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  THE

  MEASURE OF VALUE

  STATED AND ILLUSTRATED,

  WITH

  AN APPLICATION OF IT TO THE ALTERATIONS IN

  THE VALUE OF THE ENGLISH CURRENCY

  SINCE 1790.

  —♦—

  BY THE REV. T. R. MALTHUS, M.A. F.R.S.

  PROFESSOR OF HISTORY AND POLITICAL ECONOMY IN THE
  EAST INDIA COLLEGE, HERTFORDSHIRE.


  LONDON:
  JOHN MURRAY, ALBEMARLE STREET.
  MDCCCXXIII.




  London: Printed by C. Roworth,
  Bell-yard, Temple-bar.




THE MEASURE OF VALUE.


It is generally allowed that the word value, in common language,
has two different meanings; one, value in use, the other, value in
exchange; the first expressing merely the usefulness of an object in
supplying the most important wants of mankind, without reference to
its power of commanding other objects in exchange; and the second
expressing the power of commanding other objects in exchange, without
reference to its usefulness in supplying the most important wants of
mankind.

It is obviously value in the last sense, not the first, with which the
science of Political Economy is mainly concerned.

But the power of one object to command another in exchange, or in other
words the power of purchasing, may obviously arise either from causes
affecting the object itself, or the commodities against which it is
exchanged.

In the one case, the value of the object itself may properly be said
to be affected; in the other, only the value of the commodities which
it purchases; and if we could suppose any object always to remain of
the same value, the comparison of other commodities with this one would
clearly show, which had risen, which had fallen, and which had remained
the same. The value of any commodity estimated in a measure of this
kind might with propriety be called its absolute or natural value;
while the value of a commodity estimated in others which were liable to
variation, whether they were one or many, could only be considered as
its nominal or relative value, that is, its value in relation to any
particular commodity, or to commodities in general.

That a correct measure of the power of purchasing generally, or
of commanding such important commodities as the necessaries and
conveniences of life, in whatever way such power might arise, would be
very desirable, cannot for a moment be doubted, as it would at once
enable us to form a just estimate and comparison of wages, salaries,
and revenues, in all countries, and at all periods. But when we
consider what such a measure implies, we must feel certain that no one
object exists, or can be supposed to exist, with such qualities as
would fit it to become a standard measure of this kind. It would imply
steadiness of value, not merely in one object, but in a great number,
which is contrary to all theory and experience.

Whether there is any object, which, though it cannot measure the power
of purchasing generally under the varying facilities of production and
varying state of the demand and supply by which different commodities
are affected, may be a correct measure of absolute and natural value as
above described, is the specific object of the present inquiry.

It follows directly, from the principles of Adam Smith, that the
conditions of the supply of the great mass of commodities are, that
the returns should be sufficient to pay the wages, profits and rents
necessary to their production. If these payments be made in money at
the ordinary rates of the time, they form what Adam Smith calls their
natural prices. Money however we know is variable. But if for money we
substitute the objects necessary to give the producer the same power
of production and accumulation as the natural money prices would have
commanded, such returns maybe considered as the natural conditions of
the supply of commodities, and may with propriety be denominated their
natural value, in contradistinction to their natural price.

Of these three conditions of supply, or elements of natural value,
the two first are obviously the most important. They are not only the
sole conditions of supply in those early stages of society before the
appropriation of land has taken place, but they continue to be so in
reference to large classes of objects in the most advanced stages
of improvement; and it is now generally acknowledged that even the
main vegetable food of an improving country, which is the foundation
of wages, must necessarily be of the same value as that part of the
produce which is almost exclusively resolvable into wages and profits,
and pays very little rent.

We cannot therefore essentially err in assuming for the present that
the natural value of objects in their more simple forms is composed of
labour and profits,[A] and the effect of any portion of rent, or of
other ingredients which are sometimes added to these elements, may be
allowed for subsequently.

We may also consider as a postulate which will be readily granted, that
any given quantity of labour must be of the same value as the wages
which command it, or for which it actually exchanges.

Of the two main elements of value, labour and profits, the former,
particularly if we include, as we ought to do, accumulated as well as
immediate labour, is much the largest and most powerful.

The great instrument of production is labour. There is no commodity nor
implement used to assist manual exertions in which it does not enter
as a condition of supply, and very few in which it does not enter very
largely. If in the production of commodities and of the implements
which assist in this production, no other ingredient were required than
labour, and the interval between the exertion of the labour and its
remuneration in the completed commodity were so inconsiderable that it
might be entirely disregarded, it is certain that, as the same quantity
of labour would have a constant tendency to produce commodities in the
same relative proportion to each other, and to the demand for them,
they would be found on an average to exchange with each other according
to the quantity of labour which had been employed to obtain them.

Thus if ten mackerel were, on an average, obtained by the same quantity
of labour as two soals, it would be necessary, in order to continue
the supply of both in the market, that the value of a soal should be
five times as great in the power of purchasing similar commodities,
as the value of a mackerel; because if it were less, none would apply
themselves to the catching of soals; and though it is quite certain
that at any given period the relative value of soals and mackerel
would be exclusively determined by the state of the demand and
supply of each; and that they would, in consequence, often vary very
considerably; yet it is as certain, that on the supposition of the
hypothesis being correct, and that they both continued to be brought
to market, each would on an average be supplied in such a quantity,
compared with the demand for it, that a soal would ordinarily exchange
for five mackerel, and the different quantities of labour required to
produce them would, in this case, be a correct measure both of their
natural and relative value in exchange.

Now supposing that the skill and power of the labourers were so to
increase, that, in the same time and with the same personal exertions,
they could obtain three soals and fifteen mackerel, it is obvious that
the relative value of soals to mackerel would remain the same, but they
would both have essentially altered their value compared with all those
commodities which still required the same quantity of labour to produce
the same supply of them. With regard to such commodities, soals and
mackerel would have become of less value, and consequently they would
have become of less value with regard to a given quantity of labour.
The correct language in this case would be, not that labour had become
dearer, but that soals and mackerel had become cheaper. And if the
same increase of skill and power could be conceived to extend to all
other commodities, and all commodities were similarly circumstanced
as to their mode of production and bringing to market; it cannot be
doubted, that though they might retain the same relative value compared
with each other, they would all become more plentiful with regard to
the wants of the society, and any given quantity of labour. And the
correct language would still be, not that labour had become dearer, but
that all commodities had become cheaper. This fall would be a fall in
the absolute and natural value of commodities; and as long as labour
alone was concerned in their production, and they were brought to
market immediately, it would be allowed that the different quantities
of labour employed upon them would be a correct measure both of their
relative value compared with each other, and of their absolute and
natural value in reference to the conditions of their supply. Their
natural values would be exactly represented by the different quantities
of labour worked up in them; while their natural prices would be these
different quantities of labour estimated in money, according to the
money price of the labour employed.

But at a very early period of society a considerable interval must
elapse between the exertion of some sorts of labour and the completion
of the article on which they are employed. And the next simplest form
of production, beyond the result of mere labour, is that, where, in
addition to the labour employed directly on the commodity and on the
simple tools necessary to its production, the condition of the supply
requires that a certain compensation be made in the final remuneration
for the time which has elapsed from the period of the advances of
the labour, to the period when the labourer, or capitalist, can be
remunerated. This compensation, which equally applies to the formation
of the capital, as to the products to be obtained by it, is the profit
which must be paid on the advances of the labour, and is absolutely
necessary to the encouragement of such advances.

But in this state of things commodities would cease to exchange with
each other according to the quantity of labour employed upon them. Some
commodities, on which the same quantity of accumulated and immediate
labour had been employed, would be of a different exchangeable value,
on account of the different quantity of profits which had entered into
their composition; while others, on which different quantities of
accumulated and immediate labour had been employed, might be of the
same exchangeable value, on account of the greater quantity of profits
of which they were composed being balanced by the smaller quantity of
labour advanced to produce them.

In the earliest stages of society accumulations of capital are very
rare, and profits may be extremely high, perhaps forty or fifty per
cent. If under these circumstances the construction of a war canoe
were to take two years before it were fit for use, it is evident that
its value in exchange would be prodigiously enhanced by such profits.
Compared with a number of deer which might have cost exactly the same
quantity of accumulated and immediate labour to bring to market, the
canoe would be seventy or eighty per cent. of greater value; and on
the fall of profits from forty or fifty per cent. to ten per cent. in
the progress of society, an object of this kind might fall in value
sixty or seventy per cent. compared with such objects as deer or fish,
without any difference in the quantity of labour employed upon either.

It is observed by Adam Smith that corn is an annual crop, butchers’
meat a crop which requires four or five years to grow; and
consequently, if we compare two quantities of corn and beef which are
of equal exchangeable value, it is certain that a difference of three
or four additional years profit at fifteen per cent. upon the capital
employed in the production of the beef would, exclusively of any
other considerations, make up in value for a much smaller quantity of
labour, and thus we might have two commodities of the same exchangeable
value, while the accumulated and immediate labour of the one was forty
or fifty per cent. less than that of the other. This is an event of
daily occurrence in reference to a vast mass of the most important
commodities in the country; and if profits were to fall from fifteen
per cent. to eight per cent. the value of beef compared with corn
would fall above twenty per cent.

When commodities are obtained by the assistance of a large proportion
of fixed capital of a very durable nature, the advances are only
consumed in part, and the whole produce of the accumulated and
immediate labour employed must be considered as composed of the new
produce obtained, together with the remainder of the fixed capital
which is unconsumed.[B] In reference to the separate value of the new
produce, this will be the same as if to the labour actually worked up
in such produce were added the profits of the whole capital advanced.
It sometimes happens that the proportion of value arising from these
profits is very considerable; and commodities so produced will
necessarily have much less labour worked up in them, and will be much
more affected in their value by a rise or fall of profits, than those
which are composed mainly of immediate labour.

Thus, if a commodity were produced by the aid of accumulated labour
in machinery worth £2,000, the annual wear and tear of which was
one-twentieth, or £100, and the labour employed on cheap materials and
in the working of the machinery were worth £200, while profits were
20 per cent. then the value of the labour worked up in the commodity
would be £100 added to £200, equal to £300; and the whole capital
advanced being £2,300, the profits upon it would be £460, which, added
to £300 would make the whole value of the produce £760. Compared with a
commodity of equal value which had been produced without fixed capital,
and had yet been brought to market in the same time and with the same
rate of profits, it would contain less than half of the labour worked
up in it; while, if profits were to fall from 20 per cent. to 10 per
cent. the value of the commodity would fall in the proportion of from
£760 to £530, or, if profits had been 10 per cent. and were to rise to
20 per cent. the value of the commodity would rise in the proportion
of from £530 to £760, or above 42 per cent., without any change in the
quantity of labour employed.[C]

It must be allowed, then, that whenever two elements are necessary to
the supply, and enter into the composition of commodities, their value
cannot depend exclusively upon one of them, except by accident, or
when the other can be considered as a given or common quantity. But
it is universally acknowledged, that the great mass of commodities
in civilized and improved countries is made up at the least of two
elements--labour and profits; consequently, the exchangeable value of
commodities into which these two elements enter as the conditions of
their supply, will not depend exclusively upon the quantity of labour
employed upon them, except in the very peculiar cases when both the
returns of the advances and the proportions of fixed and circulating
capitals are exactly the same.

It cannot, then, be said with any thing like an approximation towards
correctness, that the labour worked up in commodities is the measure of
their exchangeable value.

But if to the accumulated and immediate labour worked up in
commodities, we add the profits upon the whole advances for the time
that they are advanced, we shall then make the proper allowance for
the other element of value, and may expect to obtain a more accurate
measure. If we had estimated the value of the labour advanced in money,
or any other medium, we should of course estimate the profits in the
same medium, and the natural price of the commodity estimated in such
medium, would obviously be equal to the price of the accumulated and
immediate labour expended on the commodity, together with the ordinary
profits estimated upon such advances. But if, with a view to the
natural conditions of supply, we consider only the quantity of labour
advanced, without reference to any other medium, we must of course
estimate the profits in quantity of labour also, which will give us an
amount of labour in proportion to which commodities will be found to
exchange with each other, just in the same way as they would exchange
with each other according to the quantity of labour employed on them,
if labour had been the sole ingredient which had entered into their
composition.

Thus, if a hundred days labour were employed upon a commodity, at two
shillings a day, and the average interval between the advance of such
wages and the period when the commodity could be brought to sale were
a year, and profits were 20 per cent. the price of the commodity would
be £12, while the price of a commodity which had cost the same quantity
of labour of the same kind, and could be brought to market immediately,
would be only £10. And it is equally certain, that, if putting money
or any other medium of exchange out of the question, we had estimated
the profits for a year upon the advances of the hundred days labour
actually employed, we should obtain a quantity of labour which,
compared with the labour employed on the commodity sold immediately,
would be in the proportion of 120 to 100, and expressing the relative
conditions of supply, would accurately measure the rate at which the
two commodities obtained under these different circumstances would
exchange with each other.

It appears, then, that in the same country, and at the same time,
the exchangeable value of those commodities which can be resolved
into labour and profits alone, would be accurately measured by the
quantity of labour which would result from adding to the accumulated
and immediate labour actually worked up in them the varying amount
of the profits on all the advances estimated in labour. But this
must necessarily be the same as the quantity of labour which they
will command, as appears from the instances above stated, and will
be more fully shown farther on; and where the precious metals may be
considered for short periods as of a uniform value, the conformity of
this measure with the proportions of money prices at which commodities
would be exchanging all around us, might daily be brought to the test
of experience and be established beyond the possibility of doubt.

It will be said, perhaps, that in the same place, and at the same
time, almost every commodity may be considered as an accurate measure
of the relative value of others, and that what is true of labour in
this respect is true of cloth, cotton, iron, or any other article. Any
two commodities which, at the same time, and in the same place, will
purchase or command the same quantity of cloth, cotton, or iron, of a
given quality, will have the same relative value, or will exchange with
each other.

This will be readily granted, if we take the same time and place
exactly, and consider only relative value; but not if either any
latitude be allowed as to time and place, or if we consider, as it
is our object to do, not merely relative, but absolute and natural
value. Cloth, cotton, iron, and similar commodities, are subject to
vary most essentially in a single year, or even month, so that the
manufacturer who could obtain for his goods the same quantity of cloth
as he could the year before, would be very little likely to obtain the
same quantity of other articles. But even supposing that these articles
and the product of the capitalist were to continue of the same relative
value to each other, he might still be quite unable to carry on his
business. The conditions of the supply of commodities do not require
that they should retain always the same relative values, but that each
should retain its proper _natural_ value, or the means of obtaining
those objects which will continue to the producer the same power of
production and accumulation. If the advances of capitalists consisted
specifically in cloth, then these advances would always have the effect
required in production; and as profits are calculated upon the advances
necessary to production, whatever they may be, the quantity of cloth
advanced, with the addition of the ordinary profits estimated also in
quantity of cloth, would represent both the natural and relative value
of the commodity. But the specific advances of capitalists do not
consist of cloth, but of labour; and as no other object whatever can
represent a given quantity of labour, it is obvious that labour stands
quite alone in this respect, and that it is the quantity of _labour_
which a commodity will command, and not the quantity of any other
commodity, which can represent the conditions of its supply, or its
natural value.[D]

It will be allowed, then,

First, that when commodities are obtained by labour alone, and sold
immediately, they will, on an average, exchange with each other
according to the quantity of labour employed upon them.

Secondly, that when profits are concerned, and differ either in rate or
quantity, commodities can no longer exchange with each other, according
to the quantity of labour employed upon them, except by accident.

Thirdly, that the quantity of accumulated and immediate labour applied
to their production, must, in all the less complex cases, form the
advances on which profits may be correctly calculated.

And, fourthly, that when profits are calculated upon these advances,
a quantity of labour is obtained, according to which it is found, by
experience, that commodities do exchange with each other in the same
country; and, further, that this quantity of labour not only expresses
correctly their value in exchange with each other, but their absolute
and natural value in reference to the conditions of their supply.

       *       *       *       *       *

In proceeding to consider what takes place in different countries where
the value of the precious metals is very different, it will readily be
acknowledged, that the rate at which commodities exchange with each
other is not proportioned to the labour which has been employed upon
them, with the addition of profits. And it is quite certain, that
they cannot be proportioned to the quantity of labour alone of which
they are composed. We know, from experience, that the commodities of
different countries are actually exchanged with each other according to
their money prices at the time. These prices must be determined partly
by those natural elements of value which determine the rate at which
commodities exchange with each other, and the natural conditions of
their supply in each country, and partly by the different value of the
precious metals in different situations, which must necessarily have
a most powerful effect on the rate at which foreign commodities are
exchanged.

Knowing then the elements of the natural and relative value of
commodities in the same country, if we knew also the difference in the
value of money in different countries, we should know at once the rate
at which the commodities of different countries would exchange with
each other.

Now there is no supposition but one, relating to the value of money in
different countries, which, combined with the natural elements of the
value of produce in each, would constitute the present natural prices
of commodities in these countries, or the rates at which they actually
exchange with each other. This is the supposition that the differences
in the value of money in different countries are proportioned to the
differences in the money prices of agricultural labour.[E]

The conditions of the supply of an Indian commodity are the advance and
consumption of a certain quantity of Indian labour, with the profits
on all the advances for the time that they are employed. Thus, if for
the production of an Indian commodity, a fixed capital consisting of
accumulated labour and profits, equal to 300 days, were advanced for a
year, and a quantity of accumulated and immediate labour, consisting
of the wear and tear of the machinery, the materials to be worked up,
and direct labour, equal to 1500 days, were consumed on the commodity
in the same time, profits being 20 per cent., the natural value of such
commodity in India would be equal to the 1500 days labour consumed,
with a profit of 20 per cent. upon 1800 days labour, which would amount
to 1860 days labour.

If labour in India were fourpence a day, the fixed money capital in
this case would equal £5, the labour advanced and consumed £25, and
the labour consumed, together with the profits on the whole advances,
would be equal to £31. And this would evidently be the natural price
at which the commodity would circulate, and according to which it would
exchange with any foreign commodity brought to India.

On the same principle, if for the production of an English commodity,
300 days labour were advanced in fixed capital for a year, and 1500
days labour were consumed on the commodity in the same time, while
profits were 10 per cent., the natural value of such commodity, or the
conditions of its supply, would be 1500 days labour, with a profit
of 10 per cent. upon 1800, which together would equal 1680: and if
labour were two shillings a day, the natural price at which the
commodity would circulate, and according to which it would exchange
with any foreign commodity brought to England, would be £168. This
prodigious difference in the natural prices of two commodities in
England and India, the natural values of which in each country were
nearly the same, could only arise from a difference in the value of
money occasioned by the very superior efficiency of English labour in
the purchase of the precious metals, owing to the energy, skill, and
situation of English labourers and capitalists, compared with those
of India. But in estimating this difference in the value of money in
England and India, it is quite obvious, that if, after ascertaining
the natural conditions of the supply of a commodity in each country,
we were to estimate the value of money either by its general power of
purchasing, by a mean between corn and labour,[F] or by the quantity
of labour alone which had been actually employed in bringing the
money from the mine to the market, or by any other measure whatever,
except the labour which it would command, we should not account for
the natural prices which are found actually to prevail in the two
countries, and according to which Indian and English commodities are
found to exchange with each other by experience.

Consequently, as no other supposition will suit the actual phenomena,
and as it has already appeared that the value of commodities in the
same country is determined by the quantity of labour which they will
command, we may safely conclude that the value of the precious metals
in different countries is determined by the same measure, or by the
different quantities of common agricultural labour, taking the average
of summer and winter wages, which a given portion of them will command.

       *       *       *       *       *

When we come to consider the varying value of commodities at distant
periods in the same country, or the rise or fall of produce in the
progress of cultivation and improvement, we are necessarily deprived
of the test of an actual exchange. We know, however, that at different
periods in the same country both the value of the precious metals, and
the rate of profits and corn wages, may alter most essentially.

The effect of the varying value of the precious metals, when we have
once obtained a measure of value, will be easily estimated. The most
important point at present is, to consider the effects which must be
produced upon the value of commodities in the progress of society, by
the changes which necessarily take place in the profits of stock and
the corn wages of labour.

On the supposition of high profits at an early period of society, and
a considerable fall of them subsequently, how are we to measure and
compare the value of commodities at these different periods? With
regard to those which had continued to cost the same quantity of
accumulated and immediate labour, we could not say that they were of
the same value, unless we were prepared to assert that the value of
commodities is determined solely by the labour employed upon them,
not only when the rate of profits is the same but when it is totally
different;[G] a proposition which no one can venture to assert in the
case of foreign commodities, and which there is as little reason to
assert in comparing the commodities of distant periods.

If profits were 50 per cent. five hundred years ago, and are 10 per
cent. now, the question is, whether a piece of cloth which had cost
the same quantity of labour at these different periods would be of the
same value. By the supposition it was composed of a greater quantity
of profits in the earlier period, and having cost the same quantity of
labour, we should naturally conclude that it would be of a higher value.

It is said, however, that, although it cost the same quantity of
labour, yet that the labour in the former period was of much less
value, which would counterbalance the greater quantity of profits, and
leave the value obtained by the same quantity of labour the same. But
when we are thus referred to the lower value of labour, the principle
of compensation which had before been applied is quite forgotten. The
corn which pays the labourer is indeed obtained by a smaller quantity
of labour, on account of the superior fertility of the soil from which
it is raised, but it is sold as the cloth is sold, at a profit of 50
per cent.; and if it be said that, in the case of the cloth, the low
value of wages which is supposed to be the result of superior fertility
counteracts the high profits and keeps the value of cloth the same,
surely it may be said, in the case of the corn which pays the wages,
that the smaller quantity of labour necessary to produce it is made up
by the greater rate of profits at which it is sold, and the value of
wages is thus kept the same.

If 100 quarters of corn be obtained in the different periods of society
by the labour of a different number of men, such as 7, 8 and 9, each
paid at the rate of 10 quarters a year, the value of the 100 quarters
of corn, or the value of the wages of any one of the men employed,
estimated in the labour advanced, with the addition of the profits
upon such advances, must obviously always be the same.

At an early period of society, when the soil was very fertile and the
labour of 7 men only was necessary to produce 100 quarters of corn
on land which paid little or no rent, the advances in labour being 7
men, or in corn 70 quarters, and the return 100 quarters, the rate of
profits would be 42-6/7 per cent., and the advances of the labour of
7 men increased by a profit of 42-6/7 would equal the labour of 10
men, or the quantity of labour which the whole return would command.
At a more advanced period, when the last land taken into cultivation
was less fertile, and the labour of 8 men was necessary to obtain the
return of 100 quarters, the advances in labour being 8 men, or in corn
80 quarters, the rate of profits would be 25 per cent., and the labour
of 8 men increased by 25 per cent. would exactly equal the labour of
10 men. On the same principle, if at a still later period 9 men were
necessary to produce the 100 quarters, the rate of profits would be
11-1/9 per cent., and the quantity of labour employed increased by the
profits would still be equal to the labour of 10 men.

It appears then that when the labourer continues to be paid the same
corn wages, the value of the whole corn produce, or the value of each
man’s wages estimated in the usual way in labour and profits, must
obviously remain constant, and that it must be most erroneous to infer
that labour rises in value because it requires more labour in the
progress of cultivation to produce the wages of 10 men or one man, if
at the same time it requires such a diminished value of profits as
exactly to balance it.

But in the progress of cultivation, the corn wages of labour do not
continue the same, and corn must consequently be liable to great
variation of value, both on account of temporary variations in the
state of the supply compared with labour, and on account of the more
permanent state of the demand and supply of corn compared with labour,
owing to the increasing difficulty of production.

It may be laid down, however, as a general proposition, liable to no
exception, that when the value of any produce can be resolved into
labour and profits, then as the _proportion_ of such produce which goes
to labour increases, the proportion which goes to profits must decrease
in the same degree, and as the _proportion_ which goes to labour
decreases, the proportion which goes to profits must increase in the
same degree.[H]

Thus if ¾ of the produce, whatever that produce may be, go to labour, ¼
will remain for profits; if ⅚ go to labour, ⅙ will remain for profits;
and if ½ only go to labour, ½ will remain for profits.

In reference to corn or commodities in general, compared with each
other at different periods in the progress of cultivation, it is
obvious that neither an increase in the quantity of labour required to
produce them, nor an increase in the quantity of produce awarded to
the labourer, can ever determine the proportion of the whole produce
which goes to labour and affect profits accordingly; because if the
quantity of labour required to produce them increases, the effect of
this upon profits may be totally destroyed by a diminution at the same
time of the quantity of produce awarded to the labourer; or if a larger
quantity of produce be awarded to the labourer, it may be only in
consequence of a smaller quantity of labour being necessary to obtain
the same produce, in which case profits may remain undiminished, or
even rise, at the same time that corn wages rise.

But if instead of referring to commodities generally, we refer to the
variable quantity of produce which, under different circumstances,
forms the wages of a given number of labourers, we shall find that the
variable quantity of labour required to obtain this produce will always
exactly agree with the proportion of the whole produce which goes to
labour; because, however variable may be the amount of this produce, it
will be divided into a number of parts equal to the number of labourers
which it will command, and as the first set of labourers who produced
these wages may be considered as having been paid at the same rate as
the second set, whose labour the produce commands; it is obvious that
if to obtain the produce which commands ten labourers, 6, 7, 8, or
9 labourers be required, the proportion of the produce which goes to
labour, in these different cases, will be 6/10, 7/10, 8/10, or 9/10,
leaving 4/10, 3/10, 2/10, or 1/10, for profits.

It is impossible to refer what is proposed as a standard to any
_other_ measure, because, in that case, the other measure would be the
standard. But if it can be shown, that any object, the value of which
is composed of two elements, is of such a nature that while the value
of one of these elements increases, the value of the other decreases
exactly in the same degree, such object must be of a constant value.
If the values of two variable quantities, _X_ and _Y_, be equal to the
constant value _A_, it follows that, in all the variations to which
_X_ and _Y_ are subject, whatever value _X_ gains must be lost by _Y_,
and whatever value _Y_ gains must be lost by _X_. The converse of this
proposition must also be true, that is, if the value of any object be
made up of the variable values of two other objects, and it can be
shown that, from the nature of these two objects, whatever increase
of value one of them gains, must necessarily be lost by the other,
and vice versâ, it follows that the value of the object, to which the
two others are equal, must be constant. Now it has appeared that the
variable values of the labour and of the profits which compose the
value of the variable quantity of corn awarded in wages to a given
number of labourers, must necessarily be such, that, as the quantity
of labour required to produce them increases, either from difficulty
of production or from the greater quantity of produce awarded to the
labourer, all the value thus gained by labour is lost by profits; and
as the quantity of labour required to produce them is diminished,
either by facility of production or the small quantity of produce
awarded to the labourer, all the value which is gained by profits is
lost by labour. Consequently, the value of the variable quantity of
produce which, under different circumstances, forms the wages of a
given number of men, being composed of the values of the two elements,
labour and profits, varying as above described, must be constant, and
may therefore, with propriety, be proposed as a standard measure.

I have entered at some length into the details which show the necessary
constancy of the value of labour, on account of its great importance;
but, in reality, it follows directly from the manner in which the
natural value of commodities and of wages is estimated, that when the
labourer earns a greater or a smaller quantity of money or necessaries,
it is not the value of labour which varies, but, as Adam Smith says,
“it is the goods which are cheap in the one case and dear in the other.”

If labour alone, without any capital, were employed in procuring the
fruits of the earth, the greater facility of procuring one sort of them
compared with another, would not, it is acknowledged, alter the value
of labour, or the exchangeable value of the whole produce obtained by a
given quantity of exertion. We should, without hesitation, allow that
the difference was in the cheapness or dearness of the produce, not of
the labour.

In the same manner it will follow, that when capital and profits enter
into the computation of value, and the demand for labour varies, the
high or low reward of labour estimated in produce, implies a change in
the value of the produce, not a change in the value of the labour.

If the increased reward of the labourer takes place without an increase
of produce, this cannot happen without a fall of profits, as it is
a self-evident truth, that given the quantity of the produce to be
divided between labour and profits, the greater the portion of it which
goes to labour the less will be left for profits. What then will be
the result? It will appear that the value of the produce has fallen,
and the value of wages, or of labour, will have remained the same. To
obtain any given portion of the produce the same quantity of labour is
necessary as before, but profits being diminished, the value of the
produce is decreased; while this diminution of profits in reference to
the value of wages is just counterbalanced by the increased quantity
of labour necessary to procure the increased produce awarded to the
labourer, leaving the value of labour the same as before.

Perhaps in the case just supposed, the result may be said to be
occasioned by a fall in the value of the produce, without what could
properly be called an increased demand for labour. But if we suppose
that a considerable number of labourers were sent out of the country,
or swept off by a plague, there could then be no doubt of a great
demand for labour, yet the result would be similar. A larger quantity
of produce would necessarily be awarded to the labourer, and profits
would fall. A given quantity of produce obtained by the same quantity
of labour as before, would fall in value on account of the fall of that
part of its value which consisted of profits, while the fall of profits
on the increased wages would be balanced by the increased labour
necessary to obtain them.

If instead of labourers being sent out of the country, labourers were
imported, the result would be just opposite. A smaller quantity of
produce would be awarded to the labourer and profits would rise. A
given quantity of produce, which had been obtained by the same quantity
of labour as before, would rise in value on account of the rise of
profits, while this rise of profits, in reference to the wages of the
labourer, would be balanced by the smaller quantity of labour necessary
to obtain the diminished produce awarded to the labourer.

In the former case of the demand for labour, it appeared that the
greater earnings of the labourer were occasioned, not by a rise in the
value of labour, but by a fall in the value of the produce for which
the labour was exchanged. And in the latter case of the abundance
of labour, it appeared that the small earnings of the labourer were
occasioned by a rise in the value of the produce, and not by a fall in
the value of the labour.

The result would be similar, if instead of supposing the same quantity
of produce to be obtained by the same quantity of labour, we were to
suppose the greatest variations to take place in the fertility of
the soil, and, consequently, in the productive power of labour. In
all cases it would still be found that, as Adam Smith says, it is
the produce which varies in value, not the labour for which it will
exchange; and if money were obtained in the way in which its value
would unquestionably be the most constant, all these variations would
appear in the money prices of commodities, whenever the demand for
labour varied; while the money price of a given quantify of labour
would remain the same.[I]

The following Table will further illustrate the necessary constancy
in the value of labour, and some of its most important results, in a
clearer manner and in a shorter compass than if each case were taken
separately.

The first column represents the varying fertility of the soil, by the
varying quantity of corn which can be obtained by the labour of a given
number of men.

The second column represents the yearly corn wages of each labourer,
determined by the state of the demand and supply of produce compared
with labour.

The third column represents the variable advances of produce, in the
form of corn wages, which, according to the rate at which the labourers
are paid, are necessary to obtain the produce of the first column.

The fourth column represents the rate of profits determined in the
common way, by the proportion which the excess of the produce in the
first column above the produce paid to the labourers in the third,
bears to these advances.

The fifth and sixth columns represent the quantity of labour required
to produce the varying corn wages of the given number of men, with the
profits estimated also in quantity of labour; and the reader will see
at once that these two columns must necessarily, from the manner in
which profits and wages are estimated, make up the constant quantity
and value of labour which appears in the seventh column.

The eighth and ninth columns show the value of a given quantity of
corn, and the value of the produce of a given number of men under the
varying circumstances supposed.

_Table illustrating the invariable Value of Labour and its Results._

  KEY:

  1.  Quarters of Corn produced by Ten Men, of varying Fertility of the
      Soil.

  2.  Yearly Corn Wages to each Labourer, determined by the Demand and
      Supply.

  3.  Advances in Corn Wages, or variable Produce commanding the Labour
      of Ten Men.

  4.  Rate of Profits under the foregoing Circumstances.

  5.  Quantity of Labour required to produce the Wages of Ten Men under
      the foregoing Circumstances.

  6.  Quantity of Profits on the Advances of Labour.

  7.  Invariable Value of the Wages of a given Number of Men.

  8.  Value of 100 Quarters of Corn under the varying Circumstances
      supposed.

  9.  Value of the Product of the Labour of Ten Men under the
      Circumstances supposed.

  +---------+--------+---------+-----------+------+------+----+------+-------+
  |    1.   |   2.   |    3.   |     4.    |  5.  |  6.  | 7. |  8.  |   9.  |
  +---------+--------+---------+-----------+------+------+----+------+-------+
  | 150 qrs.| 12 qrs.| 120 qrs.| 25 pr. Ct.| 8    | 2    | 10 | 8.33 | 12.5  |
  | 150     | 13     | 130     | 15.38     | 8.66 | 1.34 | 10 | 7.7  | 11.53 |
  | 150     | 10     | 100     | 50        | 6.6  | 3.4  | 10 | 10   | 15    |
  | 140     | 12     | 120     | 16.66     | 8.6  | 1.4  | 10 | 7.14 | 11.6  |
  | 140     | 11     | 110     | 27.2      | 7.85 | 2.15 | 10 | 9.09 | 12.7  |
  | 130     | 12     | 120     | 8.3       | 9.23 | 0.77 | 10 | 8.33 | 10.8  |
  | 130     | 10     | 100     | 30        | 7.7  | 2.3  | 10 | 10   | 13    |
  | 120     | 11     | 110     | 9         | 9.17 | 0.83 | 10 | 9.09 | 10.9  |
  | 120     | 10     | 100     | 20        | 8.33 | 1.67 | 10 | 10   | 12    |
  | 110     | 10     | 100     | 10        | 9.09 | 0.91 | 10 | 10   | 11    |
  | 110     | 9      | 90      | 22.2      | 8.18 | 1.82 | 10 | 11.1 | 12.2  |
  | 100     | 9      | 90      | 11.1      | 9    | 1    | 10 | 11.1 | 11.1  |
  | 100     | 8      | 80      | 25        | 8    | 2    | 10 | 12.5 | 12.5  |
  | 90      | 8      | 80      | 12.5      | 8.88 | 1.12 | 10 | 12.5 | 11.25 |
  +---------+--------+---------+-----------+------+------+----+------+-------+

The first and most important truth illustrated in the table is, that,
from the division of value into labour and profits, and the mode in
which profits are always estimated, it follows necessarily, that the
quantity of labour required to produce the wages of a given number of
men, with the addition of the profits upon these advances estimated
in labour, must always be exactly the same as the quantity of labour
which the wages will command, and must together always make up the
constant quantity which appears in the seventh column. But the quantity
of labour required to produce the varying wages of ten men is, under
the different circumstances supposed, very different, as appears in
the fifth column; and it is obvious, that while the numbers in the
fifth column vary, the numbers in the seventh column, or the quantity
of labour and profits united, cannot be constant, unless, as the
quantity of labour required to produce the wages of ten men increases,
the quantity of profits estimated in labour diminishes exactly in the
same degree. But this, from what has before been stated, must, under
the circumstances supposed, be the case. And it follows, that if the
natural value of a commodity may be estimated by the labour and profits
of which it is composed, the natural value of the corn wages of a
given number of men must always be the same. But such wages, according
to the postulate with which we commenced, must necessarily be equal to
the quantity of labour for which they will exchange. Consequently the
value of a given quantity of labour must, under every variety which can
take place in the fertility of the soil and the corn wages of labour,
be always constant. It is, however, of the greatest importance to
remark, that an exact balance of labour, and of profits estimated in
labour, so as to yield always a constant quantity, cannot take place in
the production of any one commodity or given portion of a commodity;
because any one commodity, or given portion of a commodity, is liable
to vary in relation to labour, and such variation will either increase
or decrease the amount of the labour and profits united. It is only the
varying wages of a given number of men bearing, as the terms imply, a
constant relation to labour, which, under any changes in the quantity
of labour required to produce them, can still continue of the same
natural value. And it is precisely this necessary constancy in the
natural value of the varying corn wages of labour, which renders the
labour which a commodity will command, a standard measure both of its
natural and exchangeable value.

2dly. It appears from the Table, that given the produce obtained by ten
men, then as corn wages rise, the value of the produce will fall, or
command less labour; and the constant value of the advances in labour
absorbing a larger proportion of the value of the produce, profits will
fall in proportion. But when more is produced by the same number of
persons, then unless the corn wages rise so high as exactly to balance
it, the value of the whole produce is increased, and the rate of
profits and corn wages may both rise at the same time. Thus while the
produce is 130 quarters, as labour rises from ten to twelve quarters,
profits fall in an opposite direction from 30 per cent. to 8.3. per
cent.; but if we compare the wages of labour when the produce is 130
quarters, with the wages of labour when the produce is 150, it appears
that labour may rise from twelve to thirteen quarters, at the same time
that profits rise from 8.3. to 15.38.

A third result illustrated in the Table is, that labour being constant,
all commodities into which profits enter, which may be said to be
nearly the whole mass, must fall on the fall of profits, and among
these will, of course, be found metallic money. Supposing, therefore,
money always to require in its production the same quantity of labour
and capital, it will regularly fall in value in the progress of
cultivation and population; while labour being uniform in value will
rise in money price,[J] and the demand for corn increasing, compared
with the demand for labour, the money price of corn will probably rise
still more. But if the labourers were paid at all times exactly the
same quantity of corn, (which, however, cannot be the case,) the value
of corn, like the value of wages, would be constant, and the variations
of fertility would only show themselves in the enormous variations of
profits.

Thus, when labour is paid at ten quarters each man, the numbers in the
eighth column, or the value of a given quantity of corn, must, it is
obvious, always be the same, whatever be the quantity produced; and
when the land is fertile, the small quantity of labour required to
produce ten quarters is balanced by the great profits which appear in
the fourth column.

In the actual state of things, corn generally rises in the progress
of cultivation, not only nominally, but really, as may be seen in the
eighth column, while labour, it is evident, can only rise nominally.

A fourth result shown in the Table is, that the value of the corn
obtained by ten men depends mainly upon the rate of profits, which
again depends mainly upon the demand and supply of corn compared with
labour. If corn be in such demand, that notwithstanding the fertility
of the soil, a small quantity of it comparatively will purchase the
labour required, profits will be very high, and the value of the
produce will greatly exceed the constant value of the wages of the
labour advanced; but if the supply of corn be so great, compared with
labour, that a large quantity of it is required to purchase the given
quantity of labour, profits will be low, and the excess of the value of
the produce above the constant value of the advances in wages will be
inconsiderable.

Thus, when the produce is 150 quarters, if corn be in such plenty that
each labourer is awarded thirteen quarters, the profits of stock will
be only 15.38 per cent.; and this rate of profit, added to the constant
value of the advances in labour, which are represented by 10, will
make the natural value of the produce equal to 11.53. But if corn,
notwithstanding the fertility of the soil, be only supplied in such
quantities, compared with labour, as to award the labourer no more than
ten quarters, the rate of profits, instead of 15.38 per cent., will be
50 per cent., and the value of the produce, instead of being 11.53,
will be 15.

This shows how greatly the natural value of commodities depends upon
the average state of the demand and supply, and completely confirms
the position in my last work, that the only difference between natural
and market prices is, that the former are regulated by the average and
ordinary relations of the demand to the supply, and the latter, when
they differ from the former, upon the accidental and extraordinary
relations of the demand to the supply.

Fifthly, it follows, from the constant value of labour, that,

Given the value of money in different countries, the natural prices of
commodities, in which the same quantities of labour have been employed,
will depend upon the rate and quantity of profits.

Given the rate and quantity of profits, and the value of money, the
natural prices of commodities in different countries will depend upon
the quantity of labour employed upon them.

And given the quantity of labour employed on them, and the rate and
quantity of profits, the natural prices of commodities will depend upon
the value of money.

But in reality none of the ingredients of natural or money price are
given, excepting the natural value of labour, and consequently the
money prices of commodities which regulate the ordinary rate at which
different countries exchange their commodities with each other, will be
determined partly by the quantity of labour employed upon them, partly
by the ordinary rate of profits, and partly by the value of money.

The value of metallic money, it has before been stated, while it
continues to be obtained by the same quantity of labour and capital,
must always fall with the fall of profits, and will consequently
have a strong tendency to fall with the progress of cultivation and
improvement; but as few nations comparatively have mines of their own,
the supplies which they obtain of the precious metals must be purchased
by their exportable commodities; and these are produced and exported
under such a variety of circumstances, in respect to cost, and the
value of the same amount of the precious metals is further so much
affected by the demand for corn and labour, the state of credit, paper
currencies, taxation, and other circumstances, that no rule can safely
be laid down on the subject.

Generally the value of money is the lowest in the richest and most
manufacturing countries; but this is not always the case; and a country
which raises an abundance of raw produce at a small expense of labour
and profits, while its money value is kept up by a ready sale for it
in foreign markets, and a continued demand for labour, may have the
value of its money very low, although it is not rich or manufacturing.
This is the case with the United States of America, where, owing to the
low value of money, or high money price of labour, there are no doubt
some commodities which, though produced by a less value of labour and
profits, cannot be exported to England on account of the higher value
of money in England; while we know that there are many other products
which are obtained by so much a smaller quantity of labour and profits
as more than to counterbalance the higher value of money in England, or
the higher money price of labour in the United States.

In the same manner there are no doubt many commodities which, though
obtained in England by a much less quantity of labour and profits than
in India, cannot be exported to that country on account of the very
high value of money in India; while, on the other hand, there are a few
commodities in England in which the saving of labour and the effects of
capital and skill have been so great, as to allow of their exportation
from a country where the money wages of labour are two shillings a day,
to one where they are only fourpence; that is, from a country where
the value of money is six times lower than in the country to which the
commodities are sent.

On the same principle, commodities may be imported from India into
England, although the same commodities might be produced in England
by a much less quantity of labour and profits, the low value of money
in England more than compensating the greater quantity of labour and
profits employed in India.

It is evident, therefore, that the values which determine what
commodities shall be exported, and what imported, depend, as before
stated, partly upon the quantity of labour employed in their
production, partly upon the ordinary rates of profits in each country,
and partly upon the value of money.

A sixth result illustrated in the Table is the important distinction
between cost and value. The two last columns show the value of a given
quantity of corn, and the value of the product of a given quantity of
labour, under all the variations which may be supposed of fertility and
corn wages. The difference between the numbers in the last column, and
the uniform number expressing the value of labour, shows exactly the
difference between the value of the labour which has been employed upon
a production, or its cost, and the labour which that production will
command, or its natural and exchangeable value; which, where profits
and wages are alone concerned, must be exactly equal to the additional
value occasioned by the amount of profits.

The reader will be aware that neither the preceding Table, nor any
thing which has been said, tends in any degree to contradict the
acknowledged truth that different _kinds_ of labour are of very
different natural and exchangeable value. It will be further allowed,
that even the same kind of labour, and the kind which has been
especially referred to, namely common agricultural labour, may, under
particular circumstances, and in particular places, vary in value from
a partial or temporary state of demand and supply. We well know, that,
from a partial and temporary demand at a particular period of the year,
summer wages are of a very different value from winter wages; but in
reality summer wages form a very important part of the wages of the
whole year. They are generally employed to pay the rent of the house,
or to purchase the necessary clothing for the family. They could not be
essentially diminished, without altering the condition of the labourer
throughout the year, or the rate of the increase of population. And if
the labourer earned a smaller quantity of corn throughout the year,
with an undiminished produce, it appears from the Table that the value
of that corn would still remain the same, owing to the increased value
of those profits of which it was in part composed.

With regard to the variations in the value of labour in different
parts of the same country, if they are not partial, or temporary, and
consequently exceptions to the general average, they are all resolvable
into those differences in the value of money, which unquestionably take
place in different parts of the same country, and arise from a want of
demand for corn and labour, and a want of commodities to exchange with
those parts of the country which are richer in the precious metals.

Having obtained a measure of the value of commodities in their more
simple forms, we may apply this measure to the ingredients which
compose the most complicated productions, and estimate all the advances
which consist of accumulated profits, rents, tithes, and taxes in
labour. In the case of taxes on the wages of labour, or an increase in
the prices of those other necessaries of the labourer, besides food,
which may occasion the sale of a greater quantity of the produce, in
order to pay the same number of labourers, as these increased advances
will have the same effect upon profits as a simple increase of wages,
they will in no respect interfere with the constant value of labour,
though an increase of wages, under such circumstances, will be of no
advantage to the labourer.

Cases will of course frequently occur, in which the advances which do
not consist of wages vary in a different degree from wages; but still
the value of labour will remain constant. If the produce, instead of
being obtained by the direct labour of a certain number of men, were
obtained by the direct labour of only a part of this number, together
with an amount of materials, or other advances consumed in the same
time, equal to the labour of the other part, then upon a rise in the
corn wages of labour, if the other advances were to fall, or not to
be worth so much labour as before, it is obvious that the profits of
stock would not fall so much as if the same rise of corn wages had
taken place, when all the advances had been in labour; and it might be
thought at first that profits not falling in proportion to the rise of
labour, the value of labour would not continue the same. But it will
be observed, that, in all cases of this kind, there will be a less
value of labour, which is equivalent to a less quantity of it employed
to obtain the same produce; and a less quantity of labour altogether
being consequently necessary to produce the food of the labourer, than
if labour alone had been employed, the higher profits, or smaller
diminution of the former profits, will only just be such as to maintain
labour of a constant value.

Let us suppose, for instance, that 120 quarters of corn are produced by
ten men. If each man were paid ten quarters, profits would be 20 per
cent.; and if wages were increased to eleven quarters, profits would
fall from 20 per cent. to 9.09 per cent. Now supposing, that, instead
of ten men being directly employed, five only are so employed, and that
the other advances consist of capital which will continue of the same
value as the corn;[K] then, while each labourer earns ten quarters,
and the other capital advanced is worth the labour of five men so
paid, profits will be, as before, 20 per cent. But if the labourer be
paid eleven quarters instead of ten, profits will not fall, as before,
from 20 per cent. to 9.09 per cent., but only from 20 per cent. to
14.28 per cent.; because the advances, instead of being 110, will only
be 105; and the value of these advances estimated in labour paid at
eleven quarters each man, being only 9.54, instead of 10; 9.54 may be
considered as the number of persons employed. Then if 120 quarters
be produced by 9.54 men, 105 quarters will be produced by 8.34. But
8.34, increased by a profit of 14.28, will make 9.54, the quantity of
labour employed, and show that the natural value of labour is always
proportioned to its quantity. In the former case, when ten men were
employed at eleven quarters, as the advances were 110 quarters,
instead of 105, the labour required to produce the food of the labourer
was 9.166, and consequently a profit of only 9.09 will be sufficient to
make up ten, the number of men employed, and thus equalize the value
with the quantity.

In the case of fixed capital of considerable duration, there is always
a probability that it will alter in value in reference to the quantity
of labour, and of profits estimated in labour, of which it was composed
when first produced; but after having advanced so far in establishing
the labour which a commodity will command, as the measure of its value,
we are entitled to consider the present value estimated in labour of
any fixed capital which is about to be employed in production, as
representing the quantity of accumulated labour actually so applied.
It is further necessary, as before stated, to reckon the remaining
value of the fixed capital as a part of the produce resulting from the
whole of the accumulated and immediate labour employed. When, however,
these corrections have been made, all the cases in which fixed capital
enters, which may be said to include the great mass of commodities,
will be found to answer to the theory as accurately as the simplest
case that can be stated.

The exceptions, therefore, to the general proposition that the labour
which commodities will command may be considered as a standard measure
of their value are only apparent, not real, and may all be consistently
explained.

And if the proposition be true, a standard measure of value is of so
much importance in political economy, and the one proposed is at all
times so very ready and easy of application,[L] that there is scarcely
any part of the science in which it will not tend to simplify and
facilitate our inquiries.

To advert shortly to a few points on which there have been some
differences of opinion.

On the subject of rents, such a standard would determine, among other
things, that, as the increase in the _value_ of corn is only measured
by a decrease in the corn wages of labour, such increase of value is
a very inconsiderable source of the increase of rents compared with
improvements in agriculture; and on the same principle that, if tithes
do not fall mainly on the labourer, the acknowledged diminution in the
_corn_ rents of the landlord, occasioned by tithes, cannot be balanced
by an increase of their value, and that, consequently, tithes must fall
mainly on the landlord.

On the subject of labour it would determine, that the increasing
_value_ of the funds destined for the maintenance of labour can alone
occasion an increase in the demand for it, or the will and power
to employ a greater number of labourers; and that it is consistent
with theory, as well as general experience, that high corn wages, in
proportion to the quantity of work done, should frequently occur with
a very slack demand for labour;[M] or, in other words, that when the
_value_ of the whole produce falls from excess of supply compared with
the demand, it cannot have the power of setting the same number of
labourers to work.

On the subject of profits, it would show, that they are determined,
not by the varying value of a given quantity of labour compared with
the constant value of the commodities which it produces, but, as is
more conformable to our experience, by the variable value of the
commodities produced by a given quantity of labour, compared with the
constant value of such labour; and that profits never, on any occasion,
rise or fall, unless the value of the produce of a given quantity of
labour rises or falls, either from the temporary or ordinary state of
the demand and supply.

On the subject of the distinction between wealth and value, it would
show, that though they are by no means the same, they are much more
closely connected than they have of late been supposed to be; and
that the best practical measure of the relative wealth of different
countries would be the quantity of common labour which the value of the
whole annual produce of each country would enable it to command at the
actual price of the time, which in some rich countries might amount
to above double the number of families actually employed, and in poor
countries might not greatly exceed such number.

On the subject of foreign trade, it would show that its universally
acknowledged effect in giving a stimulus to production, generally, is
mainly owing to its increasing the value of the produce of a country’s
labour by the extension of demand, before the value of its labour is
increased by the increase of its quantity; and that the effect of every
extension of demand, whether foreign or domestic, is always, as far as
it goes, to increase the average rate of profits[N] till this increase
is counteracted by a further accumulation of capital.

On the subject of the accumulation of capital it would show that if the
increase of capital be measured by the increase of its materials, such
as corn, clothing, &c., then it is obvious that the supply of these
materials may, by saving, increase so rapidly, compared with labour and
the wants of the effective demanders, that with a greater quantity of
materials the capitalist will neither have the power nor the will to
set in motion the same quantity of labour, and that consequently the
progress of wealth will be checked; but that if the increase of capital
be measured, as it ought to be, by the increase of its power to command
labour, then accumulation so limited cannot possibly go on too fast.

On the general subject of demand and supply, it would show that they
must be restored to their universal empire, both in reference to the
prices of commodities, and the dependence of the progress of wealth on
the due proportion maintained between them. If the cost of a commodity
be considered as composed exclusively of the actual advances of the
capital required for its production, which seems to be the most natural
and correct mode of viewing it,[O] then it is obvious, that as both the
prices and values of commodities are proportioned to these advances,
with the _addition_ of profits very variable in their amount, neither
of them can be determined by these advances alone, or by the costs of
production so defined. We must therefore have recourse to demand and
supply. And on the other hand, if profits be included in the costs of
production, then, as it follows, from the constancy of the value of
labour, that ordinary profits are determined by the ordinary demand
compared with the ordinary supply of the products of the same quantity
of labour, the certain conclusion must be, that demand and supply
enter powerfully into the costs of production according to this latter
definition, and that therefore their dominion as to prices and value is
absolutely universal.[P]

Nor would they be less so in their effect on the general progress of
wealth. If commodities and the materials of capital increase faster
than the effectual demand for them, profits fall prematurely, and
capitalists are ruined without a proportionate benefit to the labouring
classes, because an increasing demand for labour cannot go on under
such circumstances. If the value of commodities and the materials of
capital increase for some time without an increase of their quantity,
the labouring classes must soon be supported on the lowest amount of
food on which they will consent to keep up their actual number; and
the main part of the population would suffer severely without any
proportionate benefit to the capitalists; because the value of their
capitals, measured by the labour which they can command, would shortly
be incapable of further increase. In either of these cases a decided
check would be given to the progress of wealth, which progress must
necessarily be the greatest, when the joint product of the capitalist
and labourer, which the state of the land and the skill with which
it is worked enable them to obtain, is so divided between them, that
in the progress of cultivation and improvement any unnecessary or
premature fall either of profits or corn wages is prevented. But this
can only be accomplished by a proper proportion of the supply to the
demand, that is, by an accumulation so proportioned to the actual
consumption of produce by those who can make an effectual demand for
it, as to occasion the greatest permanent annual increase in the value
of the materials of capital.

The reader of my last work, in which I laid down as my rule, to admit
no principles of Political Economy as just which were inconsistent
with general experience, will be aware that the conclusions to which
I have here shortly adverted, as following necessarily from the
constancy of the value of labour, are almost exactly the same as the
conclusions of that work. And the reason is, that although at that time
I did not think that the labour which a commodity would command could,
with propriety, be considered as a _standard_ measure of value, yet I
thought it the nearest approximation to a standard of any one object
known, and consequently applied it, on almost all occasions, to correct
the errors arising from the application of more variable measures. The
conclusions, therefore, of my former and present reasonings were likely
to be nearly the same, although the premises might now admit of further
correction and illustration, and the conclusions might be pronounced
with greater precision and certainty.

It was my intention to have done this much more fully than in
the present treatise; but having been interrupted by unforeseen
circumstances, and being unwilling to delay any longer the publication
of this essential part of my proposed plan, I have determined to submit
it to the public in its present form; and will only add here a few
observations on a question closely connected with it, which has lately
excited much interest and discussion.

Among the questions for the determination of which a standard measure
of value is most particularly required, are those which relate to
alterations in the value of the currency. We know perfectly well, from
experience, that commodities are subject to great variations of price,
and that many of these variations may arise from causes which alter
the natural value of these commodities, and are equally applicable to
a large mass of them, as to a very few. On the supposition of a large
mass being altered, any article which had retained the same natural
value, would have its power of purchasing considerably affected;
but this would be owing to an alteration in the value of the mass
of commodities, and not in the value of the article, which by the
supposition remains the same. It follows, that although money may
increase in its power of purchasing, it does not necessarily increase
in value. But in estimating the value of money, some criterion or other
must be referred to. If we cannot refer to the mass of commodities, we
must refer to some one object, and this object can only be labour. Our
present inquiry, therefore, must be into the causes which affect the
value of the precious metals as compared with labour.

These causes are of two kinds:--first, those which occasion a high
or low rate of profits, which, as connected with the progressive
cultivation of poorer land, and operating universally and necessarily
on the precious metals in common with all other commodities, and
raising or lowering them with regard to labour, may be denominated
the primary and necessary cause of the high or low value of metallic
money.--And secondly, those which depend on the fertility and vicinity
of the mines; the different efficiency of labour in different
countries; the abundance or scarcity of exportable commodities; and the
state of the demand and supply of commodities and labour compared with
money; which may be denominated the secondary and incidental causes of
the high or low value of metallic money.

These two different kinds of causes will sometimes act in conjunction,
and sometimes in opposition, so that it may not always be easy to
distinguish their separate effects; but as these effects have really a
different origin, it is desirable to keep them as separate as we can.

The marks which distinguish a fall in the value of the precious metals,
arising from the primary cause, are,--a rise in the money price of raw
produce and labour, without a general rise in the price of wrought
commodities. All of them, indeed, as far as they are composed of
raw produce, will have a tendency to rise; but, in a large class of
commodities, this tendency to rise will be more than counterbalanced
by the effect of the fall of profits.--Some therefore will rise, and
some will fall, as I stated in my last work,[Q] according to the nature
of the capitals employed upon them, compared with those which produce
money; and while the money prices of corn and labour very decidedly
increase, the prices of commodities, taken on the average, may possibly
remain not far from the same.

On the other hand, when the value of metallic money falls, from
the secondary causes above noticed, there will be a tendency to a
proportionate rise of all commodities as well as of corn and labour,
though in some cases it may take a considerable time before it is
completely effected. And, in general, whenever a fall in the value of
money takes place, without a fall in the rate of profits, an event
which is generally open to observation, it is to be attributed to
incidental and secondary causes affecting the relations of money to
labour, and not to that which is connected with the taking of poorer
land into cultivation.

Of these two classes of causes the second produces much the greatest
part of those differences in the value of metallic money, which are the
most observable in different countries, and at different periods in
the same country. If India and England had each of them mines of equal
natural fertility, the superior efficiency of English labour, assisted
by machinery, would extract a much greater quantity of metal from such
mines; and the money price of labour might be three or four times
higher, and the value of money three or four times lower in England
than in India.

The same effect is, at present, practically produced by the skill and
machinery employed on the manufactures with which England purchases her
gold. If she can prepare exportable commodities which are in demand
abroad, with much less labour than other nations, she will be able to
buy gold at a much lower natural value, and will continue to import it
under favourable exchanges, till its value falls in proportion.

It is farther established by experience, that a brisk or slack
demand for commodities and labour, and particularly for corn, has
a considerable effect on the value of gold. Such a demand not only
occasions a more rapid circulation of money, and enables the same
quantity to perform a greater number of transactions, but calls into
action a greater quantity of credit and private paper,[R] so that a
general rise of bullion prices, including labour, seems to be at all
times possible, even without any fresh importations of the precious
metals; and the only practical limit to this rise, is the turn of the
exchange, and the impossibility of maintaining the exchanges nearly at
par beyond a certain elevation of labour and commodities.

The secondary and incidental causes here enumerated, as affecting the
value of gold, often completely overcome the effects arising from the
primary cause. The state of bullion prices in most of the countries of
the commercial world make it evident, that the efficiency of labour,
and the abundance of exportable commodities, are much more powerful
in lowering the value of bullion in the countries where they prevail,
than high profits in raising it; and the same appears to be true, in
reference to an increased demand for corn and labour.

It cannot be doubted that the rate of interest and profits was
comparatively high during the late war, and this high rate of profits
would naturally have a tendency to lower the bullion price of labour;
but this was more than counterbalanced by the tendency of a brisk
demand for corn and labour to raise money prices generally, including
labour, and the consequence was a fall, during the greatest part of the
time, in the value of bullion.

It can as little be doubted, that the rate of interest and profits has
fallen since the war, and this low rate of profits would have a natural
tendency to raise the bullion price of labour; but this has been more
than counterbalanced by the tendency of a slack demand for corn and
labour to lower prices generally, and the consequence has been a rise
in the value of gold, and a still greater rise in the value of the
currency.

This rise, however, in the value of the currency, has been by no means
so considerable as those are inclined to make it, who would measure it
by the fall of agricultural produce; nor is it so inconsiderable as
those imagine who would measure it solely by the difference between
paper and gold. But whether this difference is the whole of what can
be fairly attributed to the Bank Restriction and the return to cash
payments, or not, it may by no means be the whole change which has
taken place in the value of the currency, when compared with an object
which has not changed.

It would be very desirable to be able to form an accurate estimate of
the rise and fall which has taken place in the bullion price of labour
for the last thirty years; but unfortunately, during the latter part of
the period, no general estimates of the price of labour have been made,
at least none that have come to my knowledge; and there is reason to
think that, under the late stagnation in the demand for agricultural
labour, the common rate of wages in England has been more than usually
interrupted by the operation of the poor laws. On this account, I have
made some inquiries respecting wages in Scotland, and have obtained a
most valuable communication; but before I refer to it particularly,
it may be useful to consider the results of the data we possess in
England. The rise in the bullion price of labour from 1790 to 1810 and
11, may be established upon satisfactory grounds, although the amount
of the fall which has since taken place may be a matter of considerable
uncertainty.

According to the communications to the Board of Agriculture, the price
of labour, in 1790, was 8_s._ 1_d._ per week. In 1796, Sir F. M.
Eden, in his work on the Poor, stated it at 8_s._ 11_d._ per week. In
1803, the communications to the Board of Agriculture make it 11_s._
5_d._, and in 1810 and 11, according to satisfactory returns obtained
by Arthur Young, it was 14_s._ 6_d._[S] This was a steady and very
great rise in the price of agricultural labour during the course of
twenty years. But in 1810 and 11, paper had separated from gold to a
considerable extent. Taking an average of the market prices of gold
during these two years, this price was £4. 13_s._ and reducing the
14_s._ 6_d._ currency to a bullion price, it will appear that the
bullion wages of labour in 1810 and 11 were a little above 12_s._ The
bullion price of labour had therefore risen 50 per cent. Now, on the
supposition that manufacturing and mercantile labour continued to bear
the same proportion to agricultural labour as before,[T] it is obvious
that there would be a difference of 50 per cent. between the quantity
of labour and profits with which an ounce of gold could be purchased
at the former period, compared with the latter; that is, while labour
was 8_s._ 1_d._ per week, it would require a piece of muslin, which
would command above nine and a half weeks labour, to purchase an ounce
of gold; but when wages were 12_s._ per week, a piece of muslin, which
would command little more than six and a half weeks labour, would be
sufficient for the purpose. The natural value of bullion, therefore,
the quantity of English labour and profits of which it was composed,
must have fallen to that extent.

Mr. Tooke, in his late valuable publication, after stating very justly
that an unusual proportion of unfavourable seasons must have had a
considerable effect in raising the prices of corn and labour during
the period adverted to, goes on to “ask upon what ground of fact or
reasoning can the high prices included in such a period be ascribed, in
fairness, to alterations in the currency, beyond the degree indicated
by the difference between paper and gold, when, after a sufficient time
has elapsed for the subsidence of the extraordinary effects of such an
unusual succession of bad seasons, there is a restoration to a level
even somewhat lower than that from which the rise is assumed to have
taken place, and to have continued progressively.”

Of the subsidence here alluded to, before 1814, Mr. Tooke has certainly
not given proofs sufficiently general; but without dwelling on this
point, it appears to me that the question of the fall in the value of
the currency including the gold, is exclusively a question of fact, and
must be referred to some criterion. It is a very intelligible thing to
say that paper has fallen, if it has fallen with regard to the gold
which it professes to represent; but it is not intelligible to say
that gold has not fallen, when it is acknowledged to have fallen both
with regard to its power of purchasing generally, and its power of
commanding labour; unless a reference can be made for the proof of it
to some more satisfactory criterion. A season of scarcity will make
corn dear, and a season of plenty cheap, without necessarily affecting
labour in either case, as is shown by Adam Smith, and proved by
repeated experience. But if seasons of scarcity occur so frequently as
to raise generally the bullion price of labour, it must of necessity be
accompanied by a power of purchasing bullion with a smaller quantity of
labour and profits; otherwise the event could not occur. Whenever it
does occur, the natural value of bullion falls.[U]

The observations here made, with a view to place the controversy
respecting the alterations in the currency on its proper ground, and to
make the necessary distinction between facts and the causes which may
have produced them, apply still more strongly to the publication of Mr.
Blake, in much of the reasoning of which I entirely concur. He proposes
to prove that it was the gold which rose, and not the paper which fell
during the war, although he acknowledges as a matter of fact, that
almost all prices, including labour, rose not only in paper but in
gold. This has, no doubt, the air of a contradiction, according to all
the common modes of estimating the value of money; and it certainly is
not removed by showing that the main cause of these high prices was a
great demand compared with the supply of commodities--a cause which,
involving as it always does, more transactions on credit, and a more
rapid circulation of currency, is one of the most legitimate causes of
a fall in the value of money.

Mr. Blake, however, is certainly right in his view of the effects of
an unfavourable exchange on the price of gold, when it ceases to form
a part of the circulation. It is not only possible that from this
cause gold might for a time rise in value much beyond the expense of
transporting it; but as a matter of fact, this did unquestionably occur
at certain periods during the war. There is no account of the price
of agricultural labour in England subsequently to 1811. Probably it
did not rise any more; but if it did, judging from what took place in
Scotland, it did not rise sufficiently to balance the subsequent rise
in the market price of gold, which was from £4. 15_s._ in 1811, to £5.
8_s._[V] in 1813. Consequently, in 1813, as compared with 1811, the
value of gold must have risen considerably; and on the supposition that
the price of labour did not rise after 1811, it would appear that the
natural and exchangeable value of gold, as measured by the standard,
rose above 13½ per cent.

The rise of gold from the sudden fall of the exchange in consequence
of Buonaparte’s return from Elba was still more remarkable. The price
had been as low, in the spring of 1815, as 4_l._ 9_s._, and without
any known change in the currency price of labour, it rose suddenly to
5_l._ 5_s._, or 18 per cent.; and consequently, to purchase an ounce
of gold it was necessary at that time to give commodities worth 18 per
cent. more of agricultural labour than it might have been purchased
for a month or two before. Whatever might have been the case with the
paper, there could not, on any view of the subject, be the slightest
foundation for the supposition of a sudden abundance and cheapness of
labour just before the battle of Waterloo. In fact, agricultural labour
had not fallen, and manufacturing labour was higher than usual; so
that even without considering labour as a standard, it must have been
acknowledged, that, of these two objects which had altered in relative
value, it was the gold which had risen, not the labour which had fallen.

In attempting to measure the _rise_ in the value of the currency since
the period of the high prices, we shall be greatly assisted by the
following very valuable document respecting the price of labour in the
county or stewartry of Kircudbright. It is considered that the prices
in this table represent pretty nearly (though they are rather below)
the wages in other parts of Scotland. The labourers have no other
allowances whatever except the daily wages specified in the table. In
the intermediate years not quoted the wages remained stationary at the
rates last mentioned; and when any change took place, the period of
such change and the degree of it are regularly stated.

  --------+-----------+-----------
          | Rate per  |  Rate per
   Years. |  day in   |   day in
          |  winter.  |   summer.
  --------+-----------+-----------
   1760   |    4_d._  |     6_d._
   1765   |    6_d._  |     8_d._
   1770   |    8_d._  |    10_d._
   1772   |    8_d._  |    12_d._
   1776   |    7_d._  |     9_d._
   1780   |    8_d._  |    10_d._
   1791   |    8_d._  |    11_d._
   1793   |    9_d._  |    12_d._
   1798   |   11_d._  |    14_d._
   1799   |   12_d._  |    15_d._
   1800   |   14_d._  |    16_d._
   1802   |   16_d._  |    18_d._
   1811   |   18_d._  |    22_d._
   1812   |   20_d._  |    24_d._
   1816   |   18_d._  |    22_d._
   1817   |   16_d._  |    20_d._
   1819   |   15_d._  |    18_d._
   1822   |   12_d._  |    15_d._

In 1812, farm servants boarded in the house received from 14_l._ to
22_l._ a year; women servants from 5_l._ to 8_l._ At present, (April,
1823,) men receive from 10_l._ to 14_l._, and women from 3_l._ 10_s._
to 6_l._

Masons’ wages per day were three shillings in 1812, and are now
half-a-crown.

All work done by the piece, such as building stone fences, cutting
ditches either for fences or drains, making roads, &c. may be done at
a greater reduction of price than the fall in the rate of labour by
the day. Work is now performed more frequently by the piece; and the
best labourers are employed by the day; while the inferior workmen, and
those unable from age, or other causes, to perform a full day’s work,
are turned over to work by the piece. Agricultural affairs are under
such depression, that the work is curtailed, and the competition for
work is thereby increased.[W]

The first thing that strikes us in the table is the very remarkable
rise of labour in Scotland from 1760--much greater than in England, and
much greater than in proportion to the rise in the price of corn. This
was no doubt owing in part to the comparatively unimproved state of the
district in question, and of Scotland in general at the earliest period
adverted to. But to go no farther back than 1790, the period with which
we commenced in England, it appears that the rise from 1790 to 1811,
was considerably greater than in England, and nearly in proportion
to the rise in the price of wheat. If, indeed, we take the price of
labour as mentioned in the table for 1812, and compare it with the
average price of wheat for the four years from 1812 to 1815 inclusive,
during which period the same price of labour seems to have continued,
it will appear, that labour, taking summer and winter wages together,
rose in the proportion of from 19_s._ to 44_s._, while wheat rose
from 43_s._ in 1792, (according to the average of England and Wales,
which commences with that year,) to 88_s._ and therefore labour rose
decidedly more than wheat, except in reference to the peculiarly high
price of wheat in 1812.

Taking the currency price of labour in Scotland as having risen from
9½_d._ to 22_d._, and reducing the 22_d._ to its value in bullion,
the average price of bullion in that year being 5_l._ 1_s._, it will
appear, that the bullion price of labour in Scotland rose, in the
interval between 1790 and 1812, from 9½_d._ to 16½_d._, or nearly 73
per cent. And consequently, the same quantity of gold for which it
would have been necessary to give commodities worth 173 days labour in
1790, might be purchased for 100 days labour in 1812; or the value of
the currency estimated in gold might be considered as having fallen in
that proportion.

In 1812, the bullion price of labour as above stated was 16½_d._;
it has since fallen to 13½_d._, or in the proportion of from 100 to
81·8--rather more than 18 per cent. This view of it shows most clearly
the change in the bullion value of the currency since 1812. But if we
wish to estimate the whole fall which has taken place in the currency,
and then subtract what is due to the difference between paper and
gold, it will appear that the whole fall since 1812, estimated on the
currency wages of 1812, has been rather less than 39 per cent.; of
which, if the average difference between paper and gold in the year
1812 was as 101 to 78, about 23 per cent. would belong to the paper,
leaving about 16 per cent. for the fall in the currency independently
of the excess of paper prices above gold prices. The apparent
difference in the results of these estimates arises merely from the per
centage in the latter case being taken on a higher number.

I stated before, that I was not aware of any data on which reliance
could be placed respecting the amount of the fall of agricultural wages
in England since the termination of the war; but on the supposition
that the wages, which in 1810 and 1811 were 14_s._ 6_d._ per week,
had fallen to 10_s._ then as the bullion wages of 1810 and 1811 were
a little above 12_s._, the fall in the bullion value of the currency
would be nearly 17 per cent., or for the same quantity of gold which in
1810 and 1811 might be purchased by commodities worth 83 days labour,
it would now be necessary to give commodities the natural value of
which would be represented by 100 days labour. This difference of
course includes the effects which have been attributed to the purchases
of bullion by the Bank with a view to a return to cash payments, the
amount of which separately it is scarcely possible to calculate; but I
am inclined to agree with Mr. Tooke in thinking that it is not above
one or two per cent. If the price of agricultural labour in England
has not fallen so much as is here supposed, the difference in the
value of the currency will not be so great as above stated, but on any
supposition which is at all probable, it must be something considerable.

It is certain therefore that the currency, estimated in what appears to
be a correct standard of value, has fallen in such a degree beyond the
difference between paper and gold, as to add much to the pressure upon
the landed interest, though by no means to the extent which would be
implied by measuring the value of the currency in agricultural produce.
This produce, from the scantiness of the supply compared with the
demand, was at one time much above its natural and ordinary value, and
has since, from the abundance of the supply compared with the demand,
been as much below its natural value; while the value of the currency,
though it has fallen and risen considerably, has been much more steady
than the value of corn.

To what extent the alterations in the value of the currency beyond
the difference between bullion and paper are attributable to the Bank
restriction, and the return to cash payments, it is by no means easy
to say. That the currency would have fallen very considerably under
the circumstances of the last war, and risen very considerably under
the circumstances which accompanied the peace, although paper had been
kept on a par with gold, I cannot feel the least doubt; and probably
the only difference has been, that as the increase of paper beyond what
would circulate at par with gold gave facilities to production, and
to the bringing of poor land into cultivation during the war, it has
tended to increase the glut and low prices since the peace.

But whatever may have been the pressure on the owners of land since
the peace, they cannot have the slightest plea for an attempt to
indemnify themselves at the expense of the public creditor. In the
turns of the wheel of fortune all parties should have fair play; no
class of persons can be justified in endeavouring to lift themselves
up by using unfair and dishonourable means to pull others down; and
least of all ought such means to be thought of by the landlords of this
country, who, whatever inconveniences they may have suffered latterly,
have unquestionably altogether benefited much more largely from the
alterations in the value of the currency, than the very persons who in
their opinion should be made to relieve them from their embarrassments.


  London: Printed by C. Roworth,
  Bell-Yard, Temple-Bar.




FOOTNOTES


[A] Mr. Ricardo, speaking of the commodities produced by the
capitalist, says, “their whole value is divided into two portions only:
one constitutes the profits of stock; the other the wages of labour.”
(p. 107. 3d edit.) The language of Mr. Mill, in his _Elements of
Political Economy_, is similar.

[B] This is very properly stated by Colonel Torrens, in his _Production
of Wealth_, c. 1. p. 28.

[C] The effects of slow or quick returns, and of the different
proportions of fixed and circulating capitals, are distinctly allowed
by Mr. Ricardo; but in his last edition, (the third, p. 32.) he
has much underrated their amount. They are both theoretically and
practically so considerable as entirely to destroy the position that
commodities exchange with each other according to the quantity of
labour which has been employed upon them; but no one that I am aware
of has ever stated that the different quantity of labour employed on
commodities is not a much more powerful source of difference of value.

[D] Colonel Torrens, by representing capital under the form of certain
quantities of cloth and corn, instead of value in labour, has precluded
himself from the possibility of giving a just view either of value,
profits, or effectual demand. An increase of cloth and corn from
the same quantity of labour is of no avail whatever in increasing
value, profits, or effectual demand, if this increased produce will
not command so much labour as before, an event which is continually
occurring, from deficiency of demand.

[E] Agricultural labour is taken for the obvious reasons that it is
the commonest species of labour, that it directly produces the food of
the labourer, and that it is the most immediately connected with the
gradations of soil, and the necessary variations of profits. It is also
assumed with Adam Smith, Mr. Ricardo, and other political economists,
that, on an average, other kinds of labour continue to bear the same
proportions to agricultural labour.

[F] In my last work, I thought that a mean between corn and labour
might be a better measure of value than labour alone; but I am now
convinced that I was wrong, and that labour alone is the true measure.

[G] Whenever it is said that the value of labour rises in the progress
of cultivation, a comparison is made between the value of a given
quantity of labour at two different periods; and when it is added that
wages rise in proportion to the quantity of labour required to produce
them, objects are measured solely by the quantity of labour employed
upon them, although the rate of profits may be totally different.

[H] This proposition is essentially the same as that which is very
clearly and ably expressed by Mr. Ricardo in his chapter on Profits,
(p. 128. 3d ed.) in the following terms: “in all countries and at all
times profits depend on the quantity of labour requisite to provide
necessaries for the labourers on that land, or with that capital which
yields no rent;” a proposition which though incomplete in reference
to the ultimate causes of the variations of profits, contains a most
important truth. From this truth the legitimate deduction appears to
me to be, the constant value of labour; but Mr. Ricardo has formed
his system on a deduction exactly opposite to it. He has, however, in
my opinion, amply compensated for the errors into which he may have
fallen, by furnishing us, at the same time, not only with the means of
their refutation, but the means of improving the science of Political
Economy.

[I] Mr. Ricardo, by supposing gold to be produced always by a certain
quantity of labour and _capital_, is compelled to acknowledge that his
standard “would be a perfect measure of value for all things produced
under the same circumstances precisely as itself, but for no others.”
p. 43. This concession appears to me quite fatal. We want to measure
the value of commodities under _all circumstances_, and it is only gold
obtained exclusively by labour, or labour itself, which can do this.
See _Principles of Political Economy considered with a View to their
Practical Application_, pp. 111 and 118.

[J] It is this rise in the money price of labour, occasioned by the
fall of profits, which Mr. Ricardo considers as that necessary rise in
the _value_ of labour on which he makes so much depend in his system;
but if the foregoing reasoning be well founded, it follows that this
rise is not a rise in the _value_ of labour, but a fall in the value of
money.

[K] This applies to the seed, and the food of the working cattle in
agriculture.

[L] The labour worked up in a commodity could not, in many cases, be
ascertained without considerable difficulty; but the labour which it
will command is always open and palpable.

[M] Practically, in all countries such as South America and Ireland,
where there is a slack demand for labour, and the people are but half
employed, the food wages of labour are high, compared with the work
done.

[N] If profits rise in some departments without falling proportionally
in others, the _average_ rate of profits will have increased, although,
from the difficulty of moving capital, the rate of profits in some
employments may not have had time to rise before the stimulus to such
rise comes to an end by a fresh increase of capital.

[O] This is the view taken of it by Colonel Torrens in his _Production
of Wealth_, which I think the just one; because it makes the proper
distinction between cost and value, on which the great stimulus to
production depends. But he has most unnecessarily and incorrectly given
the same interpretation to _natural price_, which always includes
profits.

[P] In order to exclude demand and supply from the costs of production,
when ordinary profits are considered as making a part of them, it
would be necessary to assume that the corn wages of labour are always
the same, an assumption which would be quite unwarranted, not only in
reference to short periods, but to periods of fifty or sixty years, as
the history of corn wages in this country alone amply testifies (see
ch. iv. sect. 4, of my Princ. of Pol. Econ. &c.); and what but the
state of the demand and supply of corn, compared with labour, prevents
profits in the United States from being 100 per cent.? The quantity
of corn divided between the labourer and capitalist would be amply
sufficient to yield such profits, if the corn wages of labour were no
higher than in England.

[Q] Sect. IV. p. 91, et seq.

[R] One of the most valuable sections in Mr. Tooke’s late work _On
High and Low Prices_, is the seventh, in which he proves the frequent
occurrence of this event, and explains, with great clearness and
knowledge of the subject, the mode in which it takes place.

[S] Inquiry into the Rise of Prices in Europe, p. 15.

[T] Perhaps at the time specifically adverted to, this supposition will
not be allowed. But it is always assumed as a general proposition; and
although 1810 and 11 were years of great manufacturing distress, yet
Mr. Tooke himself brings evidence which shows that manufacturing labour
was particularly high in 1805 and 6.

[U] In poor countries a succession of bad seasons sometimes takes place
without any rise in the price of labour, and in that case, though there
may be a high price of corn, there is no fall in the natural value of
money. It will not be purchased with less labour.

[V] These averages are taken from Lord Lauderdale’s _Further
Considerations on the State of the Currency, published in 1813_.
Appendix, p. 33.

[W] For the foregoing valuable table, and the information accompanying
it, I am indebted to Mr. Mure, of Kircudbright, through the kind
intervention of Mr. M’Culloch, of Edinburgh.




Transcriber’s Notes


Simple typographical errors were corrected. Punctuation, hyphenation,
and spelling were made consistent when a predominant preference was
found in the original book; otherwise they were not changed.

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