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*** START OF THE PROJECT GUTENBERG EBOOK 61483 ***

                              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_.





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