The Principles of Political Economy and Taxation

By David Ricardo | Go to book overview

CHAPTER XXIII

ON BOUNTIES ON PRODUCTIONS

IT may not be uninstructive to consider the effects of a bounty on the production of raw produce and other commodities, with a view to observe the application of the principles which I have been endeavouring to establish with regard to the profits of stock, the division of the annual produce of the land and labour, and the relative prices of manufactures and raw produce. In the first place, let us suppose that a tax was imposed on all commodities for the purpose of raising a fund to be employed by government in giving a bounty on the production of corn. As no part of such a tax would be expended by government, and as all that was received from one class of the people would be returned to another, the nation collectively would be neither richer nor poorer from such a tax and bounty. It would be readily allowed that the tax on commodities by which the fund was created would raise the price of the commodities taxed; all the consumers of those commodities, therefore, would contribute towards that fund; in other words, their natural or necessary price being raised, so would, too, their market price. But for the same reason that the natural price of those commodities would be raised, the natural price of corn would be lowered; before the bounty was paid on production, the farmers obtained as great a price for their corn as was necessary to repay them their rent and their expenses, and afford them the general rate of profits; after the bounty, they would receive more than that rate, unless the price of corn fell by a sum at least equal to the bounty. The effect, then, of the tax and bounty would be to raise the price of commodities in a degree equal to the tax levied on them, and to lower the price of corn by a sum equal to the bounty paid. It will be observed, too, that no permanent alteration could be made in the distribution of capital between agriculture and manufactures, because, as there would be no alteration either in the amount of capital or population, there would be precisely the same demand for bread and manufactures. The profits of the farmer would be no higher than the general level after the fall in the price of corn; nor

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