On The Principles of Political Economy and Taxation
London: John Murray, Albemarle-Street,
by David Ricardo, 1817
(third edition 1821)
PREFACE
The produce of the earth - all that is derived from its
surface by the united application of labour, machinery, and
capital, is divided among three classes of the community; namely,
the proprietor of the land, the owner of the stock or capital
necessary for its cultivation, and the labourers by whose
industry it is cultivated.
But in different stages of society, the proportions of the
whole produce of the earth which will be allotted to each of
these classes, under the names of rent, profit, and wages, will
be essentially different; depending mainly on the actual
fertility of the soil, on the accumulation of capital and
population, and on the skill, ingenuity, and instruments employed
in agriculture.
To determine the laws which regulate this distribution, is
the principal problem in Political Economy: much as the science
has been improved by the writings of Turgot, Stuart, Smith, Say,
Sismondi, and others, they afford very little satisfactory
information respecting the natural course of rent, profit, and
wages.
In 1815, Mr Malthus, in his 'Inquiry into the Nature and
Progress of Rent,' and a Fellow of University College, Oxford'.
in his 'Essay on the Application of Capital to Land,' presented
to the world, nearly at the same moment, the true doctrine of
rent; without a knowledge of which, it is impossible to
understand the effect of the progress of wealth on profits and
wages, or to trace satisfactorily the influence of taxation on
different classes of the community; particularly when the
commodities taxed are the productions immediately derived from
the surface of the earth. Adam Smith, and the other able writers
to whom I have alluded, not having viewed correctly the
principles of rent, have, it appears to me, overlooked many
important truths, which can only be discovered after the subject
of rent is thoroughly understood.
To supply this deficiency, abilities are required of a far
superior cast to any possessed by the writer of the following
pages; yet, after having given to this subject his best
consideration - after the aid which he has derived from the works
of the above-mentioned eminent writers - and after the valuable
experience which a few late years, abounding in facts, have
yielded to the present generation - it will not, he trusts, be
deemed presumptuous in him to state his opinions on the laws of
profits and wages, and on the operation of taxes. If the
principles which he deems correct, should be found to be so, it
will be for others, more able than himself, to trace them to all
their important consequences.
The writer, in combating received opinions, has found it
necessary to advert more particularly to those passages in the
writings of Adam Smith from which he sees reason to differ; but
he hopes it will not, on that account, be suspected that he does
not, in common with all those who acknowledge the importance of
the science of Political Economy, participate in the admiration
which the profound work of this celebrated author so. justly
excites.
The same remark may be applied to the excellent works of M.
Say, who not only was the first, or among the first, of
continental writers, who justly appreciated and applied the
principles of Smith, and who has done more than all other
continental writers taken together, to recommend the principles
of that enlightened and beneficial system to the nations of
Europe; but who has succeeded in placing the science in a more
logical, and more instructive order; and has enriched it by
several discussions, original, accurate, and profound.(1*) The
respect, however, which the author entertains for the writings of
this gentleman, has not prevented him from commenting with that
freedom which he thinks the interests of science require, on such
passages of the 'Economie Politique,' as appeared at variance
with his own ideas.
Advertisement to the Third Edition
In this Edition I have endeavoured to explain more fully than in
the last, my opinion on the difficult subject of VALUE, and for
that purpose have made a few additions to the first chapter. I
have also inserted a new chapter on the subject of MACHlNERY, and
on the effects of its improvement on the interests of the
different classes of the State. In the chapter on the DISTINCTIVE
PROPERTIES OF VALUE AND RICHES, I have examined the doctrines of
M. Say on that important question, as amended in the fourth and
last edition of his work. I have in the last chapter endeavoured
to place in a stronger point of view than before, the doctrine of
the ability of a country to pay additional money taxes, although
the aggregate money value of the mass of its commodities should
fall, in consequence either of the diminished quantity of labour
required to produce its corn at home, by improvements in its
husbandry, or from its obtaining a part of its corn at a cheaper
price from abroad, by means of the exportation of its
manufactured commodities. This consideration is of great
importance, as it regards the question of the policy of leaving
unrestricted the importation of foreign corn, particularly in a
country burthened with a heavy fixed money taxation, the
consequence of an immense National Debt. I have endeavoured to
shew, that the ability to pay taxes, depends, not on the gross
money value of the mass of commodities, nor on the net money
value of the revenues of capitalists and landlords, but on the
money value of each man's revenue, compared to the money value of
the commodities which he usually consumes.
March 26, 1821.
Chapter 1
On Value
The value of a commodity, or the quantity of any other
commodity for which it will exchange, depends on the relative
quantity of labour which is necessary for its production, and not
on the greater or less compensation which is paid for that
labour.
It has been observed by Adam Smith, that 'the word Value has
two different meanings, and sometimes expresses the utility of
some particular object, and sometimes the power of purchasing
other goods which the possession of that object conveys. The one
may be called value in use; the other value in exchange. The
things,' he continues, 'which have the greatest value in use,
have frequently little or no value in exchange; and, on the
contrary, those which have the greatest value in exchange, have
little or no value in use; Water and air are abundantly useful;
they are indeed indispensable to existence, yet, under ordinary
circumstances, nothing can be obtained in exchange for them.
Gold, on the contrary, though of little use compared with air or
water, will exchange for a great quantity of other goods.
Utility then is not the measure of exchangeable value,
although it is absolutely essential to it. If a commodity were in
no way useful, - in other words,
if it could in no way contribute
to our gratification, - it would be destitute of exchangeable
value, however scarce it might be, or whatever quantity of labour
might be necessary to procure it.
Possessing utility, commodities derive their exchangeable
value from two sources: from their scarcity, and from the
quantity of labour required to obtain them.
There are some commodities, the value of which is determined
by their scarcity alone. No labour can increase the quantity of
such goods, and therefore their value cannot be lowered by an
increased supply. Some rare statues and pictures, scarce books
and coins, wines of a peculiar quality, which can be made only
from grapes grown on a particular soil, of which there is a very
limited quantity, are all of this description. Their value is
wholly independent of the quantity of labour originally necessary
to produce them, and varies with the varying wealth and
inclinations of those who are desirous to possess them.
These commodities, however, form a very small part of the
mass of commodities daily exchanged in the market. By far the
greatest part of those goods which are the objects of desire, are
procured by labour,. and they may be multiplied, not in one
country alone, but in many, almost without any assignable limit,
if we are disposed to bestow the labour necessary to obtain them.
In speaking then of commodities, of their exchangeable
value, and of the laws which regulate their relative prices, we
mean always such commodities only as can be increased in quantity
by the exertion of human industry, and on the production of which
competition operates without restraint.
In the early stages of society, the exchangeable value of
these commodities, or the rule which determines how much of one
shall be given in exchange for another, depends almost
exclusively on the comparative quantity of labour expended on
each.
'The real price of every thing,' says Adam Smith, 'what
every thing really costs to the man who wants to acquire it, is
the toil and trouble of acquiring it. What every thing is really
worth to it, or the man who has acquired it, and who wants to
dispose of it, or exchange it for something else, is the toil and
trouble which it can save to himself, and which it can impose
upon other people.' 'Labour was the first price - the original
purchase-money that was paid for all things.' Again,, in that
early and rude state of society, which precedes both the
accumulation of stock and the appropriation of land, the
proportion between the quantities of labour necessary for
acquiring different objects seems to be the only circumstance
which can afford any rule for exchanging them for one another. If
among a nation of hunters, for example, it usually cost twice the
labour to kill a beaver which it does to kill a deer, one beaver
should naturally exchange for, or be worth two deer. It is
natural that what is usually the produce of two days', or two
hours' labour, should be worth double of what is usually the
produce of one day's, or one hour's labour.'(2*)
That this is really the foundation of the exchangeable value
of all things, excepting those which cannot be increased by human
industry, is a doctrine of the utmost importance in political
economy; for from no source do so many errors, and so much
difference of opinion in that science proceed, as from the vague
ideas which are attached to the word value.
If the quantity of labour realized in commodities, regulate
their exchangeable value, every increase of the quantity of
labour must augment the value of that commodity on which it is
exercised, as every diminution must lower it.
Adam Smith, who so accurately defined the original source of
exchangeable value, and who was bound in consistency to maintain,
that all things became more or less valuable in proportion as
more or less labour was bestowed on their production, has himself
erected another standard measure of value, and speaks of things
being more or less valuable, in proportion as they will exchange
for more or less of this standard measure. Sometimes he speaks of
corn, at other times of labour, as a standard measure; not the
quantity of labour bestowed on the production of any object, but
the quantity which it can command in the market: as if these were
two equivalent expressions, and as if because a man's labour had
become doubly efficient, and he could therefore produce twice the
quantity of a commodity, he would necessarily receive twice the
former quantity in exchange for it.
If this indeed were true, if the reward of the labourer were
always in proportion to what he produced, the quantity of labour
bestowed on a commodity, and the quantity of labour which that
commodity would purchase, would be equal, and either might
accurately measure the variations of other things: but they are
not equal; the first is under many circumstances an invariable
standard, indicating correctly the variations of other things;
the latter is subject to as many fluctuations as the commodities
compared with it. Adam Smith, after most ably showing the
insufficiency of a variable medium, such as gold and silver, for
the purpose of determining the varying value of other things, has
himself, by fixing on corn or labour, chosen a medium no less
variable.
Gold and silver are no doubt subject to fluctuations, from
the discovery of new and more abundant mines; but such
discoveries are rare, and their effects, though powerful, are
limited to periods of comparatively short duration. They are
subject also to fluctuation, from improvements in the skill and
machinery with which the mines may be worked; as in consequence
of such improvements, a greater quantity may be obtained with the
same labour. They are further subject to fluctuation from the
decreasing produce of the mines, after they have yielded a supply
to the world, for a succession of ages. But from which of these
sources of fluctuation is corn exemptedDoes not that also vary,
on one hand, from improvements in agriculture, from improved
machinery and implements used in husbandry, as well as from the
discovery of new tracts of fertile land, which in other countries
may be taken into cultivation, and which will affect the value of
corn in every market where importation is freeIs it not on the
other hand subject to be enhanced in value from prohibitions of
importation, from increasing population and wealth, and the
greater difficulty of obtaining the increased supplies, on
account of the additional quantity of labour which the
cultivation of inferior lands requiresIs not the value of
labour equally variable; being not only affected, as all other
things are, by the proportion between the supply and demand,
which uniformly varies with every change in the condition of the
community, but also by the varying price of food and other
necessaries, on which the wages of labour are expendedIn the same country double the quantity of labour may be
required to produce a given
quantity of food and necessaries at
one time, that may be necessary at another, and a distant time;
yet the labourer's reward may possibly be very little diminished.
If the labourer's wages at the former period, were a certain
quantity of food and necessaries, he probably could not have
subsisted if that quantity had been reduced. Food and necessaries
in this case will have risen 100 per cent if estimated by the
quantity of labour necessary to their production, while they will
scarcely have increased in value, if measured by the quantity of
labour for which they will exchange.
The same remark may be made respecting two or more
countries. In America and Poland, on the land last taken into
cultivation, a year's labour of any given number of men, will
produce much more corn than on land similarly circumstanced in
England. Now, supposing all other necessaries to be equally cheap
in those three countries, would it not be a great mistake to
conclude, that the quantity of corn awarded to the labourer,
would in each country be in proportion to the facility of
productionIf the shoes and clothing of the labourer, could, by
improvements in machinery, be produced by one fourth of the
labour now necessary to their production, they would probably
fall 75 per cent; but so far is it from being true, that the
labourer would thereby be enabled permanently to consume four
coats, or four pair of shoes, instead of one, that it is probable
his wages would in no long time be adjusted by the effects of
competition, and the stimulus to population, to the new value of
the necessaries on which they were expended. If these
improvements extended to all the objects of the labourer's
consumption, we should find him probably at the end of a very few
years, in possession of only a small, if any, addition to his
enjoyments, although the exchangeable value of those commodities,
compared with any other commodity, in the manufacture of which no
such improvement were made, had sustained a very considerable
reduction; and though they were the produce of a very
considerably diminished quantity of labour.
It cannot then be correct, to say with Adam Smith, 'that as
labour may sometimes purchase a greater, and sometimes a smaller
quantity of goods, it is their value which varies, not that of
the labour which purchases them;' and therefore, 'that labour
alone never varying in its own value, is alone the ultimate and
real standard by which the value of all commodities can at all
times and places be estimated and compared;' - but it is correct
to say, as Adam Smith had previously said, 'that the proportion
between the quantities of labour necessary for acquiring
different objects seems to be the only circumstance which can
afford any rule for exchanging them for one another; or in other
words, that it is the comparative quantity of commodities which
labour will produce, that determines their present or past
relative value, and not the comparative quantities of
commodities, which are given to the labourer in exchange for his
labour.
Two commodities vary in relative value, and we wish to know
in which the variation has really taken place. If we compare the
present value of one, with shoes, stockings, hats, iron, sugar,
and all other commodities, we find that it will exchange for
precisely the same quantity of all these things as before. If we
compare the other with the same commodities, we find it has
varied with respect to them all: we may then with great
probability infer that the variation has been in this commodity,
and not in the commodities with which we have compared it. If on
examining still more particularly into all the circumstances
connected with the production of these various commodities, we
find that precisely the same quantity of labour and capital are
necessary to the production of the shoes, stockings, hats, iron,
sugar, &c.; but that the same quantity as before is not necessary
to produce the single commodity whose relative value is altered,
probability is changed into certainty, and we are sure that the
variation is in the single commodity. we then discover also the
cause of its variation.
If I found that an ounce of gold would exchange for a less
quantity of all the commodities above enumerated, and many
others; and if, moreover, I found that by the discovery of a new
and more fertile mine, or by the employment of machinery to great
advantage, a given quantity of gold could be obtained with a less
quantity of labour, I should be justified in saying that the
cause of the alteration in the value of gold relatively to other
commodities, was the greater facility of its production, or the
smaller quantity of labour necessary to obtain it. In like
manner, if labour fell very considerably in value, relatively to
all other things, and if I found that its fall was in consequence
of an abundant supply, encouraged by the great facility with
which corn, and the other necessaries of the labourer, were
produced, it would, I apprehend, be correct for me to say that
corn and necessaries had fallen in value in consequence of less
quantity of labour being necessary to produce them, and that this
facility of providing for the support of the labourer had been
followed by a fall in the value of labour. No, say Adam Smith and
Mr Malthus, in the case of the gold you were correct in calling
its variation a fall of its value, because corn and labour had
not then varied; and as gold would command a less quantity of
them, as well as of all other things, than before, it was correct
to say that all things had remained stationary, and that gold
only had varied; but when corn and labour fall, things which we
have selected to be our standard measure of value,
notwithstanding all the variations to which we acknowledge they
are subject, it would be highly improper to say so; the correct
language will be to say, that corn and labour have remained
stationary, and all other things have risen in value.
Now it is against this language that I protest. I find that
precisely, as in the case of the gold, the cause of the variation
between corn and other things, is the smaller quantity of labour
necessary to produce it, and therefore, by all just reasoning, I
am bound to call the variation of corn and labour a fall in their
value, and not a rise in the value of the things with which they
are compared. If I have to hire a labourer for a week, and
instead of ten shillings I pay him eight, no variation having
taken place in the value of money, the labourer can probably
obtain more food and necessaries, with his eight shillings, than
he before obtained for ten: but this is owing, not to a rise in
the real value of his wages, as stated by Adam Smith, and more
recently by Mr Malthus, but to a fall in the value of the things
on which is wages are expended, things perfectly distinct; and
yet for calling this a fall in the real value of wages, I am told
that I adopt new and unusual language, not reconcileable with the
true principles of the science. To me it appears that the unusual
and, indeed, inconsistent language, is that used by my opponents.
Suppose a labourer to be paid a bushel of corn for a week's
work, when the price of corn is 80s. per quarter, and that he is
paid a bushel and a quarter when the price falls to 40s. Suppose,
too, that he consumes half a bushel of corn a-week in his own
family, and exchanges the remainder for other things, such as
fuel, soap, candles, tea, sugar, salt, &c. &c.; if the
three-fourths of a bushel which will remain to him, in one case,
cannot procure him as much of the above commodities as half a
bushel did in the other, which it will not, will labour have
risen or fallen in valueRisen, Adam Smith must say, because his
standard is corn, and the labourer receives more corn for a
week's labour. Fallen, must the same Adam Smith say, 'because the
value of a thing depends on the power of purchasing other goods
which the possession of that object conveys,' and labour has a
less power of purchasing such other goods.
Section II
Labour of different qualities differently rewarded. This is no
cause of variation in the relative value of commodities.
In speaking, however, of labour, as being the foundation of
all value, and the relative quantity of labour as almost
exclusively determining the relative value of commodities, I must
not be supposed to be inattentive to the different qualities of
labour, and the difficulty of comparing an hour's or a day's
labour, in one employment, with the same duration of labour in
another. The estimation in which different qualities of labour
are held, comes soon to be adjusted in the market with sufficient
precision for all practical purposes, and depends much on the
comparative skill of the labourer, and intensity of the labour
performed. The scale, when once formed, is liable to little
variation. If a day's labour of a working jeweller be more
valuable than a day's labour of a common labourer, it has long
ago been adjusted, and placed in its proper position in the scale
of value.(3*)
In comparing therefore the value of the same commodity, at
different periods of time, the consideration of the comparative
skill and intensity of labour, required for that particular
commodity, needs scarcely to be attended to, as it operates
equally at both periods. One description of labour at one time is
compared with the same description of labour at another; if a
tenth, a fifth, or a fourth, has been added or taken away, an
effect proportioned to the cause will be produced on the relative
value of the commodity.
If a piece of cloth be now of the value of two pieces of
linen, and if, in ten years hence, the ordinary value of a piece
of cloth should be four pieces of linen, we may safely conclude,
that either more labour is required to make the cloth, or less to
make the linen, or that both causes have operated.
As the inquiry to which I wish to draw the reader's
attention, relates to the effect of the variations in the
relative value of commodities, and not in their absolute value,
it will be of little importance to examine into the comparative
degree of estimation in which the different kinds of human labour
are held. We may fairly conclude, that whatever inequality there
might originally have been in them, whatever the ingenuity,
skill, or time necessary for the acquirement of one species of
manual dexterity more than another, it continues nearly the same from one generation to another; or at least, that the variation
is very inconsiderable from year to year, and therefore, can have
little effect, for short periods, on the relative value of
commodities.
'The proportion between the different rates both of wages
and profit in the different employments of labour and stock,
seems not to be much affected, as has already been observed, by
the riches or poverty, the advancing, stationary, or declining
state of the society. Such revolutions in the public welfare,
though they affect the general rates both of wages and profit,
must in the end affect them equally in all different employments.
The proportion between them therefore must remain the same, and
cannot well be altered, at least for any considerable time, by
any such revolutions.'(4*)
Section III
Not only the labour applied immediately to commodities affect
their value, but the labour also which is bestowed on the
complements, tools, and buildings, with which much labour is
assisted.
Even in that early state to which Adam Smith refers, some
capital, though possibly made and accumulated by the hunter
himself, would be necessary to enable him to kill his game.
Without some weapon, neither the beaver nor the deer could be
destroyed, and therefore the value of these animals would be
regulated, not solely by the time and labour necessary to their
destruction, but also by the time and labour necessary for
providing the hunter's capital, the weapon, by the aid of which
their destruction was effected.
Suppose the weapon necessary to kill the beaver, was
constructed with much more labour than that necessary to kill the
deer, on account of the greater difficulty of approaching near to
the former animal, and the consequent necessity of its being more
true to its mark; one beaver would naturally be of more value
than two deer, and precisely for this reason, that more labour
would, on the whole, be necessary to its destruction. Or suppose
that the same quantity of labour was necessary to make both
weapons, but that they were of very unequal durability; of the
durable implement only a small portion of its value would be
transferred to the commodity, a much greater portion of the value
of the less durable implement would be realized in the commodity
which it contributed to produce.
All the implements necessary to kill the beaver and deer
might belong to one class of men, and the labour employed in
their destruction might be furnished by another class; still,
their comparative prices would be in proportion to the actual
labour bestowed, both on the formation of the capital, and on the
destruction of the animals. Under different circumstances of
plenty or scarcity of capital, as compared with labour, under
different circumstances of plenty or scarcity of the food and
necessaries essential to the support of men, those who furnished
an equal value of capital for either one employment or for the
other, might have a half, a fourth, or an eighth of the produce
obtained, the remainder being paid as wages to those who
furnished the labour. yet this division could not affect the
relative value of these commodities, since whether the profits of
capital were greater or less, whether they were 50, 20, or IO per
cent or whether the wages of labour were high or low, they would
operate equally on both employments.
If we suppose the occupations of the society extended, that
some provide canoes and tackle necessary for fishing,
others the
seed and rude machinery first used in agriculture, still the same
principle would hold true, that the exchangeable value of the
commodities produced would be in proportion to the labour
bestowed on their production; not on their immediate production
only, but on all those implements or machines required to give
effect to the particular labour to which they were applied.
If we look to a state of society in which greater
improvements have been made, and in which arts and commerce
flourish, we shall still find that commodities vary in value
conformably with this principle: in estimating the exchangeable
value of stockings, for example, we shall find that their value,
comparatively with other things, depends on the total quantity of
labour necessary to manufacture them, and bring them to market.
First, there is the labour necessary to cultivate the land on
which the raw cotton is grown; secondly, the labour of conveying
the cotton to the country where the stockings are to be
manufactured, which includes a portion of the labour bestowed in
building the ship in which it is conveyed, and which is charged
in the freight of the goods; thirdly, the labour of the spinner
and weaver; fourthly, a portion of the labour of the engineer,
smith, and carpenter, who erected the buildings and machinery, by
the help of which they are made; fifthly, the labour of the
retail dealer, and of many others, whom it is unnecessary further
to particularize. The aggregate sum of these various kinds of
labour, determines the quantity of other things for which these
stockings will exchange, while the same consideration of the
various quantities of labour which have been bestowed on those
other things, will equally govern the portion of them which will
be given for the stockings.
To convince ourselves that this is the real foundation of
exchangeable value, let us suppose any improvement to be made in
the means of abridging labour in any one of the various processes
through which the raw cotton must pass, before the manufactured
stockings come to the market, to be exchanged for other things;
and observe the effects which will follow. If fewer men were
required to cultivate the raw cotton, or if fewer sailors were
employed in navigating, or shipwrights in constructing the ship,
in which it was conveyed to us; if fewer hands were employed in
raising the buildings and machinery, or if these, when raised,
were rendered more efficient, the stockings would inevitably fall
in value, and consequently command less of other things. They
would fall, because a less quantity of labour was necessary to
their production, and would therefore exchange for a smaller
quantity of those things in which no such abridgment of labour
had been made.
Economy in the use of labour never fails to reduce the
relative value of a commodity, whether the saving be in the
labour necessary to the manufacture of the commodity itself, or
in that necessary to the formation of the capital, by the aid of
which it is produced. In either case the price of stockings would
fall, whether there were fewer men employed as bleachers,
spinners, and weavers, persons immediately necessary to their
manufacture; or as sailors, carriers, engineers, and smiths,
persons more indirectly concerned. In the one case, the whole
saving of labour would fall on the stockings, because that
portion of labour was wholly confined to the stockings; in the
other, a portion only would fall on the stockings, the remainder being applied to all those other commodities, to the production
of which the buildings, machinery, and carriage, were
subservient.
Suppose that in the early stages of society, the bows and
arrows of the hunter were of equal value, and of equal
durability, with the canoe and implements of the fisherman, both
being the produce of the same quantity of labour. Under such
circumstances the value of the deer, the produce of the hunter's
day's labour, would be exactly equal to the value of the fish,
the produce of the fisherman's day's labour. The comparative
value of the fish and the game, would be entirely regulated by
the quantity of labour realized in each; whatever might be the
quantity of production, or however high or low general wages or
profits might be. If for example the canoes and implements of the
fisherman were of the value of 100 and were calculated to last
for ten years, and he employed ten men, whose annual labour cost
100 and who in one day obtained by their labour twenty salmon:
If the weapons employed by the hunter were also of 100 value and
calculated to last ten years, and if he also employed ten men,
whose annual labour cost 100 and who in one day procured him ten
deer; then the natural price of a deer would be two salmon,
whether the proportion of the whole produce bestowed on the men
who obtained it, were large or small. The proportion which might
be paid for wages, is of the utmost importance in the question of
profits; for it must at once be seen, that profits would be high
or low, exactly in proportion as wages were low or high; but it
could not in the least affect the relative value of fish and
game, as wages would be high or low at the same time in both
occupations. If the hunter urged the plea of his paying a large
proportion, or the value of a large proportion of his game for
wages, as an inducement to the fisherman to give him more fish in
exchange for his game, the latter would state that he was equally
affected by the same cause; and therefore under all variations of
wages and profits, under all the effects of accumulation of
capital, as long as they continued by a day's labour to obtain
respectively the same quantity of fish, and the same quantity of
game, the natural rate of exchange would be one deer for two
salmon.
If with the same quantity of labour a less quantity of fish,
or a greater quantity of game were obtained, the value of fish
would rise in comparison with that of game. If, on the contrary,
with the same quantity of labour a less quantity of game, or a
greater quantity of fish was obtained, game would rise in
comparison with fish.
If there were any other commodity which was invariable in
its value, we should be able to ascertain, by comparing the value
of fish and game with this commodity, how much of the variation
was to be attributed to a cause which affected the value of fish,
and how much to a cause which affected the value of game.
Suppose money to be that commodity. If a salmon were worth
1 and a deer 2 one deer would be worth two salmon. But a deer
might become of the value of three salmon, for more labour might
be required to obtain the deer, or less to get the salmon or both
these causes might operate at the same time. If we had this
invariable standard, we might easily ascertain in what degree
either of these causes operated. If salmon continued to sell for
1 whilst deer rose to 3 we might conclude that more labour was
required to obtain the deer. If deer continued
at the same price
of 2 and salmon sold for 13s. 4d. we might then be sure that
less labour was required to obtain the salmon; and if deer rose
to 2 10s. and salmon fell to 16s. 8d. we should be convinced
that both causes had operated in producing the alteration of the
relative value of these commodities.
No alteration in the wages of labour could produce any
alteration in the relative value of these commodities; for
suppose them to rise, no greater quantity of labour would be
required in any of these occupations, but it would be paid for at
a higher price, and the same reasons which should make the hunter
and fisherman endeavour to raise the value of their game and
fish, would cause the owner of the mine to raise the value of his
gold. This inducement acting with the same force on all these
three occupations, and the relative situation of those engaged in
them being the same before and after the rise of wages, the
relative value of game, fish, and gold, would continue unaltered.
Wages might rise twenty per cent, and profits consequently fall
in a greater or less proportion, without occasioning the least
alteration in the relative value of these commodities.
Now suppose, that with the same labour and fixed capital,
more fish could be produced, but no more gold or game, the
relative value of fish would fall in comparison with gold or
game. If, instead of twenty salmon, twenty-five were the produce
of one day's labour, the price of a salmon would be sixteen
shillings instead of a pound, and two salmon and a half, instead
of two salmon, would be given in exchange for one deer, but the
price of deer would continue at 2 as before. In the same manner,
if fewer fish could be obtained with the same capital and labour,
fish would rise in comparative value. Fish then would rise or
fall in exchangeable value, only because more or less labour was
required to obtain a given quantity; and it never could rise or
fall beyond the proportion of the increased or diminished
quantity of labour required.
If we had then an invariable standard, by which measure the
variation in other commodities, we should the utmost limit to
which they could permanently rise, if produced under the
circumstances supposed, was proportioned the additional quantity
of labour required for their production; and that unless more
labour were required for their production, they could not rise in
any degree whatever. A rise of wages would not raise them in
money value, nor relatively to any other commodities, the
production of which required no additional quantity of labour,
which employed the same proportion of fixed and circulating
capital, and fixed capital of the same durability. If more or
less labour were required in the production of the other
commodity, we have already stated that this will immediately
occasion an alteration in its relative value, but such alteration
is owing to the altered quantity of requisite labour, and not to
the rise of wages.
Section IV
The principle that the quantity of labour bestowed on the
production of commodities regulates their relative value,
considerably modified by the employment of machinery and other
fixed and durable capital.
In the former section we have supposed the implements and
weapons necessary to kill the deer and salmon, to be equally
durable, and to be the result of the same quantity of labour, and
we have seen that the variations in the relative value of deer
and salmon depended solely on the varying quantities of labour
necessary to obtain them, - but in every state of society, the
tools, implements, buildings, and machinery employed in different
trades may be of various degrees of durability, and may require
different portions of labour to produce them. The proportions,
too, in which the capital that is to support labour, and the
capital that is invested in tools, machinery and buildings, may
be variously combined. This difference in the degree of
durability of fixed capital, and this variety in the proportions
in which the two sorts of capital may be combined, introduce
another cause, besides the greater or less quantity of labour
necessary to produce commodities, for the variations in their
relative value - this cause is the rise or fall in the value of
labour.
The food and clothing consumed by the labourer, the
buildings in which he works, the implements with which his labour
is assisted, are all of a perishable nature. There is however a
vast difference in the time for which these different capitals
will endure: a steam-engine will last longer than a ship, a ship
than the clothing of the labourer, and the clothing of the
labourer longer than the food which he consumes.
According as capital is rapidly perishable, and requires to
be frequently reproduced, or is of slow consumption, it is
classed under the heads of circulating, or of fixed capital.(5*)
A brewer, whose buildings and machinery are valuable and durable,
is said to employ a large portion of fixed capital: on the
contrary, a shoemaker, whose capital is chiefly employed in the
payment of wages, which are expended on food and clothing,
commodities more perishable than buildings and machinery, is said
to employ a large proportion of his capital as circulating
capital.
It is also to be observed that the circulating capital may
circulate, or be returned to its employer, in very unequal times.
The wheat bought by a farmer to sow is comparatively a fixed
capital to the wheat purchased by a baker to make into loaves.
One leaves it in the ground, and can obtain no return for a year;
the other can get it ground into flour, sell it as bread to his
customers, and have his capital free to renew the same, or
commence any other employment in a week.
Two trades then may employ the same amount of capital; but
it may be very differently divided with respect to the portion
which is fixed, and that which is circulating.
In one trade very little capital may be employed as
circulating capital, that is to say in the support of labour - it
may be principally invested in machinery, implements, buildings,
&c. capital of a comparatively fixed and durable character. In
another trade the same amount of capital may be used, but it may
be chiefly employed in the support of labour, and very little may
be invested in implements, machines, and buildings. A rise in the
wages of labour cannot fail to affect unequally, commodities
produced under such different circumstances.
Again two manufacturers may employ the same amount of fixed,
and the same amount of circulating capital; but the durability of
their fixed capitals may be very unequal. One may have
steam-engines of the value of 10,000, the other, ships of the
same value.
If men employed no machinery in production but labour only,
and were all the same length of time before they brought their
commodities to market, the exchangeable value of their goods
would be precisely in proportion to the quantity of labour
employed.
If they employed fixed capital of the same value and of the
same durability, then, too, the value of the commodities produced
would be the same, and they would vary with the greater or less
quantity of labour employed on their production.
But although commodities produced under similar
circumstances, would not vary with respect to each other, from
any cause but an addition or diminution of the quantity of labour
necessary to produce one or other of them, yet compared with
others not produced with the same proportionate quantity of fixed
capital, they would vary from the other cause also which I have
before mentioned, namely, a rise in the value of labour, although
neither more nor less labour were employed in the production of
either of them. Barley and oats would continue to bear the same
relation to each other under any variation of wages. Cotton goods
and cloth would do the same, if they also were produced under
circumstances precisely similar to each other, but yet with a
rise or fall of wages, barley might be more or less valuable
compared with cotton goods, and oats compared with cloth.
Suppose two men employ one hundred men each for a year in
the construction of two machines, and another man employs the
same number of men in cultivating corn, each of the machines at
the end of the year will be of the same value as the corn, for
they will each be produced by the same quantity of labour.
Suppose one of the owners of one of the machines to employ it,
with the assistance of one hundred men, the following year in
making cloth, and the owner of the other machine to employ his
also, with the assistance likewise of one hundred men, in making
cotton goods, while the farmer continues to employ one hundred
men as before in the cultivation of corn. During the second year
they will all have employed the same quantity of labour, but the
goods and machine together of the clothier, and also of the
cotton manufacturer, will be the result of the labour of two
hundred men, employed for a year; or, rather, of the labour of
one hundred men for two years; whereas the corn will be produced
by the labour of one hundred men for one year, consequently if
the corn be of the value of 500 the machine and cloth of the
clothier together, ought to be of the value of 1,000 and the
machine and cotton goods of the cotton manufacturer ought to be
also of twice the value of the corn. But they will be of more
than twice the value of the corn, for the profit on the
clothier's and cotton manufacturer's capital for the first year
has been added to their capitals, while that of the farmer has
been expended and enjoyed. On account then of the different
degrees of durability of their capitals, or, which is the same
thing, on account of the time which must elapse before one set of
commodities can be brought to market, they will be valuable, not
exactly in proportion to the quantity of labour bestowed on them,
- they will not be as two to one, but something more, to
compensate for the greater length of time which must elapse
before the most valuable can be brought to market.
Suppose that for the labour of each workman 50 per annum
were paid, or that 5,000 capital were employed and profits were
10 per cent, the value of each of the machines as well as of the
corn, at the end of the first year, would be 5,500. The second
year the manufacturers and farmer will again employ 5,000 each
in the support of labour, and will therefore again sell their
goods for 5,500, but the men using the machines, to be on a par
with the farmer, must not only obtain 5,500, for the equal
capitals of 5,000 employed on labour, but they must obtain a
further sum of 550; for the profit on 5,500 which they have
invested in machinery, and consequently their goods must sell for
6,050. Here then are capitalists employing precisely the same
quantity of labour annually on the production of their
commodities, and yet the goods they produce differ in value on
account of the different quantities of fixed capital, or
accumulated labour, employed by each respectively. The cloth and
cotton goods are of the same value, because they are the produce
of equal quantities of labour, and equal quantities of fixed
capital; but corn is not of the same value as these commodities,
because it is produced, as far as regards fixed capital, under
different circumstances.
But how will their relative value be affected by a rise in
the value of labourIt is evident that the relative values of
cloth and cotton goods will undergo no change, for what affects
one must equally affect the other, under the circumstances
supposed: neither will the relative values of wheat and barley
undergo any change, for they are produced under the same
circumstances as far as fixed and circulating capital are
concerned; but the relative value of corn to cloth, or to cotton
goods, must be altered by a rise of labour.
There can be no rise in the value of labour without a fall
of profits. If the corn is to be divided between the farmer and
the labourer, the larger the proportion that is given to the
latter, the less will remain for the former. So if cloth or
cotton goods be divided between the workman and his employer, the
larger the proportion given to the former, the less remains for
the latter. Suppose then, that owing to a rise of wages, profits
fall from 10 to 9 per cent, instead of adding 550 to the common
price of their goods (to 5,500) for the profits on their fixed
capital, the manufacturers would add only 9 per cent on that sum,
or 495, consequently the price would be 5,995 instead of
6,050. As the corn would continue to sell for 5,500, the
manUfactured goods in which more fixed capital was employed,
would fall relatively to corn or to any other goods in which a
less portion of fixed capital entered. The degree of alteration
in the relative value of goods, on account of a rise or fall of
labour, would depend on the proportion which the fixed capital
bore to the whole capital employed. All commodities which are
produced by very valuable machinery, or in very valuable
buildings, or which require a great length of time before they
can be brought to market, would fall in relative value, while all
those which were chiefly produced by labour, or which would be
speedily brought to market would rise in relative value.
The reader, however, should remark, that this cause of the
variation of commodities is comparatively slight in its effects.
With such a rise of wages as should occasion a fall of one per.
cent in profits, goods produced under the circumstances I have
supposed, vary in relative value only one per cent: they fall
with so great a fall of profits from 6,050 to 5,995. The
greatest effects which could be produced on the relative prices
of these goods from a rise of wages, could not exceed 6 or 7 per
cent; for profits could not, probably, under any circumstances,
admit of a greater general and permanent depression than to that
amount.
Not so with the other great cause of the variation in the
value of commodities, namely, the increase or diminution in the
quantity of labour necessary to produce them. If to produce the
corn, eighty, instead of one hundred men, should be required, the
value of the corn would fall 20 per cent or from 5,500 to
4,400. If to produce the cloth, the labour of eighty instead of
one hundred men would suffice, cloth would fall from 6,050 to
4,950. An alteration in the permanent rate of profits, to any
great amount, is the effect of causes which do not operate but in
the course of years; whereas alterations in the quantity of
labour necessary to produce commodities, are of daily occurrence.
Every improvement in machinery, in tools, in buildings, in
raising the raw material, saves labour, and enables us to produce
the commodity to which the improvement is applied with more
facility, and consequently its value alters. In estimating, then,
the causes of the variations in the value of commodities,
although it would be wrong wholly to omit the consideration of
the effect produced by a rise or fall of labour, it would be
equally incorrect to attach much importance to it; and
consequently, in the subsequent part of this work, though I shall
occasionally refer to this cause of variation, I shall consider
all the great. variations which take place in the relative value
of commodities to be produced by the greater or less quantity of
labour which may be required from time to time to produce them.
It is hardly necessary to say, that commodities which have
the same quantity of labour bestowed on their production, will
differ in exchangeable value, if they cannot be brought to market
in the same time.
Suppose I employ twenty men at an expense of 1,000 for a
year in the production of a commodity, and at the end of the year
I employ twenty men again for another year, at a further expense
of 1,000 in finishing or perfecting the same commodity, and that
I bring it to market at the end of two years, if profits be 10
per cent, my commodity must sell for 2,310; for I have employed
1,000 capital for one year, and 2,100 capital for one year
more. Another man employs precisely the same quantity of labour,
but he employs it all in the first year; he employs forty men at
an expense of 2,000, and at the end of the first year he sells
it with 10 per cent profit, or for 2,200. Here then are two
commodities having precisely the same quantity of labour bestowed
on them, one of which sells for 2,310 - the other for 2,200.
This case appears to differ from the last, but is, in fact,
the same. In both cases the superior price of one commodity is
owing to the greater length of time which must elapse before it
can be brought to market. In the former case the machinery and
cloth were more than double the value of the corn, although only
double the quantity of labour was bestowed on them. In the second
case, one commodity is more valuable than the other, although no
more labour was employed on its production. The difference in
value arises in both cases from the profits being accumulated as
capital, and is only a just compensation for the time that the
profits were withheld.
It appears then that the division of capital into different
proportions of fixed and circulating capital, employed in
different trades, introduces a considerable modification to the
rule, which is of universal application when labour is almost
exclusively employed in production; namely, that commodities
never vary in value, unless a greater or less quantity of labour
be bestowed on their production, it being shown in this section
that without any variation in the quantity of labour, the rise of
its value merely will occasion a fall in the exchangeable value
of those goods, in the production of which fixed capital is
employed; the larger the amount of fixed capital, the greater
will be the fall.
Section V
The principle that value does not vary with the rise of fall of
wages, modified also by the unequal durability of capital, and by
the unequal rapidity with which it is returned to its employer.
In the last section we have supposed that of two equal
capitals in two different occupations, the proportions of fixed
and circulating capitals were unequal, now let us suppose them to
be in the same proportion but of unequal durability. In
proportion as fixed capital is less durable, it approaches to the
nature of circulating capital. It will be consumed and its value
reproduced in a shorter time, in order to preserve the capital of
the manufacturer. We have just seen, that in proportion as fixed
capital preponderates in a manufacture, when wages rise, the
value of commodities produced in that manufacture, is relatively
lower than that of commodities produced in manufactures where
circulating capital preponderates. In proportion to the less
durability of fixed capital, and its approach to the nature of
circulating capital, the same effect will be produced by the same
cause.
If fixed capital be not of a durable nature, it will require
a great quantity of labour annually to keep it in its original
state of efficiency; but the labour so bestowed may be considered
as really expended on the commodity manufactured, which must bear
a value in proportion to such labour. If I had a machine worth
20,000 which with very little labour was efficient to the
production of commodities, and if the wear and tear of such
machine were of trifling amount, and the general rate of profit
10 per cent, I should not require much more than 2,000 to be
added to the price of the goods, on account of the employment of
my machine; but if the wear and tear of the machine were great,
if the quantity of labour requisite to keep it in an efficient
state were that of fifty men annually, I should require an
additional price for my goods, equal to that which would be
obtained by any other manufacturer who employed fifty men in the
production of other goods, and who used no machinery at all.
But a rise in the wages of labour would not equally affect
commodities produced with machinery quickly consumed, and
commodities produced with machinery slowly consumed. In the
production of the one, a great deal of labour would be
continually transferred to the commodity produced - in the other
very little would be so transferred. Every rise of wages,
therefore, or, which is the same thing, every fall of profits,
would lower the relative value of those commodities which were
produced with a capital of a durable nature, and would
proportionally elevate those which were produced with capital
more perishable. A fall of wages would have precisely the
contrary effect.
I have already said that fixed capital is of various degrees
of durability - suppose now a machine which could in any
particular trade be employed to do the work of one hundred men
for a year, and that it would last only for one year. Suppose
too, the machine to
cost 5,000, and the wages annually paid to
one hundred men to be 5,000, it is evident that it would be a
matter of indifference to the manufacturer whether he bought the
machine or employed the men. But suppose labour to rise, and
consequently the wages of one hundred men for a year to amount to
5,500, it is obvious that the manufacturer would now no longer
hesitate, it would be for his interest to buy the machine and get
his work done for 5,000. But will not the machine rise in price,
will not that also be worth 5,500 in consequence of the rise of
labourIt would rise in price if there were no stock employed on
its construction, and no profits to be paid to the maker of it.
If for example, the machine were the produce of the labour of one
hundred men, working one year upon it with wages of 50 each, and
its price were consequently 5,000; should those wages rise to
55, its price would be 5,500, but this cannot be the case; less
than one hundred men are employed or it could not be sold for
5,000, for out of the 5,000 must be paid the profits of the
stock which employed the men. Suppose then that only eighty-five
men were employed at an expense of 50 each, or 4,250 per annum,
and that the 750 which the sale of the machine would produce
over and above the wages advanced to the men, constituted the
profits of the engineer's stock. When wages rose 10 per cent he
would be obliged to employ an additional capital of 425 and
would therefore employ 4,675 instead of 4,250, on which capital
he would only get a profit of 325 if he continued to sell his
machine for 5,000; but this is precisely the case of all
manufacturers and capitalists; the rise of wages affects them
all. If therefore the maker of the machine should raise the price
of it in consequence of a rise of wages, an unusual quantity of
capital would be employed in the construction of such machines,
till their price afforded only the common rate of profits.(6*) We
see then that machines would not rise in price, in consequence of
a rise of wages.
The manufacturer, however, who in a general rise of wages,
can have recourse to a machine which shall not increase the
charge of production on his commodity, would enjoy peculiar
advantages if he could continue to charge the same price for his
goods; but he, as we have already seen, would be obliged to lower
the price of his commodities, or capital would flow to his trade
till his profits had sunk to the general level. Thus then is the
public benefited by machinery: these mute agents are always the
produce of much less labour than that which they displace, even
when they are of the same money value. Through their influence,
an increase in the price of provisions which raises wages will
affect fewer persons; it will reach, as in the above instance,
eighty-five men instead of a hundred, and the saving which is the
consequence, shows itself in the reduced price of the commodity
manufactured. Neither machines, nor the commodities made by them,
rise in real value, but all commodities made by machines fall,
and fall in proportion to their durability.
It will be seen, then, that in the early stages of society,
before much machinery or durable capital is used, the commodities
produced by equal capitals will be nearly of equal value, and
will rise or fall only relatively to each other on account of
more or less labour being required for their production; but
after the introduction of these expensive and durable
instruments, the commodities produced by the employment of equal
capitals will be of very unequal value; and although they will
still be liable to rise or fall relatively to each other, as more
or less labour becomes necessary to their production, they will
be subject to another, though a minor variation, also, from the
rise or fall of wages and profits. Since goods which sell for
5,000 may be the produce of a capital equal in amount to that
from which are produced other goods which sell for 10,000, the
profits on their manufacture will be the same; but those profits
would be unequal, if the prices of the goods did not vary with a
rise or fall in the rate of profits.
It appears, too, that in proportion to the durability of
capital employed in any kind of production, the relative prices
of those commodities on which such durable capital is employed,
will vary inversely as wages; they will. fall as wages rise, and
rise as wages fall; and, on the contrary, those which are
produced chiefly by labour with less fixed capital, or with fixed
capital of a less durable character than the medium in which
price is estimated, will rise as wages rise, and fall as wages
fall.
Section VI
On an invariable measure of value
When commodities varied in relative value, it would be
desirable to have the means of ascertaining which of them fell
and which rose in real value, and this could be effected only by
comparing them one after another with some invariable standard
measure of value, which should itself be subject to none of the
fluctuations to which other commodities are exposed. Of such a
measure it is impossible to be possessed, because there is no
commodity which is not itself exposed to the same variations as
the things, the value of which is to be ascertained; that is,
there is none which is not subject to require more or less labour
for its production. But if this cause of variation in the value
of a medium could be removed - if it were possible that in the
production of our money for instance, the same quantity of labour
should at all times be required, still it would not be a perfect
standard or invariable measure of value, because, as I have
already endeavoured to explain, it would be subject to relative
variations from a rise or fall of wages, on account of the
different proportions of fixed capital which might be necessary
to produce it, and to produce those other commodities whose
alteration of value we wished to ascertain. It might be subject
to variations too, from the same cause, on account of the
different degrees of durability of the fixed capital employed on
it, and the commodities to be compared with it - or the time
necessary to bring the one to market, might be longer or shorter
than the time necessary to bring the other commodities to market,
the variations of which were to be determined; all which
circumstances disqualify any commodity that can be thought of
from being a perfectly accurate measure of value.
If, for example, we were to fix on gold as a standard, it is
evident that it is but a commodity obtained under the same
contingencies as every other commodity, and requiring labour and
fixed capital to produce it. Like every other commodity,
improvements in the saving of labour might be applied to its
production, and consequently it might fall in relative value to
other things merely on account of the greater facility of
producing it.
If we suppose this cause of variation to be removed, and the
same quantity of labour to be always required to obtain the same
quantity of gold, still gold would not be a perfect measure of
value, by which we could accurately ascertain the variations in
all other things, because it would not be produced with precisely
the same combinations of fixed and circulating capital as all
other things; nor with fixed capital of the same durability'. nor
would it require precisely the same length of time, before it
could be brought to market. It would be a perfect measure of
value for all things produced under the same circumstances
precisely as itself, but for no others. If, for example, it were
produced under the same circumstances as we have supposed
necessary to produce cloth and cotton goods, it would be a
perfect measure of value for those things, but not so for corn,
for coals, and other commodities produced with either a less or a
greater proportion of fixed capital, because, as we have shown,
every alteration in the permanent rate of profits would have some
effect on the relative value of all these goods, independently of
any alteration in the quantity of labour employed on their
production. If gold were produced under the same circumstances as
corn, even if they never changed, it would not, for the same
reasons, be at all times a perfect measure of the value of cloth
and cotton goods. Neither gold then, nor any other commodity, can
ever be a perfect measure of value for all things; but I have
already remarked, that the effect on the relative prices of
things, from a variation in profits, is comparatively slight;
that by far the most important effects are produced by the
varying quantities of labour required for production; and
therefore, if we suppose this important cause of variation
removed from the production of gold, we shall probably possess as
near an approximation to a standard measure of value as can be
theoretically conceived