experience is enlarged and skill perfected; it would seem, then, that labor, being more abundantly supplied with all the means for its most effectual exercise, would be most successfully applied, and would be followed by the largest and most profitable results. True, the prices of commodities fall as the cost of their production is diminished. But there seems to be no reason why they should fall more rapidly than the cost of the articles decline; and therefore we cannot see, at the first glance, why the rate of profit should be diminished,-why it should be less than when men work at great disadvantage, under all the privations and difficulties incident to the attempt to found a new colony.

Adam Smith ascribes the fall of profits in some measure to the competition of capitalists. "When the stocks of many rich merchants," he says, "are turned into the same trade, their mutual competition naturally tends to lower its profits; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all." But the objection is properly made, that competition can tend only to equalize the profits in different employments and different places. It can make the profits of cotton-spinning equal to those in the iron manufacture, and can reduce the gains of merchants in New York to a level with those in Boston; but it supplies no reason why the average rate of profit in all employments, and at all places, should be depressed. To produce this effect, there must be something to come into competition with capital itself, some other agent, which shall render industry equally effective; and we have no such agent, and cannot even conceive of one.

Mr. Ricardo and his followers attempt to solve the problem by reasoning in their peculiar manner from the few facts which are all that they admit as data in the science. With them, as I have said, the doctrine of profits is a deduction from the Malthusian theories of population and rent. The value of every commodity being divisible into the three elements of rent, wages, and profits, whatever cause tends to augment the two former, or even to increase but one of them without an equivalent reduction of the other, must certainly lessen the third element, which is all that remains for profit. Such a

cause is found in the necessity, created by an ever-increasing population, of constantly having recourse to inferior soils, and thereby of perpetually augmenting the rent of the lands which were previously under cultivation. But if rent is increased, there remains a smaller portion to be divided between wages and profits. Still further; there is a limit to the depression of wages, but there is none to the fall of profits. The natural and necessary rate of wages, according to these theories, as has been already explained, is the smallest sum that will supply the laborer and his family with what are believed to be the necessaries of life. As the cost of food is increased, therefore, by the necessity of cultivating inferior land, the expense of supplying the laborer with food is also increased, and his wages must rise. The portion remaining for profit is thus diminished, as it were, at both ends; as the population increases in number, from the value of every commodity a constantly increasing share must be cut off for rent, and another regularly augmented portion must be deducted for wages. Obviously but a small portion, and that perpetually becoming less, remains for profit. "In one brief formula," says Mr. De Quincey, "it might be said of profits, that they are the leavings of wages; so much will the profit be upon any act of production, whether agricultural or manufacturing, as the wages upon that act permit to be left behind."

The following diagram or ocular construction, also borrowed with some modification from Mr. De Quincey, may not only make this clearer to the reader, but may illustrate the peculiar character of Ricardo's reasoning, the strict, logical deduction from a few arbitrarily assumed premises, little or no regard being paid to the modifying circumstances in a case which is obviously a very complicated one.

Here No. I., the upper parallelogram, represents land of the

No. II. repre

first quality, yielding 100 bushels to the acre. sents the second class of soils, yielding but 90 bushels to the acre, and required for tillage as soon as the growing population has made the produce of No. I. insufficient to satisfy the demand for food. No. III. represents the third class of soils, yielding but 80 bushels to the acre, brought under cultivation under the same pressure continually increasing. No. IV. represents the poorest quality of the soil that is cultivated, yielding 70 bushels to the acre, or only enough to pay the ordinary wages of the labor, and the necessary rate of profit on the capital required for its cultivation, and therefore yielding no surplus for rent. We have only to add, that W expresses the function of wages, P of profit, w', w", and w"" the several increments of wages, and R', R′′, and R"" the several increments of rent, as they emerge successively under the series of agricultural expansions rendered necessary by the constant growth of the population.

As soon as No. II. is called into use by the increased demand for food, the increased price of that food will pay ordinary profits and wages for the cultivation of land yielding only 90 bushels an acre; and therefore R', representing 10 bushels an acre, will be left for the rent of No. I., though it yielded no rent before No. II. was cultivated. But this enhanced price of food renders necessary also an advance of wages, because the wages formerly paid were barely sufficient to purchase the necessary food for the laborer's family at the old price. Hence this increment of wages, represented by w', must also be cut off from P, which is at the same time lessened by the deduction of R'. When a further increase of the population brings into use No. III., yielding only 80 bushels, both R' and R", representing 20 bushels, must be deducted from No. I.; and R", or 10 bushels, from No. II., for rent. So, also, w" must be deducted for a further rise of wages. In like manner, when No. IV. is broken up for tillage, R', R", and R"" will be paid for rent on the three classes of soils of a higher quality, and w', w", and w"" will be the successive additions to the original rate, W, of wages. So long as No. IV. is the poorest land in cultivation, its whole produce will be absorbed in the payment of profits and wages, and nothing will be left for rent.

The preceding diagram is constructed only to show the suc

cessive deductions that are made from profits to pay wages and rent. It does not represent the whole state of the case, after tillage has been brought down to No. IV.; for as there can be but one rate of wages at the same time, w', w", and w"", or the successive increments of wages, must be deducted from the three higher classes of soils, as well as from No. IV. The following construction, then, shows how little remains for profits after No. IV. has come into use.

Here P, representing profits, extended from a to b when only No. I. was in cultivation, but reaches only from c to d after tillage has descended to No. IV.

This diminution of the rate of profits must go on indefinitely, so long as the increase of the population obliges us to have recourse to soils of constantly diminishing fertility. Rent at the same time will be proportionally augmented; the landholder will receive not only a larger portion of the total product, but the price per bushel of the whole product will be augmented. Wages, however, will be only nominally increased; the successive increments, w', w", and w"", cannot be more than enough to pay the enhanced price of food which caused them. In fact, they will not suffice to pay the new price, but the laborer will submit to live on a smaller quantity of food, or on food of a coarser quality; for while food is becoming dearer, the constant tendency of the population to increase is adding to the competition in the labor-market, so that wages cannot rise in full proportion to the higher cost of food.

Thus far, it would seem that the new rates of wages and profits would be established only in agriculture, where alone a necessity for them appears to have been created. But a little reflection will show that they must extend equally to all employments of industry and capital. The enhanced price of food must raise wages throughout the country; and competi

tion must equalize profits. If the returns for the employment of capital were smaller in farming than in commerce and manufactures, capital would be diverted from agriculture till the balance was restored. Furthermore, the increased cost of the raw material, which is always obtained more or less directly from agriculture, will immediately lessen the profits of the manufacturer; for instance, "even upon shoes," as De Quincey remarks, "there will be a small increase of labor, because the raw material will grow a little dearer as hides grow dearer; and hides will grow dearer as cattle grow dearer, by descending upon worse pasture-lands."

There is but one possible check upon this descent of agriculture to inferior soils, and the consequent declension of profits, augmentation of the price of food, and increase of rent. This is the progress of agricultural improvements, by means of which more food is obtained from the same quantity of land, or the same amount of food is procured by a smaller expenditure of labor and capital. In this way, the wants of an increasing population may be provided for without the necessity of bringing more land into tillage, or of applying capital with constantly diminishing returns. But this check cannot have any permanent influence; it may postpone, but cannot finally avert, the consequences of a steady growth of the population. Its influence, indeed, is self-limited; for, as McCulloch remarks, "the rise of profits consequent to every invention, by occasioning a greater demand for labor, gives a fresh stimulus to population; and thus, by increasing the demand for food, again inevitably forces the cultivation of poorer soils, and raises prices." And again, "from the operation of fixed and permanent causes, the increasing sterility of the soil is sure, in the long run, to overmatch the improvements already made in machinery and agriculture, prices experiencing a corresponding rise, and profits a corresponding fall."

It only remains to notice a corollary from this theory, in respect to the different manner in which this declension of the rate of profits affects the comparative value of commodities produced in great part by Fixed Capital, and of those produced in great part by Circulating Capital. These two kinds of capital differ chiefly in point of durability; Circulating Capital is employed for the most part in the payment of wages,