not conform to their cost of production alone, but to their cost of production plus something else. Unless, indeed, for the sake of generality in the expression, we include the profit which the wine-merchant foregoes during the five years, in the cost of production of the wine: looking upon it as a kind of additional outlay, over and above his other advances, for which outlay he must be indemnified at last.

All commodities made by machinery are assimilated, at least approximately, to the wine in the preceding example. In comparison with things made wholly by immediate labour, profits enter more largely into their cost of production. Suppose two commodities, A and B, each requiring a year for its production, by means of a capital which we will on this occasion denote by money, and suppose it to be 10007. A is made wholly by immediate labour, the whole 10007. being expended directly in wages. B is made by means of labour which cost 500l. and a machine which cost 5007., and the machine is worn out by one year's use. The two commodities will be of exactly the same value which, if computed in money, and if profits are 20 per cent per annum, will be 12007. But of this 1200l., in the case of A, only 2007., or one-sixth, is profit: while in the case of B there is not only the 2007., but as much of 5007. (the price of the machine) as consisted of the profits of the machinemaker; which, if we suppose the machine also to have taken a year for its production, is again one-sixth. So that in the case of A only one-sixth of the entire return is profit, whilst in B the element of profit comprises not only a sixth of the whole, but an additional sixth of a large part.

The greater the proportion of the whole capital which consists of machinery, or buildings, or material, or anything else which must be provided before the immediate labour 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 sup

posed one extreme case, 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 for ever, 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 500l. which he gave for the machine, since he has always the machine itself, worth 5007. ; but he must be paid, as before, a profit on it. The commodity B, therefore, which in the case previously supposed was sold for 12007. of which sum 10007. were to replace the capital and 2007. were profit, can now be sold for 7007., being 500l. to replace wages, and 2007. profit on the entire capital. Profit, therefore, enters into the value of B in the ratio of 2007. out of 7007., 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 16 per cent. The case is of course purely ideal, since no machinery or other fixed capital lasts for ever; 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 5007. loses one-fifth of its value by each year's use, 1007. must be added to the return to make up this loss, and the price of the commodity will be 8007. Profit therefore will enter into it in the ratio of 2007. to 8007., or one-fourth, which is still a much higher proportion than one-sixth, or 2007. in 12007., as in case A.

From the unequal proportion in which, in different em ployments, 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 commodities do not exchange in the ratio simply of the quantities of labour required to produce them; not even if we allow for the unequal rates at which different kinds of labour 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 labour. But instead of B, made by 500l. worth of immediate labour and a machine worth 500., let us suppose C, made by 5007. worth of immediate labour with the aid of a machine which has been produced by another 500l. worth of immediate labour: 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 labour, paid at the same rate: A costs 1000l. worth of direct labour; C, only 500l. worth, which however is made up to 10007. by the labour expended in the construction of the machine. If labour, 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 500l., and profits being 20 per cent., the natural price of the machine is 6007.: making an additional 100%. which must be advanced, over and above his other expenses, by the manufacturer of C, and repaid to him with a profit of 20 per cent. While, therefore, the commodity A is sold for 12007., C cannot be permanently sold for less than 13207.

A second consequence is, that every rise or fall of general profits will have an effect on values. Not indeed by raising or lowering them generally (which, as we have so of ten said, is a contradiction and an impossibility): but by altering the proportion in which the values of things are af fected by the unequal lengths of time for which profit is due. When two things, though made by equal labour, 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 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 labour, were sold for 12007. and

13207., a difference of 10 per cent., would, if profits had been only half as much, have been sold for 1100l. and 11557. a difference of only 5 per cent.

It follows from this, that even a general rise of wages, when it involves a real increase in the cost of labour, does in some degree influence values. It does not affect them in the manner vulgarly supposed, by raising them universally. But an increase in the cost of labour, lowers profits; and therefore lowers in natural values 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 value of things made by labour, in comparison with those made by machinery. But things made by machinery, just as much as any other things, are made by labour, namely the labour 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 labour. It is better, therefore, to associate the effect 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 labourer's real remuneration, rather than of what is alone to the purpose here, namely, the cost of labour to its employer.

§ 6. Besides the natural and necessary elements in cost of production-labour and profits-there are others which are artificial and casual, as for instance a tax. The taxes on hops and malt are as much a part of the cost of production of those articles, as the wages of the labourers. 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 so as to take an equal percentage from all profits, 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 relations 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 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

* Some of these quarries, I believe, have been rediscovered, and are again worked.