530 REPORT — 1888. 



Metaphors, however, are proverbially liable to break down at some 

 important point ; and therefore I will, at the risk of trespassing upon the 

 patience of the Section, endeavour to make my meaning plain by an 

 examination of the general nature of the change which has, I think, passed 

 over the theory of wages in modern economics. The old theory of 

 Ricardo ^ — so much maligned and so often misunderstood — was, I 

 imao-ine, so far true that, looking at the matter chiefly from what I may 

 call a statical point of view, and remembering that Ricardo used the 

 term ' profits ' in what would now be regarded as a loose and inexact 

 sense — making allowance for this, and looking at the matter chiefly from 

 the statical standpoint — if you had a definite total amount of wealth pro- 

 duced, and a definite share of that total were taken for the landlords in 

 rent, the remainder would be all that could be divided between the 

 capitalists and the labourers, and if wages gained profits must lose. Look- 

 ing at the matter, then, in this way, it would not be difficult to obtain 

 from Ricardo an idea of what I will call the ' competitive ' maximum 

 limit of wages. That limit would consist in the amount of wealth left 

 when the capitalists had secured the rate of profits prevailing in the 

 country- — the rate that is prescribed by the return yielded by the land on 

 the margin of cultivation to the capital and labour applied to it.^ Nor, 

 again, would it be easy even now to discover any other ' competitive ' 

 minimum limit, as I will call it, than that presented in Ricardo's idea of 

 the cost of production of labour. 



Wherein, then, we may ask, did he fail ? He failed in neglecting to 

 lay sti-ess on the causes which might extend the maximum limit. Nay, 

 he rather looked forward — and we cannot in fairness say that this pes- 

 simistic forecast was unwarranted by the circumstances of the times when 

 the law of Diminishing Return seemed to be applying to England with 

 terrible reality — he rather looked forward to a contraction than to an 

 extension of the maximum limit. Neither he nor Malthus — as M. Leroy- 

 Beaulieu has insisted with characteristically French epigrammatic force ^ — 

 were ' geographers.' Their horizon — so far at least as the future was 

 concerned — was to a great extent bounded by the circumstances of their 

 own country, and it was in a large degree on those circumstances that 

 they founded their generalisations of the future. 



In the second place, Ricardo may be said, on the whole, to have failed 

 by neglecting to give sufficient emphasis — and to repeat the emphasis 

 from time to time at each successive stage in the argument — to the 

 fslasticity of the expressions, ' the cost of production of labour ' and 

 ' the average rate of profits.' It was, I suppose, to a large extent in 

 consequence of this that he failed to examine the distance by which, at 

 any particular time and in any particular condition of the labour market, 



' So far, indeed, as Ricardo can strictly be said to hsive formulated anj de&niie 

 and complete theory of wages. 



' And so Ricardo may really be said to agree with later writers in finding the 

 maximum limit to wages in the productivity of industry, however much he may difEer 

 from them in the narrowness and rigidity with which he may have conceived that 

 limit. It must, of course, be admitted that it would perhaps be more accurate to 

 represent him as limiting profits by wages rather than wages by profits ; but the 

 statement in the text may nevertheless be regarded as consistent with the broad 

 outlines of his reasoning. 



» I am not sure that we ought not to add ' with characteristically French exagge- 

 ration,' for M. Leroy-Beaulieu appears in some passages to betray a slight tendency 

 to exaggerate the deficiencies of the older economists. 



