AN 
 EXAMINATION 
 
 DOCTRINES OF VALUE, 
 
 AS SET FORTH BY 
 
 ADAM SMITH, RICARDO, M'CULLOCH, 
 
 MILL, THE AUTHOR OF " A CRITICAL DISSERTATION," &c. 
 TORRENS, MALTHUS, SAY, &c. &c. 
 
 A REPLY 
 
 TO THOSE DISTINGUISHED AUTHORS, 
 
 BY 
 
 CHARLES FORSTER COTTERILL. 
 
 LONDON : 
 SIMPKIN & MARSHALL, STATIONERS' HALL COURT. 
 
 AND 
 
 RIDGWAY, PICCADILLY. 
 1831. 
 
H^ 
 
 
 W\^i1 
 
 
 riy:^ 
 
 BIRMINGHAM, PRINTED BY THOMAS KNOTT. 
 
PREFACE. 
 
 IN difFering from some of the most dis- 
 tinguished economists of the past and present 
 day respecting the law which determines value 
 in exchange, I have not been unsusceptible of 
 diffidence* in laying my view of the subject 
 before the tribunal of public opinion. This 
 diffidence of feeling, however, has not pre- 
 vented me from stating my principles, nor from 
 ** commenting with that freedom which the in- 
 terests of science require" on such parts of the 
 works of economists as were at variance with 
 my own opinions, and which I considered as 
 obstacles in the pursuit of truth. How far I 
 have been successful in removing old impedi- 
 ments, or avoiding the substitution of any ad- 
 ditional, the reader will best judge. It will, 
 however, afford me considerable pleasure, if 
 the prediction of Colonel Torrens respecting 
 the probable union of economists on this sub- 
 ject, be shortly fulfilled; as the laws which 
 affect the distribution of wealth can never be 
 generally or clearly known until this anticipated 
 union is accomplished. 
 
 * Especially as the MS. originally intended for publication, and 
 submitted for perusal to a gentleman, has been unfortunately mis- 
 laid by him. The following pages therefore were hastily re-com- 
 posed, in the midst of other and most pressing engagements, from, 
 such menioianda as were preserved 
 
 \-i <S «_5 'J.' V/ t 
 
With respect to the controversial character 
 of the following pages, 1 can only say it w^as un- 
 avoidable in consequence of my theory involv- 
 ing positive differences from other economists ; 
 but respecting the form of it, I must be permit- 
 ted to give some explanation. It is allowed 
 that the division of Mr. Ricardo's chapter on 
 value admits of considerable improvement. In 
 following therefore his arrangement, I have ne- 
 cessarily participated in his defect; this, how- 
 ever, appeared to me more than balanced by 
 the advantage it afforded me of following him 
 step by step, and of very particularly and mi- 
 nutely scrutinizing his opinions. 1 have, there- 
 fore, divided my work into the same number of 
 sections which I find in Mr. Ricardo's chapter 
 on value ; and by making his doctrines in each 
 the text of my remarks, I have, at the same 
 time, been enabled more conveniently to inves- 
 tigate the opinions of other economists, both 
 such as have attached themselves to the Ri- 
 cardo school and such as are opposed to it. In 
 the investigation, brevity (so far as was con- 
 sistent with perspicuity) has been a principal 
 object; though the intricacy of the subject not 
 only admits but requires more copious illustra- 
 tions than many subjects which are less abstract. 
 In consequence of the form selected, it will be 
 seen that various arguments and principles have 
 been unavoidably repeated. 
 
 The most important features in the following 
 pages appear to me to consist- in shewing the 
 
eflficient and determining cause of value— the 
 effect of alterations in wages on value under 
 different proportions of fixed and circulating 
 capital, &c. — the conditions necessary to a 
 standard of value — and in confuting, as I con- 
 ceive, the erroneous doctrine that the supposi- 
 tion of such a standard involves contradictory 
 conditions. 1 am far from supposing that every 
 opinion disclosed is free from error or objec- 
 tion; the subject, however, I trust, will not suf- 
 fer under my criticism. On the contrary, I 
 hope it may be found I have acted as a pioneer, 
 rather than an obstructer of the way on which 
 subsequent adventurers may desire to travel. 
 
 It is scarcely necessary to say that political 
 economy is a very useful and important science; 
 that which explains the phenomena of the pro- 
 duction, distribution, and consumption of 
 wealth, can only be thought useless and unim- 
 portant by the ignorant and prejudiced. While 
 the world is much indebted to the astronomer 
 for his discovery of distant orbs, and to the 
 chemist for some important analytical processes, 
 society is much more indebted to that science 
 which discloses the hidden causes of wealth, 
 thus furnishing the fund from which scien- 
 tific and literary men draw their encourage- 
 ment and subsistence. Were the laws of 
 wealth more generally studied, those ebbs and 
 flows of commerce, and those violent convul- 
 sions which shake society to its base, would, 
 if not entirely prevented, at least be modified in 
 
VI 
 
 their influence, and their recurrence would be 
 rendered less frequent. But to affirm in the 
 present day that the people are not growing 
 in knowledge would be libellous : the progress 
 of late years has been almost geometric; nor 
 has our legislature been unaffected by this 
 change. The relaxations in the commercial 
 code are practical proofs of the explosion of old 
 and contracted views, and of the substitution of 
 more enlarged and scientific opinions. That 
 the writings of political economy have had a 
 principal effect in causing the change, would be 
 a great injustice to them and their authors to 
 deny ; much, however, now remains to be done. 
 The work will not be complete until every pro- 
 tective duty is withdrawn, and the different na- 
 tions of the globe are allowed freely to trade 
 with us unembarrassed by fiscal claims. A be- 
 neficent Creator has given to different countries 
 a vast variety of soil and climate, congenial to 
 the production of commodities infinitely varied 
 in their character and use : to refuse this bounty 
 seems both infatuated and impious. To the late 
 Mr. Huskisson we are indebted for much that 
 has been done; and to the present confidential 
 advisers of his Majesty we look for a great deal 
 more which we hope will be done. That we may 
 not hope in vain, but realise more than we expect- 
 ed, and as much as we desired, is the most im- 
 portunate wish of 
 
 THE AUTHOR. 
 
 Walsall, February, 1831. 
 
CONTENTS. 
 
 PAGE 
 
 An Examination of the 1st Section of Mr. Ricardo's t i 
 
 :'i 
 
 Chapter on Value , 
 
 Ditto of the 2d ditto 54 
 
 Ditto of the 3d ditto 62 
 
 Ditto oc.ofthe4th ditto 72 
 
 Ditto oftheSth ditto * 91 
 
 Ditto of the 6th ditto 98 
 
 Ditto of the 7th ditto 123 
 
SECTION I 
 
 -The doctrine set forth by Mr. Ricardo in his \ 
 rst section is both original* and profound. It ' 
 is original in assigning quantity of labour as the 
 cause of value nhough an erroneous cause, as 
 others have proved, and as I shall afterwards 
 shew ;) and profound in combating the doctrine 
 propounded by Dr. Adam Smith, that the price 
 given to the labourer is the cause of value in ex- 
 change. However much this part of Mr. Ri- 
 cardo's argument may be admired, and however 
 much we may applaud the dexterity by which 
 the opinion of Dr. Smith on this subject is con- 
 futed, the theory itself which this profound 
 writer substituted, will, I think, be shewn des- 
 titute of foundation, notwithstanding it is con- 
 secrated by the approbation of men of no mean 
 attainments in economical science. Unfortu- 
 nately for political economy, Mr. Ricardo's 
 extreme deficiency in analytical subtlety has 
 engendered in all his writings very important 
 and very radical errors. 
 
 That the subject may have an ample exami- 
 nation, I shall first give an epitome of the doc- 
 trines divulged hy Mr. Ricardo in this his first 
 
 • Sir "William Petty, in Charles the Second's Reign, stated quan- 
 tity of labour to be the ground or cause of value ; hut as he was evi- 
 dently not aware of all the consequences of his theory, we must con- 
 ceda to Mr. Ricardo the merit of originality. 
 
 B 
 
section ; I shall then offer my criticisms upon 
 them, and assign what appears to me, after an 
 anxious examination, the true principles which 
 determine exchangeable value. I shall after- 
 wards examine the opinions of some of our most 
 eminent economists, particularly those of Mr. 
 M'Culloch, the Professor of Political Economy 
 in the University of London. And in the pro- 
 secution of this enquiry, I not only ask the 
 patience, but the candour of my reader, and 
 also his forbearance. 
 
 Mr. Ricardo commences by a quotation 
 
 I from Adam Smith, shewing the distinction be- 
 tween value in use and value in exchange. He 
 observes, " Water and air are abundantly 
 useful; they are, indeed, indispensable to exist- 
 ence ; yet, under ordinary circumstances, 
 nothing can be obtained in exchange for them." 
 *' Utility then," he says, " is not the measure of 
 exchangeable value, although it is absolutely 
 essential to it." He proceeds to state, that 
 
 ; commodities possessing utility derive their value 
 
 ; from two sources — from their scarcity, and from 
 the quantity of labour necessary to their pro- 
 duction. The former he considers as forming 
 
 ""Trvery inconsiderable part of the mass of com- 
 modities, and in speaking therefore of the ex- 
 changeable value of commodities, he means 
 those only *' on the production of which com- 
 petition operates without restraint." He then 
 proceeds with various quotations from the 
 work of Smith, shewing* that in that '* rude 
 
state of society which precedes both the 
 accumulation of stock and the appropriation 
 of land, the proportion between the quan- 
 tities of labour necessary for acquiring dif- 
 ferent objects seems to be the only circum- 
 stance which can afford any rule for ex- 
 chanoing^ them for one another," Afterwards 
 he impugns the erratic genius of this great eco- 
 nomist, and charges him with creating another 
 standard measure of value, sometimes in corn, 
 and sometimes in the purchasing power of la- 
 bour, after having consistently defined the 
 original source of value. He then attempts to 
 prove that Smith, in ejecting gold and silver as 
 his standard, had himself, by fixing on corn and 
 labour, chosen media no less variable. Gold 
 and silver, Ricardo very truly affirms, are sub- 
 ject to great fluctuations from the discovery of 
 fresh mines, from improvements in working 
 them, and from their exhaustion after yielding a 
 supply to the world for a succession of ages. 
 But from which of these variations he cogently 
 asks are corn and labour exempt ? He then ob- 
 serves, that " In the same country double the 
 quantity of labour may be required to produce 
 a given quantity of food and necessaries at one 
 time that may be necessary at another and a 
 distant time ; yet the labourer's reward may 
 possibly be very little diminished. If the la- 
 bourer's wages at the former period were a cer- 
 tain quantity of food and necessaries, he pro- 
 bably could not have subsisted if that quantity 
 
 B 2 
 
 r 
 
had been reduced. Food and necessaries in 
 this case will have risen one hundred per cent, 
 if estimated by the quantity of labour necessary 
 to their production, while they will scarcely 
 have increased in value, if measured by the 
 quantity of labour for which they will e.vchange.'' 
 And he then proceeds to remark respecting the 
 food and clothing of the labourer, that in case 
 improvements in machinery should lower their 
 cost, and consequently their value, *' we should 
 find him probably at the end of a few years in 
 possession of only a small, if any addition to his 
 enjoyments." " It cannot then be correct to say 
 with Adam Smith," " that as labour may some- 
 times purchase a greater, and sometimes a 
 smaller quantity of goods, it is their value which 
 varies, not that of the labour which purchases 
 them." " But coJ?f'ect as Adam Smith had pre- 
 viously said," M that the proportion between the 
 quantities of labour necessary for acquiring 
 different objects seems to be the only circum- 
 stance which can afford any rule for exchanging 
 them for one another.'' Two commodities, gold 
 and labour for instance, fall in exchangeable 
 value in reference to the mass of commodities ; 
 upon investigation w^e find that the discovery of 
 new and more fertile mines has lowered the cost 
 of producing gold, and that, in consequence of 
 an abundant supply, or the increased facility of 
 producing corn, &c. labour had fallen to other 
 things. It would, says Mr. Ricardo, *' be cor- 
 rect for me to say, that corn and necessaries 
 
5 
 
 had fallen in value in consequence of less quan- 
 tity of labour being necessary to produce them, 
 and that this facility of providing for the sup- 
 port of the labourer had been followed by a fall 
 in the value of labour." No, say Adam Smith 
 and Mr. Malthus, with regard to gold you were 
 correct ; but corn and labour are our standard; 
 it would therefore be highly improper to say 
 they had varied — " the correct language will be 
 to say, that corn and labour have remained 
 stationary, and all other things have risen in 
 value " Against this language Mr. Ricardo , y 
 
 protests, because he finds in the case of gold ' ^/^' 
 
 and corn that a less quantity of labour is neces- 
 sary to produce them, he considers they have 
 fallen, and not that other things have risen in 
 value, and concludes by putting Smith in the 
 following inextricable dilemma. " Suppose a ,■ 
 labourer to be paid a bushel of corn for a week's 
 work, when the price of corn is 80s. per quarter, 
 and that he is paid a bushel and a quarter when 
 the price falls to 40s. Suppose too that he 
 consumes half a bushel of corn a week in his 
 own family, and exchanges the remainder for 
 other things, such as fuel, soap, candles, tea, 
 sugar, salt, &c. &c. ; if the three-fourths of a 
 bushel which will remain to him, in one case, 
 cannot procure him as much of the above com- 
 modities as half a bushel did in the other, which 
 it will not, will labour have risen or fallen in 
 value ? Risen, Adam Smith must say, because 
 his standard is corn, and the labourer receives 
 
more corn for a week's labour. Fallen must 
 the same A. Smith say, " because the value of 
 a thing depends upon the power of purchasing 
 other goods, which the possession of that ob- 
 ject conveys," and labour has a less power of 
 purchasing such other goods." 
 
 After this very brief synoptical statement of 
 the doctrines disclosed by Mr. Ricardo in this 
 section, I shall endeavour to try the truth of 
 them by the test of analysis in three ways — 
 
 1st. By considering the negative part of his 
 theory. 
 
 2dly. The positive part of it. And 
 
 3dly. By considering the comparative me- 
 rits of the Smithian and Ricardian schemes. 
 
 First then with respect to the negative part 
 of Mr. Ricardo's doctrine, that value is not 
 caused by the purchasing power of labour, I 
 may remark very briefly, that Ricardo success- 
 fully overthrew the erroneous notion of the 
 great Scotch economist, that value was altered 
 by an alteration in the wages of labour. It was 
 a doctrine advanced by Adam Smith, and con- 
 firmed by every succeeding economist to the 
 time of Ricardo, that the exchangeable value of 
 all goods was raised by a rise of wages, and di- 
 minished by a fall. Ricardo proved this not 
 only to be untrue, but that, on the contrary, 
 those goods which had a preponderating share 
 of fixed capital in their production, fell as wages 
 rose, and rose as wages fell. This doctrine, 
 paradoxical as it may appear, is supported by 
 
the distinguished names of Malthiis, M'Culloch, 
 Mill, &c. and is true beyond all possibility of 
 doubt as respects the fact of an inverse variation U '" 
 
 to wages, though theAuthor of the presentwork, 
 as will afterwards be shewn, differs from all these 
 writers as to the exact incidence of a rise and 
 fall of wages on value under different proportions 
 of fixed and circulating capital, and different 
 rates of profit. That aggregate value is not 
 encreased or diminished by a rise or fall of 
 wages. Mill and M'Culloch have very clearly 
 stated ; but I feel well convinced Mr. Ricardo 
 had not such clear views. It is, however, very 
 evident, that as a rise or fall of wages merely 
 affects the distribution of commodities, any al- 
 teration in it cannot alter aggregate value, be- 
 cause it does neither increase nor diminish the 
 amount of commodities. These principles eco- 
 nomists have very successfully stated. I there- 
 fore deem it useless to say further, but pro- 
 ceed, 
 
 Secondly, to consider the positive part of 
 Mr. Ricardo's theory. 
 
 Value Mr. Ricardo very properly divides 
 into two parts, viz. value in use and value in \ 
 exchange. The former comprises all those gra- 
 tuitous gifts of God's goodness, such as air, 
 water, &c. which are spontaneously produced. 
 The latter includes all commodities that require 
 labour to produce them, and which possess ** a 
 power of purchasing other goods." The first 
 then obviously does not come within the range 
 
8 
 
 of political economy, and is only mentioned in 
 transitu for the sake of perspicuity. It is 
 consequently the last or value in exchange 
 that Mr. Ricardo proceeds to mvestigate, 
 and the cause of which he unequivocally states 
 to be quantity of labour. Notwithstanding 
 this doctrine has been confuted in the clearest 
 manner by the Author of the "Dissertation on the 
 Nature, Measures, and Causes of Value," I 
 shall endeavour, as there are some Ricar- 
 dians still remaining, to give it a further 
 confutation, and various are the modes by 
 which it may be accomplished. I shall con- 
 fine myself to two, viz. in supposing all com- 
 modities increased in their producing labour, 
 and only a part so increased. In the first place 
 then we will assume three classes of capitalists. 
 No. 1, 2, and 3, each class with a capital of 1000/. 
 or what is the same thing, with wages sufficient 
 for the maintenance of twenty men, each at 50/. 
 per annum, and profits at 20/. per cent. The 
 total capital will therefore be 3000/. and the 
 total profit 600/. Now let us imagine, that 
 from some cause or other the productiveness of 
 capital or labour is generally depreciated, and 
 that 1100/. is now necessary, or twenty-two 
 men at the same wages as before, viz. 50/. to 
 produce the amount of commodities which 
 1000/. or twenty men formerly produced. Is it 
 not then evident, that the capitalists of class 1 
 will not obtain a larger value from class 2 and 
 class 3 than they formerly obtained before the 
 

 
 diminished power of labour and capital ? For 
 if they should urge increased quantity of la- 
 bour or capital as a reason for obtaining more 
 of the commodities produced by the labour 
 and capital of classes 2 and 3, will not these ca- 
 pitalists urge the same plea, and contend that 
 they should have more of the commodities pro- 
 duced by the capital of class 1, instead of less, 
 on account of the increased difficulty of pro- 
 ducing their particular articles ? It is there- 
 fore very plain, that all the goods produced 
 from classes 1, 2, and 3, will exchange against 
 each other in the former ratio ; and that too 
 notwithstanding an increase in the quantity of 
 labour necessary to produce them. What then 
 becomes of Mr. Ricardo's doctrine of value? 
 
 Again; we will suppose 3 classes of capital- 
 ists, as before, equally employing 1000/. each, 
 or 20 men at wages of 50/. per annum per man, 
 and instead of a decrease in the productiveness 
 of industry in all the classes, we will assume it, 
 in only one, say class 3. In this class then let 
 us suppose 22 men necessary, each at 50/. per 
 annum wages, to produce the same amount of 
 goods which 20 men or 1000/. was only neces- 
 sary before to produce, and that classes 1 and 2 
 still require their former quantity of labour. 
 Here, then, will the followers of Mr. Ricardo 
 be unbounded in their triumph, and exclaim 
 with some assurance, " your very supposition 
 proves the truth of Mr. Ricardo's doctrine that 
 value is caused by quantity of labour, for with 
 
10 
 
 regard to the commodities of class 3 you find 
 their exchangeable value increased because the 
 cause of value is increased." Most certainly 
 the goods produced by the capital or labour of 
 class 3 will be increased, if the producing la- 
 bour of classes 2 and 3 have not equally in- 
 creased; we suppose they have not, and conse- 
 quently we find that commodities produced un- 
 der the circumstances of class 3 have gained in 
 exchangeable value. But we do not from 
 thence conclude that quantity of labour is the 
 cause of value, because we find upon comparing 
 classes 1 and 2 with class 3 that they have fallen 
 in exchangeable worth, which they never could 
 have done if quantity of labour were the cause of 
 value, as the quantity of their producing 
 labour by the supposition has not altered. 
 Quantity of labour, therefore, cannot be the 
 cause why the various commodities of classes 1, 
 2, and 3, mutually exchange for each other. 
 Mr. Ricardo had only one point of sight, he 
 would look at classes 1 and 2 from class 3, where 
 there had been an alteration in the producing 
 labour. Had he inverted his view, and seen 
 class 3 from either point, class 1, or class 2, he 
 could never have propounded his doctrine with 
 such uncompromising decision. Enamoured 
 with his theory, he evidently, either through 
 fear or negligence, omitted to view it at those va- 
 ried points of sight which are necessary to try the 
 stability of any system, and especially one 
 which went to overthrow long established and 
 
ti 
 
 very deep rooted prejudices. To say the most 
 of his theory, it is but a theory of ratios, and can 
 never determine value. A. and B. he says, 
 have the same value, because the quantity of 
 labour necessary to produce A, is the same as 
 the quantity necessary to produce B. But it 
 does not follow from thence that quantity of la- 
 bour is the cause of A. exchanging i'or B. or B. 
 exchanging for A. any more than the desire of 
 an individual to take a journey may be said to 
 be the cause of his travelling. For it evidently 
 is not merely the desire which constitutes the 
 cause. Besides the disposition to go, there must 
 be the necessary means of going, such as convey- 
 ances, roads, money, physical strength, &c. 
 And though in popular language it may be cor- 
 rect to say, we travel because we desire to 
 travel, in strict philosophical language it is 
 highly incorrect to say so ; as this is simply 
 but one ingredient in the cause, whereas 
 it is compounded of many ingredients. Just in 
 this manner I conceive Mr. Ricardo's error to 
 have arisen. Assuming A. and B. to exchange 
 for each other, and discovering that the produc- 
 ing labour of A. was the same as the producing 
 labour of B. he precipitately concluded that 
 quantity of labour was the sole cause of their 
 value; whereas it was only a moiety of the 
 cause. The native strength of Mr. Ricardo's 
 mind led him to reject A. Smith's cause of 
 value, but unfortunately, the theory substi- 
 tuted is quite inadequate to satisfy the inquisi- 
 
12 
 
 tive investigator of truth. It is, however, 
 urged in extenuation of Mr. Ricardo by some of 
 those who favour his view of the subject, that 
 he used the term value designedly, sometimes in 
 a techical sense as not meaning exchangeable 
 power, but that he always indicated in the con- 
 text in which sense he wished it to be under- 
 stood. Mr. Ricardo, however, only acquaints 
 the reader with two kinds of value, viz. value in 
 use and value in exchange, and in combating 
 Adam Smith, his arguments are worthless unless 
 he used the term in the sense of exchange- 
 able power. It is true, in his chapter on "Value 
 and Riches," he avows two meanings ; but this 
 might have been expected, because being about 
 the middle of his book, it would be a gross in- 
 sult to his understanding to suppose he did not 
 then see the great inconsistencies to which his 
 doctrine led him. But whether he used the 
 term value in one sense or two is now very im- 
 material, and would not in the least help him 
 from a disagreeable dilemma. For in the event 
 of his using the term in the sense of purchasing 
 power it is most obvious thatquantity of labour 
 cannot be the determining cause, as we have be- 
 fore proved; and if he used the term designedly, 
 in two senses it is absurd and contradictory. 
 Because we want to know the cause of value, 
 and Mr. Ricardo unequivocally stating quantity 
 of labour, the objectors to this theory place it 
 in such a critical situation that those friendly to 
 it immediately step forward, and cry out " that 
 
13 
 
 he used the term in a technical sense," and so 
 think they vindicate their master, but they 
 would really serve him better by an avowed 
 hostility. 
 
 We will thirdly consider the comparative 
 merits of the Smithian and Ricardian schemes. 
 
 However much the interesting science of 
 political economy is indebted to Mr. Ricardo 
 for some important truths, it remains to me a 
 mystery, and is, I believe, an anomaly in the 
 history of the science, that so sa2:acious and 
 profound an investigator of truth should have 
 been misled at the very threshold of his princi- 
 ple. The very ingenious author of the "Disser- 
 tation on the Nature, Measures, and Causes of 
 Value," has objected to the very heading of this 
 section, and his remarks appear just, for I am 
 much mistaken if it is not a false antithesis, 
 and if the two parts of the proposition are not 
 the same in their result. Economists allow 
 wages to be equal in all departments upon an 
 average of years, in the same manner that they 
 agree upon an equality of profits. If, there- 
 fore, wages are equal in all departments, shall 
 we not as accurately acquire the value of a com- 
 modity by a knowledge of the wages consumed 
 in its production as we shall by the quantity of 
 labour employed to produce it? Here are A. 
 and B. that mutually exchange for each other. 
 Now what is the cause that A. exchanges for B.? 
 The quantity of labour consumed in the pro- 
 duction of A. Mr. Ricardo says. The price or 
 
14 
 
 the wages of labour, on the contrary, Adam Smith 
 says. Assuming afterwards that one A. ex- 
 changes for two B. Mr. Ricardo would contend 
 that either there had been an increase in the 
 producing labour of A. or a decrease in the pro- 
 ducino- labour of B. On the other hand it 
 would be urged by Adam Smith that the 
 wages to produce A. had either been increased, 
 or the wages to produce B. decreased, and 
 both these economists would propound pretty 
 correct criteria of value, but the former would 
 not have any superiority over the latter. For 
 suppose that when A. and B. were first as- 
 sumed to exchange for each other the labour of 
 one man for one year at 50/. per annum, was 
 necessary equally to produce A. and B. and 
 that in consequence of great facilities in the 
 production of B. one man at half a year, or 25/. 
 was only necessary, Mr. Ricardo would then 
 affirm it as very certain that quantity of labour 
 was the cause of the specific value which A. and 
 B. mutually possessed, because he would dis- 
 cover that B. was depreciated 50/. per cent, in 
 its exchangeable value, just as its producing 
 labour was diminished. ButAdam Smith would 
 perceive an equal coincidence with his theory, 
 for he would find that the wages to produce B. 
 were fallen directly as its value. We therefore 
 see clearly that the value of any commodities 
 at the same time may be as correctly estimated 
 by Smith's as by Ricardo's rule. For if A. 
 is known to be of equal value to B. because the 
 
15 
 
 quantity of labour to produce A. is the same as 
 the quantity to produce B. the value of A. in 
 like manner is toB. as the value of the producing 
 labour of A. is to the value of the producing la- 
 bour of B. It may however be affirmed that 
 Mr. Ricardo's is a superior mode of estimating 
 value at different times. For were we to as- 
 sume a universal rise of wages if value were es~ 
 tiraated according to the rule laid down by A. 
 Smith, goods would generally rise; whereas if 
 quantity of labour be assigned as the cause, value 
 would remain the same, though wages should 
 ever so greatly vary. Thus Y. and Z. would 
 not alter in their exchangeable value, if wages 
 rose, quantity of labour being the rule; but 
 should there be a general rise of wages of 10/. 
 per cent, and value be estimated in them, all 
 commodities would rise 10 per cent, which is 
 absurd. Probably this view of the case may- 
 have misled Mr. Ricardo. It appeared very- 
 evident to him that an alteration in wages, 
 which only affected the distribution of commo- 
 dities, could not.^lter aggregate value, and 
 tacitly assuming the productiveness of labour to 
 continue stationary, he saw clearly that his 
 doctrines were free from the objection which 
 was very forcible against the Smithian Theory. 
 The productiveness of labour however is under- 
 going continued and almost infinite changes, 
 and therefore the law of value by Ricardo, like 
 Smith's, was framed under the greatest mis- 
 conception. But it may be observed that 
 
16 
 
 quantity of labour will always cause an indefi- 
 nite value : it will do so, because upon an aver- 
 age of trials it always produces a result. Did 
 not experience furnish us with this fact there 
 would evidently be an impropriety in saying 
 thus much. Experience, however, does assure 
 us that labour in the aggregate invariably pro- 
 duces something. Individual labour is fre- 
 quently abortive. It is not, however, of indivi- 
 dual labour we now speak, but of aggregate 
 labour, and the aggregate mass of labour will in- 
 variably be productive ; though individual labour 
 may not be so invariably successful. We may, 
 however, with equal propriety term the wages 
 of labour an invariable cause of some value. It 
 is true a servant may have received his wages, 
 and from incapacity or unwillingness he may not 
 have created any utility ; but certainly the price 
 of such misconduct would ultimately be an 
 ejection from his master's employment. Mas- 
 ters would scarcely retain a person from whom 
 they received no equivalent for what was ad- 
 vanced to him. If upon repeated trials it was 
 discovered that the wages advanced to servants 
 did not produce a result, their employment 
 would clearly be discontinued, and it then could 
 not with truth be said that wages of labour al- 
 ways produced a value. But as we find from ex- 
 perience that the wages advanced to servants 
 upon an average do create an equivalent utility, 
 it appears to me as correct to say that the price 
 given to the labourer is always a cause of value, 
 
17 
 
 as the quantity oflabour is always a cause. They 
 are both indefinite enough, but one, 1 imagine, 
 not more so tlian another. 
 
 But, it will be asked, if Adam Smith is in- 
 correct in stating corn and labour as the causes 
 of value, and that all things fall or rise as they 
 command less or more of these, and Ricardo in- 
 correct in assigning quantity of labour as the 
 cause, what may be correctly affirmed as the 
 cause? The answer is simple enough, viz. cost 
 of production. ** Cost of production, why Mr. 
 Ricardo says that himself." He does so, but in 
 my opinion did not understand the meaning of 
 the term, and frequently used it in different and 
 contradictory senses. But we will examine 
 into the import of Mr. Ricardo's cost, and see 
 if there is any identity between it and quantity 
 of labour, and if he were justified in using the 
 terms indiscriminately. The term cost of pro- 
 duction does not occur in the section we are 
 now investigating, but appears very frequently 
 in other parts of his work, and it is used indif- 
 ferently with quantity of labour. Thus, if X. 
 Y. Z. permanently exchanged for each other, 
 Mr. Ricardo would say the quantity of labour 
 in each was the same or the cost of their pro- 
 duction; and if X. permanently fell in reference 
 to Y. and Z. and he discovered that whilst 
 there had been no alteration in their producing 
 labour, the quantity of labour employed in the 
 production of X. was diminished, he would say 
 its cost had altered, at the same time that the 
 
 c 
 
18 
 
 cost of Y. and Z. had continued as before. 
 Now it is against this meaning of cost that I 
 most decidedly protest. Indeed, Mr. Ricardo 
 would have better maintained his consistency 
 by allowing an alteration in the cost of Y. and 
 Z, ; because in controverting Smith he depre- 
 cates the idea of an alteration in the value of 
 the precious metals in consequence of changes 
 in the wages of labour. To be consistent, 
 therefore, he must equally deprecate a change 
 in their value in consequence of changes in the 
 productiveness of labour. This change, how- 
 ever, would take place, assuming a fall in the 
 value of X. without any corresponding rise else- 
 where. We cannot therefore but suppose such 
 a rise in Y. and Z. as would neutralize the fall 
 in X. But a rise in the money value of Y. and 
 Z, would, according to Mr. Ricardo's view, 
 alter their cost, because he estimates cost in 
 money. Here then would be an increase in the 
 cost of producing Y. and Z. without any in- 
 crease in their producing labour. Quantity of 
 labour therefore, and what Mr. Ricardo calls 
 cost of production, cannot be identical. But 
 as this is important, we will exemplify it by an 
 instance, and in order to do so, let us recur to 
 a former illustration, and suppose the whole 
 capital of the kingdom divided into three 
 classes, Nos. 1, 2, and 3, in each of which 1000/. 
 capital is embarked or twenty men employed, 
 each man at 50/. wages per annum. We will 
 suppose too profits 20/. per cent. ; the total 
 
19 
 
 product and money value will therefore be as 
 under : — 
 
 CLASS I. 
 
 £1000 Capital 
 200 I'rotits 
 
 I'liOO MoneyValue 
 
 12U0 Product Val. 
 
 CLASS H. 
 
 I'lnno Capital 
 200 Profits 
 
 £1200 MoneyValue 
 1200 Product Val. 
 
 CLASS IIL 
 
 £1000 Capital 
 200 Profits 
 
 £1200 MoneyValue 
 
 1200 Product Val. 
 
 Total 
 Mon.iy 
 Value 
 
 Total 
 Product 
 Value 
 
 £3600 
 
 Class 1 we may assume to produce ne- 
 cessaries, class 2 conveniences, class 3 luxu- 
 ries. Now Mr. Ricardo would say 12001. re- 
 presented the cost of all the three separate 
 classes, and he would say truly, for every rea- 
 sonable man would, I believe, say the same. 
 £1200 then would be the natural price of the 
 necessaries, the conveniences, and the luxuries 
 of human life. As far, therefore, as this goes, 
 we all agree ; but we shall very soon materially 
 disagree. To exhibit this difference of opinion, 
 let us further suppose a 30 per cent, increase 
 in the productions from the capital of class 3, or 
 that commodities before represented by 1200 
 are now increased to 1500, what will Mr. Ri- 
 cardo then say is the total money value of com- 
 modities produced by the capital of class 3 ? 
 The same as before, viz. 1200/. because the 
 quantity of labour remains the same, and, ac- 
 cording to his view, the cost also ; and assum- 
 ing money to be his invariable standard, 1200/. 
 would be the exact expression of their value. 
 This I consider to be the incipient cause of all 
 Mr. Ricardo's errors. He assumed money to 
 be invariable in its value, and considered quan- 
 tity of labour to be the cause of value : therefore if 
 
 c2 
 
20 
 
 commodities which formerly took 50 men to 
 produce them now only take 25 men, they 
 would exactly fall to half their former price. 
 But this evidently invalidates money from being 
 a perfect standard ; the very supposition de- 
 stroys its integrity, for it no longer bears the 
 same relation to all commodities, as it evidently 
 must do in order to constitute it an invaria- 
 ble standard.* Supposing by improvements in 
 machinery, the quantity of labour to produce 
 commodities is generally diminished, what would 
 be the consequence ? Not an equivalent fall, as 
 stated by Mr. Ricardo, for that would suppose the 
 precious metals to be very unequally distributed 
 over the Globe, which he would be the first to 
 deny, as money he states, like every other com- 
 modity, will flow to the best market. Therefore 
 imagining a great reduction in the quantity of la- 
 bour to produce commodities here, a great influx 
 of the precious metals would certainly follow, and 
 quickly restore the level of prices. Consequently 
 instead of an equivalent fall in class 3 to the 
 amount of the decrease in the quantity of labour, 
 and classes 1 and 2 remaining at their former mo- 
 ney value, the exact effect of such an alteration in 
 production on price would be as underneath: — 
 
 CLASS I. 
 
 £1000 capital 
 390 I'rofit 
 
 £'1300 Money Value 
 
 1200 PruiJuct Val. 
 
 TLASS II. 
 £1000 CapUal 
 
 300 I'rcifit 
 
 £1300 MoaeyValuo 
 
 1-200 Product Val. 
 
 CLASS III 
 
 £i000 Capital 
 300 Profit 
 
 £1300 Mouey Value 
 
 1500 Pnxluct Val. 
 
 Total 
 
 Money 1 £3900 
 
 Value J 
 
 Total 
 J'roduct I 3000 
 Valua i 
 
 • The conditions necessary to a measure of value are here assumed 
 for tiie sake of the argument, but thev will afterwards be proved in 
 Section 6. 
 
21 
 
 Thus we find that, instead of the 1500 pro- 
 ducts selling for 1200/. as Mr. Ricardo would 
 state, they will sell for 1300/., and instead of 
 the 1200 products of classes 1 and 2 having the 
 same money value as before, in consequence of 
 the alteration in class 3 they have an increased 
 value, viz, 1300/. though neither the capital 
 nor the quantity of labour employed in their 
 production is increased. In the first instance the 
 total products were 3600, and were represented 
 in money by 3600/. ; in the latter case, the 
 products by the supposition are increased to 
 3900, and they are estimated in money at 
 3900/. Mr. Ricardo would give the same money 
 value after as before the increased productive- 
 ness of class 3, but in doing so his standard 
 would evidently be increased in value, notwith- 
 standing he assumed it to be the same ; for 1 200/. 
 in the first instance v/ould commaiid, under 
 the several heads of necessaries, conveniences, 
 and luxuries, a value equal to 1200/., in the latter 
 instance a value equal to 1300/. The standard 
 would therefore be increased in value, and 
 could not express the variations in other things. 
 On the contrary, according to my theory, the 
 integrity of the standard is not destroyed, but 
 still preserves the same purchasing power over 
 the whole mass of commodities, and though it 
 suffers as compared with classes 1 and 2, it 
 gains equivalently in class 3 ; and in reference 
 to all the classes it maintains an equality of rela- 
 tion. The effect would be the same on value, if 
 
22 
 
 an increase in production of 10 per cent, had 
 taken place in all the classes; they would then, 
 as before, command an equal money value of 
 1300/. But the effect of a fall of wages 
 would be different. Supposing, instead of 20 
 men at 50/. each per annum, 20 men at 45/. per 
 annum, are only necessary in all the classes to 
 produce the former amount of commodities, it is 
 evident, notwithstanding there will be a change 
 in the distribution of goods, there will be no 
 change in the total value, because by the 
 supposition there has been no change in the 
 total amount of commodities ; for though the 
 labourers will receive 10 per cent, less upon 
 what they formerly received, the capitalists 
 will receive 10 per cent, more upon what 
 they formerly advanced, and the cost of pro- 
 duction, and consequently value, will remain 
 the same. There are two ingredients in cost 
 of production, wages of labour (or capital, 
 which is a multifarious accumulation of wages 
 and profit) and profits of stock. These two 
 make up the cost, and any fluctuation in the 
 one, unless countervailed by an opposite fluc- 
 tuation in the other, will alter cost, and conse- 
 quently alter value. It will therefore be very 
 evident, that as the cost of producing any com- 
 modities varies by variations in the producing 
 labour of every other commodity, it can only 
 be ascertained by an invariable standard. Mo- 
 ney, Mr. Ricardo assumed to be this invariSible 
 standard, but though assumed by him as such. 
 
23 
 
 it was an assumption to be invalidated as often 
 as he assumed alterations in other things. Mr. 
 Ricardo forgot that it was only upon certain 
 data that one beaver exchanged for one deer. 
 For instance, he would assume them to be the 
 produce of one day or one week's labour, 
 and that therefore they would mutually ex 
 change for each other. But only after postu- 
 lating one day or one week's labour capable of 
 catching one beaver and one deer ; postulate 
 the same labour to produce two beavers and 
 two deer, and the beaver, now produced by 
 half the former difficulty, will still exchange for 
 one deer. Labour, and the general produc- 
 tiveness of labour then, or what is the same 
 thing, cost of production, can only be the deter- 
 minate cause of value. Rent cannot by possibility 
 be a component of cost, for if it were, supposing 
 the supply of corn adjusted to the demand, the 
 abolition of rent ought to lower its price. But 
 the price could not be lowered by its abolition, 
 for should this be the case, that land which pays 
 no rent must be thrown out of cultivation. This 
 however is impossible, unless there was pre- 
 viously a surplus production of corn ; and as we 
 assume there was not a surplus production of 
 corn, rent cannot be an ingredient of the cost of 
 production. 
 
 But we will advert to the writinq:s of eco- 
 nomists generally, and scrutinize their opinions 
 on this difficult subject. 
 
24 
 
 Mr. M'CuUoch, the able Professor of Political 
 Economy in the University of London, under the 
 article Political Economy in the Supplement to 
 the Encyclopedia Britannica, adopts implicitly 
 Mr. Ricardo's doctrine, that quantity of labour 
 is the cause of value. But in his "Principles" 
 published in 1825, also in the second edition, 
 after he had seen the ** Dissertation on the Na- 
 ture, Measures, and Causes of Value," for the 
 first time, besides the natural division of value 
 into value in use and value in exchange, Mr. 
 M*Culloch adds another, viz. real value, the 
 absurdity of which is so evident, that it is sur- 
 prising he should have resorted to so extraordi- 
 nary an auxiliary. 
 
 In an edition of A. Smith's Wealth of Na- 
 tions, published by Mr. M'Culloch in 1828, in 
 a note on value, vol. 4, there is the same divi- 
 sion of value into real and exchangeable. I 
 shall confine my strictures to this note, and in 
 order to guide my remarks, I intend noticing 
 four things — 
 
 First. — The determinate cause or limiting 
 principle of value assigned by Mr. M'Culloch. 
 
 Secondly. — The introduction of the term real 
 value, and the reason stated for its introduction. 
 
 Thirdly. — The phrases, *' the real is identi- 
 cal with the exchangeable," or ** upon an ave- 
 rage is identical." 
 
 Fourthly. — What must really be meant by 
 these phrases. 
 
 First, then, as to the determinate cause 
 
25 
 
 or limiting principle of value, Mr. M'CuUoch is 
 extremely plain, for at p. 86 he says, *' The va- 
 lue of such commodities as are the product of 
 labour, and are not subjected to any species of 
 monopoly, is exclusively determined so long as 
 their supply is adjusted according to the effec- 
 tive demand, by the quantities of labour requir- 
 ed for their production." And at p. 88, "Let it 
 be supposed, that when A. and B. were brought 
 to market twelve months since, the supply of 
 each was adjusted precisely in proportion to the 
 demand for them. It is plain that, under such 
 circumstances, their exchangeable value must 
 have been limited and determined exclusively 
 by their real value, or by the quantity of labour 
 which was required to produce them and bring 
 them to market." These quotations, as to the 
 source and determining principle of value, are 
 quite sufficient to shew Mr. M'Culloch's opi- 
 nions thereon. But I trust enough has pre- 
 viously been stated to confute the principle ; 
 for it is very obvious that quantity of labour 
 does not determine value, purely because (as 
 before stated) it does not determine the produc- 
 tiveness of labour. If labour always did pro- 
 duce the same amount of commodities, it might 
 then be appealed to as an unerring cause. But 
 nothing is more variable, and therefore a more 
 uncertain cause of value could not be advanced, 
 as uncertain as the wages of labour. I deem it 
 therefore a plain dictate of common sense, that 
 value is not determined by quantity of labour ; 
 
26 
 
 consequently any farther argumentation, espe- 
 cially after what has before been said, will be 
 deemed superfluous. I will therefore proceed 
 to notice. 
 
 Secondly, the introduction of the term 
 " rea/," together with the cause of its introduc- 
 tion, and this I am able to give in Mr. M'Cul- 
 loch's own words, for at p. 85 he observes, *' An 
 unusually luxuriant harvest, by increasing the 
 supply of corn above its average amount, will 
 sink its value or price ; while an unusually 
 deficient harvest will have a directly opposite 
 effect, or will, by reducing the supply of corn 
 below its average, increase the competition of 
 the buyers, and raise its value or price ; though 
 the quantity of labour expended in producing 
 the whole crop in both years may have been the 
 same ; and so of any other commodity." 
 " Hence, in order to disentangle this important 
 subject, and to set it in a clear point of view, 
 it is necessary to distinguish between the ea:- 
 changeable value and the real or cost value of 
 commodities or products." Thus we have a 
 reason given for the introduction of the term 
 real value. But as economists have generally a 
 chapter specifically to explain how the tempo- 
 rary alterations in demand and supply may 
 affect value, these are generally laid aside in 
 investigating the permanent principles which 
 determine value in exchange. The reason there- 
 fore assigned by Mr. M'Culloch appears of 
 scarcely sufficient importance to warrant so ex- 
 
27 
 
 traordinary an innovation in terms, Adam Smith 
 had only value in use and value in exchange ; 
 Ricardo had merely these two kinds of value, 
 and so had only iMr. M'Culloch when he wrote 
 the article Political Economy in the Supple- 
 ment to the Encyclopedia Britannica. How- 
 ever, in his ** Pnnciples of Political Economy," 
 he has added real value. The adjunct " real" 
 also appears in the note to his edition of Adam 
 Smith from which we have quoted above. Now 
 the Author of the Critical Dissertation on Value 
 shewed clearly that Mr. Ricardo used the term un- 
 consciously in two senses, and that Mr. M'Cul- 
 loch had unwittingly followed his example. 
 The introduction of the term ''real value" was 
 therefore to extricate himself from the disagree- 
 able animadversions of this anonymous author, 
 and not, as Mr M'Culloch really states, in conse- 
 quence of possible changes in value from the tem- 
 porary influencesof demand and supply, because 
 these are the subject of a separate chapter. So 
 far, however, from the term "real value" re- 
 lieving him from the painful situation in which 
 he has been placed by adopting Mr. Ricardo's 
 theory, it has placed him in a still more disa- 
 greeable situation, and has led him into great 
 confusedness of expression, as all must allow 
 who will take the trouble of reading the note on 
 value to which I have before referred, and also 
 the chapter on this subject in both editions of 
 his " Principles of Political Economy." This 
 leads me to notice, 
 
28 
 
 Thirdly, The peculiar phraseology em- 
 ployed. 
 
 At p. 91 he observes, " Where there are no 
 monopolies, and the supply of commodities in the 
 market is exactly proportioned to the effectual 
 demand, their exchangeable value is identical 
 w^ith their real value or their costT x4.t p. 95, 
 ** But although a knowledge of the compara- 
 tive quantities of labour required for the pro- 
 duction of such commodities as are freely pro- 
 duced, and may be indefinitely increased in 
 quantity, will not enable us to pronounce as to 
 their exchangeable value at any given moment, 
 we may notwithstanding be assured that it 
 must, generally speaking, be idejitical ivith their 
 real value. The latter, if I may so speak, forms 
 the centre or pivot round which the former os- 
 cillates.'' At p. 97, " The quantity of labour 
 required to produce commodities is at once the 
 only determining principle and measure of their 
 real, and also of their average exchangeable va- 
 lue." And at p. 100, " Upon an average their 
 exchangeable is identical with their real value ; 
 that is, it depends upon and is measured by the 
 quantities of labour required for their produc- 
 tion." 
 
 To shew my reader the contradiction of 
 terms into which Mr. M'Culloch is betrayed by 
 the phrase " the exchangeable is identical with 
 the real," I subjoin his definition of ex- 
 changeable and real value. ** By the first," he 
 says, " or the exchangeable value of acommo- 
 
29 
 
 dity or product, is meant its power or capacity 
 of exchanging either for other commodities or 
 for labour ; and by the second, or its real or 
 cost value, is meant the quantity of labour which 
 is required for its production or appropriation." 
 Thus a property vested in any article of com- 
 manding or exchanging for other commodities 
 or labour is stated to be sometimes identical 
 with the real value of a commodity, or the 
 quantity of labour necessary to produce it, or 
 any other commodity. Now what can Mr. 
 M'Culloch mean by exchangeable power and 
 quantity of labour being identical ? If we were 
 to search creation through, we should pro- 
 bably not find any two things more essentially 
 diverse than the sweat and toil of the labourer 
 and the property of exchangeable power which 
 all commodities not spontaneously produced in- 
 variably possess. How then can it be said they 
 are sometimes identical? By identity every 
 one understands sameness, not diversity. Is it 
 possible therefore that the most refined sophis- 
 try can make the mere exertion of physical 
 strength by the labourer to be the same as the 
 quality of exchangeable power? Suppose it is 
 granted to Mr. M'Culloch that quantity of la- 
 bour is the cause of value in exchange, will it 
 not then be gross impropriety of speech to say 
 the cause is, at anytime, identical with the effect. 
 Did any one ever exist, so infatuated as to con- 
 tend that the effect of a thing is the same as the 
 cause of a thing, and that they may be used in- 
 
30 
 
 differently? And yet Mr. M'CuIIoch says that 
 quantity of labour the cause, and exchange- 
 able value the effect, may be identical, ab- 
 stracting the temporary influences of demand and 
 supply. But howeverabsurd this phrase is, it is a 
 simple absurdity : the expression however ''upon 
 an average is identical," is a compound ab- 
 surdity, for besides what we have just been 
 noticing there is the addition of " upon an 
 average." Now this is the first time I ever 
 heard that an average could be made of diffe- 
 rent and heterogeneous things. To say the 
 chords of a piece of music are very harmonious, 
 or very discordant, though true or false, would 
 not involve a contradiction of terms. To say 
 also that the colouring of a certain picture upon 
 an average was very gaudy or very dead, and 
 the expression could convey nothing contra- 
 dictory. But if it were said the average chords 
 of the piece of music were identical with the 
 average tints of the landscape, it would be 
 grossly absurd. Sound and colour, like sweat 
 and toil, and exchangeable value, are things as 
 different as possible; to say, therefore, upon 
 an average they are identical, is ridiculous and 
 without meaning. But though the expression be 
 obviously contradictory, the writer must cer- 
 tainly have intended, however unsuccessfully, 
 to convey some idea. As I have been at some 
 trouble in attempting to understand Mr. M'Cul- 
 loch, I shall consider, 
 
31 
 
 Fourthly, What must really be intended by 
 the phrases. 
 
 The only possible meaning I can conceive 
 Mr. M'CuUoch intended by the expression, 
 ** the exchangeable upon an average is iden- 
 tical with the real," must be this — as he con- 
 ceived quantity of labour to be the cause of the 
 value which any commodity at any specific 
 time possessed abstracting the temporary influ- 
 ence of monopolies and variations in the demand 
 and supply, he imagined that under the influence 
 of these causes, upon an average of years, the 
 value of any commodity would be the same as its 
 natural or cost value. Forthough the influences 
 of demand and supply, and monopolies, might 
 sometimes raise the value of any commodity a 
 little above, they might sometimes sink it a little 
 below its natural cost, and that upon an average 
 of years the natural value of any commodities 
 determined by quantity of labour, and the mar- 
 ket value of any commodities determined by the 
 relation of demand to supply mightbe identically 
 the same. Thus, if we imagine all commodities to 
 be represented by A. B. C. and the quantity of 
 labour to produce A. be the same as the quantity 
 to produce B. and C. the exchangeable value 
 of A. B. C. (if the supply is precisely adjusted 
 to the demand) will be equal according to Mr. 
 M'Culloch, and will be identical with their real 
 or their cost value ; and if, by extraordinary 
 demand, A. should command at one time B|^ 
 and C^, and by an extraordinary supply at 
 
32 
 
 another time command only ^ a B. and a a C. 
 the oscillation on the one side would obviously 
 balance that on the other, so that the medium 
 exhangeable and real value would be identical. 
 This is the only meaning I can attach to the 
 term '* real," when asserted to be identical 
 with the exchangeable, without involving an 
 outrageous contradiction of terms. It must, 
 however, be very obvious, that if "real value" 
 means natural or cost value in these passages, it 
 is used flagrantly in an opposite sense to Mr. 
 M'Culloch's definition of it, because he defines 
 ** real value" as being only another word for 
 quantity of labour, in contradistinction to ex- 
 changeable value : whereas, in the above quo- 
 tations, it must mean what economists, in my 
 opinion, correctly call natural value. I have 
 read Mr. M'Culloch's doctrines of value very 
 attentively, and must confess that, owing to 
 the chameleon nature of his *' real value," his 
 doctrines have appeared on many occasions 
 inexplicable to me. The knowledge, however, 
 of his using the term in two senses, will tend to 
 relieve the reader of much perplexity which 
 he might otherwise experience in attempting to 
 untie this gordian knot. An author may de- 
 fine his terms as he pleases ; all that is required 
 from him is to use them consistently with the 
 definition, and Mr. M'Culloch having stated 
 '* real value" in several places to be measured 
 by quantity of labour only, to use it in any other 
 sense, without notice to his reader, was the best 
 
33 
 
 way he could have devised to cover his theory 
 with a most confusing mysticism. The profes- 
 sor, therefore, has only a choice of difficulties ; 
 for either the phrase, " the real and exchange- 
 able are identical," is an absolute contradiction, 
 or he used the term ** real value" in the sense 
 of natural and exchangeable value, after having 
 defined it to mean quantity of labour. But 
 there is another difficulty in Mr. M'CuUoch's 
 using the term, as we have supposed he must 
 have done, in order to avoid an absurdity, and 
 it is this, viz. that quantity of labour determines 
 exchangeable value. For if the term " real 
 value," in the passages above alluded to, means 
 natural value, or in other words, that species of 
 value which replaces the producer's capital 
 with the ordinary profits of stock, and that 
 *' real value," understood in this manner, be 
 identical with its average exchangeable value, or 
 a value regulated by the tem.porary and acciden- 
 tal influences of demand and supply ; then it 
 will follow that quantity of labour, upon an 
 average of years, will be a determinate and cer- 
 tain cause of value in exchange, and may be 
 appealed to as a sure and infallible criterion of 
 the worth of any commodity. Now though 
 this property of quantity of labour, as will ap- 
 pear by the quotations under the first head, is 
 in perfect accordance with Mr. M'Culloch's 
 own expressions, it is nevertheless in direct 
 contradiction to many sentiments that appear 
 in other parts of the note. For instance, at 93 
 
34 
 
 he observes, " Suppose that A. and B. are com- 
 modities produced by equal quantities of labour, 
 and that the supply of them brought to market 
 is exactly proportioned to the effectual demand, 
 their real and exchangeable values will in such 
 a case be equal. Suppose now that, from 
 some cause or other, the quantity of labour 
 required to produce A. is doubled, and the 
 quantity required to produce B. trebled. In 
 this case it is plain that the real value of A. 
 will be double what it was before ; but as the 
 real value of B. has increased still more ra- 
 pidly, the exchangeable value of A. will have 
 sunk as compared with B. in the same propor- 
 tion in which the labour required to produce 
 the latter exceeds that required to produce the 
 former, or in the proportion of two to three." 
 Again, at 92, he says, "A day's labour in a 
 rude state of society, when the arts are in their 
 infancy, and the machines used by the labourer 
 comparatively inefficient, will undoubtedly 
 yield a very different quantity of produce from a 
 day's labour in an advanced and civilized period, 
 when the arts are highly improved, and the 
 most powerful machinery universally intro- 
 duced. Nothing, however, can be more ob- 
 vious, than that the sacrifice made by the 
 labourer is quite as great in the one case as in 
 the other. The variation is not in the amount 
 of physical force, or of labour exerted by the 
 agent that produces, but merely in the mode 
 in which that force is applied. But, however 
 
35 
 
 the same quantity of labour may be laid out, and 
 whatever may be the amount of its produce, its 
 performance must unavoidably occasion the 
 same sacrifice to those by whom it is performed ; 
 and hence it is plain, that the products of equal 
 quantities of labour, or of toil and trouble, 
 must, however much they may differ in magni- 
 tude, always be of precisely the same real 
 value." Here then we see Mr. M'Culloch con- 
 sidered quantity of labour not to be a determi- 
 nate cause of value, in consequence of the 
 unequal amount of commodities which a given 
 quantity of labour will produce in a savage state 
 of society, and when the arts are in a high state 
 of refinement. But if quantity oflabourbean 
 indefinite cause of value under different circum- 
 stances of production, how can it at any time be 
 said, as Mr. M'Culloch has so unequivocally 
 stated it, to be the cause of value in exchange. 
 But whether quantity of labour be the cause of 
 value or not, it appears very useless to say, in a 
 chapter of exchangeable value, that the same 
 amount of physical exercise by the labourer in 
 one state of society, is the same as in another. 
 The investigation does not turn on the sacrifice 
 of physical strength by the labourer, or on the 
 amount of his sweat and toil, but on the nature 
 and causes of value : this is the subject of in- 
 quiry. But Mr. M'Culloch, though he has 
 defined exchangeable value correctly, has not 
 satisfied the inquirer as to its cause ; on the 
 contrary, he is betrayed into strange inconsis- 
 D 2 
 
36 
 
 tencies and contradictions of thought and lan- 
 guage. 
 
 We shall now be prepared to make a general 
 estimate of Mr. M'Culloch's doctrine of value. 
 The credit of pointing out the double meaning 
 Mr. Ricardo attached to the term value is due 
 entirely to the ingenious Author of the " Dis- 
 sertation on the Nature, Measures, and Causes 
 of Value;" and Mr. M'Culloch having followed 
 Mr. Ricardo exclusively in the supplement to 
 the Encyclopedia Britannica before alluded to, 
 thought of obviating objections by the introduc- 
 tion of the term "real value" in his *' Principles 
 of Political Economy," and in his edition of the 
 "Wealth of Nations." But the chaotic confusion 
 to which it has led him, will be justly appre- 
 ciated by the intelligent reader. The term 
 value in itself is simple enough, and the science 
 of Political Economy does not require a better, 
 and its division into value in use and value in ex- 
 change by Adam Smith, I^icardo, and other Eco- 
 nomists, is both natural and proper. The inves- 
 tigation then refers to the causes of value in 
 exchange. Adam Smith says the purchasing 
 power of labour is the cause, Ricardo, quantity 
 of labour, and Mr.M'CuUoch, quantity of labour. 
 But if quantity of labour be the determining cause 
 of value, supposing the cause remains invariable, 
 the effect should be so ; this, however, Mr. 
 M'CuUoch admits will not be the case : hence, 
 to mystify the whole inquiry, "real value" is 
 mtroduced ; and by the double meaning in 
 
37 
 
 which it is employed, all kinds of objections to 
 its being an invariable and determining cause of 
 value, are merged in the attempt to shew that 
 the differences originate in the particular influ- 
 ences of demand and supply. The preceding 
 arguments lead us to the following estimate of 
 Mr. M'Culloch's doctrine of value : — 
 
 That quantity of labour, abstracting the 
 temporary influences of monopolies, and de- 
 mand and supply, determines value in exchange; 
 and yet, in consequence of variations in the 
 productiveness of labour, does not determine 
 value in exchange. 
 
 That real value means quantity of labour, or 
 the physical exercise of the labourer ; and yet 
 does not mean quantity of labour, but what is 
 commonly called cost or natural value in ex- 
 change ; or else. 
 
 That real value or quantity of labour is the 
 very same identical thing with value in ex- 
 change, or the power of commanding other 
 goods or labour, though they are obviously 
 most diverse ; and lastly. 
 
 That the sweat and toil of the labourer are, 
 in all periods of time, the same as the sweat and 
 toil of the labourer. 
 
 In the '* Elements of Political Economy," 
 by Mr. Mill, third edition, though I do not find 
 the division of value into real and exchange- 
 able, I find it unequivocally stated, that cost 
 of production (defined quantity of labour} is 
 the principle which determines exchangeable 
 
3S 
 
 value. Though no one esteems more highly 
 than myself Mr. Mill's ** Elements," yet 1 es- 
 sentially differ from him as to the determining 
 principle of value. To say more would be 
 superfluous, because my previous strictures upon 
 Mr. Ricardo may be applied to Mr. Mill, w^ho 
 adopts the Ricardian theory. 
 
 Beside Mr. M'Culloch and Mr. Mill, disci- 
 ples of Mr. Ricardo, may be ranked the Author 
 of the Dialogues on Political Economy which 
 appeared in the London Magazine for the months 
 of April and May, 1824 ; and whether we re- 
 gard the boldness which characterises these 
 dialogues in expounding Mr. Ricardo's doc- 
 trine of value, or the humour which pervades 
 them throughout, they are equally worthy of 
 our notice. They shew also visible marks of 
 having been written by a person of cultivated 
 understanding, and the extent to which Ri- 
 cardo's law is pushed, forms indeed an " e.rpe- 
 rimentum crucis," by which its truth or error 
 may be ascertained. But I do not seriously 
 suppose the author really inherited the doctrine 
 bequeathed by Mr. Ricardo. On the contrary, 
 1 view the dialogues as an ingenious logical 
 legerdemain, in which the author was more de- 
 sirous to shew his skill as a disputant, than 
 seriously to expound the doctrines of truth, or 
 combat the pernicious influences of error. I 
 doubt not, however, if truth, and not an exhibi- 
 tion of dialectical ingenuity were his object, that 
 he has discovered by this time solid reasons for 
 
39 
 
 altering his sentiments; for if the reflections of 
 his own mind were insufficient for this, the re- 
 flections and reasonings of the Author of '* The 
 Dissertation on the Nature, Measures, and 
 Causes of Value," must have been enough, as 
 the latter has in a masterly manner demonstrat- 
 ed, that X. Y. Z.* used the term value uncon- 
 sciously in two senses. Indeed it does not 
 require any peculiar formation of the optic nerve 
 to see this. For in the first Dialogue, where 
 the author has a tilting match with Adam Smith, 
 the worth of his argument depends entirely on 
 the fact of value being used in the sense of ex- 
 changeable power. Smith says, when the 
 wages of labour rise, value rises. No, replies 
 the dialogist, as wages are paid by all pro- 
 ducers, value cannot be altered by any change 
 in the purchasing power of labour ; and this he 
 farther demonstrates algebraically. But when 
 all commodities are supposed to rise in their 
 producing labour, he then most emphatically 
 asserts that there is no possible connection be- 
 tween the thing commanded and the thing com- 
 manding ; a very strange transition indeed !f 
 
 " The designation assumed by the Author of the Diakiguea. 
 
 •f- Abstracting however the logical error which pervades all these 
 dialogues, there is a point in them really useful in an economical 
 sense, and it is the definition of the word " determine," which is often 
 used indiscriminately, both sitljcctively and objectively. 
 
 The verb is used subjectively or as the princijiium cngnoscendi, 
 when it is said the thermometer determines the teni])erature of the 
 air, or money the value of commodities ; and objectively^ when it is 
 
40 
 
 To say the least, iiowever, of these collo- 
 quial discussions, they have been abundantly 
 useful in unfolding the doctrine of value if 
 they had only given rise to the "Dissertation 
 on the Nature, Measures, and Causes of Va- 
 lue." Not that 1 think this a performance 
 likely to set the controversy at rest : on the 
 contrary, I consider the Author's use of the term 
 value, on many occasions, inconsistent with its 
 obvious meaning, and the chapter on the causes 
 of value, in my opinion, leads to nothing less 
 than absolute scepticism. So that, however 
 certain I am, that the work has done much to 
 evolve the difficulties in which the subject was 
 acknowledged to be enveloped, and however 
 dexterously 1 conceive the author detected 
 the double meaning in which P*Ir. Ricardo 
 used the term, I cannot but regret the appear- 
 ance of these blemishes. Of course, in an 
 inquiry respecting the causes of exchangeable 
 
 affirmed that gravitation determines the stone to fall downwards to 
 the earti', or labour and the gener; 1 j)ro(Iuctivenes8 of labour deter- 
 n ine value in exchange. In the first sense it is plainly not used 
 causatively, but as a criterion, or as determining the heat and the 
 value of commodities to our knowledge, arid may be used indiffer- 
 ently with the verb ascertain. But in the latter case it is used as the 
 ground or cause ; for gravitation does not ascertain the descent of 
 the stone to our knowledge, and labour and the general productiveness 
 of labour do not ascertain the value of any commodity, but cause 
 them, are indeed their princijiiiim esscudi. This obvious distinction 
 ou^ht always to be attended to, for much obscurity has been eiigen- 
 dered bv its palpable neglect. The dialogues also abound with some 
 ingenious strictures on the measure of value propounded by IMr. IVIal- 
 thus; to all of which, of course, I cannot agree, and sinijdy because 
 niv view of value is difl'crent irom the Author of the Dialogues. 
 
41 
 
 value, as I have before observed, economists 
 very properly abstract from their notice the 
 temporary influences of monopolies, and de- 
 mand and supply, and endeavour to explain 
 the permanent principles which determine 
 why such a commodity, or such commodities, 
 exchange for a determinate or fluctuating por- 
 tion of other commodities. This determinate 
 cause I conceive the author of the *' Disserta- 
 tion" has not stated. It is true, at p. 205 he 
 says, it "may be correctly stated to arise prin- 
 cipally from the cost of production ; and that 
 cost of production may be either labour or ca- 
 pital, or both." But this definition of cost is 
 defective; it does not include profit, and there- 
 fore never can determine value, because, though 
 the labour or capital should not vary, the profit 
 may vary, and consequertly the value of any 
 commodities. 
 
 Neither do I agree with the distinguished 
 French economist, M. Say. This great Adam 
 Smith of France, who has done so much for 
 the science of political economy, esteems uti- 
 lity the basis of value. Utility is the basis of 
 aggregate value, that is, a nation is rich or poor, 
 or has a great or small national value, in pro- 
 portion to its aggregate utility, but it cannot be 
 affirmed of any specific commodity that it is 
 valuable or not in the ratio of its utility. Cost 
 of production is the cause of the specific value 
 in exchange which any commodity may pos- 
 sess, A. mav increase in cost, and conse- 
 
42 
 
 quently exchange for more of B.; but just so 
 much as A. gains in value and cost, B. and all 
 other commodities (if the amount produced re- 
 mains the same) in the aggregate, lose. So that, 
 though an alteration in the cost of a particular 
 commodity may alter its relation to other things, 
 it cannot be said of aggregate value or aggre- 
 gate cost, that there is any increase or decrease 
 unless there is an increase or decrease of utility. 
 We suppose there is not; consequently the ag- 
 gregate mass of value, and cost, remains sta- 
 tionary. Every increase or decrease in the pro- 
 ductiveness of labour will necessarily, accord- 
 ing to the principle previously disclosed, af- 
 fect profits ; the former will as assuredly raise 
 as the latter will certainly lower them. But 
 supposing the rate of wages remains the same, 
 an increase or decrease in the quantity of la- 
 bour necessary to produce the same commodi- 
 ties, notwithstanding they will alter the total 
 amount of wages requisite for their production, 
 and this amount of wages must vary inversely 
 with profits, cannot alter cost. If cost con- 
 sisted separately of wages or profits, any greater 
 or less quantity of labour required to produce 
 the same commodities would of necessity alter 
 it. Cost, however, is compounded both of wages 
 and profits, and the commodities produced re- 
 maining stationary in quantity, it will infallibly 
 follow that neither value nor cost can in the 
 least alter, though the quantity of labour neces- 
 sary to produce commodities ever so greatly 
 
43 
 
 vary. M. Say was singularly confused in his 
 explication of the causes of value, for though 
 he justly saw that a nation M'^as rich or poor in 
 proportion to the amount of its useful products, 
 and that a commodity was valuable or not, as it 
 exchanged for many or few of these products, 
 he did not understand the true principle which 
 determines value in exchange. 
 
 But I so far agree with M. Say in consi- 
 dering the wealth and value of a nation to 
 be identical, that I necessarily differ from 
 Colonel Torrens, who, in his work on the pro- 
 duction of wealth, endeavours to prove by what 
 appears to me unsatisfactory arguments, that 
 national wealth is not determined by the sum 
 of values of which it is composed. Now what 
 do economists mean by exchangeable value? 
 A power vested in any commodity of exchang- 
 ing for other commodities which possess utility. 
 Row then can it be otherwise than that the sum 
 of these various powers be but the sum of their 
 utility ? Aggregate value, therefore, can be no- 
 thing more or less than aggregate wealth or 
 utility. If improvements in production take 
 place, there follows necessarily an increased 
 amount of useful products and an increased 
 amount of value in exchange. Col. Torrens 
 also says that value is not an essential but acci- 
 dental adjunct of wealth, for he observes, 
 •* Abolish the divisions of labour, or establish a 
 community of goods, and in either case ex- 
 changeable value will be lost." As, however, it 
 
44 
 
 is an essential part of the present system of affairs 
 that labour be divided, and that there be no 
 community of goods, I am much more inclined, 
 with all deference to the author, to consider 
 value an essential> rather than an accidental qua- 
 lity of wealth. When it is affirmed that cost of 
 production is the cause of value, it is of course 
 taken for granted that there is in all channels of 
 industry an equality of profits. But though 
 this is taken for granted, we are assured that 
 there are very frequent and very great depar- 
 tures from equality. Still, however, we are 
 satisfied there can be no difference for perma- 
 nent periods of time, and therefore we take an 
 equality of profits as the rule, and an inequality 
 of profits as the exception. Just so with value, 
 many commodities there are, as doubtless there 
 must be, which are consumed without being 
 exchanged; this, however, is only an exception 
 to the rule, for in the vast majority of instances 
 the products we consume are by no means the 
 result of our own industry, but are what have 
 been purchased in the market with equivalents 
 advanced. But Col. Torrens proceeds to ex- 
 plain the causes of comparative or proportional 
 value at the same time, previous to the accu- 
 mulation of stock. This, however, does not 
 satisfy the inquirer, for our object is not to as- 
 certain that A. is twice as valuable as B, be- 
 cause it takes twice the producing labour, but 
 to ascertain the cause of the determinate value 
 of A. to all commodities. To say one man has 
 
45 
 
 double the wealth of another man informs us 
 nothing, if we know the wealth of neither. Va- 
 lue meaning exchangeable power, an effect of 
 some principle or other, must have a cause. 
 This cause, however, Col. Torrens does not 
 state; his section on value is consequently in- 
 complete. But this gentleman proceeds to that 
 period when a nation has accumulated stock, 
 and then he states comparative or proportional 
 value to be determined by capital. Capital 
 however, Mr. Mill properly says, is commo- 
 dities, and to say the value of commodities is 
 determined by the value of commodities is not 
 solving the difficulty, or stating any cause what- 
 ever. To this the author of the Dissertation on 
 Value has objected, and contends it is really 
 assigning a cause, though only the proximate 
 cause. But the assigning of this proximate as 
 the efficient cause appears to me really as un- 
 satisfactory to the inquirer as if it were asked 
 me what moved the last of a series of wag- 
 gons linked to a loco-motive engine, and I 
 answered, ** the preceding waggon." The 
 preceding waggon was certainly the proxi- 
 mate, though not the efficient cause; the reply, 
 therefore, would be unsatisfactory. Were I, 
 however, to say the *' steam engine," the in- 
 quirer would be satisfied. And just as incom- 
 plete is the cause of value assigned by Col. 
 Torrens, it is not a perfect answer to the ques- 
 tion. Granting, however, that it is the real 
 cause of comparative value, it then is subject 
 
46 
 
 to the objection just urged against quantity of 
 labour previous to the accumulation of stock. 
 For neither capital nor quantity of labour de- 
 termines the cause of the specific value which 
 any commodity at any particular time pos- 
 sesses, and it is this we want. But though Col. 
 Torrens in many places asserts quantity of la- 
 bour or capital to be the cause of a comparative 
 value only, in other places he states absolutely 
 that they deternjine value. The confusion evi- 
 dently arose, as I shall afterwards have occa- 
 sion to notice, from the view he took respecting 
 a standard of value. 
 
 But Col. Torrens thinks it improper to in- 
 clude profits in natural price or cost of produc- 
 tion; he says, p. 51, " The profits of stock 
 never make any part of the expence of produc- 
 tion; they are, on the contrary, a new creation 
 brought into existence in consequence of this 
 expence." This is very erroneous, for if the 
 profits of stock do not form a component part 
 of cost, the wages of labour cannot; as the for- 
 mer is to the capitalist what the latter is to the 
 labourer. The labourer gives his muscular 
 strength and time, and receives reward under 
 the term wages. The capitalist finds the imple- 
 ments of husbandry, the machines of manufac- 
 tures, advances the wages of labour, and re- 
 ceives his reward under the term profit. Now 
 the wages of labour fluctuate like the profits of 
 stock; sometimes they are at a high and at other 
 times at a low rate. If, then, the wages of the 
 
47 
 
 labourer given for his muscular strength be con- 
 sidered part of the cost of production, the pro- 
 fits of stock, which are received in return for 
 the capitalist's advance, must also be considered 
 a part.* The capital too, which Col. Torrens 
 himself assumes to be employed in production, 
 and which he considers to express the natural 
 price or cost of the products obtained by it, 
 would be, if analyzed, composed of that very 
 element for adopting which he finds fault 
 with economists. Money, for instance, the 
 sign of his capital, were all its various transmu- 
 tations traced, would probably be compounded 
 part of the wages of labour and part of the 
 wages of capital in a million different ways. So 
 much then for Col. Torrens ejecting profit as an 
 element in the compound cost, and so much for 
 his consistency in assuming the cost of produc- 
 tion to be totally included in the capital em- 
 ployed. Supposing a labourer agrees to sell 
 the produce of his labour for a certain sum, 
 taking the average, he neither receives more nor 
 less than other labourers similarly situated. 
 The price given in such a case forms the com- 
 mon or natural wages of labour. "When a capi- 
 talist embarks his money in any enterprise, he 
 expects to obtain a sum equal to what other 
 capitalists obtain who employ a similar sum and 
 incur equal risks. If the price of his produce 
 be not equal to replace the capital employed, 
 
 • Ttlr. IVlalthus also, " In hia Definitions in Political Ecotiomy," 
 thinks it proper to inc'u'le profits in cost of production. 
 
48 
 
 together with the ordinary profits of stock, he 
 naturally transfers it into such a channel where 
 the common return to capital may be obtained. 
 The ordinary profits of stock, added to the ca- 
 pital employed, therefore form the natural price 
 that must be given, or the cost of production, 
 and no sort of commodities for any length of 
 time will be produced, unless a sum equal to 
 their cost is received. These opinions so accu- 
 rately coincide with Adam Smith's, that I can- 
 not resist the temptation of transcribing them. 
 At p. 94, vol. I. book I. M'Culloch's edition, he 
 says, "Though in commonlanguage what is call- 
 ed the prime cost of any commodity does not com- 
 prehend the profit of the person who is to sell it 
 again, yet if he sells it at a price which does not 
 allow him the ordinary rate of profit in his 
 neighbourhood, he is evidently a loser by the 
 trade ; since by employing his stock in some 
 other way he might have made that profit. His 
 profit, besides, is his revenue, the proper fund 
 of his subsistence. As, while he is preparing 
 and bringing the goods to market, he advances 
 to his workmen their wages or their subsistence; 
 so he advances to himself, in the same manner, 
 his own subsistence, which is generally suitable 
 to the profit which he may reasonably expect 
 from the sale of his goods. Unless they yield 
 him this profit, therefore, they do not repay him 
 what they may very properly be said to have 
 really cost him." 
 
 In Col. Torrens' invaluable Essay on the 
 
49 
 
 External Corn Trade it is also stated that capi- 
 tal, exclusive of profits, forms the cost of pro- 
 duction. Thus, if a farmer employs a capital 
 of 1000/. in the production of corn, and the corn 
 sells at the expiration of the year for 1200/. 
 profits being 20 per cent. Col. Torrens would 
 say the cost of producing it was 1000/. Now, 
 though at the same time, a capital repre- 
 sented by 1000/. would be twice as great as a 
 capital represented by 500/., at different times 
 and under changes in production it might not 
 be so. For, in consequence of the general dear- 
 ness of commodities at one time, and their ge- 
 neral cheapness at another, nothing can be more 
 ambiguous or uncertain, than estimating the 
 value of capital in money, a medium so very 
 fluctuating. £500 at one time might be 
 really as great a capital as 1000/. at another. 
 This is a principle so generally admitted, and 
 so very obvious, that the following quotation 
 appears to me very erroneous. At page 85 he 
 says, " Let us suppose, in the first instance, 
 that the real annual wages of the labourer con- 
 sist of six quarters of corn, and three suits of 
 clothing; and that a quarter of corn and a suit 
 of clothing cost each 3/. This being the previ- 
 ous state of things, we will suppose further, that 
 while the cost of producing the material of 
 money and all other commodities, remains un- 
 changed, the cost of raising corn is doubled ; 
 and then the price of that part of the labourer's 
 real annual wages which consists of corn, will 
 
 E 
 
50 
 
 rise from 1 8/. to 36/., and the price of his whole 
 real wages from 27/. to 45/." Thus we find that 
 cost, which is, according to Col. Torrens, iden- 
 tical with capital, and expressed by a given 
 amount of money, may remain stationary when 
 it is assumed to fall in value compared with 
 corn, which forms so large a part of the whole 
 products of industry. If money were a home- 
 produced commodity, and corn were to be 
 raised by twice its former difficulty, it would 
 clearly be raised in price. But then this hypo- 
 thesis most glaringly incapacitates money from 
 being a perfect instrument to measure cost. 
 However much society generally is indebted to 
 Col, Torrens for his admirable essay, the senti- 
 ment quoted, which more or less runs through 
 his whole work, appears to me a great blemish 
 in what would otherwise be an almost perfect 
 performance. 
 
 It is also easy to confute the Malthusian 
 theory of value. In his work on Political Eco- 
 nomy, chap. 2, Mr. Malthus lays down the 
 principle, that the proportion of demand to 
 supply is the dominant cause of value, and that 
 cost of production is subordinate to it. Thus, 
 if a yard of cloth exchange for a bushel of wheat, 
 he would say it was the relation of the demand 
 to the supply that determined their value, and 
 not the quantity of labour spent in their pro- 
 duction. It is certainly not my object now to 
 argue that their value is caused by quantity of 
 labour in Mr. Ricardo's or any other person's 
 
sense, because I have before attempted to prove 
 that value is otherwise determined ; still the 
 theory of Mr. Mai thus I consider radically defec- 
 tive,forlmuch mistake if itdoesnotleadhiminto 
 inextricable difficulties. For instance, in the 
 case of cloth and corn, should any improvement 
 be made in the manufacturing of the former, 
 and its price should proportionately fall, he 
 would say that the fall was not owing to any di- 
 minution in its cost, but to an increase in the 
 supply. Thus, though such an amount of capital 
 should be withdrawn from its production as would 
 neutralize the increased facility of its manu- 
 facture, the demand for the same identical num- 
 ber of yards continuing as before, Mr. Malthus 
 would still say the supply of cloth had increas- 
 ed, or what was the same thing, that there 
 was a less demand for it. But he evidently 
 could not say so without manifest contradiction 
 and absurdity, if by demand he meant the quan- 
 tity demanded, and by supply the quantity 
 supplied. But he does not understand demand 
 and supply in this sense ; he makes use of the 
 epithet '* intense," and considers the demand 
 increased, if the value given be increased, 
 though the quantity demanded be the same. 
 Consequently, notwithstanding cloth should fall 
 in price, and the very same quantity of yards 
 as before be only produced, Mr. Malthus would 
 still contend there was a less intense demand 
 or a greater intense supply. This meaning, 
 
 however, of the terms will not in the least help 
 
 e2 
 
52 
 
 him, for by intenseness of demand we commonly 
 understand vehemence or great desire ; it would, 
 however, be difficult to prove that cloth is less 
 desirable when its price falls ; the reverse being 
 much nearer the truth. Water, for example, is 
 demanded, it being essential to existence, but 
 because it costs nothing there must not be sup- 
 posed a less intense demand for it than if it cost 
 individuals 10/. per annum. In the latter case 
 there is certainly a greater expression of desire 
 for it, because in the first case nothing is ex- 
 pressed, in the last the desire is manifested by 
 10/, per annum being given; but in either case 
 water is equally demanded, and equally essen- 
 tial to existence. To say, therefore, that one 
 
 A. exchanges for two B. precisely on account of 
 such a ratio of intenseness between the demand 
 and supply is not evolving the phenomenon of 
 value, but giving a very nugatory explanation 
 of it. It appears to me much the most natural 
 way of accounting for the effect, to say the cost 
 of producing A. is double the cost of producing 
 
 B. and that this is the reason why one A. ex- 
 changes for two B. 
 
 I have thus brought the first section to a 
 close, but I cannot dismiss it without a brief 
 recapitulation of what has been stated. It has 
 been shewn 
 
 That quantity of labour assigned by Ri- 
 cardo, Mill, M'Culloch, &c. is as erroneous a 
 cause of value as the price of labour advocated 
 by Adam Smith. 
 
53 
 
 That cost of production, meaning labour and 
 the general productiveness of labour, is the cause, 
 and the only cause why one commodity ex- 
 changes for a determinate or fluctuating portion 
 of other commodities, or in other words, of value 
 in exchange. 
 
 That the divison of value into real and ex- 
 changeable by Mr. M'Culloch has led that 
 gentleman into glaring contradictions. 
 
 That the causes of value, as stated by the 
 author of the " Critical Dissertation," &c. are ex- 
 tremely unsatisfactory; notwithstanding many 
 parts of that work cannot but be admired by 
 every one friendly to the science of political 
 economy. 
 
 That the doctrines of value advocated by M. 
 Say, though correct in assigning wealth and va- 
 lue to be identical, are very erroneous in af- 
 firming utility to be the cause of exchangeable 
 value. 
 
 That capital, as the determining principle 
 of comparative value, stated by Col. Torrens, 
 is insufficient to satisfy the inquirer ; and that 
 the Malthusian theory of demand and supply 
 is most obviously wrong, notwithstanding the 
 peculiar meaning attached to these terms. 
 
 All these theories, with the exception of 
 Malthus' and Say's, assign true causesof a value. 
 Both quantity of labour, wages of labour, and 
 capital, will always produce something pos- 
 sessing exchangeable power over other commo- 
 dities, but it will not be to any of them that we 
 
54 ■ 
 
 can look for specific causes of a speciiic value, 
 and therefore they can not furnish us with a 
 solution of the phenomenon of value. 
 
 Cost of production or labour and the general 
 productiveness of labour, however, do furnish 
 us with a specific cause, and had we an invari- 
 able standard, the exact measure of the cost of 
 any commodity would be the precise expression 
 of its value in exchangfe. 
 
 SECTION II. 
 
 Mr. Kicardo in this section points out the 
 different qualities of labour, and states them to 
 be "no cause of variation in the relative value 
 of commodities:" for he observes, " the esti- 
 mation in which different qualities of labour 
 are held, comes soon to be adjusted in the 
 market with sufficient precision for all practical 
 purposes, and depends much on the compara- 
 tive skill of the labourer, and intensity of the 
 labour performed. The scale, when once form- 
 ed, is liable to little variation. If a day's labour 
 of a working jeweller be more valuable than a 
 day's labour of a common labourer, it has long- 
 ago been adjusted, and placed in its proper po- 
 sition in the scale of value." 
 \ 
 
55 
 
 He then proceeds to state, that as the com- 
 parative skill and intensity of the labour to be 
 performed operates equally at both periods, it 
 needs scarcely to be attended to in comparing 
 commodities at different times, and further ob- 
 serves, that " the proportion between the 
 different rates, both of wages and profit, in the 
 different employments of labour and stock, 
 seems not to be much affected, as has already 
 been observed, by the riches or poverty, the 
 advancing, stationary, or declining state of so- 
 ciety." 
 
 As Mr. Ricardo in this section appears to me 
 to have omitted to state with sufficient clear- 
 ness the causes of the difference of various kinds 
 of labour, I shall endeavour to supply this de- 
 ficiency, as the subject could scarcely be un- 
 derstood without it ; and then the assertion, 
 that " the scale when once formed, is liable to 
 little variation," will appear palpably incor- 
 rect. 
 
 With reference to the causes of the various 
 kinds of labour it may be observed, that to say 
 the estimation in which different qualities of 
 labour are held, determines their value, is no 
 solution of the phenomenon. A physician's fee 
 is not given because his labour is more esteem- 
 ed than a common gardener's, but because he 
 demands more ; it is but a just reward for 
 talents that have cost him many anxious 
 years of study to acquire. He has (if I may 
 use the expression) embarked a large capital 
 
56 
 
 in his profession, and his fees are but an ade- 
 quate interest or profit upon his expenditure ; 
 they are the necessary price that must be 
 given for the existence and continuance of so 
 valuable a class of men. The subject will be 
 better understood by a definition of what is 
 meant by the labourer, in contradistinction to 
 capital. By a labourer we mean that person 
 who gives, for wages, mere muscular strength ; 
 his unassisted bodily powers, which have been 
 gratuitously given him by a beneficent Creator. 
 Hence a collier, a day-labourer, a porter, a 
 ploughman, &c. are labourers in the strictest 
 sense of the term. To be fitted for their various 
 occupations, they have only required the growth 
 of their bodies and that common share of sense 
 with which man is commonly endowed. On 
 the other hand, by capital we mean instru- 
 ments, either material or immaterial, which 
 abridge or assist labour. The former includes 
 machines of all sorts, implements of husbandry, 
 waggons, boats, canals, roads, &c. The latter 
 includes the acquired talents of the divine, the 
 physician, the lawyer, the painter, the musician, 
 the player, engraver, &c. &c. Now none of 
 these last derives the value of his labours from 
 any actual or supposed muscular strength which 
 he may possess; nor from any material capital 
 embarked in his profession : for perhaps the 
 sacerdotal appointments of the divine, such as 
 the surplice, gown, &c. and a few books, form 
 all the " materieV necessary to commence his la- 
 
 
67 
 
 bours. A library and the furniture of a room 
 also are all the physician and lawyer princi- 
 pally require ; and a fiddle and a few colours 
 will set up the musician and the painter. It is 
 therefore very evident, that none of these derives 
 the value of his labour either from any supe- 
 rior muscular strength or material capital which 
 he may employ ; but a very few arguments will 
 be sufficient to prove that it is owing to the cost 
 of his attainments ; that is, to the money he 
 has spent and the time he has sacrificed in 
 acquiring his professional fitness. It will con- 
 sequently follow that the value of all this kind of 
 labour will upon an average be in proportion to 
 the difficulties to be surmounted, and to the 
 comparative skill required. But in the same 
 manner that quantity of labour is insuflicient to 
 solve the phenomenon of exchangeable value 
 in commercial products, quantity of labour is 
 insufficient to explain why one profession re- 
 ceives a great and another a small remunera- 
 tion. It is insufficient, because it takes no 
 cognizance of profit. Cost of production, how- 
 ever, as I have defined it, does take cognizance 
 of profit; it is therefore the cost of producing 
 that professional skill to which we must look 
 for a correct cause why one quality of labour 
 receives a higher compensation than another. 
 Mr. Malthus has objected to this doctrine, and 
 has cited the insufficient pay of curates to sup- 
 port his objection. But I do not consider the 
 objection valid, for if we regard the whole 
 
58 
 
 Church establishment, the funds cannot by any 
 means be said to be insufficient. Many candi- 
 dates there certainly are, but many prizes are 
 there too, and in the lottery of life man is too 
 prone to calculate upon prizes than blanks. 
 Promotion is continually going on, and this is 
 an incessant stimulus to the buoyancy of hope. 
 We cannot calculate, humanly speaking, upon 
 a supply of spiritual labourers, unless the remu- 
 neration given be in some sort of proportion to 
 the sacrifices made. Of physicians and lawyers 
 the same may be said. To make a physician there 
 must not only be a maturity of bodily powers, 
 but there must have been a long and anxious 
 mental application. Books must have been 
 read, lectures attended, operations performed, 
 and perhaps half a man's life must have been 
 unproductively occupied in order to give pro- 
 ductiveness and efficiency to the remainder. 
 All the money therefore embarked, and all the 
 time spent, must be paid for ; the physician must 
 receive the ordinary remuneration for the capital 
 consumed . Were he and all others of his profes- 
 sion not to receive this ordinary compensation, 
 the race of physicians would cease. No one 
 would be a candidate for a profession which 
 yielded so low and inadequate a return. But, 
 perhaps, in consequence of its gentility, per- 
 sons might be found willing to prosecute their 
 professional duties for a less compensation than 
 they would be content with in common and 
 trading operations. Say that the scale was in 
 
f)d 
 
 the ratio of 7 to 10, or that individuals were sa- 
 tisfied to receive 7 per cent, merely upon their 
 professional advances, when 10 per cent, was 
 the ordinary profit upon commercial under- 
 takings. In this case, should the fees, &c. be 
 raised to 8 per cent, or diminished to 6, there 
 would be a great professional influx or efl3ux. 
 Upon the same principles, if commercial pro- 
 fits rise to 20 per cent, professional profits must 
 rise to 14, or the same results would follow, 
 viz an influx or efflux, should their return not 
 equal, or should it exceed 14 per cent. If 
 there were on the other hand to be a fall in 
 commercial profits, a fall in the wages of this 
 kind of labour would inevitably follow. Thus 
 we see that a rise or fall of commercial profits 
 will proportionably elevate or depress the fees 
 of the physician. We may observe too, re- 
 specting the musician, painter, &c. that the 
 value of their productions will be equal to the 
 cost of producing them. If to make a first-rate 
 painter greater industry is required than to 
 make a first-rate musician, the productions of 
 the former will certainly exceed in value the 
 productions of the latter. But I must not be 
 inattentive to the varieties of men's genius, or to 
 the different worth of one painter's labour com- 
 pared with another's. This variety in the ge- 
 nius of different men is much the same as varie- 
 ties in the quality of land. When land of the 
 first quality is only in cultivation, no rent is 
 paid, and the value of the produce is exclu- 
 
60 
 
 sively as the cost of growing it. When the 
 price of agricultural produce begins to rise, 
 and land of the second quality is demanded, 
 rent is paid for No. 1 . When land of the third 
 quality is brought into cultivation, Nos. 1 and 
 2 both pay rent. Now supposing all the paint- 
 ers in the kingdom possessed the same merit, 
 and that the supply of them was just equal to 
 the demand, the value of their productions then 
 unquestionably would be as the cost of produc- 
 ing them. But assuming these painters of the 
 first order insufficient to meet the demand, their 
 paintings would rise in price, and this would 
 call into notice painters of the second order. 
 Painters of the first order would therefore enjoy 
 a species of monopoly, and the benefit would 
 be in proportion to the difference between their 
 genius and the genius of the last order neces- 
 sary to produce the requisite supply. These 
 remarks will apply equally to every superior 
 quality of labour, and to all employments where 
 skill is required. 
 
 On the contrary, mere labourers or those 
 who advance nothing beyond their corporeal 
 powers, receive from century to century a 
 pretty stationary reward. The price of their 
 labour is generally at the lowest level, and 
 neither the prosperity nor the adversity of the 
 country can for any length of time raise wages 
 much above, or depress them much below that 
 sum of necessaries which is required to keep 
 them and to maintain their children, the future 
 
61 
 
 labourers. But this is very different from that 
 kind of labour the value of which is not owing 
 to any bodily strength, but to mental acquire- 
 ments ; for it has been seen that this species of 
 wages fluctuates with a fluctuation in profits, 
 and it therefore cannot in truth be said, **that 
 the scale when once formed is liable to little 
 variation," or that different rates of wages are 
 not much affected ** by the riches or poverty, 
 the advancing, stationary, or declining state of 
 society," as they are evidently affected to a 
 great degree by any alteration in them. Many 
 opinions in this section accurately accord with 
 the following passage by Mr. Senior, the learn- 
 ed Professor of Political Economy at Oxford, 
 extracted from the Appendix to Dr.Whateley's 
 Logic, p. 331 : — '* Much of what properly be- 
 longs to profit and rent is generally included 
 under wages. Almost all economists consider 
 the members of the liberal professions under 
 the class of labourers. The whole subsistence 
 of such persons, observes Mr. M'Culloch, is de- 
 rived from wages ; and they are as evidently 
 labourers as if they handled the spade or the 
 plough. But it should be considered, that 
 those who were engaged in any occupation re- 
 quiring more skill than that of a common husband- 
 man, must have expended capital, more or less, on 
 the acquisition of their skill ; their education 
 must have cost something in every case, from 
 that of the handicraft apprentice, to that of the 
 legal or medical student ; and a profit on this 
 
62 
 
 outlay is of course looked for, as in other dis- 
 bursements of capital ; and the higher profit, in 
 proportion to the risk, viz. the uncertainty of a 
 man's success in his business. Part, therefore, 
 and generally far the greater part, of what has been 
 reckoned the wages of his labour, ought more 
 properly to be reckoned profits on the capital 
 expended in fitting him for that particular kind 
 of labour. And all the excess of gains ac- 
 quired by one possessing extraordinary talents, 
 opportunities, or patronage (since these corres- 
 pond to the possession of land — of a patent 
 right — or other monopoly — of a secret, &c.) may 
 be more properly regarded as rent than as 
 wages." 
 
 SECTION III. 
 
 To mark the climacterics of the mind, to see 
 how the wild ebullitions of youth are followed 
 by the solidity of manhood and the imbecility of 
 old age, is very curious and very instructive. To 
 watch, however, the wheel of national fortune, 
 and to trace its circle through its various turns, 
 from savage ignorance to refined civilization and 
 high intellectual eminence, is equally curious and 
 equally instructive. When we contemplate the 
 solstitial splendour to which many European 
 
63 
 
 countries are now arrived, compared with that 
 thick and impervious mist of ignorance in which 
 they were so long and inextricably enveloped, 
 we are naturally desirous to ascertain how 
 the moral and physical change was effected, and 
 what were the particular steps of its progress. 
 It was not accomplished electrically, but by 
 slow and gradual means, and by a long series of 
 causes and effects. To glance at these now, even 
 generally, would be very irrelevant ; but it will 
 not be irrelevant to attempt to explain the par- 
 ticular principles which determine value in ex- 
 change in that intermediate state, limited on 
 one side by savage barbarity and the non- 
 accumulation of capital, and on the other by 
 that polished civilization which we denominate 
 the zenith of national greatness. It is evident, 
 that in this parenthetical condition, the princi- 
 ples which determine the value of products are 
 rather different from those which obtain in the 
 two extremes that bound it on either side. Let 
 us suppose, for instance, that an ingenious 
 savage contrives by great industry and skill to 
 manufacture a net, which is very serviceable in 
 catching salmon: it is clear he will not ex- 
 change his fish for other commodities produced 
 by the same labour; for were he to do so, all the 
 advantages obtainable by the use of his net 
 would be thrown away. But it may be asked, 
 would he not obtain the same quantity of com- 
 modities as was produced by the same labour, in- 
 cluding the labour spent in the manufacture of the 
 
64 
 
 net? No. — The fisherman of salmon would 
 evidently obtain as much of the hunter's pro- 
 duce as he obtained previous to the invention, 
 because, if we suppose other salmon-fishers do 
 not possess similar nets, the price of salmon 
 clearly could not be battered down to the new 
 cost, as the inventor would enjoy a species of 
 monopoly much the same in effect as that en- 
 joyed by patentees of the present day. The 
 value therefore of the salmon will not be as its 
 cost under the most favourable, but under the 
 most unfavourable circumstances. No sooner, 
 however, do the other fishermen obtain by their 
 skill and industry similar instruments to facilitate 
 salmon-fishing in sufficient abundance for the 
 demand, than the monopoly of the first inventor 
 ceases, and he then only receives a value in 
 proportion to the cost, the same as all other 
 producers. Consequently before that complete 
 accumulation of capital, when instruments for 
 abridging labour are employed in every de- 
 partment of industry, the inventor of any new 
 instrument will always receive an additional 
 value equal to the differences between the old 
 and new method of producing. Thus, if in the 
 fishing of salmon a man's labour for one day 
 were generally rewarded with one salmon, and 
 after the introduction of the net he could catch 
 two, the value of the two will be twice the 
 value of the single salmon. The inventor of 
 the net will therefore gain just double the value 
 which they who were destitute of it could gain. 
 
65 
 
 But this state of things would not last very 
 long, as the stimulus to invention would be im- 
 mensely great. In a highly civilized state, 
 where capital is accumulated in sufficient 
 quantities for every purpose, the inventor of any 
 new machine only enjoys advantages for a very 
 inconsiderable time (unless he be legally pro- 
 tected) as the efforts of producers are al- 
 ways directed to the most favourable channels 
 for the employment of their capital. Competi- 
 tion therefore soon batters down the price of 
 such commodities to their new cost. But un- 
 der these circumstances a patent is generally 
 obtained, which is a very proper encourage- 
 ment to inventive talent. 
 
 A hunter also would enjoy a similar monopoly 
 to that of the fisherman, if he, by his address, had 
 obtained weapons that abridged the labour of 
 hunting. And the advantage gained would be 
 equal to the difference in the quantity of pro- 
 ducts realized before and after this invention ; 
 nor would it cease until all hunters had obtain- 
 ed similar weapons. These results are curious; 
 not, however, less certain on that account. 
 But what are the determining principles of 
 value, when capital is accumulated in all de- 
 partments, and capitalists and labourers be- 
 come two distinct classes? This question Mr. 
 Ricardo answers in this section; for after citing 
 the different kinds of labour necessary to pro- 
 duce stockings, he observes, " The aggregate 
 sum of these various kinds of labour, determines 
 
66 
 
 the quantity of other things for which these 
 stockings will exchange, while the same consi- 
 deration of the various quatities of labour which 
 have been bestowed on those other things, will 
 equally govern the portion of them, which will 
 be given for the stockings." In the first section 
 it has been stated that quantity of labour would 
 not determine value in the early stages of so- 
 ciety that precede the accumulation of capital, 
 inconsequence of variations in the productive- 
 ness of labour, and this was equally applied 
 when capital was accumulated. It, however, 
 applies with greater force, if the proportion of 
 fixed and circulating capital be different ; be- 
 cause this circumstance introduces another ob- 
 jection be*side the greater one just mentioned. 
 But Mr. Ricardo assumes the fixed and circu- 
 lating capital to be equal, and therefore that 
 the value of stockings, or any other commodity, 
 is exactly determined by the aggregate sums 
 of labour employed in their production. The 
 value of any commodity, however, could not 
 obviously be determined by the sum of its pro- 
 ducing labour in consequence of changes in the 
 productiveness of labour; and yet he is particu- 
 larly explicit in this as in the preceding section, 
 for at p. 24 he further remarks, " Fish then 
 would rise or fall in exchangeable value, only 
 because more or less Isbour was required to 
 obtain a given quantity ; and it never could rise 
 or fall beyond the proportion of the increased 
 or diminished quantity of labour requiTed." 
 
And then after noticing that commodities pro- 
 duced under the same circumstances were li- 
 mited in value by the quantity of labour re- 
 quired to produce them, he remarks, that 
 ** unless more labour were required for their 
 production, they could not rise in any degree 
 whatever." But if fish were produced by the 
 same quantity of labour, and all other things 
 required more or less labour to produce them, 
 it would most clearly alter the value of fish; 
 and so of any other commodity. Nothing, 
 therefore, can be more untrue than this doctrine 
 of Mr. Ricardo. He is correct, however, in the 
 following passage, " Suppose that in the early 
 stages of society, the bows and arrows of the hun- 
 ter were of equal value, and of equal durability, 
 with the canoe and implements of the fisherman, 
 both being the produce of the same quantity of 
 labour. Under such circumstances the value of 
 the deer, the produce of the hunter's day's la- 
 bour, would be exactly equal to the value of 
 the fish, the produce of the fisherman's day's 
 labour. The comparative value of the fish and 
 the game would be entirely regulated by the 
 quantity of labour realized in each." Or what 
 is the same thing, that whatever the value of 
 the fish might be, will b6 the value of the game ; 
 which is obviously very different from stating 
 that the value of any commodity is determined 
 by the quantity of labour necessary to produce 
 it, and that no commodity can alter in value ex- 
 cept by an alteration in its producing labour. 
 
 F 2 
 
6S 
 
 But Mr. Ricardo further observes at p. 22, " If 
 there were any other commodity which was 
 invariable in its value, we should be able to as- 
 certain, by comparing the value of fish and game 
 with this commodity, how much of the varia- 
 tion was to be attributed to a cause which af- 
 fected the value of the fish, and how much to a 
 cause which aifected the value of game." 
 " Suppose money to be that commodity. If a 
 salmon were worth 1/. and a deer 21. one deer 
 would be worth two salmon. But a deer might 
 become of the value of three salmon, for more la- 
 bour might be required to obtain the deer, or 
 less to get the salmon, or both these causes 
 might operate at the same time. If we had 
 this invariable standard, w^e might easily ascer- 
 tain in what degree either of these causes ope- 
 rated. If salmon continued to sell for 1/. whilst 
 deer rose to 3/. we might conclude that more 
 labour was required to obtain the deer. If 
 deer continued at the same price of 21. and sal- 
 mon sold for 13s. 4d. we might then be sure 
 that less labour was required to obtain the sal- 
 mon; and if deer rose to 21. 10s. and salmon 
 fell to 16s. 8d. we should be convinced that both 
 causes had operated in producing the alteration 
 of the relative value of these commodities." 
 The supposition of invariableness in money 
 when deer is assumed to rise to 31. and salmon 
 continues to sell for 1/. involves a contradiction 
 of terms. For common sense assures us that 
 the qualifications of an invariable standard must 
 
69 
 
 be invariableness of purchasing power over the 
 mass of commodities. But, by Mr. Ricardo's 
 supposition, money (his standard) has not this 
 invariableness of exchangeable power; for after 
 fixing it at 1/. to a salmon and 21. to a deer, he 
 then assumes deer to rise to 3/., making 4/. ne- 
 cessary to purchase the deer and salmon, after 
 first supposing 3/. sufficient. Money can only 
 be invariable in its value, when it maintains the 
 same ratio to all other commodities. It is not es- 
 sential to its invariableness that it should possess 
 the same purchasing power over every particular 
 commodity; but if it alters with regard to one, 
 to maintain its integrity there must be an oppo- 
 site alteration elsewhere. In the quotation, 
 however, before us, Mr. Ricardo has not ob- 
 served this; for he has supposed deer to rise to 
 3/. and salmon to remain at its former price, 
 and afterwards deer to continue stationary, and 
 salmon to fall to 13s. 4d.; and after that, deer 
 to rise to 2/. 10s. and salmon to fall to IGs. 8d. 
 In all which suppositions, money is necessarily 
 invalidated from being a standard. The de- 
 ception evidently arose from his supposing 
 quantity of labour to be the cause of value, and 
 money the measure obtained in this country. 
 For were this true, and it required always the 
 same producing labour, it would evidently al- 
 ways possess the same exchangeable value. 
 But after what has been stated, 1 deem it 
 abundantly obvious that quantity of labour is 
 not the determinate cause of value, and there- 
 
70 
 
 fore it will not be to any fixed quantity of la- 
 bour that we are to look for an accurate and 
 unchanging cause. In order to shew the exact 
 effect of a 50 per cent, rise in the producing 
 labour of deer, as supposed by Mr. Ricardo, 
 let us suppose profits to have been 100 per 
 cent., or that the nets, &c. to catch the salmon, 
 were worth 10s., and the weapons to hunt the 
 deer 1/.; in this case the cost price of a salmon 
 will be 1/. and the cost price of a deer 21. Let 
 us further suppose a rise in the producing la- 
 bour of deer of 50 per cent. Upon such a hy- 
 pothesis, Mr. Ricardo has stated the price of 
 deer would be 3/. ; but this evidently invalidates 
 money from being an invariable standard. In- 
 stead, therefore,, of deer rising to 3/., it would 
 only rise to 2/. 5s., and instead of salmon con- 
 tinuing at \L as formerly, it would fall to 15s., 
 and then 3/. would purchase one deer and one 
 salmon, as before, and the profits of stock 
 be equal in both these channels of industry. 
 For salmon which cost 10s. in labour, or capital 
 to procure, would yield a profit of 50 per cent. 
 or 5s., making 15s. the natural value of salmon ; 
 and deer, which cost 1/. 10s. would yield, after 
 the same rate, viz. 15s., constituting 2/. 5s, the 
 cost value of deer. And this would be the pre- 
 cise effect of a 50 per cent, rise in the pro- 
 ducing labour of deer on the relative value of 
 deer and salmon, preserving the integrity of the 
 standard. The same principles apply to Mr. 
 Ricardo's supposing salmon falling to 13s. 4d. 
 
71 
 
 and 16s. 8d., and deer rising to 21. 10s. The 
 supposition of invariableness in money amidst 
 universal variation is very absurd. 
 
 Mr. Ricardo, by way of contrast to the 
 doctrine v^^hich he has just stated, proceeds to 
 observe, that *• No variation in the wages of la- 
 bour could produce any alteration in the relative 
 value of these commodities," which is very true, 
 if the proportion of fixed and circulating capital 
 is the same ; and this Mr. Ricardo has assum- 
 ed. But it does not follow from thence that 
 quantity of labour has any greater correctness 
 as a criterion of value; because, if we suppose 
 an universally increased difficulty in produc- 
 tion, the relative value of commodities would 
 continue as before, although their producing 
 labour had been greatly augmented. Cost of 
 production, however, as before defined, is an 
 infallible cause of value ; because as the two 
 ingredients of which it is composed, viz. labour 
 and the general productiveness of labour, or 
 capital and profits, are great or small, as they 
 exchange for many or few of the products of 
 human industry, there can be no alteration in 
 the productiveness of labour without an altera- 
 tion in cost; and no scheme of value ever 
 propounded can be a true scheme, unless it in- 
 clude the productiveness of labour jointly with 
 quantity or value of labour. 
 
72 
 
 SECTION IV. 
 
 In the last section Mr. Ricardo supposed 
 the implements necessary to kill the deer and 
 salmon equally durable, but he says, " In 
 every state of society, the tools, implements, 
 buildings, and machinery employed in different 
 trades may be of various degrees of durability, 
 and may require different portions of labour to 
 produce them. The proportions, too, in which 
 the capital that is to support labour, and the 
 capital that is invested in tools, machinery, and 
 buildings, may be variously combined." He 
 then observes that those articles, which are 
 produced by the same quantity of capital of 
 equal durability, will not vary in relative value 
 with a rise or fall of wages. Thus barley would 
 not vary in reference to wheat, or cotton goods 
 to cloth ; but a rise or fall of wages would alter 
 the relative value of wheat and cloth, and bar- 
 ley and cotton goods, commodities produced 
 under different jiroportions of fixed and circu- 
 lating capital. He proceeds, and at p. 31 thus 
 observes — " There can be no rise in the value of 
 labour ivithout a fall of 'profits. Jf the corn is to 
 be divided between the farmer and the labourer, 
 the larger the proportion that is given to the 
 latter, the less will remain for ll-.e fonncr. t^o 
 
I 
 
 73 
 
 if cloth or cotton goods be divided between the 
 workman and his employer, the larger the 
 proportion given to the former, the less re- 
 mains for the latter. Suppose then, that owing 
 to a rise of wages, profits fall from 10 to per 
 cent., instead of adding 550/. to the common 
 price of their goods (to 5500/.) for the profits 
 on their fixed capital, the manufacturers would 
 add only 9 per cent, on that sum, or 495/., con- 
 sequently the price would be 5995/. instead of 
 6050/. As the corn ivould continue to sell for 
 5500/., the manufactured goods, in which more 
 fixed capital was employed, would fall rela- 
 tively to corn or to any other goods in which a 
 less portion of fixed capital entered. The de- 
 gree of alteration in the relative value of goods, 
 on account of a rise or fall of labour, would de- 
 pend on the proportion which the fixed capital 
 bore to the whole capital employed. All com- 
 modities which are produced by very valuable 
 machinery, or in very valuable buildings, or 
 which require a great length of time before they 
 can be brought to market, would fall in relative 
 value, while all those which were chiefly pro- 
 duced by labour, or which would be speedily 
 brought to market, would rise in relative value." 
 This paragraph, which is in fact a compendium 
 of Mr. Ricardo's opinions as to the eflfect of a 
 rise of wages on value under different propor- 
 tions of fixed and circulating capital, is egre- 
 giously erroneous. For is it probable or natu- 
 ral to suppose the farmers would prove m^^icma- 
 
74 
 
 chines — that they would not exert themselves, 
 when a rise of wages placed them under disad- 
 vantages compared with those who employed a 
 less proportion of circulating, and a greater pro- 
 portion of fixed capital ? Is it to be expected, 
 that a spell would paralyse the elastic price of 
 agricultural produce, and chain it down in 
 everlasting fetters indissolubly with quantity of 
 labour; and that too under all variations in 
 wages, and when the value of commodities from 
 fixed capital was admitted to fall ? Nothing 
 so unnatural could possibly happen. For cir- 
 culating capitalists would certainly upon a rise 
 of wages demand a greater money value ; and 
 in consequence of competition, fixed capitalists 
 would be obliged to lower the value of their 
 products, and there would necessarily be such 
 a rise of goods produced by circulating capital, 
 and such a fall of goods produced by fixed ca- 
 pital, as would equalize profits and preserve the 
 integrity of the standard. Dr. Smith's doctrine 
 of a rise of value in consequence of a rise of wages 
 was very erroneous ; but Mr. Ricardo, in combat- 
 ing him, oscillated into the opposite extreme, not 
 unfrequently the case, it being often very diffi- 
 cult to keep in equilibrio. The author of " A 
 few observations on Political Economy" is the 
 only one I know that has noticed the error, and 
 I refer my reader to his Chapter on Value, as 
 containing many excellent observations on this 
 part of the subject. Neither in the writings of 
 Mr. Mill nor of Mr. M'Culloch do I find any 
 
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 notice of the error; indeed these gentlemen, 
 though they have been incomparably clearer 
 than Mr. Ricardo in their statement of the effect 
 of a rise of wages on value under different pro- 
 portions of fixed and circulating capital, have 
 been by no means sufficiently clear. Their 
 indiscriminate use of the essentially distinct 
 suppositions, of money being home-produced 
 and imported, has in my opinion thrown a veil 
 of confusion upon the subject calculated much 
 to annoy the inquirer after truth. The main 
 heresy in the writings of Smith, which our mo- 
 dern school of economists so much reprobates, 
 is his stating an equivalent rise in commodities 
 to the rise in wages. This very heretical doc- 
 trine, Mr. Ricardo has very forcibly and very 
 successfully impugned ; but unfortunately for 
 science, he has erected upon its ruins a theory 
 far from being orthodox. As the effect of a rise 
 or fall of wages on value and profits under dif- 
 ferent proportions of fixed and circulating capi- 
 tal, is both curious and important, and as the 
 disciples of Mr. Ricardo have either overlooked 
 the error or tacitly assented to it, Tables are 
 annexed where it is conceived the true effects 
 are stated. 
 
 In the first Table the whole capital of the 
 state is assumed at 4000/., profits at 10 per cent., 
 and the wear and tear of fixed capital equal to 
 5 percent, upon its total value; and it is sub- 
 divided into three sections. In the first section 
 the whole capital is supposed to be in the pro- 
 
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75 
 
 notice of the error; indeed these gentlemen, 
 though they have been incomparably clearer 
 than Mr. Ricardo in their statement of the effect 
 of a rise of wages on value under difterent pro- 
 portions of fixed and circulating capital, have 
 been by no means sufficiently clear. Their 
 indiscriminate use of the essentially distinct 
 suppositions, of money being home-produced 
 and imported, has in my opinion thrown a veil 
 of confusion upon the subject calculated much 
 to annoy the inquirer after truth. The main 
 heresy in the writings of Smith, which our mo- 
 dern school of economists so much reprobates, 
 is his stating an equivalent rise in commodities 
 to the rise in wages. This very heretical doc- 
 trine, Mr. Ricardo has very forcibly and very 
 successfully impugned ; but unfortunately for 
 science, he has erected upon its ruins a theory 
 far from being orthodox. As the effect of a rise 
 or fall of wages on value and profits under dif- 
 ferent proportions of fixed and circulating capi- 
 tal, is both curious and important, and as the 
 disciples of Mr. Ricardo have either overlooked 
 the error or tacitly assented to it, Tables are 
 annexed where it is conceived the true effects 
 are stated. 
 
 In the first Table the whole capital of the 
 state is assumed at 4000/., profits at 10 per cent., 
 and the wear and tear of fixed capital equal to 
 5 per cent, upon its total value ; and it is sub- 
 divided into three sections. In the first section 
 the whole capital is supposed to be in the pro- 
 
76 
 
 portion of J fixed,* and f circulating ; in the 
 second, ^ fixed, and ^ circulating ; and in the 
 third, f fixed, and ^ circulating. The two ex- 
 treme suppositions of capital being either all 
 fixed or all circulating are omitted, not only 
 because the effect of a rise or fall of wages, 
 under such circumstances, is, if possible, plain 
 and obvious ; but because such a state of things 
 could hardly, under any circumstances, exist. 
 Of course it is supposed that the same commo- 
 dities, and the same amount of commodities, 
 are produced in every section of the same table ; 
 because the tables are intended to shew the 
 effect of a rise of wages on value and profits 
 under different proportions of fixed and circu- 
 lating capital, and not under changes in the pro- 
 ductiveness of labour. Consequently if the 
 total money value of commodities is the same 
 after as before the alteration in w^ages (which 
 will be seen to be the case) the integrity of the 
 standard will of course be preserved. Having 
 
 * Perhajis the terms fixed and circulating capital, employed by 
 economists to distinguish that capital which is used to abridge, and in 
 some instances to sujiersede labour, from that which consists of those 
 various commodities employed in the payment of wages, are not suffi- 
 ciently definite. For instance, a ship, a boat, a waggon, a loco- 
 motive engine, would be called capital of the fixed kind. But fixed- 
 ness is the very reverse of their nature, they being perfectly useless 
 when not in motion. As, however, the use of the terms by econo- 
 mists has never led to any ambiguity, a new nomenclature would not 
 be expedient, if possible; they are consequently used in the text as 
 they have always previously been employed, viz. fixed capital to de- 
 note that which supersedes or abridges labour, and circulating capital 
 to denote all those commodities which are commonly used in the pay- 
 ment of labour. 
 
77 
 
 therefore set out in the first section of Table I. 
 with the hypothesis of ^ of the whole national 
 capital being fixed, and | circulating, I then 
 suppose arise of 5 percent, in wages; and what 
 does Mr. Ricardo say is the effect on value in such 
 a case ? An equivalent fall of goods produced 
 by fixed capital, goods from circulating capi- 
 tal remaining the same. But this evidently 
 raises the standard (money) and renders it an 
 extremely variable instrument to measure varia- 
 tions in other things, and is less plausible, 
 though quite as erroneous as Adam Smith's 
 doctrine of an equivalent rise. In order how- 
 ever to preserve the standard of value, and to 
 give an equality of profits in all departments of 
 industry, there must, as appears in the table, 
 be a rise in goods produced by circulating ca- 
 pital of 1/. 4s. l^d.* percent., and a fall in goods 
 produced by fixed capital of 26/. 10s. 3^d. per 
 cent., which is tol/.4s. I^d.as3300/. the product 
 value from circulating capital, is to 150/. the pro- 
 duct value from fixed capital. It will be ob- 
 served that the fall of goods from fixed capital 
 is more than four times greater than the rise of 
 goods from circulating capital, and obviously be- 
 cause the surface upon which the rise of wages 
 acts, is more than four times greater in the latter 
 than in the former. The circulating capitalist 
 must not only at the end of the year obtain a value 
 equal to his profit of 300/., but an additional 
 
 • Fractions of Farthings are purposely omitled in the Tables. 
 
78 
 
 value of 3000/. the amount consumed in wages. 
 Any alteration therefore in the value of his commo- 
 dities will spread over the whole value of 3300/. 
 On the contrary, it is evident that the action 
 will be upon 150/. only of goods produced from 
 fixed capital under the circumstances of Sec- 
 tion I. Table I. ; because, if the fixed capitalist 
 obtains this sum, he will not only get the usual 
 profits of stock, but also replace the wear and 
 tear of his fixed capital. This will explain why 
 150/. is stated in the Table as the product value 
 from fixed, and 3300/. as the product value 
 from circulating capital, before the rise of wages. 
 The rate of profit will be 6/. Os. 6d. per cent, 
 both on fixed and circulating capital, for 3 150/. 
 the circulating capital : 189/. 15s. 5d. the pro- 
 fit : : 1000/. the fixed capital: 60/. 4s. 7d. the 
 profit from it ; the total money value remaining 
 the same. For though the goods produced by cir- 
 culating capital have risen as stated, from 3300/. 
 to 3339/. 15s. 5d. ; the goods produced by fixed 
 capital have fallen from 150/. to 110/. 4s. 7d. ; 
 making a rise in the former and a fall in the 
 latter of 39/. 15s. 5d. Profits are consequently 
 depreciated 3/. 19s. 6d. per cent, in conse- 
 quence of the 5 per cent, rise of wages, viz. 
 from 10/. per cent, to 6. Os. 6d. per cent. The 
 Tate would have been 6/. 5s. had there been no 
 increase in the capital. But it will appear that 
 4000/. capital before the rise of wages produced 
 what 41501. is required to do after, and 4000/. : 
 4150/. :: 61. Os. 6d.: 61. 5s. At Section 2 
 
a. s! 
 
 
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79 
 
 where the whole capital is supposed to be 
 equally divided into fixed and circulating, 
 the total money value remains the same as 
 in Section 1, and, as I have before observed, 
 the amount of commodities also remains the 
 same. Under these circumstances it will be 
 seen that the rise of goods from circulating ca- 
 pital is 21. Ss. 9d. per cent, and the fall of goods 
 from fixed capital 17/, 17s. 6d. percent., whilst 
 the rate of profit is fallen to 11. 6s. 4^d. per cent. 
 Section 3 will be easily understood by the fore- 
 going remarks ; for on the supposition of f of 
 the whole capital being fixed, and ^ circulating, 
 goods produced by fixed capital fall only 9/. Is. 
 percent., when goods from circulating capital 
 rise 3/. 14s. per cent. ; the rate of profit being 
 reduced to 8/. 12s. lOd. per cent. 
 
 At Table II. a profit of 20 per cent, is as- 
 sumed, with a wear and tear of fixed capital 
 equal to 10/. per cent, on its total value; 
 making the aggregate money value 4800/. ; and 
 if we suppose a corresponding increase in com- 
 modities, a real value of the same amount. 
 Any sum of money, therefore, in jtkis table, will 
 have the same purchasing power as in the first; 
 for though its aggregate sum is 4800/. instead of 
 4400/. as before, the amount of commodities is 
 supposed equaliy increased, and consequently 
 the ratio between them and money remains un- 
 disturbed. In the 1st section ofthis Table there 
 is the same rise of goods from circulating capi- 
 tal (viz. 1/. 4s. 1 id.) as in the corresponding 
 
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79 
 
 where the whole capital is supposed to be 
 equally divided into fixed and circulating, 
 the total money value remains the same as 
 in Section 1, and, as I have before observed, 
 the amount of commodities also remains the 
 same. Under these circumstances it will be 
 seen that the rise of goods from circulating ca- 
 pital is 21. 8s. 9d. per cent, and the fall of goods 
 from fixed capital 17/, 17s. 6d. percent., whilst 
 the rate of profit is fallen to 71. Gs. 4^d. per cent. 
 Section 3 will be easily understood by the fore- 
 going remarks ; for on the supposition of f of 
 the whole capital being fixed, and ^ circulating, 
 goods produced by fixed capital fall only 9/. Is. 
 percent., when goods from circulating capital 
 rise 3/. I4s. per cent. ; the rate of profit being 
 reduced to 8/. 12s. lOd. per cent. 
 
 At Table II. a profit of 20 per cent, is as- 
 sumed, with a wear and tear of fixed capital 
 equal to 10/. per cent, on its total value; 
 making the aggregate money value 4800/. ; and 
 if we suppose a corresponding increase in com- 
 modities, a real value of the same amount. 
 Any sum of money, therefore, in tkis table, will 
 have the same purchasing power as in the first; 
 for though its aggregate sum is 4800/. instead of 
 4400/. as before, the amount of commodities is 
 supposed equaliy increased, and consequently 
 the ratio between them and money remains un- 
 disturbed. In the 1st section of this Table there 
 is the same rise of goods from circulating capi- 
 tal (viz. 1/. 4s. lid.) as in the corresponding 
 
80 
 
 section of Table 1. The fall, however, of goods 
 from fixed capital is very different; these goods 
 are depreciated only 14/. 9s. 3d. per cent. ; and 
 14/. 9s. 3d. : 1/. 4s. l^d. : : 3600/. the product 
 value from circulating capital, : 300/. the pro- 
 duct value from fixed capital. But the fall 
 in the product value from fixed capital in the 
 first Table is 26/. 10s. 3^d. per cent., it is there- 
 fore in the inverse ratio of profits and the da- 
 «^,g^^^^ ritliillty of "Capital. For when profits are 10/. 
 percent, and the wear and tear of fixed capital 
 51. percent, only, the fall is so great as 26/. 10s. 
 3^d. per cent. On the contrary, when profits 
 are 20/. per cent, and the wear and tear of fixed 
 capital equal to 10/. per cent, on its total 
 value, the fall is only 14/. 9s. 3d. per cent. 
 The rate of profit in this section is depreciated 
 from 20/. to 15/. 13s. 3d. In the two remaining 
 sections it will be observed that the rise of com- 
 modities from circulating capital is the same as 
 in the corresponding sections of Table 1, whilst 
 the fall of products from fixed capital varies in- 
 versely with their several amounts. 
 
 In Table III. I have assumed so large a pro- 
 fit as 100/. percent, with a wear and tear of 
 fixed capital equal to 50 per cent, on its value, 
 in order to try the strength of the principle. 
 And if a corresponding increase in production 
 has taken place, the value of money will be the 
 same in this as in the previous tables. But it 
 niay be again remarked, that it is not necessary 
 to my theory that the value of money should 
 
I a CI, 
 
 
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 slciio£ 
 
 0?B 
 
 »o o 
 
 
 ,.1 §1 s 
 
 a, 
 
 ! 
 
 ^'-000 Product\ alue from 
 Circulating Capital 
 hcforc the Rise of 
 Wages 
 
 ~UXiTf ProductValue from 
 Circulating Capital 
 after the Rise of 
 XVages.beingaRise 
 of 3M4s. percent. 
 
 lOJO Wages 
 _f' 10'J4 Profit on Circulat- 
 ing: Capital 
 
 pi lll^t l! 
 
 11° 
 
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 1-4 
 
 
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 s Si 
 
 at" 
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 14?? 13 9 ProductValue &om 
 Fixed Capital after 
 the Rise of Wages, 
 being a Fall of il. 
 163. od. per cent. 
 500 WearaudTear 
 
 ^9« 13 tl Profit on Fixed Ca- 
 pital 
 
 
 
Si 
 
 be preserved in the different Tables, where 
 there are various profits; my object being merely 
 to shevi^ the effect of an alteration of wages on 
 value in the different sections, where there are 
 different proportions of fixed and circulating 
 cdpital, profits, or the productiveness of labour, 
 remaining the same As, however, the equality 
 in the value of money may be easily preserved 
 in all the Tables by supposing a corresponding 
 alteration in the amount of commodities; we 
 will suppose such an alteration in this Table as 
 shall preserve the integrity of the standard. 
 And the rise of wages under the circumstances 
 supposed, will raise the commodities produced 
 from circulating capital exactly as in the previous 
 Tables ; but the fall of products from fixed ca- 
 pital (as before stated) will be seen to vary 
 inversely with the rate of profit and the wear 
 and tear of fixed capital. In the last section of 
 this Table there is the apparent anomaly of a 
 fall of goods from fixed capital to the amount of 
 1/. 12s. lOfd. per cent,, whilst the rise of the 
 other description of goods is 3/. 14s. percent. 
 This anomaly, however, is but apparent ; for 
 upon inspection it will be discovered to arise 
 from the product value of the fixed, exceeding 
 the product value of the circulating capital, in 
 consequence of the immense profit and the great 
 wear and tear of fixed capital. 
 
 In Table IV. the assumption of the former 
 proportion of fixed and circulating capital is 
 altered into the same proportion of product 
 
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81 
 
 be preserved in the different Tables, where 
 there are various profits; my object being merely 
 to shew the effect of an alteration of wages on 
 value in the different sections, where there are 
 different proportions of fixed and circulating 
 cdpital, profits, or the productiveness of labour, 
 remaining the same As, however, the equality 
 in the value of money may be easily preserved 
 in all the Tables by supposing a corresponding 
 alteration in the amount of commodities; we 
 will suppose such an alteration in this Table as 
 shall preserve the integrity of the standard. 
 And the rise of wages under the circumstances 
 supposed, will raise the commodities produced 
 from circulating capital exactly as in the previous 
 Tables ; but the fall of products from fixed ca- 
 pital (as before stated) will be seen to vary 
 inversely with the rate of profit and the wear 
 and tear of fixed capital. In the last section of 
 this Table there is the apparent anomaly of a 
 fall of goods from fixed capital to the amount of 
 1/. 12s. lOfd. per cent., whilst the rise of the 
 other description of goods is 3/. 14s. percent. 
 This anomaly, however, is but apparent ; for 
 upon inspection it will be discovered to arise 
 from the product value of the fixed, exceeding 
 the product value of the circulating capital, in 
 consequence of the immense profit and the great 
 wear and tear of fixed capital. 
 
 In Table IV. the assumption of the former 
 proportion of fixed and circulating capital is 
 altered into the same proportion of product 
 
82 
 
 value produced bij these different kinds of capi- 
 tal ; and though the principles are the same in 
 this as in the previous tables, the rise of wages 
 operates in a different degree. For instance, 
 in section 2, the products from fixed capital /«// 
 exactly as the products from circulating capital 
 rise, viz. 3/. 1 9s. 2\d. percent., and the profits, 
 instead of being reduced as in section 2, table 
 2, to 17/. is. 6d. per cent, only fall to 18/. 16s. 
 2|d. per cent. This difference arises purely 
 from the different proportions of fixed and cir- 
 culating capital which concur in producing the 
 products of the two tables. In the first and 
 last section too, there is a less fall than in the 
 corresponding sections of Table II, and pre- 
 cisely for the same reasons. It will moreover 
 be remarked of this table, that in section 1 
 there is a total money value of 7000/., in sec- 
 tion 2 of 10,000/., and in section 3 of 13,000/. 
 -But if we imagine a corresponding alteration in 
 the amount of commodities, which we must do, 
 the value of money will undergo no change. 
 
 It must further be observed respecting these 
 tables, that in all of them fixed capital is as- 
 sumed to be produced by such portions of fixed 
 and circulating capital, that no alteration in its 
 value is created by alterations in the value of 
 the products of which it is composed ; or what 
 is the same thing, that whatever may be its fall 
 arising from the proportion of fixed capital em- 
 ployed in its production, is its rise from the 
 proportion of circulating capital cm})loycd to 
 

 
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83 
 
 produce it. To say the least, this is not an un- 
 natural supposition, and has saved me from a 
 greater complexity of reckoning ; and merely 
 from a greater complexity, as any other suppo- 
 sition would not have affected the principles 
 elicited. 
 
 If what has been developed in these tables 
 be correct, the sentiments of Mr. M'Culloch 
 and Mr. Mill must clearly be erroneous. In 
 his " Principles of Political Economy, second 
 edition, page 349, Mr. M'CuUoch thus ex- 
 presses himself: — '* Now, suppose that com- 
 modities, instead of being wholly produced 
 either by immediate labour, as in the first 
 case ; or wholly by equal quantities of imme- 
 diate labour and of capital, as in the second; or 
 wholly by fixed capital, as in the third, — are 
 partly produced in the one mode and partly in 
 the other, and let us see what effect this in- 
 crease of 5 per cent, in the rate of wages would 
 have on their relative values, supposing, as be- 
 fore, that the productiveness of industry conti- 
 nues constant. To facilitate this inquiry, let us 
 distinguish these three descriptions of commo- 
 dities by the Nos. 1, 2, and 3. Now it is quite 
 evident that the rise of wages has affected No. 1, 
 21 per cent, more than it has affected No. 2, 
 and 5 per cent, more than it has affected No. 3. 
 No. 1 must, therefore, as compared with No. 2, 
 have risen 2^ per cent, in exchangeable value, 
 and, as compared with No. 3, it must have risen 
 5 per cent. ; No. 2 must have fallen 2^ per cent. 
 g2 
 
83 
 
 produce it. To say the least, this is not an un- 
 natural supposition, and has saved me from a 
 greater complexity of reckoning ; and merely 
 from a greater complexity, as any other suppo- 
 sition would not have affected the principles 
 elicited. 
 
 If what has been developed in these tables 
 be correct, the sentiments of Mr. M'Culloch 
 and Mr. Mill must clearly be erroneous. In 
 his " Principles of Political Economy, second 
 edition, page 349, Mr. M'Culloch thus ex- 
 presses himself: — " Now, suppose that com- 
 modities, instead of being wholly produced 
 either by immediate labour, as in the first 
 case ; or wholly by equal quantities of imme- 
 diate labour and of capital, as in the second; or 
 wholly by fixed capital, as in the third, — are 
 partly produced in the one mode and partly in 
 the other, and let us see what effect this in- 
 crease of 5 per cent, in the rate of wages would 
 have on their relative values, supposing, as be- 
 fore, that the productiveness of industry conti- 
 nues constant. To facilitate this inquiry, let us 
 distinguish these three descriptions of commo- 
 dities by the Nos. 1, 2, and 3. Now it is quite 
 evident that the rise of wages has affected No. 1, 
 2^ per cent, more than it has affected No. 2, 
 and 5 per cent, more than it has affected No, 3. 
 No. 1 must, therefore, as compared with No. 2, 
 have risen 2^ per cent, in exchangeable value, 
 and, as compared with No. 3, it must have risen 
 5 per cent. ; No. 2 must have fallen 2J per cent. 
 g2 
 
S4 
 
 as compared with No. 1, and risen 2^ per cent, 
 as compared with No. 3 ; and No. 3 must have 
 fallen 5 per cent, as compared with No. 1, and 
 2J per cent, as compared with No. 2. If wages, 
 instead of rising, had fallen, the same effects 
 would obviously have been produced, but in a 
 reversed order." Thus Mr. M'Culloch states 
 that No. 1, produced v/holly by circulating ca- 
 pital, has risen 2|- per cent, in reference to 
 No. 2, produced partly by fixed, and partly by 
 circulating, and 5 per cent, in reference to 
 No. 3, produced exclusively by circulating ca- 
 pital. In the second section of Table II. which 
 exactly corresponds* with Mr. M'Culloch's 
 hypothesis, it is stated that the rise of products 
 from circulating capital is 21. 8s. 9d. and the fall 
 of products from fixed capital is 9/. 15s. percent, 
 in reference to money ; and the rise of the former, 
 compared with the latter, or the fall of the latter, 
 compared with the former, is 12Z. 3s. 9d. percent. 
 Mr. M'Culloch's division into three parts, Nos. 1, 
 2, and 3, does not alter the relative rise of No. 1 
 Id No. 3 ; it merely introduces a fresh suppo- 
 sition. No. 2, goods produced in equal propor- 
 
 • It must be observed that the second section of all the three first 
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 gregate proportion of fixed to circulating capital goes. Mr. M'Cul- 
 loch did not appear to have been aware that any given rise of wages 
 would operate differently on goods from fixed capital under different 
 rates of profit. But if we compare the second section of the three 
 first Tables, we shall see that the fall of goods from this species of 
 capital varies, as stated in the text, inversely with the rate of profits 
 "^k^x,^ and the'^i-aSSity of ^a^pital. Section 2 of Table II. is merely select- 
 ed as exhibiting a medium profit. 
 
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85 
 
 tions by fixed and circulating capital. But 
 this will be better understood by an actual di- 
 vision of Table II. section 2, into Nos. 1, 2, and 
 3, as assumed by Mr. M'Culloch, and which I 
 have annexed. By this table, therefore, it will 
 appear that the same result follows, whether 
 the supposition is, that all commodities are 
 produced by -^ fixed and -J- circulating capital, 
 as I have supposed in Table II. section 2 ; or 
 that some of them are produced wholly by fixed 
 and some wholly by circulating, whilst others 
 are produced partly in the one mode and partly 
 in the other, as hypothetically stated by Mr. 
 M'Culloch. For we find on reference to the 
 annexed table, that the goods produced under 
 the circumstances of No. 2 remain stationary m 
 their money value ; for though I have in the 
 table adopted the analytical plan, and separated 
 the fixed from the circulating capital, whereby 
 it appears that that portion of the value of goods 
 derived from the fixed capital employed to pro- 
 duce them, has fallen, whilst that portion of the 
 value of commodities w^hich is created by the 
 wages or circulating capital consumed in their 
 production has risen, the fall of the one com- 
 ponent part of their value is exactly balanced 
 by the rise of the other, so that their compound 
 character has undergone no c'^ange in its money 
 value;* because a fall of 9/. 15s. per cent, on 
 
 • I regret that in consequence of the plan laid down of following 
 Mr. Ricardo through his various sections, I am obliged here, as in 
 many previous instances, to assume what I have endeavoured to prove 
 
86 
 
 200Z. is exactly neutralized by a rise of 2/. 8s. 9d. 
 per cent, on 800/. We also find that the com- 
 modities produced wholly by fixed capital have 
 fallen 9/. 15s. percent, whilst those produced 
 wholly by circulating capital have risen 21. 8s. 
 9d. per cent. It cannot therefore be correct, 
 as Mr. M'Culloch has stated, that No. 1 must 
 have risen 2^ per cent, in reference to No. 2, 
 and 5 per cent, in reference to No. 3, for we 
 find that No. 1 has risen 21. 8s. 9d. per 
 cent, compared with No. 2, and 12/. 3s. 9d. 
 compared with No. 3. Mr. M'Culloch did not 
 take any notice of the different rates of profit ; 
 but as the rate of profit in a great degree de- 
 termines the product value from fixed capital, 
 this is essentially necessary, in order to esti- 
 mate correctly the effect of any given rise of 
 wages on the value of commodities under differ- 
 ent proportions of fixed and circulating capital. 
 This omission, however, is not sufficient to ac- 
 count for the very great difference between us 
 respecting the effect of the rise of wages on the 
 value of goods produced by fixed capital. To 
 account for this, Mr. M'Culloch must have in- 
 distinctly supposed that fixed, like circulating 
 capital, was annually consumed, and that con- 
 sequently there existed annually a product value 
 
 in the sixth section. The conditions, however essential to an invaria- 
 ble standard, do appear to me so very obvious, especially upon Mr. 
 K-icardo's own principles in opposition to Adam Smith, that I do not 
 calculate upon any inconvenience to the reader from the assumption. 
 
87 
 
 equal to replace it and to furnish the ordinary 
 profits of stock. This appears to rne the only- 
 way of accounting for what I conceive an egre- 
 gious error.* 
 
 But though there is a great difference be- 
 tween us as to the effect of a rise of wages on 
 the value of such commodities as are produced 
 by fixed capital, the difference is considerably 
 less in regard to those produced by circulating- 
 capital. For it appears that the rise of goods 
 from this species of capital is the same, whe- 
 ther profits are 10, 20, or 100 per cent, or the 
 wear and tear of fixed capital equal to 5, 1 0, or 50 
 ])er cent, upon its value. The proportion of 
 fixed to circulating capital appears therefore to 
 be the only circumstance which determines the 
 rise of goods produced immediately by labour 
 only, when, on the contrary, the profits of 
 stock, and the durability of fixed capital, are to 
 be known and estimated before the exact effect 
 of a rise of wages on value from this species of 
 capital can be properly ascertained. Upon the 
 previousdata Mr. M'Culioch states that the rise of 
 
 • It may, however, be stated, that Mr. M'Culioch, instead of 
 supposing propoi-tions of fixed and circulating capital, as expressed by 
 him, meant proportions of cnmmoditicx produced by fixed and cii'culat- 
 ing capital. If so, Table IV. is an effectual reply ; for in the second 
 section it is there supposed, that one half the value of all commodities 
 is produced by fixed, and one half by circulating capital. But it -will be 
 observed, that the money rise of the latter and fall of the fonoier, is 
 £3. 19s. 2id. percent. ; so that, whether we understand Mr. M'Culioch 
 as he has stated, or as it may be supposed he intended to state, it foUowa 
 undeniably, in either case, that his error is both important ftnd 
 radical. 
 
88 
 
 goods from circulating capital will be ll. lOs. 
 per cent. I have stated a rise onlj^ of 2/. 8s. 9d. 
 per cent. This discrepancy however is easily- 
 explained, as it evidently arises from the in- 
 crease of capital which the supposition creates. 
 In the table to which I have before adverted, 
 viz. Table II. section 2, which is in substance 
 the same as vv'hat Mr. M'Culloch has assumed, 
 the total capital before the rise of wages is 4000/. 
 After the rise of wages, 4100/. is necessary to 
 produce the same products; and 4l00/. : 
 4000/. : : 2/. 10s. : 2/. 8s. 9d. I presume Mr. 
 M'Culloch omitted to notice this increase, as it 
 accounts for the diiference. There is also a 
 discrepancy in the rate of profit inferred from 
 Mr. M'CulIoch's statements and the rate I have 
 stated; the former being 17/. 10s. or a fall of 
 ll. lOs. per cent., the latter 17/. Is. 6d. or a fall 
 of 21. l8s. 6d. per cent. This may be explained 
 as above, for 17/. lOs. : ill. is. 6d. : : 4100/.: 
 4000/. 
 
 Mr. Mill's argument in his " Elements of 
 Political Economy," is substantially the same 
 as Mr. M'CulIoch's. Indeed, the latter gentle- 
 man appears to have borrowed his example, as 
 quoted above, from Mr. Mill. 
 
 Avery important corollary may be made 
 from the doctrines disclosed in this section, viz. 
 that all the national products, such as cotton 
 goods, &c. which are raised by a large propor- 
 tion of fixed capital, fall by a rise in wages to a 
 much greater degree than economists have pre- 
 viously supposed. This fall, however, is regu- 
 
80 
 
 lated by the total amount which fixed bears to 
 circulating capital, by the rate of profit and the 
 durability of fixed capital; and before we can 
 have any knowledge a priori as to the extent 
 of this fall, the knowledge of all these circum- 
 stances must previously be obtained. 
 
 Another corollary is, that quantity of labour 
 is not the determining cause of value ; for if it 
 were, no alteration could take place in the 
 value of commodities without an alteration in 
 the producing labour. And although 1 differ 
 from Mr. Ricardo, Mr. Mill, and Mr. M*Cul- 
 loch, as to the precise effect of any given rise 
 of wages upon value, all these authorities admit 
 such a change has an effect upon it, which ap- 
 pears to me very inconsistent with their main- 
 taining that quantity of labour, in contradis- 
 tinction to wages of labour, is the only cause 
 of value. Mr. M'Culloch, however, allows in 
 his ** Principles," second edition, p 352, 
 " Though it may not be strictly true of a par- 
 ticular commodity, that its exchangeable value is 
 directly as its 7'eal value, or as the quantity of 
 labour required to produce it and bring it to 
 market, it is most true to affirm this of the mass 
 of commodities taken together." But, if true 
 with regard to the mass, why should it not be 
 true in reference to particular commodities? 
 It is quite clear that alterations in the value of 
 labour do not necessarily suppose alterations 
 in the general productiveness of labour, or in 
 the mass of commodities ; and if they do not 
 
90 
 
 suppose this, aggregate value cannot be al- 
 tered by them ; because value is commodities 
 of which we assume neither an increase nor de- 
 crease. With regard to the mass of commodities, 
 therefore, changes in the value of labour cannot 
 have any effect ; though they may alter the 
 value of particular commodities, which Mr. 
 M'CuUoch admits in the above quotation. 
 It is, therefore, very surprising this circum- 
 stance did not lead him to doubt the accuracy 
 of his conclusions as to quantity of labour, and 
 that it did not induce him more scientifically 
 to analyze his cardinal principle. 
 
 Cost of production, however, as previously 
 defined, viz. labour and the general productive- 
 ness of labour, or capital and profits, infallibly 
 determines the value of commodities under all 
 circumstances. It determines them as a prin- 
 cipium essendi in the former case, and as 
 a 'principium cognoscendi in the latter case. 
 Labour and the general productiveness of la- 
 bour determine or originally cause the value of 
 all comniodities; capital and profits expressed 
 in money, determine them to our knowledge. 
 We obtain a knowledge of the value of any 
 commodity by knowing its money cost, but 
 this money cost is not its original cause. Hence, 
 when goods from circulating capital rise and 
 goods from fixed capital i'all, the money cost of 
 production explains with particular perspicuity 
 why this has happened. Of course, in an in- 
 quiry of this sort, economists naturally assume 
 
91 
 
 lirst of all an equality of wages and an equality 
 of profits, and also that the supply of commo- 
 dities is precisely adjusted to the demand. 
 And this being now assumed, cost of produc- 
 tion infallibly causes value under every change 
 in the wages of labour and in the productiveness 
 of labour. 
 
 SECTION V. 
 
 Mr. Ricardo in this section again modifies 
 his law that quantity of labour is the cause of 
 value; it is, however, extremely unfortunate 
 for the popularity and permanency of his doc- 
 trines that the exceptions to his rule are so ex- 
 tremely numerous. In previous sections he has 
 stated that the difference of time in bringing com- 
 modities to market, and the varied proportions 
 of fixed and circulating capital, allow of changes 
 in the comparative value of commodities, with- 
 out there being changes in their producing 
 labour. As it is very true such alterations do 
 take place, irrespective of alterations in the 
 quantity of labour employed in the production 
 of commodities, it must therefore be very ^m- 
 tr'uc that it can be the cause of value; and yet 
 Mr. Ricardo asserts it in the most unequivocal 
 manner. The main object of his 5th section is 
 
92 
 
 to urge a fresh exception to his rule, viz. that 
 the varied degrees of durability of fixed capital 
 modify ** the principle that value does not vary 
 with the rise or fall of wages." That the 
 action of a rise or fall of wages on goods pro- 
 duced by fixed capital is different under diffe- 
 rent degrees of its durability is correct as Mr. 
 Ricardo has stated. For if we inspect section 
 1 of Table 2, where the wear and tear of fixed 
 capital is 10 per cent, on its value, the fall of 
 goods produced by this species of capital is 
 14/. 9s. 3d percent.; whereas by the annexed Ta- , 
 ble, where the wear and tear is assumed at 5 per 
 cent, the fall is 17/ 7s. percent. So that the fall is 
 directly as the durability ; for it is greatest 
 where the wear and tear is least, and least where 
 the wear and tear is greatest. It must be ob- 
 served, however, that m both cases there must 
 be an equal fall of 43/. 7s. 6d. to preserve the 
 standard and the equality of profits;* and con- 
 sequently the smaller the surface the rise of 
 wages acts upon, the greater the per centage 
 
 • The reader must not suppose that the rate of profit is unaffected 
 by alterations in the durability or efficiency of the fixed capital, in 
 consequence of seeing a coincidence in the rates of the annexed and 
 Table II. Because, as I have before remarked in the text, my object 
 is not to ascertain the effect of alterations in production on the rates of 
 profit ; but to ascertain the effect of alterations in the wages of labour 
 on the value of commodities produced by different proportions of fixed 
 and circulating capital. It is very clear that money (the Standard) 
 has a greater exchangeable power in this than in Table II. just to the 
 degree of the increased efficiency of the fixed capital, in consequence 
 of the assumed increase in its durability. In both Tables there ap- 
 pears the same money value, but the product value of the annexed is 
 greater from the circumstance just meutio»icd. 
 
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93 
 
 will be. In Table II. section 1, the annual 
 value to the fixed capitalists is 300/., this sum 
 yields them not only the ordinary profits of 
 stock but also replaces the wear and tear of the 
 fixed capital. In the annexed Table 250/. gives 
 the fixed capitalists the ordinary profits of 
 stock, because the wear and tear is only 5 per 
 cent, on its value, and 300/. : 250/. : : 17/. 7s. : 
 14/. 9s. 3d. But notwithstanding it is true, as 
 Mr. Kicardo asserts, that as capital is less 
 durable, and approaches to the nature of circu- 
 lating capital, a rise of wages will have a less 
 effect, than when capital is more durable in its 
 nature, he was evidently quite ignorant of its 
 precise effects, as the following will shew, in 
 addition to what has been before quoted. At 
 p. 38 he observes, '* I have already said that 
 fixed capital is of various degrees of durability. 
 Suppose, now, a machine which could in any 
 particular trade be employed to do the work of 
 100 men for a year, and that it would last only 
 for one year. Suppose too, the machine to cost 
 5000/., and the wages annually paid to 100 men 
 to be 5000/., it is evident that it would be a mat- 
 ter of indifference to the manufacturer whether 
 he bought the machine or employed the men. 
 But suppose labour to rise, and consequently 
 the wages of 100 men for a year to amount to 
 5500/., it is obvious that the manufacturer would 
 now no longer hesitate, it would be for his in- 
 terest to buy the machine and get his work done 
 for 5000/. But will not the machine rise in 
 
m 
 
 will be. In Table II. section 1, the annual 
 value to the fixed capitalists is 300/., this sum 
 yields them not only the ordinary profits of 
 stock but also replaces the wear and tear of the 
 fixed capital. In the annexed Table 250/. gives 
 the fixed capitalists the ordinary profits of 
 stock, because the wear and tear is only 5 per 
 cent, on its value, and 300/. : 250/. : : 17/. 7s. : 
 14/. 9s. 3d. But notwithstanding it is true, as 
 Mr. Kicardo asserts, that as capital is less 
 durable, and approaches to the nature of circu- 
 lating capital, a rise of wages will have a less 
 effect, than when capital is more durable in its 
 nature, he was evidently quite ignorant of its 
 precise effects, as the following will shew, in 
 addition to what has been before quoted. At 
 p. 38 he observes, '* I have already said that 
 fixed capital is of various degrees of durability. 
 Suppose, now, a machine which could in any 
 particular trade be employed to do the work of 
 100 men for a year, and that it would last only 
 for one year. Suppose too, the machine to cost 
 5000/., and the wages annually paid to 100 men 
 to be 5000/., it is evident that it would be a mat- 
 ter of indifference to the manufacturer whether 
 he bought the machine or employed the men. 
 But suppose labour to rise, and consequently 
 the wages of 100 men for a year to amount to 
 5500/., it is obvious that the manufacturer w^ould 
 now no longer hesitate, it would be for his in- 
 terest to buy the machine and get his work done 
 for 5000/. But will not the machine rise in 
 
94 
 
 price, will not that also be worth 5500/. in con- 
 sequence of the rise of labour ? It would rise 
 in price if there were no stock employed on its 
 construction, and no profits to be paid to the 
 maker of it. If, for example, the machine were 
 the produce of the labour of 100 men, working 
 one year upon it with wages of 50/. each, and 
 its price were consequently 5000/. ; should those 
 wages rise to 551., its price would be 5500/., but 
 this cannot be the case; less than 100 men are 
 employed or it could not be sold for 5000/., for 
 out of the 5000/. must be paid the profits of 
 stock which employed the men. Suppose 
 then that only 85 men were employed at an ex- 
 pense of 50/. each, or 4250/. per annum, and 
 that the 750/. which the sale of the machine 
 would produce over and above the wages ad- 
 vanced to the men, constituted the profits of 
 the engineer's stock. When wages were 10 per 
 cent, he would be obliged to employ an addi- 
 tional capital of 425/. and would, therefore, 
 employ 4675/. instead of 4250/. on which capi- 
 tal he would only get a profit of 325/. if he con- 
 tinued to sell his machine for 5000/. ; but this 
 is precisely the case of all manufacturers and 
 capitalists ; the rise of wages affects them all. If, 
 therefore, the maker of the machine should raise 
 the price of it in consequence of a rise of wages, 
 an unusual quantity of capital would be em- 
 ployed in the construction of such machines, 
 till their price afforded only the common rate 
 of profits. We see then that machines would 
 
95 
 
 not rise in price 171 consequence of a rise of wages." 
 This passage is quite as erroneous as that upon 
 which I have animadverted in the previous sec- 
 tion. There are two points in it radically- 
 wrong, viz. the assertion and the argument. 
 With respect to the assertion that the machine 
 produced exclusively by labour would not rise 
 with a rise of labour, I deem it unnecessary to 
 say further, as the Tables shew clearly that un- 
 der such circumstances it would rise. If the 
 argument brought forward to support the asser- 
 tion were true, I admit there would be some 
 force in what Mr. Ricardo states. His very 
 supposition, however, confutes the argument; 
 since the manufacture of a machine, supposes a 
 fixed capitalist, a machine itself being fixed 
 capital; it must therefore follow that all capi- 
 talists are 7iot affected by alterations in the 
 value of labour, because fixed capitalists are 
 not; and, therefore, so far from an unusual 
 quantity of labour being invested in the con- 
 struction of such machines in case their price 
 should rise, an unusual quantity of capital would 
 infallibly be abstracted from the manufacture 
 of them in case they did 72ot rise, or else there 
 would be the anomaly of a diversity of profit in 
 the two channels of industry: this, however, 
 Mr. Ricardo and all economists deny. The 
 commodities produced by circulating capital 
 would continue stationary and the equality of 
 the profits be still preserved, if the commodi- 
 ties produced by fixed capital were to fall so as 
 
96 
 
 to reduce profits to the level at which Mr. 
 Ricardo imagines them to be after his hypo- 
 thetical rise of wages. A fall, however, of these 
 goods without a rise of such as are produced 
 by circulating capital supposes a rise in the 
 value of money, the absurdity of which has 
 been before sufficiently noticed. Mr. Ricardo 
 concludes with the following : "It appears that 
 in proportion to the durability of capital em- 
 ployed in any kind of production, the relative 
 prices of those commodities on which such 
 durable capital is employed, will vary inversely 
 as wages ; they will fall as wages rise, and rise 
 as wages fall; and, on the contrary, those which 
 are produced chiefly by labour with less fixed 
 capital, or with fixed capital of a less durable 
 character than the medium in which price is 
 estimated, will rise as wages rise, and fall as 
 wages fall." This is an absolute contradiction 
 to the previous quotation, if money is the me- 
 dium in which he estimates the rise and fall of 
 commodities. Because in the previous passage 
 he states, without any kind of modification, 
 that commodities produced from circulating 
 capital will not rise. In this, however, he states 
 there will be a rise compared with such as are 
 produced ** with fixed capital of a less durable 
 character than the medium in which price is 
 estimated." It must, therefore, mean not a rise> 
 money, but a relative rise compared with some 
 other commodity. For instance, cotton goods, 
 produced by durable fixed capital upon a rise 
 
97 
 
 of wages will fall in money price, while, ac- 
 cording to Mr, Ricardo's view, shoes produced 
 by circulating capital will remain the same in 
 money value after a rise of wages. But, though 
 in reference to money, they continue stationary ; 
 in reference to cotton goods, they have risen. 
 When, therefore, Mr. Ricardo makes use of 
 the verb "rise" in the above passage, he must not 
 mean a rise in reference to money, but a rise in 
 reference to such goods as have fallen in money 
 value. This is the only construction which can 
 be put upon it to avoid a contradiction. It is, 
 however, difficult to understand Mr. Ricardo's 
 meaning, and much of that difficulty, in my 
 opinion arises, as in many other instances, from 
 his mixing up together the essentially distinct 
 suppositions — of money being a home produced^ 
 an'L imported commodity. But 1 shall have 
 occasion to investigate this opinion at length in 
 the following section. In the mean time it must 
 be observed that both Ricardo, Mill, M'Culloch, 
 and myself, all agree that if price is estimated in a 
 commodity produced in this country, goods 
 will rise or fall upon a rise of wages, according 
 to the proportions of fixed and circulating ca- 
 pital required to produce them. At least we 
 agree there will be a rise of goods from circu- 
 lating, and « fall of goods from fixed capital, but 
 as to the exact rise or fall we widely differ. We 
 also differ with regard to the money value of 
 commodities, money being an imported com- 
 modity: these gentlemen stating that commo- 
 
 H 
 
98 
 
 dities produced by circulating capital will not 
 rise in money value upon a rise of wages, when I 
 maintain they will rise. But every one of us 
 in toto differs from Adam Smith, and unani- 
 mously repudiates his doctrine of an equivalent 
 rise in goods to the rise of wages. 
 
 SECTION VI. 
 
 Many remarks in this section have been an- 
 ticipated by the reasonings of the previous 
 sections ; the subject, however, is one of the 
 greatest importance, and has baffled the efforts 
 of men of no mean capacity ; it may therefore 
 be expedient to investigate the matter further. 
 Economists are divided into three classes as it 
 regards this subject. 
 
 The 1st Class consider a standard of value 
 quite unattainable. 
 
 The 2d Class, comprising Dr. Smith and 
 Mr. Malthus, esteem corn and labour, either 
 jointly or separately, a perfect standard of 
 value. 
 
 The 3d Class, or those who think with Col. 
 Torrens and the Author of the " Critical Disser- 
 
99 
 
 tation," &c. not only consider a standard of 
 value unattainable, but that the very supposi- 
 tion of one involves contradictory conditions. 
 
 What I shall remark on this disunanimity of 
 opinion, will be embodied under the two fol- 
 lowing capital heads : — 
 
 1st, in examining whether a contradiction is 
 or is not involved in the supposition of a stan- 
 dard of value ; and 
 
 2dly, in stating the necessary conditions of 
 a perfect standard. 
 
 1st then, the Author of the " Critical Dis- 
 sertation," &c. at p. 1 iO, says, " The phrase, in 
 variable measure of value, proves to be abso- 
 lutely destitute of a basis of meaning;" and at 
 p. 119, after quoting Mr. Ricardo's opinion 
 that it is impossible to be possessed of a com- 
 modity that is not subject to the variations of 
 other things, observes, " The supposition of 
 such a commodity, for such a purpose, involves 
 contradictory conditions," and in many other 
 places of the Dissertation, the very assumption 
 of a measure is either stated to be without the 
 shadow of a meaning, or else to be absurd and 
 contradictory. Col. Torrens too, in his work 
 ** On the Production of Wealth," is much of the 
 same opinion, as p. (5^ will testify ; for he re- 
 marks, ** we cannot, without involving our- 
 selves in contradiction and absurdity, conceive 
 the possibility of an abstract or ideal standard." 
 If an invariable standard of value meant inva- 
 riability with respect to every particular com- 
 h2 
 
100 
 
 modity, then the supposition of a standard t'> 
 measure the fluctuations in other things does 
 involve contradictory conditions, and I cor- 
 dially agree with the above authors. No such 
 thing however is meant by the term ; for eco- 
 nomists and people in general seemed princi- 
 pally desirous for a standard of value, in order 
 to ascertain the value of incomes at different 
 periods of time, and this could not be obtained 
 if, by standard, we meant invariability to every 
 particular commodity. Thus, if in 1810 I had 
 an income of 100/. per annum, with which I 
 purchased, in certain proportions, some of the 
 necessaries, conveniences, and luxuries of life ; 
 and if in 1820 I had the same income consumed 
 in a similar manner, I should, it appears to me, 
 be justified in saying the value of my income 
 had not altered, if I could purchase the same 
 aoo-resiate amount of necessaries, conveniences, 
 and luxuries, at the latter, as at the former pe- 
 riod. It would not matter to me that necessa- 
 ries at the first period should cost me 40/. and 
 conveniences and luxuries 60/. ; and at the lat- 
 ter period, that necessaries should cost me 50/. 
 and conveniences and luxuries 50/. ; because 
 my income would remain the same : since in 
 either case 100/. would purchase me the same 
 asfsresate amount of necessaries, conveniences, 
 and luxuries. In like manner the value of 
 money, both in England and France, might be 
 the same, and yet command a very unequal 
 quantity of particuhxr commodities. In Eng- 
 
101 
 
 land, for instance, money might be cheap in 
 reference to raw produce, and to all goods in 
 which raw produce might be the principal ingre- 
 dient; but it might be dear in reference to 
 products in the production of which mechanical 
 invention has been applied ; and these comprise 
 most of the conveniences and luxuries of life. 
 On the contrary, money in France might be 
 dear as compared with raw produce, and cheap 
 as compared with manufactured goods; but 
 the circumstance of the same commodity being 
 dear in France and cheap in England, or cheap 
 in France and dear in England, does not invali- 
 date the supposition of money possessing the 
 same purchasing power in both countries, con- 
 trasted with the whole range of commodities. 
 And therefore nothing contradictory is involved 
 in the hypothesis of an invariable standard, 
 amidst variations in other things. The critical 
 author, at p. 5, observes, " it would be an ab- 
 surdity to suppose, that the value of A. to B. 
 could alter, and not the value of B. to A. ; that 
 A. could rise in value to B., and B. remain sta- 
 tionary in value to A. ; an absurdity of much 
 the same kind as supposing, that the distance of 
 the earth from the sun could be altered, while 
 the distance of the sun from the earth remained 
 as before." It is clearly a gross absurdity to 
 suppose, as stated by this author, that the value 
 of one thing can alter, without altering the 
 value of that other thing with which it may be 
 compared. Thus corn cannot alter in value to 
 
102 
 
 cloth, without cloth altering in value to corn ; 
 and if corn and cloth were the only two com- 
 modities in existence, the supposition of either 
 being a standard of value would be ridiculous 
 in the extreme. But the value of corn or cloth 
 is not exclusively formed by their mutual power 
 over each other. Corn, for instance, has an 
 exchangeable power over every commodity ; 
 cloth has the same exchangeable power. The 
 value of corn, therefore, might fall or rise in 
 reference to cloth ; but if it altered in the same 
 degree in an opposite direction with some other 
 commodity, its exchangeable worth would re- 
 main the same, though it had varied compared 
 with cloth. For value, it must be again observed, 
 means a power vested in a comrrodity of ex- 
 changing for other commodities, not for a parti- 
 cular commodity. If the general value of A. 
 were altogether regulated by its power overB., 
 
 A. must of necessity alter by alterations in B., as 
 
 B. must alter by alterations in A. As things 
 however actually exist, a variation in the value 
 of one commodity compared with another, does 
 not necessarily alter its value compared with all 
 commodities, and therefore by no means invali- 
 dates the supposition of an invariable standard 
 of value. 
 
 But the author just quoted endeavours to 
 support his argument by a simile drawn from 
 astronomy, which would have considerable 
 weight did we grant that the value of one com- 
 modity was entirely formed by its power over 
 
another commodity, and that the distance of the 
 earth from the sun was calculated from any 
 specific part of its orbit ; this, however, is not 
 the case. If the orbit were circular, it would 
 be so ; but it is very elliptical. Astronomers 
 therefore give the mean distance, which is 96 
 millions of miles. But at the aphelion the dis- 
 tance considerably exceeds 96 millions ; at the 
 perihelium it falls far short of it : an average 
 therefore is taken, and this forms the 96 mil- 
 lions. The avera«fe distance therefore mioht 
 continue the same, though particular parts of 
 the earth's orbit should alter. Should the aphe- 
 lion be removed further from, just as the peri- 
 helium was brought nearer to the sun, or vice 
 versa, the mean distance might continue exactly 
 as before. In like manner, the aggregate dis- 
 tance of our sun from the fixed stars might 
 continue stationary, and yet its distance might 
 be altered compared with some stars. Sirius, 
 for example, might be brought nearer to our 
 sun, either by an impulse originating in itself, 
 or by an impulse originating in our sun. But if 
 there were an opposite alteration in the sun's re- 
 lative distance to Arcturus or any other star, it 
 might still bear the same aggregate relation of 
 distance to all. I cannot therefore imagine the 
 slightest contradiction involved in the suppo- 
 sition of an invariable standard ;* thouoh Mr. 
 
 • Mr. Malthus, in bis " Definitions in Political Economy," has 
 uonae very sensible remarks on this subject. 
 
104 
 
 M'Culloch, by his observation at p. 214 of his 
 " Principles," appears to be a convert to this 
 author s opinions. I therefore proceed, 
 
 2dly, to investigate the conditions neces- 
 sary to an invariable standard ; and first, the 
 conditions economists themselves have propos- 
 ed, and these are very numerous. We will 
 begin with Mr. Ricardo's. In his section on 
 an invariable standard, he sets out with stating 
 that it would be extremely desirable to possess 
 a measure of value ; but this he considers im- 
 possible, not only on account of the constant 
 fluctuations in the producing labour of every 
 commodity, but also on account of the differ- 
 ence of time in bringing commodities to market, 
 added to the various proportions of fixed and 
 circulating capital, and the different degrees of 
 the durability of fixed capital, which concur in 
 producing them. Thus, if wheat were the 
 standard, and an invariable quantity of labour 
 employed to produce it, according to Mr. Ri- 
 cardo's theory it would only be a perfect stand- 
 ard for all commodities produced under similar 
 circumstances. It might be a perfect standard 
 for the value of barley, but it would be no mea- 
 sure of the value of cloth or cotton goods. In- 
 variableness in the quantity of labour, however, 
 under any circumstances as the condition of a 
 standard, the critical author of the " Disserta- 
 tion," &c. has abundantly confuted. Indeed, 
 it is as absurd as invariableness in the capital or 
 in the common wages of labour. They are all 
 
106 
 
 fallacious causes of value, and therefore can 
 never be invariable standards.* Corn and la- 
 bour also, the standard of value propounded by 
 Adam Smith, are quite as erroneous as quan- 
 tity of labour, Mr. Ricardo's standard ; for w^e 
 never can accurately know the value of any 
 commodity by a mere knowledge of the quan- 
 tity of corn or labour it will purchase; and 
 therefore they cannot with any propriety, either 
 jointly or separately, be called measures of 
 value. Respecting the standard of value which 
 has issued from the ingenious pen of Malthus, 
 I refer my readers to the " Critical Disserta- 
 tion," &c. and to the Templar's Dialogues on 
 Political Economy which appeared in the Lon- 
 don Magazine for May, 1824. But it will be 
 asked, what are the essential conditions of a 
 perfect standard of value ? I have before stated 
 what I conceive to be the cause of value, viz. 
 cost of production ; the condition, therefore, 
 essential to an invariable standard, is invaria- 
 bility in the cost of its production. Gold is 
 the standard of the British nation, and an ounce 
 of it is coined into such a sum of money as we 
 call 3/. 17s. lO^d. But it is not a perfect 
 standard, because it does not maintain the same 
 relation to all other things ; if from century to 
 century, and at all times, it preserved a unity 
 
 ■ This Section appears to have been added by Mr. Ricardo in the 
 third edition ; it is much to be regretted that the whole chapter was 
 not re-mbdelled. • 
 
of relation to all commodities, it would be a 
 perfect standard ; this, however, is not the 
 case. I shall however econsider money as the 
 standard ; 
 
 1st. As if obtained in this country. 
 
 2ndly. As it is actually obtained. 
 
 1st. Assuming money to be obtained in 
 this country, the very supposition of it as a 
 standard, involves a contradiction of terms; be- 
 cause its value would necessarily alter with 
 every variation in other things, unless with a 
 variation in one commodity an opposite and 
 equivalent alteration occurred in some other. A 
 variation in one commodity, however, will not 
 ensure an opposite variation in another; so that 
 the very hypothesis involves one of the grossest 
 absurdities. Supposing gold were invariable in 
 its producing labour and were obtained in this 
 country, it would measure the producing la- 
 bour of all commodities obtained by the same 
 proportion of fixed and circulating capital, &c. 
 and would be infallible in this way; and if 
 quantity of labour were the cause of the value 
 of these commodities, it would be an infallible 
 measure of value for them at all times. Quan- 
 tity of labour, however, I trust has been suffi- 
 ciently proved not to be the cause of value un- 
 der any circumstances ; and I refer my readers 
 to the " Critical Dissertation," &c. for a very 
 lucid and complete confutation of invariable- 
 ness in the quantity of labour having any thing 
 to do with the qualifications of an invariable 
 
107 
 
 standard of value. But the case is very diffe- 
 rent, 
 
 2ndly. As money is actually obtained. 
 
 For in this case, the supposition of it as a 
 standard involves, as I conceive, no contradic- 
 tion whatever. It would clearly involve a con- 
 tradiction, if there were an equivalent rise in 
 goods to the rise in wages as Smith maintains, 
 or an equivalent alteration in their price to al- 
 terations in their producing labour, as most 
 economists maintain; but I hope my strictures 
 upon the doctrines of economists in the previ- 
 ous sections of this work, have removed all scep- 
 ticism about aggregate money value being ne- 
 cessarily altered by alterations in wages, and 
 not altered by alterations in the productiveness 
 of labour. It may, however, be necessary to 
 trace the operation ; and first as to a rise in wages. 
 A rise of wages in this country could not neces- 
 sarily alter the value of goods generally; it 
 might alter them specifically; for instance, it 
 would alter the value of those goods which were 
 produced by circulating capital. An indivi- 
 dual, who employed a good deal of labour, 
 would necessarily upon arise of wages demand 
 a greater price, and a greater price he would 
 obtain, unless all commodities were produced 
 by circulating capital; which could not be 
 the case. In the constitution of the most bar- 
 barous commercial fabric, there must be a 
 certain proportion of fixed capital, though 
 variously distributed in production. A rise of 
 
108 
 
 wages, therefore, would not affect all commodi- 
 ties equally. It would raise goods from cir- 
 culating capital, just as it lowered those from 
 fixed capital. Let us suppose, for example, 
 that the goods we usually sent out for gold, 
 were those in the production of which there 
 was a large proportion of circulating capital ; a 
 rise of wages in this country would increase 
 their price. But those who adopt the opinions 
 of Mr. Ricardo might ask why should other 
 nations give us more gold for our goods in con- 
 sequence of our wages rising? I answer, be- 
 cause the circulating capitalists must have the 
 ordinary profits of stock; which they could not 
 have unless their goods sold at a higher price. 
 Therefore, if the exporters of gold could get 
 our commodity any where else at the old 
 value, then, of course, we are excluded from 
 that market. For not to sell their commodi- 
 ties at a higher price would be, on the part of 
 circulating capitalists here, a gratuitous aban- 
 doning of the ordinary profits of stock. The 
 ultimate effect, therefore, would be an ab- 
 straction of capital from the production of 
 those particular commodities which were 
 formerly sent for gold, into another channel 
 of circulating capital, or else it would be in- 
 vested as fixed capital in the production of such 
 goods as had consequently fallen in value, and 
 which would be exported in greater abundance 
 to obtain for us that supply of gold, which we 
 were prevented from having in the first, quarter 
 
109 
 
 in consequence of the rise of goods from circu- 
 ting capital. Now if a rise of wages should 
 raise all goods, as Smith asserts, those nations 
 with which we traded would certainly purchase 
 fewer of our commodities, and we should be 
 obliged to export gold, and this would reduce 
 prices to their former level. If goods from cir- 
 culating capital were to continue at the same 
 price, and those from fixed capital to fall upon 
 a rise of wages, as Mr. Ricardo says, then 
 there would be a freer export of those reduced 
 commodities, and the ultimate result would be 
 an importation of gold and a rise of prices, as I 
 have stated in a previous section. An alteration, 
 therefore, in the wages of labour, could make 
 no alteration in the general value of gold, and 
 consequently the supposition of it as a standard 
 during the fluctuations of wages is by no means 
 contradictory, but very natural : for the suppo- 
 sition of money as a standard under the influ- 
 ence of this circumstance alone is not only 
 superior to anything we can have, but almost 
 as good as we can conceive. A fall of wages 
 would have a contrary effect. 
 
 Nor, secondly, would changes in the pro- 
 ductiveness of labour incapacitate money from 
 being a standard. Money is a commodity 
 which will flow to the best market; hence it is 
 very equally distributed over the surface of the 
 globe ; and abating small variations arising out 
 of the difference of distance from the mines and 
 the difference in the bulk and weight of the. 
 
no 
 
 commodity usually remitted ; its value is much 
 the same in all nations.* This, therefore, being 
 understood, upon any very great increase in the 
 powers of production, what say economists? 
 " An equivalent fall in commodities." This, 
 however, is impossible, as an increase in the 
 
 • If the doctriue in the text is true, the theory of Mr. Senior, 
 Professor of Political Economy in the University of Oxford, in his 
 " Lectures on the cost of obtaining money," must be essentially un- 
 true. If I understand the theory correctly, it is this — that the differ- 
 ences in the money value of labour m various countries do not arise in 
 consequence of the " different degrees of labour requisite to obtain the 
 necessaries of the labourer," nor " of the different densities of popu- 
 lation," nor " of the different pressure of taxation," nor " of the dif- 
 ferent rates of profit," but that they are caused and regulated by the dif- 
 ference in the productiveness of labour. Thus the labourer in Hindostan 
 receives less money wages than the labourer in England, and the labourer 
 in England less than the labourer in America. In accordance with 
 this theory, he supposes the price of commodities, generally, depends 
 upon the money wages of labour ; for he remarks, ." The inventions of 
 Arkwright and "Watt, by making English labour ten times, or more 
 than ten times as efficient in the production of exportable commodities, 
 doubled, or more than doubled its value in the foreign market, and 
 reduced to one-half, or less than one-half, the cost in England of obtain- 
 ing the precious metals." This reasoning appears to me erroneous ; 
 for if we imagine it true, some future Arkwright or Watt may arise 
 and lower the cost of obtaining the precious metals to | or 1/10 of their 
 present cost. Thus, if we suppose no corresponding improvement in 
 other countries, we shall have the anomaly of goods being here 5, 10, 
 or 20 times dearer than in other countries, which is absurd. Mr. 
 Senior too, in my opinion, lays an undue stress on obtaining the pre- 
 cious metals cheap, or, in other words, of having commodities dear. 
 But getting money cheap is of much less importance than getting 
 other commodities cheap ; because obtaining commodities cheap, is ad- 
 vantageous on account of its giving the same amount of consumable 
 products to the purchaser, at a less cost. But obtaining money cheap 
 is not advantageous in the same manner. For though a man's income 
 be increased from £100 to £200 annually, if the £200 will only pur- 
 chase the same amount of commodities when they are are dear, as £100 
 would when they are cheap, of what advantage is it to have £200 in- 
 stead of £100? 
 
Ill 
 
 productiveness of labour would certainly cause 
 an increased export of goods and an extra im- 
 port of the precious metals, which would in- 
 fallibly restore the old level of prices if they 
 were for a moment deranged. I admit there 
 would be a fall in some goods, though not an 
 equivalent fall; there would, however, be such 
 a rise elsewhere that the general range of prices 
 would continue undisturbed. Supposing the 
 goods sent directly for gold and silver remain 
 the same in their producing labour, and those 
 only alter which are sent to other parts, there 
 would naturally be a greater export of them, 
 and the exchanges would become favourable; 
 this would be followed by an influx of the pre- 
 cious metals and a general rise of prices, at least 
 to such an extent as would balance the particu- 
 lar depression in those channels where labour 
 had been abridged ; there could not be an ele- 
 vation any where exceeding this. Again, if the 
 producing labour of those commodities, which 
 are directly exported for gold, be abridged, then 
 the effect is immediate, and an increased impor- 
 tation of the precious metals at once takes place. 
 But it must be observed, that the effect of alter- 
 ations in the wages of labour, and alterations 
 in the productiveness of labour, is very different 
 in its influence upon the total mass of money 
 necessary for the circulation of commodities. 
 In the former case, neither more nor less money 
 is required to transact the business of com- 
 merce and manufactures ; for though one set 
 
112 
 
 requires more, another set requires just as 
 much less.* But in the latter case, notwith- 
 standing the general range of prices remains 
 the same, the aggregate mass of commodities is 
 increased. There are more corn, more hats, 
 shoes, &c. produced, and consequently more 
 money required to circulate them, but the ge- 
 neral range of prices may not be altered. If a 
 fall equivalent to the improvement in the pro- 
 duction of commodities were to take place, an 
 additional supply of money would not be re- 
 quired. This equivalent fallj however, could 
 not happen without leading to the gross absur- 
 dity of goods possibly being in this country 
 J, J, or 1-lOth of their money value in any 
 other country. Alterations, therefore,* in the 
 productiveness of labour, would not necessarily 
 for long periods of time alter the value of the 
 precious metals, and therefore this circumstance 
 does not prevent us from supposing them an 
 invariable standard of value. Nor thirdly, 
 would the incidence of a tax operate to our 
 prejudice in altering the value of money ; 
 though most economists have stated as much. 
 But that an equal rise in goods should follow 
 the imposition of a tax, appears quite as unrea- 
 sonable as the equivalent rise which is stated 
 would follow an increased difficulty in the 
 productiveness of industry, and which is equally 
 
 • It must be understood, that I am throughout speaking of the 
 permanent effects — not of the temporary or accidental. 
 
113 
 
 as absurd as the equivalent falls before noticed. 
 But it may be imagined that many practical 
 objections might be urged against this doc- 
 trine, and England produced as an instance to 
 support them. But the general range of prices 
 cannot be higher in this than in any other king- 
 dom of the earth, at a similar distance from the 
 precious metals, or we should not be able to 
 sail paramount on the seas. It is true our raw 
 produce is dearer, and many commodities also, 
 in the production of which there is a large pro- 
 portion of raw produce ; the inventive genius, 
 however, ofWatt, of Peel, of Spode, and of that 
 host of great names which stand as rich gems in 
 the commercial history of this country, has 
 more than balanced the disadvantages under 
 which we might be supposed to labour from 
 the circumstance of the agricultural produc- 
 tions of the kingdom being at a high price. If, 
 however, taxation had really the eifect ascribed 
 to it, would it be possible for us to compete 
 with other nations ; could we possibly have 
 ships freighted with British goods on every 
 sea ? The imposition or remission of taxes may 
 have a particular influence on the value of par- 
 ticular goods,* though not an influence equal to 
 
 " In his chapter of " Taxes on Profits," Mr. Ricardo states that 
 the imposition of a Tax on Profit, would not aflfect in the same pro- 
 portion the value of commodities produced under different circum- 
 stances of fixed and circulating capital, which is very true. But he 
 also states what is not true, that changes in the value of money will 
 affect in a different manner the value of commodities in those countries 
 which are taxed, than in those countries which are untaxed ; and then 
 
 1 
 
114 
 
 the imposition or remission, without involving 
 absurdities which have before been noticed. 
 
 puts the query, " AVill not this principle account for the diflFerent 
 effects, which it was remarked were produced on the prices of commo- 
 dities, from the altered value of money during the Bank Restriction ?" 
 Certainly not, as the relative value of commodities produced by differ- 
 ent proportions of fixed and circulating capital, in a taxed country, 
 will maintain the same ratio to each other after, as they did before the 
 alteration in the value of money, as wUl appear obvious by the under- 
 neath statement. I take Mr. Ricardo's own hypothesis. 
 
 Before the Tax on ProfiU of £10 per cent., ProJUs being 20 per cent. 
 
 Previous to the rise of money. 
 
 Fixed Capital. 
 £8000 
 
 £1600 Profit 
 
 Circulating Cap. 
 £2000 
 
 400 Profit 
 
 £2400 
 
 Total product value £4000 
 
 A 10 per cent, rise in the value of money 
 
 Fixed Capital 
 £7200 
 
 £1440 Profit 
 
 Circulating Cap. 
 £1800 
 
 360 Profit 
 
 £2160 
 
 Total product value £3600 
 
 The Tax- of £10 per cent, on ProJUs, Profits being 20 per cent. 
 
 Previous to the rise of money. 
 
 Fixed Capital. 
 £8000 
 
 £1600 Profit 
 160 Tax 
 
 £1760 
 
 Circulating Cftp. 
 £2000 
 
 400 Profit 
 40 Tax 
 
 £2440 
 
 A \0 per cent, rise in the value of money. 
 
 Fixed Capital. 
 £7200 
 
 £1684 
 
 Circulating Cap. 
 
 £inoo 
 
 360 Profit 
 36 Tax 
 
 £2196 
 
 Total product value £4200 ; Total product value £3780 
 
 Thus we clearly see, that whether a country be taxed or not, a change 
 in the value of money will affect equally the value of commodities 
 produced both by fixed and circulating capital. For in the first Table, 
 where we have supposed no taxation, both the products from fixed and 
 circulating capital mauitain the same relation to each other after, as 
 they did before the change in the value of money ; so in the second 
 Table, where taxation is assumed, there is the same undisturbed ratio 
 subsisting; for £1600 : £2400 : : £1440 : £2160, in like manner 
 £1760 : £2440 : : £1584 : £2196. Consequently, though Mr. Ricardo 
 stated correctly that the imposition of a tax would not operate equally 
 on the value of goods produced by fixed and circulating capital, he was 
 incorrect in saying, that " m a country where prices are artificially 
 raised by taxation, the abundance of money from an influx, or the ex- 
 portation and consequent scarcity of it from foreign demand, will not 
 operate in the same proportion on the prices of all commodities," be- 
 cause we have shewn that they would alter in the same proportion 
 whether taxation did or did not exist. 
 
115 
 
 The precious metals insinuate themselves into 
 the pores of the universal system, in exchange 
 for pretty equal equivalents, and it would be 
 strange they should have aless purchasing powder 
 in England than in other countries, because our 
 municipal laws might require heavy contribu- 
 tions to the state. 
 
 It follows, therefore, that changes in the 
 wages of labour, and in the productiveness of la- 
 bour, and that the imposition of taxes in Eng- 
 land, do not, as far as they go, alter the value 
 of the precious metals; and having premised 
 thus much, I proceed to state the conditions 
 necessary to make money a perfect standard, 
 as it is actually an imported commodity; and 
 this condition is, as we have before stated, 
 invariableness in its cost of production. There- 
 fore, in any or in all the countries where we 
 procure the supply of our gold and silver, it 
 will not only be necessary (to constitute them a 
 perfect standard of value) that they are station- 
 ary in their producing labour, but it will also 
 be necessary that all other things be stationary 
 too; and that the productive powers of labour 
 and capital continue immoveable. For cost 
 means labour and the general productiveness of 
 labour; so that if the general productiveness of 
 labour alter, one ingredient in the cost, cost will 
 infallibly alter. Consequently, if our supply 
 of gold were from South America, in order to 
 constitute it a perfect standard, the labour and 
 capital employed in its production must not 
 
 i2 
 
1!G 
 
 only be invariable, but the labour and capital 
 in all other channels too. The wages of labour 
 also must be invariable: because it has been 
 demonstrated, that in consequence of the vari- 
 ous proportions of fixed and circulating capital 
 employed in the production of all goods, any 
 change in the wages of labour will necessarily 
 alter the relative value of goods produced under 
 different circumstances of fixed and circulating 
 capital. It will, therefore, be very readily be- 
 lieved that a perfect standard of value is un- 
 attainable ; though the propriety of conceiving 
 one, 1 think, cannot fairly be disputed. 
 
 It may, however, be useful to state the 
 effects upon the value of gold, which alterations 
 in the wages of labour, in the producing labour 
 of other commodities, and in its own producing 
 labour, will create. And for the sake of greater 
 clearness, let us suppose gold produced in South 
 America only, and that therefore our supply is 
 obtained exclusively from that quarter; and 
 first, as to the influence of a rise of wages on 
 the value of gold generally, supposing it is 
 produced by fixed capital. 
 
 According to the principl-es already deve- 
 loped, a rise of wages would evidently cause a 
 fall in the value of gold in reference to all those 
 commodities which were either produced alto- 
 gether by circulating capital, or which required 
 a greater proportion of circulating capital to 
 produce them than gold, the commodity com- 
 pared; but the degree of fall would evidently 
 
117 
 
 be governed, as has been before elucidated, by 
 the rate of profit, and by the proportion which 
 the whole fixed capital of the state, bore to the 
 whole circulating capital Sec. We cannot, 
 therefore, know the precise fall unless we know 
 all these circumstances. It is, however, very 
 plain that there would be a fall in reference to 
 all those goods produced in South America by 
 capital of a less durable kind. And it will be 
 very easy to prove that a rise of wages under 
 these circumstances would cause a fall in gold 
 or a rise in commodities all over the world; 
 benefittingall debtors, and injuring all creditors. 
 Nor would the fall of gold be in reference to those 
 commodities merely which were produced alto- 
 gether by circulating capital in other countries, 
 or by capital of a less durable nature than itself; 
 it would fall in reference to all kinds of foreign 
 commodities. In the national interchange of 
 goods, the parties contracting do not stipulate 
 about proportions of fixed and circulating ca- 
 pital ; the goods undergo no analysis of this 
 sort. The American mineralist would be 
 obliged to put up with a less quantity of all 
 other goods in exchange for his commodity ; 
 and the merchants of other countries would re- 
 fuse to give the ancient price. Had the mine- 
 ralist the monopoly of his article, then he might 
 insist upon the same price as formerly, but he 
 is exposed to the rivalry of other capitalists, 
 and were he to receive the same amount of 
 foreign productions as formerly, he would gain 
 
118 
 
 more tlian the usual profits of stock, and that 
 would mcite other capitalists to embark in the 
 same enterprise, and competition would soon re- 
 duce the value of gold to such a level as would 
 only afford the common profits of capital. 
 
 On the contrary, if gold in South America 
 were produced by circulating capital, a rise of 
 wages would increase its value, compared with 
 all those goods in that country which were pro- 
 duced by a less quantity of this species of capi- 
 tal; but it would continue stationary compared 
 with those produced under the same circum- 
 stances as itself It would, however, rise in re- 
 ference to all commodities of other nations, 
 whatever might be the proportion of fixed and 
 circulating capital that conduced to produce 
 them. Because its commanding power at 
 home being increased, and profit being mea- 
 sured by this commanding power, the common 
 profits of stock could not be obtained without 
 an equivalent fall of commodities all over the 
 world. Should wages decline in value, that cir- 
 cumstance would cause a contrary effect. 
 
 Again; supposing the producing labour and 
 capital of gold remained stationary in South 
 America, and there was a general improvement 
 in production in all other channels, gold would 
 rise compared with all other things, not only in 
 that country but every where else. It is some- 
 times very difficult to trace the exact operation 
 of the clearest principles, but as to the general 
 result, it must be obvious, that if the value of 
 
119 
 
 gold is increased where it is produced, it will 
 also be increased elsewhere. Both the im- 
 porter and exporter of every species of goods 
 must have the common profits of stock in the 
 country where this importation and exportation 
 takes place. In all reasonings of this sort, 
 therefore, this is supposed to be admitted. 
 Then let us imagine that we export cotton goods, 
 woollen cloths, and all kind of hardware com- 
 modities to South America, and that we get in 
 return the precious metals, hides, &c. &c. By 
 the supposition, hides, and all commodities 
 except gold and silver, are reduced in their 
 producing labour; they will consequently sell 
 for less money in their own country, and in 
 other countries also. For if the exporters of 
 hides, &c. were to obtain the old prices, they 
 would gain more than the common profits of 
 stock. And, did we sell our goods for less 
 money, at first, we should not obtain the ordi- 
 nary profits, unless all commodities in our own 
 country were reduced in a corresponding de- 
 gree. This, however, eventually would be the 
 case; for many goods which we might have sent 
 previous to the increased productiveness of 
 South American labour at a lower cost than 
 they could have produced them, after the im- 
 provement, they might be able to obtain them- 
 selves ; we, therefore, should be turned out of 
 the market as respects these goods. The same 
 principle would be in active operation in all 
 other countries; for it would be discovered. 
 
120 
 
 that in reference to a considerable quantity of 
 foreign goods, the South Americans would 
 be able to produce cheaper than they could 
 import. The common export of the precious 
 metals would therefore be suspended p^o 
 tempore; and the general scarcity of money 
 arising from this circumstance would soon pro- 
 duce a depression in the price of goods all over 
 the world. Nor would it be a temporary, but 
 a permanent depression. This circumstance is 
 curious, and I believe has never before been 
 stated ; but it is true upon the principles of the 
 economists themselves. We, therefore, see 
 that though the producing labour of gold re- 
 mains stationary, its value is generally aug- 
 mented, and simply because the productive- 
 ness of labour is generally increased in the 
 country where we have supposed it is obtained; 
 and what is more curious still, if gold and 
 silver were to partake of this general improve- 
 ment, their value would not be altered ; because 
 in such a case goods would obviously bear to 
 each other the same relation as formerly. It is 
 scarcely necessary to say, that supposing gold 
 and silver remain the same, and all other com- 
 modities are increased in their producing labour, 
 the effect upon general prices would be in- 
 creased dearness, or a fall in the value of the 
 precious metals.* But, in real truth, we do 
 
 • It will be obserred, I have made no mention of the duties upon 
 importation and bounties on exportation as affecting prices generally ; 
 and simply because the omission does not invalidate, whilst the ad- 
 
121 
 
 not exclusively obtain our supply of gold from 
 one part of the world merely ; we obtain it from 
 various parts. A general improvement or di- 
 minution in the means of production in the 
 Southern part of the new world would not con- 
 sequently have that effect upon general prices, 
 which we have described under hypothetical 
 circumstances. But, perhaps, upon a nice 
 scrutiny, the results would not be very dissimi- 
 lar. For, imagining labour to continue at its 
 old productive rate in those other countries 
 where part of our supply was obtained, whilst 
 (excepting gold) it was so much improved in 
 South America, the effect would probably be 
 an abstraction of capital from the working of 
 the mines in South America to those other em- 
 ployments which were assumed to be so much 
 improved in productiveness, and this would 
 cause an extra demand for gold in all other 
 places, and would raise its price immediately 
 and permanently; and consequently reduce com- 
 modities, unless mines of equal fertility could 
 be obtained to supply the requisite demand. 
 Should this be the case, the value of commodi- 
 ties would undergo no change, and the only ef- 
 fect would be our obtaining supplies from other 
 places than South America, where we should 
 be prevented from trading in them to the same 
 extent as before. 
 
 mission might have embarrassed the argument. Whether such duties 
 did exist or not, previous to the alterations in gold, which have been 
 described, it does not affect the conclusion to which we have arrived ; 
 as I have assumed these duties, &c. to be stationary, if existing. 
 
122 
 
 The doctrines disclosed in this section may 
 be thus very briefly recapitulated. 
 
 That the supposition of an invariable 
 standard of value does not involve any contra- 
 diction ; on the contrary, that it is a very na- 
 tural supposition. 
 
 That all the standards economists have 
 hitherto proposed are nugatory, and would not 
 in the least measure the variations in other things. 
 
 That as cost of production, meaning labour 
 and the general productiveness of labour, is the 
 cause of value; so any commodity invariable in 
 its cause, would be a perfect measure of value 
 for other things. 
 
 That if money is the standard, and pro- 
 duced in this country, the very supposition of 
 it as an invariable standard, involves contra- 
 dictory conditions. 
 
 That money as it is actually produced, may 
 be a perfect standard of value in our country, 
 during changes in the value of our goods, and 
 that this supposition involves no contradictory 
 conditions. 
 
 That to constitute it an invariable standard 
 for any length of time, it must be invariable in 
 its cost. 
 
 That the exact effect of a rise or fall of wages, 
 an increase or decrease in the productiveness of 
 labour in any country where we assume our 
 supply of gold to be exclusively obtained, is cu- 
 rious and apparently paradoxical, but really 
 defensible upon the common principles of eco- 
 nomists. 
 
123 
 
 SECTION VII. 
 
 Though in the last section Mr. Ricardo, in 
 order to simplify his reasonings, supposed 
 money to be invariable ; he is occupied in this 
 section in stating the possible variations in it 
 from different quantities of labour being em- 
 ployed in its production ; and states that a rise 
 of vv^ages from a fall of money will have no effect 
 upon profits, while a rise of wages, from the 
 circumstance of the labourer being more libe- 
 rally rewarded, will certainly lower profits. 
 Mr. Ricardo's notion, however, of the condition 
 necessary to constitute money invariable in its 
 value, is just as curious in this as in the previ- 
 ous sections of his chapter on value. The fol- 
 lowing passage occurs at p. 49 : — •* It is not by 
 the absolute quantity of produce obtained by 
 either class, that we can correctly judge of the 
 rate of profit, rent, and wages, but by the quan- 
 tity of labour required to obtain that produce. 
 By improvements in machinery and agriculture, 
 the whole produce may be doubled ; but if 
 wages, rent, and profit be also doubled, these 
 three will bear the same proportions to one 
 another as before, and neither could be said to 
 have relatively varied. But if wages partook 
 not of the whole of this increase— if they, in- 
 
124 
 
 stead of being doubled, were only increased 
 one-half; if rent, instead of being doubled, 
 were only increased three-fourths, and the re- 
 maining increase went to profit, it would, I ap- 
 prehend, be correct for me to say, that rent and 
 wages had fallen while profits had risen ; for if 
 we had an invariable standard by which to mea- 
 sure the value of this produce, we should find 
 that a less value had fallen to the class of la- 
 bourers and landlords, and a greater to the class 
 of capitalists, than had been given before. We 
 might find, for example, that though the abso- 
 lute quantity of commodities had been doubled, 
 they were the produce of precisely the former 
 quantity of labour. Of every hundred hats, 
 coats, and quarters of corn produced, if 
 
 The labourers had before 25 
 
 The landlords 25 
 
 And the capitalists 50 
 
 100 
 
 And if, after these commodities were double 
 
 the quantity, of every 100 
 
 The labourers had only 22 
 
 The landlords 22 
 
 And the capitalists 56 
 
 100 
 
 In that case I should say, that wages and rent 
 had fallen, and profits risen ; though, in conse- 
 
126 
 
 quence of the abundance of commodities, the 
 quantity paid to the labourer and landlord would 
 have increased in the proportion of 25 to 44. 
 Wages are to be estimated by their real value, 
 viz. by the quantity of labour and capital em- 
 ployed in producing them, and not by their 
 nominal value, either in coats, hats, money, or 
 corn. Under the circumstances I have just 
 supposed, comiJiodities would have fallen to 
 half their former value, and if money had not 
 varied, to half their former price also. If then 
 in this medium, which had not varied in value, 
 the wages of the labourer should be found to 
 have fallen, it will not the less be a real fall, 
 because they might furnish him with a greater 
 quantity of cheap commodities than his former 
 wages." Thus money, the standard, is suppos- 
 ed to remain invariable in its value, notwith- 
 standing it has universally increased 100 per 
 cent, in purchasing power. With what consis- 
 tency, therefore, does Mr. Ricardo object to 
 the Smithian theory of equivalent alterations in 
 value to alterations in the wages of labour, 
 when his own doctrine is liable to the same ob- 
 jection? Mr. Ricardo in the first section 
 adopts Adam Smith's definition of value, viz. 
 '* a power of purchasing other goods." Can 
 money, therefore, be supposed invariable in its 
 value, when it purchases twice the amount of 
 commodities at one time as at another? But 
 his opinions respecting a standard are in per- 
 fect keeping, when he supposes, in the above 
 passage, that the value of wages and rent may 
 
126 
 
 fall notwithstanding their exchangeable value 
 is increased in the proportion of 25 to 44. It is 
 true Mr. Ricardo supposes the labour to pro- 
 duce the sum of commodities represented by 
 44 is less than that represented by 25, and were 
 quantity of labour the cause of value, both 
 wages and rent would be deteriorated in ex- 
 changeable worth; this, however, is not the 
 case, as the supposition of it as a complete 
 cause, opposes the plainest dictates of common 
 sense, and involves the grossest contradictions. 
 Mr. Senior, in his " Lectures on the cost of ob- 
 taining money," in a note, p. 102, animadverts 
 upon the above passage. He observes — "Ac- 
 cording to this nomenclature, if one labourer 
 were to receive 30/. a year, and the produce of 
 his labour to sell at the end of the year for 40/., 
 and another were to receive 60/. a year, and the 
 produce of his labour to sell for 100/., the first 
 labourer would be said to receive higher wages 
 than the second ; and if the wages of the second 
 were to be altered from 60/. to 40/. a year, and 
 the commodity to sell for 50/., the alteration 
 must be termed a rise of wages. According to 
 this nomenclature, the wages of the best work- 
 men are always the lowest, for it is known to 
 be more profitable to employ them." But Mr. 
 Ricardo imagined that if the producing labour 
 of gold remained stationary, all kinds of com- 
 modities would alter in price just as their pro- 
 ducing labour altered. Consequently when he 
 supposed the labourer to receive, after the in- 
 creased productiveness of industry, a sum equal 
 
127 
 
 to 44 in commodities instead of 25, he ima- 
 gined that the commodities represented by 44 
 had a less price than those represented by 25, 
 and that money, in which he estimated price, had 
 continued constant in its value. Though this 
 is radically erroneous, it is a direct corollary 
 from his doctrine. In the 1st section he sup- 
 posed that quantity of labour was demonstrated 
 to be the cause of value ; hence as all commo- 
 dities in the above passage were supposed to be 
 produced by half their former labour, he consi- 
 dered they were- reduced to half their former 
 price ; and as the quantity of labour to produce 
 the commodities 44 was less than that which 
 was previously necessary to produce the 25, 
 he concluded naturally that wages had fallen. 
 Consequently, he would not suppose the wages 
 of the best workmen to be lower than other 
 workmen, unless the quantity of labour neces- 
 sary to produce their wages was lower than 
 that necessary to produce the wages of the infe- 
 rior workman. The enigmatical character of 
 Mr. Ricardo's work arises from his using the 
 terms value and wages in tvvo senses. The 
 confusion arising from this unjustifiable li- 
 berty, Mr. M'Culloch has attempted to ob- 
 viate, but with what success he has obviated 
 the difficulties attending Mr. Ricardo's use 
 of the term value in two senses, I have en- 
 deavoured to shew in a previous section; and 
 his introduction of the term proportional wages, 
 has not freed him from many inconsistencies. 
 It were well if the terms value and wages were 
 
128 
 
 re-installed in their original meaning, and stript 
 of the confusing adjuncts " real" and " propor- 
 tional." 
 
 But Mr. Ricardo is correct when he says 
 that " the variation in the value of money, how- 
 ever great, makes no difference in the rate of 
 profits," because, though a man's gross amount 
 of profits may vary by variations in the value of 
 money, yet, as these variations do not disturb 
 the ratio subsisting between capital and profits, 
 they leave the rate unaffected. 
 
 I have thus brought to a close the critical 
 examination of Mr. Ricardo and other econo- 
 mists' doctrines of value. It has been shewn 
 what is the real principle which determines 
 value in exchange; and to what inconsistencies 
 and confusion the adjective " real" leads. It 
 has also been shewn what effects changes in the 
 wages of labour have upon value and profits 
 under different proportions of fixed and circu- 
 lating capital, &c. and the conditions necessary 
 to a perfect standard of value. Many things of 
 great practical importance follow from the prin- 
 ciples which have been exhibited. To advert 
 to them now would much exceed the limits of 
 this work. Having, however, developed what 
 I consider true principles, I submit them to 
 public criticism ; and should they stand this 
 severe test, it will remain for others to pursue 
 their consequences into various ramifications of 
 the agricultural, manufacturing, and commer- 
 cial system. 
 
ERRATA. 
 
 Page 80, line 10. For " durability of Capital," read Wear and Tear of I 
 
 Fixed Capital. ^ 
 
 84, 33. For "durability of Capital," read Wear and Tear of 
 
 Fixed Capital. 
 
 96, 29. For " rise money," read rise in money. 
 
 97, 17- For "produced, an imported," read produced and J 
 
 imported. | 
 
 12, 20. Dele , after the word designedly. 
 
 DIRECTIONS FOR PLACING THE TABLES. 
 
 Table I. to face page T 5 
 
 II 79 
 
 III 81 
 
 IV 82 
 
 V 85 
 
 VI 92 
 
128 
 
 re-installed in their original meaning, and stript 
 of the confusing adjuncts " real" and " propor- 
 tional." 
 
 But Mr. Ricardo is correct when he says 
 that *' the variation in the value of money, how- 
 ever sreat. makes no difference in the rate of 
 
 I consider true principles, I submit them to 
 public criticism ; and should they stand this 
 severe test, it will remain for others to pursue 
 their consequences into various ramifications of 
 the agricultural, manufacturing, and commer- 
 cial system. 
 
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