The value of almost all commodities is made up of labour and profits,
but in choosing a measure of value it is not necessary that it should
possess the property of determining what proportion of the value of the
commodity measured belongs to wages, and what proportion belongs to
profits. You make it a reproach on my proposed measure that it will not
do this, and prefer your own because it will. Now, as I do not think
this quality essential to a measure of value, I shall not defend mine
for not possessing this quality. This consideration appears to me wholly
foreign to the question under discussion.
We agree, I believe, that nothing can be a measure of value which does
not itself possess value. We agree too, I believe, that a measure of
value to be a good one should itself be invariable, and further that in
selecting one thing as a measure of value rather than another we are
bound to show some good reason for such selection, for, if a good reason
be not given, the choice is altogether arbitrary. Now the measure
proposed by you has value, and therefore [is] not to be objected against
on account of any deficiency of that quality; but I do not think it is
invariable, and by the concession which you make in your last letter you
appear to give up your measure, for you say that 'you expressed yourself
without sufficient care, when you intimated that, if any number of
labourers were imported or exported, the value of labour would remain
the same.' This is a large concession indeed, and I think entirely
subverts your measure, because, if it be true of labourers exported or
imported, it must be true also of labourers born or dying in the
country. If by poor laws imprudent marriages are encouraged and
population becomes excessive, the effect on the value of labour will be
precisely the same as if labourers had been imported; and, if an
epidemic disorder break out and many labourers die, it will be the same
as if they were exported. Nay more, if the people be well educated and
be taught caution and foresight with regard to the increase of their
numbers, who shall say that the effect on the value of labour will not
be the same as an exportation of labourers? You have, I think, been
imprudent, which is much at variance with your usual practice, in
conceding this point, and you allow us to enter into your fortress and
spike all your guns. You add indeed: 'This will only be true after the
supply comes to be affected by the increased or diminished number of
labourers.' When will the supply not be affected by the increased or
diminished number? What follows will not assist you, for you say: 'If
the corn obtained by twenty men be divided among ten, then the value of
the wages of ten men will be less than the quantity of labour employed
to produce them with the addition of profits, and vice versa.' What
profits? They might have been 50 per cent., and may from the
circumstance mentioned be reduced to 5 per cent. You speak of profits in
this place as if they were a fixed amount, and forget that they fall
when wages rise. Besides, I will not admit the extravagant supposition
that the corn obtained by the labour of twenty men is bestowed as wages
on ten men; but I will suppose that the corn obtained by twenty men had
been sufficient to command the labour of thirty men, but that owing to a
diminished supply of labour this same quantity of corn obtained by the
same number of men is bestowed as wages on twenty-two men. In this case
I ask you whether corn has fallen in value in the proportion of thirty
to twenty-two? If you say Yes, then you do not admit that labour may
rise in value in consequence of exporting labourers; and, if you say No,
there is an end of your measure, because you then acknowledge that
commodities do not vary according to the quantity of labour they can
command. I do not see how you are to extricate yourself from this
dilemma. I cannot discover what the value of the precious metals in
different countries can have to do with this question. A piece of cloth
or a piece of muslin can command more labour in India than in England;
on this we are agreed, but we are not agreed in our explanation of this
fact. You say the piece of cloth or muslin is more valuable in India
than in England, and your proof is that it can command more labour in
India. You would say so, although both cloth and muslin were exported
from India to England, from the country where they are dear to the
country where they are cheap. I, on the contrary, say that it is not the
cloth and muslin which are dear in India and cheap in England, but it is
labour which is cheap in India and dear in England, and that cloth and
muslin would come to England from India although there were no such
commodities as gold and silver on the face of the earth. I say further
that you are bound to admit this by the concession which you have made,
for you must admit that labour might be rendered cheap as effectually in
England by prevailing on English labourers to be satisfied with the
modest remuneration of food paid in India, as by the importation of
labourers; and, if you do not admit it, I beg to ask why you refuse to
do so. I beg you to point out the distinction between a supply of
labourers from abroad, with a consequently reduced remuneration of food,
and a supply of labourers from the principle of population, and a
consequent reduction in the remuneration paid in food. Can you be said
to have given a good reason for the selection which you have made of a
measure of value when it will not bear close examination? You have
repeatedly said that a commodity, on which a quantity of labour has been
bestowed, will always exchange for a like quantity, together with an
additional quantity which will constitute the profits on the advances.
Now this I consider to be your main proposition, and on its truth must
depend according to your own view the correctness of your measure. Is it
true then that every commodity exchanges for two quantities of labour,
one equal to the quantity actually worked up in it, another equal to the
quantity which the profits will command? I say it is not. This year corn
is cheap, and I must give a certain quantity of it to procure the labour
of ten men to be worked up in the commodity which I manufacture; but
next year, when I take my commodity to market, corn is dear and wages
high, and therefore to procure a certain quantity of labour I must give
more of my finished commodity than I should have given if corn had been
plenty [_sic_] and wages low. If corn had been cheap and wages low, my
profits would have been high; as it is, they are low. I want to know in
these two cases whether the commodity does really exchange for the two
specific quantities of labour mentioned above. You answer my question by
saying that you always make a reserve of the first quantity, and all
above it you call profits. But I contend that labour of one value has
been expended on the commodity, and, when it comes to market, it is
exchanged for labour of another value, and that is the sole reason why
the balance, over and above the labour expended on it, is small. Why is
it small but because the value of labour is high? No such thing, you
say; labour never varies; and yet you cannot but confess that, if corn
had been abundant and if wages had remained the same, the manufactured
commodity would have exchanged for a great deal more labour. You say:
'How comes it about that labour should remain of the same value in the
progress of society, when it is known that it must require more labour
to produce it?' You must mean 'to produce the remuneration paid for it;'
and you add: 'The answer to this question is that, as profits depend
upon the _proportion_ of the whole produce which goes to labour, it must
necessarily happen that the increase of value occasioned by the
additional quantity of labour will be exactly counterbalanced by the
diminution in the amount of profits, leaving the value of labour the
same.' I confess I cannot understand this answer. We are inquiring about
the meaning which should be attached to the words 'increase of value,'
'diminution of value.' You tell me that increase of value means an
increased power of commanding labour. I deny that this definition is a
correct one, because I deny the invariability of the standard measure
you have chosen; and to prove its invariability you speak of the
proportion in which the whole produce is divided, and that, if wages
have more, profits have less;--all which is true, but what connection do
you prove between this proposition and the invariability in your measure
of value? In your answer you use the words 'increase of value;' that is
to explain the meaning of the words required to be understood by the use
of the words themselves. You mistake McCulloch's and my objection to
your doctrine if you suppose it to be on account of its making the same
quantity of labour of the same value, while the condition of the
labourer is very different; we do not object to it on that account,
because, as you justly observe, our own doctrines require the same
admission; but we object to your saying that, from whatever cause it may
arise that the labourer's condition is deteriorated, he is always
receiving the same value as wages. When _our_ labourers are badly off,
although (we say) they have wages of the same value, profits must
necessarily be very low; according to you wages would be of the same
value whether profits were 2 per cent. or 50 per cent.
I think I have shown you that your long letter was acceptable by doing
that which is really a difficult task to me, writing a longer one
myself. I am, however, only labouring in my vocation and trying to
understand the most difficult question in political economy. All I have
hitherto done is to convince myself more and more of the extreme
difficulty of finding an unobjectionable measure of value. As far as I
have yet been [able] to reflect upon McCulloch's and Mill's suggestion,
I am not satisfied with it. They make the best defence for my
measure[273], but they do not really get rid of all the objections. I
believe however that, though not without fault, it is the best.
I am sorry you could not spare a few days for a visit to us; if you will
come to Gatcomb before we go to town, I shall be very glad to see you.
I have been writing a few pages in favour of my project of a National
Bank[274], with a view to prove that the nation would lose nothing in
profits by abolishing the Bank of England, and that the sole effect of
the change would be to transfer a part of the profits of the bank to the
national treasury....
Yours ever,
DAVID RICARDO.
NOTE.--Arguments very similar to those of this letter have been used
against Malthus by Julius Pierstorff, in his book on 'Die Lehre vom
Unternehmergewinn' (Berlin, 1875), where the views of Malthus and
Ricardo are compared with one another. There is, however, shrewder
criticism of Ricardo's whole doctrine in Boehm Bawerk's 'Geschichte
und Kritik der Kapital-Zins-Theorien,' Innsbrueck, 1884. A neat
_reductio ad absurdum_ of the view, held more or less explicitly by
MacCulloch and others, that cost is enough to explain value, is
given by Boehm Bawerk in his 'Grundzuege der Theorie des
wirthschaftlichen Gueterwerths' (Jena, 1886, p. 72), in a passage of
which this is the conclusion: 'To explain the value of a commodity
by its cost is to explain it by the value of the means of its
production. But how have the latter their value? Logically we must
answer from _their_ cost, in other words from the means of
production a degree farther back, and so on backwards. Now, clearly,
if we pursue this regress, we either arrive at commodities which are
not themselves 'produced,' e.g. land and labour, and our explanation
of all value by cost has failed us; or else we explain even these
sophistically as being in a sense 'products,' and owing their value
to their cost, e.g. the labour as owing its value to the cost of the
labourer's subsistence, and in this case we are bound to go farther
back and explain the value of the means of subsistence by _their_
cost, i.e. the labour that produced them; and we reason endlessly in
a circle.'