Memorials and Other Papers — Volume 2

Phil. Why, then, it passes my comprehension to understand what test remains of real value, if neither money price nor commodity price expresses it. When are wages, for example, at a high real value?

X. Wages are at a high real value when it requires much labor to produce wages; and at a low real value when it requires little labor to produce wages: and it is perfectly consistent with the high real value that the laborer should be almost starving; and perfectly consistent with the low real value that the laborer should be living in great ease and comfort.

Phil. Well, this may be true; but you must allow that it sounds extravagant.

X. Doubtless it sounds extravagant, to him who persists in slipping under his notion of value another and heterogeneous notion, namely, that of wealth. But, let it sound as it may, all the absurdities (which are neither few nor slight) are on the other side. These will discover themselves as we advance. Meantime, I presume that in your use, and in everybody's use, of the word value, a high value ought to purchase a high value, and that it will be very absurd if it should not. But, as to purchasing a great quantity, that condition is surely not included in any man's idea of value.

Phil. No, certainly; because A is of high value, it does not follow that it must purchase a great quantity; that must be as various as the nature of the thing with which it is compared. But having once assumed any certain thing, as B, it does seem to follow that, however small a quantity A may purchase of this (which I admit may be very small, though the value of A should be very great), yet it does seem to follow, from everybody's notion of value, that this quantity of B, however small at first, must continually increase, if the value of A be supposed continually to increase.

X. This may "seem" to follow; but it has been shown that it does not follow; for if A continually double its value, yet let B continually triple or quadruple its value, and the quantity of B will be so far from increasing, that it will finally become evanescent. In short, once for all, the formula is this: Let A continually increase in value, and it shall purchase continually more and more in quantity— than what? More than it did? By no means; but more than it would have done, but for that increase in value. A has doubled its value. Does it therefore purchase more than it did before of B? No; perhaps it purchases much less; suppose only one fourth part as much of B as it did before; but still the doubling of A's value has had its full effect; for B, it may happen, has increased in value eight-fold; and, but for the doubling of A, it would, instead of one fourth, have bought only one eighth of the former quantity. A, therefore, by doubling in value, has bought not double in quantity of what it bought before, but double in quantity of what it would else have bought.

The remainder of this dialogue related to the distinction between "relative" value, as it is termed, and "absolute" value; clearing up the true use of that distinction. But, this being already too long, the amount of it will be given hereafter, with a specimen of the errors which have arisen from the abuse of this distinction.

* * * * * DIALOGUE THE FIFTH ON THE IMMEDIATE USES OF THE NEW THEORY OF VALUE

X. The great law which governs exchangeable value has now been stated and argued. Next, it seems, we must ask, what are its uses? This is a question which you or I should not be likely to ask; for with what color of propriety could a doubt be raised about the use of any truth in any science? still less, about the use of a leading truth? least of all, about the use of the leading truth? Nevertheless, such a doubt has been raised by Mr. Malthus.

Phćd. On what ground or pretence.

X. Under a strange misconception of Mr. Ricardo's meaning. Mr. Malthus has written a great deal, as you may have heard, against Mr. Ricardo's principle of value; his purpose is to prove that it is a false principle; independently of which, he contends that, even if it were a true principle, it would be of little use. [Footnote: Vide the foot-note to p. 54 of "The Measure of Value."]

Phćd. Little use? In relation to what?

X. Ay, there lies the inexplicable mistake: of little use as a measure of value. Now, this is a mistake for which there can be no sort of apology; for it supposes Mr. Ricardo to have brought forward his principle of value as a standard or measure of value; whereas, Mr. Ricardo has repeatedly informed his reader that he utterly rejects the possibility of any such measure. Thus (at p. 10, edit. 2d), after laying down the conditio sine quâ non under which any commodity could preserve an unvarying value, he goes on to say: "of such a commodity we have no knowledge, and consequently are unable to fix on any standard of value." And, again (at p. 343 of the same edition), after exposing at some length the circumstances which disqualify "any commodity, or all commodities together," from performing the office of a standard of value, he again states the indispensable condition which must be realized in that commodity which should pretend to such an office; and again he adds, immediately, "of such a commodity we have no knowledge." But what leaves this mistake still more without excuse is, that in the third edition of his book Mr. Ricardo has added an express section (the sixth) to his chapter on value, having for its direct object to expose the impossibility of any true measure of value. Setting aside, indeed, these explicit declarations, a few words will suffice to show that Mr. Ricardo could not have consistently believed in any standard or measure of value. What does a standard mean?

Phćd. A standard is that which stands still whilst other things move, and by this means serves to indicate or measure the degree in which those other things have advanced or receded.

X. Doubtless; and a standard of value must itself stand still or be stationary in value. But nothing could possibly be stationary in value upon Mr. Ricardo's theory, unless it were always produced by the same quantity of labor; since any alteration in the quantity of the producing labor must immediately affect the value of the product. Now, what is there which can always be obtained by the same quantity of labor? Raw materials (for reasons which will appear when we consider Rent) are constantly tending to grow dearer [Footnote: "Constantly tending to grow dearer"—To the novice in Political Economy, it will infallibly suggest itself that the direct contrary is the truth; since, even in rural industry, though more tardily improving its processes than manufacturing industry, the tendency is always in that direction: agriculture, as an art benefiting by experience, has never yet been absolutely regressive, though not progressive by such striking leaps or sudden discoveries as manufacturing art. But, for all that, it still remains true, as a general principle, that raw materials won from the soil are constantly tending to grow dearer, whilst these same materials as worked up for use by manufacturing skill are constantly travelling upon an opposite path. The reason is, that, in the case of manufacturing improvements, no conquest made is ever lost. The course is never retrogressive towards the worse machinery, or towards the more circuitous process; once resigned, the inferior method is resigned forever. But in the industry applied to the soil this is otherwise. Doubtless the farmer does not, with his eyes open, return to methods which have experimentally been shown to be inferior, unless, indeed, where want of capital may have forced him to do so; but, as population expands, he is continually forced into descending upon inferior soils; and the product of these inferior soils it is which gives the ruling price for the whole aggregate of products. Say that soils Nos. 1, 2, 3, 4, had been hitherto sufficient for a nation, where the figures express the regular graduation downwards in point of fertility; then, when No. 5 is called for (which, producing less by the supposition, costs, therefore, more upon any given quantity), the price upon this last, No. 5, regulates the price upon all the five soils. And thus it happens that, whilst always progressive, rural industry is nevertheless always travelling towards an increased cost. The product of Nos. 1, 2, 3, 4, is continually tending to be cheaper; but when the cost of No. 5 (and so on forever as to the fresh soils required to meet a growing population) is combined with that of the superior soils, the quotient from the entire dividend, 1, 2, 3, 4, 5, is always tending gradually to a higher expression.] by requiring more labor for their production; manufactures, from the changes in machinery, which are always progressive and never retrograde, are constantly tending to grow cheaper by requiring less; consequently, there is nothing which, upon Mr. Ricardo's theory, can long continue stationary in value. If, therefore, he had proposed any measure of value, he must have forgotten his own principle of value.

Phil. But allow me to ask; if that principle is not proposed as a measure of value, in what character is it proposed?

X. Surely, Philebus, as the ground of value; whereas a measure of value is no more than a criterion or test of value. The last is simply a principium cognoscendi, whereas the other is a principium essendi.

Phil. But wherein lies the difference?

X. Is it possible that you can ask such a question? A thermometer measures the temperature of the air; that is, it furnishes a criterion for ascertaining its varying degrees of heat; but you cannot even imagine that a thermometer furnishes any ground of this heat. I wish to know whether a day's labor at the time of the English Revolution bore the same value as a hundred years after at the time of the French Revolution; and, if not the same value, whether a higher or a lower. For this purpose, if I believe that there is any commodity which is immutable in value, I shall naturally compare a day's labor with that commodity at each period. Some, for instance, have imagined that corn is of invariable value; and, supposing one to adopt so false a notion, we should merely have to inquire what quantity of corn a day's labor would exchange for at each period, and we should then have determined the relations of value between labor at the two periods. In this case, I should have used corn as the measure of the value of labor; but I could not rationally mean to say that corn was the ground of the value of labor; and, if I said that I made use of corn to determine the value of labor, I should employ the word "determine" in the same sense as when I say that the thermometer determines the heat—namely, that it ascertains it, or determines it to my knowledge (as a principium cognoscendi). But, when Mr. Ricardo says that the quantity of labor employed on A determines the value of A, he must of course be understood to mean that it causes A to be of this value, that it is the ground of its value, the principium essendi of its value; just as when, being asked what determines a stone to fall downwards rather than upwards, I answer that it is the earth's attraction, or the principle of gravitation, meaning that this principle causes it to fall downwards; and if, in this case, I say that gravitation "determines" its course downwards, I no longer use that word in the sense of ascertain; I do not mean that gravitation ascertains it to have descended; but that gravitation has causatively impressed that direction on its course; in other words, I make gravitation the principium essendi of its descent.

Phćd. I understand your distinction; and in which sense do you say that Mr. Malthus has used the term Measure of Value—in the sense of a ground, or of a criterion?

X. In both senses; he talks of it as "accounting for" the value of A, in which case it means a ground of value; and as "estimating" the value of A, in which case it means a criterion of value. I mention these expressions as instances; but, the truth is, that, throughout his essay entitled "The Measure of Value Stated and Illustrated" and throughout his "Political Economy" (but especially in the second chapter, entitled "The Nature and Measures of Value"), he uniformly confounds the two ideas of a ground and a criterion of value under a much greater variety of expressions than I have time to enumerate.

Phil. But, admitting that Mr. Malthus has proceeded on the misconception you state, what is the specific injury which has thence resulted to Mr. Ricardo?

X. I am speaking at present of the uses to be derived from Mr. Ricardo's principle of value. Now, if it had been proposed as a measure of value, we might justly demand that it should be "ready and easy of application," to adopt the words of Mr. Malthus ("Measure of Value," p. 54); but it is manifestly not so; for the quantity of labor employed in producing A "could not in many cases" (as Mr. Malthus truly objects) "be ascertained without considerable difficulty;" in most cases, indeed, it could not be ascertained at all. A measure of value, however, which cannot be practically applied, is worthless; as a measure of value, therefore, Mr. Ricardo's law of value is worthless; and if it had been offered as such by its author, the blame would have settled on Mr. Ricardo; as it is, it settles on Mr. Malthus, who has grounded an imaginary triumph on his own gross misconception. For Mr. Ricardo never dreamed of offering a standard or fixed measure of value, or of tolerating any pretended measure of that sort, by whomsoever offered.

Thus much I have said for the sake of showing what is not the use of Mr. Ricardo's principle in the design of its author; in order that he may be no longer exposed to the false criticism of those who are looking for what is not to be found, nor ought to be found, [Footnote: At p. 36 of "The Measure of Value" (in the footnote), this misconception as to Mr. Ricardo appears in a still grosser shape; for not only does Mr. Malthus speak of a "concession" (as he calls it) of Mr. Ricardo as being "quite fatal" to the notion of a standard of value,—as though it were an object with Mr. Ricardo to establish such a standard,—but this standard, moreover, is now represented as being gold. And what objection does Mr. Malthus make to gold as a standard? The identical objection which Mr. Ricardo had himself insisted on in that very page of his third edition to which Mr. Malthus refers.] in his work. On quitting this part of the subject, I shall just observe that Mr. Malthus, in common with many others, attaches a most unreasonable importance to the discovery of a measure of value. I challenge any man to show that the great interests of Political Economy have at all suffered for want of such a measure, which at best would end in answering a few questions of unprofitable curiosity; whilst, on the other hand, without a knowledge of the ground on which value depends, or without some approximation to it, Political Economy could not exist at all, except as a heap of baseless opinions.

Phćd. Now, then, having cleared away the imaginary uses of Mr. Ricardo's principle, let us hear something of its real uses.

X. The most important of these I expressed in the last words I uttered: That without which a science cannot exist is commensurate in use with the science itself; being the fundamental law, it will testify its own importance in the changes which it will impress on all the derivative laws. For the main use of Mr. Ricardo's principle, I refer you therefore to all Political Economy. Meantime, I will notice here the immediate services which it has rendered by liberating the student from those perplexities which previously embarrassed him on his first introduction to the science; I mention two cases by way of specimen.

1. When it was asked by the student what determined the value of all commodities, it was answered that this value was chiefly determined by wages. When again it was asked what determined wages, it was recollected that wages must generally be adjusted to the value of the commodities upon which they were spent; and the answer was in effect that wages were determined by the value of commodities. And thus the mind was entangled in this inextricable circle—that the price of commodities was determined by wages, and wages determined by the price of commodities. From this gross Diallćlos (as the logicians call it), or see-saw, we are now liberated; for the first step, as we are now aware, is false: the value of commodities is not determined by wages; since wages express the value of labor; and it has been demonstrated that not the value but the quantity of labor determines the value of its products.

2. A second case, in which Mr. Ricardo's law has introduced a simplicity into the science which had in vain been sought for before, is this: all former economists, in laying down the component parts of price, had fancied it impossible to get rid of what is termed the raw material as one of its elements. This impossibility was generally taken for granted: but an economist of our times, the late Mr. Francis Horner, had (in the Edinburgh Review) expressly set himself to prove it. "It is not true," said Mr. Horner, "that the thing purchased in every bargain is merely so much labor: the value of the raw material can neither be rejected as nothing, nor estimated as a constant quantity." Now, this refractory element is at once, and in the simplest way possible, exterminated by Mr. Ricardo's reformed law of value. Upon the old system, if I had resolved the value of my hat into wages and profits, I should immediately have been admonished that I had forgotten one of the elements: "wages, profits, and raw material, you mean," it would have been said. Raw material! Well, but on what separate principle can this raw material be valued? or on what other principle than that on which the hat itself was valued? Like any other product of labor, its value is determined by the quantity of labor employed in obtaining it; and the amount of this product is divided between wages and profits as in any case of a manufactured commodity. The raw material of the hat suppose to be beaver: if, then, in order to take the quantity of beavers which are necessary to furnish materials for a thousand hats, four men have been employed for twenty-five days, then it appears that the raw material of a thousand hats has cost a hundred days' labor, which will be of the same value in exchange as the product of a hundred days' labor (previously equated and discounted as to its quality) in any other direction; as, for example, if a hundred days' labor would produce two thousand pairs of stockings of a certain quality, then it follows that the raw material of my hat is worth two pairs of such stockings. And thus it turns out that an element of value (which Mr. Horner and thousands of others have supposed to be of a distinct nature, and to resist all further analysis) gives way before Mr. Ricardo's law, and is eliminated; an admirable simplification, which is equal in merit and use to any of the rules which have been devised, from time to time, for the resolution of algebraic equations.

Here, then, in a hasty shape, I have offered two specimens of the uses which arise from a better law of value; again reminding you, however, that the main use must lie in the effect which it will impress on all the other laws of Political Economy. And reverting for one moment, before we part, to the difficulty of Philebus about the difference between this principle as a principium cognoscendi or measure, and a principium essendi or determining ground, let me desire you to consider these two essential marks of distinction: 1. that by all respectable economists any true measure of value has been doubted or denied as a possibility: but no man can doubt the existence of a ground of value; 2. that a measure is posterior to the value; for, before a value can be measured or estimated, it must exist: but a ground of value must be antecedent to the value, like any other cause to its effect.

* * * * * DIALOGUE THE SIXTH ON THE OBJECTIONS TO THE NEW LAW OF VALUE

X. The two most eminent economists [Footnote: The reader must continue to remember that this paper was written in 1824.] who have opposed the Ricardian doctrines are Mr. Malthus and Colonel Torrens. In the spring of 1820 Mr. Malthus published his "Principles of Political Economy," much of which was an attack upon Mr. Ricardo; and the entire second chapter of eighty-three pages, "On the Nature and Measures of Value," was one continued attempt to overthrow Mr. Ricardo's theory of value. Three years afterwards he published a second attack on the same theory in a distinct essay of eighty-one pages, entitled, "The Measure of Value Stated and Illustrated." In this latter work, amongst other arguments, he has relied upon one in particular, which he has chosen to exhibit in the form of a table. As it is of the last importance to Political Economy that this question should be settled, I will shrink from nothing that wears the semblance of an argument: and I will now examine this table; and will show that the whole of the inferences contained in the seventh, eighth, and ninth columns are founded on a gross blunder in the fifth and sixth; every number in which columns is falsely assigned.

MR. MALTHUS' TABLE ILLUSTRATING THE INVARIABLE VALUE OF LABOR AND ITS RESULTS

(From p. 38 of "The Measure of Value Stated and Illustrated." London: 1823.)

N. B.—The sole change which has been made in this reprint of the original Table is the assigning of names (Alpha, Beta, etc.) to the several cases, for the purpose of easier reference and distinction.

CASE. 1 2 3 4 5 6 7 8 9

Alpha… 150 12 120 25 8 2 10 8.33 12.5

Beta…. 150 13 130 15.38 8.66 1.34 10 7.7 11.53

Gamma… 150 10 100 50 6.6 3.4 10 10 15

Delta… 140 12 120 16.66 8.6 1.4 10 7.14* 11.6

Epsilon. 140 11 110 27.2 7.85 2.15 10 9.09 12.7

Zeta…. 130 12 120 8.3 9.23 0.77 10 8.33 10.8

Eta….. 130 10 100 30 7.7 2.3 10 10 13

Theta… 120 11 110 9 9.17 0.83 10 9.09 10.9

Iota…. 120 10 100 20 8.33 1.67 10 10 12

Kappa… 110 10 100 10 9.09 0.91 10 10 11

Lambda.. 110 9 90 22.2 8.18 1.82 10 11.1 12.2

My…… 100 9 90 11.1 9 1 10 11.1 11.1

Ny…… 100 8 80 25 8 2 10 12.5 12.5

Xi…… 90 8 80 12.5 8.88 1.12 10 12.5 11.25

1.—Quarters of Corn produced by Ten Men. 2.—Yearly Corn Wages to each Laborer. 3.—Yearly Corn Wages of the whole Ten Men. 4.—Rate of Profits under the foregoing Circumstances. 5.—Quantity of Labor required to produce the Wages of Ten Men. 6.—Quantity of Profits on the Advance of Labor. 7.—Invariable Value of the Wages of a given Number of Men. 8.—Value of 100 Quarters of Corn under the varying Circumstances supposed. 9.—Value of the Product of the Labor of Ten Men under the Circumstances supposed.

[Footnote: *This is an oversight on the part of Mr. Malthus, and not an error of the press; for 7.14 would be the value of the 100 quarters on the supposition that the entire product of the ten men (namely, 140 quarters) went to wages; but the wages in this case (Delta) being 120 quarters, the true value on the principle of this table is manifestly 8.33.]

SECTION I

Phćd. Now, X., you know that I abhor arithmetical calculations; besides which, I have no faith in any propositions of a political economist which he cannot make out readily without all this elaborate machinery of tables and figures. Under these circumstances, I put it to you, as a man of feeling, whether you ought to inflict upon me this alarming pile of computations; which, by your gloomy countenance, I see that you are meditating.