Chapter VIII (2)

I can by no means, therefore, agree with the author, when he says, speaking of the precious metals, that, “in regard to measuring or comparing value, there is no operation that can be intelligibly described, or consistently imagined, but may be performed by the media of which we are in possession.”[73] Surely, to measure the relative power of a commodity over labour and the mass of other commodities, at different and distant times, is an operation which may be both consistently imagined, and intelligibly described; yet it is quite certain, that, in regard to distant periods, the precious metals will not perform this well. Would the author himself venture to say, that the general power of purchasing possessed by an ounce of silver in the time of Edward the Third, was not very much greater than the general power of purchasing possessed by an ounce of silver in the time of George the Fourth; or, that the same quantity of agricultural labour, at these two periods, would not much more nearly have represented the same general power of purchasing? The author seems equally unfortunate when he launches out in praise of the precious metals as a measure of value, as when he says that they do not perform this function better than corn.

It will be observed that, in speaking of the values of commodities, at different periods, as meaning their different powers of purchasing at those periods, the kind of value referred to is, exclusively, value in exchange. And, in reference to value in exchange, exclusively, it appears to be of the utmost importance to the language of political economy, to distinguish between the power of purchasing generally, and the power of purchasing any one commodity.

But it must not be imagined that when the estimation in which a commodity is held at different periods is referred to, as determined at the time by the state of the supply compared with the demand, and ordinarily by the natural and necessary conditions of its supply, or by the elementary costs of its production, which are equivalent expressions, that value in exchange is lost sight of. Yet the author is continually falling into this kind of misapprehension, and into a total forgetfulness of his first account of the meaning of value, in his examination of Mr. Ricardo’s views, as to the uses of a measure of value, in which, he says, a singular confusion of thought is to be discovered.[74]

“Suppose, he observes, that we had such a commodity as Mr. Ricardo requires for a standard: suppose, for instance, all commodities to be produced by labour alone, and silver to be produced by an invariable quantity of labour. In this case, silver would be, according to Mr. Ricardo, a perfect measure of value. But in what sense? What is the function performed? Silver, even if invariable in its producing labour, will tell us nothing of the value of other commodities. Their relations in value to silver, or their prices, must be ascertained in the usual way; and, when ascertained, we shall certainly know the values of commodities in relation to each other; but in all this, there is no assistance derived from the producing labour of silver being a constant quantity.”[75]

I have already described the function which silver would have to perform in this case, namely, either to measure the different powers of purchasing possessed by commodities at different periods, or to measure the different degrees of estimation in which they were held at these different periods.

Now, in the first place, with regard to the general power of purchasing, can it be denied for a moment, that, granting all the premises, as the author does hypothetically, silver, so produced, would be, beyond comparison, a better measure of the power of purchasing generally, than silver as it has been actually produced? It would be secured from that greatest source of variation in the general power of purchasing occasioned by the variation in its own producing labour; and an ounce of such silver would command much more nearly the same quantity of labour and commodities, for four or five hundred years together, than an ounce of silver derived from mines of greatly varying fertility.

Secondly, with regard to the estimation in which a commodity is held, it is not easy to conceive a more complete measure. If all commodities were produced by labour alone, and exchanged with each other according to the producing labour; and if silver were produced by an invariable quantity of labour, the quantity of silver given for a commodity in the market at different periods, would express almost accurately the relative estimation in which it was held at these periods; because it would express at once the relative sacrifice which people were willing to make, in order to obtain such a commodity at these different periods; the relative conditions of the supply, or elementary costs of production, of such commodity at these periods; and the proportion of the produce to the producer, or the relative state of the demand, as compared with the supply of such commodity at these different periods. And if the value of a commodity means, as the author has told us in the first sentence of his book, the esteem in which it is held, Mr. Ricardo’s measure would certainly do all which he proposed it should do; and this specifically on account of its invariability in relation to the estimation in which it was held.

It would not merely indicate, as the author states, in which of two commodities varying in relation to each other, at different periods, the variation had taken place;[76] but it would express the precise amount of the variation; that is, if it appeared by documents that the price of a yard of cloth of a certain quality four hundred years ago was twenty shillings, and its price at present was only ten shillings, it would follow, that the estimation in which it was held, or its value, had fallen one-half; because, as all commodities are, by the supposition, produced by labour alone, the sacrifice with which it could be obtained, the necessary conditions of its supply, or the elementary costs of its production, had diminished one-half.

The variations of a commodity, in relation to this kind of standard, would further show, with great exactness, the variations in its power of commanding all those commodities which had not altered in the conditions of their supply, or the elementary costs of production. If a commodity rose or fell in this standard price, at different periods, it would necessarily rise or fall exactly in the same proportion in its power of commanding, in exchange, all those commodities which had not altered in the conditions of their supply, or their elementary costs of production.

But still, it will be readily acknowledged, that, even granting all that the author has granted hypothetically to Mr. Ricardo, it is not true that such silver would be an _accurate_ measure of the general power of purchasing. Although the circumstance of its invariability, in regard to its producing labour, would give it a prodigious superiority over all other commodities even in this respect, yet, as the producing labour of many commodities may vary in the progress of society, it is quite impossible that the same quantity of any one object can, through successive periods, represent the same general power of purchasing. This is universally allowed; and as it would be clearly desirable to have _one_ rather than _two_ definitions of value, the question is, whether, both on this account, and on account of the universal language and practice of society, for short periods, it would not be decidedly better to confine the term value of a commodity, when used generally, to the estimation in which it is held, determined by the state of the supply compared with the demand, and ordinarily by the elementary costs of production, rather than to its general power of purchasing. There is very nearly an accurate measure of the former; it is universally acknowledged that there cannot be an accurate measure of the latter; and further, it is most important to remark that, in adopting the former, our language would much more nearly coincide with the ordinary language of society in referring to variations of value, than if we adopted the latter.

As a matter of fact, when a rise in the value of hops or of corn is spoken of, who ever thinks about the changes which may have taken place in the values of iron, flax, or cabbages? For short periods, we consider money as nearly a correct measure of the values of commodities, as well as of their prices; and if hops and corn have risen in this measure, we do not hesitate to say that their values have risen, without the least reference to cloths, calicoes, or cambrics. This is a clear proof that, in general, when we speak of the variations in the values of commodities, we do not measure them by the variations in their general power of purchasing, but by some sort of standard which we think better represents the varying estimation in which they are held, determined at all times by the state of the supply compared with the demand, and, on an average, by the elementary costs of production.

The only variations in the general power of a commodity to purchase, which are susceptible of a distinct and definite measure, are those which arise from causes which affect the commodity itself, and not from the causes which affect the innumerable articles against which it is capable of being exchanged. In speaking, therefore, of the variations in the value of particular commodities, it is not only more accordant with the accustomed meaning attached to the expression, but absolutely necessary with a view to precision, to consider them as exclusively proportioned to, and measured by, the amount of the causes of value operating upon themselves.

Mr. Ricardo, therefore, quite consistently with his own hypothesis, considers a commodity, the producing labour of which has doubled, as having increased to double its former value. It has increased in relation to a standard which, according to him, is the sole cause of value; it will command just double the quantity of all those commodities which have not altered in their producing value; and if it will not command just double the quantity of other commodities, it is not because it will not command just double the _value_ which it did before, but because, on account of the changes in the producing labour of the other commodities, double the quantity of them has become more or less than double the value.

On the same principle, Adam Smith considers the value of cattle as rising in the progress of cultivation and improvement, although the value of land, the value of wood, the value of poultry, &c., might rise still higher, and, consequently, a given quantity of cattle might, with regard to some commodities or sets of commodities, have its power of purchasing diminished. But in saying that the value of cattle rises in the progress of cultivation, he means to say, that it rises in relation to a standard, namely, the labour a commodity will command, which represents at different periods the state of the supply of cattle compared with the demand, and, on an average, the elementary costs of their production; and, consequently, much better represents the estimation in which they are held than any commodity or set of commodities. “Labour,” he observes, “it must always be remembered, and not any particular commodity, or set of commodities, is the real measure of the value both of silver and of all other commodities.”[77]

Even the author himself has a chapter on the causes of value; and here he finds it absolutely necessary to estimate the causes affecting one commodity as distinct from the causes affecting another; although, according to his previous doctrine, the value of one commodity might be just as powerfully affected by causes operating upon another commodity as by causes operating upon itself: If _a_ and _b_ be compared, the value of _a_ will be equally doubled, whether the elementary cost of _a_ be doubled or the elementary cost of _b_ be diminished one half; and so no doubt it would, if the relation of _a_ to _b_ were alone considered. But what does this prove? not that the value of _a_ is not very differently affected in the two cases, according to the most ordinary, the most useful, and the most correct acceptation of the term value; but that to confine the term value, as the author does, to the mere relation of any one commodity to any other, is to render it pre-eminently futile and useless.

In first separating value in exchange from value in use, it may be allowable to distinguish it by the title of the power of purchasing other goods, as Adam Smith has done, though never to interpret this power as the power of purchasing any one sort of goods, as the author has done. But the moment we come to inquire into the variations of the values of commodities at different periods, we must, with any view to precision and utility, draw a marked line of distinction between a variation in the power of purchasing derived from causes affecting the particular purchasing commodities, and the variations in the power of purchasing which may arise from causes operating upon the purchased commodities. We must confine our attention exclusively to the former; and for this purpose refer to some standard which will best enable us to estimate the variations in the elementary costs of production, and in the state of the demand and supply of these commodities, as the best criterion of their varying value, or the varying estimation in which they are held at different periods.

On these grounds, Mr. Ricardo, consistently with his peculiar theory, measures the varying values of commodities at different periods by their producing labour.

And Adam Smith, consistently with his more just and applicable theory, measures the values of commodities at different periods by the labour which they will command.

Among the author’s chapters is one (the seventh) entitled “On the Measure of Value proposed by Mr. Malthus.”

In order to prepare himself for the refutations intended, he sums up his principal doctrines respecting value; and as they are here brought into a small compass, I cannot resist the temptation of quoting them in his own words.

He says, “It has been shown that the value of labour, like that of any other exchangeable article, is denoted by the quantity of some other commodity for which a definite portion of it will exchange, and must rise or fall as that quantity becomes greater or smaller, these phrases being only different expressions of the same event. Hence, unless labour always exchanges for the same quantity of other things, its value cannot be invariable, and, consequently, the very supposition of its being, at one and the same time, invariable, and capable of measuring the variations of other commodities, involves a contradiction.”

“It has also been shown, that to term anything immutable in value, amidst the fluctuations of other things, implies that its value at one time may be compared with its value at another time, without reference to any other commodity, which is absurd, value denoting a relation between two things at the same time; and it has likewise been shown, that in no sense could an object of invariable value be of any peculiar service in the capacity of a measure.

“These considerations,” he says, “are quite sufficient to overturn the claims of the proposed measure, as maintained by its advocate.”[78]

I am most ready to acknowledge that they are amply sufficient for the purpose, if they are true. But is it possible that doctrines can be true, which, having no other foundation than a most arbitrary and unwarranted interpretation of a definition of Adam Smith, lead directly to the subjoined conclusions?

First; That the value of labour rises or falls as a given portion of it will exchange for a greater or less quantity of silk or any other commodity, however unconnected with the labourer’s wants; so that if silks were to fall to one-half their price, the value of labour would be doubled.

Secondly; That the value of corn in one year cannot be compared with the value of corn in another, because value denotes only a relation between two things at the same time.

And thirdly, That the comparative steadiness in the value of the precious metals, for short periods, is of no service to them in the capacity of a measure of value.

The decision of the question, as to the truth of doctrines necessarily leading to such conclusions, may be safely left to the reader. But to return to the main subject of the chapter, namely, the measure of value proposed by me.

In a publication entitled “_The Measure of Value stated and illustrated_,” I had given reasons, which appeared to me convincing, for adopting labour, in the sense in which it is generally understood and applied by Adam Smith, as the measure of value; and further to illustrate the subject, and bring into one view the results of different suppositions respecting the varying fertility of the soil and the varying quantity of corn paid to the labourer, I added a table in which different suppositions of this kind are made.

In reference to this table the author observes, that “In the same way any article might be proved to be of invariable value, for instance, ten yards of cloth. For whether we gave 5_l._ or 10_l._ for the ten yards, the sum given would always be equal in value to the cloth for which it was paid, or, in other words, of invariable value in relation to cloth. But that which is given for a thing of invariable value must itself be invariable, whence the ten yards of cloth must be of invariable value.”[79]

This comparison shows either a most singular want of discrimination, or a purposed disregard of the premises on which the table is founded. These premises are, that the natural and necessary conditions of the supply of the great mass of commodities, or, in other words, their elementary costs of production, are, the accumulated and immediate labour necessary to produce them, with the addition of the ordinary profits upon the whole advances for the time they have been advanced; and that the ordinary values of commodities at different periods, according to the most customary application of the term, are determined by the elementary costs of production at those periods, that is, by the labour and profits worked up in them.

If these premises be just, the table correctly illustrates all that it was intended to illustrate. If the premises be false, the whole falls to the ground.

Now, I would ask the author, what sort of resemblance there is between ten yards of cloth and ten days’ labour? Is cloth the universal and the main instrument of production? Is the advance of an adequate quantity of cloth the natural and necessary condition of the supply of all commodities? Has any one ever thought of calling cloth and profits the elementary costs of production? or has it ever been proposed to estimate the values of commodities at different periods by the different quantities of cloth and profits worked up in them?

If these questions cannot be answered in the affirmative, it is obvious that what may be true and important with regard to labour, may be perfectly false or futile in regard to any _product_ of labour.[80] The whole depends upon the mode of estimating the values of commodities.

It would, no doubt, be an absurd tautological truism merely to state, that the varying wages of a given quantity of labour will always command the same quantity of labour; but if it were previously shown that the quantity of labour which a commodity commands represents exactly the quantity of labour worked up in it, with the profits upon the advances, and does therefore really represent and measure those natural and necessary conditions of the supply, those elementary costs of production which determine value; then the truism that the varying wages of a given quantity of labour always command the same quantity of labour, must necessarily involve the important truth, that the elementary costs of producing the varying wages of a given quantity of labour must always be the same.

It is obvious to any person inspecting the table, that the uniform numbers in the seventh column, illustrating the invariable value of the wages of a given number of men, might, with perfect certainty, have been stated without the intermediate steps; but if they had been so stated, no conclusion respecting the constancy of the value of such wages could have been drawn. The intermediate steps, which show that the value of the wages of ten men is there estimated by the causes which had been previously shown to determine the values of all commodities, can alone warrant the conclusion that the uniform numbers in the seventh column imply uniformity of value in the wages.

Mr. Ricardo had stated repeatedly, that the value of the wages of labour must necessarily rise in the progress of society. He builds, indeed, the whole foundation of his theory of profits on the rise and fall of the value of labour. The table shows that, if we estimate the value of wages by the labour worked up in them, that is, by one element of value, Mr. Ricardo is right, and the value of wages will really rise as poorer land is taken into cultivation; but that, if we estimate the value of wages by the labour and _profits_ worked up in them, that is, by the two elementary ingredients of value, the value of wages will remain the same.

The author says that, from the remarks he has made, the reader will perceive that Mr. Malthus’s “Table illustrating the invariable value of labour,” absolutely proves nothing;[81] and he concludes his chapter with observing, that his “cursory review evinces that the formidable array of figures in the table yields not a single new or important truth.”[82]

I was not aware that it was ever expected from a tabular arrangement, that it should afford logical proofs of new propositions; but, if the author means that, taking the whole publication together, it contains nothing new or important, though I may be bound to believe it in relation to his own reading and his own views, I cannot help doubting it a little in regard to the reading and views of many others; and I am quite certain that, with regard to myself, the view I there took of the subject of value, and of the reasons for adopting labour as its measure, was, in many of its parts, quite new to me a year before the publication.

In the first place; I had nowhere seen it stated, that the ordinary quantity of labour which a commodity will command must represent and measure the quantity of labour worked up in it, with the addition of profits. But, as soon as my attention was strongly drawn to this truth, the labour which a commodity would ordinarily command appeared to me in a new light. I had before considered labour as the most general and the most important of all the objects given in exchange, and, therefore, by far the best measure of the general power of purchasing of any one object; but after I became aware that, by representing the labour worked up in a commodity, with the profits, it represented the natural and necessary conditions of its supply, or the elementary costs of its production, its importance, as a measure, appeared to me very greatly increased.

Secondly; I had nowhere seen it stated that, however the fertility of the soil might vary, the elementary costs of producing the wages of a given quantity of labour must always necessarily be the same. Colonel Torrens, in adverting to a measure of value, says, “In the first place, exchangeable value is determined by the cost of production; and there is no commodity, the cost of producing which is not liable to perpetual fluctuation. In the second place, even if a commodity could be found which always required the same expenditure for its production, it would not, therefore, be of invariable exchangeable value, so as to serve as a standard for measuring the value of other things. Exchangeable value is determined, not by the absolute, but by the relative, cost of production.”[83]

I had been convinced, however, that, with a view to superior accuracy and utility, and a more complete conformity to the language and practice of society, in estimating the varying values of commodities for short periods, it was necessary to separate the variations in the power of a commodity to purchase, into two parts; the first, derived from causes operating upon the commodity itself; the second, from causes operating upon other commodities; and, in speaking of the variations in the exchangeable value of a commodity, to refer only to the former. In this case it is obvious that, according to Colonel Torrens, we should possess a measure of value if we could find an object the cost of producing which was always the same.

Now it is shown, in the “_Measure of value stated and illustrated_,” that the conditions of the supply of labour, or the elementary costs of producing the corn wages of a given number of men, estimated just in the same way as we should estimate the elementary costs of producing cloth, linens, hardware, or any other commodity, must of necessity always remain the same.

I own that these two necessary qualities of the labour, which commodities will _ordinarily_ command, were practically new to me; and, when forced on my attention, and accompanied by the conviction above described, as to the most correct and useful definition of value, made me view labour as a measure of value, so far approaching towards accuracy, considering the nature of the subject, that it might fairly be called a standard.

The publication was also marked by another peculiarity, which I cannot but consider as of some importance: namely, the constant use of the term _labour and profits_, instead of the customary one, _labour and capital_.

It must be allowed that the expression _labour and capital_ is essentially tautological. In every definition of capital I have met with, the means of commanding labour are included; and there can be no doubt that machinery and raw materials require labour for their production of the same general description, and usually in as large a proportion, as the labour advanced by the last capitalist. Speaking loosely, we may indeed use the expression _labour and capital_, meaning by capital, when so used, all that part of the general description of capital which does not consist of the means of commanding the immediate labour required. But when we are engaged in an inquiry into the elements of value, nothing can be more unphilosophical than to talk of labour and capital. Excluding rent and taxes, the only elements concerned in regulating the value of commodities are labour and profits, including, of course, in such labour, the labour worked up in the raw materials, and that portion of the machinery worn out in the production; and including in the profits, the profits of the producers of the raw materials and machinery. To say that the values of commodities are regulated or determined by the _quantity_ of _capital and labour_ necessary to produce them is essentially false. To say that the values of commodities are regulated by the quantities of labour _and profits_ necessary to produce them is, I believe, essentially true. And if so, it was a point of some importance to substitute the expression _labour and profits_ for the customary one of _labour and capital_.

I have been detained longer than I intended by the Critical Dissertation on the Nature, Measures, and Causes of Value. There is still matter of animadversion remaining; but were I to go on I should tire my readers, if I have not done it already.

The author, when not under the influence of his peculiar definitions, makes some very just observations; and the work is exceedingly well written; which makes it a matter of greater surprise that its main proposition should be so strikingly adverse to the principle of utility, and so peculiarly calculated to retard the progress of that science which it must have been intended to promote.

I do not think it necessary to the object I have in view, to proceed further with these remarks on the definition and use of terms among political economists. What I have already said, if just, will be sufficient to show that much uncertainty has arisen from our[84] negligence on this important point, and much improvement might be expected from greater attention to it. I shall now, therefore, proceed to define some of the principal terms in political economy, as nearly as I can, according to the rules laid down. But before I begin, I think it may be useful to give a summary of the reasons for adopting the subjoined definition of the measure of value.