Rent,it was clear,could not be both a cause and an effect of price,though at different points of his treatise Smith had apparently accepted each view of the relation.We must first settle which is cause and which effect;and then bring our whole system into the corresponding order.For the facts,Ricardo is content to trust mainly to others.The true title of his work should be that which his commentator,De Quincey,afterwards adopted,the Logic of Political Economy .This aim gives a partial explanation of the characteristic for which Ricardo is most generally criticised.He is accused of being abstract in the sense of neglecting facts.He does not deny the charge.'If I am too theoretical (which I really believe to be the case)you,'he says to Malthus,'I think,are too practical.'9If Malthus is more guided than Ricardo by a reference to facts,he has of course an advantage.But so far as Malthus or Adam Smith theorised --and,of course,their statement of facts involved a theory --they were at least bound to be consistent,It is one thing to recognise the existence of facts which your theory will not explain,and to admit that it therefore requires modification,it is quite another thing to explain each set of facts in turn by theories which contradict each other,that is not to be historical but to be muddle-headed,Malthus and Smith,as it seemed to Ricardo,had occasionally given explanations which,when set side by side,destroyed each other.He was therefore clearly justified in the attempt to exhibit these logical inconsistencies and to supply a theory which should be in harmony with itself.He was so far neither more nor less 'theoretical'than his predecessors,but simply more impressed by the necessity of having at least a consistent theory.
There was never a time at which logic in such matters was more wanted,or its importance more completely disregarded.Rash and ignorant theorists were plunging into intricate problems and propounding abstract solutions.The enormous taxation made necessary by the war suggested at every point questions as to the true incidence of the taxes.Who really gained or suffered by the protection of corn?
Were the landlords,the farmers,or the labourers directly interested?
Could they shift the burthen upon other shoulders or not?What,again,it was of the highest importance to know,was the true 'incidence'of tithes,of a land-tax,of the poor-laws,of an income-tax,and of all the multitudinous indirect taxes from which the national income was derived?The most varying views were held and eagerly defended.Who really paid?That question interested everybody,and occupies a large part of Ricardo's book.The popular answers involved innumerable inconsistencies,and were supported by arguments which only required to be confronted in order to be confuted.Ricardo's aim was to substitute a clear and consistent theory for this tangle of perplexed sophistry.In that sense his aim was in the highest degree 'practical,'although he left to others the detailed application of his doctrines to the actual facts of the day.
II.THE DISTRIBUTION PROBLEM
The rent doctrine gives one essential datum.A clear comprehension of rent is,as he was persuaded,'of the utmost importance to political economy,'10The importance is that it enables him to separate one of the primary sources of revenue from the others.It is as though,in the familiar illustration,we were considering the conditions of equilibrium of a fluid;and we now see that one part may be considered as a mere overflow,resulting from (not determining)the other conditions.The primary assumption in the case of the market is the level of price.When we clearly distinguish rent on one side from profits and wages on the other,we see that we may also assume a level of profits.There cannot,as Ricardo constantly says,'be two rates of profit,'that is,at the same time and in the same country.But so long as rent was lumped with other sources of revenue it was impossible to see,what Malthus and West had now made clear,that in agriculture,as in manufactures,the profits of the producer must conform to the principle.Given their theory,it follows that the power of land to yield a great revenue does not imply a varying rate of profit or a special bounty of nature bestowed upon agriculture.It means simply that,since the corn from the good and bad land sells at the same price,there is a surplus on the good.But as that surplus constitutes rent,the farmer's rate of profit will still be uniform.Thus we have got rid of one complication,and we are left with a comparatively simple issue.We have to consider the problem,What determines the distribution as between the capitalist and the labourer?That is the vital question for Ricardo.
Ricardo's theory,in the first place,is a modification of Adam Smith's.He accepts Smith's statement that wages are determined by the 'supply and demand of labourers,'and by the 'price of commodities on which their wages are expended.'11The appeal to 'supply and demand'implies that the rate of wages depends upon unchangeable economic conditions.He endorses 12Malthus's statement about the absurdity of considering 'wages'as something which may be fixed by his Majesty's 'Justices of the Peace,'and infers with Malthus that wages should be left to find their 'natural level.'But what precisely is this 'natural level?'If the Justice of the Peace cannot fix the rate of wages,what does fix them?Supply and demand?What,then,is precisely meant in this case by the supply and demand?The 'supply'of labour,we may suppose,is fixed by the actual labouring population at a given time.The 'demand,'again,is in some way clearly related to 'capital.'
