[1109] To escape the confusion which would result from employing the same term in two such very different senses—a confusion that is inevitable however one may try to avoid it—Pareto has substituted the word “ophelimity,” and Gide in his Principles (1883) “desirability.”
[1110] “The idea of final utility is the ‘open sesame,’ the key to the most complicated phenomena of economic life, affording a solution of its most difficult problems.” (Böhm-Bawerk, The Austrian Economists, in Annals of the American Academy of Political and Social Science, 1891.)
[1111] Condillac had already drawn attention to this fact (see p. 48), and Buffon had noted it even before that. “The poor man’s coin which goes to pay for the necessaries of life and the last coin that goes to fill the financier’s purse are in the opinion of the mathematician two units of the same order, but to the moralist the one is worth a louis, the other not a cent.” (Essai d’Arithmétique morale.)
The connection between quantity and demand is best expressed by means of a curve either of utility or of demand (see p. 532). Along the horizontal line let the figures 1, 2, 3, 4 denote the quantities consumed, and from each of these points draw a vertical line to denote the intensity of demand for each of these quantities. The height of the ordinate decreases more or less rapidly as the quantity increases, until at last it falls to zero.
[1112] It is in cases of this kind that figures become handy. If we take two curves, an ascending one to represent the utility of each handful of salt parted with, and a descending one to represent the utility of each handful of rice acquired, the two curves must necessarily intersect, seeing that one is just the inverse of the other. The point of intersection marks the place where the utilities of the two exchanged handfuls are exactly equal.
We must be careful not to confuse matters, however. It is not suggested that the final utilities in the case of the two co-exchangers are equal. There is no common measure by which the desires of different persons can be compared, and no bridge from one to the other. What is implied is that the final utility of both commodities for the same person are the same. The balance lies between two preferences of the same individual. The actual market exchange is just the resultant of all these virtual exchanges.
The Austrian school in its explanation makes use of a hypothesis known as the double limit, which does not seem to be absolutely indispensable, seeing that other economists of the same school—Walras, for example—appear to get on well enough without it. They seem to think of buyers and sellers drawn up in two rows facing one another. Every one of the sellers attributes to the object which he possesses and which he wants to sell a certain utility different from his neighbour’s. Each buyer in the same way attributes to that object which he desires to buy a degree of utility which is different from that which his neighbour puts upon it. The first exchange, which will probably have the effect of fixing the price for all the other buyers and sellers, will take place between the buyer who attributes the greatest utility to the commodity he has to sell, and who is therefore least compelled to sell, and the buyer who attributes the least utility to the commodity he wishes to buy and who is therefore least tempted to buy. At first sight it seems impossible that the party as a whole should be bound by the action of the two individuals who show the least inclination to come to terms. It would be more natural to expect the first move to take place between the seller who is forced to sell and because of his urgency is content with a price of 10s. per bushel, say, and the buyer who feels the strongest desire to buy and who rather than go without would be willing to give 30s. for it. But upon consideration it will be found that the price is indeterminate just because these two are ready to treat at any price. The most impatient individual will surely wait to see what terms the least pressed will be able to make, and it is only natural that those who are nearest one another should be the first to come together. These two co-exchangists who control the market are known as the “limiting couple.”
[1113] It was Stanley Jevons who gave it this expressive name. It is meant to imply that if two objects which fulfil very different needs, perhaps, can be interchanged, they cannot have very different values.
[1114] The law of substitution applies not merely to different objects which satisfy the same need, but also to objects which supply different needs, provided those needs are to any extent interchangeable—to tea as a substitute for wines, to coffee as a substitute for both, to travel as a substitute for the life of a country gentleman.
[1115] “The enjoyment derived from the least enjoyable unit is what we understand by final utility.” (Böhm-Bawerk, The Austrian Economists, in the Annals of the American Academy of Political and Social Science, 1891.)
[1116] The new school deduces a very curious conclusion from this law of indifference. Although there is only one price for all corn buyers, say, the final utility of the corn for each individual is by no means the same. Let us assume that the price is 20s., but one of the buyers, rather than go without, would possibly have given 25s. for it, and others might have been willing to give 24s., 23s., 22s., etc. Every one of those who ex hypothesi only pay 20s. gains a surplus which Professor Marshall has called consumer’s rent (Principles, Book III, chap. 6). He has given it that name in order to facilitate comparison with producer’s rent, which had gained notoriety long before the Hedonistic school arose. Both are due to similar causes, namely, the existence of differential advantages which give rise to a substantial margin between the selling price and the cost of production.
Really, however, the similarity is simply a matter of words, because consumer’s rent is purely subjective, whereas producer’s rent is a marketable commodity. It would be better to say simply that in many cases of exchange it is not correct to argue that because the prices are equal the satisfaction given to different persons is necessarily equal.
[1117] It is scarcely necessary to point out that if workers are not really interchangeable on account of their different capacities the law can no longer be said to hold good, since it always presupposes free competition, whereas in this case we have a personal monopoly.
[1118] It is not quite the same when the capital is fixed, for the law of substitution is no longer applicable in that case, and the incomes are very different.
[1119] It must not be supposed that in applying the term “school” to these writers we wish to suggest that they have a common programme. All we mean is that they make use of the same method.
It is generally recognised to-day that the school dates from the appearance of Cournot’s Recherches sur les Principes mathématiques de la Théorie des Richesses (1838). Cournot, who was a school inspector, died in 1877, leaving behind him several philosophical works which are now considered to be of some importance. The story of his economic work affords an illustration of the kind of misfortune which awaits a person who is in advance of his age. For several years not a single copy of the book was sold. In 1863 the author tried to overcome the indifference of the public by recasting the work and omitting the algebraical formulæ. This time the book was called Principes de la Théorie des Richesses. In 1876 he published it again in a still more elementary form, and under the title of Revue sommaire des Doctrines économiques, but with the same result. It was only shortly before his death that attention was drawn to the merits of the work in a glowing tribute which was paid to him by Stanley Jevons.
Gossen’s book, Entwickelung der Gesetze des menschlichen Verkehrs, which appeared much later (1853), was equally unfortunate. The author remained an obscure civil servant all his life. His book, of which there is still a copy in the British Museum—the only one in existence possibly—was accidentally discovered by Professor Adamson, and Stanley Jevons was again the first to recognise its merits. A brief résumé of the work will be found in our chapter on Rent.
Stanley Jevons (died 1882) belongs both to the Mathematical and to the Final Utility school. His charming book, The Theory of Political Economy, dates from 1871.
Léon Walras, who is persistently spoken of as a Swiss economist just because he happened to spend the greater part of his life at the University of Lausanne, also known as the School of Lausanne, was in reality a Frenchman. His Éléments d’Économie politique pure, of which the first part appeared in 1874, contains a full exposition of Mathematical economics.
To-day the Mathematical method can claim representatives in every country: Marshall and Edgeworth in England, Launhardt, Auspitz, and Lieben in Germany, Vilfredo Pareto and Barone in Italy, Irving Fisher in the United States, and Bortkevitch in Russia. France, however, the country of Cournot and Walras, has no Mathematical economists, unless we mention Aupetit whose work, Théorie de la Monnaie, although dealing with a special subject, contains a general introduction.
[1120] Des Différences d’Opinion entre Économistes (Geneva, 1897), inserted in Scritti varii di Economia, pp. 1-48 (1904).
[1121] Value itself, the pivot of Classical economics, is simply a link in exchange with the new school, and thus it loses all its subjectivity; and since it is not a thing at all, but merely an expression, it would be ridiculous to struggle to find its cause, foundation, or nature, as the older writers did. This is why Jevons proposed to banish the word altogether and to employ the term “ratio of exchange” instead. And Aupetit insists that “the expression ‘value’ is to-day devoid of content … and seems doomed to disappear from the scientific vocabulary altogether. There is no great harm in omitting this parasitical element as we have done, and in treating economic equilibrium as an entity without ever employing the term ‘value.’” (Théorie de la Monnaie, p. 85.)
[1122] If demand be represented by d and price by p, then d = f(p); i.e. demand is a function of price.
[1123] Dupuit, the engineer, was the first to make use of a demand curve. Cournot, who refers to it as the law of sale, gives an admirable illustration of its operation in the case of bottles of medicinal waters of wonderful curative power. At a very low price the demand and consequently the sale would be very great, though not infinite because of the limit which exists for each want. At a very high price it would be nil. Between the two extremes would be several intermediate curves. We cannot deal with all the ingenious deductions which Cournot makes concerning monopoly and the greater or lesser discord between monopoly and the general interest.
[1124] The demand curve is generally concave, and this characteristic form is just the geometrical expression of the well-known fact that when prices are low enough to be accessible to everybody the sales increase rapidly, because lean purses being much more numerous than fat ones a slight lowering of the level of prices will bring the commodity within the reach of a fresh stratum of people. It may take different forms, however. For some products, such as common salt, a considerable fall in the price will not result in a large increase in the sales. In the case of diamonds a great fall in price may cause a falling off in demand because they have become too cheap. The supply curve, on the other hand, is generally convex, because the supply, which only enters upon the scene at a certain point, is very sensible to price movements, going up rapidly with a slight increase in price. Its upward trend is soon arrested, however, because production cannot keep up the pace. It is even possible that the supply may fall off at the next point, for the simple reason that there is no more of the commodity available.
[1125] Below on the same diagram is traced a demand and a supply curve.
The figures along the horizontal line denote price, along the vertical the quantity demanded. In the given figure when price is 1, quantity demanded is VI, and with the price at 7 the quantity demanded falls to zero.
The dotted curve represents the supply. When price is 1, supply is nil. When price is 10, supply mounts up to IV. Exchange obviously must take place just where demand and supply are equal, i.e. at b, which marks the point of intersection of the two lines, when the amount demanded is equal to the quantity offered and the price is 5.
The vertical lines are called ordinates, and 0 X the axis of the ordinates. Distances along 0 X are called abscissæ. Each point on the curve simply marks the intersection of these, of the ordinates and the abscissæ. This is true of the point a, for example, where the perpendicular denotes the price (1) and the other line the number of units sold, in this case VI.
Though in the diagram we have considered the ordinates to represent price and the abscissæ quantities, the reverse notation would work equally well.
[1126] Mathematical economics also studies other forms of equilibrium which are much more complicated and not quite so important perhaps, relating as they do to conditions of unstable equilibrium.
[1127] Note Pareto’s terms of appreciation (Économie pure, 1902, p. 11): “Walras was the first to show the importance of these equations, especially in the case of free competition. This capital discovery entitles him to all the praise that we can give him. The science has developed a good deal since then, and will undoubtedly develop still more in the future, but that will not take away from the importance of Walras’s discovery. Astronomy has progressed very considerably since Newton published his Principia, but far from detracting from the merits of the earlier work it has rather enhanced its reputation.”
[1128] If this is to be taken as literally true, we have this curious result: the entrepreneur, receiving for the products which he sells just exactly what he paid for producing them, makes no profit at all.
Both Walras and Pareto fully admit the paradoxical nature of the statement. Of course it is understood that it can only happen under a régime of perfectly free competition, care being also taken to distinguish between profits and interest, a thing that is never done, apparently, by English economists, who treat both interest and profit as constituent elements of cost of production.
But this is not so wonderful as it seems at first sight. It simply means a return to the well-known formula that under a régime of free competition selling price must necessarily coincide with cost of production.
This does not prevent our recognising the existence of actual profits. Profits are to be regarded as the result of incessant oscillations of a system round some fixed point with which it never has the good fortune actually to coincide. According to this conception they are but the waves of the sea. But the existence of waves is no reason for denying a mean level of the ocean or for not taking that mean level as a basis for measuring other heights. Some day, perhaps, equilibrium will become a fact, and profits will vanish. But if that day ever does dawn either upon the physical or the economic world, all activity will suddenly cease, and the world itself will come to a standstill.
[1129] A full exposition of Walras’s system involves the supposition not only of two but of three markets interwoven together. On the actual market where goods are exchanged the quantity of these commodities depends upon the quantity of productive services, land, capital, and labour, and the quantity of these productive services, at least the quantity of capital, depends to a certain extent upon the creation of new capital, which in turn depends upon the amount of saving. The third market, then, is that of capitalisation. Since the new capital can only be paid for out of savings, i.e. out of that part of the revenue which has been employed in other ways than in buying consumable commodities, the price of capital must be such as to equal the quantity saved and the quantity of new capital demanded. If saving exceeds the demand the price will fall, etc.
To say that the price of capital has gone up is to say that the rate of interest or the reward of saving has fallen. But a fall in the rate of interest will check saving. The result will be a change of equilibrium, the price of new capital will fall, the rate of interest will go up, etc.
Briefly, then, the total maximum utilities on the one hand and the price on the other, these are the two conditions determining equilibrium in the economic world, no matter whether it be products or services or capital. “The same thing is true of gravity in the physical world, which varies directly with the mass and inversely with the square of the distance. Such is the twofold condition which determines the movement of the celestial bodies.… In both cases the whole science may be represented by a formula consisting of only two lines. Such a formula will include a great number of facts.” (Walras, Économie politique pure, p. 306.)
[1130] Professor Edgeworth employs a similar comparison, speaking of the economic man as a charioteer and of social science as consisting of a chariot and some such charioteer (Mathematical Psychics, p. 15). “‘Mécanique Sociale’ may one day take her place along with ‘Mécanique Céleste,’ throned each upon the double-sided height of one maximum principle, the supreme pinnacle of moral as of physical science.” (Ibid., p. 12.)
Pareto regards political economy as a study of the balance between desires and the obstacles which stand in the way of their satisfaction.
[1131] During the last few years we have had, of course, M. Colson’s great book on political economy, which contains a mathematical treatment of demand and supply, M. Landry’s exposition of the Austrian theory in his Manuel d’Économique, and M. Antonelli giving a special course on Walras’s system at the Collège libre des Sciences sociales. We have already referred to Aupetit’s book on money. We must also mention the translations of the Manual of Political Economy of Vilfredo Pareto and of Jevons’s Theory of Political Economy.
[1132] M. Paul Leroy-Beaulieu is particularly severe upon the Mathematical method. “It is a pure delusion and a hollow mockery. It has no scientific foundation and is of no practical use. It is as much a gamble as the scramble for prizes at the table at Monte Carlo.… The so-called curve of utility or demand is of no earthly use, for if the price of wine goes up the consumption of beer or cider will increase, that is all.” (Traité d’Économie politique, vol. i, p. 85; vol. iii, p. 62.)
This last criticism is somewhat unexpected, for we have already seen that the Hedonists are very far indeed from ignoring the law of substitution. If they did not actually discover it they immensely amplified it. And it is very probable that if there had been a contradiction between their doctrines and this law it would not have escaped them. Moreover, we note that beer and cider have their demand curves: cannot wine have one as well? Having to pass from one to the other does undoubtedly complicate matters, and the Mathematical economist frequently finds himself obliged to juggle not with one but with two or three balls. But this is just the kind of difficulty which is amenable to mathematical treatment—nay, even, perhaps, demands it. The connection between the values of complementary or supplementary goods is one of the problems that has been most thoroughly investigated by the Hedonists. See Pantaleoni, Economia pura.
A criticism of Mathematical economics may be found in an article by M. Simiand entitled La Méthode positive en Science économique (Revue de Métaphysique et de Morale, November 1908), and a good reply in La Méthode mathématique en Économie politique, by M. Bouvier.
[1133] Walras put it well when he wrote as follows: “We have never tried to analyse the motives of free human beings. We have simply tried to give a mathematical expression of the result.” (Éléments d’Économie politique pure, p. 232.)
[1134] “We do not know exactly what it is that binds the function and the variable together, or the intensity of the satisfied need to the quantity already consumed. But for every item on the one side we feel certain that there must be a corresponding item on the other.” (Aupetit, Théorie de la Monnaie, p. 42.)
[1135] For a vigorous refutation of this criticism see two articles by Rist entitled Économie optimiste and Économie scientifique in the Revue de Métaphysique et de Morale for July 1904 and September 1907.
[1136] Or he will argue, perhaps, that the market would have been much more favourable to Esau if Jacob had had more pottage than he could easily have disposed of—a case where even monopoly might offer some advantage to the buyer.
[1137] “For purposes of demonstration,” says Pareto, “we have assumed the existence of private property. But to assume on the strength of the conclusion which we have established that a régime of private property gives the maximum of well-being would clearly be to beg the question.”
[1138] This doctrine is not accepted even by all the Hedonists. Walras especially is very critical in the fourth edition of his Économie pure. M. A. Landez in his Intérêt du Capital (1904) and Irving Fisher in The Rate of Interest (1907) have tried if not to demolish it at least to correct it by giving a more subtle analysis of the motives determining a preference for a future income as compared with a present one. This time-preference, of course, varies according to the fortune of each and other circumstances.
[1139] We have already remarked on this in the case of M. Böhm-Bawerk. This is another respect in which the Hedonists have shown themselves faithful to the Classical tradition. The necessity for separating the art from the science of political economy, pure economics from applied, was especially emphasised by Courcelle-Seneuil and Cherbuliez. Pareto put it well when he said that the maximum of ophelimity can be put in the shape of an equation, but the maximum of justice can not.
[1140] This system, according to Walras, would possess another advantage in that it would facilitate the establishment of free trade, which is an ideal of the science. The chief difficulties would thus be avoided, such as unequal import duties and unequal degree of fertility. “Free trade has always involved the absence of duties, and the nationalisation of land would further result in the free movement of capital and labour to whatever place might prove most advantageous to them.” (La Paix par la Justice sociale et par le Libre-Échange, in Questions pratiques de Législation ouvrière, September-October 1907.)
[1141] The same is true of American economists, where the use of the Hedonistic method is by no means confined to one school. Professor Clark employs it, and he is rather inclined to set up an apology for the present economic order and to trust to the efficacy of free competition. But Professor Patten also makes use of it, and he is an interventionist of the extreme type.
[1142] Economics will become a science when it can say that “what was just now nothing better than an intuition can now be fully proved.” (Walras, Économie politique pure, p. 427.)
[1143] “It is necessary to apply the law of the variation of intensity of need to each separate individual in relation to each one of his needs.” (Aupetit, La Monnaie, p. 93.)
[1144] It is only those Hedonists who claim to be able to establish an exact science that make use of the mathematical and abstract method to the total exclusion of the historical and biological method. Professor Marshall expressly declares himself in favour of the biological method, and would advocate employing diagrams and curves as little as possible (Economic Journal, March 1898, p. 50).
[1145] Pareto, Giornali degli Economisti, September 1901.
[1146] Böhm-Bawerk, the Austrian Economists, loc. cit. On the other hand, one of the disciples of this school, M. Landry, writes: “To-day the Austrian school is somewhat played out” (L’École économique, in Rivista di Scienza, 1907). At the end of thirty years!—not a very long life.
[1147] Marshall, Distribution and Exchange, in Economic Journal, March 1898.
[1148] Our figures are taken from the well-informed pamphlet of M. Einaudi, La Municipalisation du Sol dans les Grandes Villes (Girard et Brière, 1898), reprinted from Devenir social.
[1149] P. Leroy-Beaulieu, L’Art de placer et gérer sa Fortune, p. 34.
[1150] Marshall, Principles, preface to the first edition.
[1151] There is a good account of the evolution of which we have given a brief résumé in a work published as far back as 1868, entitled Versuch einer Kritischen Dogmengeschichte der Grundrente, by Edward Berens (Leipzig), but especially in La Théorie de la Rente et son Extension récente, by Paul Frézouls (Montpellier, 1908), and in the very interesting articles of Herr Schumpeter, Das Rentenprinzip in der Verteilungslehre, which appeared in Schmoller’s Jahrbuch in 1907, pp. 31 and 591.
[1152] Ricardo’s Principles, chap. 3, “On the Rent of Mines.” Cf. Stuart Mill, Principles, Book III, chap. 5, § 3.
[1153] Stuart Mill, loc. cit.
[1154] This fact was noted by Hermann even as far back as 1832 in his very remarkable Staatswirtschaftliche Untersuchungen (Munich, 1832), p. 166: “A phenomenon that is exactly analogous to rent becomes manifest whenever a country employs imported machinery the multiplication of which is difficult, possibly because the producing country discourages such exportation. [Such was the case with English machinery at the time Hermann wrote.] … Suppose now that the price of the commodity manufactured with the aid of such machinery goes up. If the country under consideration can only manufacture with machinery that is more expensive but less efficient because of its defective character, the cost of production will still be higher than if the best [foreign] machinery were employed. The result is that the proprietors of the latter retain such advantages as the rise in price had secured them.” Mangoldt (in Die Lehre vom Unternehmergewinn, Leipzig, 1855) expresses his view in a somewhat similar fashion: “Rent shows itself clearest and on the largest scale in the case of agricultural land, but it is equally evident wherever the difficulty of multiplying capital prevails or where it can only be replaced by other capital of a more expensive character or a less productive yield.” Ricardo himself possibly had the rent of capital in mind when he said: “The exchangeable value of all commodities, whether they be manufactured or the produce of the mines or the produce of land, is always regulated, not by the less quantity of labour that ill suffice for their production under circumstances highly favourable, and exclusively enjoyed by those who have peculiar facilities of production, but by the greater quantity of labour necessarily bestowed on their production by those who have no such facilities, by those who contrive to produce them under the most unfavourable circumstances—meaning by the most unfavourable circumstances the most unfavourable under which the quantity of produce required renders it necessary to carry on the production.” (Principles, p. 37.) English writers, however, seldom speak of the rent of capital. Rent with them always signifies income due, not to the intervention of man, but to the natural resources of production.
[1155] Principles, Book III, chap. 5, § 4.
[1156] “But as it is clearly a surplus, the labour having been previously paid for by average wages, and that surplus the spontaneous gift of nature, we have thought it most convenient to term it rent.” (Quoted by Cannan, Production and Distribution, p. 198.)
[1157] In an article entitled The Source of Business Profit.
[1158] Walker is one of the first of the English-speaking economists to make this distinction and to employ the term “profit” in a narrow sense, distinguishing it from interest on the one hand and wages on the other. He even went so far as to subtract the wages of superintendence and direction because this work of supervision could be delegated to others (Wages Question, 2nd ed., 1891, pp. 230, etc.), while the special function performed by the entrepreneur, namely, the adaptation of supply to demand, requires special remuneration, which he proposes to call profit. It is a little odd that a writer who seemed completely isolated should be shown, after all, to share the views of other economists. Walker declares that save his own father, Amasa Walker, he knew of no economist who had distinguished between capitalist and entrepreneur. But J. B. Say had already made the same distinction, which had been adopted by all Continental economists even as far back as the beginning of the nineteenth century.
[1159] This is how Walker summarises his duties: “To furnish also technical skill, commercial knowledge, and powers of administration; to assume responsibilities and provide against contingencies; to shape and direct production, and to organise and control the industrial machinery.” (The Wages Question, p. 245.)
[1160] Walker, Quarterly Journal of Economics, April 1887, p. 278.
[1162] Pantaleoni (Economia pura, Part III, chap. 4) seems to be the only economist who accepts Walker’s theory without any reservation.
[1163] For his criticism of Walker see the Quarterly Journal of Economics, 1887, p. 479, and the Principles, 4th edition, p. 705, note. In conformity with English tradition, Marshall includes within profits any interest upon such capital as the entrepreneur possesses.
[1164] Pantaleoni makes the same distinction: “Profits,” says he, “may be the result of superior ability acquired either by assiduous study or prolonged preparation. In that case we are dealing, not with a kind of rent, but with a species of profit which may be very remunerative but which is nevertheless amenable to a very different law from that which generally regulates the investment of capital.” (Economia pura, Part III, chap. 4.) On the other hand, Pantaleoni refuses to recognise the existence of an element of insurance against risk as an item in profits, because, as he points out, if the premium has been carefully reckoned up and compared with the risk, “it ought on an average to be equal to it at the end of a certain number of years, so that the net rent would become equal to zero.” (Ibid.)
[1165] Cf. Distribution of Wealth (1899) and Essentials of Economic Theory (1908).
[1166] Moreover, the entrepreneur may find himself forced to yield a part of this composite rent either to the landlord or to the capitalist from whom he has borrowed his capital or to the workers by whose superior ability he has benefited. The difficult question of determining what proportion ought to be given in this way is discussed by Marshall in his Principles, Book V, chap. 10, § 4; Book VI, chap. 8, § 9.
[1167] Walker might answer by saying that the dividend is simply the interest upon the capital. But we can hardly bring ourselves to believe this.
[1168] This word “acquired” is not quite in conformity with the pure theory of rent, for if these advantages are acquired the remuneration thus received should be considered merely as interest upon capital spent.
[1169] Stuart Mill, Principles, Book III, chap. 5, § 4.
[1170] “Wages and profits represent the universal elements in production, while rent may be taken to represent the differential and peculiar: any difference in favour of certain producers, or in favour of production in certain circumstances, being the source of a gain, which, though not called rent unless paid periodically by one person to another, is governed by laws entirely the same with it.” (Ibid., Book III, chap. 5, § 4.)
[1171] “Rent, it should be remembered, is the difference between the produce obtained by equal portions of labour and capital employed on land of the same or different qualities.” (Ricardo, Principles, chap. 9.)
[1172] Principles, Book II, chap. 16, § 2.
[1173] Ricardo had already made use of the following argument: “Suppose that the demand is for a million of quarters of corn, and that they are the produce of the land actually in cultivation. Now, suppose the fertility of all the land to be so diminished that the very same lands will yield only 900,000 quarters. The demand being for a million of quarters, the price of corn would rise, and recourse must necessarily be had to land of an inferior quality sooner than if the superior land had continued to produce a million of quarters.” (Principles, chap. 32, p. 246.) Towards the end of his life Ricardo seems to have been more favourably inclined to a conception of rent somewhat closer akin to J. B. Say’s. Compare the curious quotations given in Frézouls, op. cit., p. 21.
[1174] “A commodity may no doubt, in some contingencies, yield a rent even under the most disadvantageous circumstances of its production; but only when it is, for the time, in the condition of those commodities which are absolutely limited in supply, and is therefore selling at a scarcity value—which never is, nor has been, nor can be a permanent condition of any of the great rent-yielding commodities.” (Principles, Book III, chap. 5, § 4.) For the position with regard to mines see the same chapter, § 3.