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Modern History Sourcebook:
David Ricardo:
The Principles of Political Economy, 1817

An Epitome

 On Value: It is according to the division of the whole produce of the land of any particular farm, between the three classes of landlord, capitalist, and laborer, that we are to judge of the rise or fall of rent, profit, and wages, and not according to the value at which that produce may be estimated in a medium which is confessedly variable. It is not by the absolute quantity of produce obtained by either class that we can correctly judge of the rate of profit, rent, and wages, but by the quantity of labor required to obtain that produce. By improvements in machinery and agriculture, the whole produce may be doubled; but if wages, rent, and profit be also doubled, these three will bear the same proportions to one another as before, and neither could be said to have relatively varied. But if wages partook not of the whole of this increase; if instead of being doubled, were only increased one-half; if rent instead of being doubled, were only increased three-fourths, and the remaining increase went to profit, it would, I apprehend be correct for me to say, that rent and wages had risen....



The most fertile, and most favorably situated, land will be first cultivated, and the exchangeable value of its produce will be adjusted in the same manner as the exchangeable value of all other commodities, by the total quantity of labor necessary in various forms, from first to last, to produce it, and bring it to market. When land of an inferior quality is taken into cultivation, the exchangeable value of raw produce will rise, because more labor is required to produce it. The exchangeable value of all commodities, whether they be manufactured, or the produce of the mines, or the produce of land, is always regulated, not by the less quantity of labor that will suffice for their production under circumstances highly favorable, and exclusively enjoyed by those who have peculiar facilities of production, but by the greater quantity of labor necessarily bestowed on their production by those

who have no such facilities, and by those who continue to produce them under the most unfavorable circumstances.





With the progress of society the natural price of labor has always a tendency to rise, because one of the principal commodities [food] by which its natural price is regulated, has a tendency to become dearer, from the greater difficulty of producing it. As, however, the improvements in agriculture, the discovery of new markets, whence provisions may be imported, may for a time counteract the tendency to a rise in the price of necessaries, and may even occasion their natural price to fall, so will the same causes produce the correspondent effects on the natural price of labor....


Therefore, in the natural advance of society, the wages of labor will have a tendency to fall, as far as they are regulated by supply and demand; for the supply of laborers will continue to increase at the same rate, whilst the demand for them will increase at a slower rate.... As population increases, these necessaries will be constantly rising in price, because more labor will be necessary to produce them as less fertile land is brought under cultivation. If, then, the money wages of labor should fall, whilst every commodity on which the wages of labor were expended rose, the laborer would be doubly affected, and would be soon totally deprived of subsistence. Instead, therefore, of the money wages of labor falling, they would rise; but they would not rise sufficiently to enable the laborer to purchase as many comforts and necessaries as he did before the rise in the price of those commodities.... Notwithstanding, then, that the laborer would be really worse paid, yet this increase in his wages would necessarily diminish the profits of the manufacturer; for his goods would sell at no higher price, and yet the expense of producing them would be increased.

On Profits: Supposing grain and manufactured goods always to sell at the same price, profits would be high or low in proportion as wages were low or high. But suppose grain to rise in price because more labor is necessary to produce it; that cause will not raise the price of manufactured goods in the production of which no additional quantity of labor is required. If, then, wages continued the same, the profits of manufacturers would remain the same; but if, as is absolutely certain, wages should rise with the rise of grain, then their profits would necessarily fall.

Thus in every case, agricultural, as well as manufacturing profits, are lowered by a rise in the price of raw produce, if it be accompanied by a rise of wages. If the farmer gets no additional value for the grain which remains to him after paying rent, if the manufacturer gets no additional value for the goods which he manufactures, and if both are obliged to pay a greater value in wages, can any point be more clearly established than that profits must fall, with a rise of wages? The farmer then, although he pays no part of his landlord's rent, that being always regulated by the price of produce, and invariably falling on the consumers, has however a very decided interest in keeping rent low, or rather in keeping the natural price of produce low....

The natural tendency of profits then is to fall; for in the progress of society and wealth, the additional quantity of food required is obtained by the sacrifice of more and more labor. This tendency, this gravitation as it were of profits, is happily checked at repeated intervals by the improvements in machinery, connected with the production of necessaries, as well as by discoveries in the science of agriculture which enable us to relinquish a portion of labor before required, and therefore to lower the price of the prime necessary of the laborer. The rise in the price of necessaries and in the wages of labor is however limited; for as soon as wages should be equal to the whole receipts of the farmer, there must be an end of accumulation; for no capital can then yield any profit whatever, and no additional labor can be demanded, and consequently population will have reached its highest point. Long indeed before this period, the very low rate of profits will have arrested all accumulation, and almost the whole produce of the country, after paying the laborers, will be the property of the owners of land and the receivers of tithes and taxes....There would be no motive for accumulation; for no one accumulates but with a view to make his accumulation productive, and it is only when so employed that it operates on profits. The farmer and manufacturer can no more live without profit, than the laborer without wages. Their motive for accumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them an adequate compensation for their trouble, and the risk which they must necessarily encounter in employing their capital productively....In this case a reaction will take place, wages will be below their natural level, and will continue so, till the usual proportion between the supply and demand has been restored. Thus, only the landlord stands to gain. The laborer is forever condemned to the margin, for with every rise in wages he has more and more children, and thus competes his wages down to bare subsistence. The capitalist, who works and saves and invests, and drives forward the economic engine of society, finds that all his trouble is for naught, as his wage costs are higher and higher, his profits smaller and smaller, and his rent higher and higher. Thus the landlords alone, who do naught but collect rent, who contribute nothing to the progress of society, get wealthier and wealthier, while the rest of society---both capitalists and laborers---get poorer and poorer.


From: David Ricardo, The Principles of Political Economy, Edward C. K. Gonner, ed., Bohn's Economic Library (London: G. Bell & Sons, 1891), passim.

Scanned and organized by Jerome S. Arkenberg, Cal. State Fullerton. The text has been modernized by Prof. Arkenberg.



© Paul Halsall, January 1999