating causes, more incidental in their nature but equally operative when they exist, and by which the character of the result is always modified, and sometimes perhaps wholly changed. As this forms one of the peculiar principles on which the reputation of Ricardo rests as an improver of this science, it may not be uninteresting to the reader to have his merits here summed up by one who fully understands and highly appreciates them. They are thus stated by our author in his "Discourse on Political Economy:" 1. "That rent is altogether extrinsic to the cost of production. 2. "That capital being the produce of previous labour, and having no value except what it derives from that labour, the fact of the value of the commodities produced by its agency being always determined by the quantities of capital laid out or wasted in their production, shows that it is really determined by the quantities of labour bestowed on them. 3. "That a rise of wages occasions a fall of profits and not a rise in the price of commodities, and a fall of wages a rise of profits and not a fall of prices." Introductory Discourse, p. 67.-E. + The ensuing section is not, in the Editor's opinion, entitled to the same unqualified commendation with the last. It sets out on the sound principle laid down by Smith, that exchangeable value includes within it a return |