The fact that Ricardo defines the rate of profit by what is actually only the rate of surplus value is shown by the quote.
““Although a greater value is produced, a greater proportion of what remains of that value, after paying rent, is consumed by the producers, and it is this, and this alone, which regulates profits” (l.c., p. 127).” (p 463)
In other words, Ricardo, like Smith, resolves the value of the product into revenues. So, here the value of the product resolves in rent, then the portion of the value of the product consumed by the producers (workers), i.e. wages, and then only what is left constitutes profit. Nowhere here does Ricardo include in the value of the product the value of the means of production, used in its production. The surplus value here is the surplus of the workers product over what they consume, and which is retained by the capitalist, after deducting rent.
“But, with a given working-day, the rate of surplus-value can only fall if the rate of wages is rising permanently. This is only possible if the value of necessaries is rising permanently. And this only if agriculture is constantly deteriorating, in other words, if Ricardo’s theory of rent is accepted. Since Ricardo identifies rate of surplus-value with rate of profit, and since the rate of surplus-value can only be reckoned in relation to variable capital, capital laid out in wages, Ricardo, like Adam Smith, assumes that the value of the whole product—after deduction of rent—is divided between workmen and capitalists, into wages and profit. This means that he makes the false presupposition that the whole of the capital advanced consists only of variable capital.” (p 463-4)
In a note on page 463, Marx notes that Ricardo recognises that it is only productive-capital that produces profit. He also makes clear that he recognises that shares and other forms of loaned money-capital do not constitute capital. To use Marx's term, these financial assets constitute only fictitious capital. Ricardo says,
““In the form of money … capital is productive of no profit; in the form of materials, machinery, and food, for which it might be exchanged, it would be productive of revenue… “ (l.c., p. 267). “The capital of the stockholder can never be made productive—it is, in fact, no capital. If he were to sell his stock, and employ the capital he obtained for it, productively, he could only do so by detaching the capital of the buyer of his stock from a productive employment” (l.c., p. 289, note).” (Note *, p 463)
Ricardo recognises that production of agricultural products increases absolutely, but, he says, to obtain this absolute increase in output, proportionally more labour must be employed to produce it. So, even though each of these workers might receive an increasingly smaller quantity of this agricultural output, because the total number of workers receiving these wages will have risen, by a larger proportion than this fall in their real wages, the proportion of the total output left over, after these wages are paid, will get smaller and smaller. What struck fear into Ricardo, as Marx says later, is that he extrapolated this continual fall in the rate of profit to a point where it represents an actual fall in the mass of profit itself, until it disappears.
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