ON THE DEFINITION AND APPLICATION OF TERMS, BY MR. MACCULLOCH, IN HIS
“PRINCIPLES OF POLITICAL ECONOMY.”
However incautious Mr. Ricardo and Mr. Mill may have been in the
definition and application of their terms, I fear it will be found that
Mr. Macculloch has been still more so; and that, instead of growing more
careful, the longer he considers the subject, he seems to be growing
more rash and inconsiderate.
The expositors of any science are in general desirous of calling into
their service definite and appropriate terms; and for this purpose their
main object is to look for characteristic differences, not partial
resemblances. Mr. Macculloch, on the other hand, seems to be only
looking out for resemblances: and proceeding upon this principle, he is
led to confound material with immaterial objects; productive with
unproductive labour; capital with revenue; the food of the labourer with
the labourer himself; production with consumption; and labour with
profits.
That this is not an exaggerated view of what has been stated by Mr.
Macculloch, in his _Principles of Political Economy_, any person who
reads the work with attention may satisfy himself.
Mr. Macculloch’s definition of wealth, which he considers as quite
unexceptionable, is, “those articles or products which possess
exchangeable value, and are either necessary, useful, or agreeable.”[28]
It is not, perhaps, quite unexceptionable to use the term value in a
definition of wealth. It is something like explaining _ignotum per
ignotius_. But independently of this objection, the definition is so
worded, that it is left in doubt whether immaterial gratifications are
meant to be included in it. They are not in general designated by the
terms _articles_ or _products_; and it is only made clear that it is
intended to include them by a collateral remark on my definition of
wealth, which I confine specifically to material objects, and by a
subsequent definition of productive labour, which is made to include
every gratification derived from human exertion.
Mr. Macculloch, in the article on Political Economy which he published
in the Supplement to the Encyclopædia Britannica, had excluded these
kinds of gratification from his definition of wealth, and had given such
reasons for this exclusion, as would fully have convinced me of its
propriety, if I had not been convinced before. He observes that, “if
political economy were to embrace a discussion of the production and
distribution of all that is useful and agreeable, it would include
within itself every other science; and the best Encyclopædia would
really be the best treatise on political economy. Good health is useful
and delightful, and therefore, on this hypothesis, the science of wealth
ought to comprehend the science of medicine: civil and religious liberty
are highly useful, and therefore the science of wealth must comprehend
the science of politics: good acting is agreeable, and therefore, to be
complete, the science of wealth must embrace a discussion of the
principles of the histrionic art, and so on. Such definitions are
obviously worse than useless. They can have no effect but to generate
confused and perplexed notions respecting the objects and limits of the
science, and to prevent the student ever acquiring a clear and distinct
idea of the inquiries in which he is engaged.”[29]
On these grounds he confined wealth to material products; but, in the
same treatise, he included, in his definition of productive labour, all
those sources of gratification which he had, with such good reason,
excluded from his definition of wealth. When he had done this, however,
he could not but be struck with the inconsistency of saying that wealth
consisted exclusively of material products, and yet that all labour was
equally productive of wealth, whether it produced material products or
not. To get rid of this inconsistency, he has now altered his
definition, by leaving out the term material products; and it remains to
be seen, whether in so doing he has not essentially deviated from the
most obvious rules which should direct us in defining our terms.
His definition of wealth, as explained by what he subsequently says of
productive labour, now includes all the gratifications derived from
menial service and followers, whatever may be their number.
Now let us suppose two fertile countries with the same population and
produce, in one of which it was the pride and pleasure of the landlords
to employ their rents chiefly in maintaining menial servants and
followers, and in the other, chiefly in the purchase of manufactures and
the products of foreign commerce. It is evident that the different
results would be nearly what I described in speaking of the consequences
of the definition of the Economists. In the country, where the tastes
and habits of the landlords led them to prefer material conveniencies
and luxuries, there would, in the first place, be in all probability a
much better division of landed property; secondly, supposing the same
agricultural capital, there would be a very much greater quantity of
manufacturing and mercantile capital; and thirdly, the structure of
society would be totally different. In the one country, there would be a
large body of persons living upon the profits of capital; in the other,
comparatively a very small one: in the one, there would be a large
middle class of society; in the other, the society would be divided
almost entirely between a few great landlords and their menials and
dependents: in the one country, good houses, good furniture, good
clothes, and good carriages, would be in comparative abundance; while in
the other, these conveniencies would be confined to a very few.
Now, I would ask, whether it would not be the grossest violation of all
common language, and all common feelings and apprehensions, to say that
the two countries were equally rich?
Mr. Macculloch, however, has discovered that there is a resemblance
between the end accomplished by the menial servant or dependent, and by
the manufacturer or agriculturist. He says, “The end of all human
exertion is the same; that is, to increase the sum of necessaries,
comforts, and enjoyments; and it must be left to the judgment of every
one to determine what proportion of these comforts he will have in the
shape of menial services, and what in the shape of material
products.”[30]
It will, indeed, be readily allowed, that even the third footman who
stands behind a coach, and seems only to add to the fatigue of the
horses and the wear and tear of the carriage, is still employed to
gratify some want or wish of man, in the same manner as the riband maker
or the lace maker. It will further be readily allowed, that it is by no
means politic to interfere with individuals in the modes of spending
their incomes. But does it at all follow from this, that if these
different kinds of labour have very different effects on society in
regard to wealth, as the term is understood by the great mass of
mankind, that they should not be distinguished by different
appellations, in order to facilitate the explanation of these different
effects? Mr. Macculloch might unquestionably discover some resemblance
between the salt and the meat which it seasons: they both contribute,
when used in proper proportions, to compose a palatable and nutritive
meal, and in general we may leave it to the taste and discretion of the
individual to determine these proportions; but are we on that account to
confound the two substances together, and to affirm that they are
_equally_ nutritive? Are we to define and apply our terms in such a way
as to make it follow from our statements, that, if the individual were
to compound his repast of half salt and half meat, it would equally
conduce to his health and strength?
But Mr. Macculloch states, that a taste for the gratifications derived
from the unproductive labourers of Adam Smith “has exactly the same
effect upon national wealth as a taste for tobacco, champagne, or any
other luxury.”[31] This may be directly denied, unless we define wealth
in such a manner as will entitle us to say that the enjoyments derived
by a few great landlords, from the parade of menial servants and
followers, will tell as effectually in an estimate of wealth as a large
mass of manufacturers and foreign commodities. But when M. Chaptal
endeavoured to estimate the wealth of France, and Mr. Colquhoun that of
England, we do not find the value of these enjoyments computed in any of
their tables. And certainly, if wealth means what it is understood to
mean in common conversation and in the language of the highest
authorities in the science of Political Economy, no effects on national
wealth can or will be more distinct than those which result from a taste
for material conveniencies and luxuries, and a taste for menial servants
and followers. The exchange of the ordinary products of land for
manufactures, tobacco, and champagne necessarily generates capital; and
the more such exchanges prevail the more do those advantages prevail
which result from the growth of capital and a better structure of
society; while an exchange of necessaries for menial services, beyond a
certain limited amount, obviously tends to check the growth of capital,
and, if pushed to a considerable extent, to prevent accumulation
entirely, and to keep a country permanently in a semi-barbarous state.
Mr. Macculloch, when not under the influence of his definition, justly
observes, that “the great practical problem, involved in that part of
the science of political economy which treats of the production of
wealth, must resolve itself into a discussion of the means whereby the
greatest amount of necessary, useful, and desirable products may be
obtained with the least possible quantity of labour.”[32] But among the
unproductive labourers of Adam Smith there is no room for such saving of
labour. The pre-eminent advantages to be derived from capital,
machinery, and the division of labour, are here almost entirely lost;
and in most instances the saving of labour would defeat the very end in
view, namely, the parade of attendance, and the pride of commanding a
numerous body of followers.
Now, if the employment of the labour required to produce material
conveniencies and luxuries necessarily occasions the creation and
distribution of capital, and, further, affords room for all the
advantages resulting from the saving of labour and the most extended use
of machinery; while the employment of the labour, called by Adam Smith
unproductive, is necessarily cut off from all these benefits, I would
ask whether these two circumstances _alone_ do not form a sufficiently
marked line of distinction amply to justify the classification of Adam
Smith; and the utility of such a classification, in explaining the
_causes_ of the wealth of nations, is most obvious and striking.
So difficult is it, consistently, to maintain a definition which
contradicts the common usage of language, and the common feelings of
mankind, that I have not the least doubt, if Mr. Macculloch himself were
to travel through two countries of the kind before described, that is,
one flourishing in manufactures and commerce, and the other, though with
the same population and food, furnishing little more to the great mass
of its people than _panem et Circenses_, he would call the latter poor,
and the former comparatively rich.
Now, what must have been the cause of this difference? Adam Smith would
give a simple, sufficient, and most intelligible reason for it. He would
say, that the number and powers of those whom he had called productive
labourers, had been much greater in one country than in the other. This
seems to be a clear and satisfactory explanation. How Mr. Macculloch
could explain the matter according to doctrines which make no difference
between the different kinds of labour, I am utterly at a loss to
conjecture[33].
Perhaps, however, he would say, upon recollection, that his definition
of wealth did not oblige him to allow that there would really be any
difference in the wealth of these two countries. In that case, I think
it may be very safely said that his definition of wealth violates all
the most obvious rules for the definition and application of terms. It
is opposed to the meaning of the term wealth as used in common
conversation; it is opposed to the meaning of the term wealth as applied
by the writers of the highest authority in political economy; it is so
far from removing the little difficulties which had attended former
definitions of wealth and productive labour, that it very greatly
aggravates them; it so contradicts our common habits and feelings, that
it is scarcely possible to maintain it with consistency.
Mr. Macculloch’s definition of capital has exactly the same kind of
character as his definition of wealth, namely, that of being so extended
as to destroy all precision, and to confound objects which had before
been most usefully separated, with a view to the explanation of the
causes of the wealth of nations. The alteration of a definition seems
with Mr. Macculloch to be a matter of very slight consequence. The
following passage is certainly a most extraordinary one. “The capital of
a country may be defined to be _that portion of the produce of industry
existing in it, which can be made directly available, either to the
support of human existence, or to the facilitating of production_. This
definition differs from that given by Dr. Smith, which has been adopted
by most other economists. The whole produce of industry belonging to a
country, is said to form its _stock_; and its capital is supposed to
consist of that portion only of its stock, which is employed in the view
of producing some species of commodities. The other portion of the stock
of a country, or that which is employed to maintain its inhabitants,
without any immediate view to production, has been denominated its
_revenue_, and is not supposed to contribute anything to the increase of
its wealth.”
“These distinctions seem to rest on no good foundations. Portions of
stock employed without any immediate view to production, are often by
far the most productive. The stock, for example, that Arkwright and Watt
employed in their own consumption, and without which they could not have
subsisted, was laid out as _revenue_; and yet it is quite certain that
it contributed infinitely more to increase their own wealth, as well as
that of the country, than any equal quantity of stock expended on the
artisans in their service. It is always extremely difficult to say
whether any portion of stock is, or is not, productively employed; and
any definition of capital which involves the determination of this
point, can only serve to embarrass and obscure a subject that is
otherwise abundantly simple. In our view of the matter, it is enough to
constitute an article capital, if it can either directly contribute to
the support of man, or assist him in appropriating or producing
commodities; but the question respecting the mode of employing an
article ought certainly to be held to be, what it obviously is,
perfectly distinct from the question whether that article is capital.
For any thing that we can _à priori_ know to the contrary, a horse yoked
to a gentleman’s coach may be just as productively employed as if he
were yoked to a brewer’s dray, though it is quite plain, that whatever
difference may really obtain in the two cases, the identity of the horse
is not affected; he is equally possessed, in the one case as well as the
other, of the capacity to assist in production, and so long as he
possesses that capacity, he ought to be viewed, independently of all
other considerations, as a portion of the capital of the country.”[34]
If these doctrines were admitted, there would be an end, at once, of all
classifications, and of all those appropriate designations which so
essentially assist us, in explaining what is going forward in society.
If the distinction between the whole mass of the products of a country,
and those parts of it which are applied to perform particular functions,
rests on no solid foundation, it may be asked, on what better foundation
does the distinction between the mass of the male population of a
country, and the classes of lawyers, physicians, manufacturers, and
agriculturists rest? They all equally come under the general
denomination of men; but particular classes are most usefully
distinguished by particular appellations founded on the particular
functions which they generally perform.
The bread which I consume myself, or give to a menial servant, is a part
of the general produce of the country, and may not be different from
that which is advanced to a manufacturer or agriculturist. When I or my
servant consume the bread, it performs a most necessary and important
service, no less than the maintenance of life and health; but in
obtaining this service my wealth is _pro tanto_ diminished. On the other
hand, if I give the same kind of bread as wages to a manufacturer or
agricultural labourer, it will not, with regard to me, perform so
necessary an office as before, but it will perform an essentially
different one with regard to my wealth, it will increase my wealth
instead of diminishing it. In an inquiry into the causes of the wealth
of nations, does not this difference in the functions which the same
advances perform require to be marked by a particular appellation?
Accordingly, both in the language of common conversation and of the best
writers, revenue and capital have always been distinguished; by revenue
being understood, that which is expended with a view to immediate
support and enjoyment, and by capital, that which is expended with a
view to profit. But in the language of Mr. Macculloch, in the passage
above quoted, it is the capacity to perform particular functions, and
not the habitual performance of them, that justifies particular
designations. A coach-horse, drawing a chariot in the Park, has the
capacity of being employed in a brewer’s dray or a farmer’s waggon:
“whatever difference may really obtain in the two cases, the identity of
the horse is not affected; he is equally possessed, in the one case as
in the other, of the capacity to assist in production; and so long as he
possesses that capacity, he ought to be viewed, independently of all
other considerations, as a portion of the capital of the country.”
This appears to me to be very little different from saying that a man
who is capable of being made to perform the functions of a judge ought
to be denominated a judge; because, whether he sits on the bench or in
the court below, the identity of the man is the same; he is equally
possessed, in the one case as well as the other, of the capacity to
assist in the decision of causes, and so long as he possesses that
capacity he ought to be viewed, independently of all other
considerations, as one of the judges of the country. It is said, that
the French are astonished at the small number of judges in England. If
this kind of comprehensive nomenclature were adopted, their wonder would
soon cease.
The whole of the incomes of every person in a society, in whatever way
they may be actually employed, might be employed, as far as they would
go, directly in the support of man. Consequently, according to the
definitions of Mr. Macculloch, all incomes are capital. But he is not
satisfied even with this very unusually-extended meaning of the term. He
can trace a resemblance between a working man and a working horse, and
is, consequently, led to say, “However extended the sense previously
attached to the term capital may at first sight appear, I am satisfied
that it ought to be interpreted still more comprehensively. Instead of
understanding by capital all that portion of the produce of industry
extrinsic to man, which may be applicable to his support, and to the
facilitating of production, there does not seem to be any good reason
why man himself should not, and very many why he should, be considered
as forming a part of the national capital. Man is as much the produce of
labour as any of the machines constructed by his agency; and it appears
to us, that in all economical investigations he ought to be considered
in precisely the same point of view.”[35]
That there is some resemblance between a working man and a working horse
cannot for a moment be doubted; but is that sufficient reason why they
should be confounded together under the name of capital? The question is
not whether there is a partial resemblance between these two objects,
but whether there is a characteristic difference; and surely there is a
sufficient distinction in all economical investigations between a free
man, and the horse, the machine, or the food which he uses, to warrant a
different designation, especially when one of the greatest objects of
all economical investigations, and certainly the most worthy, has been
how to secure at all times a full sufficiency of the produce of industry
extrinsic to man as compared with man himself.
It has been hitherto usual to say, that the happiness of the labouring
classes of society depends chiefly upon the rate at which the capital of
the country increases, compared with its population; but if the capital
of the country includes its population, there is no meaning in the
statement. Yet hardly any writer that I know of has more frequently made
this statement than Mr. Macculloch himself. Nothing, indeed, can show
more strikingly the extreme difficulty of maintaining consistently new
and unusual definitions, than the frequency with which he seems to be
compelled to use terms in their old and accustomed sense,
notwithstanding the different definitions which he has given of them.
Thus, in his very peculiar and most untenable argument on the effects of
absenteeism in Ireland, one of the reasons which he gives, why the
absence of the landlords does not diminish the wealth of that country
is, that they do not remove any _capital_ from it, but merely what they
would spend on their own gratifications. If, however, the definition of
the capital of a country, as stated by Mr. Macculloch, be “_that portion
of the produce of industry existing in it_ which can be made directly
available either to the support of human existence or to the
facilitating of production,” it follows necessarily that they remove a
considerable quantity of capital, as it will hardly be denied that the
corn, cattle, and butter produced from their estates (which, after all
the mystery about bills of exchange is done away, are practically the
main articles exported to England for the payment of their rents) may be
made directly available to the support of human existence.
Mr. Macculloch is also disposed to recommend emigration as one of the
best means of relieving the distress of Ireland, by altering the
proportion between capital and labour; but if, according to him, in all
economical discussions, man is to be considered as capital, precisely
like the machine which he uses or the food which he consumes, the
emigration of a portion of the population will be to deprive the country
of a portion of its capital, which has always been considered as most
pernicious. Whatever, therefore, may be the merits or demerits of Mr.
Macculloch’s reasoning on these subjects, independently of his
definitions, it is obvious that the application of his definitions at
once destroys it.
It need hardly be repeated, that in all the less strict sciences,
definitions and classifications are seldom perfect and complete; but no
reasonable man will refuse to take advantage of an imperfect instrument
which is essentially useful, if no other more perfect one can be
obtained. If it be found useful, with a view to an explanation of the
causes of the wealth of nations, to make a distinction between the
labours of agriculturists and manufactures, as compared with menial
servants, followers, and buffoons, the utility of this distinction is
not destroyed, though its perfect accuracy may be impeached, because, in
a few instances, the labour of the menial servant is very similar to
that of the productive labourer. The classification is formed upon the
general character and general effects of one sort of industry as
compared with another; and if, in these respects, the line of
distinction is sufficiently marked, it is mere useless cavilling to
dwell upon particular instances.[36]
But even in the very case on which Mr. Macculloch lays his principal
stress, the difference is such as fully to warrant a different
classification. It is, no doubt, true that, to have a fire in an attic
in London, it is equally necessary that the coals should be brought up
stairs from the cellar, as that they should be brought up from the
bottom of the coal-mine to the surface: it is equally true that there is
some resemblance between carrying coals from the bottom of a house to
the top, and carrying them from the bottom of a mine to the top; but
there is still a most decided and characteristic difference in the two
cases.
The miner is paid by the owner or worker of the mine, for the express
purpose of increasing his wealth; the value of the miner’s labour is,
therefore, charged with a profit upon the price of the coals; and the
result of it would regularly enter into any estimate of national wealth.
But when the same owner or worker of coal-mines pays a menial servant
for bringing coals up from the yard to the drawing-room, he pays him for
the express purpose of facilitating and rendering more convenient and
agreeable, the consumption of that wealth which he had obtained through
the instrumentality of the miner. The two instruments are used for
purposes distinctly different, one to assist in obtaining wealth, the
other to assist in consuming it. In an inquiry into the causes of the
wealth of nations, I cannot easily conceive a more distinct and useful
line of demarcation.
On the same principle, if it be found useful with a view to
explanations, to distinguish, by a different name, the stock destined
for immediate consumption, from the stock employed or kept, with a view
to profit, surely we must not wait to investigate the peculiar talents
of each individual, before we venture to characterise the nature of his
expenditure; and if we find such men as Arkwright and Watt[37] most
naturally and properly reserving, for their immediate consumption, the
means of keeping up a handsome or splendid establishment for the
gratification of themselves, their family, and their friends, make an
exception in their favour, and call such an expenditure an outlay of
capital, instead of a consumption of revenue, as we should call it in
the case of all ordinary persons. Such an inquiry would impose a duty
upon the writers in political economy, which it would be perfectly
absurd to attempt to fulfil, as it would quite defeat the end of the
proposed classifications; and with regard to the distinguished
characters adverted to, it would surely be most unnecessary. In an
estimate of national wealth, the genius of a Newton or a Milton is
necessarily underrated, which only shows that there are other sources of
admiration and delight besides wealth. But such men as Arkwright and
Watt are quite safe in the hands of the political economist. The result
of their genius and labour is exactly of that description which is
estimated in the very great addition which it makes to the capital and
revenue of the country, in the most natural and ordinary acceptation of
these terms. And when the effects of their genius have been estimated in
this way, it would not only lead to inextricable difficulty, but it
would be obviously a double entry, to estimate, in addition, the value
of the men as extraordinary machines. It would be like estimating the
value of a commodity produced by a skilful artificer, and then adding
his high wages, and putting both into an estimate of national wealth.
But it is difficult to say what may not be called wealth, or what labour
may not be called productive, in Mr. Macculloch’s nomenclature.
According to his view of the subject, any sort of exertion, or any sort
of consumption which tends, however _indirectly_, to encourage
production, ought to be denominated productive; and before we venture to
call the most trivial sort of exercise or amusement, such as blowing
bubbles, or building houses of cards unproductive, we must wait to see
whether the person so employed does not work the harder for it
afterwards.[38] But, not to mention the impossibility of any, the most
useful classification, if such doctrines were admitted, and we were
required to wait the result in each particular case, and make exceptions
accordingly, I will venture to affirm, that if we once break down the
distinction between the labour which is so directly productive of wealth
as to be estimated in the value of the object produced, and the labour
or exertion, which is so indirectly a cause of wealth, that its effect
is incapable of definite estimation, we must necessarily introduce the
greatest confusion into the science of political economy, and render the
causes of the wealth of nations inexplicable. There is no kind of
exertion or amusement which may not, upon this principle, be called
productive. Walking, riding, driving, card-playing, billiard-playing,
&c. &c. may all be, indirectly, causes of production; and according to
Mr. Macculloch, “it is very like a truism, to say, that what is a cause
of production must be productive.”[39]
But of all the indirect causes of production, the most powerful, beyond
all question, is consumption.
If man were not to consume, how scanty, comparatively, would be the
produce of the earth. Consumption, therefore, is the main fundamental
cause of production; and if we are to put indirect causation on a
footing with direct causation, as suggested by Mr. Macculloch, we must
rank in the same class, the manufacturer and the billiard player, the
producer and the consumer.
It is impossible that the science of political economy should not most
essentially suffer from such a confusion of terms. Nothing can be
clearer, than that, with a view to any thing like precision, and the
means of intelligible explanation, it is absolutely necessary to
designate by a different name the labour which is directly productive of
wealth, from that which merely encourages it.
Another most extraordinary and inconceivable misnomer of Mr. Macculloch
is, the extension of the term labour to all the operations of nature,
and every variety of profits.
Adam Smith, and all other writers, who have happened to fall in my way,
have meant, by the term labour, when unaccompanied by any specific
adjunct, the exertions of human beings; and by the term wages of labour,
the remuneration, whether in produce or money, paid to those human
beings for their exertions. When Mr. Ricardo stated, that commodities
exchanged with each other according to the quantity of labour worked up
in them, there cannot be the least doubt that he meant the quantity of
human labour immediately employed in their production, together with
that portion of human labour worked up in the fixed and circulating
capitals consumed in aiding such production. And it is undoubtedly true,
referring merely to the relation of one commodity to another, and
supposing all other things the same; that is, supposing profits to be
the same, the proportion of fixed and circulating capitals to be the
same, and the duration of the fixed capitals and the times of the
returns of the circulating capitals the same, that then the relative
values of the commodities will be determined by the quantity of human
labour worked up in each.
But Mr. Macculloch could not but see that it was scarcely possible to
take up two commodities, of different kinds, in which all these things
would be the same, and, consequently, that such a supposition would be
so inapplicable to the mass of commodities, as to be perfectly useless;
and yet, without such a supposition, the proposition would be obviously
false.
Instead, however, of correcting Mr. Ricardo’s proposition, as he was
naturally called upon to do, by adding to the human labour worked up in
the commodity, any other element which was found ordinarily to affect
its value, and calling it by its ordinary name, he chose to retain Mr.
Ricardo’s language, but entirely to alter its meaning. There is nothing
that may not be proved by a new definition. A composition of flour,
milk, suet, and stones is a plum-pudding; if by stones be meant plums.
Upon this principle, Mr. Macculloch undertakes to show, that commodities
do really exchange with each other according to the quantity of labour
employed upon them; and it must be acknowledged, that in the instances
which he has chosen he has not been deterred by apparent difficulties.
He has taken the bull by the horns. The cases are nearly as strong as
that of the plum-pudding.[40]
They are the two following—namely, that the increase of value which a
cask of wine acquires, by being kept a certain number of years untouched
in a cellar, is occasioned by the increased quantity of labour employed
upon it; and that an oak tree of a hundred years’ growth, worth 25_l._,
which may not have been touched by man, beast, or machine for a century,
derives its whole value from labour.
Mr. Macculloch acknowledges that Mr. Ricardo was inclined to modify his
grand principle, that the exchangeable value of commodities depended on
the quantity of labour required for their production, so far as to allow
that the additional exchangeable value that is sometimes given to
commodities, by keeping them after they have been purchased or produced
until they become fit to be used, was not to be considered as an effect
of labour, but as an equivalent for the profits which the capital laid
out on the commodities would have yielded had it been actually
employed.[41] This was looking at the subject in the true point of view,
and showing that he would not get out of the difficulty by changing the
meaning of the term labour; but Mr. Macculloch says—
“I confess, however, notwithstanding the hesitation I cannot but feel in
differing from so great an authority, that I see no good reason for
making this exception. Suppose, to illustrate the principle, that a cask
of new wine, which cost 50_l._, is put into a cellar, and that at the
end of twelve months it is worth 55_l._, the question is, whether ought
the 5_l._ of additional value given to the wine to be considered as a
compensation for the time the 50_l._ worth of capital has been locked
up, or ought it to be considered as the value of additional labour
actually laid out on the wine. I think that it ought to be considered in
the latter point of view, and for this, as it appears to me a most
satisfactory and conclusive reason, that if we keep a commodity, as a
cask of wine which has not arrived at maturity, and on which therefore
_a change or effect is to be produced_, it will be possessed of
additional value at the year’s end; whereas, had we kept a cask of wine
which had _already arrived at maturity_, and on which no beneficial or
desirable effect could be produced for a hundred or a thousand years, it
would not have been worth a single additional farthing. This seems to
prove incontrovertibly that the additional value acquired by the wine
during the period it has been kept in the cellar is not a compensation
or return for time, but for the effect or change that has been produced
on it. Time cannot of itself produce any effect, it merely affords space
for really efficient causes to operate; and it is therefore clear, that
it can have nothing to do with the value.”[42]
On this passage it should be remarked, in the first place, that the
question stated in it is not the main question in reference to the new
meaning which Mr. Macculloch must give to the term labour, in order to
make out his proposition. He acknowledges that the increased value
acquired by the wine is either owing to the operation of nature during
the year in improving its quality, or to the profits acquired by the
capitalist for being deprived for a year from using his capital of
50_l._ in any other way. But in either case Mr. Macculloch’s language is
quite unwarranted. When he uses the expression, “_additional labour
actually laid out upon the wine_,” who could possibly imagine that,
instead of meaning human labour, he meant the processes carried on by
nature in a cask of wine during the time that it is kept. This is at
once giving an entirely new meaning to the term labour.
But, further, it is most justly stated by Mr. Ricardo, that when the
powers of nature can be called into action in unlimited abundance, she
always works _gratis_; and her processes never add to the value, though
they may add very greatly to the utility of the objects to which they
are applied.
This truth is also fully adopted and strongly stated by Mr. Macculloch
himself. “All the rude products (he says) and all the productive powers
and capacities of nature are gratuitously offered to man. Nature is not
niggardly or parsimonious; she neither demands nor receives an
equivalent for her favours. An object which it does not require any
portion of labour to appropriate or to adapt to our use may be of the
very highest utility, but as it is the free gift of nature, it is
utterly impossible it can be possessed of the smallest value.”[43]
Consequently, as the processes which are carrying on in the cask of
wine, while it is kept, are unquestionably the free gift of nature, and
are at the service of all who want them, it is utterly impossible, even
if their effects were ten times greater than they are, that they should
add in the smallest degree to the price of the wine. It is, no doubt,
perfectly true, as stated by Mr. Macculloch, that if wine were not
improved by keeping, it would not be worth a single additional farthing
after being kept a hundred or even a thousand years. But this proves
nothing but that, in that case, no one would ever think of keeping wine
longer than was absolutely necessary for its convenient sale or
convenient consumption.
The improvement which wine derives from keeping is unquestionably the
cause of its being kept; but when on this account the wine-merchant has
kept his wine, the additional price which he is enabled to put upon it
is regulated upon principles totally distinct from the average degree of
improvement which the wine acquires. It is regulated exclusively, as
stated by Mr. Ricardo, by the average profits which the capital engaged
in keeping the wine would have yielded if it had been actively employed;
and that this is the regulating principle of the additional price, and
not the degree of improvement, is quite certain: because it would be
universally allowed that if, in the case supposed by Mr. Macculloch, the
ordinary rate of profits had been 20 per cent., instead of 10 per cent.,
a cask of new wine, worth 50_l._, after it had been kept a year, would
have been increased in value 10_l._ instead of 5_l._, although the
processes of nature and the improvement of the wine were precisely the
same in the two cases; and there cannot be the least doubt, as I said
before, that if the quality of wine, by a year’s keeping, were
ordinarily improved in a degree ten times as great as at present, the
prices of wines would not be raised; because, if they were so raised,
all wine-merchants who sold kept wines would be making greater profits
than other dealers.
Nothing then can be clearer than that the additional value of the kept
wine is derived from the additional amount of profits of which it is
composed, determined by the time for which the capital was advanced and
the ordinary rate of profits.
The value of the oak tree of a hundred years’ growth is derived, in a
very considerable degree, from the same cause; though, in rich and
cultivated countries, where alone it could be worth 25_l._, rent would
necessarily form a part of this value.
If the number of acorns necessary on an average to rear one good oak
were planted by the hand of man, they would be planted on appropriated
land; and as land is limited in quantity, the powers of vegetation in
the land cannot be called into action by every one who is in possession
of acorns, in the same way as the improving operations of nature may be
called into action by every person who possesses a cask of wine. But
setting this part of the value aside, and supposing the acorns to be
planted at a certain expense, it is quite clear, that almost the whole
of the remaining value would be derived from the compound interest or
profits upon the advances of the labour required for the first planting
of the acorns, and the subsequent protection of the young trees. A much
larger part, therefore, of the final value of the tree than of the final
value of the wine would be owing to profits.
Now, if we were to compare an oak tree, worth 25_l._, with a quantity of
hardware worth the same sum, the value of which was chiefly made up of
human labour; and as the reason why these two objects were of the same
value, were to state that the same quantity of labour had been worked up
in them—we should obviously state a direct falsity, according to the
common usage of language; and nothing could make the statement true, but
the magical influence of a new meaning given to the term labour. But to
make labour mean profits, or fermentation, or vegetation, or rent,
appears to me quite as unwarrantable as to make stones mean plums.
To _measure_ profits by labour is totally a different thing. Adam Smith
always keeps wages, profits, and rent quite distinct; and when he
mentions one of them, never thinks of including in the same term any
other. But he observes, that “labour _measures_ the value not only of
that part of the price of a commodity which resolves itself into labour,
but of that which resolves itself into rent, and of that which resolves
itself into profit.”[44] This is perfectly just; and, in particular,
nothing can be more natural and obvious than to measure by labour the
increase of value which commodities derive from profits; because profits
are a per centage upon the advances, and the main original advances in
the great mass of commodities are the necessary quantity of labour.[45]
Thus, if a hundred days’ labour be advanced for a year,[45] in order to
produce a commodity, and the rate of profits be 10 per cent., it is
impossible in any way to represent so correctly the increase of value
which the commodity derives from profits as by adding 10 per cent., or
whatever may be the rate of profits, to the quantity of labour actually
employed, and saying, that the completed commodity when sold would be
worth ten days’ labour more than the quantity of labour worked up in it.
On the other hand, if we were ignorant of the rate of profits, but found
that a hundred days’ labour advanced for a year would produce a
commodity which would ordinarily sell for the value of one hundred and
ten days, we might safely conclude that ordinary profits were 10 per
cent.
Now, if we were to compare two commodities, on each of which a hundred
days’ labour had been employed, and one of them could be brought to
market immediately, the other in not less time than a year, it is quite
obvious, that we could not say that they would exchange with each other
according to the quantity of labour worked up in them; but we evidently
could say, that they would exchange with each other according to the
quantity of labour _and of profits_ worked up in them, and that one of
them would be 10 per cent. more valuable than the other, because profits
had added the value of ten days’ labour to the labour actually employed
upon the one; while there being no profits in the other, its value was
only in proportion to the labour actually employed upon it.
And in general, while the slightest examination of what is passing
around us must convince us that commodities, under deduction of rent and
taxes, _do not_ ordinarily exchange with each according to the quantity
of human labour worked up in them, the same examination will convince us
that, under the same deduction, they do ordinarily exchange with each
other, according to the quantity of human labour _and of profits_ worked
up in them; and further, that the quantity of human labour worked up in
them, with the profits upon the advances for the time that they have
been advanced, is correctly measured by the quantity of human labour of
the same kind which the commodity so composed will ordinarily command.
We must carefully, therefore, distinguish between _measuring_ profits by
labour, and meaning profits by labour; and while the first is obviously
justifiable, and may be in the highest degree useful, it must be
allowed, that the latter contradicts all the most obvious rules for the
use of terms: it contradicts the usage of common conversation: it
contradicts the highest authorities in the science of political economy:
it embarrasses all explanations; and it cannot be maintained with
consistency.
Though Mr. Macculloch’s work affords other instances of a want of
attention, on a point so important in all philosophical discussions, as
appropriate and consistent definitions, I will only notice further, his
use of the term _real_. He applies it to wages, in two senses entirely
different.
In part iii. p. 294, he says, “But if the variation in the rate of wages
be _real_, and not nominal, that is, if the labourer be getting either a
greater or less _proportion of the produce of his industry_, or a
greater or less quantity of money of invariable value, this will not
happen.” Here, it is evident that Mr. Macculloch applies the term _real_
to wages, in the sense of proportional wages, that is, as Mr. Ricardo
applied it.
In part iii. p. 365, Mr. Macculloch says, “If the productiveness of
industry were to diminish, proportional wages might rise,
notwithstanding that _real wages_, or the _absolute amount of the
produce_ of industry falling to the share of the labourer, might be
diminished. Here, the term real wages is used as synonymous with the
absolute amount of produce falling to the share of the labourer, that
is, in the sense in which Adam Smith has applied it.”
I have already observed, that Adam Smith’s application of the term _real
wages_, to the absolute quantity of the produce earned by the labourer,
seems to be a most natural one; and Mr. Ricardo’s application of the
same term to the _proportion_ of the produce earned by the labourer, a
most unnatural one. Mr. Macculloch, therefore, was quite right, in
introducing the term _proportionate wages_, to express Mr. Ricardo’s
meaning; but why not adhere to it? Why should he, in some places, mean,
by real wages, proportionate wages, and, in other places, something
totally different?
In the application of the term _real_ to value, Mr. Macculloch adopts
the meaning of Mr. Ricardo. He says, indeed, “that it is to Mr.
Ricardo’s sagacity, in distinguishing between the quantity of labour
required to produce commodities, and the quantity of labour for which
they will exchange, and in showing, that while the first is undeniably
correct as a measure of their real, and generally speaking, of their
exchangeable values, the second, instead of being an equivalent
proposition, is frequently opposed to the first, and consequently, quite
inaccurate, that the science is indebted for one of its greatest
improvements.”[46]
I should be sorry to think that Mr. Ricardo’s services to the science of
political economy should rest principally upon the frail foundation, on
which they are here placed; a foundation, which, as we have seen, Mr.
Macculloch himself cannot defend, without totally altering the meaning
of Mr. Ricardo’s words.
This is evident, in various passages of Mr. Macculloch’s work. In his
section on value, part ii. p. 216, he thus expresses himself: “assuming
the _toil and trouble of acquiring any thing_ to be the measure of its
real value, or of the _esteem_ in which it is held by its possessor.”
Again, he says, p. 219, “the real value of a commodity, or _the
estimation in which it is held by its possessor_, is measured or
determined by the quantity of labour required to produce or obtain it.”
In these two passages, he obviously identifies the real value of a
commodity with the estimation in which it is held. But, surely, in this
case, the term real must be applied as Adam Smith applies it, and not as
Mr. Ricardo applies it? Can it be contended for a moment, that a
commodity, which, on account of the necessary remuneration for profits,
sells for ten per cent. above the value of the human labour worked up in
it, is not held in _higher estimation_, than a commodity which sells for
ten per cent. less, on account of the value of the labour employed upon
it not having been increased by profits? Would it not be absolutely
certain, that if the latter could be obtained by the sacrifice of a
hundred days’ labour, it would be necessary to make the sacrifice of a
hundred and ten days’ labour, or some equivalent for it, in order to
obtain the former? Consequently it follows necessarily, that if the real
value of a commodity be considered as synonymous with the estimation in
which it is held, such value must be measured by the quantity of labour
which it will command, and not the quantity worked up in it.
Mr. Macculloch thus states Mr. Ricardo’s main proposition:[47] “a
commodity, produced by a certain quantity of labour, will, in the state
of the market now supposed, (that is, when the market is not affected by
either real or artificial monopolies, and when the supply of commodities
is equal to the effectual demand,) uniformly exchange for, or buy any
other commodity, produced by the same quantity of labour.”
Now, if the term labour be taken in the sense in which it is used by Mr.
Ricardo, the proposition is contradicted by universal experience. If, on
the other hand, the term labour be considered as including profits, the
proposition is true; but only because it is a totally different one from
that of Mr. Ricardo, owing to a most unwarrantable perversion of terms.
It appears, then, on the whole, that although Mr. Macculloch has at
different times compared Adam Smith to Newton and to Locke, he has, in
the definition and application of his terms, differed from him on almost
all the most important subjects of Political Economy,—in the definition
of wealth, the definition of capital, the definition of productive and
unproductive labour, the definition of profits, the definition of labour
simply, and the definition of _real value_, though, in the last
instance, it is rather professedly than substantially.[48]
However highly I may respect the authority of Adam Smith, and however
inconvenient at first a great change of terms and meanings must
necessarily be, yet if it could be made out that such changes would
essentially facilitate the explanation and improvement of the science of
political economy, I should have been the last to oppose them. But after
considering them with much attention, I own I feel the strongest
conviction that they are eminently the reverse of being _useful_, with a
view to an explanation of the _nature and causes of the wealth of
nations_; or, in more modern, though not more appropriate phrase, the
_production, distribution, and consumption of wealth_.
I have too much respect for Mr. Macculloch to suppose that he has
differed from Adam Smith on so many points with the intention of giving
to his work a greater air of originality. This is, no doubt, a feeling
which not unfrequently operates in favour of changes; but I do not think
it did on the present occasion. I should rather suppose that he adopted
them in consequence of seeing some objections to Adam Smith’s
definitions, without being sufficiently aware that, in the less strict
sciences, nothing is so easy as to find some objection to a definition,
and nothing so difficult as to substitute an unobjectionable one in its
place.
Whether the definitions substituted for those of Adam Smith on the
present occasion have removed the objections to them which Mr.
Macculloch may have felt, I cannot be a competent judge; but even
supposing them to have done this, I think I can confidently affirm that
they have left other objections, beyond all comparison greater and more
embarrassing. And on this point I would beg those of my readers who are
inclined to pay attention to these subjects, seriously and candidly to
trace the consequences to the science of political economy, in regard to
its explanation and practical application, of adopting Mr. Macculloch’s
definitions. They are not, indeed, all his own; but the very
extraordinary extension which he has given to the term capital, the
making of no distinction between directly productive consumption and
consumption that is only indirectly productive; and the extension of the
term labour, without any adjunct, to mean profits, fermentation, and
vegetation, belong, I believe, exclusively to Mr. Macculloch; and, I
think, it will be found that they are beyond the rest strikingly
calculated to introduce uncertainty and confusion into the science.
The tendency of some of our most popular writers to innovate without
improving, and their marked inattention to facts, leading necessarily to
differences of opinion and uncertainty of conclusion, have been the main
causes which have of late thrown some discredit on the science of
political economy. Nor can this be a matter of much surprise, though it
may be of regret.
At a period, when all the merchants of our own country, and many in
others, find the utmost difficulty in employing their capitals so as to
obtain ordinary profits, they are repeatedly told that, according to the
principles of political economy, no difficulty can ever be found in
employing capital, if it be laid out in the production of the proper
articles; and that any distress which they may have suffered is
exclusively owing to a wrong application of their capital, such as “the
production of cottons, which were not wanted, instead of broad cloths,
which were wanted.”[49] They are, further, gravely assured, that if they
find any difficulty in exchanging what they have produced, for what they
wish to obtain for it, “they have an obvious resource at hand; they can
abandon the production of the commodities which they do not want, and
apply themselves directly to the production of those that they _do_
want, or of substitutes for them;”[50] and this consolatory
recommendation is perhaps addressed to a merchant who is desirous of
obtaining, by the employment of his capital at the ordinary rate of
profits, such an income as will enable him to get a governess for his
daughters, and to send his boys to school and college.
At such times, assertions like these, and the proposal of such a remedy,
appear to me little different from an assertion, on supposed
philosophical principles, that it _cannot_ rain, when crowds of people
are getting wet through, and the proposal to go without clothes in order
to prevent the inconvenience arising from a wet coat. If assertions so
contrary to the most glaring facts, and remedies so preposterously
ridiculous, in a civilized country,[51] are said to be dictated by the
principles of political economy, it cannot be matter of wonder that many
have little faith in them. And till the theories of popular writers on
political economy cease to be in direct opposition to general
experience; and till some steadiness is given to the science by a
greater degree of care among its professors, not to alter without
improving,—it cannot be expected that it should attain that general
influence in society which (its principles being just) would be of the
highest practical utility.