SUMMARY OF THE REASONS FOR ADOPTING THE SUBJOINED DEFINITION OF THE
MEASURE OF VALUE.
As a preliminary, it may be proper to state, that it seems absolutely
essential to the language of political economy, that the expression
_value of a commodity_, like the expression _price of a commodity_,
should have some fixed and determined sense attached to it. Every person
who has either written or talked on the subject of political economy,
has been constantly in the habit of using the term without specifically
expressing the object of comparison intended: and if it were true, that
we might with equal propriety suppose any one of a thousand different
objects referred to, it might easily be shown, that all past writers who
had used the term value had talked the greatest nonsense; and all future
writers must abound in the most tedious circumlocutions and the most
futile propositions.
But the author of the Critical Dissertation on Value has certainly done
injustice to the writers who have gone before him, in supposing that
when they have used the term value of a commodity, no reference was
implied, if it was not expressed. As I stated before, they must be
considered as referring, in some form or other, either to its general
power of purchasing, or, to the estimation in which it was held,
determined by the state of its supply compared with the demand, and, on
an average, by the elementary costs of production; and as it would be
perfectly ridiculous to suppose, that when the values of commodities, at
different periods, are spoken of generally, by respectable writers, they
could mean to refer to individual commodities not intended to represent,
more or less accurately, the above objects of reference; it is obvious,
that the ultimate reference implied must be confined to one of these, or
their equivalents.
I have already given my reasons for thinking it more correct and useful
to refer to the estimation in which a commodity is held, determined as
above described, rather than to its general power of purchasing; but, as
others may be of a different opinion, it may be useful to include among
the reasons for adopting labour as a measure of value, its qualities as
a measure of the general power of purchasing.
Supposing, then, that the exchangeable value of a commodity were defined
to be its general power of purchasing, this must refer to the power of
purchasing the mass of commodities; but this mass is quite unmanageable,
and the power of purchasing it can never be ascertained. With a view,
therefore, to its practical application, it would unquestionably be our
endeavour to fix upon some object, or set of objects, which would best
represent an average of the general mass. Now, of any one object, it
cannot for a moment be denied that labour best represents an average of
the general mass of productions. There is no commodity considered by
society as wealth, for which labour is not, in the first instance,
exchanged; there are very few for which it is not exchanged in great
quantities: and this can be said of no other object, except labour, and
the circulating medium which represents it. It is, at once, the first,
the universal, and the most important object given in exchange for all
commodities; and if to this we add, that while there is one large class
of commodities, such as raw products, which in the progress of society
tends to rise as compared with labour, there is another large class of
commodities, such as manufactured articles, which at the same time tends
to fall; it may not be far from the truth to say, that the portion of
the average mass of commodities which a given quantity of labour will
command in the same country, during the course of some centuries, may
not very essentially vary.
Allowing, however, that it would vary, and that labour is an imperfect
measure of the general power of purchasing; yet, if some sort of
standard more applicable than the mass of commodities be required, and
labour appears to be beyond comparison the best representative of this
mass, there will be a very powerful reason for adopting labour as the
practical measure of value, even among those who may persevere in
thinking that the best definition of value in exchange is the general
power of purchasing.
To those, however, who hold the opinion that the variations in the
exchangeable value of a commodity and the variations in its power of
purchasing are not identical, and that a commodity increases in
exchangeable value only when it will command a _greater value in
exchange_, while its power of purchasing may increase merely because it
will command a _greater quantity_ of commodities which have confessedly
fallen in value, the reasons for adopting labour as the measure of value
will be found to increase tenfold in force.
There are various ways of describing value in the sense here understood;
and the slightest examination of them will show that the labour which a
commodity will command can alone be the measure of such value.
First; The author of the Critical Dissertation on Value has commenced
his work by a description of it, in which I entirely agree with him. He
says, as I have before stated, that “value, in its ultimate sense,
appears to mean the esteem in which any object is held. But it is
obvious that the degree of this esteem cannot be measured by comparing
it with another commodity about which we know as little as of the first.
The comparison with money would leave us as much in the dark as ever, if
we did not previously know the estimation in which money was held.”[85]
Even the mere _relative_ values of two commodities cannot be inferred by
putting them side by side, and looking at them for any length of time.
Before we can attain even this partial conclusion, we must refer each of
them to the desires of man, and the means of production; that is, we
must make a previous comparison, in order to ascertain the value of each
before we can venture to say what relation one bears to the other. It is
this primary comparison which, independently of any secondary
comparison, determines the estimation in which the commodity is held.
And as this primary comparison can only be represented by the exchange
with labour, it is certain that, if we define the value of a commodity
to be the estimation in which it is held, the quantity of labour which
it will command can alone measure this estimation.
Secondly: Locke, most justly looking to the foundation of all value,
considers the value of commodities as determined by the proportion of
their quantity to their vent, or of the supply to the demand; but the
varying vent or demand for one commodity cannot possibly be represented
by the varying quantity of another commodity for which it is exchanged,
unless the second commodity remain steady in regard to labour. If at one
time I give two pounds of hops for a yard of cloth, and at another time
only one, it does not at all follow that the demand for cloth has
diminished; on the contrary, it may be increased, and in giving the
value of one pound of hops, I may have enabled the cloth manufacturer to
set more men to work, and to obtain higher profits than when I gave the
value of two pounds. But the demand for a commodity, though not
proportioned to the _quantity_ of any other commodity which the
purchaser is willing and able to give for it, is really proportioned to
_the quantity of labour_ which he will give for it; and for this reason:
the quantity of labour which a commodity will _ordinarily_ command,
represents exactly the effectual demand for it; because it represents
exactly that of labour and profits united necessary to effect its
supply;[86] while the _actual_ quantity of labour which a commodity will
command when it differs from the _ordinary_ quantity, represents the
excess or defect of demand arising from temporary causes. If then
looking to the foundation of all value, namely; the limitation of the
supply as compared with the wants of mankind, we consider the value of
commodities at any time or place as proportioned to the state of their
supply compared with the demand at that time and place, it is evident
that the quantity of labour of the same time and place which any
commodity, or parcels of commodities, will command, can alone represent
and measure the state of the supply of them as compared with the
demand,[87] and their values as founded on this relation.
Thirdly: It has often been stated that the value of a commodity is
determined by the sacrifice which people are willing to make in order to
obtain it; and this seems to be perfectly true. But the question recurs,
how are we to measure this sacrifice? It is obvious that we cannot
measure it by the _quantity_ of another commodity which we are willing
to give in exchange for it. When I give more calicoes, or more potatoes,
than I did before, for a certain quantity of hardware, it does not at
all follow that I make a greater sacrifice in order to obtain what I
want. On the contrary, if calicoes and potatoes had both fallen in
price, the one from improved machinery and the other from the abundance
of the season, my sacrifice might even have been less rather than
greater. Even the quantity of money which is given for a commodity is no
measure of the sacrifice made to obtain it. Though it is an excellent
measure of the variations in the sacrifice made, at the same time and
place; yet without further information, it will tell us nothing either
about the amount, or the variations at different places and times. The
giving of an ounce of silver was a very different sacrifice in the time
of Edward I. from what it is at present. It is obvious, therefore, that
the sacrifice which we are willing to make, in order to obtain a
particular commodity, is not proportioned to the _quantity_ of any other
commodity for which it will exchange, but to the difficulty with which
such quantity, whether more or less, is attained. Now labour can measure
this difficulty, but nothing else can. If, then, the value of a
commodity be determined by the sacrifice which people are willing to
make in order to obtain it, it is the labour given for a commodity, and
labour alone, which can measure this sacrifice.
Fourthly: In the _Measure of Value Stated and Illustrated_, I considered
the value of commodities as, on an average, determined by the natural
and necessary conditions of their supply. These conditions I stated to
be the accumulated and immediate labour worked up in commodities with
the ordinary profits upon the whole advances for the time that they were
advanced. And it appeared, both in the early part of the discussion, and
in the Table, that the quantity of labour which a commodity would
ordinarily command must represent and measure the quantity of labour
worked up in it with the addition of profits. It was certainly a very
remarkable fact, that when Mr. Ricardo chose the labour worked up in
commodities “as, under many circumstances, an invariable standard,” and
rejected the labour which they would ordinarily purchase as subject to
as many fluctuations as the commodities compared with it,[88] he should
not have seen that the labour which a commodity will ordinarily command,
necessarily involves his own proposition, with that addition to it
merely which can alone make it correct; and that it is precisely because
the labour which a commodity will ordinarily command measures the labour
actually worked up in it with the addition of profits, that it is
justifiable to consider it as a measure of value. If then the ordinary
value of a commodity be considered as determined by the natural and
necessary conditions of its supply, it is certain that the labour which
it will ordinarily command is alone the measure of these conditions.
Fifthly: The values of commodities are often said to be determined by
the costs of production. When the costs of production do not refer to
money, but to those simple elements of production, without an adequate
quantity of which, whatever may be their price in money, the commodity
cannot be produced, they are precisely the same as the natural and
necessary conditions of the supply. The elementary costs of production,
excluding rents and taxes, are the labour and profits required to
produce a commodity. Of these it has been already shown, that the labour
which the commodity will ordinarily command is alone the measure; and
allowing that we could obtain with tolerable exactness the average price
of common agricultural labour at different times and in different
countries, and that when the prices of all other sorts of labour were
once established, they would (as assumed by Adam Smith and Mr. Ricardo)
continue to bear nearly the same relation to each other in the further
progress of cultivation and improvement, it is certain that the quantity
of common agricultural labour which a commodity would ordinarily command
at any place and time would measure, with a near approach to accuracy,
the elementary costs of production at that place and time; so that
commodities, which at two different periods in the same country would
ordinarily command the same quantity of agricultural labour, might
fairly be said to be equal to each other in their elementary costs of
production, and, of course, in their values, if their values be
determined by their elementary costs of production.
Sixthly: It may be said that the value of a commodity must be
proportioned to its supply compared with the number of its producers.
This appears, indeed, to be strikingly the case in the early periods of
society when many commodities are obtained, almost exclusively, by
labour. If fruits are to be procured, or game killed or caught, by
labour alone, or assisted only by capital of very little value, the
quantity obtained, on an average, by a day’s labour must represent, with
a great approach to accuracy, the degree of scarcity in which
commodities exist compared with the producers of them working for a
certain time. But the degree in which the supply of a commodity is
limited, as compared with the numbers, powers, and wants of those who
wish to obtain it, is the foundation of all value. Here the producers
are both the effectual demanders and the consumers; and the produce
obtained on an average by a single producer must represent the supply
compared with the numbers, powers, and wants of the demanders. If a
large quantity of produce be obtained by a producer, the commodity will
be in abundance, and will be considered as of comparatively little
value; if a small quantity be obtained by a producer, the commodity will
be scarce, and will be considered as of comparatively great value. If it
be the custom of the country for the producers to work only four hours
a-day instead of ten or twelve, the commodities produced will bear a
comparatively small proportion to the numbers of the producers and
effectual demanders, and will consequently be of much higher value, than
in those countries where it is the custom to work for the greater number
of hours; and, on the other hand, if the producers, besides working ten
or twelve hours a-day, are aided by ingenious instruments and great
skill in the use of them, the commodities produced will be in unusual
plenty compared with the producers, and will be considered as
proportionally of low value. In all these cases the value of the
commodity is evidently determined by the relation between its quantity
and the number of its producers.
Now though, in the more advanced stages of society, the producer is not
always at the same time the demander and consumer; yet the effectual
demand for commodities must, on an average, be proportioned to the
productive services set in motion to obtain them;[89] and when the
different kinds of producers are reduced to a common denominator, such
as common agricultural day-labour, and profits are deducted as the
remuneration of the capitalist, and rent as the remuneration of the
landowner, the proportion which the remaining produce bears to the
number of such producers must represent, exactly in the same manner as
in the early periods of society, the degree of scarcity in which the
commodity exists compared with the producers; and therefore the value of
the commodity is measured by the quantity of it which will command a
day’s common labour. In fact, if it be once allowed that when labour is
exclusively concerned, the number of days’ labour necessary to produce a
commodity at any place and time represents the natural value of the
commodity at that place and time[90], then, as it is quite certain that
the value in exchange of any other commodity compared with the first,
will be accurately in proportion to the respective quantities of the
same kind of labour which they will command, it follows necessarily,
that the value of the second commodity must always be in proportion to
the quantity of labour it will command, however its value may have been
affected by profits, rents, taxes, monopolies, or the accidental state
of its supply compared with the demand.
Seventhly: It has been stated that the values of commodities must be
proportioned to the causes of value operating upon them. The author of
the Critical Dissertation has a chapter on the causes of value, and, at
the conclusion of it, adverting to the variety of considerations
operating upon the human mind, which he thinks have been overlooked by
political economists, he observes, “these considerations are the causes
of value; and the attempt to proportion the quantities in which
commodities are exchanged for each other to the degree in which one of
these considerations exists, must be vain and ineffectual. All, in
reality, that can be accomplished on this subject, is to ascertain the
various causes of value; and, when this is done, we may always infer,
from an increase or diminution of any of them, an increase or diminution
of the effect.”[91]
These remarks, it must be allowed, are justly applicable to those who
propose to measure the values of commodities by the quantity of labour
actually bestowed upon them; but in no degree to those who propose to
measure them by the quantity of labour which they will command. We have
already shown that the labour which commodities will command measures
that paramount cause of value which includes every other; namely, the
state of the supply as compared with the demand. Whatever may be the
number and variety of considerations operating on the mind in the
interchange of commodities, whether merely the common elementary costs
of production, or whether these costs have been variously modified by
taxes, by portions of rent, by monopolies strict or partial, and by
temporary scarcity or abundance, the result of the whole must appear in
the state of the supply compared with the demand; and in the case of an
individual article, the supply of which may be considered as given, the
demand, must be proportioned to the sacrifice which the purchasers are
able and, under all the circumstances, willing to make in order to
attain it.
But it has already been shown that it is the command of labour which the
purchasers are able and willing to transfer to the sellers, and not any
particular commodity, except in proportion as it will command labour,
that can alone represent the sacrifice of the purchasers. The labour,
therefore, which a commodity will command, or which the purchasers are
willing to give for it, measures the result of all the causes of value
acting upon it,—of all the various considerations operating upon the
mind in the interchange of commodities.
Whether then we consider the value of a commodity at any place and time
as expressed by the estimation in which it is held; whether we consider
it as founded entirely on the state of the supply as compared with the
demand; whether we consider it as determined by the sacrifice which
people are willing to make in order to obtain it; or by the natural and
necessary conditions of its supply; or by the elementary costs of its
production; or by the number of its producers; or by the result of all
the causes of value operating upon it, it is plain that the labour which
it will ordinarily command in any place will measure its natural and
ordinary value; and the labour which it will actually command will
measure its market value.
It must always be recollected, however, that in any sense in which we
can use the term _value of a commodity_, there must be a reference,
either expressed or implied, to some place and time, in the same manner
as when we use the term _price of a commodity_. We all well know that
the price of the same kind of commodity of the same quality, weight, and
dimensions, is very different in different places and at different
times; and this must be equally true in regard to the value of a
commodity. It follows that, from the very nature of the thing, the value
of a commodity cannot be expressed or measured independently of place
and time. It is this quality which so essentially distinguishes the
value of a commodity from its length or weight; but it does not
necessarily destroy its capability of being measured.
It is true, however, that a very general opinion has prevailed among
political economists, even since the publication of Adam Smith’s work,
that from the very nature of value, so essentially different from length
or weight, it cannot admit of a regular and definite measure.[92] This
opinion seems to me to have arisen principally from two causes.
First—a proper distinction has seldom been made between the definitions
of wealth and value. Though the meanings of these two terms have by no
means always been considered as the same, yet the characteristics of one
of them have been continually allowed to mix themselves with the
characteristics of the other. This appears even in Adam Smith himself.
When he says, that a man is rich or poor according to the quantity of
the necessaries, conveniencies, and luxuries of life which he can
command, he gives a most correct definition of wealth; but when he
afterwards says, that he is rich or poor according to the quantity of
labour which he can command, he evidently confounds wealth with value.
The former is a definition of wealth; and of this, or of the general
power of purchasing, which too much resembles it, there is no measure.
The latter is his own definition or expression of real value; and of
this the very terms which he uses show that there is a measure. The
measure is distinctly expressed in the terms.
The second principal cause which has prevented labour from being
received, according to the language of Adam Smith, as “alone the
ultimate and real standard by which the value of all commodities can at
all times and places be estimated and compared,”[93] is, that in
different periods, and in different countries, it is not really true, as
stated by him, that the labourer in working “lays down the same portion
of his ease, his liberty, and his happiness.”[94] There is the best
reason to believe that the labourer in India, and in many other
countries, neither exerts himself so much while he is working, nor works
for so many hours a day as an English labourer. A day’s labour,
therefore, is not invariable either in regard to intensity or time. But
still it appears to me that, for the reasons before stated, that is,
because the labour of each place and time measures at that place and
time the estimation in which a commodity is held, the state of its
supply compared with the demand, the elementary costs of its production,
the natural and necessary conditions of the supply, the proportion of
the produce to the producers, &c. it must be considered as measuring,
with a fair approach towards accuracy, the values of commodities at
these places and times, so as to answer the question,—what was the value
of broad-cloth of a certain description in the time of Edward III. in
England? or, what is the value of money at present in China? The nature
of the measure, and the reason why the varying intensity of the labour
and the different number of hours employed in the day, do not disqualify
it from performing its functions, may perhaps be illustrated by the
following comparison:—
Let us suppose that the heights of men in different countries were
extremely different, varying from six feet to six inches, and that the
trees, shrubs, houses, utensils, and every other product or article were
all in proportion, and that the foot-rule in each country bore the same
relation to the race of human beings which inhabited it as the English
foot-rule does to Englishmen: then, though it is obvious that the length
of ten feet in one nation might extend over a much larger portion of
space than ten feet in another nation; yet the foot of each nation would
measure with accuracy the relative estimation in which men and things
were held in regard to height, length, breadth, &c. It would determine
whether a man was tall or short in the estimation of his
fellow-citizens; whether his shoulders were broad or narrow; whether his
circumference was great or small; and not only whether Mr. Pike’s nose
was longer than Mr. Chub’s, but whether it was not, in the accustomed
language of the country, absolutely a long nose, although perhaps it
might not extend to a quarter of an English inch. On the other hand, if,
instead of referring to the measure of each country, we were to refer
always to an English foot, though we should be able to ascertain the
relative portions of space which all the men to whom we applied our
measure occupied, we should make sad havoc with the estimates which they
and their countrymen had formed of their own heights, and many certainly
would be considered as very short who had before always been considered
as very tall. Now it must be allowed that the value of a commodity, as
it changes with place and time, and depends upon the wants and caprices
of man and the means of satisfying them, resembles more the estimate of
tall or short, broad or narrow, than a portion of space capable of being
ascertained by a measure unchangeable by time and place.
When we speak of the value of silver in China, we cannot possibly mean
the value of an ounce of Chinese silver brought to London, where, if it
were pure, it would be precisely of the same value as an ounce of pure
silver which had been in London from time immemorial. What alone we can
correctly mean is, the estimation in which the ounce of silver is held
in China, determined, at the time, by the state of the supply compared
with the demand, and ordinarily by the quantity of Chinese labour and
profits necessary to produce it; and if this be what we mean by the
value of an ounce of silver in China, there can be no doubt that Chinese
labour, and Chinese labour alone, can measure it. Even, however, if we
mean the relation of an ounce of silver to all the commodities in China
in succession, it would be impossible practically to form any
approximation towards a just notion of the result, except by referring
the silver to Chinese labour.
It might be allowed, perhaps, that labour would be a still more
satisfactory measure of value, in all countries and at all times, if the
physical force exerted in a day’s labour were always the same; and
probably this is sometimes not far from being the case in a few
countries as compared with each other, and more frequently in the same
country at different periods. The English agricultural labourers in the
time of Edward III., though probably less skilful, worked, I should
conceive, for nearly the same number of hours, and exerted nearly the
same physical force, as our labourers at present. Under such
circumstances, and in the same country, agricultural labour seems to be
a measure of value from century to century calculated to satisfy the
scruples of the most fastidious. But even when it is acknowledged, that
the labourer at different times and in different countries does _not_
always lay down the same portion of his ease, his liberty, and
happiness, the quality of labour, as a measure of value, is not
essentially impaired; and it appears to me always true, that when
commodities in different countries and at different times have been
found to command the same quantity of the agricultural labour of each
country and time, they may with propriety be said to have been held in
the same estimation, and considered as of the same value.
We may now proceed to the definition of some of the most important terms
in common use among political economists, particularly those which have
been most controverted. Whenever it has been thought necessary either to
deviate from the general rule of employing terms according to their
ordinary meaning, or to determine between two meanings both of which
have some authorities in their favour, I have always been guided in my
choice by what appeared to me the superior practical utility of the
meaning selected in explaining the causes of the wealth of nations.[95]
The reader will be aware, from the manner in which I have treated the
subject, and the discussions into which I have allowed myself to enter,
that what I consider as the main obstacle to a more general agreement
among political economists, is rather the differences of opinion which
have prevailed as to the classes of objects which are to be separated
from each other by appropriate names, than as to the names which these
classes should receive. It seems indeed to be pretty generally and most
properly agreed, that the principal names which have been so long in use
should remain. It would certainly be an Herculean task to change them,
nor would any change which could be adopted in the present state of
things remove the real difficulties. It has been most justly observed by
Bacon, that “to say, where notions cannot be fitly reconciled, that
there wanteth a term or nomenclature for it, is but a shift of
ignorance.” When some people think that every sort of gratification,
whether arising from immaterial or material objects, from spiritual
comfort or comfortable clothing, should be designated by the same
appropriate term; while others think it of great use and importance that
they should be distinguished, it is obvious that such different notions
cannot be reconciled by a new nomenclature. The grand preliminary
required is that the notions should be fitly reconciled; and till this
is done, a change of names would be perfectly futile. Preserving
therefore, generally, the old names, the great practical question is,
what they are to include and what they are to exclude?