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diff --git a/old/61483-0.txt b/old/61483-0.txt deleted file mode 100644 index 34ade92..0000000 --- a/old/61483-0.txt +++ /dev/null @@ -1,5622 +0,0 @@ -Project Gutenberg's Definitions in Political Economy, by T. R. Malthus - -This eBook is for the use of anyone anywhere at no cost and with -almost no restrictions whatsoever. You may copy it, give it away or -re-use it under the terms of the Project Gutenberg License included -with this eBook or online at www.gutenberg.org/license - - -Title: Definitions in Political Economy, - Preceded by an Inquiry Into the Rules which Ought to Guide - Political Economists in the Definition and Use of Their - Terms; with Remarks on the Deviation from These Rules in - Their Writings - -Author: T. R. Malthus - -Release Date: February 22, 2020 [EBook #61483] - -Language: English - -Character set encoding: UTF-8 - -*** START OF THIS PROJECT GUTENBERG EBOOK DEFINITIONS IN POLITICAL ECONOMY *** - - - - -Produced by Richard Tonsing and the Online Distributed -Proofreading Team at http://www.pgdp.net (This file was -produced from images generously made available by The -Internet Archive) - - - - - - - - - - DEFINITIONS - IN - POLITICAL ECONOMY, - PRECEDED BY - AN INQUIRY INTO THE RULES WHICH OUGHT TO GUIDE POLITICAL ECONOMISTS IN - THE DEFINITION AND USE OF THEIR TERMS; - WITH REMARKS - ON THE DEVIATION FROM THESE RULES IN THEIR WRITINGS. - - - BY THE - - REV. T. R. MALTHUS, A.M., F.R.S., A.R.S.L., - - AND - - _PROFESSOR OF HISTORY AND POLITICAL ECONOMY IN THE EAST-INDIA COLLEGE, - HERTFORDSHIRE_. - - - LONDON: - - JOHN MURRAY, ALBEMARLE-STREET. - - MDCCCXXVII. - - - - - LONDON: - Printed by WILLIAM CLOWES, - Stamford-street. - ------------------------------------------------------------------------- - - - - - CONTENTS. - - - PAGE - - PREFACE vii - - - CHAPTER I. - - Rules for the Definition and Application of Terms in Political - Economy 1 - - - CHAPTER II. - - On the Definition of Wealth by the French Economists 8 - - - CHAPTER III. - - On the Definition and Application of Terms by Adam Smith 10 - - - CHAPTER IV. - - Application of the term Utility by M. Say 19 - - - CHAPTER V. - - On the Definition and Application of Terms by Mr. Ricardo 23 - - - CHAPTER VI. - - On the Definition and Application of Terms by Mr. Mill, in his - “Elements of Political Economy.” 37 - - - CHAPTER VII. - - On the Definition and Application of Terms, by Mr. Macculloch, in - his “Principles of Political Economy.” 69 - - - CHAPTER VIII. - - On the Definition and Use of Terms by the Author of “A Critical - Dissertation on the Nature, Measure, and Causes of Value.” 125 - - - CHAPTER IX. - - Summary of the Reasons for Adopting the subjoined Definition of - the Measure of Value 203 - - - CHAPTER X. - - Definitions in Political Economy 234 - - - CHAPTER XI. - - Remarks on the Definitions 249 - - - - - PREFACE. - - -The differences of opinion among political economists have of late been -a frequent subject of complaint; and it must be allowed, that one of the -principal causes of them may be traced to the different meanings in -which the same terms have been used by different writers. - -The object of the present publication is, to draw attention to an -obstacle in the study of political economy, which has now increased to -no inconsiderable magnitude. But this could not be done merely by laying -down rules for the definition and application of terms, and defining -conformably to them. It was necessary to show the difficulties which had -resulted from an inattention to this subject, in some of the most -popular works on political economy; and this has naturally led to the -discussion of certain important principles and questions of -classification, which it would be most desirable to settle previously, -as the only foundation for a correct definition and application of -terms. - -These are the reasons for the arrangement and mode of treating the -subject which has been adopted. - - - - - DEFINITIONS - - IN - - POLITICAL ECONOMY. - - - - - CHAPTER I. -RULES FOR THE DEFINITION AND APPLICATION OF TERMS IN POLITICAL ECONOMY. - - -In a mathematical definition, although the words in which it is -expressed may vary, the meaning which it is intended to convey is always -the same. Whether a _straight_ line be defined to be a line which lies -evenly between its extreme points, or the shortest line which can be -drawn between two points, there never can be a difference of opinion as -to the lines which are comprehended, and those which are not -comprehended, in the definition. - -The case is not the same with the definitions in the less strict -sciences. The classifications in natural history, notwithstanding all -the pains which have been taken with them, are still such, that it is -sometimes difficult to say to which of two adjoining classes the -individuals on the confines of each ought to belong. It is still more -difficult, in the sciences of morals and politics, to use terms which -may not be understood differently by different persons, according to -their different habits and opinions. The terms virtue, morality, equity, -charity, are in every-day use; yet it is by no means universally agreed -what are the particular acts which ought to be classed under these -different heads. - -The terms liberty, civil liberty, political liberty, constitutional -government, _&c._ _&c._, are frequently understood in a different sense -by different persons. - -It has sometimes been said of political economy, that it approaches to -the strict science of mathematics. But I fear it must be acknowledged, -particularly since the great deviations which have lately taken place -from the definitions and doctrines of Adam Smith, that it approaches -more nearly to the sciences of morals and politics. - -It does not seem yet to be agreed what ought to be considered as the -best definition of wealth, of capital, of productive labour, or of -value;—what is meant by real wages;—what is meant by labour;—what is -meant by profits;—in what sense the term ‘demand’ is to be -understood,[1] _&c._ _&c._ - -As a remedy for such differences, it has been suggested, that a new and -more perfect nomenclature should be introduced. But though the -inconveniences of a new nomenclature are much more than counterbalanced -by its obvious utility in such sciences as chemistry, botany, and some -others, where a great variety of objects, not in general use, must be -arranged and described so as best to enable us to remember their -characteristic distinctions; yet in such sciences as morals, politics, -and political economy, where the terms are comparatively few, and of -constant application in the daily concerns of life, it is impossible to -suppose that an entirely new nomenclature would be submitted to; and if -it were, it would not render the same service to these sciences, in -promoting their advancement, as the nomenclatures of Linnæus, Lavoisier, -and Cuvier, to the sciences to which they were respectively applied. - -Under these circumstances, it may be desirable to consider what seem to -be the most obvious and natural rules for our guidance in defining and -applying the terms used in the science of political economy. The object -to be kept in view should evidently be such a definition and application -of these terms, as will enable us most clearly and conveniently to -explain the nature and causes of the wealth of nations; and the rules -chiefly to be attended to may, perhaps, be nearly included in the four -following:— - -First. When we employ terms which are of daily occurrence in the common -conversation of educated persons, we should define and apply them, so as -to agree with the sense in which they are understood in this ordinary -use of them. This is the best and more desirable authority for the -meaning of words. - -Secondly. When the sanction of this authority is not attainable, on -account of further distinctions being required, the next best authority -is that of some of the most celebrated writers in the science, -particularly if any one of them has, by common consent, been considered -as the principal founder of it. In this case, whether the term be a new -one, born with the science, or an old one used in a new sense, it will -not be strange to the generality of readers, nor liable to be often -misunderstood. - -But it may be observed, that we shall not be able to improve the science -if we are thus to be bound down by past authority. This is -unquestionably true; and I should be by no means inclined to propose to -political economists “jurare in verba magistri,” whenever it can be -clearly made out that a change would be beneficial, and decidedly -contribute to the advancement of the science. But it must be allowed, -that in the less strict sciences there are few definitions to which some -plausible, nay, even real, objections are not to be made; and, if we -determine to have a new one in every case where the old one is not quite -complete, the chances are, that we shall subject the science to all the -very serious disadvantages of a frequent change of terms, without -finally accomplishing our object. - -It is acknowledged, however, that a change may sometimes be necessary; -and when it is, the natural rules to be attended to seem to be, - -Thirdly. That the alteration proposed should not only remove the -immediate objections which may have been made to the terms as before -applied, but should be shown to be free from other equal or greater -objections, and on the whole be obviously more _useful_ in facilitating -the explanation and improvement of the science. A change which is always -itself an evil, can alone be warranted by superior utility taken in the -most enlarged sense. - -Fourthly. That any new definitions adopted should be consistent with -those which are allowed to remain, and that the same terms should always -be applied in the same sense, except where inveterate custom has -established different meanings of the same word; in which case the sense -in which the word is used, if not marked by the context, which it -generally is, should be particularly specified. - -I cannot help thinking that these rules for the definitions in political -economy must be allowed to be obviously natural and proper, and that if -changes are made without attention to them, we must necessarily run a -great risk of impeding, instead of promoting, the progress of the -science. - -Yet, although these rules appear to be so obvious and natural, as to -make one think it almost impossible that they should escape attention, -it must be acknowledged that they have been too often overlooked by -political economists; and it may tend to illustrate their use and -importance; and possibly excite a little more attention to them in -future; to notice some of the most striking deviations from them in the -works of writers of the highest reputation. - - - - - CHAPTER II. - ON THE DEFINITION OF WEALTH BY THE FRENCH ECONOMISTS. - - -It will not be worth while to advert to the misnomers of the mercantile -system; but the system of the French Economists was a scientific one, -and aimed at precision. Yet it must be acknowledged that their -definition of wealth violated the first and most obvious rule which -ought to guide men of science, as well as others, in the use of terms. -Wealth and riches are words in the commonest use; and though all persons -might not be able at once to describe with accuracy what they mean when -they speak of the wealth of a country, yet all, we believe, who intend -to use the term in its ordinary sense, would agree in saying that they -_do not_ confine the term either to the gross raw produce, or the neat -raw produce of such country. And it is quite certain that two countries, -with both the same gross raw produce, and the same neat raw produce, -might differ most essentially from each other in a great number of the -most universally acknowledged characteristics of wealth, such as good -houses, good furniture, good clothes, good carriages, which, in the one -case, might be possessed only by a few great landlords, and a small -number of manufacturers and merchants; and in the other case, by an -equal, or greater proportion of landlords, and a much greater number of -manufacturers and merchants. This difference might take place without -any difference in the amount of the raw produce, the neat produce, or -the population, merely by the conversion of idle retainers and menial -servants into active artisans and traders. The result, therefore, of -comparing together the wealth of different countries, according to the -sense of that term adopted by the Economists, and according to the sense -in which it is generally understood in society, would be totally -different. And this circumstance detracts in a very great degree from -the practical utility of the works of the Economists. - - - - - CHAPTER III. - ON THE DEFINITION AND APPLICATION OF TERMS BY ADAM SMITH. - - -In adverting to the terms and definitions of Adam Smith, in his “Wealth -of Nations,” I think it will be found that he has less frequently and -less strikingly deviated from the rules above laid down, and that he has -more constantly and uniformly kept in view the paramount object of -explaining in the most intelligible manner the causes of the wealth of -nations, according to the ordinary acceptation of the expression, than -any of the subsequent writers in the science, who have essentially -differed from him. His faults in this respect are not so much that he -has often fallen into the common error, of using terms in a different -sense from that in which they are ordinarily applied in society, but -that he is sometimes deficient in the precision of his definitions; and -does not always, when adopted, adhere to them with sufficient -strictness. - -His definition of wealth, for instance, is not sufficiently accurate; -nor does he adhere to it with sufficient uniformity: yet it cannot be -doubted that he means by the term generally the material products which -are necessary, useful, and agreeable to man, and are not furnished by -nature in unlimited abundance; and I own I feel quite convinced that it -is in this sense in which it is most generally understood in society, -and in which it may be most usefully applied, in explaining the causes -of the wealth of nations. - -In adopting the labour which a commodity will command as the measure of -its value, he has not, as it appears to me, given the most conclusive -reasons for it, nor has he in all cases made it quite clear whether he -means the labour which a commodity will command, or the labour worked up -in it. He has more frequently failed in not adhering practically to the -measure he had proposed, and in substituting as an equivalent the -quantity of corn a commodity will command, which, as a measure of value, -has properties essentially distinct from labour. Yet, with all this, it -must be acknowledged that he has generally used the terms labour and -value in the sense in which they are ordinarily understood in society, -and has, with few exceptions, applied labour as the measure of value in -the way in which it may be made most extensively useful in the -explanation of the science. - -It has been sometimes objected to Adam Smith, that he has applied the -term _productive_ in a new and not very appropriate sense. But if we -examine the manner in which this term is applied in ordinary -conversation and writing, it must be allowed that, whatever meaning may -be thought to attach to it, from its derivation, it is practically used -as implying causation in regard to almost any effect whatever. Thus we -say that such and such things are productive of the best effects, others -of the very worst effects, and others are unproductive of, or do not -produce, any perceptible effects; meaning by these expressions, that -some things cause the best effects, others the worst effects, others, -again, cause no perceptible effects; and these effects may, of course, -apply according to the context, and the subject under discussion, to the -health of the body, the improvement of the mind, the structure of -society, or the wealth of a nation. - -Now, Adam Smith was inquiring into the nature and causes of the wealth -of nations; and having confined the term _wealth_ to material objects, -and described human labour as the main source of wealth, he clearly saw -the necessity of making some distinction between those different kinds -of labour which, without reference to their utility, he could not but -observe had the most essentially distinct effects, in directly causing -that wealth, the nature of which he was investigating. He called one of -these kinds of labour _productive_, or productive of wealth, and the -other _unproductive_, or not productive of wealth; and knowing that it -would occasion interminable confusion, and break down all the barriers -between production and consumption, to attempt to estimate the -circumstances which might _indirectly_ contribute to the production of -wealth, he described productive labour in such a way, as to leave no -doubt that he meant the labour which was so directly productive of -wealth, as to be estimated in the quantity or value of the material -object produced. - -In his application of the terms _productive_ and _unproductive_, -therefore, he does not seem to have violated the usage of common -conversation and writing; and it appears to me, that, if we fully and -impartially consider the consequences of making no distinction between -different kinds of labour, we must feel the conviction that the terms -which he has adopted are pre-eminently useful for the purpose to which -they are applied—that is, to enable him to explain, intelligibly and -satisfactorily, the causes of the wealth of different nations, according -to the ordinary meaning which men attach to the term wealth, whatever -may be their theories on the subject. - -Where Adam Smith has most failed in the use of his terms, is in the -application of the word _real_. The _real_ value of a commodity he -distinctly and repeatedly states to be the quantity of _labour_ which it -will command, in contradistinction to its nominal value, that is, its -value in money, or any other specific commodity named. But while he is -thus using the word real, in this sense, he applies it to wages in a -totally different sense, and says, that the _real_ wages of labour are -the necessaries and conveniencies of life which the money received by -the labourer will enable him to command. Now, it must be allowed that -both these modes of applying the word _real_, cannot be correct, or -consistent with each other. If the value of labour varies continually -with the varying quantity of the necessaries and conveniencies of life -which it will command, it is completely inconsistent to bring it forward -as a measure of real value. And if it can, with propriety, be brought -forward as a measure of the real value of commodities, it follows -necessarily that the average value of a given quantity of labour, of a -given description, can never be considered as in the slightest degree -affected by the varying quantity of commodities for which it will -exchange. Of this Adam Smith seemed to be fully aware in the fifth -chapter of his first book, where he says distinctly, that when more or -less goods are given in exchange for labour, it is the goods that vary, -not the labour. - -It is evident, therefore, that to get right, we must cease to use the -term _real_, in one or other of the meanings in which it has been -applied by Adam Smith. - -If the term had never been applied in political economy in a different -sense from that in which it was first used by Adam Smith, there could be -no doubt that it might be advantageously continued, and the expression -_real value_ might answer its purpose very well, and save any question -respecting the substitution of some other term, such as intrinsic, -positive, absolute, or natural. But as the term _real_ has been very -generally applied, by most writers, to wages, implying the real quantity -of the means of subsistence and comfort which the labourer is enabled to -command, in contradistinction to his nominal or money wages, the matter -cannot be so easily settled, and we must come to some determination as -to which of the two meanings it would be most advisable to reject. - -Adhering to the rules which have been laid down, it will probably be -acknowledged that the term _real_, when applied to the means of -obtaining something in exchange, seems more naturally to imply the power -of commanding the necessaries, conveniencies, and luxuries of life, than -the power of commanding labour. A certain quantity of wealth is -something more _real_, if the word real be used in its most ordinary -sense, than a certain quantity of labour; and if, on this account, we -continue to apply the term real to wages, we must express by positive, -absolute, intrinsic, or natural, what Adam Smith has expressed by the -word real, as applied to value: or it would be still better if political -economists would agree in assigning a distinct meaning to the term -value, as contradistinguished from price, whenever the value of a -commodity is mentioned without mentioning any specific article in which -it is proposed to estimate it, in the same manner as the price of a -commodity is universally understood to mean price in money, whenever the -term is used without referring specifically to some other article. - -If, however, it should be found that the term _real_, in the sense in -which it is first and most frequently applied by Adam Smith, has by -usage got such fast hold of this meaning, that it cannot easily be -displaced; and, further, if it be thought that an adjunct of this kind -to the term value will sometimes be wanted in explanations, and that to -express what Adam Smith means, the term real is preferable to either of -the terms intrinsic, positive, absolute, or natural, there would be -little objection to letting it retain its first meaning, provided we -took care not to use it in application to the wages of labour, as -implying the necessaries, conveniencies, and amusements of life. Instead -of _real_ wages, we must then say corn wages, commodity wages, wages in -the means of subsistence, or something of the kind. But the other change -is obviously more simple, and therefore in my opinion preferable. - - - - - CHAPTER IV. - APPLICATION OF THE TERM UTILITY BY M. SAY. - - -It would lead me too far and into too many repetitions, if I were to go -through the principal definitions of the continental political -economists, and examine the manner in which they have used their terms -in reference to the obvious rules above laid down; but I cannot resist -noticing one very signal deviation from them in the justly distinguished -work of M. Say. It relates to the term _utility_. - -It must be allowed by those who are acquainted with M. Say’s work, -first, that he has used the term utility in a sense totally different -from that in which it is used in common conversation, and in the -language of those who are considered as the best authorities in -political economy. Proceeding upon the principle, that nothing can be -valuable which is not useful to some person or other, he has strangely -identified utility and value, and made the utility of a commodity -proportionate to its value, although the custom is universal of -distinguishing between that which is useful and that which is merely -high-priced, of that which is calculated to satisfy the acknowledged and -general wants of mankind, and that which may be only calculated to -satisfy the capricious tastes of a few. He has thus violated the first -and most obvious rule for the use of terms. - -Secondly, he has gone directly against the usage of the best writers in -political economy, and particularly against the authority of Adam Smith, -whom he himself considers as the main founder of the science. Adam Smith -has declared his opinion in the most decided manner on this subject, by -contrasting value in use, and value in exchange, and illustrating the -distinction between them by adducing the marked instances of a diamond -and water. M. Say, therefore, in the manner in which he has applied the -term utility, has violated the second obvious rule for the use of terms, -as well as the first. - -Thirdly, the objections to the old terms in use, wealth and value, if -there were any, do not by any means seem to have been such as to warrant -the introduction of a new term. The object of M. Say seems to have been -to show, that production does not mean production of new matter in the -universe, but I cannot believe that even the Economists had this idea; -and it is quite certain that Adam Smith’s definition of production -completely excludes it. “There is one sort of labour,” he says, “which -adds to the value of the subject on which it is bestowed * * * and as it -produces a value may be called productive.”[2] There is, certainly, no -question here about the creation of new matter. And as M. Say observes, -that when things are in their ordinary and natural state their value is -the measure of their utility, while he had before affirmed that riches -were in proportion to value,[3] it is difficult to conceive what -beneficial purpose he could have in view in introducing the term utility -thus made synonymous with value or riches. - -Fourthly, as the terms useful and utility are in such very common use, -when applied in their accustomed sense, and cannot easily be supplied by -others, it is extremely difficult to confine their application to the -new sense proposed by M. Say. It is scarcely possible not to use them -sometimes, as M. Say himself has done, according to their ordinary -acceptation; but this necessarily introduces uncertainty and obscurity -into the language of political economy. - -M. Say had before made little or no distinction between riches and -value, two terms which Mr. Ricardo justly considers as essentially -different. He then introduces another term, utility, which, as he -applies it, can hardly be distinguished from either of the others. The -new term, therefore, could not have been called for; and it must be -allowed that the use of it in the sense proposed, violates all the most -obvious rules for the introduction of a new term into any science. - - - - - CHAPTER V. - ON THE DEFINITION AND APPLICATION OF TERMS BY MR. RICARDO. - - -Although it must be allowed that the criterion of value which Mr. -Ricardo has endeavoured to establish is an incomplete one, yet I cannot -but think that he has conferred an important benefit on the science of -political economy, by drawing a marked line of distinction between -riches and value. A difference had perhaps been felt by most writers, -but none before him had so strongly marked it, and attached so much -importance to it. He agrees entirely with Adam Smith in the following -definition of riches: “Every man is rich or poor according to the degree -in which he can afford to enjoy the necessaries, conveniencies, and -amusements of human life.”[4] And adds an observation in which I think -he is quite right. “Value, then, essentially differs from riches; for -value depends not on abundance, but on the difficulty or facility of -production.”[5] He subsequently says, “although Adam Smith has given the -correct description of riches which I have more than once noticed, he -afterwards explains them differently, and says that a man must be rich -or poor, according to the quantity of labour which he can afford to -purchase. Now this description differs essentially from the other, and -is certainly incorrect; for suppose the mines were to become more -productive, so that gold and silver fell in value, from the greater -facility of production; or that velvets were to be manufactured by so -much less labour than before, that they fell to half their former value; -the riches of all those who purchased these commodities would be -increased; one man might increase the quantity of his plate, another -might buy double the quantity of velvet; but with the possession of this -additional plate and velvet, they could employ no more labour than -before, because, as the exchangeable value of velvet and of plate would -be lowered, they must part with proportionably more of these species of -riches to purchase a day’s labour. Riches then cannot be estimated by -the quantity of labour which they will purchase.”[6] - -In these remarks I entirely agree with Mr. Ricardo. If riches consist of -the necessaries, conveniencies, and luxuries of life, and the same -quantity of labour will at different times, and under different -circumstances, produce a very different quantity of the necessaries, -conveniencies, and luxuries of life, then it is quite clear that the -power of commanding labour, and the power of commanding the necessaries, -conveniencies and luxuries of life are essentially distinct. One, in -fact, is a description of value, and the other of wealth. - -But though Mr. Ricardo has fully succeeded in showing that Adam Smith -was incorrect in confounding wealth and value, even according to his own -descriptions of them; yet he has nowhere succeeded in making out the -propriety of that peculiar view of value which forms the most prominent -feature of his work. - -He has not confined himself to the assertion, that what he calls the -value of a commodity is determined by the quantity of labour worked up -in it; but he states, in substance, the following proposition, that -commodities exchange with each other according to the quantity of manual -labour worked up in them, including the labour worked up in the -materials and tools consumed in their production, as well as that which -is more immediately employed.[7] - -Now this proposition is contradicted by universal experience. The -slightest observation will serve to convince us, that after making all -the required allowances for temporary deviations from the natural and -ordinary course of things, the class of commodities subject to this law -of exchange is most extremely confined, while the classes, not subject -to it, embrace the great mass of commodities. Mr. Ricardo, indeed, -himself admits of considerable exceptions to his rule; but if we examine -the classes which come under his exceptions, that is, where the -quantities of fixed capital employed are different and of different -degrees of duration, and where the periods of the returns of the -circulating capital employed are not the same, we shall find that they -are so numerous, that the rule may be considered as the exception, and -the exceptions the rule. - -Yet, notwithstanding these admissions, he proceeds with his rule as if -there had been few or no exceptions to it: he especially estimates the -value of wages by the quantity of human labour worked up in them; and as -it is quite true, that if we look only to this element of value, the -value of wages has a tendency to rise in the progress of cultivation and -improvement, he has attributed the fall of profits which usually takes -place in rich countries to the rise in the value of wages; and, in fact, -has founded his whole theory of profits, which has been considered as -the crowning achievement in the science, upon the rise and fall in the -value of wages. “It has been my endeavour,” he says, “to show throughout -this work, that the rate of profits can never be increased but by a fall -of wages.”[8] Again he observes, “Profits—it cannot be too often -repeated—depend on wages; not on nominal but real wages; not on the -number of pounds which may be annually paid to the labourer, but on the -number of days’ work necessary to obtain these pounds.”[9] - -Real wages, then, according to Mr. Ricardo’s definition, are determined -by the quantity of labour worked up in the articles, which the labourer -receives as a remuneration for his labour, whether food and clothing, or -money. - -Now the meaning here attached to the term real wages, on which Mr. -Ricardo’s theory of profits is made to depend, is quite unusual, and -decidedly contradicts all the most obvious rules which suggest -themselves for the application of terms in any science. - -In the first place, no one we believe ever heard, before the time of Mr. -Ricardo, this term used in conversation in such a manner, that an -increase of real wages would generally imply a diminution in the means -of subsistence and comfort among the labouring classes and their -families. Yet this would be the case, according to the sense in which -Mr. Ricardo uses the term. Speaking of the different situations of the -landlord and the labourer, in the progress of society, after describing -the increasing wealth of the landlord, he says, “The fate of the -labourer will be less happy; he will receive more money-wages it is -true, (and the money of Mr. Ricardo is here used as measuring what he -calls real wages;) but his corn wages will be reduced; and not only his -command of corn, but his general condition will be deteriorated.” With a -continued increase of real wages, “the condition of the labourer will -generally decline, while the condition of the landlord will always be -improved.”[10] - -Secondly, No writer that I have met with, anterior to Mr. Ricardo, ever -used the term wages, or real wages, as implying proportions. Profits, -indeed, imply proportions; and the rate of profits had always justly -been estimated by a per centage upon the value of the advances. But -wages had uniformly been considered as rising or falling, not according -to any _proportion_ which they might bear to the whole produce obtained -by a certain quantity of labour, but by the greater or smaller quantity -of any particular produce received by the labourer, or by the greater or -smaller power which such produce would convey, of commanding the -necessaries and conveniencies of life. Adam Smith in particular had -often used the term _real wages_, and always in the most natural sense -possible, as implying the necessaries and conveniencies of life, which, -according to the common language and feelings of men, might justly be -considered as more _real_ than money, or any other particular article in -which the labourer might be paid. And the use of the term, in this -sense, by Adam Smith, and most other political economists, necessarily -made the new interpretation given to it more strange, and more -unwarranted. - -Thirdly, There were no objections to the sense in which the term was -before applied. It was both natural and useful. Nor was a new -interpretation of it wanted for the purpose of explanation. All the -effects of the wages of labour upon profits might have been clearly -described, by stating, that profits are determined by the proportion of -the whole produce which goes to pay the wages of labour, without calling -this proportion, whether small or great in quantity, _the real wages of -labour_, and without asserting that, as the value of wages rises, -profits must proportionably fall. That profits are determined by the -proportion of the whole produce which goes to pay the wages of labour, -is a proposition, which, when correctly explained, will be found to be -true, and to be confirmed by universal experience; while the -proposition, that as the value of wages rises profits proportionably -fall, cannot be true, except on the assumption that commodities, which -have the same quantity of labour worked up in them, are always of the -same value, an assumption which probably will not be found to be true in -one case out of five hundred; and this, not from accidental or temporary -causes, but from that natural and necessary state of things, which, in -the progress of civilisation and improvement, tends continually to -increase the quantity of fixed capital employed, and to render more -various and unequal the times of the returns of the circulating capital. -The introduction, therefore, of a new meaning of the term _real wages_, -has not certainly the recommendation of being more useful. - -Fourthly, the new sense in which the term real wages is used, is not -maintained with consistency, or applied to old facts and opinions, with -a proper allowance for the change that has been made. This is almost -unavoidable, when old terms, which are quite familiar in one sense, are -applied in another and different sense. It is particularly remarkable in -Mr. Ricardo’s use of his artificial money, which is meant to be the -measure of real wages. Thus, he says, “It may be proper to observe, that -Adam Smith, and all the writers who have followed him, have, without one -exception that I know of, maintained, that a rise in the price of labour -would be uniformly followed by a rise in the price of all commodities. I -hope I have succeeded in showing that there are no grounds for such an -opinion, and that only those commodities would rise which had less fixed -capital employed upon them than the medium in which price was estimated, -and that all those which had more would positively fall in price when -wages rose. On the contrary, if wages fell, those commodities only would -fall which had a less proportion of fixed capital employed upon them -than the medium in which price was estimated; all those which had more -would positively rise in price.”[11] - -Now all these effects of a rise or fall in the wages of labour, depend -entirely upon wages being estimated in Mr. Ricardo’s imaginary money. -Estimated in this way, and in this way alone, Mr. Ricardo’s statement -would be correct. But neither Adam Smith, nor any of his followers, down -to the time of Mr. Ricardo, ever thought of estimating the price of -wages in this way. And estimating them in the way to which they were -always accustomed, that is in money, as they found it, they are quite -justified in what they have said. According to Adam Smith, at least, who -estimates the value of commodities by the quantity of labour which they -will command, if the money wages of labour universally rise, the value -of money proportionably falls; and when the value of money falls, Mr. -Ricardo himself says, that the prices of goods always rise. - -The difference, therefore, between Mr. Ricardo and Adam Smith in this -case, arises from Mr. Ricardo’s forgetting that he was using the term -price of labour in a different sense from that in which it was used in -the proposition objected to. - -In the same manner, Mr. Ricardo’s very startling proposition respecting -the effects of foreign trade, namely, that “no extension of foreign -trade will immediately increase the amount of _value_ in a country,” -arises entirely from his using the term value in a different sense from -that in which it had been used by his predecessors. - -If the value of foreign commodities imported is to be estimated by the -quantity of labour worked up in the commodities sent out to purchase -them, then it is quite true that, whatever may be the returns, their -value is unsusceptible of increase. But if the value of foreign -commodities imported be estimated in the way in which they had ever been -estimated before, that is, either in the money, in the labour, or in the -mass of commodities which they would command when brought home, then -there cannot be the least doubt that the _immediate_ effect of a -prosperous venture which gives great profits to the merchants concerned -would be to increase the amount of value in the country. The value of -the returns compared with the value of the outgoings would, in this -particular trade, be greater than usual; and it is quite certain, that -this increase of value in one quarter would not necessarily be -counterbalanced by a decrease of value in any other. Practically, -indeed, nothing is more usual than a simultaneous rise in the value of -the great mass of commodities from a prosperous trade, whether this -value be estimated in money or in labour. - -It must be allowed, then, that Mr. Ricardo has been very far from -cautious in the definition and application of his terms, in treating of -some of the most fundamental principles of political economy; and I have -very little doubt, as I have stated elsewhere, that this is one of the -reasons why many of the readers of his work have found great difficulty -in understanding it. When old and very familiar terms are used in a new -sense, it is scarcely possible for the writer to be always consistent in -their application, and extremely difficult to the reader always to be -aware of the sense meant to be affixed to them. - - - - - CHAPTER VI. -ON THE DEFINITION AND APPLICATION OF TERMS BY MR. MILL, IN HIS “ELEMENTS - OF POLITICAL ECONOMY.” - - -Mr. Mill, in his _Elements of Political Economy_, professedly lays no -claim to discovery. His main object seems to have been to give the -substance of Mr. Ricardo’s work in a more concentrated form, and with a -better arrangement; and this object he has accomplished. In the -definition and application of his terms he nearly follows Mr. Ricardo; -but it may be useful to notice a few cases, where he has either made the -errors of Mr. Ricardo’s definitions more prominent, or has altered -without improving them. - -On his first approach to the question of value, he describes the causes -which determine it much more inaccurately than Mr. Ricardo. He says, -that “the value of commodities is determined by the _quantity_ of -capital and labour necessary to produce them.”[12] But this is obviously -untrue and quite inconsistent with what he says afterwards respecting -the regulator of value. It may be correct, and I fully believe it is, to -estimate the value of labour by its _quantity_; but how can we estimate -the value of different kinds of machinery, or different kinds of raw -materials by their _quantity_? The _quantity_ of raw material contained -in a coarse and thick piece of calico, as compared with a very fine and -thin piece of muslin, worked up by the same quantity of labour, may be -four or five times greater, while the value of it, and the degree in -which it affects the value of the commodity, may be actually less. We -cannot, in short, measure the value of any product of labour by its bulk -or quantity; and it must therefore be essentially incorrect to say, that -the value of commodities is determined by the quantity of capital and -labour necessary to produce them. - -Proceeding afterwards to investigate more minutely what it is, which in -the last resort determines the proportion in which commodities exchange -for one another, he observes, that “as all capital consists in -commodities, it follows, of course, that the first capital must have -been the result of pure labour. The first commodities could not be made -by any commodities existing before them. But if the first commodities, -and of course the first capital, were the result of pure labour, the -value of this capital, the quantity of other commodities for which it -would exchange, must have been estimated by labour. This is an immediate -consequence of the proposition which we have just established, that -where labour was the sole instrument of production, exchangeable value -was determined by the quantity of labour which the production of the -commodity required. If this be established, it is a necessary -consequence that the exchangeable value of all commodities is determined -by quantity of labour.”[13] - -Now this necessary consequence, which is here so confidently announced, -does not appear to me to follow either from this statement, or from any -thing which is said subsequently. Allowing that the first commodities, -if completed and brought into use immediately, might be the result of -pure labour, and that their value would therefore be determined by the -quantity of that labour; yet it is quite impossible that such -commodities should be employed as capital to assist in the production of -other commodities, without the capitalist being deprived of the use of -his advances for a certain period, and requiring a remuneration in the -shape of profits. - -In the early periods of society, on account of the comparative scarcity -of these advances of labour, this remuneration would be high, and would -affect the value of such commodities to a considerable degree, owing to -the high rate of profits. In the more advanced stages of society, the -value of capital and commodities is largely affected by profits, on -account of the greatly increased quantity of fixed capital employed, and -the greater length of time for which much of the circulating capital is -advanced before the capitalist is repaid by the returns. In both cases, -the rate at which commodities exchange with each other, is essentially -affected by the varying amount of profits. It is impossible, therefore, -to agree with Mr. Mill, when he says, “It appears by the clearest -evidence, that quantity of labour in the last resort determines the -proportion in which commodities exchange for one another.”[14] - -On the same grounds Mr. Mill is quite incorrect, in calling capital -hoarded labour. It may, perhaps, be called hoarded labour and profits; -but certainly not hoarded labour alone, unless we determine to call -profits labour. This Mr. Mill himself could not but see; and -consequently, in his second edition, he has deserted Mr. Ricardo, and -boldly ventured to say, that “profits are in reality the measure of -quantity of labour.”[15] But as this very peculiar and most unwarranted -abuse of terms belongs, I believe, originally to Mr. Macculloch, it may -be best to defer the more particular examination of it, till I come to -consider the definitions and application of terms adopted by Mr. -Macculloch. - -In a work like that of Mr. Mill, which has so much the air of logical -precision, one should have hoped and expected to find superior accuracy -in the definitions, and great uniformity in the application of his -terms, in whatever sense he might determine to use them; but in this the -reader will be disappointed. It is difficult, for instance, to infer -from the language of Mr. Mill, whether a commodity is to be considered -as altering in its value in proportion to its costs of production, or in -proportion to its power of commanding other commodities, and they are -certainly not the same. - -At the commencement of his seventh section, of chap. iii., entitled, -“_What regulates the Value of Money_,” he says, - -“By the value of money is here to be understood the proportion in which -it exchanges for other commodities, or the quantity of it which -exchanges for a certain quantity of other things.” - -This is, to be sure, a very lax description of the value of money, very -inferior in point of accuracy, even to what would be understood by _the -general power of purchasing_. What are the things a certain quantity of -which is here alluded to? and if these things change in the costs of -their production, will money be proportionally affected? - -But we have a different and better description of value in the next -section. It is there said, that “gold and silver are, in reality, -commodities. They are commodities for the attainment of which labour and -capital must be employed. It is cost of production which determines the -value of these as of other ordinary productions.”[16] - -Now, if cost of production determines the value of money, it follows -that, while the cost of producing a given quantity of money remains the -same, its value remains the same. But it is obvious that the value of -money may remain the same in this sense of the term, while, owing to the -alterations which may be taking place in the costs of producing the -commodities alluded to, the quantity of other things for which it will -exchange may be essentially different. Which of the two, then, is the -true criterion of the value of money? It is surely most desirable that -the student in political economy should not be left in the dark on this -subject; yet Mr. Mill gives him no assistance; and he is left to decide -between two very different meanings as well as he can. - -But, perhaps, the most culpable confusion of terms which Mr. Mill has -fallen into, is in relation to demand and supply; and as he has a more -original and appropriate claim to this error than any other English -writer, and its belief leads to very important consequences, the notice -of it is particularly called for. - -In the first place, no person can have turned his attention, in the -slightest degree, to the language of political economy, either in -conversation or books, without being fully aware that the term demand is -used in two very distinct senses; one implying the quantity of the -commodity consumed, and the other the amount of sacrifice which the -purchasers are willing to make in order to obtain a given portion of it. -In the former sense, an increase of demand is but very uncertainly -connected with an increase of value, or a further encouragement to -production, as in general the greatest increase of such kind of demand -takes place in consequence of a very abundant supply and a great fall in -value. It is the other sense alone to which we refer, when we speak of -the demand compared with the supply as determining the values and prices -of commodities; and in this latter sense of the term demand, which, -perhaps, is in the most frequent use, an increase of supply is so far -from increasing demand that it diminishes it, while a diminution of -demand increases it. - -Secondly, it has been generally agreed, that when the quantity of a -commodity brought to market is neither more nor less than sufficient to -supply all those who are able and willing to give the natural and -necessary price for it, the demand may then, and then only, be said to -be equal to the supply; because, if the quantity wanted by those who are -able and willing to give the natural price exceed the supply, the demand -is said to be greater than the supply, and the price rises above the -ordinary costs of production; and if the quantity wanted by those who -are able and willing to give the natural price fall short of the supply, -the demand is said to be less than the supply, and the price falls below -the ordinary costs of production. This is the language of Adam Smith, -and of almost all writers on political economy, as well as the language -of common conversation when such subjects are discussed. Indeed it is -difficult to conceive in what other sense it could, with any propriety, -be said, that the supply was equal to the demand, because in any other -sense than this, the supply of a commodity might be said to be equal to -the demand, whether it were selling at double or the half of its cost. - -Thirdly, it must be allowed, that according to the best authorities in -books and conversation, what is meant by the glut of a particular -commodity is such an abundant supply of it compared with the demand as -to make its price fall below the costs of production; and what is meant -by a _general_ glut, is such an abundance of a large mass of commodities -of different kinds, as to make them all fall below the natural price, or -the ordinary costs of production, without any proportionate rise of -price in any other equally large mass of commodities. - -With these preliminary definitions, we may proceed to examine some of -the arguments by which Mr. Mill endeavours to show that demand and -supply are always equal in the aggregate; that an over supply of some -commodities must always be balanced by a proportionate under supply of -others; and that, therefore, a general glut is impossible. - -If Mr. Mill had always strictly adhered to that meaning of the term -_demand for a commodity_ which signifies the quantity consumed, he might -have maintained the position with which he heads the third section of -his fourth chapter, namely, _that consumption is co-extensive with -production_. This, however, is, in reality, no more than saying, that if -commodities were produced in such abundance as to be sold at half their -cost of production, they would still be somehow or other consumed—a -truism equally obvious and futile. But Mr. Mill has used the term demand -in such a way, that he cannot shelter himself under this truism. He -observes, “It is evident that whatever a man has produced, and does not -wish to keep for his own consumption, is a stock which he may give in -exchange for other commodities. His will, therefore, to purchase, and -his means of purchasing, in other words, his demand, is exactly equal to -the amount of what he has produced, and does not mean to consume.”[17] - -Here it is evident that Mr. Mill uses the term demand in the sense of -the amount of sacrifice which the purchaser is able to make, in order to -obtain the commodity to be sold, or, as Mr. Mill correctly expresses it, -his means of purchasing. But it is quite obvious that his means of -purchasing other commodities are not proportioned to the _quantity_ of -his own commodity which he has produced, and wishes to part with; but to -its _value in exchange_; and unless the value of a commodity in exchange -be proportioned to its quantity, it cannot be true that the demand and -supply of every individual are always equal to one another. According to -the acknowledged laws of demand and supply, an increased quantity will -often lower the value of the whole, and actually diminish the means of -purchasing other commodities. - -Mr. Mill asks, “What is it that is necessarily meant, when we say that -the supply and the demand are accommodated to one another? It is this -(he says) that goods which have been produced by a certain quantity of -labour, exchange for goods which have been produced by an equal quantity -of labour. Let this proposition be attended to, and all the rest is -clear. Thus, if a pair of shoes is produced by an equal quantity of -labour as a hat, so long as a hat exchanges for a pair of shoes, so long -the supply and demand are accommodated to one another. If it should so -happen that shoes fell in value, as compared with hats, which is the -same thing as hats rising in value, as compared with shoes, this would -imply that more shoes had been brought to market, as compared with hats. -Shoes would then be in more than due abundance. Why? Because in them the -produce of a certain quantity of labour would not exchange for the -produce of an equal quantity. But for the very same reason, hats would -be in less than due abundance, because the produce of a certain quantity -of labour in them would exchange for the produce of more than an equal -quantity in shoes.”[18] - -Now, I have duly attended, according to Mr. Mill’s instructions, to the -proposition which is to make all the rest clear; and yet the conclusions -at which he wishes to arrive, appear to me as much enveloped in darkness -as ever. This, indeed, was to be expected from the proposition itself, -which obviously involves a most unwarranted definition of what is meant, -when we say that the supply and the demand are accommodated to one -another. It has already been stated that what has hitherto been meant, -both in conversation and in the writings of the highest authority on -political economy, by the supply being accommodated to, or equal to the -demand, is, that the supply is just sufficient to accommodate all those -who are able and willing to pay the natural and necessary price for it, -in which case, of course, it will always sell at what Adam Smith calls -its natural price. - -Now, unless Mr. Mill is ready to maintain that people would still say -that the supply of a commodity was accommodated to the demand for it, -whether it were selling at three times the cost of its production, or -only one-third of that cost, he cannot maintain his definition. He -cannot, for instance, deny that hats and shoes may be both selling below -the costs of production, although they may exchange for each other in -such proportions, that the hats produced by a certain quantity of labour -may exchange for the shoes produced by the same quantity of labour. But -can it be said on this account, that the supply of hats is suited to the -demand for hats, or the supply of shoes suited to the demand for shoes, -when they are both so abundant that neither of them will exchange for -what will fulfil the conditions of their continued supply? And supposing -that, while both are selling below the costs of production, shoes should -fall still lower than hats, what would be the consequence? According to -Mr. Mill, “shoes would then be in more than due abundance. Why? Because -in them the produce of a certain quantity of labour would not exchange -for the produce of an equal quantity. But for the very same reason, hats -would be in less than due abundance, because the produce of a certain -quantity of labour in them would exchange for the produce of more than -an equal quantity in shoes.”[19] - -It will be most readily allowed that, in the case supposed, shoes will -be in more than due abundance, though not for the reason given by Mr. -Mill. But how can it be stated, with the least semblance of truth, that -hats would be in less than due abundance, when, by the very supposition, -they are selling at a price which will not re-purchase the quantity of -labour employed in producing them. - -Nothing can show more distinctly than the very case here produced by Mr. -Mill, that his proposition or definition, which is to clear up -everything, is wholly inapplicable to the question; and that to -represent the abundance or deficiency of the supply of one commodity, as -determined by the deficiency or abundance of another, is to give a view -of the subject totally different from the reality, and calculated to -lead to the most absurd conclusions. There is hardly any stage of -society subsequent to the division of labour, where the state of the -supply compared with the demand of shoes is essentially affected by the -state of the supply compared with the demand for hats; and in the -present state of society in this country, where the question of a -general glut has arisen, it is still more irrelevant to advert to any -other objects as efficient causes of demand for a particular commodity, -except those which relate to the costs of producing it. - -The hop-planter who takes a hundred bags of hops to Weyhill fair, thinks -little more about the supply of hats and shoes than he does about the -spots in the sun. What does he think about, then? and what does he want -to exchange his hops for? Mr. Mill seems to be of opinion that it would -show great ignorance of political economy, to say that what he wants is -money; yet, notwithstanding the probable imputation of this great -ignorance, I have no hesitation in distinctly asserting, that it really -is money which he wants, and that this money he must obtain, in the -present state of society, in exchange for the great mass of what he has -brought to market, or he will be unable to carry on his business as a -hop-planter; and for these specific reasons; first, that he must pay the -rent of his hop grounds in money; secondly, that he must pay for his -poles, his bags, his implements, &c., &c., in money; thirdly, that he -must pay the numerous labourers which he employs on his grounds, during -the course of the next year, in money; and fourthly, that it is in -money, and in money alone of all the articles brought to the fair, that -he can calculate his profits. - -It is perfectly true, that both the landlords and the labourers who are -paid in money will finally exchange it for something else, as no one -enjoys money _in kind_, except the miser; but the landlord who may spend -perhaps a good deal in post-horses, dinners at inns, and menial -servants, would be little likely to accept from the hop-planter the -articles which he could get at the fair in exchange for his hops; and -though the expenditure of the labourer is much more simple, and may be -said to consist almost entirely in food and clothing, yet it is quite -certain that the power of commanding a given quantity of labour can -never be represented, with any approach towards correctness, by a given -quantity of corn and clothing. As a matter of fact, the labourer in this -country is paid in money; and while it often happens that for many years -together the money-price of labour remains the same, the money-price of -corn is continually altering, and the labourer may, perhaps, receive the -value of twice as much corn in one year as he does in another. - -What an entirely false view, then, does it give of the real state of -things, what a complete obscuration instead of illustration of the -subject is it, to represent the demand for shoes as determined by the -supply of hats, or the demand for hops by the supply of cloth, cheese, -or even corn. In fact, the doctrine that one half of the commodities of -a country necessarily constitute an adequate market or effectual demand -for the other half, is utterly without foundation. The great producers -who are the great sellers, before they can venture to think about the -supplies of hats, shoes, and cloth, on which they may perhaps expend a -tenth part of a tenth part of what they have brought to market, must -first direct their whole attention to the replacing of their capital, -and to the question whether, after replacing it, they will have realized -fair profits. Whatever may be the number of intermediate acts of barter -which may take place in regard to commodities—whether the producers send -them to China,[20] or sell them in the place where they are produced: -the question as to an adequate market for them, depends exclusively upon -whether the producers can replace their capitals with ordinary profits, -so as to enable them successfully to go on with their business. - -But what are their capitals? They are, as Adam Smith states, the tools -to work with, the materials to work upon, and the means of commanding -the necessary quantity of labour. Colonel Torrens, therefore, is quite -right, when he says, “that an increased production of those articles -which do not form component parts of capital, cannot create an increased -effectual demand, either for such articles themselves, or for those -other articles which do form component parts of capital.”[21] And, -perhaps, he may be considered as making some approaches towards the -truth, when he says, that “effectual demand consists in the power and -inclination, on the part of consumers, to give for commodities, either -by immediate or circuitous barter, some greater proportion of all the -ingredients of capital than their production costs.”[22] But in this -latter position, he is still very far from representing what actually -takes place. When we consider how much labour is directly employed in -the production of the great mass of commodities, and recollect further, -that raw materials and machinery, the other two branches of capital, are -mainly produced by labour, it is obvious that the power of replacing -capitals will mainly depend on the power of commanding labour: but a -given quantity of what Colonel Torrens calls the ingredients of capital, -can never represent a given quantity of labour; and consequently, if a -given quantity of labour be necessary in any production, a very -different quantity of the ingredients of capital would be required at -different times, to occasion the same effectual demand for it. It is -far, therefore, from being true, that if the ingredients of capital, -represented by a hundred and ten quarters of corn, and a hundred and ten -suits of clothing, were increased to “two hundred and twenty quarters of -corn, and two hundred and twenty suits of clothing, the effectual demand -for the article would be doubled.”[23] - -It is still further from the truth, “that increased supply is the one -and only cause of increased effectual demand;”[24] and most happy is it -for mankind that this is not true. If it were, how difficult would it be -for a society to recover itself, under a temporary diminution of food -and clothing! But by a kind provision of nature, this diminution, within -certain limits, instead of diminishing, will increase effectual demand. -The theory of demand and supply, shows that the food and clothing thus -diminished in quantity, will rise in value; and universal experience -tells us, that, as a matter of fact, the money-price of the remaining -food and clothing will for a time rise in a greater degree than in -proportion to the diminution of its quantity, while the money-price of -labour may remain the same. The necessary consequence will be, the power -of setting in motion a greater quantity of productive industry than -before.[25] - -There is no assumption so entirely fatal to a just explanation of what -is really taking place in society, as the assumption, that the natural -wages of labour in food and clothing are always nearly the same, and -just about sufficient to maintain a stationary population. All the most -common causes of an acceleration or retardation in the movements of the -great machine of human society, involve variations, and often great -variations, in the real wages of labour. Commodities in general, and -corn most particularly, are continually rising or falling in -money-price, from the state of the supply as compared with the demand, -while the money-price of labour remains much more nearly the same. In -the case of a rise of corn and commodities, the real wages of common -day-labour are necessarily diminished: the labourer obtains a smaller -proportion of what he produces; profits necessarily rise; the -capitalists have a greater power of commanding labour; more persons are -called into full work, and the increased produce which follows, is the -natural remedy for that state of the demand and supply, from whatever -cause arising, which had occasioned the temporary rise in the -money-price of commodities. On the other hand, if corn and other -commodities fall in money-price, as compared with the money-price of -labour, it is obvious that the day-labourer, who gets employment, will -be able to buy more corn with the money which he receives; he obtains a -larger proportion of what he produces; profits necessarily fall; the -capitalists have a diminished power of commanding labour; fewer persons -are fully employed, and the diminished production which follows, is the -natural remedy for that state of the demand and supply, from whatever -cause arising, which occasioned the temporary fall in the money-price of -commodities. The operation of these remedial processes to prevent the -continuance of excess or defect, is so much what one should naturally -expect, and is so obviously confirmed by general experience, that it is -inconceivable that a proposition should have obtained any currency which -is founded on a supposed law of demand and supply diametrically opposed -to these remedial processes. - -It will be recollected, that the question of a glut is exclusively -whether it may be general, as well as particular, and not whether it may -be permanent as well as temporary. The causes above mentioned act -powerfully to prevent the permanence either of glut or scarcity, and to -regulate the supply of commodities so as to make them sell at their -natural prices. But this tendency, in the natural course of things, to -cure a glut or a scarcity, is no more a proof that such evils have never -existed, than the tendency of the healing processes of nature to cure -some disorders without assistance from man, is a proof that such -disorders have not existed. - -But to return more particularly to Mr. Mill. After asserting that the -supply is the demand, and the demand is the supply, so frequently, that -the unwary reader must feel quite at a loss to know which is which, he -comes to a distinct conclusion, which is so directly contradicted both -by theory and experience, as to show either that his premises must have -been false, or that what he calls his indissoluble train of reasoning -consists of mere unconnected links. He says, “It is therefore -universally true, that as the aggregate demand and aggregate supply of a -nation never can be unequal to one another, so there never can be a -superabundant supply in particular instances, and hence a fall in -exchangeable value below the cost of production, without a corresponding -deficiency of supply, and hence a rise in exchangeable value beyond cost -of production in other instances. The doctrine of the glut, therefore, -seems to be disproved by a chain of reasoning perfectly -indissoluble.”[26] - -While commodities are merely compared with each other, it is -unquestionably true that they cannot all fall together, or all rise -together. But when they are compared with the costs of production, as -they are in the above passage, it is evident that, consistently with the -justest theory, they may all fall or rise at the same time. For what are -the costs of production? They are either the quantity of _money_ -necessary to pay the labour worked up in the commodity, and in the tools -and materials consumed in its production, with the ordinary profits upon -the advances for the time that they have been advanced; or they are the -quantity of labour in kind required to be worked up in the commodity, -and in the tools and materials consumed in its production with such an -additional quantity as is equivalent to the ordinary profits upon the -advances for the time that they have been advanced. - -Now it surely cannot be denied theoretically, that all commodities -produced in this country may fall in comparison with a commodity -produced in Mexico. As little can it be denied theoretically that all -commodities produced by British labour may fall as compared with that -labour, either from an unusually increased supply of such commodities, -or a diminution of demand for them. And when, from these theoretical -concessions, required by the universally acknowledged laws of demand and -supply, we turn to the facts, we see with our own eyes, and learn from -authority which there is no reason whatever for doubting, that a very -large mass of commodities does at times fall below the costs of -production, whether those costs be estimated in money or labour, without -the slightest shadow of pretence for saying that any other equally large -mass is raised proportionally above the costs of production. - -Even within the very last year, it is a matter of the most public -notoriety that the cotton manufactures, the woollen manufactures, the -linen manufactures, the silk manufactures, have all fallen below the -costs of production, including ordinary profits. To go no further, the -amount of these manufactures, taken together, must, on a rough estimate, -exceed seventy millions of pounds sterling. And if this mass of -commodities, partly from over production and over trading, and partly -from their necessary consequences, the shock to confidence and credit -and the diminution of bills of exchange and currency, have fallen below -the ordinary costs of production, what man is there credulous enough to -believe that there must have been, according to the language of Mr. -Mill, “a corresponding deficiency of supply, and hence a rise of -exchangeable value beyond cost of production in other instances”? I -doubt, indeed, much, whether satisfactory evidence could be brought to -show that a single million’s worth of goods has risen above the cost of -production, while seventy millions’ worth have fallen below it. - -Consequently, if the definition of a general glut be a fall in a great -mass of commodities below the costs of production, not counterbalanced -by a proportionate rise of some other equally large mass of commodities -above the costs of production, Mr. Mill’s conclusion against the -existence of a general glut, founded on “a chain of reasoning perfectly -indissoluble,” seems to be utterly without foundation. - -If facts so notorious as these to which I have adverted are either -boldly denied, or considered as undeserving attention, in founding the -theories of political economy, there is an end at once to the utility of -the science. - -On the subject of the wages of labour, Mr. Mill has added his authority -to the peculiar views and language of Mr. Ricardo. He says, “Whatever -the share of the labourer, such is the rate of wages; and, _vice versâ_, -whatever the rate of wages, such is the share of the commodity or -commodities’ worth which the labourer receives.”[27] Perhaps the term -_rate of wages_ used by Mr. Mill to express the proportion of the -produce which falls to the share of the labourer is in some respects -preferable to the term _real wages_, used by Mr. Ricardo for the same -purpose; but still it is highly objectionable, because it is an old and -familiar term used in an entirely new sense. When the expressions high -or low rates of wages were used, before the time of Mr. Ricardo and Mr. -Mill, no one understood them to mean the proportion of the produce -awarded to the labourer. In fact, this meaning had not been before -conveyed by any appropriate terms in the language of political economy; -yet it is a meaning the expression of which was much wanted in -explaining the theory of profits. To express it, therefore, a new term -should certainly have been chosen, and not an old one, which was -familiar in a different sense. There seems to be no objection to the -term _proportionate wages_, which has been used by Mr. Macculloch. - -On the whole, it must be allowed, that Mr. Mill in his _Elements of -Political Economy_ has but little attended to the most obvious rules -which ought to guide political economists in the definition and -application of their terms. They are often unsanctioned by the proper -authorities, and rarely maintained with consistency. - - - - - CHAPTER VII. - ON THE DEFINITION AND APPLICATION OF TERMS, BY MR. MACCULLOCH, IN HIS - “PRINCIPLES OF POLITICAL ECONOMY.” - - -However incautious Mr. Ricardo and Mr. Mill may have been in the -definition and application of their terms, I fear it will be found that -Mr. Macculloch has been still more so; and that, instead of growing more -careful, the longer he considers the subject, he seems to be growing -more rash and inconsiderate. - -The expositors of any science are in general desirous of calling into -their service definite and appropriate terms; and for this purpose their -main object is to look for characteristic differences, not partial -resemblances. Mr. Macculloch, on the other hand, seems to be only -looking out for resemblances: and proceeding upon this principle, he is -led to confound material with immaterial objects; productive with -unproductive labour; capital with revenue; the food of the labourer with -the labourer himself; production with consumption; and labour with -profits. - -That this is not an exaggerated view of what has been stated by Mr. -Macculloch, in his _Principles of Political Economy_, any person who -reads the work with attention may satisfy himself. - -Mr. Macculloch’s definition of wealth, which he considers as quite -unexceptionable, is, “those articles or products which possess -exchangeable value, and are either necessary, useful, or agreeable.”[28] - -It is not, perhaps, quite unexceptionable to use the term value in a -definition of wealth. It is something like explaining _ignotum per -ignotius_. But independently of this objection, the definition is so -worded, that it is left in doubt whether immaterial gratifications are -meant to be included in it. They are not in general designated by the -terms _articles_ or _products_; and it is only made clear that it is -intended to include them by a collateral remark on my definition of -wealth, which I confine specifically to material objects, and by a -subsequent definition of productive labour, which is made to include -every gratification derived from human exertion. - -Mr. Macculloch, in the article on Political Economy which he published -in the Supplement to the Encyclopædia Britannica, had excluded these -kinds of gratification from his definition of wealth, and had given such -reasons for this exclusion, as would fully have convinced me of its -propriety, if I had not been convinced before. He observes that, “if -political economy were to embrace a discussion of the production and -distribution of all that is useful and agreeable, it would include -within itself every other science; and the best Encyclopædia would -really be the best treatise on political economy. Good health is useful -and delightful, and therefore, on this hypothesis, the science of wealth -ought to comprehend the science of medicine: civil and religious liberty -are highly useful, and therefore the science of wealth must comprehend -the science of politics: good acting is agreeable, and therefore, to be -complete, the science of wealth must embrace a discussion of the -principles of the histrionic art, and so on. Such definitions are -obviously worse than useless. They can have no effect but to generate -confused and perplexed notions respecting the objects and limits of the -science, and to prevent the student ever acquiring a clear and distinct -idea of the inquiries in which he is engaged.”[29] - -On these grounds he confined wealth to material products; but, in the -same treatise, he included, in his definition of productive labour, all -those sources of gratification which he had, with such good reason, -excluded from his definition of wealth. When he had done this, however, -he could not but be struck with the inconsistency of saying that wealth -consisted exclusively of material products, and yet that all labour was -equally productive of wealth, whether it produced material products or -not. To get rid of this inconsistency, he has now altered his -definition, by leaving out the term material products; and it remains to -be seen, whether in so doing he has not essentially deviated from the -most obvious rules which should direct us in defining our terms. - -His definition of wealth, as explained by what he subsequently says of -productive labour, now includes all the gratifications derived from -menial service and followers, whatever may be their number. - -Now let us suppose two fertile countries with the same population and -produce, in one of which it was the pride and pleasure of the landlords -to employ their rents chiefly in maintaining menial servants and -followers, and in the other, chiefly in the purchase of manufactures and -the products of foreign commerce. It is evident that the different -results would be nearly what I described in speaking of the consequences -of the definition of the Economists. In the country, where the tastes -and habits of the landlords led them to prefer material conveniencies -and luxuries, there would, in the first place, be in all probability a -much better division of landed property; secondly, supposing the same -agricultural capital, there would be a very much greater quantity of -manufacturing and mercantile capital; and thirdly, the structure of -society would be totally different. In the one country, there would be a -large body of persons living upon the profits of capital; in the other, -comparatively a very small one: in the one, there would be a large -middle class of society; in the other, the society would be divided -almost entirely between a few great landlords and their menials and -dependents: in the one country, good houses, good furniture, good -clothes, and good carriages, would be in comparative abundance; while in -the other, these conveniencies would be confined to a very few. - -Now, I would ask, whether it would not be the grossest violation of all -common language, and all common feelings and apprehensions, to say that -the two countries were equally rich? - -Mr. Macculloch, however, has discovered that there is a resemblance -between the end accomplished by the menial servant or dependent, and by -the manufacturer or agriculturist. He says, “The end of all human -exertion is the same; that is, to increase the sum of necessaries, -comforts, and enjoyments; and it must be left to the judgment of every -one to determine what proportion of these comforts he will have in the -shape of menial services, and what in the shape of material -products.”[30] - -It will, indeed, be readily allowed, that even the third footman who -stands behind a coach, and seems only to add to the fatigue of the -horses and the wear and tear of the carriage, is still employed to -gratify some want or wish of man, in the same manner as the riband maker -or the lace maker. It will further be readily allowed, that it is by no -means politic to interfere with individuals in the modes of spending -their incomes. But does it at all follow from this, that if these -different kinds of labour have very different effects on society in -regard to wealth, as the term is understood by the great mass of -mankind, that they should not be distinguished by different -appellations, in order to facilitate the explanation of these different -effects? Mr. Macculloch might unquestionably discover some resemblance -between the salt and the meat which it seasons: they both contribute, -when used in proper proportions, to compose a palatable and nutritive -meal, and in general we may leave it to the taste and discretion of the -individual to determine these proportions; but are we on that account to -confound the two substances together, and to affirm that they are -_equally_ nutritive? Are we to define and apply our terms in such a way -as to make it follow from our statements, that, if the individual were -to compound his repast of half salt and half meat, it would equally -conduce to his health and strength? - -But Mr. Macculloch states, that a taste for the gratifications derived -from the unproductive labourers of Adam Smith “has exactly the same -effect upon national wealth as a taste for tobacco, champagne, or any -other luxury.”[31] This may be directly denied, unless we define wealth -in such a manner as will entitle us to say that the enjoyments derived -by a few great landlords, from the parade of menial servants and -followers, will tell as effectually in an estimate of wealth as a large -mass of manufacturers and foreign commodities. But when M. Chaptal -endeavoured to estimate the wealth of France, and Mr. Colquhoun that of -England, we do not find the value of these enjoyments computed in any of -their tables. And certainly, if wealth means what it is understood to -mean in common conversation and in the language of the highest -authorities in the science of Political Economy, no effects on national -wealth can or will be more distinct than those which result from a taste -for material conveniencies and luxuries, and a taste for menial servants -and followers. The exchange of the ordinary products of land for -manufactures, tobacco, and champagne necessarily generates capital; and -the more such exchanges prevail the more do those advantages prevail -which result from the growth of capital and a better structure of -society; while an exchange of necessaries for menial services, beyond a -certain limited amount, obviously tends to check the growth of capital, -and, if pushed to a considerable extent, to prevent accumulation -entirely, and to keep a country permanently in a semi-barbarous state. - -Mr. Macculloch, when not under the influence of his definition, justly -observes, that “the great practical problem, involved in that part of -the science of political economy which treats of the production of -wealth, must resolve itself into a discussion of the means whereby the -greatest amount of necessary, useful, and desirable products may be -obtained with the least possible quantity of labour.”[32] But among the -unproductive labourers of Adam Smith there is no room for such saving of -labour. The pre-eminent advantages to be derived from capital, -machinery, and the division of labour, are here almost entirely lost; -and in most instances the saving of labour would defeat the very end in -view, namely, the parade of attendance, and the pride of commanding a -numerous body of followers. - -Now, if the employment of the labour required to produce material -conveniencies and luxuries necessarily occasions the creation and -distribution of capital, and, further, affords room for all the -advantages resulting from the saving of labour and the most extended use -of machinery; while the employment of the labour, called by Adam Smith -unproductive, is necessarily cut off from all these benefits, I would -ask whether these two circumstances _alone_ do not form a sufficiently -marked line of distinction amply to justify the classification of Adam -Smith; and the utility of such a classification, in explaining the -_causes_ of the wealth of nations, is most obvious and striking. - -So difficult is it, consistently, to maintain a definition which -contradicts the common usage of language, and the common feelings of -mankind, that I have not the least doubt, if Mr. Macculloch himself were -to travel through two countries of the kind before described, that is, -one flourishing in manufactures and commerce, and the other, though with -the same population and food, furnishing little more to the great mass -of its people than _panem et Circenses_, he would call the latter poor, -and the former comparatively rich. - -Now, what must have been the cause of this difference? Adam Smith would -give a simple, sufficient, and most intelligible reason for it. He would -say, that the number and powers of those whom he had called productive -labourers, had been much greater in one country than in the other. This -seems to be a clear and satisfactory explanation. How Mr. Macculloch -could explain the matter according to doctrines which make no difference -between the different kinds of labour, I am utterly at a loss to -conjecture[33]. - -Perhaps, however, he would say, upon recollection, that his definition -of wealth did not oblige him to allow that there would really be any -difference in the wealth of these two countries. In that case, I think -it may be very safely said that his definition of wealth violates all -the most obvious rules for the definition and application of terms. It -is opposed to the meaning of the term wealth as used in common -conversation; it is opposed to the meaning of the term wealth as applied -by the writers of the highest authority in political economy; it is so -far from removing the little difficulties which had attended former -definitions of wealth and productive labour, that it very greatly -aggravates them; it so contradicts our common habits and feelings, that -it is scarcely possible to maintain it with consistency. - -Mr. Macculloch’s definition of capital has exactly the same kind of -character as his definition of wealth, namely, that of being so extended -as to destroy all precision, and to confound objects which had before -been most usefully separated, with a view to the explanation of the -causes of the wealth of nations. The alteration of a definition seems -with Mr. Macculloch to be a matter of very slight consequence. The -following passage is certainly a most extraordinary one. “The capital of -a country may be defined to be _that portion of the produce of industry -existing in it, which can be made directly available, either to the -support of human existence, or to the facilitating of production_. This -definition differs from that given by Dr. Smith, which has been adopted -by most other economists. The whole produce of industry belonging to a -country, is said to form its _stock_; and its capital is supposed to -consist of that portion only of its stock, which is employed in the view -of producing some species of commodities. The other portion of the stock -of a country, or that which is employed to maintain its inhabitants, -without any immediate view to production, has been denominated its -_revenue_, and is not supposed to contribute anything to the increase of -its wealth.” - -“These distinctions seem to rest on no good foundations. Portions of -stock employed without any immediate view to production, are often by -far the most productive. The stock, for example, that Arkwright and Watt -employed in their own consumption, and without which they could not have -subsisted, was laid out as _revenue_; and yet it is quite certain that -it contributed infinitely more to increase their own wealth, as well as -that of the country, than any equal quantity of stock expended on the -artisans in their service. It is always extremely difficult to say -whether any portion of stock is, or is not, productively employed; and -any definition of capital which involves the determination of this -point, can only serve to embarrass and obscure a subject that is -otherwise abundantly simple. In our view of the matter, it is enough to -constitute an article capital, if it can either directly contribute to -the support of man, or assist him in appropriating or producing -commodities; but the question respecting the mode of employing an -article ought certainly to be held to be, what it obviously is, -perfectly distinct from the question whether that article is capital. -For any thing that we can _à priori_ know to the contrary, a horse yoked -to a gentleman’s coach may be just as productively employed as if he -were yoked to a brewer’s dray, though it is quite plain, that whatever -difference may really obtain in the two cases, the identity of the horse -is not affected; he is equally possessed, in the one case as well as the -other, of the capacity to assist in production, and so long as he -possesses that capacity, he ought to be viewed, independently of all -other considerations, as a portion of the capital of the country.”[34] - -If these doctrines were admitted, there would be an end, at once, of all -classifications, and of all those appropriate designations which so -essentially assist us, in explaining what is going forward in society. -If the distinction between the whole mass of the products of a country, -and those parts of it which are applied to perform particular functions, -rests on no solid foundation, it may be asked, on what better foundation -does the distinction between the mass of the male population of a -country, and the classes of lawyers, physicians, manufacturers, and -agriculturists rest? They all equally come under the general -denomination of men; but particular classes are most usefully -distinguished by particular appellations founded on the particular -functions which they generally perform. - -The bread which I consume myself, or give to a menial servant, is a part -of the general produce of the country, and may not be different from -that which is advanced to a manufacturer or agriculturist. When I or my -servant consume the bread, it performs a most necessary and important -service, no less than the maintenance of life and health; but in -obtaining this service my wealth is _pro tanto_ diminished. On the other -hand, if I give the same kind of bread as wages to a manufacturer or -agricultural labourer, it will not, with regard to me, perform so -necessary an office as before, but it will perform an essentially -different one with regard to my wealth, it will increase my wealth -instead of diminishing it. In an inquiry into the causes of the wealth -of nations, does not this difference in the functions which the same -advances perform require to be marked by a particular appellation? - -Accordingly, both in the language of common conversation and of the best -writers, revenue and capital have always been distinguished; by revenue -being understood, that which is expended with a view to immediate -support and enjoyment, and by capital, that which is expended with a -view to profit. But in the language of Mr. Macculloch, in the passage -above quoted, it is the capacity to perform particular functions, and -not the habitual performance of them, that justifies particular -designations. A coach-horse, drawing a chariot in the Park, has the -capacity of being employed in a brewer’s dray or a farmer’s waggon: -“whatever difference may really obtain in the two cases, the identity of -the horse is not affected; he is equally possessed, in the one case as -in the other, of the capacity to assist in production; and so long as he -possesses that capacity, he ought to be viewed, independently of all -other considerations, as a portion of the capital of the country.” - -This appears to me to be very little different from saying that a man -who is capable of being made to perform the functions of a judge ought -to be denominated a judge; because, whether he sits on the bench or in -the court below, the identity of the man is the same; he is equally -possessed, in the one case as well as the other, of the capacity to -assist in the decision of causes, and so long as he possesses that -capacity he ought to be viewed, independently of all other -considerations, as one of the judges of the country. It is said, that -the French are astonished at the small number of judges in England. If -this kind of comprehensive nomenclature were adopted, their wonder would -soon cease. - -The whole of the incomes of every person in a society, in whatever way -they may be actually employed, might be employed, as far as they would -go, directly in the support of man. Consequently, according to the -definitions of Mr. Macculloch, all incomes are capital. But he is not -satisfied even with this very unusually-extended meaning of the term. He -can trace a resemblance between a working man and a working horse, and -is, consequently, led to say, “However extended the sense previously -attached to the term capital may at first sight appear, I am satisfied -that it ought to be interpreted still more comprehensively. Instead of -understanding by capital all that portion of the produce of industry -extrinsic to man, which may be applicable to his support, and to the -facilitating of production, there does not seem to be any good reason -why man himself should not, and very many why he should, be considered -as forming a part of the national capital. Man is as much the produce of -labour as any of the machines constructed by his agency; and it appears -to us, that in all economical investigations he ought to be considered -in precisely the same point of view.”[35] - -That there is some resemblance between a working man and a working horse -cannot for a moment be doubted; but is that sufficient reason why they -should be confounded together under the name of capital? The question is -not whether there is a partial resemblance between these two objects, -but whether there is a characteristic difference; and surely there is a -sufficient distinction in all economical investigations between a free -man, and the horse, the machine, or the food which he uses, to warrant a -different designation, especially when one of the greatest objects of -all economical investigations, and certainly the most worthy, has been -how to secure at all times a full sufficiency of the produce of industry -extrinsic to man as compared with man himself. - -It has been hitherto usual to say, that the happiness of the labouring -classes of society depends chiefly upon the rate at which the capital of -the country increases, compared with its population; but if the capital -of the country includes its population, there is no meaning in the -statement. Yet hardly any writer that I know of has more frequently made -this statement than Mr. Macculloch himself. Nothing, indeed, can show -more strikingly the extreme difficulty of maintaining consistently new -and unusual definitions, than the frequency with which he seems to be -compelled to use terms in their old and accustomed sense, -notwithstanding the different definitions which he has given of them. - -Thus, in his very peculiar and most untenable argument on the effects of -absenteeism in Ireland, one of the reasons which he gives, why the -absence of the landlords does not diminish the wealth of that country -is, that they do not remove any _capital_ from it, but merely what they -would spend on their own gratifications. If, however, the definition of -the capital of a country, as stated by Mr. Macculloch, be “_that portion -of the produce of industry existing in it_ which can be made directly -available either to the support of human existence or to the -facilitating of production,” it follows necessarily that they remove a -considerable quantity of capital, as it will hardly be denied that the -corn, cattle, and butter produced from their estates (which, after all -the mystery about bills of exchange is done away, are practically the -main articles exported to England for the payment of their rents) may be -made directly available to the support of human existence. - -Mr. Macculloch is also disposed to recommend emigration as one of the -best means of relieving the distress of Ireland, by altering the -proportion between capital and labour; but if, according to him, in all -economical discussions, man is to be considered as capital, precisely -like the machine which he uses or the food which he consumes, the -emigration of a portion of the population will be to deprive the country -of a portion of its capital, which has always been considered as most -pernicious. Whatever, therefore, may be the merits or demerits of Mr. -Macculloch’s reasoning on these subjects, independently of his -definitions, it is obvious that the application of his definitions at -once destroys it. - -It need hardly be repeated, that in all the less strict sciences, -definitions and classifications are seldom perfect and complete; but no -reasonable man will refuse to take advantage of an imperfect instrument -which is essentially useful, if no other more perfect one can be -obtained. If it be found useful, with a view to an explanation of the -causes of the wealth of nations, to make a distinction between the -labours of agriculturists and manufactures, as compared with menial -servants, followers, and buffoons, the utility of this distinction is -not destroyed, though its perfect accuracy may be impeached, because, in -a few instances, the labour of the menial servant is very similar to -that of the productive labourer. The classification is formed upon the -general character and general effects of one sort of industry as -compared with another; and if, in these respects, the line of -distinction is sufficiently marked, it is mere useless cavilling to -dwell upon particular instances.[36] - -But even in the very case on which Mr. Macculloch lays his principal -stress, the difference is such as fully to warrant a different -classification. It is, no doubt, true that, to have a fire in an attic -in London, it is equally necessary that the coals should be brought up -stairs from the cellar, as that they should be brought up from the -bottom of the coal-mine to the surface: it is equally true that there is -some resemblance between carrying coals from the bottom of a house to -the top, and carrying them from the bottom of a mine to the top; but -there is still a most decided and characteristic difference in the two -cases. - -The miner is paid by the owner or worker of the mine, for the express -purpose of increasing his wealth; the value of the miner’s labour is, -therefore, charged with a profit upon the price of the coals; and the -result of it would regularly enter into any estimate of national wealth. -But when the same owner or worker of coal-mines pays a menial servant -for bringing coals up from the yard to the drawing-room, he pays him for -the express purpose of facilitating and rendering more convenient and -agreeable, the consumption of that wealth which he had obtained through -the instrumentality of the miner. The two instruments are used for -purposes distinctly different, one to assist in obtaining wealth, the -other to assist in consuming it. In an inquiry into the causes of the -wealth of nations, I cannot easily conceive a more distinct and useful -line of demarcation. - -On the same principle, if it be found useful with a view to -explanations, to distinguish, by a different name, the stock destined -for immediate consumption, from the stock employed or kept, with a view -to profit, surely we must not wait to investigate the peculiar talents -of each individual, before we venture to characterise the nature of his -expenditure; and if we find such men as Arkwright and Watt[37] most -naturally and properly reserving, for their immediate consumption, the -means of keeping up a handsome or splendid establishment for the -gratification of themselves, their family, and their friends, make an -exception in their favour, and call such an expenditure an outlay of -capital, instead of a consumption of revenue, as we should call it in -the case of all ordinary persons. Such an inquiry would impose a duty -upon the writers in political economy, which it would be perfectly -absurd to attempt to fulfil, as it would quite defeat the end of the -proposed classifications; and with regard to the distinguished -characters adverted to, it would surely be most unnecessary. In an -estimate of national wealth, the genius of a Newton or a Milton is -necessarily underrated, which only shows that there are other sources of -admiration and delight besides wealth. But such men as Arkwright and -Watt are quite safe in the hands of the political economist. The result -of their genius and labour is exactly of that description which is -estimated in the very great addition which it makes to the capital and -revenue of the country, in the most natural and ordinary acceptation of -these terms. And when the effects of their genius have been estimated in -this way, it would not only lead to inextricable difficulty, but it -would be obviously a double entry, to estimate, in addition, the value -of the men as extraordinary machines. It would be like estimating the -value of a commodity produced by a skilful artificer, and then adding -his high wages, and putting both into an estimate of national wealth. - -But it is difficult to say what may not be called wealth, or what labour -may not be called productive, in Mr. Macculloch’s nomenclature. -According to his view of the subject, any sort of exertion, or any sort -of consumption which tends, however _indirectly_, to encourage -production, ought to be denominated productive; and before we venture to -call the most trivial sort of exercise or amusement, such as blowing -bubbles, or building houses of cards unproductive, we must wait to see -whether the person so employed does not work the harder for it -afterwards.[38] But, not to mention the impossibility of any, the most -useful classification, if such doctrines were admitted, and we were -required to wait the result in each particular case, and make exceptions -accordingly, I will venture to affirm, that if we once break down the -distinction between the labour which is so directly productive of wealth -as to be estimated in the value of the object produced, and the labour -or exertion, which is so indirectly a cause of wealth, that its effect -is incapable of definite estimation, we must necessarily introduce the -greatest confusion into the science of political economy, and render the -causes of the wealth of nations inexplicable. There is no kind of -exertion or amusement which may not, upon this principle, be called -productive. Walking, riding, driving, card-playing, billiard-playing, -&c. &c. may all be, indirectly, causes of production; and according to -Mr. Macculloch, “it is very like a truism, to say, that what is a cause -of production must be productive.”[39] - -But of all the indirect causes of production, the most powerful, beyond -all question, is consumption. - -If man were not to consume, how scanty, comparatively, would be the -produce of the earth. Consumption, therefore, is the main fundamental -cause of production; and if we are to put indirect causation on a -footing with direct causation, as suggested by Mr. Macculloch, we must -rank in the same class, the manufacturer and the billiard player, the -producer and the consumer. - -It is impossible that the science of political economy should not most -essentially suffer from such a confusion of terms. Nothing can be -clearer, than that, with a view to any thing like precision, and the -means of intelligible explanation, it is absolutely necessary to -designate by a different name the labour which is directly productive of -wealth, from that which merely encourages it. - -Another most extraordinary and inconceivable misnomer of Mr. Macculloch -is, the extension of the term labour to all the operations of nature, -and every variety of profits. - -Adam Smith, and all other writers, who have happened to fall in my way, -have meant, by the term labour, when unaccompanied by any specific -adjunct, the exertions of human beings; and by the term wages of labour, -the remuneration, whether in produce or money, paid to those human -beings for their exertions. When Mr. Ricardo stated, that commodities -exchanged with each other according to the quantity of labour worked up -in them, there cannot be the least doubt that he meant the quantity of -human labour immediately employed in their production, together with -that portion of human labour worked up in the fixed and circulating -capitals consumed in aiding such production. And it is undoubtedly true, -referring merely to the relation of one commodity to another, and -supposing all other things the same; that is, supposing profits to be -the same, the proportion of fixed and circulating capitals to be the -same, and the duration of the fixed capitals and the times of the -returns of the circulating capitals the same, that then the relative -values of the commodities will be determined by the quantity of human -labour worked up in each. - -But Mr. Macculloch could not but see that it was scarcely possible to -take up two commodities, of different kinds, in which all these things -would be the same, and, consequently, that such a supposition would be -so inapplicable to the mass of commodities, as to be perfectly useless; -and yet, without such a supposition, the proposition would be obviously -false. - -Instead, however, of correcting Mr. Ricardo’s proposition, as he was -naturally called upon to do, by adding to the human labour worked up in -the commodity, any other element which was found ordinarily to affect -its value, and calling it by its ordinary name, he chose to retain Mr. -Ricardo’s language, but entirely to alter its meaning. There is nothing -that may not be proved by a new definition. A composition of flour, -milk, suet, and stones is a plum-pudding; if by stones be meant plums. -Upon this principle, Mr. Macculloch undertakes to show, that commodities -do really exchange with each other according to the quantity of labour -employed upon them; and it must be acknowledged, that in the instances -which he has chosen he has not been deterred by apparent difficulties. -He has taken the bull by the horns. The cases are nearly as strong as -that of the plum-pudding.[40] - -They are the two following—namely, that the increase of value which a -cask of wine acquires, by being kept a certain number of years untouched -in a cellar, is occasioned by the increased quantity of labour employed -upon it; and that an oak tree of a hundred years’ growth, worth 25_l._, -which may not have been touched by man, beast, or machine for a century, -derives its whole value from labour. - -Mr. Macculloch acknowledges that Mr. Ricardo was inclined to modify his -grand principle, that the exchangeable value of commodities depended on -the quantity of labour required for their production, so far as to allow -that the additional exchangeable value that is sometimes given to -commodities, by keeping them after they have been purchased or produced -until they become fit to be used, was not to be considered as an effect -of labour, but as an equivalent for the profits which the capital laid -out on the commodities would have yielded had it been actually -employed.[41] This was looking at the subject in the true point of view, -and showing that he would not get out of the difficulty by changing the -meaning of the term labour; but Mr. Macculloch says— - -“I confess, however, notwithstanding the hesitation I cannot but feel in -differing from so great an authority, that I see no good reason for -making this exception. Suppose, to illustrate the principle, that a cask -of new wine, which cost 50_l._, is put into a cellar, and that at the -end of twelve months it is worth 55_l._, the question is, whether ought -the 5_l._ of additional value given to the wine to be considered as a -compensation for the time the 50_l._ worth of capital has been locked -up, or ought it to be considered as the value of additional labour -actually laid out on the wine. I think that it ought to be considered in -the latter point of view, and for this, as it appears to me a most -satisfactory and conclusive reason, that if we keep a commodity, as a -cask of wine which has not arrived at maturity, and on which therefore -_a change or effect is to be produced_, it will be possessed of -additional value at the year’s end; whereas, had we kept a cask of wine -which had _already arrived at maturity_, and on which no beneficial or -desirable effect could be produced for a hundred or a thousand years, it -would not have been worth a single additional farthing. This seems to -prove incontrovertibly that the additional value acquired by the wine -during the period it has been kept in the cellar is not a compensation -or return for time, but for the effect or change that has been produced -on it. Time cannot of itself produce any effect, it merely affords space -for really efficient causes to operate; and it is therefore clear, that -it can have nothing to do with the value.”[42] - -On this passage it should be remarked, in the first place, that the -question stated in it is not the main question in reference to the new -meaning which Mr. Macculloch must give to the term labour, in order to -make out his proposition. He acknowledges that the increased value -acquired by the wine is either owing to the operation of nature during -the year in improving its quality, or to the profits acquired by the -capitalist for being deprived for a year from using his capital of -50_l._ in any other way. But in either case Mr. Macculloch’s language is -quite unwarranted. When he uses the expression, “_additional labour -actually laid out upon the wine_,” who could possibly imagine that, -instead of meaning human labour, he meant the processes carried on by -nature in a cask of wine during the time that it is kept. This is at -once giving an entirely new meaning to the term labour. - -But, further, it is most justly stated by Mr. Ricardo, that when the -powers of nature can be called into action in unlimited abundance, she -always works _gratis_; and her processes never add to the value, though -they may add very greatly to the utility of the objects to which they -are applied. - -This truth is also fully adopted and strongly stated by Mr. Macculloch -himself. “All the rude products (he says) and all the productive powers -and capacities of nature are gratuitously offered to man. Nature is not -niggardly or parsimonious; she neither demands nor receives an -equivalent for her favours. An object which it does not require any -portion of labour to appropriate or to adapt to our use may be of the -very highest utility, but as it is the free gift of nature, it is -utterly impossible it can be possessed of the smallest value.”[43] -Consequently, as the processes which are carrying on in the cask of -wine, while it is kept, are unquestionably the free gift of nature, and -are at the service of all who want them, it is utterly impossible, even -if their effects were ten times greater than they are, that they should -add in the smallest degree to the price of the wine. It is, no doubt, -perfectly true, as stated by Mr. Macculloch, that if wine were not -improved by keeping, it would not be worth a single additional farthing -after being kept a hundred or even a thousand years. But this proves -nothing but that, in that case, no one would ever think of keeping wine -longer than was absolutely necessary for its convenient sale or -convenient consumption. - -The improvement which wine derives from keeping is unquestionably the -cause of its being kept; but when on this account the wine-merchant has -kept his wine, the additional price which he is enabled to put upon it -is regulated upon principles totally distinct from the average degree of -improvement which the wine acquires. It is regulated exclusively, as -stated by Mr. Ricardo, by the average profits which the capital engaged -in keeping the wine would have yielded if it had been actively employed; -and that this is the regulating principle of the additional price, and -not the degree of improvement, is quite certain: because it would be -universally allowed that if, in the case supposed by Mr. Macculloch, the -ordinary rate of profits had been 20 per cent., instead of 10 per cent., -a cask of new wine, worth 50_l._, after it had been kept a year, would -have been increased in value 10_l._ instead of 5_l._, although the -processes of nature and the improvement of the wine were precisely the -same in the two cases; and there cannot be the least doubt, as I said -before, that if the quality of wine, by a year’s keeping, were -ordinarily improved in a degree ten times as great as at present, the -prices of wines would not be raised; because, if they were so raised, -all wine-merchants who sold kept wines would be making greater profits -than other dealers. - -Nothing then can be clearer than that the additional value of the kept -wine is derived from the additional amount of profits of which it is -composed, determined by the time for which the capital was advanced and -the ordinary rate of profits. - -The value of the oak tree of a hundred years’ growth is derived, in a -very considerable degree, from the same cause; though, in rich and -cultivated countries, where alone it could be worth 25_l._, rent would -necessarily form a part of this value. - -If the number of acorns necessary on an average to rear one good oak -were planted by the hand of man, they would be planted on appropriated -land; and as land is limited in quantity, the powers of vegetation in -the land cannot be called into action by every one who is in possession -of acorns, in the same way as the improving operations of nature may be -called into action by every person who possesses a cask of wine. But -setting this part of the value aside, and supposing the acorns to be -planted at a certain expense, it is quite clear, that almost the whole -of the remaining value would be derived from the compound interest or -profits upon the advances of the labour required for the first planting -of the acorns, and the subsequent protection of the young trees. A much -larger part, therefore, of the final value of the tree than of the final -value of the wine would be owing to profits. - -Now, if we were to compare an oak tree, worth 25_l._, with a quantity of -hardware worth the same sum, the value of which was chiefly made up of -human labour; and as the reason why these two objects were of the same -value, were to state that the same quantity of labour had been worked up -in them—we should obviously state a direct falsity, according to the -common usage of language; and nothing could make the statement true, but -the magical influence of a new meaning given to the term labour. But to -make labour mean profits, or fermentation, or vegetation, or rent, -appears to me quite as unwarrantable as to make stones mean plums. - -To _measure_ profits by labour is totally a different thing. Adam Smith -always keeps wages, profits, and rent quite distinct; and when he -mentions one of them, never thinks of including in the same term any -other. But he observes, that “labour _measures_ the value not only of -that part of the price of a commodity which resolves itself into labour, -but of that which resolves itself into rent, and of that which resolves -itself into profit.”[44] This is perfectly just; and, in particular, -nothing can be more natural and obvious than to measure by labour the -increase of value which commodities derive from profits; because profits -are a per centage upon the advances, and the main original advances in -the great mass of commodities are the necessary quantity of labour.[45] - -Thus, if a hundred days’ labour be advanced for a year,[45] in order to -produce a commodity, and the rate of profits be 10 per cent., it is -impossible in any way to represent so correctly the increase of value -which the commodity derives from profits as by adding 10 per cent., or -whatever may be the rate of profits, to the quantity of labour actually -employed, and saying, that the completed commodity when sold would be -worth ten days’ labour more than the quantity of labour worked up in it. -On the other hand, if we were ignorant of the rate of profits, but found -that a hundred days’ labour advanced for a year would produce a -commodity which would ordinarily sell for the value of one hundred and -ten days, we might safely conclude that ordinary profits were 10 per -cent. - -Now, if we were to compare two commodities, on each of which a hundred -days’ labour had been employed, and one of them could be brought to -market immediately, the other in not less time than a year, it is quite -obvious, that we could not say that they would exchange with each other -according to the quantity of labour worked up in them; but we evidently -could say, that they would exchange with each other according to the -quantity of labour _and of profits_ worked up in them, and that one of -them would be 10 per cent. more valuable than the other, because profits -had added the value of ten days’ labour to the labour actually employed -upon the one; while there being no profits in the other, its value was -only in proportion to the labour actually employed upon it. - -And in general, while the slightest examination of what is passing -around us must convince us that commodities, under deduction of rent and -taxes, _do not_ ordinarily exchange with each according to the quantity -of human labour worked up in them, the same examination will convince us -that, under the same deduction, they do ordinarily exchange with each -other, according to the quantity of human labour _and of profits_ worked -up in them; and further, that the quantity of human labour worked up in -them, with the profits upon the advances for the time that they have -been advanced, is correctly measured by the quantity of human labour of -the same kind which the commodity so composed will ordinarily command. - -We must carefully, therefore, distinguish between _measuring_ profits by -labour, and meaning profits by labour; and while the first is obviously -justifiable, and may be in the highest degree useful, it must be -allowed, that the latter contradicts all the most obvious rules for the -use of terms: it contradicts the usage of common conversation: it -contradicts the highest authorities in the science of political economy: -it embarrasses all explanations; and it cannot be maintained with -consistency. - -Though Mr. Macculloch’s work affords other instances of a want of -attention, on a point so important in all philosophical discussions, as -appropriate and consistent definitions, I will only notice further, his -use of the term _real_. He applies it to wages, in two senses entirely -different. - -In part iii. p. 294, he says, “But if the variation in the rate of wages -be _real_, and not nominal, that is, if the labourer be getting either a -greater or less _proportion of the produce of his industry_, or a -greater or less quantity of money of invariable value, this will not -happen.” Here, it is evident that Mr. Macculloch applies the term _real_ -to wages, in the sense of proportional wages, that is, as Mr. Ricardo -applied it. - -In part iii. p. 365, Mr. Macculloch says, “If the productiveness of -industry were to diminish, proportional wages might rise, -notwithstanding that _real wages_, or the _absolute amount of the -produce_ of industry falling to the share of the labourer, might be -diminished. Here, the term real wages is used as synonymous with the -absolute amount of produce falling to the share of the labourer, that -is, in the sense in which Adam Smith has applied it.” - -I have already observed, that Adam Smith’s application of the term _real -wages_, to the absolute quantity of the produce earned by the labourer, -seems to be a most natural one; and Mr. Ricardo’s application of the -same term to the _proportion_ of the produce earned by the labourer, a -most unnatural one. Mr. Macculloch, therefore, was quite right, in -introducing the term _proportionate wages_, to express Mr. Ricardo’s -meaning; but why not adhere to it? Why should he, in some places, mean, -by real wages, proportionate wages, and, in other places, something -totally different? - -In the application of the term _real_ to value, Mr. Macculloch adopts -the meaning of Mr. Ricardo. He says, indeed, “that it is to Mr. -Ricardo’s sagacity, in distinguishing between the quantity of labour -required to produce commodities, and the quantity of labour for which -they will exchange, and in showing, that while the first is undeniably -correct as a measure of their real, and generally speaking, of their -exchangeable values, the second, instead of being an equivalent -proposition, is frequently opposed to the first, and consequently, quite -inaccurate, that the science is indebted for one of its greatest -improvements.”[46] - -I should be sorry to think that Mr. Ricardo’s services to the science of -political economy should rest principally upon the frail foundation, on -which they are here placed; a foundation, which, as we have seen, Mr. -Macculloch himself cannot defend, without totally altering the meaning -of Mr. Ricardo’s words. - -This is evident, in various passages of Mr. Macculloch’s work. In his -section on value, part ii. p. 216, he thus expresses himself: “assuming -the _toil and trouble of acquiring any thing_ to be the measure of its -real value, or of the _esteem_ in which it is held by its possessor.” -Again, he says, p. 219, “the real value of a commodity, or _the -estimation in which it is held by its possessor_, is measured or -determined by the quantity of labour required to produce or obtain it.” - -In these two passages, he obviously identifies the real value of a -commodity with the estimation in which it is held. But, surely, in this -case, the term real must be applied as Adam Smith applies it, and not as -Mr. Ricardo applies it? Can it be contended for a moment, that a -commodity, which, on account of the necessary remuneration for profits, -sells for ten per cent. above the value of the human labour worked up in -it, is not held in _higher estimation_, than a commodity which sells for -ten per cent. less, on account of the value of the labour employed upon -it not having been increased by profits? Would it not be absolutely -certain, that if the latter could be obtained by the sacrifice of a -hundred days’ labour, it would be necessary to make the sacrifice of a -hundred and ten days’ labour, or some equivalent for it, in order to -obtain the former? Consequently it follows necessarily, that if the real -value of a commodity be considered as synonymous with the estimation in -which it is held, such value must be measured by the quantity of labour -which it will command, and not the quantity worked up in it. - -Mr. Macculloch thus states Mr. Ricardo’s main proposition:[47] “a -commodity, produced by a certain quantity of labour, will, in the state -of the market now supposed, (that is, when the market is not affected by -either real or artificial monopolies, and when the supply of commodities -is equal to the effectual demand,) uniformly exchange for, or buy any -other commodity, produced by the same quantity of labour.” - -Now, if the term labour be taken in the sense in which it is used by Mr. -Ricardo, the proposition is contradicted by universal experience. If, on -the other hand, the term labour be considered as including profits, the -proposition is true; but only because it is a totally different one from -that of Mr. Ricardo, owing to a most unwarrantable perversion of terms. - -It appears, then, on the whole, that although Mr. Macculloch has at -different times compared Adam Smith to Newton and to Locke, he has, in -the definition and application of his terms, differed from him on almost -all the most important subjects of Political Economy,—in the definition -of wealth, the definition of capital, the definition of productive and -unproductive labour, the definition of profits, the definition of labour -simply, and the definition of _real value_, though, in the last -instance, it is rather professedly than substantially.[48] - -However highly I may respect the authority of Adam Smith, and however -inconvenient at first a great change of terms and meanings must -necessarily be, yet if it could be made out that such changes would -essentially facilitate the explanation and improvement of the science of -political economy, I should have been the last to oppose them. But after -considering them with much attention, I own I feel the strongest -conviction that they are eminently the reverse of being _useful_, with a -view to an explanation of the _nature and causes of the wealth of -nations_; or, in more modern, though not more appropriate phrase, the -_production, distribution, and consumption of wealth_. - -I have too much respect for Mr. Macculloch to suppose that he has -differed from Adam Smith on so many points with the intention of giving -to his work a greater air of originality. This is, no doubt, a feeling -which not unfrequently operates in favour of changes; but I do not think -it did on the present occasion. I should rather suppose that he adopted -them in consequence of seeing some objections to Adam Smith’s -definitions, without being sufficiently aware that, in the less strict -sciences, nothing is so easy as to find some objection to a definition, -and nothing so difficult as to substitute an unobjectionable one in its -place. - -Whether the definitions substituted for those of Adam Smith on the -present occasion have removed the objections to them which Mr. -Macculloch may have felt, I cannot be a competent judge; but even -supposing them to have done this, I think I can confidently affirm that -they have left other objections, beyond all comparison greater and more -embarrassing. And on this point I would beg those of my readers who are -inclined to pay attention to these subjects, seriously and candidly to -trace the consequences to the science of political economy, in regard to -its explanation and practical application, of adopting Mr. Macculloch’s -definitions. They are not, indeed, all his own; but the very -extraordinary extension which he has given to the term capital, the -making of no distinction between directly productive consumption and -consumption that is only indirectly productive; and the extension of the -term labour, without any adjunct, to mean profits, fermentation, and -vegetation, belong, I believe, exclusively to Mr. Macculloch; and, I -think, it will be found that they are beyond the rest strikingly -calculated to introduce uncertainty and confusion into the science. - -The tendency of some of our most popular writers to innovate without -improving, and their marked inattention to facts, leading necessarily to -differences of opinion and uncertainty of conclusion, have been the main -causes which have of late thrown some discredit on the science of -political economy. Nor can this be a matter of much surprise, though it -may be of regret. - -At a period, when all the merchants of our own country, and many in -others, find the utmost difficulty in employing their capitals so as to -obtain ordinary profits, they are repeatedly told that, according to the -principles of political economy, no difficulty can ever be found in -employing capital, if it be laid out in the production of the proper -articles; and that any distress which they may have suffered is -exclusively owing to a wrong application of their capital, such as “the -production of cottons, which were not wanted, instead of broad cloths, -which were wanted.”[49] They are, further, gravely assured, that if they -find any difficulty in exchanging what they have produced, for what they -wish to obtain for it, “they have an obvious resource at hand; they can -abandon the production of the commodities which they do not want, and -apply themselves directly to the production of those that they _do_ -want, or of substitutes for them;”[50] and this consolatory -recommendation is perhaps addressed to a merchant who is desirous of -obtaining, by the employment of his capital at the ordinary rate of -profits, such an income as will enable him to get a governess for his -daughters, and to send his boys to school and college. - -At such times, assertions like these, and the proposal of such a remedy, -appear to me little different from an assertion, on supposed -philosophical principles, that it _cannot_ rain, when crowds of people -are getting wet through, and the proposal to go without clothes in order -to prevent the inconvenience arising from a wet coat. If assertions so -contrary to the most glaring facts, and remedies so preposterously -ridiculous, in a civilized country,[51] are said to be dictated by the -principles of political economy, it cannot be matter of wonder that many -have little faith in them. And till the theories of popular writers on -political economy cease to be in direct opposition to general -experience; and till some steadiness is given to the science by a -greater degree of care among its professors, not to alter without -improving,—it cannot be expected that it should attain that general -influence in society which (its principles being just) would be of the -highest practical utility. - - - - - CHAPTER VIII. - ON THE DEFINITION AND USE OF TERMS BY THE AUTHOR OF “A CRITICAL - DISSERTATION ON THE NATURE, MEASURE, AND CAUSES OF VALUE.” - - -It might be thought that I was not called upon to notice the deviations -from the most obvious rules for the use of terms in a _Critical -Dissertation on the Nature, Measure, and Causes of Value_, by an -anonymous writer. But the great importance of the subject itself at the -present moment, when it may be said to be _sub judice_, the tone of -scientific precision in which the dissertation is written, -notwithstanding its fundamental errors, and the impression which it is -understood to have made among some considerable political economists, -seem to call for and justify attention to it. - -The author, in his preface, observes, that “Writers on political economy -have generally contented themselves with a short definition of the term -value, and a distinction of the property denoted by it into several -kinds, and have then proceeded to employ the word with various degrees -of laxity. Not one of them has brought into distinct view the nature of -the idea represented by this term, or the inferences which a full -perception of its meaning immediately suggests; and the neglect of this -preliminary has created differences of opinion and perplexities of -thought which otherwise could never have existed.”[52] - -Now it appears to me, that the author, at his first setting out, has in -an eminent degree fallen into the very errors which he has here -animadverted upon. - -He begins by stating, very justly, that “value, in its ultimate sense, -appears to mean the esteem in which any object is held;” and then -proceeds to state, in the most lax and inconsequent manner, that “It is -only when objects are considered together as subjects of preference or -exchange that the specific feeling of value can arise. When they are so -considered, our esteem for one object, or our wish to possess it, may be -equal to, or greater, or less than our esteem for another; _it may, for -instance, be doubly as great_, or, in other words, we would give one of -the former for two of the latter. So long as we regarded objects singly, -we might feel a great degree of admiration or fondness for them, but we -could not express our emotions in any definite manner. When, however, we -regard two objects, as subjects of choice or exchange, we appear to -acquire the power of expressing our feelings with precision; we say, for -instance, that one _a_ is, in our estimation, equal to two _b_.... The -value of _a_ is expressed by the quantity _b_, for which it will -exchange, and the value of _b_ is, in the same way, expressed by the -quantity of _a_.”[53] - -So, then, it appears, as a consequence of value, meaning the esteem in -which an object is held, that if there were two sorts of fruit in a -country, called _a_ and _b_, both very plentiful in the summer, and both -very scarce in the winter; and if in both seasons they were to bear the -same relation to each other, the feelings of the inhabitants with regard -to the fruit _a_ would be _expressed with precision_, by saying that, as -it would always command the same quantity of the fruit _b_, it would -continue to be of the same value—that is, would be held in the same -estimation in summer as in winter. - -It appears, further, that in a country where there were only deer, and -no beavers or other products to compare them with, the specific feeling -of value for deer could not arise among the inhabitants; although, on -account of the high esteem in which they were held, any man would -willingly walk fifty miles in order to get one!! These are, to be sure, -very strange conclusions, but they follow directly from the previous -statements. - -The author, however, nothing daunted, goes on to say, that “If from any -consideration, or number of considerations, men esteem one _a_ as highly -as two _b_, and are willing to exchange the two commodities in that -ratio, it may be correctly said that _a_ has the power of commanding two -_b_, or that _b_ has the power of commanding half of _a_.” - -“The definition of Adam Smith, therefore, that the value of an object -expresses the power of purchasing other goods which the possession of -that object conveys, is substantially correct; and as it is plain and -intelligible, it may be taken as the basis of our subsequent reasonings -without any further metaphysical investigation.”[54] - -In a Critical Dissertation on Value, which is introduced with a heavy -complaint against all preceding political economists for neglecting the -preliminary labour necessary to give a full perception of its meaning, -it might naturally have been expected, that previous to the final -adoption of the meaning in which it was intended to use the term, -throughout the dissertation, the consideration, or number of -considerations, which induce men to prefer one object to another, or to -give two _b_ for one _a_, should be carefully investigated. But nothing -of this kind is done. A definition of the value of an object by Adam -Smith, which, as he afterwards clearly shows, requires explanation and -modification, is arbitrarily adopted, or, in the language of the author, -is “taken as the basis of his subsequent reasonings, without any further -metaphysical investigation.” - -That this first general description of value in exchange by Adam Smith -does not, without further explanation, convey to the reader the -prevailing meaning which he himself attaches to the term, is obvious in -many passages of his work, and particularly in his elaborate inquiry -into the value of silver during the four last centuries. He there shows, -in the most satisfactory manner, that, in the progress of cultivation -and improvement, there is a class of commodities, such as cattle, wood, -pigs, poultry, &c., which, on account of their becoming comparatively -more scarce and difficult of attainment, necessarily rise in value; yet -he particularly states, that this rise in their value is not connected -with any degradation in the value of silver,[55] although it is obvious -that, other things being the same, a pound of silver would have a -smaller power of purchasing other goods. - -Nothing, indeed, can be clearer than that this general description of -value requires further explanation. There is the greatest difference -imaginable between an increased power in any object of purchasing other -goods, arising from its scarcity and the increased difficulty of -procuring it; and the increase of its power to purchase other goods -arising from the increased plenty of such goods and the increased -facility of procuring them. Nor is it easy to conceive any distinction -more vital to the subject of _value_, as the term is generally -understood, or more necessary to “a full perception of its meaning.” - -I cannot but think, therefore, that the author, under all the -circumstances of the case, was not justified in adopting this definition -of Adam Smith without further investigation. - -But the adoption of this definition by the author in so unceremonious a -manner, though quite inconsistent with the declarations in the preface, -and most unpromising in regard to any improvement of the science which -might have been expected from the dissertation, is by no means the -gravest offence which he has committed in the opening of his subject. - -Adam Smith’s definition, taken as it stands, however imperfect it may -be, would still serve as a rough but useful standard of value in those -cases where, in using the most ordinary forms of expression, some kind -of standard is tacitly referred to, and no other more accurate one had -been adopted. - -But how is this definition of Adam Smith to be interpreted? If we -understand it in the sense usually conveyed by the terms employed, it is -impossible to doubt that by the power of purchasing other goods is meant -the power of purchasing other goods generally. Who, then, could have -conceived before-hand that the author would have inferred from this -definition that he was justified in representing the power of purchasing -other goods by the power of purchasing any one sort of goods which might -first come to hand?—so that, considering the value of money in this -country to be proportioned to its general power of purchasing, it would -be correct to say that the value of an ounce of silver was proportioned -to the quantity of apples which it would command; and that when it -commanded more apples, the value of silver rose—when it commanded fewer -apples, the value of silver fell. - -It is, no doubt, quite allowable to compare any two commodities whatever -together in regard to their value in exchange, and, among others, silver -and apples. It is also allowable to say, though it would in general -sound very strange, that the value of an ounce of silver, _estimated in -apples_, is the quantity of apples it will command, provided that, by -thus using the qualifying expression _estimated in apples_, immediately -after the word value, we distinctly give notice to the reader that we -are not going to speak of the exchangeable value of silver generally, -according to the definition of Adam Smith, but merely in the very -confined sense of its relation to one particular article. But if, -without this distinct notice to the reader, we simply say that the value -of an ounce of silver is expressed by the quantity of apples for which -it will exchange, or, in the words of the author, that “the value of _a_ -is expressed by the quantity of _b_, for which it will exchange,” -nothing can be more clear than that we use the term value in a manner -totally unwarranted by the previous definition, that is, in a sense -quite distinct from that in which Adam Smith uses it in the description -of value adopted by the author. - -Putting the corn and the circulating medium of a country out of the -question, the relations of which to labour and the costs of producing -various commodities are tolerably well known, I think no one, in -ordinary conversation, has ever been heard to express the general power -of purchasing by the power of purchasing some one particular commodity. -I certainly, at least, myself never recollect to have heard these two -very distinct meanings confounded. It would, indeed, sound very strange, -if a person returning from India, on being asked what was the value of -money in that country, were to mention the quantity of English broad -cloth which a given quantity of money would exchange for, and to infer, -in consequence, that the value of money was lower in India than in -England. - -In regard to the opinions and practice of other writers on political -economy, most of them have considered the general power of purchasing, -and the power of purchasing a particular commodity as so essentially -distinct, that they have given them different names. The only authority -quoted with approbation by the author, is Colonel Torrens, whose views, -as to the nature of value, appear to him, he says, to be sounder than -those of any other writer. Yet, what does Colonel Torrens say on this -subject?—“The term exchangeable value expresses the power of purchasing -with respect to commodities in general. The term price denotes the same -power with respect to some particular commodity, the quantity of which -is given. Thus, when I speak of the _exchangeable value_ of cotton as -rising or falling, I imply, that it will purchase a greater or less -quantity of corn, and wine, and labour, and other marketable -commodities; but when I talk of the _price_ of cotton as rising or -falling, I mean, that it will purchase a greater or less quantity of -some one particular commodity, such as corn, or wine, or labour, or -money, which is either expressed or understood. Exchangeable value may -rise, while price falls, or fall while price rises. For example; if -cotton were, from any cause, to acquire twice its former power of -purchasing, with respect to goods in general, while gold, the particular -commodity in which the price of cotton is expressed, rose in a still -higher ratio, and acquired four times its former power in the market, -then, though the exchangeable value of cotton would be doubled, its -price would fall one half. Again; if cotton would purchase only half the -former quantity of commodities, while it purchased twice the quantity of -some particular commodity, such as corn, or wine, or labour, or money, -then its exchangeable value would have sunk one half, while its price, -as expressed in corn, or wine, or labour, or money, became double. And -again; if cotton, and the particular commodity in which price is -expressed, should rise or fall in the same proportion with each other, -then the exchangeable value of cotton, or its general power of -purchasing, would fluctuate, while its price remained stationary.”[56] - -It appears then, that, whether Colonel Torrens’s view of value be quite -correct or not, he draws the most marked line of distinction possible -between the power of purchasing generally, and the power of purchasing a -particular commodity, and is decidedly of opinion, that the latter, -which is the sense in which the author uses the term value, should not -be called value, but price. The authority of Colonel Torrens, therefore, -whose views on the subject of value the author considers as so sound, is -directly against him. - -But not only does Colonel Torrens attach a very different meaning to the -term value, from that in which it is used by the author throughout the -greatest part of his work, but the author himself, in his notes and -illustrations,[57] has given extracts from almost all the distinguished -writers in political economy, expressly for the purpose of showing the -universality of an opinion respecting the nature and measure of value -directly opposed to his own. The writers to whom he refers, are Adam -Smith, Sir James Stuart, Lord Lauderdale, M. Storch, M. Say, Mr. -Ricardo, myself, Colonel Torrens, Mrs. Marcet, Mr. Mill, the Templar’s -Dialogues, and Mr. Blake. - -In the case of a proposition the nature of which admits of a logical -proof, authority is of no consequence; but in a question which relates -to the meaning to be attached to a particular term, it is quite -incredible that any person should thus have ventured to disregard it. - -Much, however, of inconsistency, of illogical inference, and disregard -of authority, might have been forgiven, if the proposed change in the -meaning of the term value would introduce a much greater degree of -clearness and precision into the language of political economy, and, in -that way, be eminently useful to the progress of the science. - -But, what would be the consequence of adopting the meaning which the -author attaches to the term value, and of allowing, according to his own -words, that “the value of _a_ is expressed by the quantity of _b_ for -which it will exchange, and the value of _b_ is, in the same way, -expressed by the quantity of _a_?”[58] One of these consequences is -strikingly described in the following passage of the author’s chapter on -_Real and Nominal Value_, a distinction which he is pleased to call -unmeaning. “The value of a commodity denoting its relation in exchange -to some other commodity, we may speak of it as money-value, corn-value, -cloth-value, according to the commodity with which it is compared: and -hence there are a thousand different kinds of value, as many kinds of -value as there are commodities in existence, and all are equally real -and equally nominal.”[59] - -This is precision with a vengeance. Now, though I am very far from -intending to say that the writers on political economy have been -sufficiently agreed as to the precise meaning which they attach to the -terms _value of a commodity_, when no express reference is made to the -object with which it is to be compared, yet, by drawing a marked line of -distinction between what has been called the real value of commodities -and their nominal value, or, more correctly, between their _value_ and -their _price_, they have avoided the prodigious confusion which would -arise from a commodity having a thousand or ten thousand different -values at the same time. Whenever they use the term value of a commodity -alone, and speak of its rising or falling, if they do not mean -money-price, they refer either to its power of purchasing generally, or -to something expressive of its elementary cost of production. - -In either case, some general and very important information is -communicated; but the value of a commodity, in the sense understood by -the author, might be expressed a hundred different ways, without -conveying a rational answer to any person who had inquired about it. - -Further; the use of the term _value_, in the sense understood by the -author, is entirely superfluous. It has exactly the same meaning as the -term _price_, except that the term price has this very decided advantage -over it, namely, that when the price of a commodity is mentioned, -without an express reference to any other object in which it is to be -estimated, political economists have universally agreed to understand it -as referring to money. This is a prodigious advantage in favour of the -term price, and tends greatly to promote both facility and precision in -the language of political economy. When I ask, what is the _price_ of -wheat in Poland? no one has the least doubt about my meaning, and I -should, without fail, get the kind of answer I intended. But if I asked, -what was the _value_ of wheat in Poland? I might, according to the -author, be answered in a thousand different ways, all equally proper, -and yet not one of the answers be of the kind I wanted. Of course, -whether I use the term value or price, if I always expressly subjoin the -object to which I mean to refer, it will be quite indifferent to which -term I resort. But it is vain to suppose that the public will submit to -such constant and unnecessary circumlocution. It would quite alter the -language of political economy; and the kind of abbreviation which has -taken place in application to the term price could not take place in -regard to value, according to the doctrines of the author; because, when -the _value_ of a commodity is used alone, like the price of a commodity, -no one object rather than another is entitled to a preference for the -expression of that value. The author says distinctly in a note,[60] that -money-value has no greater claim to the general term _value_ than any -other kind of value. It is quite clear, therefore, that if the term -value is only to be applied in the sense in which it is applied by the -author, it would be much better to exclude it at once from the -vocabulary of political economy as utterly useless, and only calculated -to produce confusion. - -It may be further observed, that the sense in which the author proposes -to apply the term value, is so different from the sense in which it is -understood in ordinary conversation, and among the best writers, that it -would be quite impossible to maintain it with consistency. The author -himself, however obstinately, at times, he seems to persevere in the -peculiar meaning which he has given to the term value, frequently uses -it by itself, without reference to any particular article in which he -proposes to express it. Even in the titles of some of his chapters he -does this; and when in Chapter XI. he discusses _the distinction between -value and riches_, and in Chapter XI. _the causes of value_, we are -entitled to complain, that he has not acted according to the -instructions which he has given to others, and told us, either -expressly, or by implication, in what article the value here mentioned -is to be expressed. - -Again; when he mentions the value of that corn which is produced on -lands paying rent, and when he speaks, as he frequently does, of the -value of capital,[61] he does not tell us in what he means to express -the value of corn, or of capital, although he thinks that such a -reference, either expressed or implied, is always necessary, and -particularly says, “In the preceding pages it has been shown, that we -can express the value of a commodity only by the quantity of some other -commodity for which it will exchange.”[62] - -The meaning, therefore, which he gives to the term value is such, that -he cannot and does not maintain it consistently himself, much less can -he expect that others should so maintain it. - -It appears, then, that the author has arbitrarily adopted a meaning of -the term value quite unwarranted by the usage of ordinary conversation, -directly opposed to the authority of the best writers on political -economy, pre-eminently and conspicuously useless; and of such a nature -that it cannot be maintained with consistency. - -And what does he do with his definition after so adopting it? - -He applies it to try the truth of a number of propositions advanced by -different writers, who, according to his own showing, have used the term -in a very different sense. - -This, I own, appears to me much the same kind of proceeding as if a -person were to define a straight line to be something essentially -different from a line lying evenly between its two extremes, and then -were gravely to apply it to one proposition after another of Euclid, and -show, as might easily be done, granting the definition, that the -conclusions of the Grecian geometer were all wrong. - -The perseverance with which the author proceeds gravely to apply his -peculiar definition of value to other writers, who have defined it -differently, is truly curious, and must be allowed to be a great waste -of time and labour. If, as he says he has repeatedly stated, “to know -the value of an article at any period is merely to know its relation in -exchange to some other commodity;”[63] and if, as I believe, no previous -writer, in referring to the value of an article at any period ever -thought or said that it could be expressed by its relation in exchange -to any other contemporary commodity indifferently, it might at once be -presumed, without further trouble, that almost all former propositions -involving the term value would turn out to be either false or futile. It -was quite unnecessary for him, therefore, to go into the detail; but as -he has done so, it may be useful to follow him in some of his -conclusions, as it may assist in drawing attention to a subject which -lies at the bottom of many of the difficulties in political economy, and -has not been sufficiently considered. - -One of the first effects of the author’s definition is to destroy the -distinction between what many writers of great authority have called -_real value_, and _nominal value_. I have already had occasion to -observe, that Adam Smith, by applying the term _real_ wages to express -the necessaries and conveniencies of life earned by the labourer, had -precluded himself from the power of applying it consistently to the -_value_ of a commodity, in order to express its power of commanding -labour; because it is well known that the same quantity of labour will -both produce and command, at different times and under different -circumstances, a very different quantity of the necessaries and -conveniencies of life. But putting aside for the present this -acknowledged inconsistency of Adam Smith, and taking real value as -distinguished from nominal in the sense in which the writers who have so -applied it intended, the author’s observations on these writers are not -a little extraordinary. - -After noticing the doctrines of Adam Smith, Mr. Ricardo, and myself, on -the subject of real and nominal value, he says, “After the disquisition -on the nature of value in the preceding chapter, the distinction of it -in this way must appear to be merely arbitrary and incapable of being -turned to any use. What information is conveyed or what advance in -argument is effected, by telling us that value estimated in one way is -real, but in another, is nominal?”[64] He afterwards goes on to say, in -reference to a passage in the Templar’s Dialogues, “It would not, -however, probably have been written, had the author attended to the -simple fact, that value must always imply value in something, and unless -that something is indicated, the word conveys no information. Now, as -the terms nominal and real do not denote anything in this way, they -convey no precise information, and are liable to engender continual -disputes, because their meaning is arbitrarily assumed.”[65] - -These appear to me, I confess, to be very extraordinary observations. It -must surely be allowed, that to compare a commodity either with the mass -of other commodities, or with the elementary costs of production, is -most essentially distinct from comparing it with some particular -commodity named. And if so, writers are bound so to express themselves -as to convey to their readers, which of the two they intend to refer to. -Whether these writers have chosen the very best terms to express these -ideas is another question; but that the ideas themselves are quite -different, and that it is essential to the language of political economy -that they should be distinguished by different terms, cannot admit of a -doubt. It appears to me, therefore, almost inconceivable that the author -should say, “What information is conveyed, or what advance in argument -is effected, by telling us, that value estimated in one way is real, but -in another, is nominal?” It might as well be said, that, in speaking of -our planetary system, no information is conveyed by using different -adjuncts to the term distance, in order to distinguish between the -distances of the planets from the sun, and the relations of their -distances to each other. And supposing it had been the habit of most -writers to call the first distances real and the second relative, would -it not be most strange to say that the distinction in this way of -distance into two kinds is incapable of being turned to any use, as all -distance is relative? - -The author is repeatedly dwelling upon the relative nature of value, as -if he alone had considered it in this light; but no other writer that I -have met with has ever appeared to me to use the term value without an -intelligible reference expressed or implied to something else; and when -the author says, in the passage above quoted, that value must always -imply value in something which ought to be indicated, and that the terms -nominal and real do not denote anything in this way, he appears to me, I -own, to assert what is entirely without foundation. M. Say, for -instance, in a passage quoted by the author in his notes,[66] observes, -“There is this difference between a real and a relative variation of -price; that the former is a change of value arising from an alteration -of the changes of production; the latter a change arising from an -alteration in the ratio of value of one particular commodity to other -commodities.” Now is it possible to say with truth, that the real and -relative values here described do not both refer to other objects, and -that these objects are not so different as to require to be -distinguished? - -The author may, perhaps, say, that if both expressions are meant to be -relative, why use the terms real, positive, or absolute? The answer is, -that the usage of our language allows it, and that nothing is more -common than the use of the terms real, positive, and absolute, in -contradistinction to relative, when the former terms have relation to -some more general object, particularly to anything which is considered -as a standard, whether accurate or inaccurate. - -Thus, in the illustration before adverted to, although all distances are -relative, it would be quite justifiable to say, that if the earth was -moving towards the farthest part of her orbit, her positive, absolute, -or real distance from the sun was increasing, although her distance -relatively to that of some other planet or comet, moving from the sun -with greater velocity, was diminishing. Tall and short, rich and poor, -are relative terms: yet surely we should be warranted in saying, that -Peter was not only taller than his three brothers, but, really or -positively, a tall man. In the first case he is said to be tall in -relation to three individuals; but a stranger, knowing nothing of the -height of these individuals, would obtain very little information from -the statement. He would not know whether Peter was four feet, five feet, -or six feet high: in the latter case, Peter is said to be tall in -relation to the average or standard height of the race of men spoken of; -and though the stranger might not have in his mind a perfectly accurate -notion of this standard, yet he would immediately have before him the -height of Peter within a few inches, instead of a few feet. - -On the same principle, would it not be most ridiculous for any person -gravely to propose that as rich and poor are relative terms, no one -should ever call a man rich without mentioning at the same time the -individual in relation to whom he was rich? It is perfectly well known, -that when, in any particular place or country, a man is said to be a -rich man, the term refers to a sort of loose standard, expressing either -a certain command over the goods of this life, or a certain superiority -in this respect over the mass of the society, which superiority it had -been the custom to mark by this expression. In either case, it would be -allowable to call the man really or positively rich. But if the proposed -change were adopted, and instead of saying that Mr. John Doe was a rich -man, we could only say that he was rich in relation to Mr. Richard Roe, -as poor Richard might be little better than a pauper, Mr. Doe might, -after all, be in very narrow circumstances. - -It is clear, therefore, not only that the terms real and positive may be -legitimately applied in contradistinction to relative, when a relation -to some more general object or standard is intended; but that the -difference between the two sorts of relations is of the utmost -importance, and ought to be carefully distinguished. It is not easy to -conceive, therefore, how any writer could suppose that the language of -political economy would be improved by a definition which would destroy -this distinction, and make as many kinds of value as there are -commodities, all equally real and equally nominal. In reference to all -other political economists, whenever they have used the term value of a -commodity, without specifically mentioning the object in which they -intended to estimate it, I have always felt myself authorised, -consistently with their general language, to consider them as referring -tacitly either to the mass of commodities, to the state of the supply -compared with the demand, or to the elementary costs of production. But -when the author of the Critical Dissertation uses the term value, which -he does frequently without specific application, his general doctrine -must leave the reader quite at a loss to conjecture what he means. - -Proceeding on the same strange misapprehension or perversion of the -language of other writers, the author says of the writer of the -Templar’s Dialogues, “Following Mr. Ricardo, he appears entirely to lose -sight of the relative nature of value, and, as I have remarked in the -preceding chapter, to consider it as something positive and absolute; so -that if there were only two commodities in the world, and they should -both, by some circumstances or other, come to be produced by double the -usual quantity of labour, they would both rise in real value, although -their relation to each other would be undisturbed. According to this -doctrine every thing might at once become more valuable by requiring at -once more labour for its production; a position utterly at variance with -the truth, that value denotes the relation in which commodities stand to -each other as articles of exchange. Real value, in a word, is on this -theory considered as the independent result of labour; and, -consequently, if under any circumstances the quantity of labour is -increased, the real value is increased. Hence the paradox, that it is -impossible for _a_ continually to increase in value—in real value -observe, and yet command a continually decreasing quantity of _b_, and -this although they were the only two commodities in existence. For it -must not be supposed that the author means that _a_ might increase in -value in relation to a third commodity _c_, while it commanded a -decreasing quantity of _b_; a proposition which is too self-evident to -be insisted on; but he means that _a_ might increase in a kind of value -called real, which has no reference to any other commodity whatever.” -Apply to the position of this author the rule recommended in the last -chapter; inquire, when he speaks of value, value in what? and all the -possible truth on the subject appears in its naked simplicity. He adds -afterwards again, “value must be value in something, or in relation to -something.”[67] - -Now let the reader recollect that this passage was written by a person -who sets out with saying that value in its ultimate sense appears to -mean the esteem in which any object is held, and it will appear most -remarkable. - -In the first place, what can the author possibly mean by speaking of the -kind of value here called _real_, as if it had no relation to any thing -else? The Templar, it must surely be allowed, has explained himself with -sufficient clearness that by real value he means value in relation to -the producing labour. - -Secondly, I would ask the writer, who says that the value of a commodity -means the esteem in which it is held, whether the labour required to -produce a commodity does not, beyond all comparison, express more nearly -the esteem in which the commodity is held, than a reference to some -other commodity the producing labour of which is utterly unknown, and -may therefore be one day or one thousand days? - -I have already stated that I decidedly differ from Mr. Ricardo, and it -follows of course that I differ equally from the Templar, in thinking -that the value of a commodity may be correctly expressed by referring to -the producing labour alone; but compared with the expression of value -proposed to be substituted by the author of the Critical Dissertation, -it has a prodigious superiority. Let us try both, for instance, by the -touch of the talisman recommended by the author himself. Let the -question be the value of silver before the discovery of the American -mines; and let us ask, as directed, value in relation to what? The -Templar would answer, value in relation to the producing labour; and -though in this answer a material ingredient of elementary value is -omitted, yet I should collect from it some tolerable notion of the -esteem in which silver was held at that time; and if I found, on -comparison, that the producing labour was now three or four times less, -I should be able, with tolerable certainty, to infer, that silver had -grown more plentiful; and that four centuries ago a given quantity of -silver was held in much greater esteem, that is, people would make a -much greater sacrifice in order to obtain it, than at present. - -On the other hand, if the author of the Critical Dissertation should -speak of the value of silver before the discovery of the American mines, -and we should ask, value in relation to what? the answer would be, “I -have repeatedly stated that to know the value of an article at any -period is merely to know its relation in exchange to some other -commodity;” consequently, we should know the value of silver in the -fifteenth century, or the esteem in which it was held, by comparing it -with calicoes, although we might know nothing at all about the -difficulty or facility of obtaining calicoes at that time. And if we -were to proceed, as in the former case, and, with a view to ascertain -the esteem in which silver was held in the fifteenth century, as -compared with the esteem in which it is held in the nineteenth, were to -mark the relation of silver to calicoes in the two periods, it would -appear, that as, owing to the improvements in the cotton machinery, a -given quantity of silver would command more calicoes now than formerly, -silver should be considered as being held in higher estimation now than -four centuries ago. Yet no person, I believe, not even the author -himself, would agree to this conclusion. He would probably say that the -comparison was merely between silver and calicoes, and had nothing to do -with anything else. If this be all he means, why does he confuse his -readers by stating that value means the esteem in which a commodity is -held? and why does he say that to know the value of an article at any -period is merely to know its relation in exchange to some other -commodity? If all he means by the value of a commodity is its relation -to some other, why did he not at once say, without ever talking about -esteem, that the value of one commodity in relation to any other was -expressed by the quantity of that other for which the first would -exchange; and that, when the first rose in relation to the other, the -other would always fall proportionably in relation to the first? If he -had so expressed himself, his proposition would have obtained universal -consent; it would have been a truism which had never been denied. But as -long as he continues to talk of the esteem in which commodities are -held, his readers must consider him as peculiarly inconsistent, if, on -the supposition of there being only two commodities in existence, he -prefers measuring the esteem in which one of them is held by its -relation to the other, rather than by its relation to the producing -labour. And they must further think, that while he continues to state -that “to know the value of an article at any period is merely to know -its relation in exchange to some other commodity,” he is stating a -proposition which, according to the usual sense in which the word value -is understood when so placed, is totally unfounded. No man, I believe, -but the author would venture to say that he should know the value of -silver four hundred years ago by knowing the quantity of calicoes which -an ounce of silver would then command. - -The sixth chapter of the author is entitled “On Measures of Value;” and -the discussion of this subject leads him to such strange conclusions, -that one cannot but feel the greatest surprise at his not seeing that he -must have been proceeding in a wrong course. He ridicules the notion of -its being necessary that a commodity should possess invariable value, in -order to form a perfect measure of value. Such a notion, which he says -in a note has been entertained by all the most distinguished writers in -political economy, he civilly calls an utter absurdity. According to the -doctrines and language of the author, no relation exists between the -value of a commodity at one time and the value of the same sort of -commodity at another; and “the only use of a measure of value, in the -sense of a medium of comparison, is between commodities existing at the -same time.”[68] - -“If this be so, it is, no doubt, quite absurd in political economists to -look for anything approaching towards an invariable measure of value, or -even to talk of one commodity or object being more steady or constant in -its value than another. At the same moment, bags of hops are as good a -measure of the relative value of commodities as labour or money. With -regard to money, indeed, the author particularly observes, that from the -relations between corn and money, at two different periods, no other -relation can be deduced; we do not advance a step beyond the information -given. * * We cannot deduce the relation of value between corn at the -first, and corn at the second period, because no such relation exists, -nor, consequently, can we ascertain their comparative power over other -commodities. If we made the attempt, it would be, in fact, endeavouring -to infer the quantities of corn which exchanged for each other at two -different periods of time, a thing obviously absurd. And further, money -would not be here discharging a particular function any more than the -other commodity. We should have the value of corn in money and the value -of money in corn, but one would be no more a measure or medium of -comparison than the other.”[69] - -From all this it follows necessarily that we must on no account say, -that butter has been rising during the last month; if we do, we shall be -convicted of the absurdity of proposing to exchange the butter which was -consumed three weeks ago with the butter now on our table, in order to -ascertain that a pound of the former will command less than a pound of -the latter. For the same reason, we must not on any account say, that -the value of wheat fell very greatly from 1818 to 1822, and rose -considerably from 1822 to 1826. We must not venture to compare the value -of the advances of a master manufacturer with the value of his returns; -or, in estimating the rate of his profits, presume to prefer money, -which generally changes slowly and inconsiderably in its power of -setting labour to work, to hops, which change so rapidly and greatly, -&c. &c. In short, the whole of the language and inferences of the -business of buying and selling, and making money, must be altered and -adapted to the new definitions and doctrines. - -It is quite astonishing that these consequences should not have startled -the author, and made him turn back. If he had but adhered to his first -description of value, namely, the esteem in which an object is held; or -even if he had interpreted his second definition of value, namely, “the -power of purchasing other goods,” according to the ordinary and natural -meaning of the expression, he could never have been led into the strange -mistake of supposing, that when people have talked of the value of a -commodity at one period, compared with the value of the same kind of -commodity at another, they could only refer to the rate at which they -would actually exchange with each other, which, as no exchange could in -such a case take place, would be absurd. What then did they mean? They -obviously meant either to compare the esteem in which a commodity was -held at one period with the esteem in which it was held at another, -founded on the state of its supply compared with the demand, and -ordinarily on its costs of production; or to compare the general power -of purchasing which a commodity possessed at one period with its general -power of purchasing at another period. And will the author venture to -assert, that there are not some objects better calculated than others to -measure this esteem, or measure this general power of purchasing at -different periods? Will the author maintain, that if, in reference to -two periods in the same country, a commodity of a given kind will in the -second period command double the quantity of labour that it did in the -first, we could not with much more certainty infer that the esteem for -it had greatly increased, than if we had taken calicoes or currants as -the medium of comparison? Or would the author, upon a little reflection, -repeat again what he says in the passage last quoted, that from the -relations between corn and money in two successive seasons, we can -deduce no other relation, * * “money would not be here discharging a -particular function any more than the other commodity. We should have -the value of corn in money and the value of money in corn, but one would -be no more a measure or medium of comparison than the other.”[70] - -To me, at least, these statements appear utterly unfounded. If the -money-price of corn has risen this year to double what it was in the -last, I can infer, with almost absolute certainty, that corn is held in -much higher estimation than it was. I can be quite sure that the -relation of corn to other articles, besides money, has most essentially -changed, and that a quarter of corn will now command a much greater -quantity of labour, a much greater quantity of cloth, a much greater -quantity of hardware, a much greater quantity of hats and shoes, than it -did the year before: in short, that it will command nearly double the -quantity of all other commodities which are in their natural and -ordinary state, and have not been essentially affected by the causes -which have operated upon the price of corn. - -Where then is the truth of saying, that from the altered relation -between corn and money we deduce no other relation? It is perfectly -obvious that we _can_ deduce and _do_ deduce a great number of other -most important relations; and, in fact, _do_ ascertain, though not with -perfect accuracy, yet with a most desirable and useful approach to it, -the degree of increase in the power of corn to command in exchange the -mass of other commodities. - -On the other hand, from the diminished power of money in relation to -corn, we _cannot_ infer that money has fallen nearly in the same -proportion in relation to other commodities. If an ounce of silver will -now command only half a bushel of wheat, instead of a whole bushel, we -can by no means infer that an ounce of silver will therefore command -only about half the quantity of labour, half the quantity of cloth, half -the quantity of hardware, half the quantity of hats and shoes, and of -all those commodities which are in their natural and ordinary state. To -all these objects money will probably bear nearly the same relation as -before. - -Where, then, is the truth of saying, that money would not be here -discharging a particular function more than the other commodity? Broad, -glaring, and incontrovertible facts show, that for short periods money -_does_ perform the function of measuring the variations in the general -power of purchasing possessed by the corn; but that the corn does _not_ -measure the variations in the general power of purchasing possessed by -the money. This is one of the instances of that extraordinary -inattention to facts which, most unfortunately for the science of -political economy, the professors of it have lately indulged themselves -in. - -The author has said a great deal in good set phrase about the false -analogy involved in the application of the term _measure_ to the value -of commodities at different periods; and gravely states the difference -between measuring length at different periods and measuring value. - -I was not aware that people were ignorant of this difference. As I said -before, whenever mention is made of the value of a commodity at -different periods, I have always thought that a reference has been -intended either to its general power of purchasing, or to something -calculated to express the estimation in which it was held at these -different periods, founded on the state of its supply compared with the -demand, or the elementary costs of its production. - -But if the term has been generally understood in this way, people must -have been fully aware that value was essentially different from length: -they would know perfectly well that a piece of cloth of a yard long -would continue to be a yard long when it was sent to China; but that its -value, that is, its general power of purchasing in China, or the -estimation in which it was held there, would probably be essentially -altered. But allowing this most marked distinction, and that the value -of a commodity cannot be so well defined, and its variations so -accurately measured, as the length of a commodity—where is the false -analogy of endeavouring to measure these variations as well as we can? -We cannot certainly describe the wealth of a merchant, nor measure the -increase of his wealth during the last four years, with the same -exactness as we can describe the height of a boy, and measure the amount -of his growth during the same period. We can perform the latter -operation with the most perfect precision by means of a foot-rule. The -nature of wealth, and the best instruments used to measure its increase, -are such, that the same precision is unattainable; but there is no false -analogy involved in the process of measuring the wealth of a merchant at -one time with his wealth four years before, by the number of pounds -sterling which he possesses now, as compared with the number of pounds -sterling he possessed at the former period. What false analogy is -involved in applying money to measure the value of the advances of a -manufacturer, as compared with the value of his returns, in order to -estimate his profits? and what can the author mean by saying, that no -relation of value can exist between commodities at different -periods;[71] and that it is a case where money has no function to -perform? - -Notwithstanding such assertions, we see every day the most perfect -conviction prevailing among all agriculturists, merchants, -manufacturers, and shopkeepers, and among all writers on political -economy, except the author, that to estimate the relation of -commodities, at different periods, in regard to their general power of -purchasing, and particularly the power of purchasing labour, the main -instrument of production, is a most important function, which it is -peculiarly desirable to have performed; and that, for moderately short -periods, money _does_ perform this function with very tolerable -accuracy. And for this specific reason; that, for moderately short -periods, a given quantity of money will represent, more nearly than any -other commodity, the general power of purchasing, and particularly the -power of setting labour in motion, so vital to the capitalist. It will -approach, in short, more nearly than any other commodity, to that -invariability which the author thinks so utterly useless in a measure of -value, and the very mention of which seems to excite his -indignation.[72] - -It is, in fact, by means of this same steadiness of value in the -precious metals, which they derive from their great durability, and the -consequent uniformity of their supply in the market, that they are -enabled to perform their most important functions. Hops, or corn, as -before stated, will measure the relative values of commodities at the -same time and place; but let the author or reader attempt to estimate -the profits of a capitalist in hops or corn, by the excess of the value -of his advances above the value of his returns so estimated, and he will -soon be bewildered. If a very plentiful year of corn were to succeed to -a comparatively scarce one, the farmer, estimating both his outgoings -and incomings in the corn of each year, might appear to gain above fifty -per cent., while, in reality, he might have lost, and might not be able, -without trenching on his capital, to employ as many men on his farm as -the year before. On the other hand, if a comparatively scarce year were -to succeed to a plentiful one, his profits, estimated in corn, might -appear to be less than nothing, and yet he might have been an unusual -gainer, in reference to his general power of purchasing labour and other -commodities, except corn. If the hop-planter were to estimate his -advances and returns in hops, it is obvious that the results would be of -the same kind, but aggravated in degree. - -It must be allowed, then, that the commercial world have acted most -wisely in selecting, for their practical measure of value, a commodity -which is not only peculiarly convenient in its form, but is, in general, -subject only to slow changes of value; and possesses, therefore, that -steadiness in its power of purchasing labour and commodities, without -which, all confidence in carrying on mercantile enterprises, of any -duration, would be at an end. - -But though the precious metals are a very useful and excellent measure -of value for those periods, within which almost all mercantile -transactions are begun and completed; yet, as Adam Smith very justly -observes, they are not so for very long periods; not because there is no -function for them to perform, but because, in the course of four hundred -years, they are found to lose that uniformity of value, which, in -general, they retain so well during four years. - -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. - - - - - CHAPTER IX. - SUMMARY OF THE REASONS FOR ADOPTING THE SUBJOINED DEFINITION OF THE - MEASURE OF VALUE. - - -As a preliminary, it may be proper to state, that it seems absolutely -essential to the language of political economy, that the expression -_value of a commodity_, like the expression _price of a commodity_, -should have some fixed and determined sense attached to it. Every person -who has either written or talked on the subject of political economy, -has been constantly in the habit of using the term without specifically -expressing the object of comparison intended: and if it were true, that -we might with equal propriety suppose any one of a thousand different -objects referred to, it might easily be shown, that all past writers who -had used the term value had talked the greatest nonsense; and all future -writers must abound in the most tedious circumlocutions and the most -futile propositions. - -But the author of the Critical Dissertation on Value has certainly done -injustice to the writers who have gone before him, in supposing that -when they have used the term value of a commodity, no reference was -implied, if it was not expressed. As I stated before, they must be -considered as referring, in some form or other, either to its general -power of purchasing, or, to the estimation in which it was held, -determined by the state of its supply compared with the demand, and, on -an average, by the elementary costs of production; and as it would be -perfectly ridiculous to suppose, that when the values of commodities, at -different periods, are spoken of generally, by respectable writers, they -could mean to refer to individual commodities not intended to represent, -more or less accurately, the above objects of reference; it is obvious, -that the ultimate reference implied must be confined to one of these, or -their equivalents. - -I have already given my reasons for thinking it more correct and useful -to refer to the estimation in which a commodity is held, determined as -above described, rather than to its general power of purchasing; but, as -others may be of a different opinion, it may be useful to include among -the reasons for adopting labour as a measure of value, its qualities as -a measure of the general power of purchasing. - -Supposing, then, that the exchangeable value of a commodity were defined -to be its general power of purchasing, this must refer to the power of -purchasing the mass of commodities; but this mass is quite unmanageable, -and the power of purchasing it can never be ascertained. With a view, -therefore, to its practical application, it would unquestionably be our -endeavour to fix upon some object, or set of objects, which would best -represent an average of the general mass. Now, of any one object, it -cannot for a moment be denied that labour best represents an average of -the general mass of productions. There is no commodity considered by -society as wealth, for which labour is not, in the first instance, -exchanged; there are very few for which it is not exchanged in great -quantities: and this can be said of no other object, except labour, and -the circulating medium which represents it. It is, at once, the first, -the universal, and the most important object given in exchange for all -commodities; and if to this we add, that while there is one large class -of commodities, such as raw products, which in the progress of society -tends to rise as compared with labour, there is another large class of -commodities, such as manufactured articles, which at the same time tends -to fall; it may not be far from the truth to say, that the portion of -the average mass of commodities which a given quantity of labour will -command in the same country, during the course of some centuries, may -not very essentially vary. - -Allowing, however, that it would vary, and that labour is an imperfect -measure of the general power of purchasing; yet, if some sort of -standard more applicable than the mass of commodities be required, and -labour appears to be beyond comparison the best representative of this -mass, there will be a very powerful reason for adopting labour as the -practical measure of value, even among those who may persevere in -thinking that the best definition of value in exchange is the general -power of purchasing. - -To those, however, who hold the opinion that the variations in the -exchangeable value of a commodity and the variations in its power of -purchasing are not identical, and that a commodity increases in -exchangeable value only when it will command a _greater value in -exchange_, while its power of purchasing may increase merely because it -will command a _greater quantity_ of commodities which have confessedly -fallen in value, the reasons for adopting labour as the measure of value -will be found to increase tenfold in force. - -There are various ways of describing value in the sense here understood; -and the slightest examination of them will show that the labour which a -commodity will command can alone be the measure of such value. - -First; The author of the Critical Dissertation on Value has commenced -his work by a description of it, in which I entirely agree with him. He -says, as I have before stated, that “value, in its ultimate sense, -appears to mean the esteem in which any object is held. But it is -obvious that the degree of this esteem cannot be measured by comparing -it with another commodity about which we know as little as of the first. -The comparison with money would leave us as much in the dark as ever, if -we did not previously know the estimation in which money was held.”[85] -Even the mere _relative_ values of two commodities cannot be inferred by -putting them side by side, and looking at them for any length of time. -Before we can attain even this partial conclusion, we must refer each of -them to the desires of man, and the means of production; that is, we -must make a previous comparison, in order to ascertain the value of each -before we can venture to say what relation one bears to the other. It is -this primary comparison which, independently of any secondary -comparison, determines the estimation in which the commodity is held. -And as this primary comparison can only be represented by the exchange -with labour, it is certain that, if we define the value of a commodity -to be the estimation in which it is held, the quantity of labour which -it will command can alone measure this estimation. - -Secondly: Locke, most justly looking to the foundation of all value, -considers the value of commodities as determined by the proportion of -their quantity to their vent, or of the supply to the demand; but the -varying vent or demand for one commodity cannot possibly be represented -by the varying quantity of another commodity for which it is exchanged, -unless the second commodity remain steady in regard to labour. If at one -time I give two pounds of hops for a yard of cloth, and at another time -only one, it does not at all follow that the demand for cloth has -diminished; on the contrary, it may be increased, and in giving the -value of one pound of hops, I may have enabled the cloth manufacturer to -set more men to work, and to obtain higher profits than when I gave the -value of two pounds. But the demand for a commodity, though not -proportioned to the _quantity_ of any other commodity which the -purchaser is willing and able to give for it, is really proportioned to -_the quantity of labour_ which he will give for it; and for this reason: -the quantity of labour which a commodity will _ordinarily_ command, -represents exactly the effectual demand for it; because it represents -exactly that of labour and profits united necessary to effect its -supply;[86] while the _actual_ quantity of labour which a commodity will -command when it differs from the _ordinary_ quantity, represents the -excess or defect of demand arising from temporary causes. If then -looking to the foundation of all value, namely; the limitation of the -supply as compared with the wants of mankind, we consider the value of -commodities at any time or place as proportioned to the state of their -supply compared with the demand at that time and place, it is evident -that the quantity of labour of the same time and place which any -commodity, or parcels of commodities, will command, can alone represent -and measure the state of the supply of them as compared with the -demand,[87] and their values as founded on this relation. - -Thirdly: It has often been stated that the value of a commodity is -determined by the sacrifice which people are willing to make in order to -obtain it; and this seems to be perfectly true. But the question recurs, -how are we to measure this sacrifice? It is obvious that we cannot -measure it by the _quantity_ of another commodity which we are willing -to give in exchange for it. When I give more calicoes, or more potatoes, -than I did before, for a certain quantity of hardware, it does not at -all follow that I make a greater sacrifice in order to obtain what I -want. On the contrary, if calicoes and potatoes had both fallen in -price, the one from improved machinery and the other from the abundance -of the season, my sacrifice might even have been less rather than -greater. Even the quantity of money which is given for a commodity is no -measure of the sacrifice made to obtain it. Though it is an excellent -measure of the variations in the sacrifice made, at the same time and -place; yet without further information, it will tell us nothing either -about the amount, or the variations at different places and times. The -giving of an ounce of silver was a very different sacrifice in the time -of Edward I. from what it is at present. It is obvious, therefore, that -the sacrifice which we are willing to make, in order to obtain a -particular commodity, is not proportioned to the _quantity_ of any other -commodity for which it will exchange, but to the difficulty with which -such quantity, whether more or less, is attained. Now labour can measure -this difficulty, but nothing else can. If, then, the value of a -commodity be determined by the sacrifice which people are willing to -make in order to obtain it, it is the labour given for a commodity, and -labour alone, which can measure this sacrifice. - -Fourthly: In the _Measure of Value Stated and Illustrated_, I considered -the value of commodities as, on an average, determined by the natural -and necessary conditions of their supply. These conditions I stated to -be the accumulated and immediate labour worked up in commodities with -the ordinary profits upon the whole advances for the time that they were -advanced. And it appeared, both in the early part of the discussion, and -in the Table, that the quantity of labour which a commodity would -ordinarily command must represent and measure the quantity of labour -worked up in it with the addition of profits. It was certainly a very -remarkable fact, that when Mr. Ricardo chose the labour worked up in -commodities “as, under many circumstances, an invariable standard,” and -rejected the labour which they would ordinarily purchase as subject to -as many fluctuations as the commodities compared with it,[88] he should -not have seen that the labour which a commodity will ordinarily command, -necessarily involves his own proposition, with that addition to it -merely which can alone make it correct; and that it is precisely because -the labour which a commodity will ordinarily command measures the labour -actually worked up in it with the addition of profits, that it is -justifiable to consider it as a measure of value. If then the ordinary -value of a commodity be considered as determined by the natural and -necessary conditions of its supply, it is certain that the labour which -it will ordinarily command is alone the measure of these conditions. - -Fifthly: The values of commodities are often said to be determined by -the costs of production. When the costs of production do not refer to -money, but to those simple elements of production, without an adequate -quantity of which, whatever may be their price in money, the commodity -cannot be produced, they are precisely the same as the natural and -necessary conditions of the supply. The elementary costs of production, -excluding rents and taxes, are the labour and profits required to -produce a commodity. Of these it has been already shown, that the labour -which the commodity will ordinarily command is alone the measure; and -allowing that we could obtain with tolerable exactness the average price -of common agricultural labour at different times and in different -countries, and that when the prices of all other sorts of labour were -once established, they would (as assumed by Adam Smith and Mr. Ricardo) -continue to bear nearly the same relation to each other in the further -progress of cultivation and improvement, it is certain that the quantity -of common agricultural labour which a commodity would ordinarily command -at any place and time would measure, with a near approach to accuracy, -the elementary costs of production at that place and time; so that -commodities, which at two different periods in the same country would -ordinarily command the same quantity of agricultural labour, might -fairly be said to be equal to each other in their elementary costs of -production, and, of course, in their values, if their values be -determined by their elementary costs of production. - -Sixthly: It may be said that the value of a commodity must be -proportioned to its supply compared with the number of its producers. -This appears, indeed, to be strikingly the case in the early periods of -society when many commodities are obtained, almost exclusively, by -labour. If fruits are to be procured, or game killed or caught, by -labour alone, or assisted only by capital of very little value, the -quantity obtained, on an average, by a day’s labour must represent, with -a great approach to accuracy, the degree of scarcity in which -commodities exist compared with the producers of them working for a -certain time. But the degree in which the supply of a commodity is -limited, as compared with the numbers, powers, and wants of those who -wish to obtain it, is the foundation of all value. Here the producers -are both the effectual demanders and the consumers; and the produce -obtained on an average by a single producer must represent the supply -compared with the numbers, powers, and wants of the demanders. If a -large quantity of produce be obtained by a producer, the commodity will -be in abundance, and will be considered as of comparatively little -value; if a small quantity be obtained by a producer, the commodity will -be scarce, and will be considered as of comparatively great value. If it -be the custom of the country for the producers to work only four hours -a-day instead of ten or twelve, the commodities produced will bear a -comparatively small proportion to the numbers of the producers and -effectual demanders, and will consequently be of much higher value, than -in those countries where it is the custom to work for the greater number -of hours; and, on the other hand, if the producers, besides working ten -or twelve hours a-day, are aided by ingenious instruments and great -skill in the use of them, the commodities produced will be in unusual -plenty compared with the producers, and will be considered as -proportionally of low value. In all these cases the value of the -commodity is evidently determined by the relation between its quantity -and the number of its producers. - -Now though, in the more advanced stages of society, the producer is not -always at the same time the demander and consumer; yet the effectual -demand for commodities must, on an average, be proportioned to the -productive services set in motion to obtain them;[89] and when the -different kinds of producers are reduced to a common denominator, such -as common agricultural day-labour, and profits are deducted as the -remuneration of the capitalist, and rent as the remuneration of the -landowner, the proportion which the remaining produce bears to the -number of such producers must represent, exactly in the same manner as -in the early periods of society, the degree of scarcity in which the -commodity exists compared with the producers; and therefore the value of -the commodity is measured by the quantity of it which will command a -day’s common labour. In fact, if it be once allowed that when labour is -exclusively concerned, the number of days’ labour necessary to produce a -commodity at any place and time represents the natural value of the -commodity at that place and time[90], then, as it is quite certain that -the value in exchange of any other commodity compared with the first, -will be accurately in proportion to the respective quantities of the -same kind of labour which they will command, it follows necessarily, -that the value of the second commodity must always be in proportion to -the quantity of labour it will command, however its value may have been -affected by profits, rents, taxes, monopolies, or the accidental state -of its supply compared with the demand. - -Seventhly: It has been stated that the values of commodities must be -proportioned to the causes of value operating upon them. The author of -the Critical Dissertation has a chapter on the causes of value, and, at -the conclusion of it, adverting to the variety of considerations -operating upon the human mind, which he thinks have been overlooked by -political economists, he observes, “these considerations are the causes -of value; and the attempt to proportion the quantities in which -commodities are exchanged for each other to the degree in which one of -these considerations exists, must be vain and ineffectual. All, in -reality, that can be accomplished on this subject, is to ascertain the -various causes of value; and, when this is done, we may always infer, -from an increase or diminution of any of them, an increase or diminution -of the effect.”[91] - -These remarks, it must be allowed, are justly applicable to those who -propose to measure the values of commodities by the quantity of labour -actually bestowed upon them; but in no degree to those who propose to -measure them by the quantity of labour which they will command. We have -already shown that the labour which commodities will command measures -that paramount cause of value which includes every other; namely, the -state of the supply as compared with the demand. Whatever may be the -number and variety of considerations operating on the mind in the -interchange of commodities, whether merely the common elementary costs -of production, or whether these costs have been variously modified by -taxes, by portions of rent, by monopolies strict or partial, and by -temporary scarcity or abundance, the result of the whole must appear in -the state of the supply compared with the demand; and in the case of an -individual article, the supply of which may be considered as given, the -demand, must be proportioned to the sacrifice which the purchasers are -able and, under all the circumstances, willing to make in order to -attain it. - -But it has already been shown that it is the command of labour which the -purchasers are able and willing to transfer to the sellers, and not any -particular commodity, except in proportion as it will command labour, -that can alone represent the sacrifice of the purchasers. The labour, -therefore, which a commodity will command, or which the purchasers are -willing to give for it, measures the result of all the causes of value -acting upon it,—of all the various considerations operating upon the -mind in the interchange of commodities. - -Whether then we consider the value of a commodity at any place and time -as expressed by the estimation in which it is held; whether we consider -it as founded entirely on the state of the supply as compared with the -demand; whether we consider it as determined by the sacrifice which -people are willing to make in order to obtain it; or by the natural and -necessary conditions of its supply; or by the elementary costs of its -production; or by the number of its producers; or by the result of all -the causes of value operating upon it, it is plain that the labour which -it will ordinarily command in any place will measure its natural and -ordinary value; and the labour which it will actually command will -measure its market value. - -It must always be recollected, however, that in any sense in which we -can use the term _value of a commodity_, there must be a reference, -either expressed or implied, to some place and time, in the same manner -as when we use the term _price of a commodity_. We all well know that -the price of the same kind of commodity of the same quality, weight, and -dimensions, is very different in different places and at different -times; and this must be equally true in regard to the value of a -commodity. It follows that, from the very nature of the thing, the value -of a commodity cannot be expressed or measured independently of place -and time. It is this quality which so essentially distinguishes the -value of a commodity from its length or weight; but it does not -necessarily destroy its capability of being measured. - -It is true, however, that a very general opinion has prevailed among -political economists, even since the publication of Adam Smith’s work, -that from the very nature of value, so essentially different from length -or weight, it cannot admit of a regular and definite measure.[92] This -opinion seems to me to have arisen principally from two causes. - -First—a proper distinction has seldom been made between the definitions -of wealth and value. Though the meanings of these two terms have by no -means always been considered as the same, yet the characteristics of one -of them have been continually allowed to mix themselves with the -characteristics of the other. This appears even in Adam Smith himself. -When he says, that a man is rich or poor according to the quantity of -the necessaries, conveniencies, and luxuries of life which he can -command, he gives a most correct definition of wealth; but when he -afterwards says, that he is rich or poor according to the quantity of -labour which he can command, he evidently confounds wealth with value. -The former is a definition of wealth; and of this, or of the general -power of purchasing, which too much resembles it, there is no measure. -The latter is his own definition or expression of real value; and of -this the very terms which he uses show that there is a measure. The -measure is distinctly expressed in the terms. - -The second principal cause which has prevented labour from being -received, according to the language of Adam Smith, as “alone the -ultimate and real standard by which the value of all commodities can at -all times and places be estimated and compared,”[93] is, that in -different periods, and in different countries, it is not really true, as -stated by him, that the labourer in working “lays down the same portion -of his ease, his liberty, and his happiness.”[94] There is the best -reason to believe that the labourer in India, and in many other -countries, neither exerts himself so much while he is working, nor works -for so many hours a day as an English labourer. A day’s labour, -therefore, is not invariable either in regard to intensity or time. But -still it appears to me that, for the reasons before stated, that is, -because the labour of each place and time measures at that place and -time the estimation in which a commodity is held, the state of its -supply compared with the demand, the elementary costs of its production, -the natural and necessary conditions of the supply, the proportion of -the produce to the producers, &c. it must be considered as measuring, -with a fair approach towards accuracy, the values of commodities at -these places and times, so as to answer the question,—what was the value -of broad-cloth of a certain description in the time of Edward III. in -England? or, what is the value of money at present in China? The nature -of the measure, and the reason why the varying intensity of the labour -and the different number of hours employed in the day, do not disqualify -it from performing its functions, may perhaps be illustrated by the -following comparison:— - -Let us suppose that the heights of men in different countries were -extremely different, varying from six feet to six inches, and that the -trees, shrubs, houses, utensils, and every other product or article were -all in proportion, and that the foot-rule in each country bore the same -relation to the race of human beings which inhabited it as the English -foot-rule does to Englishmen: then, though it is obvious that the length -of ten feet in one nation might extend over a much larger portion of -space than ten feet in another nation; yet the foot of each nation would -measure with accuracy the relative estimation in which men and things -were held in regard to height, length, breadth, &c. It would determine -whether a man was tall or short in the estimation of his -fellow-citizens; whether his shoulders were broad or narrow; whether his -circumference was great or small; and not only whether Mr. Pike’s nose -was longer than Mr. Chub’s, but whether it was not, in the accustomed -language of the country, absolutely a long nose, although perhaps it -might not extend to a quarter of an English inch. On the other hand, if, -instead of referring to the measure of each country, we were to refer -always to an English foot, though we should be able to ascertain the -relative portions of space which all the men to whom we applied our -measure occupied, we should make sad havoc with the estimates which they -and their countrymen had formed of their own heights, and many certainly -would be considered as very short who had before always been considered -as very tall. Now it must be allowed that the value of a commodity, as -it changes with place and time, and depends upon the wants and caprices -of man and the means of satisfying them, resembles more the estimate of -tall or short, broad or narrow, than a portion of space capable of being -ascertained by a measure unchangeable by time and place. - -When we speak of the value of silver in China, we cannot possibly mean -the value of an ounce of Chinese silver brought to London, where, if it -were pure, it would be precisely of the same value as an ounce of pure -silver which had been in London from time immemorial. What alone we can -correctly mean is, the estimation in which the ounce of silver is held -in China, determined, at the time, by the state of the supply compared -with the demand, and ordinarily by the quantity of Chinese labour and -profits necessary to produce it; and if this be what we mean by the -value of an ounce of silver in China, there can be no doubt that Chinese -labour, and Chinese labour alone, can measure it. Even, however, if we -mean the relation of an ounce of silver to all the commodities in China -in succession, it would be impossible practically to form any -approximation towards a just notion of the result, except by referring -the silver to Chinese labour. - -It might be allowed, perhaps, that labour would be a still more -satisfactory measure of value, in all countries and at all times, if the -physical force exerted in a day’s labour were always the same; and -probably this is sometimes not far from being the case in a few -countries as compared with each other, and more frequently in the same -country at different periods. The English agricultural labourers in the -time of Edward III., though probably less skilful, worked, I should -conceive, for nearly the same number of hours, and exerted nearly the -same physical force, as our labourers at present. Under such -circumstances, and in the same country, agricultural labour seems to be -a measure of value from century to century calculated to satisfy the -scruples of the most fastidious. But even when it is acknowledged, that -the labourer at different times and in different countries does _not_ -always lay down the same portion of his ease, his liberty, and -happiness, the quality of labour, as a measure of value, is not -essentially impaired; and it appears to me always true, that when -commodities in different countries and at different times have been -found to command the same quantity of the agricultural labour of each -country and time, they may with propriety be said to have been held in -the same estimation, and considered as of the same value. - -We may now proceed to the definition of some of the most important terms -in common use among political economists, particularly those which have -been most controverted. Whenever it has been thought necessary either to -deviate from the general rule of employing terms according to their -ordinary meaning, or to determine between two meanings both of which -have some authorities in their favour, I have always been guided in my -choice by what appeared to me the superior practical utility of the -meaning selected in explaining the causes of the wealth of nations.[95] - -The reader will be aware, from the manner in which I have treated the -subject, and the discussions into which I have allowed myself to enter, -that what I consider as the main obstacle to a more general agreement -among political economists, is rather the differences of opinion which -have prevailed as to the classes of objects which are to be separated -from each other by appropriate names, than as to the names which these -classes should receive. It seems indeed to be pretty generally and most -properly agreed, that the principal names which have been so long in use -should remain. It would certainly be an Herculean task to change them, -nor would any change which could be adopted in the present state of -things remove the real difficulties. It has been most justly observed by -Bacon, that “to say, where notions cannot be fitly reconciled, that -there wanteth a term or nomenclature for it, is but a shift of -ignorance.” When some people think that every sort of gratification, -whether arising from immaterial or material objects, from spiritual -comfort or comfortable clothing, should be designated by the same -appropriate term; while others think it of great use and importance that -they should be distinguished, it is obvious that such different notions -cannot be reconciled by a new nomenclature. The grand preliminary -required is that the notions should be fitly reconciled; and till this -is done, a change of names would be perfectly futile. Preserving -therefore, generally, the old names, the great practical question is, -what they are to include and what they are to exclude? - - - - - CHAPTER X. - DEFINITIONS IN POLITICAL ECONOMY. - - - WEALTH. - -1. The material objects necessary, useful or agreeable to man, which -have required some portion of human exertion to appropriate or produce. - - - UTILITY. - -2. The quality of being serviceable or beneficial to mankind. The -utility of an object has generally been considered as proportioned to -the necessity and real importance of these services and benefits. - -All wealth is necessarily useful; but all that is useful is not -necessarily wealth. - - - VALUE. - -3. Has two meanings—value in use, and value in exchange. - - - VALUE IN USE. - -4. Is synonymous with Utility. It rarely occurs in political economy, -and is never implied by the word value when used alone. - - - VALUE, OR VALUE IN EXCHANGE. - -5. The relation of one object to some other, or others in exchange, -resulting from the estimation in which each is held. When no second -object is specified, the value of a commodity naturally refers to the -causes which determine this estimation, and the object which measures -it. - -Value is distinguished from wealth in that it is not confined to -material objects, and is much more dependent upon scarcity and -difficulty of production. - - - PRODUCTION. - -6. The creation of objects which constitute wealth. - - - PRODUCT, PRODUCE. - -7. The portion of wealth created by production. - - - SOURCES OF WEALTH. - -8. Land, labour, and capital. The two original sources, are land and -labour; but the aid which labour receives from capital is applied so -very early, and is so very necessary in the production of wealth, that -it may be considered as a third source. - - - LAND. - -9. The soil, mines, waters, and fisheries of the habitable globe. It is -the main source of raw materials and food. - - - LABOUR. - -10. The exertions of human beings employed with a view to remuneration. -If the term be applied to other exertions, they must be particularly -specified. - - - PRODUCTIVE LABOUR. - -11. The labour which is so directly productive of wealth as to be -capable of estimation in the quantity or value of the products obtained. - - - UNPRODUCTIVE LABOUR. - -12. All labour which is not directly productive of wealth. The terms -productive and unproductive are always used by political economists in a -restricted and technical sense exclusively applicable to the direct -production or non-production of wealth. - - - INDUSTRY. - -13. The exertion of the human faculties and powers to accomplish some -desirable end. No very marked line is drawn in common language, or by -political economists, between industry and labour; but the term industry -generally implies more superintendence and less bodily exertion than -labour. - - - STOCK. - -14. Accumulated wealth, either reserved by the consumer for his -consumption, or kept, or employed with a view to profit. - - - CAPITAL. - -15. That portion of the stock of a country which is kept or employed -with a view to profit in the production and distribution of wealth. - - - FIXED CAPITAL. - -16. That portion of stock employed with a view to profit which yields -such profit while it remains in the possession of the owner. - - - CIRCULATING CAPITAL. - -17. That portion of stock employed with a view to profit which does not -yield such profit till it is parted with. - - - REVENUE. - -18. That portion of stock or wealth which the possessor may annually -consume without injury to his permanent resources. It consists of the -rents of land, the wages of labour, and the profits of stock. - - - ACCUMULATION OF CAPITAL. - -19. The employment of a portion of revenue as capital. Capital may -therefore increase without an increase of stock or wealth. - - - SAVING. - -20. In modern times, implies the accumulation of capital, as few people -now lock up their money in a box. - - - RENT OF LAND. - -21. That portion of the produce of land which remains to the owner after -all the outgoings belonging to its cultivation are paid, including the -ordinary profits of the capital employed. - - - MONEY-RENT OF LAND. - -22. The average rent of land as before defined, estimated in money. - - - GROSS SURPLUS OF THE LAND. - -23. That portion of the produce of land which is not actually consumed -by the cultivators. - - - WAGES OF LABOUR. - -24. The remuneration paid to the labourer for his exertions. - - - NOMINAL WAGES. - -25. The wages which the labourer receives in the current money of the -country. - - - REAL WAGES. - -26. The necessaries, conveniences, and luxuries of life which the wages -of the labourer enable him to command. - - - THE RATE OF WAGES. - -27. The ordinary wages paid to the labourer by the day, week, month, or -year, according to the custom of the place where he is employed. They -are generally estimated in money. - - - THE PRICE OF LABOUR. - -28. Has generally been understood to mean the average money-price of -common day-labour, and is not therefore different from the rate of -wages, except that it more specifically refers to money. - - - THE AMOUNT OF WAGES. - -29. The whole earnings of the labourer in a given time, which may be -much more or much less than the average rate of wages, or the price of -common day-labour. - - - THE PRICE OF EFFECTIVE LABOUR. - -30. The price in money of a given quantity of human exertion of a given -strength and character, which may be essentially different from the -common price of day-labour, or the whole money-earnings of the labourer -in a given time. - - - ACCUMULATED LABOUR. - -31. The labour worked up in the raw materials and tools applied to the -production of other commodities. - - - PROFITS OF STOCK. - -32. When stock is employed as capital in the production and distribution -of wealth, its profits consist of the difference between the value of -the capital advanced, and the value of the commodity when sold or used. - - - THE RATE OF PROFITS. - -33. The per centage proportion which the value of the profits upon any -capital bears to the value of such capital. - - - THE INTEREST OF MONEY. - -34. The net profits of a capital in money separated from the risk and -trouble of employing it. - - - THE PROFITS OF INDUSTRY, SKILL, AND ENTERPRISE. - -35. That portion of the gross profits of capital, independent of -monopoly, which remains after deducting the net profits, or the interest -of money. - - - MONOPOLY PROFITS. - -36. The profits which arise from the employment of capital where the -competition is not free. - - - CONDITIONS OF THE SUPPLY OF COMMODITIES. - -37. The advance of the quantity of accumulated and immediate labour -necessary to their production, with such a per centage upon the whole of -the advances for the time they have been employed as is equivalent to -ordinary profits. If there be any other necessary conditions of the -supply arising from monopolies of any description, or from taxes, they -must be added. - - - ELEMENTARY COSTS OF PRODUCTION. - -38. An expression exactly equivalent to the conditions of the supply. - - - MEASURE OF THE CONDITIONS OF THE SUPPLY, OR OF THE ELEMENTARY COSTS OF - PRODUCTION. - -39. The quantity of labour for which the commodity will exchange, when -it is in its natural and ordinary state. - - -THE VALUE, MARKET VALUE, OR ACTUAL VALUE, OF A COMMODITY AT ANY PLACE OR - TIME. - -40. The estimation in which it is held at that place and time, -determined in all cases by the state of the supply compared with the -demand, and ordinarily by the elementary costs of production which -regulate that state. - - - THE NATURAL VALUE OF A COMMODITY AT ANY PLACE AND TIME. - -41. The estimation in which it is held when it is in its natural and -ordinary state, determined by the elementary costs of its production, or -the conditions of its supply. - - - MEASURE OF THE MARKET OR ACTUAL VALUE OF A COMMODITY AT ANY PLACE OR - TIME. - -42. The quantity of labour which it will command or exchange for at that -place and time. - - - MEASURE OF THE NATURAL VALUE OF A COMMODITY AT ANY PLACE AND TIME. - -43. The quantity of labour for which it will exchange at that place and -time, when it is in its natural and ordinary state. - - -THE PRICE, THE MARKET PRICE, OR ACTUAL PRICE OF A COMMODITY AT ANY PLACE - AND TIME. - -44. The quantity of money for which it exchanges at that place and time, -the money referring to the precious metals. - - - THE NATURAL PRICE OF A COMMODITY AT ANY PLACE AND TIME. - -45. The price in money which will pay the elementary costs of its -production, or the money conditions of its supply. - - - SUPPLY OF COMMODITIES. - -46. The quantity offered, or ready to be immediately offered, for sale. - - - DEMAND FOR COMMODITIES. - -47. Has two distinct meanings: one, in regard to its extent, or the -quantity of commodities purchased; and the other, in regard to its -intensity, or the sacrifice which the demanders are able and willing to -make in order to satisfy their wants. - - - DEMAND IN REGARD TO ITS EXTENT. - -48. The quantity of the commodity purchased, which generally increases -with the increase of the supply, and diminishes with the diminution of -it. It is often the greatest when commodities are selling below the -costs of production. - - - DEMAND IN REGARD TO ITS INTENSITY. - -49. The sacrifice which the demanders are able and willing to make in -order to satisfy their wants. It is this species of demand alone which, -compared with the supply, determines prices and values. - - - EFFECTUAL DEMAND, IN REGARD TO ITS EXTENT. - -50. The quantity of a commodity wanted by those who are able and willing -to pay the costs of its production. - - - EFFECTUAL DEMAND, IN REGARD TO ITS INTENSITY. - -51. The sacrifice which the demanders must make, in order to effectuate -the continued supply of a commodity. - - - MEASURE OF THE INTENSITY OF THE EFFECTUAL DEMAND. - -52. The quantity of labour for which the commodity will exchange, when -in its natural and ordinary state. - - - EXCESS OF THE DEMAND ABOVE THE SUPPLY. - -53. The demand for a commodity is said to be in excess above the supply, -when, either from the diminution of the supply, or the increase of the -effectual demand, the quantity in the market is not sufficient to supply -all the effectual demanders. In this case the intensity of the demand -increases, and the commodity rises, in proportion to the competition of -the demanders, and the sacrifice they are able and willing to make in -order to satisfy their wants. - - - EXCESS OF THE SUPPLY ABOVE THE DEMAND, OR PARTIAL GLUT. - -54. The supply of a commodity is said to be in excess above the demand, -or there is a partial glut, when, either from the superabundance of -supply, or the diminution of demand, the quantity in the market exceeds -the quantity wanted by those who are able and willing to pay the -elementary costs of production. It then falls below these costs in -proportion to the eagerness of the sellers to sell; and the glut is -trifling, or great, accordingly. - - - GENERAL GLUT. - -55. A glut is said to be general, when, either from superabundance of -supply or diminution of demand, a considerable mass of commodities falls -below the elementary costs of production. - - - A GIVEN DEMAND. - -56. A given demand, in regard to price, is a given quantity of money -intended to be laid out in the purchase of certain commodities in a -market; and a given demand, in regard to value, is the command of a -given quantity of labour intended to be employed in the same way. - - - VARIATIONS OF PRICES AND VALUES. - -57. Prices and values vary as the demand directly and the supply -inversely. When the demand is given, prices and values vary inversely as -the supply; when the supply is given, directly as the demand. - - - CONSUMPTION. - -58. The destruction wholly or in part of any portions of wealth. - - - PRODUCTIVE CONSUMPTION. - -59. The consumption or employment of wealth by the capitalist, with a -view to future production. - - - UNPRODUCTIVE CONSUMPTION, OR SPENDING. - -60. The consumption of wealth, as revenue, with a view to the final -purpose of all production—subsistence and enjoyment; but not with a view -to profit. - - - - - CHAPTER XI. - OBSERVATIONS ON THE DEFINITIONS. - - -_Def. 1._ The reader will be aware that, in almost all definitions, the -same meaning may be conveyed in different language, and that it is the -meaning rather than the mode of expressing it that should be the main -object of our consideration. The essential question in the definition of -wealth is, whether or not it should be confined to material objects, and -the reader is already apprised of my reasons for thinking that it -should. Even M. Say, who admits “_les produits immatériels_,” allows, as -I have before stated (p. 93), that the multiplication of them “_ne fait -rien pour la richesse_;” and M. Storch, in his able “_Cours d’Economie -Politique_,” though he justly lays great stress on what he calls _les -biens internes_, with a view to civilization and the indirect production -of wealth, confines the term _richesses_ to _biens externes_, or -material objects; and according to this meaning treats of the _Théorie -de la Richesse Nationale_, in the first, and far the largest, part of -his work. Altogether, I can feel no doubt that some classification of -this kind, or some separation of material from immaterial objects is, in -the highest degree, useful in a definition of wealth. - -The latter part of the definition is of minor importance. It is intended -to exclude such material objects as air, light, rain, &c.—which, however -necessary and useful to man, are seldom considered as wealth; and, -perhaps, it is more objectionable to exclude them, by the introduction -of the term exchangeable value into a definition of wealth, than in the -mode which has been adopted. If the latter clause were not added, the -only consequence would be, that, in comparing different countries -together, such objects as air, light, &c., would be neglected as common -quantities. - - -_Def. 2._ I have already alluded to the manner in which M. Say has -applied the term Utility. His language cannot be considered as -consistent, when he says that the price of an article is the measure of -its utility, although it might be, according to his own expression, _la -chose la plus inutile_.[96] It is much better for the science of -political economy that the term should retain its natural and ordinary -meaning. All wealth is no doubt useful, but there are so very many -immaterial, and some material objects which are highly useful, and yet -not wealth, that there can be no excuse for confounding them. M. Storch -has not escaped the same kind of error. - - -_Def. 5._ Two articles are never exchanged with each other without a -previous estimation being formed of the value of each, by a reference to -the wants of mankind and the means of production. This general and most -important relation to the means of production, and the labour which -represents these means, seems to be quite forgotten by those who imagine -that there is no relation implied when the value of a commodity is -mentioned without specific reference to some other commodity. - -M. Say, under the head _Valeur des Choses_, observes, “c’est la quantité -d’autres choses évaluables qu’on peut obtenir en échange d’elle.”[97] -This is a most vague and uncertain definition, and much less -satisfactory than the general power of purchasing. - -M. Storch says, that “la valeur des choses, c’est leur utilité -relative;” but this certainly cannot be said unless we completely change -the natural and ordinary meaning either of utility or value. - -Neither M. Say nor M. Storch has sufficiently distinguished utility, -wealth, and value. - - -_Def. 6._ The term creation is not here meant to apply to the creation -of matter, but to the creation and production of the objects which have -been defined to be wealth. - - -_Defs. 11 and 12._ If wealth be confined to material objects, it must be -allowed to be peculiarly convenient and useful, in explaining the causes -of the wealth of nations, to have some appropriate term for that species -of labour which directly produces wealth; and as the principal founder -of the science of political economy has used the terms _productive -labour_ in the restricted sense necessary for this special purpose, -perhaps few objections would have been made to it, if it had not -involved all other kinds of labour, however useful and important, under -the apparently disparaging designation of unproductive. This is a -consequence, no doubt, to be regretted: yet, when it has been repeatedly -stated that the term unproductive, as applied by Adam Smith, in no -degree impeaches the utility and importance of such labour, but merely -implies that it does not directly produce gross wealth, the mere name -ought not to decide against a classification for which it appears from -experience that it is very difficult to find a satisfactory substitute. - -In M. Storch’s “_Considérations sur la Nature du Revenu National_,” he -does not appear to me to give a correct view of what Adam Smith means by -productive labour.[98] The difficulty of classification above alluded to -appears strikingly in this treatise. There is some plausibility in the -system, and it is explained with ingenuity and ability; but I think that -the adoption of it would destroy all precision in the science of -political economy. - - -_Defs. 19 and 20._ I have never been able to understand how the -accumulation of capital and the difference between saving and spending -can be distinctly explained, if we call all labour equally productive. - - -_Def. 23._ It is this gross surplus of the land which furnishes the -means of subsistence to the inhabitants of towns and cities. Besides the -rents of land, which are powerfully effective in this respect, a large -part of what, in the division of the produce of land, would fall to the -shares of the farmers and labourers, is exchanged by them for other -objects of convenience and gratification, thus giving the main -necessaries of life to a great mass of persons not immediately connected -with the soil. The proportion which this mass of persons may bear to the -cultivators will depend upon the natural fertility of the soil, and the -skill with which it has been improved, and continues to be worked. - - -_Defs. 28 and 30._ In a valuable publication on the _Price of Corn, and -Wages of Labour_, by Sir Edward West, which has just fallen into my -hands, he proposes that the _price of labour_ should mean the sum paid -for a given quantity of labour of a given character. I quite agree with -him in thinking that it would be useful to have some appropriate term to -express this meaning; but, as the _price of labour_ has certainly not -hitherto been used in this sense, and as it would be, in almost all -cases, extremely difficult to give an answer to a question respecting -the price of labour so understood, it would certainly be proper to vary -the expression in some degree, in order to prepare people for a new -meaning. In Definition 30, therefore, I have given this meaning to _The -price of effective labour_. - - -_Def. 31._ It would save time and circumlocution, which is one of the -great objects of appropriate terms, if, in speaking of the labour worked -up in commodities, the labour worked up in the capital necessary to -their production were designated by the term _accumulated labour_, as -contradistinguished from the _immediate labour_ employed by the last -capitalist. We must always recollect, however, that labour is not the -only element worked up in capital. - - -_Def. 38._ I have used the word _elementary_, in order to show that -money-costs are not meant. On account of the doubt which may arise in -this respect when the term _costs of production_ is used alone, and the -further doubt, whether ordinary profits are always included, I am -decidedly of opinion that _the conditions of the supply_ is a more -expressive and less uncertain term for the same meaning. I do not find, -however, that generally it is so well understood. I have defined, -therefore, _the costs of production_ with the addition of the word -_elementary_, and including profits, as having precisely the same -meaning as the conditions of the supply. I once thought it might be -better not to include profits in costs of production; but as Adam Smith -has included them, and more particularly as the profits worked up in the -capital necessary to any production must form a part of the advances or -_costs_ in any sense in which the word costs can be used, I think it -best, on the whole, to include necessary profits in the elementary costs -of production. They are obviously included in the necessary conditions -of the supply. - - -_Defs. 39 and 40._ In speaking, of the quantity of labour for which a -commodity will exchange, as a measure either of the conditions of its -supply or of its value, it must always be understood, that the different -kinds of labour which may have been employed to produce it, must be -reduced to labour of one description and of the lowest denomination, -namely, common agricultural day-labour, estimated on an average -throughout the year. This is the kind of labour which is always referred -to when labour is spoken of as a measure. - - -_Def. 57._ It is not true, as stated by M. Say, that prices rise in the -direct ratio of the _quantity_ demanded, and the inverse ratio of the -_quantity_ supplied.[99] They only vary in this way, when the demand is -understood to mean the sacrifice which the demanders are able and -willing to make, in order to supply themselves with what they want; -which may be represented in regard to price by the quantity of money -ready to be employed in purchases in a market. When the demand for -_labour_ is spoken of, it can only relate to _extent_; and a greater -demand can only signify a power of commanding a greater _quantity_ of -labour. - - -_Def. 59._ The only productive consumption, properly so called, is the -consumption or destruction of wealth by capitalists with a view to -reproduction. This is the only marked line of distinction which can be -drawn between productive and unproductive consumption. The workman whom -the capitalist employs certainly consumes that part of his wages which -he does not save, as revenue, with a view to subsistence and enjoyment; -and not as capital, with a view to production. He is a productive -consumer to the person who employs him, and to the state, but not, -strictly speaking, to himself. Consumption is the great purpose and end -of all production. The consumption of wealth, as revenue, with a view to -support and enjoyment, is even more necessary and important than the -consumption of wealth as capital; but their effects are essentially -different in regard to the direct production of wealth, and they ought -therefore to be distinguished. - - -I am far from meaning to present the foregoing definitions to the notice -of the reader as in any degree complete; either in regard to extent, or -correctness. In extent, they have been purposely limited, and in regard -to correctness, I am too well aware of the difficulty of the subject to -think that I have succeeded in making my definitions embrace all I wish, -and exclude all I wish. I am strongly, indeed, disposed to believe, that -in the sciences of morals, politics, and political economy, which will -not admit of a change in the principal terms already in use, the full -attainment of this object is impossible; yet a nearer approach to it is -always something gained. I should not indeed have been justified in -offering these definitions to the public, if I had not thought that they -were, on the whole, less objectionable, and would be more useful in -explaining the causes of the wealth of nations than any which I had -seen. But I am conscious of some anomalies, and probably there are some -more of which I am not conscious. Knowing, however, that the attempt to -remove them might destroy useful classifications, I shall not consider a -few individual cases, of little importance, as valid objections. - -It is known that Adam Smith gave few regular definitions; but the -meanings in which he used his terms may be collected from the context, -and to these I have, in a considerable degree, adhered. For some I have -been indebted to M. Say; others are my own; and in all, I have -endeavoured to follow the rules for the definition and use of terms laid -down at the beginning of this treatise. I shall consider my object as -fully answered, if what I have done, should succeed in drawing that -degree of attention to the subject which may lead to the production of -something of the same kind, more correct and more useful, and so -convincing as to be generally adopted. - - - FINIS. - ------ - -Footnote 1: - - It may seem strange to the reader, but it is nevertheless true, that - the meanings of all these terms, which had been settled long ago, and - in my opinion with a great approach towards correctness, by Adam - Smith, have of late been called in question, and altered. - -Footnote 2: - - Wealth of Nations, b. ii. c. iii. p. i. vol. ii. 6th ed. - -Footnote 3: - - Traité d’ Economie Politique, liv. i. c. i. pp. 2, 4, 4th ed. - -Footnote 4: - - Wealth of Nations, b. i. c. v. p. 43. 6th edit. - -Footnote 5: - - Polit. Econ. c. xx. p. 320. 3rd Edit. - -Footnote 6: - - Polit. Econ. c. xx. p. 326. 3rd edit.—It may be remarked, by the way, - that Mr. Ricardo here uses labour as a measure of value in the sense - in which I think it ought always to be used, and not according to his - own theory. He measures the exchangeable value of the plate and - velvet, not by the quantity of labour worked up in them, but by the - quantity they will command or employ. - -Footnote 7: - - Polit. Econ. c. i. sec. iii. pp. 16, 18, 3rd edit. - -Footnote 8: - - Polit. Econ. c. vii. p. 137, 3rd edit. - -Footnote 9: - - Id. p. 152. - -Footnote 10: - - Polit. Econ. c. v. p. 98, 3rd edit. - -Footnote 11: - - Polit. Econ. c. i. sec. vi. p. 45, 3rd edit. - -Footnote 12: - - Elements of Polit. Econ. c. ii. sec. iii. p. 75, 2nd edit. - -Footnote 13: - - Elements of Polit. Econ. c. iii. sec. ii. p. 92. - -Footnote 14: - - Elements of Polit. Econ. c. iii. sec. ii. p. 94. - -Footnote 15: - - Id. c. iii. sec. ii. p. 95. - -Footnote 16: - - Sec. viii. p. 188. - -Footnote 17: - - Elements of Polit. Econ. c. iv. s. iii. p. 225. If the demand of every - individual were equal to his supply, in the correct sense of the - expression, it would be a proof that he could always sell his - commodity for the costs of production, including fair profits; and - then even a _partial_ glut would be impossible. The argument proves - too much. It is very strange that Mr. Mill should not have seen what - appears to be so very obvious,—that supply must always be proportioned - to _quantity_, and demand to _value_. - -Footnote 18: - - Elem. of Polit. Econ. c. iv. s. iii. p. 233. - -Footnote 19: - - Elem. of Polit. Econ. c. iv. s. iii. p. 234. - -Footnote 20: - - Foreign trade is, no doubt, mainly a trade of barter; but the question - whether British woollens find an adequate market in the United States, - does not depend upon their purchasing the same quantity of tobacco as - usual, but upon whether the tobacco, or whatever the returns may be, - will purchase the British money or the British labour necessary to - enable the woollen manufacturer to carry on his business successfully. - If both woollen manufactures and tobacco are below the costs of - production in money or labour, both parties may be carrying on a - losing trade, at the time when the rate at which the two articles - exchange with each other is the same as usual. This is the answer to - the pamphlet, which M. Say addressed to me some years ago. - -Footnote 21: - - On the Production of Wealth, c. vi. s. vi. p. 349. - -Footnote 22: - - On the Production of Wealth, c. vi. s. vi. p. 349. - -Footnote 23: - - On the Production of Wealth, c. vi. s. vi. p. 345. - -Footnote 24: - - Id. p. 348. - -Footnote 25: - - It is quite astonishing that political economists of reputation should - be inclined to resort to any kind of illustration, however clumsy and - inapplicable, rather than refer to money. I suppose they are afraid of - the imputation of thinking that wealth consists in money. But though - it is certainly true that wealth does not consist in money, it is - equally true that money is a most powerful agent in the distribution - of wealth; and those who, in a country where all exchanges are - practically effected by money, continue the attempt to explain the - principles of demand and supply, and the variations of wages and - profits, by referring chiefly to hats, shoes, corn, suits of clothing, - &c., must of necessity fail. - -Footnote 26: - - Elem. of Polit. Econ. c. iv. s. iii. p. 234. - -Footnote 27: - - Elements of Polit. Econ. c. ii. sec. ii. p. 41. - -Footnote 28: - - Principles of Political Economy, part i. p. 5. - -Footnote 29: - - These remarks were principally directed against Lord Lauderdale’s - definition of wealth—_all that man desires as useful and delightful to - him_; but they apply with nearly equal force to Mr. Macculloch’s - present definition, which is limited to those objects which possess - exchangeable value. According to Mr. Macculloch’s own statement, - health is purchased from the physician, and the gratification derived - from acting from the actor; and it must be allowed that it is - impossible to enjoy the benefits of civil and religious liberty - without paying those who administer a good government. It has been - said by Mr. Hallam, with some truth, that the liberties of England - were chiefly obtained by successive purchases from the crown. - -Footnote 30: - - Principles of Polit. Econ., part iv. p. 406. - -Footnote 31: - - Principles of Polit. Econ., part iv. p. 410. - -Footnote 32: - - Principles of Polit. Econ., part ii. p. 71. This language has - absolutely no meaning, if all labour be equally productive in regard - to national wealth. - -Footnote 33: - - Mr. Macculloch dwells very much upon the extreme importance of - accumulation to the increase of national wealth. But how are the - gratifications afforded by menial servants to be accumulated? - -Footnote 34: - - Principles of Polit. Econ., part ii. p. 92. - -Footnote 35: - - Principles of Polit. Econ., part ii. p. 114. - -Footnote 36: - - This is very justly stated in Mr. Mill’s “Elements of Political - Economy,” ch. iv. sec. i. p. 219, 2d edit.: both Mr. Ricardo and Mr. - Mill, indeed, fully allow the distinction between productive and - unproductive labour. M. Say, though he calls the labour of the menial - servant productive, makes a distinction between the labour which is - productive of _material_ products and the labour which is productive - of _immaterial_ products. Of the latter products he says, “En - favorisant leur multiplication, on ne fait rien pour la richesse, on - ne fait que pour la consommation.”—_Table Analytique_, liv. i. ch. 13. - This is a most characteristic difference; and though I prefer the - classification of Adam Smith, as more simple, I should allow that, on - these principles, the causes of the wealth of nations may be clearly - explained. But I own myself utterly at a loss to conceive how they can - be explained, if all labour be considered as equally productive. - -Footnote 37: - - Elem. of Polit. Econ. part ii. p. 93. - -Footnote 38: - - Princip. of Polit. Econ., part iv. p. 409. - -Footnote 39: - - Princip. of Polit. Econ., part iv. p. 411. - -Footnote 40: - - Principles of Polit. Econ., part iii., pp. 313, 317. - -Footnote 41: - - Principles of Polit. Econ., part iii. p. 313. - -Footnote 42: - - Principles of Polit. Econ., part iii. p. 313. - -Footnote 43: - - Principles of Polit. Econ. part ii. p. 69. - -Footnote 44: - - Wealth of Nations, b. i. c. vi. - -Footnote 45: - - It must always be recollected, that the advance of a certain number of - days’ labour necessarily involves the wages paid for them, however - these wages may vary in quantity. But the essential advance is the - quantity of labour, not the quantity of money or corn. - -Footnote 46: - - Principles of Polit. Econ., part iii. p. 223. This is a most - remarkable passage to come from Mr. Macculloch, who, though he agrees - with Mr. Ricardo in words, has, in reality, deserted him, and agrees - in substance with Adam Smith. According to the new meaning, which Mr. - Macculloch has given to the term profits—the quantity of labour - required to produce a commodity, is precisely equal to the quantity of - labour for which it will ordinarily exchange, and certainly not equal - to what Mr. Ricardo meant by the quantity of labour bestowed upon it. - -Footnote 47: - - Principles of Polit. Econ., part iii, s. 1. p. 221. - -Footnote 48: - - A person who uses a term in a particular sense practically defines it - in that sense. Mr. Macculloch sometimes makes what have hitherto - always been considered as profits mean labour; and sometimes makes - labour, when used simply without any adjunct, mean fermentation, - vegetation, or profits. - -Footnote 49: - - Macculloch’s Principles of Polit. Econ., part ii. p. 189. - -Footnote 50: - - Id. p. 190. - -Footnote 51: - - I own I want words to express the astonishment I feel at the proposal - of such a remedy. A man, under the intoxication of what he conceives - to be a new and important discovery, may be excused for occasionally - making a rash statement; but that a proposal directly involving the - discontinuance of the division of labour should, in a civilized - country, be repeated over and over again by succeeding writers, and - considered as an _obvious resource_ in a sudden fall of profits, - absolutely passes my comprehension. What a strange and most inapt - illustration too, is it to talk about the possessors of broad cloths - wanting to change them for silks! Who ever heard of a great producer - of any commodity wishing to obtain an equivalent for it in some _one_ - other sort of completed commodity? If he is to produce what he wants, - it must not be silks, but raw materials, tools, corn, meat, coats, - hats, shoes and stockings, &c. &c.; and this is the _obvious resource_ - which is at hand in a glut!!! - -Footnote 52: - - Preface, p. 5. - -Footnote 53: - - Dissertation on Value, c. 1. p. 3. - -Footnote 54: - - Dissertation on Value, c. 1. p. 4. - -Footnote 55: - - Wealth of Nations, b. i. c. xi. - -Footnote 56: - - Production of Wealth, c. i. p. 49. - -Footnote 57: - - P. 242. - -Footnote 58: - - Dissertation on Value, c. i. p. 3. - -Footnote 59: - - C. ii. p. 39. - -Footnote 60: - - Dissertation on Value, c. iii. p. 58. - -Footnote 61: - - Dissertation on Value, c. xi. p. 194, 224. In the question between - Colonel Torrens and Mr. Mill, “Whether the value of commodities - depends upon capital as the final standard,” the author decides - against Mr. Mill, but surely without reason. Mr. Mill cannot be wrong - in thinking, that no progress whatever is made towards tracing the - value of a commodity to its elements, by saying, that its value is - determined by the value of the capital employed to produce it. The - question still remains, how is the value of the capital determined? As - to what the author says, p. 202, about the _amount_ of capital, unless - this amount be estimated in _money_, which quite alters the question, - it is entirely inapplicable as a standard. - -Footnote 62: - - C. viii. p. 160. - -Footnote 63: - - C. vi. p. 135. - -Footnote 64: - - Dissertation on Value, c. ii. p. 58. - -Footnote 65: - - Id. p. 39. - -Footnote 66: - - P. 240. - -Footnote 67: - - Dissertation on Value, c. ii. p. 40. - -Footnote 68: - - Dissertation on Value, c. vi. p. 117. - -Footnote 69: - - Dissertation on Value, c. vi. p. 117. - -Footnote 70: - - Dissertation on Value, c. vi. p. 117. - -Footnote 71: - - Dissertation on Value, c. vi. p. 113, et seq. - -Footnote 72: - - Dissertation on Value, c. vi. p. 110. - -Footnote 73: - - Dissertation on Value, c. vi. p. 102. - -Footnote 74: - - Dissertation on Value, c. vi. p. 120. - -Footnote 75: - - Dissertation on Value, c. vi. p. 122. - -Footnote 76: - - Dissertation on Value, c. vi. p. 121. - -Footnote 77: - - Wealth of Nations, b. i. c. xi. p. 291, 6th edit. - -Footnote 78: - - Dissertation on Value, c. vii. p. 140. - -Footnote 79: - - Dissertation on Value, c. vi. p. 145. - -Footnote 80: - - It has always been a matter of great surprise to me that I should have - been accused of _arbitrarily_ adopting labour as the measure of value. - If there be not a most marked and characteristic distinction between - labour and any _product_ of labour, I do not know where a - characteristic distinction between two objects is to be found; and - surely I have stated this distinction often enough, and brought - forward the peculiar qualities of labour as my reasons for thinking - that it may be taken as a measure of value. Opinions may differ as to - the sufficiency of these reasons, or as to the degree of accuracy with - which it will serve the purpose of a measure. But how it can be said - that I have adopted it arbitrarily, is quite unintelligible to me. If - I had merely stated, that I had adopted it because it was the main - element in the natural costs of production, there could have been no - ground for such a charge. - -Footnote 81: - - Dissertation on Value, c. vii. p. 148. - -Footnote 82: - - Dissertation on Value, c. vii. p. 150. - -Footnote 83: - - On the Production of Wealth, c. i. p. 56. - -Footnote 84: - - I am very ready to include myself among those political economists who - have not been sufficiently attentive to this subject. - -Footnote 85: - - If in a foreign country, in which the relation of money to men and - labour was unknown to us, we were told that a quarter of corn was - selling for four ounces of silver, we should not know whether there - was a famine, and corn was held in the highest estimation, or whether - there was a glut of corn, and it was held in the lowest estimation. - The very term estimation, as applied to commodities, must of necessity - refer to man and labour. - -Footnote 86: - - It is a truth fruitful in important consequences, that the labour - which commodities will command when in their natural state, by - representing accurately the quantity of labour and profits necessary - to produce them, must represent accurately the effectual demand for - them. And this holds good at different places and times, referring of - course to the labour of the same description at each place and time. - -Footnote 87: - - What could give us any information respecting the scarcity of a - commodity in China, or the state of its supply as compared with the - demand, but a reference to Chinese labour? - -Footnote 88: - - Principles of Polit. Econ., c. i. s. i. p. 5. 3d edit. - -Footnote 89: - - M. Say’s comprehensive expression, “_Services productifs_,” includes - profits and rents as well as labour; but it is certain that labour - will measure accurately the value of the whole amount of these - services. - -Footnote 90: - - If this concession be once made, the whole question respecting labour - as a measure of value is at once decided. - -Footnote 91: - - C. xi. p. 232. - -Footnote 92: - - I own that I was myself for a very long time of this opinion; but I am - now perfectly convinced that I was wrong, and that Adam Smith was - quite right in the prevailing view which he took of value, though he - did not always strictly adhere to it. I am also convinced that it - would be a great improvement to the language of political economy, if, - whenever the term value, or value in exchange, is mentioned without - specific reference, it should always be understood to mean value in - exchange for labour,—the great instrument of production, and primary - object given in exchange for every thing that is wealth; in the same - manner as, when the price of a commodity is mentioned without specific - reference, it is always understood to mean price in money—the - universal medium of exchange, and practical measure of relative value. - I am further convinced that the view of value here taken throws - considerable light on the nature of demand and the means of expressing - and measuring it, and that just view of value is absolutely necessary - to a correct explanation of rents, profits, and wages. These - convictions on my mind, which have acquired increase of strength the - longer I have considered the subject, must be my apology to the reader - for dwelling on it longer than, in considering it cursorily, he may - think it deserves. - -Footnote 93: - - Wealth of Nations, b. i. c. v. - -Footnote 94: - - Wealth of Nations, b. i. c. v. - -Footnote 95: - - It is specifically on this ground that I think the meaning of the term - Wealth should be confined to material objects; that productive labour - should be confined to that labour alone which is directly productive - of wealth; and that value, or value in exchange, when no specific - object is referred to, should mean value in exchange for the means of - production, of which labour, the great instrument of production, is - alone the representative. - -Footnote 96: - - Traité d’Economie Politique, Epitome, vol. ii. p. 506, 4th edit. - -Footnote 97: - - Epitome, vol. ii. p. 507. - -Footnote 98: - - C. iv. p. 83. - -Footnote 99: - - Vol. ii. p. 17. 4th edition. - ------------------------------------------------------------------------- - - - - - TRANSCRIBER’S NOTES - - - 1. Silently corrected typographical errors and variations in spelling. - 2. Archaic, non-standard, and uncertain spellings retained as printed. - 3. Footnotes have been re-indexed using numbers and collected together - at the end of the last chapter. - 4. Enclosed italics font in _underscores_. - - - - - -End of Project Gutenberg's Definitions in Political Economy, by T. R. 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