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i thing else which must be provided before the immediate labor can commence, the more largely will profits enter into the cost of production. It is equally true, though not so obvious at first sight, that greater durability in the portion of capital which consists of machinery or buildings, has precisely the same effect as a greater amount of it. As we just supposed one extreme case, that of a machine entirely worn out by a year's use, let us now suppose the opposite and still more extreme case, of a machine which lasts forever, and requires no repairs. In this case, which is as well suited for the purpose of illustration as if it were a possible one, it will be unnecessary that the manufacturer should ever be repaid the £500 which he gave for the machine, since he has always the machine itself, worth £500 ; but he must be paid, as before, a profit on it. The commodity B, therefore, which in the case previously supposed was sold for £1,200, of which sum £1,000 were to replace the capital and £200 were profit, can now be sold for £700, being £500 to replace wages, and £200 profit on the entire capital. Profit, therefore, enters into the value of B in the ratio of £200 out of £700, being two sevenths of the whole, or 284 per cent., while in the case of A, as before, it enters only in the ratio of one sixth, or 162 per cent. The case is, of course, purely ideal, since no machinery or other fixed capital lasts forever ; but the more durable it is, the nearer it approaches to this ideal case, and the more largely does profit enter into the return. If, for instance, a machine worth £500 loses one fifth of its value by each year's use, £100 must be added to the return to make up this loss, and the price of the commodity will be £800. Profit, therefore, will enter into it in the ratio of £200 to £800, or one fourth, which is still a much higher proportion than one sixth, or £200 in £1,200, as in case A.

From the unequal proportion in which in different employments profits enter into the advances of the capitalist, and therefore into the returns required by him, two consequences follow in regard to value. One is, that commod-D ities do not exchange in the ratio simply of the quantities of labor required to produce them; not even if we allow for the unequal rates at which different kinds of labor are permanently remunerated. We have already illustrated this by the example of wine; we shall now further exemplify it by the case of commodities made by machinery. Suppose, as before, an article A made by a thousand pounds worth of immediate labor. But instead of B, made by £500 worth of immediate labor and a machine worth £500, let us suppose C, made by £500 worth of immediate labor with the aid of a machine which has been produced by another £500 worth of immediate labor; the machine requiring a year for making, and worn out by a year's use; profits being as before 20 per cent. A and C are made by equal quantities of labor, paid at the same rate; A costs £1,000 worth of direct labor; C, only £500 worth, which however is made up to £1,000 by the labor expended in the construction of the machine. If labor, or its remuneration, were the sole ingredient of cost of production, these two things would exchange for one another. But will they do so? Certainly not. The machine having been made in a year by an outlay of £500, and profits being 20 per cent., the natural price of the mar hine is £600; making an adutional £100, which must be advanced, over and above his other expenses, by the manufacturer of (', and repaid to him with a profit of 20 per cent. While, therefore, the commodity is sold for £1,200, C cannot be permanently sold for less than £1,320.

A second consequence is, that every rise or full of general profits will have an eflect on values. Vot indeed by raining or lowering them generally, (which, as we have so often sind, is a contradiction and an impossibility) but by altering the proportion in which the values of things are

VOL. I.

affected by the unequal lengths of time for which profit is due. When two things, though made by equal labor, are of unequal value because the one is called upon to yield profit for a greater number of years or months than the other, this difference of value will be greater when profits are greater, and less when they are less. The wine which has to yield five years' profit more than the cloth, will surpass it in value, and much more if profits are 40 per cent., than if they are only 20. The commodities A and C, which, though made by equal quantities of labor, were sold for £1,200 and £1,320, a difference of 10 per cent., would, if profits had been only half as much, have been sold for £1,100 and £1,155, a difference of only 5 per cent. ir It follows from this that even a general rise of wages, when it involves a real increase in the cost of labor, does in "some degree influence values. It does not affect them in the manner vulgarly supposed, by raising them universally. But an increase of the cost of labor, lowers profits; and therefore, lowers in natural value the things into which profits enter in a greater proportion than the average, and raises those into which they enter in a less proportion than the average. All commodities in the production of which machinery bears a large part, especially if the machinery is very durable, are lowered in their relative value when profits fall; or, what is equivalent, other things are raised in value relatively to them. This truth is sometimes expressed in a phraseology more plausible than sound, by saying that a rise of wages raises the values of things made by labor, in comparison with those made by machinery. But things made by machinery, just as much as any other things, are made by labor, namely, the labor which made the machinery itself; the only difference being that profits enter somewhat more largely into the production of things for which machinery is used, though the principal item of the outlay is still labor. It is better, therefore, to associate the etiect with fall of profits than 'with rise of wages; especially as this last expression is extremely ambiguous, suggesting the idea of an increase of the laborer's real remuneration, rather than of what is alone to the purpose here, namely, the cost of labor to its employer.

S 6. Beside the natural and necessary elements in cost ten of production-labor and profits—there are others which are artificial and casual, as, for instance, a tax. The taxes on bricks and malt are as much a part of the cost of production of those articles, as the wages of the laborers. The expenses which the law imposes, as well as those which the nature of things imposes, must be reimbursed with the ordinary profit from the value of the produce, or the things will not continue to be produced. But the influence of taxation on value is subject to the same conditions as the influence of wages and of profits. It is not general taxation, but differential taxation, that produces the effect. If all productions were taxed by a fixed percentage on their value, relative values would be in no way disturbed. If only a few commodities were taxed, their value would rise; and if only a few were left untaxed, their value would fall. If half were taxed and the remainder untaxed, the first half would rise, and the last would fall relatively to each other. This would be necessary in order to equalize the expectation of profit in all employments, without which the taxed employments would ultimately, if not immediately, be abandoned. But general taxation, when equally imposed, and not disturbing the relation of different productions to one another, cannot produce any effect on values.

We have thus far supposed that all the means and appliances which enter into the cost of production of commodities, are things whose own value depends on their cost of production. Some of them, however, may belong to the class of things which cannot be increased ad libitum

Sunut value

in quantity, and which therefore, if the demand goes beyond a certain amount, command a scarcity value. The materials of many of the ornamental articles manufactured in Italy are the substances called rosso, giallo, and verde antico, which, whether truly or falsely I know not, are asserted to be solely derived from the destruction of ancient columns and other ornamental structures; the quarries from which the stone was originally cut being exhausted, or their locality forgotten. A material of such a nature, if in much demand, must be at a scarcity value; and this value enters into the cost of production, and, consequently, into the value of the finished article. The time seems to be approaching when the more valuable furs will come under the influence of a scarcity value of the material. Hitherto the diminishing number of the animals which produce them, in the wildernesses of Siberia and on the coasts of the Esquimaux Sea, has operated on the value only through the greater labor which has become necessary for securing any given quantity of the article, since, without doubt, by employing labor enough, it might still be obtained in much greater abundance for some time longer.

But the case in which scarcity value chiefly operates in adding to cost of production, is the case of natural agents. These, when unappropriated, and to be had for the taking, do not enter into cost of production, save to the extent of the labor which may be necessary to fit them for use. Even when appropriated, they do not (as we have already seen) bear a value from the mere fact of the appropriation, but only from scarcity, that is, from limitation of supply. But it is equally certain that they often do bear a scarcity value. Suppose a fall of water, in a place where there are more mills wanted than there is water-power to supply; the use of the fall of water will have a scarcity value, sufficient either to bring the demand down to the supply, or to pay

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