Sraffa versus Ricardo. The Historical Irrelevance of the Corn-Profit Model

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Sraffa versus Ricardo. The historical
irrelevance of the ‘corn-profit’ model
Gilbert Faccarello ∗
Sraffa’s interpretation of Ricardo’s theory of the profit rate in the Es-
say on Profits (Ricardo, 1815) has so far been widely accepted, and not
only by the so-called ‘neo-Ricardian’ or ‘Sraffian’ school. It has been sug-
gested, however, that while this interpretation is simple and suggestive,
it is more of a projection on Ricardo’s work of ideas developed in Sraffa’s
Production of Commodities by Means of Commodities (1960) than a ca-
reful exegesis of the Ricardian system itself. Perhaps the most well-known
expositor of this view to date is Samuel Hollander (1973, 1975, 1979). Un-
fortunately, Hollander’s point is part of an attempt on his part to build
another comprehensive interpretation of Ricardo, probably at least as
ahistorical as Sraffa’s, from the point of view of neoclassical economics. 1
∗Université Panthéon-Assas, Paris. Email: gilbert.faccarello@u-paris2.fr. Published
in Economy and Society,11 (2), May 1982, pp. 122-137. I am indebted to Istvan Hont,
Philippe Mongin and Antoine Rebeyrol for helpful comments and discussions.
1. An estimation of the ‘merits’ and/or ‘demerits’ of S. Hollander’s analysis goes
beyond the purpose of this article. On the whole, it is true that this analysis ‘will
stimulate a reassessment of the “orthodox” interpretations, and this can only help the
cause of scholarship’ (Peach, 1981, p. 247). But Hollander’s interpretation is neverthe-
less established on a very ‘narrow basis’. I thus agree with K. Tribe’s opinion (Tribe,
1981, p. 463), especially when he argues that ‘one of the most general reasons for the
study of the history of economics is to establish the unevenness and incommensurabi-
lity of diverse theoretical systems, the resistance of such systems to uniform principles
of coherence, the heterogeneity of the manner of setting up and solving various pro-
blems. Hollander’s approach on the other hand results in the steady obliteration of
difference, and promotes the view that neo-classicism is a truth to which all other
theoretical systems merely tend’.
1

Sraffa versus Ricardo 2
This essay tries to map out a way to preserve Hollander’s point about
the invalidity of Sraffa’s analysis but also rejecting his ‘neoclassical’ rea-
ding by choosing the following route : instead of reading Ricardo with
modern eyes one should try to locate the Ricardo-Malthus encounter in
the context of an emerging clash between Ricardo’s natural price notion
versus Malthus’s demand and supply framework. Once one sees this as
the context of Ricardo’s statements it will be clear that Sraffa’s model
not only is at variance with the inner logic of Ricardo’s 1813-15 texts
but also represents a misreading of the dialectic of the Ricardo-Malthus
correspondence from which it draws some of its crucial evidence. It would
appear that Sraffa took over some of Malthus’s misunderstanding of Ri-
cardo’s approach to prices.
1. Ricardo’s correspondence (1813-15) : a first view
Ricardo’s early conception of the variation in the profit rate is to be
found in two oft quoted letters from 1813 and 1814. The first one is ad-
dressed to Malthus and underlines the effects of the war upon income
distribution. It states that despite capital accumulation, the increased
rate of profit is only due ‘to improvements of agriculture both here and
abroad’ and ‘new facilities in the production of food’ (17 August 1813, in
Ricardo (1951-5) vol. 6, pp. 94–5). Several months later, Ricardo clarified
the terms of the outstanding dispute in a second letter (to Hutches Tro-
wer, 8 March 1814, ibid., pp. 103-5). The starting-point seems identical
for both protagonists.
Interest rises only when the means of employment for Capital
bears a greater proportion than before to the Capital itself,
and falls when the Capital bears a greater proportion to the
arena, as Mr Malthus has called it, for its employment. (ibid.,
p. 103)
In other words, the profit and interest rates depend, on the one side,
on the amount of money capital invested in production and, on the other
side, on the real capital (labour and means of production) commanded

Sraffa versus Ricardo 3
by the sum advanced (and which can also be defined by the amount of
commodities it can produce). These two elements are called by Malthus
‘supply’ and ‘demand’ of capital, terms about which Ricardo does not
agree. 2This disagreement about terminology is of course meaningful,
and the dispute runs precisely on the problem which lies behind it. Put
succinctly, Ricardo does not think that it is possible to produce too many
commodities, except by accident : thus, fluctuations in the market prices
cannot influence profits in the long run. If capital is scarce with respect
to the means of employing it (following Malthus’s words which Ricardo
will soon give up), i.e. if commodities could be produced (or produced
in greater amounts) because of the demand for them, the only way for
increasing the quantity of capital is to make its constituting elements,
e.g. food, cheaper. The sums of money released in this way can, ceteris
paribus, be employed to increase real capital ; profits will in any case be
increased.
I contend that the arena for the employment of new Capital
cannot increase in any country in the same or greater propor-
tion than the Capital itself, unless there be improvements in
husbandry — or new facilities be offered for the introduction
of food from foreign countries ; — that in short it is the pro-
fits of the farmer which regulate the profits of all other trades
— and as the profits of the farmer must necessarily decrease
with every augmentation of Capital employed on the land,
provided no improvements be at the same time made in hus-
2. As writes Malthus (6 July 1814, in Ricardo (1951-5), vol. 6, pp.111-12) : ‘In short
all will in my opinion depend upon the state of capital compared with the demand for
it. This will be the prime mover, and it is this which will determine the profits which
a capital employed in agriculture shall yield, whether the land be naturally rich or
naturally poor, much worked or little worked. The demand for capital depends, not
upon the abundance of present produce, but upon the demand for the future products
of capital, or the power of producing something by means of capital which shall be
more in demand than the produce actually employed’. To this formulation, taken up
by Malthus in his Principles, Ricardo objects (Notes on Malthus, ibid., vol. 2, p. 331) :
(a) that ‘the temptation to increase capital does not arise from the demand for its
products, for that never fails’, and (b) that ‘what Mr. Malthus calls a demand for
capital I call high profits — capital is not bought and sold, it is borrowed at interest,
and a great interest is given when profits are high. Mr. Malthus’language appears to
me in this instance ‘new and unusual”’.

Sraffa versus Ricardo 4
bandry, all other profits must diminish and therefore the rate
of interest must fall. (ibid., pp. 103-4)
It is thus sufficient to set forth the principle of diminishing returns on
land as far as capital accumulation goes on to be led to the following :
increased difficulty in the production of food induces a fall in the over-all
profits through a fall in the profits of the farmer. Let us examine what
happens in agriculture. Assuming an unchanged real wage rate, increased
difficulty in the production of (agricultural) wage goods causes a rise in
their prices, a general increase of (nominal) wages and decrease in the
profits of the farmer.
The capitalist ‘who may find it necessary to employ a hun-
dred days labour instead of fifty in order to produce a certain
quantity of corn’ [Malthus’s example] cannot retain the same
share for himself unless the labourers who are employed for a
hundred days will be satisfied with the same quantity of corn
for their subsistence that the labourers employed for fifty had
before. If you suppose the price of corn doubled, the capital
to be employed estimated in money will probably be also dou-
bled — or at any rate will be greatly augmented and if his
monied income is to arise from the sale of the corn which re-
mains to him after defraying the charges of production how
is it possible to conceive that the rate of his profits will not
be diminished ? (to Malthus, 25 July 1814, ibid., pp. 114-15)
The same mechanism will take place everywhere in the economy.
Thus, it is not in fact the falling profit of the farmer which induces a
perequation in all other trades, but rather the monetary wage increase.
The context of the different statements is never ambiguous, nor is the
connection made by Ricardo between the two seemingly conflicting for-
mulations. ‘It is by the rise of the price of corn that all other profits are
regulated to agricultural profits’ (to Malthus, 17 March 1815, ibid., p.
194).
To this opinion, Malthus answers quite ironically (5 August 1814,
ibid., p. 117).

Sraffa versus Ricardo 5
If the nominal price of corn be doubled, and the nominal
amount of capital employed, be not quite doubled which you
seem to allow be the case, instead of saying ‘how it is possible
to conceive that the rate of profits will not be diminished’ I
should say how is it possible to conceive that it should not be
increased ?
The objection is well grounded indeed. It points out strikingly that
important questions concerning the variations in the profit rate remained
unsettled : (1) why should the farmer’s profit rate fall ? The money capi-
tal is greater for the same physical product, but the price of this product
is rising ; (2) why should the profit rate decrease in the other activities?
Money wages are rising, but in accordance with the adding-up theory of
value that Ricardo was accepting at that time (‘the prices of all com-
modities must increase if the price of corn be increased’ (25 June 1814,
ibid., p. 114), the prices of all commodities increase : thus, there is no
reason why the profit rate should fall ; (3) does not the above argument
apply to agricultural prices also ? They first rise because of an increased
difficulty of production (the amount of wages and profits paid at their
natural rates are greater than before), but should they not increase a
second time, following the rise of the money wages?
We know how Ricardo settled the question by substituting a ‘deduc-
tive’ theory of value (based on the ‘difficulty of production’ bound to
the only labour spent in the production processes of commodities) for
the Smithian ‘adding-up’ one, and by a qualified acceptance of Malthus’s
theory of rent. He can then assert that when money wages rise following
an increased difficulty in the production of food, the profit rate in all
trades must fall (the prices of all commodities other than agricultural
ones being constant) and that the same happens in agriculture because
of the existence and increase of rents. This was stated in the Essay on
Profits.

Sraffa versus Ricardo 6
2. Ricardo’s correspondence : a second view
Before examining the 1815 pamphlet, I should like to go back to the
controversy of the previous year. This will, I think, make it possible to
understand the post-Essay dispute better.
At first sight, the controversy seems to centre on the relevance of
‘Mill’s law’. It seems to Ricardo that the demand for commodities de-
pends on those very circumstances that act on producction. Income and
production go pari passu and each factor affecting the latter also lessens
the former (to Malthus, 26 June 1814, ibid., p. 108). Malthus’s answer
(6 July 1814, ibid., pp. 109-12) is important and characteristic of his ap-
proach. I must therefore quote it at length before commenting on it. The
dissension between the two authors will then appear in a different and
hopefully more suggestive light.
You observe that in the case supposed [of restrictions on
corn’s importations], there would be less production and less
demand with the same capital ; but surely there would be
much less capital. There would be a smaller quantity both of
corn, and of all other commodities, and every monied accu-
mulation would command less labour and less product. The
question then seems to be whether production or demand
would decrease the fastest ? and . . . in my opinion the dear-
ness of labour would have more effect in diminishing capital
than in diminishing revenue.
‘I can by no means agree with you in thinking that every thing which
diminishes produce, tends to diminish the power of paying for the com-
modities wanted.’ Thus far, the objection bears on Mill’s (or Say’s) law,
with the following indication : the increased price of corn would induce
a decrease in the real capital and in that way a disequilibrium between
the (unchanged) demand and the (diminished) supply of commodities,
all other things being the same.
Malthus goes on emphasizing the fact that the profit rate depends on
the state of demand and supply for ‘in this question that great element

Sraffa versus Ricardo 7
of effective demand . . . must always have great influence. I think you
overlook it too much.’ The
rate of production, or more definitely speaking, the propor-
tion of production to the consumption necessary to such pro-
duction, seems to be determined by the quantity of accumu-
lated capital compared with the demand for the product of
capital, and not by the mere difficulty and expense of procu-
ring corn.
Having already taken into account the effects of restrictions on corn’s
importation, the author is now to meet the second case evoked by Ri-
cardo : an increased difficulty in the production of food.
If it is necessary to employ a hundred days labour instead
of fifty, in order to produce a certain quantity of corn, there
seems to be no reason whatever that the person who possesses
an accumulation sufficient to make the necessary advances
should have a less remuneration for his capital. The effects
of a great difficulty in procuring corn would in my opinion
be, a diminution of capital, a diminution of produce, and a
diminution in the real wages of labour, or their price in corn ;
but not a diminution of profits ; although unquestionably low
profits might accompany a great difficulty of procuring corn,
if at the same time . . . there was a great abundance of capital.
In short all will in my opinion depend upon the state of capital
compared with the demand for it.
The effect mentioned by Ricardo is thus considered as unusual, and
only associated with a situation where there exists a ‘great abundance’
of capitals competing with each other in search of one of the many fields
of investment left and satisfying themselves with a diminished rate of
profit.
This letter, however, states the two ways by which demand and supply
can influence the profit rate, by distinguishing demand and supply of
commodities from those of capital.
The working of demand and supply of commodities remains here quite
implicit. But it is very well known. It is analysed by the protagonists in

Sraffa versus Ricardo 8
the same manner. A change on the side of demand, not (or not imme-
diately) followed by the reaction of supply, induces price changes which
themselves induce variations in the sectoral rates of profits. Capital mi-
grations will then restore the uniformity of the profit rate by provoking
changes on the supply side. But opinions of course differ as for ulterior
specifications.
The working of the demand and supply of capital is a more intricate
problem, which is really the focus of the dissensions. In contradiction with
the previous case, which only allows for the disturbance due to demand,
everything being the same, the present case deals with the effects induced
by changes on the supply side, with initial unchanged demand. We must
here distinguish the two Ricardian situations of a rise in the price of corn
due to restrictions on importation and a rise induced by an increased
difficulty of production (this latter sometimes follows from the former).
If Ricardo thinks they lead to an identical result (fall in the profit rate
for a given real wage rate), Malthus argues in quite a different way :
1. Restrictions on importations at first cause a rise in the price of
food, which acts on all activities, and the disequilibria thus indu-
ced are cancelled by the working out of a price adjustment. The
rise in the price of corn induces an increase in money wages, and
capitals engaged in the production process are suddenly reduced
in real terms. Supply of commodities thus decreases, while the
demand for them is, by hypothesis, to remain unchanged or to di-
minish in a lower proportion. Following Malthus’s theory of value,
prices of commodities increase, maintaining the profit rate at its
previous level, or even at a higher one.3
2. As regards an increased difficulty in the production of food, it
only has a real effect on one activity (agriculture), disequilibria
3. ‘If the capitalist in the Cotton or Woolen manufacture be obliged to pay more
for the labour which he employs, owing to restrictions upon importation, he will not
be able to work up the same quantity of goods with his capital ; the goods will in
consequence rise in price, and his profits, from the general scarcity of capital, will be
increased’ (letter to Ricardo, 5 August 1814, in Ricardo (1951-5), vol. 6, p. 117).

Sraffa versus Ricardo 9
being at first cancelled by a quantity adjustment. As a matter of
fact, an increased difficulty of production on land does not imme-
diately alter prices, demand and supply of agricultural products
being unchanged. The profit rate on land only is affected and,
as a consequence, the farmer withdraws part of his capital from
that activity, inducing a fall in supply of agricultural commodi-
ties. But two phenomena are to occur simultaneously, which are
at variance with the previous tendency. First, an excess supply of
labour arises, and a new equilibrium state is reached only through
a decrease in the real wages. Second, this fall of real wages lessens
the demand for agricultural products and thus tempers the rise
in agricultural prices due to a depletion of supply. On balance, a
new equilibrium position is to prevail, Malthus says, with a lower
real (but the same nominal) wage rate, so that the initial profit
rate is not affected, neither on land nor in all other trades.
We can of course imagine other analytical cases. It remains that the
views of the two authors are at variance with each other. The dispute
apparently centres on the part played by demand and supply, in the
perspective of the acceptance or the rejection of Mill’s law. A common
analytical framework seems to exist, within which the discussion is em-
bedded. As a consequence, the particular views expressed by the two
authors seem at last to consist in a matter of personal (more or less
grounded) opinion about the permanence of the acting economic forces.
When Malthus again objects that
in stating the cause of high profits you seem to me to consider
almost exclusively the expense of production, without atten-
ding sufficiently to the price of produce, and greatly to under-
rate the wants and tastes of mankind in affecting prices, and
consequently in affecting the means of profitably employing
capital. (9 October 1814, ibid., p. 141)
Ricardo simply answers that he does not think to underrate these
factors which ‘frequently occasion large profits on particular commodities
for short periods’ (23 October 1814, ibid., p. 147 ; my italics).

Sraffa versus Ricardo 10
The basic question is not clarified after the publication of the Essay
on Profits. In 1817, Ricardo is still writing that
It appears to me that one great cause of our difference in
opinion, on the subjects we have so often discussed, is that
you have always in your mind the immediate and temporary
effects of particular changes — whereas I put these immediate
and temporary effects quite aside, and fix my whole attention
on the permanent state of things which will result from them.
(1951-5, vol. 7, p. 120)
It is still a matter of personal and subjective judgment (‘Perhaps
you estimate these temporary effects too highly, whilst I am too much
disposed to undervalue them’). But there is a shift in 1818 when the
true motive of the dispute eventually arises : ‘I confess it fills me with
astonishment to find that you think .. . that natural price, as well as
market price, is determined by the demand and supply’ (30 January 1818,
ibid., p. 250). Ricardo is now perfectly aware of being in opposition, as
a defender of the natural price theory, to the economists who claim that
a concept of a normal price determined independently of demand and
supply is irrelevant or even meaningless.
In saying this do you mean to deny that facility of production
will lower natural price and difficulty of production raise it ?
. . . I may be so foolishly partial to my own doctrine, that I
may be blind to its absurdity. I know the strong disposition
of every man to deceive himself in his eagerness to prove a
favourite theory, yet I cannot help viewing this question as a
truth which admits a demonstration and I am full of wonder
that it should admit of a doubt. If indeed this fundamental
doctrine of mine were proved false I admit that my whole
theory falls with it. (ibid., pp. 250-1)
3. Sraffa’s interpretation
Sraffa’s well-known interpretation of the early Ricardian theory of
profits (Sraffa, 1951, section 4) is illustrated by the simple scheme of the
‘corn-profit model’, in which one agricultural product (called ‘corn’ or

Sraffa versus Ricardo 11
‘wheat’) is the only basic commodity. The rate of profit is thus inde-
pendent of the methods of production prevailing in any other trade and
of the price system itself. Ricardo, Sraffa says, would have supported this
theory in some lost paper of 1814, during a conversation with Malthus
and in the famous Table of the pamphlet. 4He would also have given
up his views (and simultaneously adhered to the labour theory of value)
under the attacks of Malthus after the Essay was published. 5This sum-
mary of Sraffa’s position is sufficient for our purpose and obviously sets
an important problem to the historian of economic thought : is such a
retrospective interpretation sufficiently well grounded, that is, could it
be supported not only by the relevant texts but also by the analysis of
the inner logic of the 1813-15 dispute, such as has just been attempted ?
To answer this question, we must first sum up Sraffa’s arguments which
proceeds from two sources :
1. From the correspondence of these years :
(a) letters from Ricardo : assertion that the profits of the farmer
regulate the profits of all other trades (to Trower, 8 March 1814);
and a sentence which states that ‘the rate of profits and of interest
must depend on the proportion of production to the consumption
necessary to such production’ (to Malthus, 26 June 1814) ;
(b) letters from Malthus : the proposition that ‘in no case of pro-
duction, is the produce exactly of the same nature as the capital
advanced. Consequently we can never properly refer to a material
rate of produce . . . [It] is not the particular profits or the rate
4. ‘Although this argument is never stated by Ricardo in any of his extant letters
and papers, he must have formulated it either in his lost “papers on the profits of
Capital” of March 1814 or in conversation’ (Sraffa, 1951, p.xxxi).
5. In the Principles, ‘it was now labour, instead of corn, that appeared on both
sides of the account — in modern terms, both as input and output : as a result, the
rate of profits was no longer determined by the ratio of the corn produced to the corn
used up in production, but, instead, by the ratio of the total labour of the country
to the labour required to produce the necessaries for that labour’ (Sraffa, 1951, p.
xxxii). A corollary of Sraffa’s thesis is the unimportance of the theory of price as
regards profits before 1817. The two previous sections sufficiently prove that it is not
the case, and I do not examine this point further in this paper.

Sraffa versus Ricardo 12
of produce upon the land which determines the general profits of
stock and the interest of money’ (to Ricardo, 5 August 1814) ; a
critique of the Essay’s table (to Ricardo, 12 March 1815 and to
Horner, 14 March 1815) and precisely of the ‘corn’ expression of
circulating capital, whereas this capital also includes ‘tea sugar
clothes ecc. ecc. used by [the] labourers’.
2. From the pamphlet itself : Sraffa’s sole evidence here is an excerpt
from the table in which all numerical examples are quantities of
‘corn’. Following the author, this suggests that ‘both capital and
the “neat produce” are expressed in corn, and thus the profit per
cent is calculated without need to mention price’ (Sraffa, 1951, p.
xxxii). I can even add to this a second argument : a footnote in the
Essay resumes the question under examination in the terms of the
letter to Trower quoted above : ‘I am only desirous of proving that
the profits on agricultural capital cannot materially vary, without
occasioning a similar variation in the profits on capital, employed
on manufactures and commerce’ (1951-5, vol. 4, p. 12).
I shall start with the arguments related to the pamphlet. Those ex-
cerpted from the correspondence are considered in the following section.
There is a striking feature in the first half of the Essay, where the
famous table appears : corn is only a numéraire by means of which dif-
ferent kinds of capitals are estimated. This has already been noted by
many commentators, and is unquestionable. Ricardo always makes it
clear that capital is ‘estimated in quarters of wheat’ and includes fixed
as well as circulating capital (see for example ibid., p. 10, and the foot-
note, pp. 15-16). What should be emphasized here is that this reasoning
in real terms forms the first step in the argumentation : Ricardo is inter-
ested in showing that, as far as cultivation of land goes on, rents rise at
the expense of profits. We can call this the real effect of the extension of
cultivation. But then follows a second step to take into account a price
effect, i.e. the variation in relative prices to the advantage of agriculture,

Sraffa versus Ricardo 13
and particularly, again, to landlords. The price effect thus strengthens
the real effect, and acts in the same way.
Not only is the situation of the landlord improved .. . by ob-
taining an increased quantity of the produce of the land, but
also by the increased exchangeable value of that quantity. If
his rent be increased from fourteen to twenty-eight quarters,
it would be more than doubled, because he would be able to
command more than double the quantity of commodities, in
exchange for the twenty-eight quarters. (ibid., p. 20)
‘It follows then, that the interest of the landlord is always opposed to
the interest of every other class in community’ (ibid., p. 21). I shall show
that Malthus’s objection to the pamphlet does not relate to a supposed
‘com-profit model’ but precisely to this dissociation between the two
effects he thinks irrelevant.
It remains, then, to come back to the expression of the Essay which re-
states the terms of Ricardo’s letters to Trower. The context shows unam-
biguously that it must be accepted in the broad sense of a fall of the
general profit rate due to the rise in the price of food, and not to the
decrease in the profits upon the land : ‘general profits on capital, can
only be raised by a fall in exchangeable value of food’ (ibid., p. 22).
A fall of a price of com, in consequence of improvements in
agriculture or of importation ; will lower the exchangeable va-
lue of com only — the price of no other commodity will be
affected. If, then, the price of labour falls, which it must do
when the price of com is lowered, the real profits of all descrip-
tions must rise ; and no person will be so materially benefited
as the manufacturing and commercial part of society. (ibid.,
pp. 35-6)
4. The grounds of an opinion
Sraffa’s first argument excerpted from Ricardo’s letters relies, howe-
ver, on the literal interpretation that the profits of the farmer regulate

Sraffa versus Ricardo 14
all other profits. We should notice here that Malthus’s objection is men-
tioned in the same letter to Trower and is related by Ricardo himself.
To this proposition Mr. Malthus does not agree. He thinks
that the arena for the employment of Capital may increase,
and consequently profits and interests may rise, altho’ there
should be no new facilities, either by importation, or improved
tillage, for the production of food ; — that the profits of the
farmer no more regulate the profits of all other trades, than
the profits of other trades regulate the profits of the farmer,
and consequently if new markets are discovered, in which we
can obtain a greater quantity of foreign commodities in ex-
change for our commodities, than before the discovery of such
markets, profits will increase and interest will rise .. . A chea-
per mode of obtaining food will undoubtedly increase profits
says Mr. Malthus but there are many other circumstances
which may also increase profits with an increase of Capital.
The discovery of a new market where there will be a great de-
mand for our manufactures is one. (1951-5, vol. 6, pp. 104-5;
my italics)
According to Ricardo, Malthus’s objection is not directed to the sup-
posed physical homogeneity of capital and product in one activity, but
rather (and more logically) to the point at issue on the preceding years :
the part played by demand and supply in the determination of prices and
the profit rate. Malthus claims that a discovery of new markets, i.e. an
increase in demand, will induce a rise in the profit rate. As a matter of
fact, the price of those commodities the demand for which is increased
will rise. Migrations of capital from other activities towards those sectors
where prices (and profit rates) first rise will induce a supply shortage in
these activities, and thus similarly a rise of prices and the rate of profits,
until a new equilibrium is reached.
Against this, Ricardo not only argues that excess demands or supplies
are temporary and cannot raise the sectoral profit rates in a permanent
way above their ‘normal’ level determined by the difficulty of production
on the land, but also that migration of capital does not take place ea-
sily, especially if capital is invested in agriculture, where it is absolutely
necessary to satisfy an incompressible demand. The context of the letter

Sraffa versus Ricardo 15
to Trower and the correspondence with Malthus supports this interpre-
tation. I shall add that this line of theoretical analysis is taken up again
in the Essay (pp. 24-5) with the terms of the letter to Trower recurring,
and in the Principles (Ch. 6). The basic difficulty remains the incompa-
tibility of the two approaches, i.e. the natural price ‘problématique’ and
the approach which is grounded on the symmetric working of demand
and supply.
As far as the second piece of evidence (namely that the rate of profit
‘must depend on the proportion of production to the consumption neces-
sary to such production’) is concerned, it is by no means relevant. This
definition relates to the ‘produce rate’ only from which the rate of pro-
fit can be known. If this expression had been specific to the ‘corn-profit
model’, it would have been very surprising to find it currently employed
by Malthus himself (see the letter to Ricardo quoted above, 6 July 1814,
in which the context shows that this produce rate is expressed in value
terms and not in physical ones).
The evidence quoted by Sraffa from Malthus’s letters seems to be
more decisive. I shall first come back to the objection addressed to Ri-
cardo’s table, and examine Sraffa’s own assertion that
the feature of calculating the advances of the farmer in corn
is singled out by Malthus as ‘the fault of Mr. Ricardo’s ta-
ble’ ; since circulating capital did not consist only of corn, but
included ‘tea sugar cloaths ecc. for the labourers’ ; so that a
rise in the relative price of corn would ‘afford a greater sur-
plus from the land’. (1951, p. xxxii, n. 4 ; my italics)
The last sentence simply means that Malthus’s remark, again, has
not much to do with the supposed homogeneity of capital and product
in agriculture ; but rather with the dissociation which Ricardo has made
between a real and a price effect. Malthus’s very acceptable objection is
that the price effect does not strengthen the real one, but is not even
an autonomous effect. The distortion of relative prices structure to the
advantage of agriculture does not simply favour the landlord, but also
the farmer, who gets the non-agricultural items of his capital from the

Sraffa versus Ricardo 16
other activities in exchange for a lower quantity of com. Consequently,
the figures of the table, showing the different quantities invested on the
land ‘estimated in quarters of wheat’, cannot remain unchanged when
cultivation is extended to land of a worse quality. Ricardo’s calculations
are thus faulty, and the compared evolution of rent and profit rates is
greatly affected. To sum up, in 1815 Malthus only repeats what he had
said before, and points out again the analytical difficulty which induced
Ricardo to give up the Smithian adding-up theory of value. It is thus by no
means certain that an increased difficulty of production induces a higher
amount of capital with respect to the product. Indeed, the evolution of
the profit rate in agriculture is indeterminate.6
Sraffa’s thesis seems further supported by the second quotation ex-
cerpted from Malthus’s letters (to Ricardo, 5 July 1814) :
In no case of production, is the produce exactly of the same
nature as the capital advanced. Consequently we can never
properly refer to a material rate of produce . . . [It] is not the
particular profits or rate of produce upon land which deter-
mines the general profits of stock and the interest of money.
We can, however, interpret this sentence in a different manner from
Sraffa’s, and at the same time explain the probable origin of the ‘corn-
profit model’ which, it must be said, lies either here or nowhere else in
the writings of that time.
First of all, note that Sraffa neglects to quote two sentences of Mal-
thus, which are to be found between the first two (refutation of the idea
of a physical rate of return) and the last one in the passage I have just
quoted. The last sentence thus appears as a logical conclusion of the pre-
vious ones, and the truncated passage results in that way a critique of
6. ‘Pray think once more on the effect of a rise in the relative price of corn, upon
the whole surplus derived from land already in cultivation. It appears to me I confess,
as clear as possible that it must be increased. The expenses estimated in Corn will be
less, owing to the power of purchasing with a less quantity of corn, the same quantity
of fixed capital, and of the circulating capital’ (Malthus to Ricardo, 12 March 1815,
in Ricardo (1951-5), vol. 6, p. 185).

Sraffa versus Ricardo 17
Ricardo’s supposed thesis, which it is not if we restate it unabridged. One
missing sentence is the following : ‘The more I reflect on the subject, the
more firmly I feel convinced, that it is the state of capital, or the general
profits of stock and interest of money, which determines the particular
profit upon the land.’ Here, Malthus not only mentions the interconnec-
tion of the different sectors in the determination of the profit rate but
also and more fundamentally all his thesis that this rate is determined
by the ‘state of capital’, i.e. the ‘quantity of capital’ compared with ‘the
means of employing it’. Clearly this is a restatement of the demand and
supply theory, once again.
The other missing sentence, which we quote here in italics, argues
in a similar way. ‘Consequently’, Malthus writes, ‘we can never properly
refer to a material rate of produce, independent of demand, and of the
abundance or scarcity of capital.’ We must conclude again that Malthus’s
critique does not test the logical coherence of his adversary’s views, which
is never the case in this controversy, but consists in reading Ricardo’s wri-
tings through Malthusian spectacles. This remark is important if we recall
the long period of reciprocal misconception between the two authors.
Another important point can be emphasized. It is striking that a very
specific theory like the ‘corn-profit model’, the occurrence of which would
have been rather surprising in that time (remember the Physiocrats on
whom discredit was thrown, especially by Smith), reaches us in such
an indirect way, and that absolutely no writing of Ricardo remains to
attest it. It is also disconcerting that the arguments excerpted from the
correspondence, which mainly consist in a remark made by Malthus and
written by Ricardo to Trower, has not brought about a clear restatement
of the supposed theory, just as Ricardo usually did every time one of his
principles was questioned. Unless it is assumed, of course, that all the
papers or letters in which such a clarification was made have been lost,
just as the leaves of the 1814 Notes and the words of the conversation
with Malthus (Sraffa’s references) have been blown away by the wind. . .
Last but not least, it is also surprising to note that the only indications

Sraffa versus Ricardo 18
which support Sraffa’s thesis, related or not by Ricardo, proceed from
Malthus.
My conclusion is then an obvious one. If indeed such a corn-profit
model was really formulated, it took shape, for a brief period of time, in
Malthus’s fancy. This theory, to suppose again it really was formulated
before Sraffa, only results from the incapacity of Ricardo’s opponent to
grasp correctly the natural price approach he was fighting against. To
Malthus, imbued with demand and supply theory, the idea of a normal
price determined independently of demand and basically different from
a market price was inconceivable (just as the determination of the natu-
ral price by the interaction of demand and supply was not acceptable to
Ricardo). Ricardo’s refusal to take demand into account appears to him
as a simple refusal to consider prices themselves, the two concepts being
closely associated in his mind. All this could but induce him to impute
to Ricardo the purpose of arguing in physical terms only. The fact that
Sraffa’s evidence is all bound to the discussion of the demand and supply
principle in price and profit determination corroborates our interpreta-
tion. In a letter quoted above (9 October 1814), Malthus blames Ricardo
for not considering the working of demand on prices and writes :
The profits of stock, or the means of employing capital advan-
tageously may be said to be accurately equal to the price of
produce, minus the expense of production. And consequently
whenever the price of produce keeps a head of the price of pro-
duction the profits of stock must rise . . . It is not the quantity
of produce compared with the expense of production that de-
termines profits (which I think is your proposition) but the
exchangeable value or money price of that produce, compa-
red with the money expense of production. (1951-5, vol. 6,
pp. 140-1)
To which Ricardo unambiguously replies :
You say ‘that I seem to think that the state of production
from the land, compared with the means necessary to make
it produce, is almost the sole cause which regulates the profits
of stock, and the means of advantageously employing capital’.

Sraffa versus Ricardo 19
This is a correct statement of my opinion, and not as you
have said in another part of your letter, and which essentially
differs from it, ‘that it is the quantity of produce compared
with the expense of production, that determines profits’ (23
October 1814, ibid., p. 244 ; my italics). 7
Sraffian economists see themselves as the modern heralds of the anti-
Neoclassical fight. It is thus ironical that their conception of the Ricardian
theory in part falls into the trap set by Malthus’s misconception. 8
References
De Vecchi, N. (1976). Valore e profitto nell’economia politica classica, Milan :
Feltrinelli.
Hollander, S. (1973). ‘Ricardo’s analysis of the profit rate : 1813-15’, Econo-
mica,XL, pp. 260-82.
Holllander, S. (1975). ‘Ricardo and the corn profit model : reply to Eatwell’,
Economica,XLII, pp. 188-202.
Hollander, S. (1979). The Economics of David Ricardo, London : Heinemann.
Peach, T. (1981). Review of Hollander, The Economics of David Ricardo,The
Economic Journal,91, pp. 244-7.
Ricardo, D. (1815). An Essay on the Influence of a low Price of Corn on the
Profits of Stock, in Ricardo, D. (1951-5), vol. 4, pp. 1-41.
Ricardo, D. (1951-5). The Works and Correspondence of David Ricardo, Cam-
bridge : Cambridge University Press.
7. Among the Sraffian literature, the work of N. De Vecchi (1976) is a kind of
exception : the book has a careful analysis of the Ricardo-Malthus debate. It is thus
surprising to read the author’s desperate attempts to make Ricardo and Sraffa agree
with each other.
8. As a matter of fact, Sraffa is more artful. ‘It should perhaps be stated’, he argues
(1960, p. 93), ‘that it was only when the Standard system and the distinction between
basics and non-basics had emerged in the course of the present investigation that the
above interpretation of Ricardo’s theory suggested itself as a natural consequence.’

Sraffa versus Ricardo 20
Sraffa, P. (1951). ‘Introduction’ to The Works and Correspondence of David
Ricardo, in Ricardo, D. (1951-5), vol. 1, pp. xiii-Ixii.
Sraffa, P. (1960). Production of Commmodities by Means of Commodities, Pre-
lude to a Critique of Economic Theory, Cambridge : Cambridge University
Press.
Tribe, K. (1981) ‘Ricardian histories’, Economy and Society,10, pp. 451-66.