23: Bounties on Production

Ricardo gives brief consideration to bounties on production of commodities, which differ from bounties on export because they reward production regardless of where the product is ultimately sold.

In this instance, Ricardo begins with the consideration that in order to offer a bounty on the production of one product, a tax must be levied on all products to generate the funds to pay the bounty. With that in mind, the net effect of a bounty is not to leave the people of a nation in better shape than they were before - as they will pay less for some goods and more for others - merely to grant advantage to some producers at the expense of others.

There follows some speculation of the precise party on whom the benefit of a bounty would fall. But ultimately, there is no consistent answer: a bounty constitutes a disruptive force in the market, where some may benefit in the short term, but over time the equilibrium of the market would be restored for all except the consumers, whose capacity for obtaining one good is increased and whose capacity for obtaining all other goods is diminished.

He goes on for a time, considering the net effect on other parties - investor, landlord, and worker - to arrive at the same conclusion. He also considers whether a bounty on crops funded by taxes on manufacture or vice-versa would have any significant beneficial effect, and likewise arrives at the conclusion that, in the long run, none are affected.

Granted, the question of production bounties are typically considered in the context of an insulated market, having no external commercial connections from which goods would be imported or exported to supply buyers at a lower price or offer sellers a higher one than the local market affords for a given good.

With this in mind, a bounty paid to producers would not only artificially decrease the price to the domestic market, but would decrease the price to foreign markets to which the commodity was exported - in essence, taxing its own citizens to cheapen their product to buyers in other markets, which is ruinous to domestic prosperity.

(EN: Ricardo does not consider the possibility to add an export tax to recover bounties meant to benefit domestic consumers, which is an obvious counterpoint, but breaks down quickly, as to counterbalance an imposed imbalance is inherently absurd and becomes even more difficult to propose when one considers the amount of effort necessary to manage economic activity on such a granular level.)