Howwilltheresultingstrainaffecttherelationsofthetworemainingclasses，thelabourersandthecapitalists?Theultimateevilofprotectionisthebaddistributionofcapital。Butcapitalalwaysactsbyemployinglabour。Thefarmer’scapitaldoesnotactbyitself，butbyenablinghismentowork，Hence，tounderstandtheworkingoftheindustrialmachinery，wehavetosettletherelationofwagesandprofits。Ricardostatesthisemphaticallyinhispreface。Rent，profit，andwages，hesays，representthethreepartsintowhichthewholeproduceoftheearthisdivided。’Todeterminethelawswhichregulatethisdistributionistheprincipalprobleminpoliticaleconomy’；andone，headds，whichhasbeenleftinobscuritybypreviouswriters。7Hisinvestigationsareespeciallydirectedbythepurposethusdefined。Hewasthefirstwriterwhofairlybroughtunderdistinctconsiderationwhatheheld，withreason，tobethemostimportantbranchofeconomicalinquiry。
　　TherewasclearlyagapintheeconomicdoctrinerepresentedbytheWealthofNations。AdamSmithwasprimarilyconcernedwiththetheoryofthe’market。’Heassumestheexistenceofthesocialarrangementwhichisindicatedbythatphrase。
　　Themarketimpliesaconstitutionofindustrialagenciessuchthat，withinit，onlyonepriceispossibleforagivencommodity，or，rather，suchthatadifferenceofpricecannotbepermanent。Accordingtotheacceptedillustration，theseaisnotabsolutelylevel。butitisalwaystendingtoalevel。8Apermanentelevationatonepointisimpossible。
　　Theagencybywhichthislevellingorequilibratingprocessiscarriedoutiscompetition，involvingwhatSmithcalledthe’higglingofthemarket。’
　　Themomentaryfluctuation，again，supposestheactionof’supplyanddemand’
　　which，astheyvary，raiseanddepressprices。Toillustratetheworkingofthismachinery，toshowhowpreviouswritershadbeencontenttonoticeaparticularchangewithoutfollowingoutthecollateralresults，andhadthusbeenledintofallaciessuchasthatofthe’mercantilesystem，’wasSmith’sprimarytask。
　　Beyondorbeneaththesequestionsliedifficulties，whichSmith，thoughnotblindtotheirexistence，treatedinavacillatingandinconsistentfashion。Variationsofsupplyanddemandcausefluctuationsintheprice；butwhatfinallydeterminesthepointtowhichthefluctuatingpricesmustgravitate?Wefollowtheprocessbywhichonewavepropagatesanother；butthereisstillthequestion，Whatultimatelyfixesthenormallevel?UponthispointRicardocouldfindnodefinitestatementinhisteacher。’Supplyanddemand’wasasacredphrasewhichwouldalwaysgiveaverbalanswer，orindicatetheimmediatecauseofvariationsonthesurface。Beneaththesurfacetheremustbecertainforcesatworkwhichsettlewhyaquarterofcorn’gravitates’toacertainprice；whythelandlordcangetjustsomanyquartersofcornfortheuseofhisfields；andwhytheproduce，whichisduejointlytothelabourerandthefarmer，isdividedinacertainfixedproportion，tosettlesuchpointsitisnecessarytoanswertheproblemofdistribution，fortheplayoftheindustrialforcesisdirectedbytheconstitutionoftheclasseswhichcooperateintheresult，RicardosawinMalthus’sdoctrinesofrentandofpopulationanewmodeofapproachingtheproblem。Whatwaswanted，inthefirstplace，wastosystematisethelogicadoptedbyhispredecessors。
　　Rent，itwasclear，couldnotbebothacauseandaneffectofprice，thoughatdifferentpointsofhistreatiseSmithhadapparentlyacceptedeachviewoftherelation。Wemustfirstsettlewhichiscauseandwhicheffect；
　　andthenbringourwholesystemintothecorrespondingorder。Forthefacts，Ricardoiscontenttotrustmainlytoothers。Thetruetitleofhisworkshouldbethatwhichhiscommentator，DeQuincey，afterwardsadopted，theLogicofPoliticalEconomy。ThisaimgivesapartialexplanationofthecharacteristicforwhichRicardoismostgenerallycriticised。Heisaccusedofbeingabstractinthesenseofneglectingfacts。Hedoesnotdenythecharge。’IfIamtootheoreticalwhichIreallybelievetobethecaseyou，’hesaystoMalthus，’Ithink，aretoopractical。’9IfMalthusismoreguidedthanRicardobyareferencetofacts，hehasofcourseanadvantage。ButsofarasMalthusorAdamSmiththeorised——
　　and，ofcourse，theirstatementoffactsinvolvedatheory——theywereatleastboundtobeconsistent，Itisonethingtorecognisetheexistenceoffactswhichyourtheorywillnotexplain，andtoadmitthatitthereforerequiresmodification，itisquiteanotherthingtoexplaineachsetoffactsinturnbytheorieswhichcontradicteachother，thatisnottobehistoricalbuttobemuddle-headed，MalthusandSmith，asitseemedtoRicardo，hadoccasionallygivenexplanationswhich，whensetsidebyside，destroyedeachother。Hewasthereforeclearlyjustifiedintheattempttoexhibittheselogicalinconsistenciesandtosupplyatheorywhichshouldbeinharmonywithitself。Hewassofarneithermorenorless’theoretical’
　　thanhispredecessors，butsimplymoreimpressedbythenecessityofhavingatleastaconsistenttheory。
　　Therewasneveratimeatwhichlogicinsuchmatterswasmorewanted，oritsimportancemorecompletelydisregarded。Rashandignoranttheoristswereplungingintointricateproblemsandpropoundingabstractsolutions。Theenormoustaxationmadenecessarybythewarsuggestedateverypointquestionsastothetrueincidenceofthetaxes。Whoreallygainedorsufferedbytheprotectionofcorn?
　　Werethelandlords，thefarmers，orthelabourersdirectlyinterested?
　　Couldtheyshifttheburthenuponothershouldersornot?What，again，itwasofthehighestimportancetoknow，wasthetrue’incidence’oftithes，ofaland-tax，ofthepoor-laws，ofanincome-tax，andofallthemultitudinousindirecttaxesfromwhichthenationalincomewasderived?Themostvaryingviewswereheldandeagerlydefended。Whoreallypaid?Thatquestioninterestedeverybody，andoccupiesalargepartofRicardo’sbook。Thepopularanswersinvolvedinnumerableinconsistencies，andweresupportedbyargumentswhichonlyrequiredtobeconfrontedinordertobeconfuted。Ricardo’saimwastosubstituteaclearandconsistenttheoryforthistangleofperplexedsophistry。Inthatsensehisaimwasinthehighestdegree’practical，’
　　althoughhelefttoothersthedetailedapplicationofhisdoctrinestotheactualfactsoftheday。
　　II。THEDISTRIBUTIONPROBLEM
　　Therentdoctrinegivesoneessentialdatum。Aclearcomprehensionofrentis，ashewaspersuaded，’oftheutmostimportancetopoliticaleconomy，’10Theimportanceisthatitenableshimtoseparateoneoftheprimarysourcesofrevenuefromtheothers。Itisasthough，inthefamiliarillustration，wewereconsideringtheconditionsofequilibriumofafluid；andwenowseethatonepartmaybeconsideredasamereoverflow，resultingfromnotdetermining
　　theotherconditions。Theprimaryassumptioninthecaseofthemarketisthelevelofprice。Whenweclearlydistinguishrentononesidefromprofitsandwagesontheother，weseethatwemayalsoassumealevelofprofits。Therecannot，asRicardoconstantlysays，’betworatesofprofit，’thatis，atthesametimeandinthesamecountry。Butsolongasrentwaslumpedwithothersourcesofrevenueitwasimpossibletosee，whatMalthusandWesthadnowmadeclear，thatinagriculture，asinmanufactures，theprofitsoftheproducermustconformtotheprinciple。Giventheirtheory，itfollowsthatthepoweroflandtoyieldagreatrevenuedoesnotimplyavaryingrateofprofitoraspecialbountyofnaturebestoweduponagriculture。Itmeanssimplythat，sincethecornfromthegoodandbadlandsellsatthesameprice，thereisasurplusonthegood。Butasthatsurplusconstitutesrent，thefarmer’srateofprofitwillstillbeuniform。Thuswehavegotridofonecomplication，andweareleftwithacomparativelysimpleissue。Wehavetoconsidertheproblem，Whatdeterminesthedistributionasbetweenthecapitalistandthelabourer?ThatisthevitalquestionforRicardo。
　　Ricardo’stheory，inthefirstplace，isamodificationofAdamSmith’s。HeacceptsSmith’sstatementthatwagesaredeterminedbythe’supplyanddemandoflabourers，’andbythe’priceofcommoditiesonwhichtheirwagesareexpended。’11Theappealto’supplyanddemand’impliesthattherateofwagesdependsuponunchangeableeconomicconditions。Heendorses12Malthus’sstatementabouttheabsurdityofconsidering’wages’assomethingwhichmaybefixedbyhisMajesty’s’JusticesofthePeace，’andinferswithMalthusthatwagesshouldbelefttofindtheir’naturallevel。’Butwhatpreciselyisthis’naturallevel?’IftheJusticeofthePeacecannotfixtherateofwages，whatdoesfixthem?Supplyanddemand?What，then，ispreciselymeantinthiscasebythesupplyanddemand?The’supply’oflabour，wemaysuppose，isfixedbytheactuallabouringpopulationatagiventime。The’demand，’again，isinsomewayclearlyrelatedto’capital。’
　　AsSmithagainhadsaid，13thedemandforlabourincreaseswiththe’increaseofrevenueand”stock，”andcannotpossiblyincreasewithoutit。’Ricardoagreesthat’populationregulatesitselfbythefundswhicharetoemployit，andthereforealwaysincreasesordiminisheswiththeincreaseordiminutionofcapital。’14Itwasindeedacommonplacethattheincreaseofcapitalwasnecessarytoanincreaseofpopulation，asitisobviousenoughthatpopulationmustbelimitedbythemeansofsubsistenceaccumulated。Smith，forexample，goesontoinsistuponthisinoneofthepassageswhichpartlyanticipatesMalthus。15Butthisdoesnotenableustoseparateprofitfromwages，orsolveRicardo’sproblem。Whenwespeakofsupplyanddemandasdeterminingthepriceofacommodity，wegenerallyhaveinmindtwodistinctthoughrelatedprocesses。
　　Onesetofpeopleisgrowingcorn，andanotherworkingcoalmines。Eachindustry，therefore，hasaseparateexistence，thougheachmaybepartlydependentupontheother。Butthisisnottrueoflabourandcapital。Theyarenotproductsofdifferentcountriesorprocesses。Theyareinseparableconstituentsofasingleprocess。Labourcannotbemaintainedwithoutcapital，norcancapitalproducewithoutlabour。Capital，accordingtoRicardo’sdefinition，isthe’partofthewealthofacountrywhichisemployedinproduction，andconsistsoffood，clothing，rawmaterials，machinery，etc。，necessarytogiveeffecttolabour。’16Thatpart，then，ofcapitalwhichisappliedtothesupportofthelabourer——hisfood，clothing，andsoforth——isidenticalwithwages。Tosaythat，ifitincreases，hiswagesincreaseistobesimplytautologous。If，ontheotherhand，weincludethemachineryandrawmaterials，itbecomesdifficulttosayinwhatsense’capital’canbetakenasademandforlabour。RicardotellsMalthusthatanaccumulationofprofitdoesnot，asMalthushadsaid，necessarilyraisewages；17andheultimatelydecided，muchtothescandalofhisdisciple，M’Culloch，thatanincreaseof’fixedcapital’ormachinerymightbeactuallyprejudicial，undercertaincircumstances，tothelabourer。
　　Thebeliefofthelabouringclassthatmachineryofteninjuresthemisnot，heexpresslysays，’foundedonprejudiceanderror，butisconformabletothecorrectprinciplesofpoliticaleconomy。’18Theword’capital，’indeed，wasusedwithavaguenesswhichcoveredsomeofthemostbesettingfallaciesofthewholedoctrine。Ricardohimselfsometimesspeaksasthoughhehadinmindmerelythesupplyoflabourers’necessaries，thoughheregularlyusesitinawidersense。Thegeneralities，therefore，aboutsupplyanddemand，takeuslittlefurther。