tion must equalize profits. If the returns for the employment of capital were smaller in farming than in commerce and manufactures, capital would be diverted from agriculture till the balance was restored. Furthermore, the increased cost of the raw material, which is always obtained more or less directly from agriculture, will immediately lessen the profits of the manufacturer; for instance, "even upon shoes," as De Quincey remarks, "there will be a small increase of labor, because the raw material will grow a little dearer as hides grow dearer; and hides will grow dearer as cattle grow dearer, by descending upon worse pasture-lands."

There is but one possible check upon this descent of agriculture to inferior soils, and the consequent declension of profits, augmentation of the price of food, and increase of rent. This is the progress of agricultural improvements, by means of which more food is obtained from the same quantity of land, or the same amount of food is procured by a smaller expenditure of labor and capital. In this way, the wants of an increasing population may be provided for without the necessity of bringing more land into tillage, or of applying capital with constantly diminishing returns. But this check cannot have any permanent influence; it may postpone, but cannot finally avert, the consequences of a steady growth of the population. Its influence, indeed, is self-limited; for, as McCulloch remarks, "the rise of profits consequent to every invention, by occasioning a greater demand for labor, gives a fresh stimulus to population; and thus, by increasing the demand for food, again inevitably forces the cultivation of poorer soils, and raises prices." And again, "from the operation of fixed and permanent causes, the increasing sterility of the soil is sure, in the long run, to overmatch the improvements already made in machinery and agriculture, prices experiencing a corresponding rise, and profits a corresponding fall.”

It only remains to notice a corollary from this theory, in respect to the different manner in which this declension of the rate of profits affects the comparative value of commodities produced in great part by Fixed Capital, and of those produced in great part by Circulating Capital. These two kinds of capital differ chiefly in point of durability; Circulating Capital is employed for the most part in the payment of wages,

and is very soon replaced by the fruits of the laborers' industry. Fixed Capital consists of tools and machines, varying in their degrees of durability, though all are consumed and replaced much more slowly than the various elements of Circulating Capital. According as Fixed Capital has less and less of durability, so far it approximates the separate nature of Circulating Capital. Some commodities are almost exclusively produced by the expenditure of capital, chiefly of Fixed Capital. Gunpowder, for instance, to avoid the hazard of human life, is manufactured by machinery moved by water-power in some retired place, the works being so contrived that the process is continued with very little superintendence, the workmen visiting the place only occasionally, to bring additional raw material, to remove the finished product, and to make a few adjustments of the machinery. Boots and shoes, on the other hand, are made almost entirely by the immediate labor of man; machines are not used in their manufacture, and the workman needs but few and simple tools.

Now, a fall of profits, as Mr. Mill remarks, "lowers in natural value the things into which profits enter in a greater proportion than the average, and raises those into which they enter in a less proportion than the average. All commodities in the production of which machinery bears a large part, especially if the machinery is very durable, are lowered in their relative value when profits fall; or, what is equivalent, other things are.raised in value relatively to them." Recurring to the diagram, we see that wages rise while profits fall, though not in the same proportion, the fall of profits, owing to the deduction of rent, being more rapid than the rise of wages. For a double reason, then, as population advances, and inferior soils are brought into cultivation, gunpowder, and other articles the value of which consists mostly of profits, fall in price when compared with boots and shoes, and other commodities the value of which consists chiefly in wages. The elements of the former are declining, at the same time that the elements of the latter are rising, in comparative value. The result is otherwise briefly stated by Mr. Mill in this formula :"Every fall of profits lowers, in some degree, the cost value of things made with much or durable machinery, and raises that of things made by hand; and every rise of profits does the reverse."

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This is a brief outline of Ricardo's celebrated theory of value in relation to rent, wages, and profits. It is a masterpiece of abstract reasoning, imposing from its scientific pretensions, the boldness of its assumptions, the paradoxical character of many of its results, and the ingenuity which has been manifested in explaining these paradoxes and reconciling them with the facts of observation. In point of logic, it is unexceptionable; once admit its premises, and there is no stopping short of its conclusions. We may accept in great part the criticism of it by an eminent French economist, J. B. Say. "It is," he remarks, perhaps a well-founded objection to Mr. Ricardo, that he sometimes reasons upon abstract principles to which he gives too great a generalization. When once fixed in an hypothesis which cannot be assailed, from its being founded on unquestionable observations, he pushes his reasonings to their remotest consequences, without comparing their results with those of actual experience. In this respect, he resembles a writer upon the mathematical theory of mechanics, who, from undoubted proofs drawn from the nature of the lever, would demonstrate the impossibility of the vaults daily executed by dancers on the stage. And how does this happen? The reasoning is unexceptionable; but a vital force, often unperceived, and always inappreciable, makes the facts differ very far from the calculations. From that moment, nothing in the author's work is represented as it really occurs in nature. It is not suf ficient to begin with facts; other facts must be collected, steadily examined, and the consequences drawn from them constantly compared with the effects observed. The science of Political Economy, to be of practical utility, should not attempt to teach what must necessarily take place, even if deduced by legitimate reasoning, and from undoubted premises; it ought to show in what manner that which in reality does take place is the consequence of another fact equally certain. It should ascertain the chain which binds them together, and always establish from observation the existence of the two links at their point of connection."

It is unnecessary at present to examine this reasoning in detail, in order either to point out flaws in the argument, or to show that its results do not harmonize with those of observation and experience. The whole theory rests upon a few

premises, which have already been examined and shown to be mere assumptions, paradoxical in appearance, and having no foundation in fact. It is not true, that the increase of the population tends to outrun the supply of food, or that it compels us to have recourse to inferior soils, or that it necessarily increases the competition of laborers for employment. Food does not become dearer, but is cheapened, by the growth of the population; the districts which are most recently brought into cultivation are not the least fertile, but are often more productive than those which have been peopled and tilled for centuries; and the capital which is applied to them generally yields a larger return than that which is employed in the old settlements. It is not even necessary, as the people increase in numbers, to send to a greater distance for food; but emigration distributes the people, and commerce distributes the food, where both are most needed, the combined result being that each generation is more fully supplied with the means of subsistence than its predecessor. The only inequality to be feared is that which is sometimes caused by human institutions, in the distribution of property; and the only famine which is possible in modern times, and among civilized nations, is produced by poverty, and not by a deficient supply of food.

The premises of Ricardo's theory being thus proved to be baseless, the entire superstructure falls. The whole is a mere exercise of logical ingenuity, a long series of deductions being obtained from a few definitions and hypotheses, which have no foundation in experience, and no applicability to the circumstances of the present time. The original phenomenon to be explained the declension of the rate of profit as society advances in numbers and wealth-presents little difficulty, when we regard the limited extent of the field for the employment of capital. But this subject demands for full consideration a separate chapter.

CHAPTER XVII.

THE RATE OF PROFIT AS AFFECTED BY THE LIMITED EXTENT OF THE FIELD FOR THE EMPLOYMENT OF CAPITAL: THE

THEORY OF GLUTS.

MR. WAKEFIELD was the first among English Economists to notice the seemingly obvious fact, that, in every country, the field for the employment of capital is of limited extent. The first introduction of capital into such a field is attended with very large returns; but as the amount of it increases, the rate of profit falls off; and when the limit is attained, or so nearly attained that profits have fallen to a minimum, accumulation ceases, there being no longer any sufficient motive for the exercise of frugality. With an evident desire to reconcile this fact to the theories of Malthus and Ricardo, with which it appears to conflict, Mr. Mill states the principle thus:- that "on a limited extent of land, only a limited quantity of capital can find employment at a profit." Thus enunciated, it seems to be only a corollary from Ricardo's doctrine of rent, which expressly affirms that successive applications of capital to the same quantity of land can be made only with successively diminishing returns. It will appear, however, that the extent of territory is not the only, or even the chief, limiting circumstance; but that the proper restriction is to be found in the magnitude of the wants of the people, as determined by their numbers, by the degree of civilization under which they live, and by the greater or less inequality of the distribution of property among them.

But it should be observed, that we are here speaking of a limit to the profitable employment of capital. Some distinguished Economists, among whom are Sismondi and Malthus, have maintained that there may be a general over-production of wealth, "a supply of commodities in the aggregate exceeding the demand, and a consequent depressed condition of all classes of production." We are all familiar with the fact, that there is often, in the market, a glut of a particular commodity,