Political Economy

“The profit of stock, so far from forming any part of the cost of production, is a surplus remaining after this cost has been completely replaced. In carrying on their business, the farmer and manufacturer do not expend their profit, they create it. It forms no part of their first advances; on the contrary, it forms a part of their subsequent returns. It could not have been employed in carrying on the work of production, because, until this work was completed, it had no existence. It is essentially a surplus, a new creation, over and above all that is necessary to replace the cost of production, or, in other words, the capital advanced. It is hoped that enough has been said to convince the reader of the nature of the error into which those Economists fall who maintain that the profit of stock is included in the expense of production, and that natural and market price tend to an equality. Market price is that which we give in order to obtain a commodity by exchange in the market: natural price is that which we give to effect a purchase at the great storehouse of nature: it consists of the several articles of capital employed in production, and cannot by possibility include the surplus or profit created during the progress of production.”
*20

Colonel Torrens’s remarks are just, so far as they apply to the mere expressions which he is criticising. Profit is certainly not a means, but a result. It is true that unless that result were expected, production would not be continued. Neither the farmer nor the manufacturer could be induced by any other motive to abstain from the unproductive enjoyment of his capital; so food would not be produced unless its consumption were necessary or agreeable. But the obtaining a profit is no more a part of the cost of producing a harvest than the gratification of appetite is a part of the cost of producing a dinner, or protection from cold part of the cost of producing a coat.

Want of the term abstinence, or of some equivalent expression, has led Mr. Malthus into inaccuracy of language. He seems to have felt that something besides mere labour is essential to production. He felt that simple industry would not convert a naked heath into a valuable wood; that the planter, in addition to the labour of inserting and protecting the saplings, incurred the additional
sacrifice of directing his labour to the production of remote results; and that the successive generations of proprietors, in suffering the young plantation to become mature, sacrificed their own emolument to that of their successors. He seems to have felt that these sacrifices were part of the cost of producing the wood, and, having no term to express them, he denominated them by the name of their reward. When he termed profit a part of the cost of production, he appears to us to have meant not profit, but that conduct which is repaid by profit: an inaccuracy precisely similar to that committed by those who term wages a part of the cost of production; meaning not wages, which are the result, but the labour for which wages are the remuneration.

Colonel Torrens’s error is an error of omission. He refuses to consider profit as part of the cost of production, but he does not substitute for it abstinence or any equivalent expression. Although he admits that where equal capitals are employed the value of the products may differ if the one be brought to market sooner than the other, he has not stated the principle on which this difference depends. That principle is that, though in both cases the labour employed is the same, more abstinence is necessary in the one case than in the other.

Cost of Production Defined.—By
Cost of Production, then, we mean the sum of the labour and abstinence necessary to production. But Cost of Production, thus defined, must be divided into the cost of production on the part of the producer or seller, and the cost of production on the part of the consumer or purchaser. The first is of course the amount of the labour and abstinence which must be undergone by him who offers for sale a given class of commodities or services in order to enable him to continue to produce them. The second is, the amount of the labour and abstinence which must be undergone by those to whom a given commodity or service is offered for sale, if, instead of purchasing, they themselves, or some of them on the behalf of themselves and the others, were to produce it. The first is equal to the minimum, the second to the maximum, of price. For, on the one hand, no man would continue to produce, for the purpose of sale, what should sell for less than it cost him to produce it. And, on the other hand, no men would continue to buy what they themselves, or some of them on the behalf of themselves and the others, could produce at less expense. With respect to those commodities, or, to speak more accurately, with respect to the value of those parts or attributes of commodities, which are the subjects of equal competition, which may be produced by all persons with equal advantages, the cost of production to the producer and the cost of production to the consumer are the same. Their price, therefore, represents the aggregate amount of the labour and abstinence necessary to continue their production. If their price should fall lower, the wages or the profits of those employed in their production must fall below the average remuneration of the labour and abstinence that must be undergone if their production is to be continued. In time, therefore, it is discontinued or diminished, until the value of the product has been raised by the diminution of the supply. If the price should rise beyond the cost of their production, the producers must receive more than an average remuneration for their sacrifices. As soon as this has been discovered, capital and industry flow towards the employment which, by this supposition, offers extraordinary advantages. These who formerly were purchasers, or persons on their behalf, turn producers themselves, until the increased supply has equalized the price with the cost of production.

Some years ago London depended for water on the New River Company. As the quantity which they can supply is limited, the price rose with the extension of buildings, until it so far exceeded the cost of production as to induce some of the consumers to become producers. Three new Water Companies were established, and the price fell as the supply increased, until the shares in the New River Company fell to nearly one-fourth of their former value; from £15,000 to £4000. If the metropolis should continue to increase, these transactions will recur. The price of water will increase and exceed the cost at which it could be afforded. New Companies will arise, and, unless the additional supply is checked by greater natural obstacles than those which the existing Companies have to surmount, the price will again fall to its present level.

But though, under free competition, cost of production is the regulator of price, its influence is subject to much occasional interruption. Its operation can be supposed to be perfect only if we suppose that there are no disturbing causes, that capital and labour can be at once transferred, and without loss, from one employment to another, and that every producer has full information of the profit to be derived from every mode of production. But it is obvious that these suppositions have no resemblance to the truth. A large portion of the capital essential to production consists of buildings, machinery, and other implements, the results of much time and labour, and of little service for any except their existing purposes. A still larger portion consists of knowledge and of intellectual and bodily dexterity, applicable only to the processes in which those qualities were originally acquired. Again, the advantage derived from any given business depends so much upon the dexterity and the judgment with which it is managed, that few capitalists can estimate, except upon an average of some years, the amount of their own profits, and still fewer can estimate those of their neighbours. Established businesses, therefore, may survive the causes in which they originated, and become gradually extinguished as their comparative unprofitableness is discovered, and the labourers and capital engaged in them wear away without being replaced; and, on the other hand, other employments are inadequately supplied with the capital and industry which they could profitably absorb. During the interval, the products of the one sell for less, and those of the others for more, than their cost of production. Political Economy does not deal with particular facts but with general tendencies, and when we assign to cost of production the power of regulating price in cases of equal competition, we mean to describe it not as a point to which price is attached, but as a centre of oscillation which it is always endeavouring to approach.

We have seen that, under circumstances of equal competition, or, in other words, where all persons can become producers, and that with equal advantages, the cost of production on the part of the producer or seller, and the cost of production on the part of the consumer or purchaser, are the same, and that the commodity thus produced sells for its cost of production; or, in other words, at a price equal to the sum of the labour and abstinence which its production requires; or, to use a more familiar expression, at a price equal to the amount of the wages and profits which must be paid to induce the producers to continue their exertions. It has lately been a general opinion that the bulk of commodities is produced under circumstances of equal competition. “By far the greater part of those goods,” says Mr. Ricardo, (
Principles, &c. p. 3,) “which are the objects of desire, are produced by labour, and may be multiplied almost without any assignable limit, if we are disposed to bestow the labour necessary to obtain them. In speaking then of commodities, of their exchangeable value, and of the laws which regulate their relative prices, we always mean such commodities only as can be increased in quantity by the exertion of human industry, and in the production of which competition operates without restraint.”

Now it is clear that the production in which no appropriated natural agent has concurred, is the only production which has been made under circumstances of perfectly equal competition. And how few are the commodities of which the production has in no stage been assisted by peculiar advantages of soil, or situation, or by extraordinary talent of body or mind, or by processes generally unknown, or protected by law from imitation? Where the assistance of these agents, to which we have given the general name of natural agents, has been obtained, the result is more valuable than the result of equal labour and abstinence unassisted by similar aids. A commodity thus produced is called the subject of a
monopoly; and the person who has appropriated such a natural agent, a
monopolist.

Monopolies.

Monopolies may be divided into four kinds.

1.
Where the monopolist has not the exclusive power of producing, but only certain exclusive facilities as a producer, and can increase, with undiminished, or even increased facility, the amount of his produce.

The value of a commodity produced under such circumstances approaches more nearly to the cost of production on the part of the seller, than that of any other monopolised commodity. It is obvious that its price can never permanently fall below the value of the sacrifices which must be paid by the producer, and, on the other hand, that it never can permanently rise above the value of the sacrifices which must be made by the consumers, if, instead of purchasing, they, or some persons on their behalf, were to turn producers. Sir R. Arkwright’s yarn could not sell for more than yarn of an equal quality produced without the aid of his patent machinery; nor would Arkwright have sold it for less than the value of the labour and abstinence employed in its production. The first was the cost of production to the consumer, the second the cost of production to the producer. But the difference between the two was enormous; the cost to Arkwright was not one-fifth of what it would have been to his customers.

His inventions enabled him to produce a greater quantity, but not a better quality. The finger and thumb constitute an instrument more delicate than any system of rollers, and the muslin formed by the comparatively unassisted labour of the Hindoo is finer and more durable than the produce of our elaborate manufactories. The price which Arkwright
could exact was therefore limited, as we have seen, by the competition of other productive instruments, more expensive but quite as efficient. The price which he
did exact was still further limited by a regard to his own interest. He had discovered an instrument of which the powers, instead of being exhausted, increased with every increase in its application. To erect a mill for the purpose of spinning annually a hundred or a thousand pounds of cotton would be madness. The expense of spinning ten thousand pounds very little exceeds the expense of spinning one thousand, and forty thousand might probably be spun at less than double the expense of ten thousand. As the quantity produced is increased, the relative cost of production is diminished. If, therefore, on the sale of ten thousand pounds weight of yarn at a given price, which we will call £10,000, his profit amounted to £5000, the profit of selling one hundred thousand weight at the same price might have amounted to £90,000, and his profit on selling one million pounds weight to £900,000. But to effect this was obviously impossible. As value depends mainly on limitation of supply, he could not have at once offered a large quantity for sale without diminishing the price, if he left that price to be fixed by the competition of the purchasers, or without having a large portion unsold, if he refused to submit to that diminution. His only mode of stimulating a constant increase of consumption was to submit to such a constant lowering of price as should constantly widen the circle of those able and willing to purchase. As is usually the case, his own interest and that of the public coincided, and led him to accept a price far exceeding indeed the cost of production to himself, but falling short by a still wider interval of what would have been the cost of production to them.

Sir R. Arkwright’s monopoly, therefore, was of the most limited kind. His remuneration was bounded, and it was not his interest even to approach that boundary.

2. A second kind of monopoly is in the opposite extreme.
It exists where price is checked neither by the hopes nor by the fears of the producer, where no competition is dreaded, and no increased supply can be effected. The owners of some vineyards have such a monopoly. Constantia owes its peculiar flavour to the agency of a few acres of ground, and that flavour would be destroyed if high cultivation were employed to force from that grornd a larger quantity of wine. As no person but the proprietor of the Constantia farm can be a producer, the price is not checked by any cost of production to the consumer. It is not checked by any wish of the proprietor to increase the consumption, since the quantity produced, and consequently the quantity consumed, is incapable of increase. The price cannot of course fall below the cost of production, but may indefinitely exceed it. It is limited solely by the will and the ability of the consumers. And if fashion were to make it an object of intense desire among the opulent, a pipe of Constantia, produced perhaps at the expense of £20, might sell for £20,000.

3. A third and more frequent kind of monopoly lies between these two extremes, and is neither so strict as the last, nor so comparatively open as the first.
This comprises those cases in which the monopolist is the only producer, but, by the application of additional labour and abstinence, can indefinitely increase his production. The book trade affords an illustration. While a work is protected by copyright, no person but the proprietor of that copyright can produce copies; and he may multiply them indefinitely by the application of additional labour and abstinence. There is here no cost of production on the part of the purchaser, and, as far as he is concerned, the price is limited only by his will and ability. The efficient check arises from the interest of the publisher. As is the case with manufactures generally, the relative expense of publication diminishes as the number of copies published increases. It is his interest, therefore, to encourage a large sale by affixing a price but slightly exceeding the cost of production, diminished as that cost is by the magnitude of the produce. A hundred copies of
Waverley might, perhaps, have been sold at ten guineas a copy; but there can be no doubt that a larger aggregate profit was obtained by selling ten thousand at a guinea and a half.

4.
The fourth and last class of monopolies exists where production must be assisted by natural agents, limited in number, and varying in power, and repaying with less and less relative assistance every increase in the amount of the labour and abstinence bestowed on them. It is under these circumstances that the greater part of the raw produce, whatever it be, which is the staple food of the inhabitants in every Country, potatoes in Ireland, wheat in England, or rice in India, is produced. It is, in fact, THE GREAT MONOPOLY OF LAND; and as there are scarcely any commodities of which the supply is not in some measure limited by the limited extent of the land essential or serviceable to some process in their production, all general theories as to value must be subject to error until the general laws regulating the value of the assistance to be derived from land have been ascertained. It will be necessary, therefore, to examine them at some length.

Land.—The soil of every extensive district is of different degrees of fertility and convenience of situation, and the soils of each degree constitute a distinct class of natural agents, affording each a distinct amount of assistance to the cultivator. And we have seen that each portion of soil, whatever be its fertility, agricultural skill remaining the same, generally gives a less and less proportionate return to each additional quantity of labour and abstinence bestowed on its cultivation, and may be said, therefore, to comprise within itself a system of natural agents of different powers. The different classes of natural agents will be successively employed, in proportion to their efficiency; an inferior class being never resorted to while a superior one is equally accessible: and each class, until it has been completely appropriated, may be considered as practically unlimited in supply, since it is universally accessible. What shall be the worst natural agent employed, or, in other words, to what extent inferior soils shall be cultivated, or additional labour and abstinence employed at a comparative disadvantage on the cultivation of those which are more fertile or better situated, must always be determined by the wealth and wants of the community; by the quantity of agricultural produce which they have the power and the desire to purchase. While those wants can be satisfied by slightly cultivating only a portion of the most fertile and best situated land, that land, though highly productive, indeed more productive in proportion to the labour and abstinence bestowed on it than at any subsequent stage, cannot be a separate and independent source of value. It is then a natural agent universally accessible, and its produce, however large, will exchange only for the value of the labour and abstinence employed on its production. In short, the cost of production to the producer, and the cost of production to the consumer, are, under such circumstances, the same. This is the state of some of the fertile and thinly-peopled districts of the tropics. The inhabitants of the greater part of the Tierra Caliente, of Mexico, appropriate at will from the fertile wilderness over which they are scattered the small patches which afford them the materials of lodging, food, and raiment. We are told that in these districts the labour of a week will provide subsistence for a year, but even this vast productive power, or even any conceivable increase in it, is incapable of giving value to the assistance afforded as long as the supply of that assistance remains unlimited.

It becomes limited, however, in the very earliest stages of improvement. Both the causes and the consequences of this event may be illustrated by tracing the progress of a Colony.

When a body of emigrants arrives on the coast of an unoccupied district, their first operation must be to fix the situation of their future metropolis; the seat of government, of law, of foreign trade, and of those manufactures which require the congregation of numerous workmen. We may suppose their numbers and the local advantages to be such as to enable them to occupy, within such a distance from their infant town as to render the expense of carriage immaterial, as much land of the highest fertility as each agricultural family may wish to cultivate. The agricultural produce thus obtained must sell for its cost of production to the producer; every consumer being able at will to turn a producer, with advantages equal to those enjoyed by the existing producers, and being unwilling to give for the result of a given amount of labour and abstinence on their part more than the result of an equal amount of labour and abstinence on his own part. Such a commodity rapidly increases in numbers and in wealth, and that increase is accompanied by an increased desire and ability to purchase agricultural produce. Until the supply of raw produce has been increased, the price must now rise above the cost of production. But when the most fertile lands within a given distance of the town have been occupied, there remain only three modes of increasing the supply; either, 1. by cultivating the fertile lands at a greater distance from the town; or, 2. by cultivating the inferior land in its neighbourhood; or, 3. by employing additional labour and abstinence in the cultivation of the lands already occupied. Whichever of these plans be adopted, and probably they will all be adopted, the additional quantity must be supplied at an increased expense. The first is loaded with the expenses of carriage; and we know that a given amount of labour and abstinence is employed to comparative disadvantage, when applied either to the cultivation of inferior land, or to the further improvement of the best land.

The immediate consequence of the increase of supply must be a fall of price, but a fall not equal to the previous rise. The additional supply is produced under circumstances of equal competition, every consumer having it in his power to turn producer by occupying the more distant or less fertile territory; it sells, therefore, for the cost of production to the producer. But commodities of precisely the same qualities cannot sell in the same market for different prices. The purchaser of a bushel of wheat does not inquire whether it was grown within a furlong or at ten miles from the place of sale. The produce, therefore, of the fertile lands in the immediate vicinity of the market, sells at the same price as that of the distant or inferior land.

That price, as it is equal to the cost of production of what is produced at the greatest expense, must exceed the cost of production of what is produced at the least expense. The proprietor of the most fertile and best situated land has no motive to take less, as he cannot, like the owner of a patent, increase the amount of what he produces and continue to produce at equal advantage; and the purchaser cannot support an offer of less, as he cannot turn producer but by submitting to disadvantages which equalize the current price and the cost of production.

As the Colony grows into a People and an Empire, the same processes are repeated. Every increase of wealth and population raises the price of raw produce. Increase of price occasions an increase of supply, raised at a comparatively greater expense. The price falls in consequence of the increased supply, but is prevented from falling to its former level by the increase which has taken place in the cost of producing that part of the whole supply which is brought to market at the greatest expense.

The effect will be the same whether we select for the scene a continent or an island; a district containing soils of every degree of fertility, or of precisely uniform quality. The Anglo-Americans have supplied their constantly increasing wants chiefly by spreading themselves backwards over their unbounded Western territory, and have made little use of inferior soils, or of high cultivation, except in the immediate vicinity of their cities. In Malta, a single acre receives more labour than would be devoted to a square mile in the Illinois; but precisely the same motives impel the Maltese to terrace his mountains into gardens, and the American to reclaim the prairies of the Missouri.

It may be inferred, from the picture which we have given of the progress of society, that we believe an increased difficulty of obtaining raw produce to be the natural incident to an increase of population. In the absence of counteracting causes it certainly would be so; but those causes are so powerful, that, unless checked by legislation, they in many respects balance the causes which we have been considering. In a colony, the counteracting causes appear likely to preponderate for a period, the duration of which must of course depend in part on the quantity of fertile and unoccupied land in its vicinity. As the circle of appropriated land expands, and the expense of bringing food to the consumers becomes more oppressive, there is a tendency in the consumers to follow the food. The colonial capital, now turned into a metropolis, may continue to send out portion after portion of her increased inhabitants, until the whole territory acquires something approaching to an average amount of cultivation. Again, in every Country increased wealth and numbers are accompanied by increased agricultural skill and improved means of transport. The use of implements, the division of labour, and physical knowledge are powerful aids to the agriculturist, though they do not afford to him the almost magical increase of power which they give to the manufacturer. The improvements in carriage are still more important: a given amount of labour applied for twenty years to a given piece of land, would probably now produce a return four or five times as great as would have been obtained at the Conquest. But the labour necessary to transport that produce one hundred miles is probably now not one one-hundredth of what it was then. No improvements in husbandry instruments, or in breeding, or in the rotation of crops, have been so efficient as the substitution of the waggon, the Macadamized road, the canal, the navigable river, and the railway, for the pack-horse of our ancestors and the dangerous tracks through which they beat out and picked their way. The intervention of a hill or a morass was then an obstacle sufficient to allow the price of corn on one side to be double that on the other; and London was so dependent on the immediately adjacent Counties, that the landlords of those Counties petitioned against the opening of roads, as interfering with their vested right to a monopoly of the metropolitan supply; a petition which failed because the immediate interests of other landlords opposed it.

But the principal means by which a Country, when increasing in wealth and population, may avoid the necessity of raising its raw produce at a constantly increasing disadvantage, is by importation.

We have seen that additional labour employed in manufactures produces an increasing proportionate effect; that if one thousand men can in a given time work up one million of pounds of cotton, two thousand men would be able to work up in the same time more than two millions of pounds, and four thousand men, much more than twice as much as two thousand. As a nation increases in opulence and population, it becomes the interest, therefore, of the community to devote their additional population rather to manufactures, in which they have a constantly increasing advantage, than to agriculture, at a constantly increasing disadvantage. As their industry becomes more and more efficient, they are in general able to purchase with the produce of a given amount of labour and abstinence a larger and larger amount of the produce of the industry of their less advanced contemporaries. The produce of the labour of a single Englishman employed for a given time in fabricating cotton, will purchase the cotton grown by the labour of five, or perhaps ten Hindoos, or the wheat grown by three, or perhaps five, Lithuanians or Poles.

It must be recollected, indeed, that a nation, while extending its manufactures, must increase its importation of raw produce; and we have already stated that the increased labour at which the additional produce must be obtained would retard the progress of such a community. But though this is unquestionable, though it is even certain that, if sufficient time be allowed, this obstacle is able not merely to retard, but almost to arrest, the advance of manufactures, there seems to be little to fear from it within any of those periods within which calculations for practical purposes are generally confined. In the first place, the stimulus of an advantageous trade must tend to increase the agricultural skill of the exporting nations, and increase the facilities of transport; causes which, especially in the earlier stages of a nation’s improvement, often enable it, and for considerable periods, to bring to market an increased quantity of raw produce with the same or even less proportionate labour. And, secondly, even if we suppose the manufacturing nation to be supplied by its agricultural customers at an increased proportionate expense to
them, it does not follow that the proportionate expense to
her need be increased. The increased difficulty on the one side may be balanced by the increased facility on the other. We will suppose that at present one hundred thousand yards of muslin, fabricated by twelve Englishmen, can be exchanged for one hundred and fifty quarters of wheat, raised by thirty-six Poles; that an increase in population of one-third makes it necessary to import two hundred instead of one hundred and fifty quarters, and that the two hundred quarters are raised, not by forty-eight, the former proportion, but by sixty Poles. If the increase in our skill has kept pace with our increase of numbers, it is probable that eighteen Englishmen would be able to fabricate at least two hundred thousand yards of muslin, instead of one hundred and fifty thousand, the former proportion. The exchange under such circumstances, instead of being less, would be more beneficial than before. England would purchase more corn, and Poland more muslin, at a less proportionate amount of labour.

It must be carefully remembered that the preceding remarks apply not to the higher or lower
price of raw produce, but to the greater or less difficulty in obtaining it; things which have no necessary connection; one of them depending on the causes which affect the general value of raw produce, the other on the causes which affect the general value of money. At the same time, and in the same place, the prices of articles exactly measure the difficulty of obtaining them. It is exactly half as difficult to get a commodity that costs one sovereign as to get a commodity that costs two. But this is only true at the same time and in the same place. Though in England a quarter of corn now costs about fifty shillings, and in the reign of Henry VIII, cost about twenty, it is probable that it was then more difficult to obtain one than it is now. This must have been the case if it was then more difficult to obtain twenty shillings than it is now to obtain fifty. It is equally clear that, although a quarter of wheat now costs in England about ten ounces of silver, and about six ounces in Poland, yet, if it is easier in England to obtain ten ounces of silver than in Poland to obtain six ounces, it is easier in England to obtain a quarter of wheat than it is in Poland. Experience shows that wealth and population almost always increase together, though not in equal ratios, the increase of wealth being, as we have already stated, generally greater than the increase of population. The increased capital and labour of an increasing population are naturally directed to manufactures, in which, as we have already seen, every increased production is more easily effected. As their labour becomes more productive, the value of the products of a given quantity of that labour rises in the general market of the world; or, in other words, they obtain in return for it a greater amount of the precious metals; or, in other words, a higher price. Therefore, although they may have to pay a higher price for a given quantity of raw produce, whether of home growth or imported, it does not follow that the difficulty of obtaining that given quantity has increased; it is possible, and not improbable, that it may have diminished. A nation so situated may be compared to an individual whose income happens to be rising at the same time when the price of corn is rising. If the rise of his income more than counterbalances the rise of corn, he finds it every year more easy to purchase a given quantity, though he may have to give a higher and higher price for it.

Effects of the Cost of Production on Price.—We have seen that production may take place under five different circumstances.

The price of those commodities which are comprehended in the first class appears to be subject to laws capable of accurate investigation. Where labour alone has been employed, the price must be equal to the wages of that labour. Where that labour has been assisted by abstinence, or, in other words, where a period has elapsed between the employment of the labour and the sale of its produce, the price must be equal to the amount of the wages of that labour and the remuneration to be paid either to the labourer for having suffered the payment of his wages to be deferred, or to the capitalist who has paid those wages in advance.

There are, however, very few commodities of which the whole price can be resolved into the remuneration for the labour, or the abstinence, or both, which must be bestowed on their production.

Mere abstinence can produce nothing. Labour, or the agency of nature, must afford the subject with respect to which it is to be exercised. It is possible, indeed, that a natural agent universally accessible may sometimes afford a product of no value at first, but capable of becoming valuable by mere keeping; but no instance of the kind occurs to us, and some little trouble is generally requisite for the mere safe custody of any article.

Mere labour
does produce a very few articles. The laver collected and sold on the coast of Devonshire is an example. It grows naturally on the unappropriated rocks within the influence of the tide, and in abundance practically unlimited. No instruments are necessary to gather or prepare it, and, as it will not keep, it is sold as soon as it has been collected and washed. The price of a given quantity consists, therefore, merely of the wages of those who gather, wash, and bring it to market.

A class of commodities, perhaps rather larger, but still inconsiderable when compared with the general mass, is produced by labour and abstinence, assisted only by those natural agents which are universally accessible. It is difficult, however, to point out an article, however simple, that can be exposed to sale without the concurrence, direct or indirect, of many hundred, or, more frequently, of many thousand different producers; almost every one of whom will be found to have been aided by some monopolized agent.

There are few things of which the price seems to consist more exclusively of wages and profits than a watch;
*21 but if we trace it from the mine to the pocket of the purchaser, we shall be struck by the payment of rent (the invariable sign of the agency of some instrument not universally accessible) at every stage of its progress. Rent was paid for the privilege of extracting from the mines the metals of which it is composed; for the land which afforded the materials of the ships in which those metals were transported to an English port; for the wharfs at which they were landed, and the warehouses where they were exposed to sale; the watchmaker pays a rent for the land covered by his manufactories, and the retailer for that on which his shop is situated. The miner, the shipwright, the house-builder, and the watchmaker, all use implements formed of materials produced by the same processes as the materials of the watch, and subject also in their different stages to similar payments of rent. The whole amount of all these different payments forms probably a very small portion of the value of the watch; but if we were to attempt to enumerate them, they would be found subdivided into ramifications too minute for calculation. What remains consists of the wages of the workmen, and the profits of the capitalists who paid those wages in advance. The attempt to trace back these wages and profits to their earliest beginnings, would be as vain as the attempt to enumerate all the payments of rent. In estimating, therefore, the value of a manufactured commodity, we seldom go farther back than to the price paid by the manufacturer for his materials and implements, a price which must have included all previous payments of rent, wages, and profits.

We will now trace the causes which increase the value of those materials after they have been the property of the manufacturer. We will suppose a watchmaker’s capital to consist of materials worth £500, that he has bought the land covered by his buildings for £500, and has expended £900 in erecting them, that his tools have cost him £100, and that an annual expense of £100 is necessary to keep his buildings and tools in repair. We will suppose him to employ ten workmen, each receiving at an average £100 a-year, and that one year is the average period from the commencement to the sale of a watch. We will suppose that his ten workmen can annually convert his £500 worth of materials into five hundred watches, and that the average rate of profit in his business amounts to ten per centum per annum. To give him this profit it is clear that his watches must sell for

Value of materials,	£500
Wages for a year,	1000
Repairs for a year,	100
	1600
Profit on the advance of these sums, and on the value of the land, and buildings, and tools, for half-a-year, at 10 per cent. per annum,	155
	£1755

It will be observed that, although a year is supposed to elapse between the commencement and the sale of a watch, we suppose the cost of its production to have been advanced for only half-a-year. The fact is that some part of the advances must have been made for more, and some for less than half-a-year. Supposing a workman to have been employed on the watch for a year, and paid daily, he received his first day’s wages one year before the watch was sold, but his last day’s wages on the very day of the sale; six months, therefore, is the average period for which the whole were advanced before the sale; just as large a proportion having been advanced for a shorter as for a longer period.

It will be observed, too, that we suppose the whole value of the materials, repairs, and wages to be repaid, but only a profit on the value of the land, buildings, and tools. The first are annually expended by the capitalist, the second remain to be used as instruments of further production. The land is indestructible, and the damage done to the buildings and tools is paid for by the £100 supposed to be expended in repairs.

But the whole cost of production has not yet been enumerated.

In the first place, some wages must be allowed to the master watchmaker himself for his labour in superintending his business; and, secondly, some profit on the expense of his education. And as his knowledge and habits, which form his mental capital, will not survive him, something more than the average rate of profit is necessary to replace their value.

If we suppose the expense of his education to have amounted to £1000, and that it will be replaced with average profit by an annual return of £15 per cent., and the average wages of labour to be £30 a-year, we have £180 to add to the price of the watches, and £9 more for the advance of this sum for half-a-year, making £1944.

The last source of expense is taxation, or, in other words, the wages and profits of those who have protected all the different producers of the watches from foreign and domestic violence and fraud. A considerable portion of the price paid by the watchmaker for his materials, tools, and buildings, probably consisted of the taxation to which those commodities had been previously subjected; but the taxation which we are now considering is that which he incurs during the year supposed to be employed in manufacturing the watch.

This is an expense little capable of previous estimation; partly because the expenses of government are subject to constant variation, and partly because no general principle regulates the proportions in which those expenses are divided among the contributors. In England they are in general imposed upon the persons using or producing certain commodities; upon the use, for instance, of a carriage or window, and upon the production of candles or glass. We will suppose the annual taxation imposed on the shop and other instruments of production used by the watchmaker to amount to £53 7s., the profit on the advance of this sum for half-a-year would exceed by a slight fraction £2 13s., together £56, making with the £1944, the amount of our previous calculation, the sum of £2000, the whole cost of production of the five hundred watches, or £4 a-piece.

The different sums in this example have of course been taken at random; but we have thought it worth while to go through it partly as an instance of the calculations on which every manufacturer must found his estimate of the profit or loss likely to follow any given undertaking; and partly to show in how many shapes, labour, abstinence, and the agency of nature, or, in other words, rent, profits, and wages, are constantly re-appearing in every productive process.

When we speak, therefore, of a class of commodities as produced under circumstances of equal competition, or as the result of labour and abstinence unassisted by any other appropriated agent, and consider their price as equal to the sum of the wages and profits that must be paid for their production, we do not mean to state that any such commodities exist, but that, if they did exist, such would be the laws by which their price would be regulated; and that so far as labour or abstinence, or both, are conducive to the production of any given commodity, it is to be considered as produced under circumstances of equal competition, and as worth the wages or profits, or both, with which that labour or abstinence, or both, must be remunerated.

Effects of Monopolies on Price.—The prices of the commodities comprised in the second, third, and fourth classes, are but little governed by any general rules. The prices of those comprised in the second class, cannot rise above the cost of production when unassisted by the monopolized agent, but have a tendency to approach the cost of production to the monopolist. The prices of those comprised in the third and fourth classes have no necessary limits, but approach much more nearly to the cost of production in the fourth class, where the monopolist can increase his produce, than in the third class, where nature strictly limits the amount that can be produced.

Rent.—The price of the commodities comprised in the fifth and last class, those which are produced under what may be called unequal competition or qualified monopoly, where all persons may become producers, but every additional quantity is obtained at a greater proportionate expense, has a constant tendency to coincide with the cost of production of that portion which is continued to be produced at the greatest expense. The annual supply of London requires about one million five hundred thousand quarters of wheat. Of this quantity, perhaps fifty thousand can be obtained only by means of high cultivation, or very distant carriage, at an expense of about 50s. a quarter. While the wants and the wealth of the inhabitants of London are such as to make them require, and enable them to purchase, one million five hundred thousand quarters, and the expenses of carriage and cultivation remain unaltered, it is clear that the whole quantity, supposing it to be of uniform quality, must sell at the rate of 50s. a quarter. If it were to sell for less, the last fifty thousand quarters would cease to be produced, and the price would again rise in consequence of the deficiency of the supply. But of the whole one million five hundred thousand quarters, a portion, perhaps fifty thousand, might be produced by slightly cultivating the most fertile and best situated land, at the expense of 10s. a quarter. A hundred thousand may cost the producer 20s. a quarter, two hundred thousand 25s., two hundred thousand more 30s. a quarter, and the cost of production of all, except the last fifty thousand, must have been less than the 50s. for which they are sold. The difference between the price and the cost of production is
Rent. It is an advantage derived from the use of a natural agent not universally accessible. It is taken, therefore, by the owner of the agent by whose assistance it was obtained.

A portion of the whole supply, however, that portion which is produced at the greatest expense, is produced without any payment of rent. If the cost of producing and sending to market from a given farm be in the following proportions: for one hundred quarters £100, for ninety more £100, for eighty more £100, for seventy more £100, for sixty more £100, for fifty more £100, for forty more £100, and for thirty-three and one-third of a quarter more £100, and the price per quarter is 60s., it is clear that the landlord’s rent will be in the following proportions:—

And it is equally clear that no rent can be paid by the farmer for the privilege of producing the last thirty-three one-third quarters, as the whole £100 for which it sells is absorbed by the cost of production. The last thirty-three one-third quarters will continue to be produced as long as the wants and the wealth of the purchasers render them willing and able to purchase a quantity of corn, the whole of which cannot be supplied unless this last and most expensive portion is produced. If those wants and wealth should increase, it might become necessary to raise an additional supply at a still further additional expense, at the cost, we will say, of £100 for only twenty quarters. But it is clear that this could not be done unless the price should be £5 a quarter, since that is the lowest price at which the cost of producing the last supply would be repaid. The price, indeed, would probably have previously risen to above £5 a quarter, since an interval must have elapsed between the increased demand occasioned by the increased wants and wealth of the purchasers and the increase of the supply. During that interval the price must have risen somewhat above the price at which it would settle when the additional supply had been obtained. The appearance of that additional supply would sink it to £5 a quarter, the cost at which that supply is produced, but it could not permanently fall below that price unless a diminution should take place either in the wants or wealth of the purchasers, or in the expenses of cultivation or conveyance.

All this appears almost too plain for formal statement. It is, however, one of the most recent discoveries in Political Science: so recent that it can scarcely be said to be universally admitted even in this Country,and abroad it does not seem to be even comprehended. If any writer could be expected to be fully master of it, it would be Say, the most distinguished of the Continental Economists, and the annotator on Ricardo. In his notes to the French translation of the
Principles of Political Economy and Taxation, he constantly objects to Mr. Ricardo’s Reasonings, the fact that all cultivated land pays rent; as if such a fact were inconsistent with the existence of corn-raised without the payment of rent. He repeats this objection in a note to a passage in which Ricardo has demonstrated its falsity. In the twenty-fourth chapter of the
Principles, Mr. Ricardo examines Adam Smith’s opinions on rent.

“Adam Smith,” observes Mr. Ricardo, “had adopted the notion that there were some parts of the produce of land for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market; and he considered food as one of those parts.

“He says that ‘land in almost every situation produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market, in the most liberal way in which labour is ever maintained. The surplus, too, is always more than sufficient to replace the stock which employed that labour, together with its profits. Something, therefore, always remains for a rent to the landlord.’

“But what proof does he give of this? No other than the assertion that ‘the most desert moors in Norway and Scotland produce some sort of pasture for cattle, of which the milk and the increase are always more than sufficient not only to maintain all the labour necessary for tending them, and to pay the ordinary profit to the farmer or owner of the herd or flock, but to afford some small rent to the landlord.’ Now of this I may be permitted to entertain a doubt. I believe that as yet in every Country, from the rudest to the most refined, there is land of such a quality that it cannot yield a produce more than sufficiently valuable to replace the stock employed on it, together with the profits ordinary and usual in that Country. In America we all know that this is the case, and yet no one maintains that the principles which regulate rent are different in that Country and in Europe. But if it were true that England had so far advanced in cultivation, that at this time there were no lands remaining which did not afford a rent, it would be equally true, that there formerly must have been such lands;
and that whether there be or not, is of no importance to this question, for it is the same thing if there be any capital employed in Great Britain on land which yields only the return of stock with its ordinary profits, whether it be employed on new or old land. If a farmer agrees for land on a lease for seven or fourteen years, he may propose to employ on it a capital of £10,000, knowing that at the existing price of grain and raw produce he can replace that part of his stock which he is obliged to expend, pay his rent, and obtain the general rate of profit. He will not employ £11,000 unless the last £1000 can be employed so productively as to afford him the usual profits of stock. In his calculation whether he shall employ it or not, he considers only whether the price of raw produce is sufficient to replace his expenses and profits, for he knows that he shall have no additional rent to pay. Even at the expiration of his lease his rent will not be raised; for if his landlord should require rent, because this additional £1000 was employed, he would withdraw it, since by employing it he gets by the supposition, only the ordinary and usual profits which he may obtain by any other employment of stock.”
Principles, &c., 389-391.

To this passage, M. Say affixes the following note: “This is precisely what Adam Smith does not admit, since he says that the worst land in Scotland gives to its proprietor a rent.” We answer to M. Say: “This is precisely what Mr. Ricardo declares to be immaterial, since a portion of what is produced on a farm giving a rent of ten guineas an acre, may be produced without any rent being paid for the privilege of producing it.”

It must be admitted, however, that the doctrine in question has often been stated in a form likely to confuse the dull or inattentive, and liable to the cavils of the uncandid. Mr. Ricardo, who, though not its discoverer, is its best known expositor, was led, both by his merits and his deficiencies, into frequent inaccuracy of language. He was not enough master of logic to obtain precision, or even to estimate its importance. His sagacity prevented his making sufficient allowance for the stupidity or carelessness of his readers; and he was too earnest a lover of truth to anticipate wilful misconstruction.

Under the influence of these causes he is, perhaps, the most incorrect writer who ever attained philosophical eminence; and there are few subjects on which he has been guilty of more faults of expression than on rent.

He perceived that an increased will and power on the part of the community to purchase raw produce, and the impossibility of increasing the supply but at an increased expense, must necessarily raise rents, and must also occasion an extension of cultivation. Associating, therefore, in his own mind the ideas of the rise of rents and of the extension of cultivation, he has often spoken of them as if they stood in the relation of cause and effect: as if the extension of cultivation were a cause of the rise of rent, instead of being, as it obviously is, a means by which that rise is counteracted. The inaccuracy is so obvious that we can scarcely suppose it to have misled any reader of tolerable care and acuteness.

He has also too frequently used the expression “the corn raised
on land paying no rent,” as an equivalent for “the corn raised without the payment of rent.” And when his opponents reply, as is true, that “in old Countries all land pays a rent,” he has sometimes denied the truth of the reply, instead of showing, as he has done in the passage which we have quoted, that the doctrine is just as true when applied to a small district in which all the land is highly rented, as when applied to a colony where rent is the exception and freedom from it the rule.

Again, he has often spoken of the existence of rent as dependent on the cultivation of land of different degrees of fertility, or on the fact that the same land repays, with a proportionably smaller return, the application of additional capital. And yet it is clear that if we suppose the existence of a populous and opulent district of great but uniform fertility, giving a large return to a given expenditure of capital, but incapable of giving any return whatever on a less expenditure, or any greater return on a larger expenditure, such a district would afford a high rent though every rood of land and every portion of the capital applied to it would be equally productive.

Consequences of the Proposition that Additional Labour, when employed in Manufactures is MORE, and when employed in Agriculture is LESS, efficient in proportion.—We now proceed to consider some remarkable consequences of the proposition [see page 81,] that additional labour when employed in Manufactures is
more, and when employed in Agriculture
less, efficient in proportion; or, in other words, that the efficiency of labour increases in Manufactures in an increasing ratio, and in Agriculture in a decreasing ratio. And, consequently, that every additional quantity of manufactured produce is obtained, so far as the manufacturing of it is alone concerned, at a less proportionate cost, and every additional quantity of agricultural produce is obtained, generally speaking, at a greater proportionate cost.

I. Different effects of Increased Demand on Manufactured and Raw Produce.—So far as the price of any commodity is affected by the value of the raw material of which it is formed, it has a tendency to rise; so far as the price consists of the remuneration to be paid for the labour and abstinence of those employed in manufacturing it, it has a tendency to fall, with the increase of population.

It is obvious that commodities of rude or simple workmanship are subject to the first rule, and the finer manufactures to the second. Bread may afford an instance of the first kind, and lace of the second. The average price in England of a half-peck loaf is now about 1s. 3d. Of this sum 10d., at least, may be assumed to be the price of the wheat; the wages and profit of the miller, baker, and retailer absorbing the remainder. If circumstances should arise, requiring the present supply of bread to be immediately doubled from our home-produce, it is obvious that the increased supply of wheat could not be obtained by merely doubling the amount of labour now employed in its production. It is impossible to say to what amount the increased difficulty of production would raise the price of wheat; we will, however, suppose it to be doubled, and the price of the wheat necessary to make a half-peck loaf to be 1s. 8d. instead of 10d.: at the same time the increased labour employed in its manufacture and sale would become more efficient. The miller and the baker would employ better instruments and a greater division of labour, and the retailer would be able to double his sales at little additional expense. The price of bread, so far only as its manufacture and retail is concerned, would be reduced perhaps one-fourth, or from 5d. to 3¾d. In which case, the whole result of the increased production would be that the half-peck loaf would sell for 1s. 11¾d. instead of 1s. 3d.

We will now see what would be the effect of an increased use of lace.

At the present price of lace and cotton, a pound of cotton worth, in the Liverpool market, 2s., may be converted into a piece of lace worth 100 guineas. Suppose the consumption of lace to double, and the increased difficulty of producing the additional quantity of the cotton fit for lace-making to raise its price from 2s. to 4s. a pound; the price of the lace, supposing it still to be manufactured at the same expense, would be raised one thousand-and-fiftieth part, or from £105 to £105 2s. But it is impossible to doubt that the stimulus thus applied to the production of lace would improve every process of the manufacture. We should probably much underrate the amount of that improvement if we were to estimate the consequent saving of expense at one-fourth; in which case the whole result of the increased production would be that the lace would sell for £78 17s. instead of £105; the same circumstances which would nearly double the price of bread would reduce by one-fourth the price of lace.

II. Different effects of Taxation on the Prices of Manufactured and Raw Produce.—Another inference from the proposition in question is the difference between the effects of taxation when imposed on raw produce and when imposed on manufactured produce.

Taxes on manufactured commodities ultimately raise the price, and that by an amount exceeding the amount of the tax. Taxes on agricultural produce in its unmanufactured state do not necessarily occasion any ultimate rise of price, and raise it, if at all, by an amount less than that of the tax.

Effect of Taxation on Manufactured Produce.—The first proposition may be easily illustrated.

We will suppose a tax on watches of twenty-five per cent. on their value to have existed from the commencement of that trade. As there is no reason to suppose that the profits or the wages of master watchmakers or their workmen are, under present circumstances, above the average wages and profits of persons similarly employed, it is clear that, if such a tax had always existed, the price for the time being of watches must always have been one-fourth higher than it has been, or the trade of watchmaking would have been followed neither by labourers nor capitalists. It is clear also that such an increase of price must always have diminished or retarded in its increase the sale, and, consequently, the production of watches. But if fewer watches had been made, the smaller number would have been made at a greater proportionate expense. And the price of watches must have been higher than it actually has been, first by the amount of the tax, and, secondly, by the greater expensiveness of the more limited manufacture. It is equally clear that, after the removal of such a tax, the price of watches would sink, first by the amount of the tax removed, and, secondly, by the improvement in the manufacture consequent on an increased production. It is equally clear that, if such a tax were now for the first time to be imposed, the price of watches must rise, first by the amount of the tax, and, secondly, by the amount of the increased proportionate expense of making and selling the diminished quantity sold, or watchmaking would cease to be as profitable as the average of trades. It is clear, too, that the more the use of watches diminished, the higher the price must eventually rise. If only ten new watches were made every year, they would probably cost £500 a-piece. If only one were made, it would probably cost little less than the whole price of the ten. It is true that these effects would not immediately follow either the imposition or the removal of the tax; an interval must in either case elapse, during which, the existing capital in the watchmaking trade continuing the same, the supply of watches would be neither increased nor diminished, and, consequently, the price but little affected. During this interval, both the wages and the profits of those engaged in that business would be unnaturally high, or unnaturally low, and they would not acquire their natural level until, in the case of the removal of the tax, a sufficient number of persons were educated to the business, or, in the case of the imposition of the tax, the number of persons educated to the business had been sufficiently diminished, to enable the supply of watches to be proportioned to the demand, at a price giving average profits and wages to the capitalists and labourers employed in their manufacture and sale.

Effect of Taxation on Agricultural Produce.—But if agricultural produce were subjected to such a tax, relief would be afforded by precisely the same conduct which in manufactures aggravates the pressure, namely, by a diminution of production.

It may be assumed that capital is fairly distributed among the various channels for its employment, and that, in the absence of peculiar disturbing causes, agriculture, the most agreeable of all occupations, has not less than an average share of it. It may therefore be assumed, generally speaking, that capital is employed on land until its produce repays, but does not more than repay, the expense of cultivation; or, in other words, that the occupier of land pushes its cultivation until the additional produce obtained by means of the last labourers employed is just sufficient, at the existing price, to pay their wages, and average profits to himself, for the time during which those wages must be paid in advance. On the imposition of a tax, either the price of what he produces must rise by the amount of the tax, or the farmer must discontinue the production of that portion of his crop which is raised at the greatest expense.

We will suppose a farmer to occupy a farm containing six hundred acres of arable land of different degrees of fertility; one hundred acres of which, with the labour of ten men directly and indirectly employed on them, would give a return which, in order to reduce it to one denomination, we will call six quarters of wheat an acre; one hundred others capable of giving with an equal number of men only five quarters per acre; one hundred others, four quarters per acre; one hundred others, three quarters per acre; one hundred others, two quarters per acre; and the last and worst one hundred acres, only one quarter per acre. We will suppose, also, that the wages of ten men for a year amount at an average to £400, or £40 a man; that the farmer has to advance these wages for a year before the produce is sold; and that the average rate of profit in similar occupations, is ten per cent. per annum. Under such circumstances, when wheat was £2 4s. a quarter it would be worth his while to employ every man whose labour produced twenty quarters, the price of which would amount to £44, being £40 for the labourer’s wages, and £4 for the farmer’s profit. The forty men supposed to be employed on the four best qualities of soil produce each this amount and more; the ten men employed on the fifth quality of soil produce each precisely this amount, namely, a return of two hundred quarters, worth £440. The sixth and last quality of soil, on which one man could produce only ten quarters, would not repay the cultivation of wheat. Now, if a tax were laid on raw produce, which, to make the illustrations less complex, we will call a tax of 14s. 8d. on every quarter of wheat, and no rise of price should take place, it is obvious that it would no longer be worth his while to cultivate any land of worse quality than that in which the labour of ten men could produce three hundred quarters of corn; a return which, at the existing price of £2 4s. a quarter, would procure £660, being £220 for the tax, and £440 as before for wages and profits. But it would obviously be worth his while to cultivate land of that quality, and also to employ labour in the cultivation of his superior land up to the point at which the labour of an additional man would no longer produce an additional product of thirty quarters. Nothing but a tax so great as absolutely to prohibit agriculture, such a tax as never has existed, and which would, in fact, be rather a penalty than a tax, could induce him to discharge all his labourers, and leave his best land uncultivated. We do not deny that he would be a loser, even by the conduct which we have supposed him to adopt. We do not deny that he would much have preferred a rise in the price of corn equal to the tax,—a rise which would have enabled him to continue in its existing investment all his agricultural capital. But we deny that any imposition to which the name of a tax can fairly be applied, though unaccompanied by a rise of price, would induce him altogether to discontinue production. And we wish to draw the attention of our readers to the contrast between his situation and that of the manufacturer, whom any tax, however slight, if unaccompanied by a rise of price, must in time force to discontinue manufacturing. What is a remedy to the agriculturist is an aggravation of evil to the manufacturer; a diminution of capital makes what remains in agriculture more productive, and makes what remains in manufactures less so.

It has been supposed, however, that the price of agricultural produce would rise to the full amount of the tax, and that the whole amount of that tax would consequently fall on the consumer. This is the opinion of Mr. Ricardo and of Mr. Mill. And it is on this ground that they both maintain that the effect of tithes is to produce a rise in the price of raw produce equal to the whole value of the tithe, and affecting equally all classes so far as they are consumers of raw produce. We believe that the
immediate effect of a general tax on raw produce is to raise the price, but to an amount not equal to that of the tax; but that its
ultimate effect is to diminish the consumption and production of raw produce, but to leave its price unaffected.

To prove our first proposition we need only show that the rise of price, which we admit to be the immediate consequence of the imposition of the tax, would diminish the consumption, and consequently the production of the taxed commodity. It has been shown already that as production is diminished, the expense of producing the quantity still produced is diminished: and that the price of agricultural produce depends on the expense of producing that portion of it which is produced at the greatest expense, or, in other words, under circumstances of equal competition. That no person would diminish his consumption of corn in consequence of the rise of its price, is therefore a premise necessary to the conclusion which we are combating. This is true as respects that portion of the population of England which is dependent on parochial relief. In those districts in which the amount of that relief is calculated with reference to the price of bread, their means of purchasing are unconnected with price, and neither rise with its fall nor sink with its rise. It is true, also, as respects the families of those opulent individuals (a prominent, but in fact a small portion of society) whose direct expenditure in bread and flour bears a small proportion to their general expenses. But the bulk of the community, consisting of the labourers who receive no parish assistance, and happily they are now the majority, and we trust, will soon be the great majority; and the smaller shopkeepers and farmers, unquestionably regulate, in a great measure, their purchases of wheat by its price. Much of their consumption, when it is comparatively cheap, consists of puddings and pies, articles of mere luxury, which, on the slightest rise, are immediately discontinued. If the rise continue, they turn from wheaten bread to cheaper subsistence: in the North to oatmeal, in the South to potatoes. And, indeed, without recurring to details, it may be laid down as a principle of universal application, that, in the absence of disturbing causes, every increase in the price of a commodity must diminish both the ability and the will to purchase it.

We now proceed to prove our second proposition, namely, that the ultimate effect of a tax on raw produce is not to raise its price, but to diminish the quantity produced. It will be at once admitted that the price of raw produce, in any Country, does not depend on the positive extent, or on the positive fertility of that Country, but, all the other things remaining the same, on the proportion which that extent, or that fertility bears to the number and wealth of the existing inhabitants. It may be low in a barren territory, if that territory be thinly peopled, just as it may be high in a fertile and populous one. It is high in the rich Lowlands of Scotland, and low in the sandy plains of Poland. And it will also be admitted that, all other things remaining the same, the population of a Country is in proportion to its extent and its fertility. Now, the ultimate effect of tithes, or of any other tax, on the cultivation of land, is precisely the same as if the Country in which they have long prevailed was thereby rendered rather less extensive, or rather less fertile, and, consequently, rather less populous, and probably also rather poorer than it otherwise would have been.

Tithes.—If England, from time immemorial, had been rather more extensive, or rather more fertile than it now is, no one will suppose that the price of provisions would have been lower than it now is. We should have had rather more corn, and a rather greater population to eat that corn, than we now have. The increase would have been positive, not relative. So if Devonshire or Lincolnshire had never existed, the agricultural produce and the population of England would each have been positively diminished; but, as they would have borne the same proportion to one another as they do now, the price of the existing quantity of corn could not have been higher than it is now. So if tithes had never existed, we should have had rather more corn and a rather larger and probably a rather richer population; every thing else would have been as it is. It is true that, if a new Devonshire, or a new Lincolnshire, fit for immediate cultivation, were now suddenly added to our shores, the immediate consequences would be an increased supply of provisions, and a fall in their price. But it is also true that, if this accession to our territory were followed by no change in our habits and institutions, the comparative cheapness, which would be its immediate consequence, would gradually disappear as our population rose with the increased supply of subsistence, and, ultimately, we should be just where we are now, excepting that we should be rather more numerous. So, if tithes were suddenly commuted, and their interference, such as it is, with agricultural improvement, got rid of, the same consequences would follow as if the extent of our territory, or its fertility, were suddenly augmented. And, supposing no improvement to take place in our institutions and habits, the consequent increase of our population would bring us back, as far as the price of provisions is concerned, to the point at which we are now.

It is probable, indeed, that the ultimate effect of the abolition of tithes would be not a lowering but an increase of the price of raw produce. A denser population cultivating a territory, the productiveness of which had increased in proportion to the increased number of its inhabitants, would probably advance in opulence. The productiveness of the soil of a Country in proportion to its population being given, or, in other words, the amount of raw produce and the number of people being ascertained, the smaller the extent of the land from which that amount is obtained the better. The expenses of transport, and the trouble and loss of time in journeys, are material elements of the cost of production both in agriculture and in manufactures, and the amount of these expenses depends principally on the extent of Country affording a given return. As our industry became more efficient the value of our labour would rise in the general market of the world, and the consequence would be a general rise of prices, in which agricultural produce would participate. But these statements form no part of our argument. We believe, indeed, that the ultimate effect of tithes is to lower the price of raw produce: but all that we have undertaken to show is, that they do not raise it.

From these premises follow very important practical inferences. If we lay a tax on the production at home of any manufactured commodity which is produced with the same, or nearly the same, facility abroad, it is absolutely necessary that a duty of the same, or a rather greater amount, should be imposed on the importation of that commodity. On the imposition of the tax the cost of production at home is increased, first by the tax, and, secondly, by the increased expense of producing the smaller quantity which, when the price becomes higher, continues to be demanded. But if importation were untaxed, the cost of production abroad would be diminished in consequence of the diminished proportionate expense of producing the larger quantity demanded. The domestic production, and with the domestic production the tax, would not be merely diminished, but absolutely destroyed, and the whole result would be gratuitous evil. But when a tax, unbalanced by any countervailing duty on importation, is imposed on any agricultural produce for which a foreign substitute can be obtained, the only result is to stop
that portion which is most expensive of the domestic production. The least productive part of the existing agricultural capital is withdrawn, or worn out without being replaced. The deficiency is attempted to be supplied by importation; but the increased demand, instead of lowering, as would be the case with manufactures, raises the cost of production abroad, just as the diminished demand, instead of raising, lowers the cost of production at home. The price of agricultural produce rises until the state of the population has accommodated itself to the change, and then falls to its former level. If our present heavy tax on the domestic production of glass were unbalanced by any duty on importation, all the English glass-works would in time be abandoned. Or, if some of our glass-works were free from the tax, and others subject to it, all those which were taxed would be ruined. But the lands in England which are subject to the payment of tithes are not thrown out of cultivation by the competition of those which are free from that burden, or by the importation of the tithe-free corn and cattle of Scotland, or of the comparatively tithe-free produce of Ireland. The estates which are subject to tithes continue to be productive, they continue even to afford a rent, though the burden diminishes the productiveness, and diminishes in a still greater degree the rent.

Before we quit the subject of tithes, it may be worth while to expose another error connected with them, namely, the popular opinion that their tendency to increase in amount is greater than that of rent. We believe the fact to be just the reverse.

Tithes are a definite, rent is an indefinite, share of the produce. Tithes can never exceed a tenth; rent need not be a tenth, or even a hundredth, but may amount to a fourth, a third, a half, or even more than a half. Tithes, therefore, can be exacted, where rent cannot be; but when once any spot of land can afford to pay both rent and tithes, there is no comparison between their respective powers of increase. This will immediately appear on a reference to the familiar illustration of the progress of rent.

If we suppose a Country to be divided into ten districts designated by the numbers from 1 to 10, each of equal extent, but each of a different degree of fertility, No. 1 producing, at a given expense, two hundred quarters of corn, and the amount of the produce, at the same expense, of each quality of land, diminishing by ten quarters, until we come to No. 10, which produces only one hundred quarters, we shall find that when No. 1 only will pay for cultivation, it affords twenty quarters for tithes, and no rent. When the price of corn has risen sufficiently to enable No. 2 to be cultivated, there will be on Nos. 1 and 2 thirty-nine quarters for tithes, and on No. 1 ten for rent. When No. 3 has become worth cultivation, there will be on Nos. 1, 2, and 3, fifty-seven for tithes, and on Nos. 1 and 2 thirty for rent. When No. 4 has become worth cultivating, there will be on Nos. 1, 2, 3, and 4, seventy-four for tithes, and on Nos. 1, 2, and 3, sixty for rent. When No. 5 has become worth cultivating, there will be on Nos. 1, 2, 3, 4, and 5, ninety for tithes, and on Nos. 1, 2, 3, and 4, one hundred for rent. Rent has now passed tithes, and its subsequent superiority is very striking. When No. 6 has become worth cultivating, there will be one hundred and five for tithes, and one hundred and fifty for rent. When No. 7 has become worth cultivating, there will be one hundred and nineteen for tithes, and two hundred and ten for rent. When No. 8 has become worth cultivating, tithes will be one hundred and thirty-two, and rent two hundred and eighty. When No. 9 has become worth cultivating, tithes will be one hundred and forty-four, and rent three hundred and sixty. And when No. 10 has become worth cultivating, tithes will be one hundred and fifty-five, and rent four hundred and fifty. And the same results will follow if, instead of supposing fresh land of a regularly decreasing fertility to be taken into cultivation, we suppose further capital to be applied to the same land, with a regularly decreasing proportionate return. Of course we do not mean that either of these suppositions represents what actually takes place, but they each represent the course of events to which there is a natural tendency. They represent the relative ratio at which rent and tithes would increase in the absence of disturbing causes. It must be recollected, however, that these events would not take place in the regular order in which we have placed them, except on the supposition of each different district which we have supposed to be successively cultivated being of the same extent, and of each successive application of capital being of the same value. If, for instance, No. 10 were ten times as large as any one of the other districts, and received ten times as much capital, it would increase the whole amount of titheable produce by one thousand quarters instead of by one hundred quarters, and tithes would be raised from one hundred and forty-four quarters to two hundred and forty-four quarters, while rent would have risen only from three hundred and sixty quarters to four hundred and fifty. In such an event, therefore, tithes would rise more than rent. And it must also be recollected that tithes and rent do not rise at precisely the same period. The highest amount of rent must be just
before the land producing the additional supply has been cultivated. The increased demand is then in full operation, and has not been counteracted by the increased supply. But the amount of tithes is not increased until
after the additional supply has been produced. Their increase, therefore, is generally contemporaneous with a temporary fall of rent: which is probably one of the causes of the popular opinion that their general tendency to increase is greater than that of rent. Another source of that opinion is, that in England the land has been for centuries subject to a constant process of subdivision, while tithes, except the comparatively small part which belongs to laymen, have not. The incumbent of a given benefice receives the tithes of the same quantity of land which was tithed by his predecessor three hundred years ago. But that land three hundred years ago may have belonged to one or two persons, and may now be divided between ten or twenty. The present incumbent’s income may bear a higher proportion than his predecessors did to the average income of a single landlord, though it bears a lower proportion to the aggregate income of all the landlords of the parish. And as a general proposition, we have no doubt that, in a progressive Country, the value of tithes will seldom increase in proportion to the increasing value of the land out of which they issue.

It appears, therefore, that in a new or ill-peopled Country where the abundance of land and the want of agricultural capital almost prevent the existence of rent, in the economical sense of the word, tithes are the only endowment which a Clergy can receive from the soil. We see, therefore, why they were adopted for the Israelites, who, in fact, were colonists, and by our Danish and Saxon ancestors. We see too why the attempt to endow with lands the Canadian Church has so signally failed. Tithes would not, perhaps, have been a politic, but they would have been an actual endowment. The reserves stand so many desert spots in the midst of improvements retarding the settlement, interrupting the communications, and injuring the wealth and civilization of all that is round them. Five centuries hence they might afford an ample provision.