I am, my dear Sir, Yours very truly, DAVID RICARDO.

II.

STOCK EXCHANGE, _22 March, 1810_.

MY DEAR SIR,

Mrs. Ricardo is expecting Mrs. Malthus to accompany her on Friday next to Knyvett's concert, and will, I am sure, be very much disappointed at the information which I am to give her that she will not be able to accompany you to town. I will not however quite give up all hopes of seeing her.

You must positively not think of leaving us before Tuesday. I have engaged several of your friends to meet you at dinner on Monday, and I not only advance my own claims but those of Mr. Wishaw[29], Mr.

Sharp[30], Mr. Tennant[31], and Mr. Dumont[32].

I have been making enquiries concerning a bullion merchant. I find that the trade is mostly carried on by a cla.s.s of people not particularly scrupulous in their modes of getting money, and I am told that they would not be very communicative, particularly on the subject of their _exports_. There are however some well-informed merchants who know a great deal of the trade without themselves being actively engaged in it, to whom I hope I shall be able to introduce you.

I do not admit that if you were to double the medium of exchange it would fall to half its former value, not even if you were also to double the quant.i.ty of metal which was the standard of such medium. The consumption would increase in consequence of its diminished value, and the fall of its value would be regulated precisely by the same law as the fall in the value of indigo, sugar, or coffee.

Mr. Mushet will dine with us on Sunday. What do you think of Mr.

Vansittart's financial talents?

Yours very truly, DAVID RICARDO.

NOTE.--Speaking in the House of Commons on Agricultural Distress, on May 7, 1822, Ricardo gives an ill.u.s.tration which bears on some points in the foregoing and following letters: 'Suppose my own case.

I am possessed of a considerable quant.i.ty of land, the whole unburthened with a single debt. Now according to the honourable member (Mr. Attwood) I and the tenants on that land would have only been injured to the amount of the increase which the change in the value of money has made in the burthen of taxation; but we are in point of fact injured much more.' 'The superabundant supply' has caused a sinking in the value of corn greater than in proportion to the additional quant.i.ty itself. To understand why, take the case of a commodity introduced for the first time, say a particular kind of superfine cloth: 'If 10,000 yards of this cloth were imported, under such circ.u.mstances, many persons would be desirous of purchasing it, and the price consequently would be enormously high.

Suppose this quant.i.ty of cloth to be doubled; the aggregate value of the 20,000 yards would be much more considerable than the aggregate value of the 10,000 yards, for the article would still be scarce and therefore in great demand. If the quant.i.ty of cloth were to be again doubled, the effect would still be the same, for, although each particular yard of the 40,000 would fall in price, the value of the whole would be greater than that of the 20,000. But, if they went on in this way increasing the quant.i.ty of the cloth until it came within the reach of the purchase [_sic_] of every cla.s.s in the country, from that time any addition to its quant.i.ty would diminish the aggregate value. This argument would apply to corn. Corn is an article which is necessarily limited in its consumption, and, if you went on increasing it in quant.i.ty, its aggregate value would be diminished beyond that of a smaller quant.i.ty. I make an exception in favour of money. If there were only 100,000 in this country, it would answer all the purposes of a more extended circulation; but, if the quant.i.ty were increased, the value of commodities would alter only in proportion to the increase, because there is no necessary limitation of the quant.i.ty of money [wanted].' (Cf. Letter III, p.

3.) So on June 12th he says: 'Quant.i.ty regulates the value of everything,' though it is also true (he says in a speech of May 9, 1822) 'that the price of every commodity is const.i.tuted by the wages of labour and the produce [_sic_] of stock.'

III.

STOCK EXCHANGE, _24 March, 1810_.

MY DEAR SIR,

I have left you quite free for Friday, but I regret that your engagements will not conveniently allow you to come to us on that day.

We shall expect you on Sat.u.r.day morning. I hope Mrs. Malthus' visit will not be deferred longer than the next meeting of the King of Clubs[33].

It appears to me that you ascribe the difference in the variations of price which would probably be the effect of doubling the quant.i.ty of coffee, sugar, or indigo, on [the] one hand, or of doubling the quant.i.ty of the precious metals on the other, to a wrong cause. Coffee, sugar, and indigo are commodities for which, although there would be an increased use if they were to sink much in value, still, as they are not applicable to a great variety of new purposes, the demand would necessarily be limited; not so with gold and silver. These metals exist in a degree of scarcity, and are applicable to a great variety of _new_ uses; the fall of their price, in consequence of augmented quant.i.ty, would always be checked, not only by an increased demand for those purposes to which they had before been applied, but to the want of them for entirely new employments. If they were in sufficient abundance, we might even make our tea-kettles and saucepans of them. It is to this essential difference between these commodities, and not to the circ.u.mstance of one of them being employed as a circulating medium, that I should attribute the different effects which would follow from the augmentation of their quant.i.ty. In any point of view however I do not see how it bears materially on the question between us, namely whether the precious metals are frequently resorted to for the payment of debts between countries when no disturbance has taken place in the amount or proportion of the currency.

I wonder as you do that the stocks have not felt the effects of Mr.

Vansittart's vigorous system. The delay which has taken place in creating new stock, the good news from abroad, and, above all, the want of reflection in the ma.s.s of stockholders may be considered as the cause.

Ever truly yours, DAVID RICARDO.

NOTE.--'The King of Clubs' is described in the Life of Sir James Mackintosh, (by his son,--2nd ed. 1836), vol. i. p. 137 (under date 1800): 'As an agreeable rallying point in addition to the ordinary meetings of a social circle, a dinner-club (christened "The King of Clubs" by Mr. Robert Smith [Bobus, brother of Sydney Smith]), was founded by a party at his [Mackintosh's] house, consisting of himself [Mackintosh] and the five following gentlemen, all of whom still survive:--Mr. Rogers, Mr. Sharp, Mr. Robert Smith, Mr.

Scarlett, and Mr. John Allen. To these original members were afterwards added the names of many of the most distinguished men of the time; and it was with parental pride and satisfaction that he received intelligence some time after of their "being compelled to exclude strangers and to limit their numbers, so that in what way 'The King of Clubs' eats, by what secret rites and inst.i.tutions it is conducted, must be matter of conjecture to the ingenious antiquary, but can never be regularly transmitted to posterity by the faithful historian."'--The biographer adds in a note that the Club was suddenly dissolved in the year 1824. Some of the most distinguished members are enumerated, among them Ricardo (l. c. p.

138 _n._). To judge by a letter of Mackintosh to Sharp on 29th June, 1804, the Club at that date included (besides the writer and his correspondent) only Sydney Smith, Scarlett, Boddington, the poet Rogers, Whishaw, and Horner (Mack. Life, vol. i. 209). The time of meeting seems to have been the first Sat.u.r.day of every month. See below Letter XLIV, but cf. XLIII. Add Memoirs of Horner, i. 193, under date April 1802, and Holland's Memoir of Sydney Smith i. 91, &c.

IV.

LONDON, _10 Aug., 1810_.

MY DEAR SIR,

On my return to London, after a short excursion to Tunbridge Wells, I found your obliging letter.... On further reflection I am confirmed in the opinion which I gave with regard to the effect of opening new markets or extending the old. I most readily allow that since the war not only the nominal but the real value of our exports and imports has increased; but I do not see how this admission will favour the view which you take of the subject.

England may have extended its carrying trade with the capital of other countries. Instead of exporting sugar and coffee direct from Guadaloupe and Martinique to the continent of Europe, the planters in those colonies may first export them to England, and from England to the continent. In this case the list of our exports and imports will be swelled without any increase of British capital. The taste for some foreign commodity may have increased in England at the expense of the consumption of some home commodity. This would again swell the value of our exports and imports, but does not prove a general increase of profits nor any material growth of prosperity.

I am of opinion that the increased value of commodities is always the effect of an increase either in the quant.i.ty of the circulating medium or in its power, by the improvements in economy [in] its use [_sic_][34],--and is never the cause[35]. It is the diminished value, I mean nominal value, of commodities, which is the great cause of the increased production of the mines; but the increased nominal value of commodities can never call money into circulation. It is certainly an effect and not a cause. I am writing in a noisy place; you must therefore excuse all blunders. I must offer the same apology for my two half sheets[36]. I did not like to copy the first half over again.

With best compliments to Mrs. Malthus, I remain,

Yours very sincerely, DAVID RICARDO.

V.

STOCK EXCHANGE, _17 Aug., 1810_.

MY DEAR SIR,

... I cannot deny myself the pleasure of accepting your kind invitation for Sat.u.r.day next. I will be with you at the usual hour.

That we have experienced a great increase of wealth and prosperity since the commencement of the war, I am amongst the foremost to believe; but it is not certain that such increase must have been attended by increased profits, or rather an increased rate of profits, for that is the question between us. I have little doubt however that for a long period, during the interval you mention[37], there has been an increased rate of profits, but it has been accompanied with such decided improvements of agriculture both here and abroad, for the French Revolution was exceedingly favourable to the increased production of food, that it is perfectly reconcileable to my theory. My conclusion is that there has been a rapid increase of capital, which has been prevented from showing itself in a low rate of interest by new facilities in the production of food. I quite agree that an increased value of particular commodities occasioned by demand has a tendency to occasion an increased circulation, but always in consequence of the cheapness of some other commodities. It is therefore their cheapness which is the immediate cause of the introduction of additional money.

I have not been home since I received your letter. I will look at the pa.s.sage you refer me to in Adam Smith[38], and will consider of the other matters in your letter, so as to be prepared to give you my theory when we meet.

The facts you have extracted from Wetenhall's tables are curious[39], and are hardly reconcileable to any theory. I attribute many of them to the state of confusion into which Europe has been plunged by the extent and nature of the war; and it would be quite impossible to reason correctly from them without calculating what the state was of the real as well as the computed exchange during the periods referred to. Pray make my best respects to Mrs. Malthus, and believe me,

Truly yours, DAVID RICARDO.

VI.

DEAR SIR,

I lose no time in answering your obliging letter and endeavouring as far as lies in my power to remove the very few objections which prevent us from being precisely of the same opinion on the subject of money and the laws which regulate its value in the countries which have constant commercial intercourse with each other. I have no view in this discussion but that which you have avowed, the circulation of truth; if therefore I should fail to convince you, and you should express your opinions in print, it is immaterial to me whether you mention my name or not. I trust you will do that which shall most fully tend to establish the just principles of the science.