Now, though it has been pointed out that these modes of estimating the Value of a quantity are by no means identical, we observe that in this passage Smith defines the Value of a thing to be something external to itself. The Value of a thing is some other thing for which it can be exchanged. Hence, it is manifest that the Value of A must vary directly as 1, p, or m. The greater the Quantity of 1, p, or m that can be got for A, the more valuable is A: the less of 1, p, or m that can be got for A, the less valuable is A. It is also perfectly clear that if any change whatever takes place in the exchangeable relations between A and these Quantities, the Value of A has changed.

Hence Smith admits that Value, like distance, requires two objects: if any change takes place in the position of either of these, the distance between them has changed: no matter in which the change has taken place. So if the exchangeable relation between two Quantities changes, their value has changed, no matter in which the change takes place.

Hence it is clear that there can be no such thing as Invariable Value. Nothing whatever can by any possibility have an Invariable Value unless the relations of all other things are fixed also.

Hence we can at once see that by the very nature of things there can be no such thing as an invariable Standard of Value by which to measure the variations in value of other things, because, by the very nature of things, the very condition of anything being invariable in value is that nothing else shall vary in value: and consequently the very condition of there being an invariable standard is that there shall be no variations to measure.

Nevertheless, a very large body of Economists have set out upon this wild-goose chase-this search after an Invariable Standardwhich it is utterly contrary to the nature of things should exist at all. Directly after the passages we have referred to, Smith commences the search for that single thing which is to be the Invariable Standard of Value.

He says that gold and silver will not do because they vary in their value-sometimes they can purchase more and sometimes less labour and other commodities. Then he says: "But as a measure of quantity such as the natural foot, fathom, or handful, which is constantly varying its own quantity, can never be an accurate measure of the quantity of other things, so a commodity which is itself continually varying in its own value can never be an accurate measure of the value of other commodities. Equal Quantities of Labour, at all times and places, may be said to be of equal value to the

labourer. In his ordinary state of health, strength, and spirits, in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, his happiness. The price which he pays must always be the same, whatever the quantity of goods which he receives in return for it [which, by Smith's own definition, is the Value of his labour]. Of these, indeed, it may sometimes purchase a greater and sometimes a smaller quantity, but it is their Value which varies, not that of the labour which purchases them. At all times and places that is dear which is difficult to come at, or which costs much labour to acquire; and that cheap which is to be had easily, or with very little labour. Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times be estimated and compared. It is their real price: money is their nominal price only.

"But though equal Quantities of Labour are always of equal value to the labourer (!!), yet to the person who employs him they appear sometimes to be of greater and sometimes of smaller value.

"Labour, therefore, it appears evidently, is the only universal, as well as the only accurate, measure of value, or the only standard by which we can compare the value of different commodities at all times and places.”

The utter confusion of ideas in these passages is manifest. A foot or a fathom is an absolute quantity, and of course may increase or decrease by itself: but Value, by Smith's own definition, is a Ratio: and therefore we might just as well say that because a foot, which is varying in its own length, cannot be an accurate measure of the length of other things; therefore a quantity which is always varying its own Ratio cannot be an accurate measure of the Ratio of other things. The utter confusion of ideas as to the whole nature of the thing is manifest. We may measure a tree with a yard, because they are each of them single quantities: but it is impossible that a Single Quantity can measure a Ratio. It is manifestly impossible to say

ab x.

It is manifestly absurd to say that 4 is to 5 as 8, without saying as 8 is to what just as it is absurd to say that a horse gallops at the rate of 20 miles, without saying in what time.

Smith says that "Equal quantities of labour are always of equal value to the labourer."

Now, by his own definition, the Value of a thing is what can be got in exchange for it; consequently, if "equal quantities are always of equal value to the labourer," a man's labour must be of the same

value to him whether he gets £100 for it, or £50, or £10, or nothing at all!

The contradiction of ideas in this chapter of Smith's is palpable. He first defines the value of A to be the quantity of things it will purchase, and therefore, of course, varying directly as that quantity: and then he suddenly changes the conception of value to be the quantity of labour in obtaining A: and says that the Value of A is invariable so long as it is produced by the same quantity of labour and that its Value is the same whatever quantity of other things it will purchase!

The word Value has been so misused by Economical writers, that it will be well to illustrate it by the use of another word of similar import whose meaning has not been so misused.

Value, like Distance, requires two objects, and we may present Smith's ideas in this form.

"As a measure of quantity, such as a foot, which is always varying its own length, can never be an accurate measure of the length of other things, so an object which is always varying its own distance can never be an accurate measure of the distance of other objects. But the Sun is always at the same distance. And though the earth is sometimes nearer the sun, and sometimes further off from it, the sun is always at the same distance. And though the earth is at different distances from the sun, it is the distance of the earth which has varied, and not that of the sun; and the sun alone, never vary-ing its own distance, is the ultimate and real standard by which the distances of all things can at all times and places be estimated and compared."

Such is a fair translation of Smith's ideas, merely substituting Distance for Value. No wonder that Francis Horner says: "We have been under the necessity of suspending our progress in the perusal of the Wealth of Nations on account of the insurmountable difficulties, obscurity, and embarrassment in which the reasonings of the fifth chapter are involved."

But after saying that a thing produced by the same quantity of labour is always of the same value, no matter what it may exchange for: he says, speaking of Money in a subsequent passage, if it could be exchanged for nothing, it would be of no more value than the most useless piece of paper!

So, after all, Smith came back to Exchangeability as the test of value, and this confusion runs through the whole of Smith. One half the work is based upon Labour as the foundation of value, and the other half upon Exchangeability.

Having thus shown the confusion and contradictions of Smith on the two fundamental concepts of Economics, Wealth and Value, we have now to consider his notions on the Law of Value, or the Law which governs the exchangeable relations of Economic Quantities.

On this point, Smith never had the slightest idea that there can only be one General Law of Value, or General Equation of Economics; on the contrary, his work is full of a multiplicity of Theories of Value. He catches at a new Theory of Value for every class of cases he discusses. Consequently, his Theories of Value are a mass of contradictions, and, of course, he must sometimes be right. But his confusion and contradiction on the terms, Wealth and Value, and the Law of Value, which are the foundations of the whole science, render the work utterly useless as a general treatise on the science, fit to be placed in the hands of students. It was the necessity of determining general principles of Value which was one of the causes of Ricardo's work.

Stated in a broad, general way, Smith's chief merits are—

1. He shewed, by a course of masterly reasoning, which no one else approached, that in an exchange, both sides gain, which one or two Economists had casually observed before him, in contradiction to the doctrines that had prevailed before the Economists, that what one side gains the other loses; and the doctrine of the Economists, that in an exchange, neither side gains nor loses.

This is one of Smith's titles to immortal glory; for it at once removed from the science a doctrine which had been the cause of innumerable commercial wars, and shewed how utterly the Economists had under-estimated the advantages of commerce. It created a complete reversal of the policy of nations, because it shewed that nations were not interested in the destruction of their neighbours, but in their prosperity.

2. He burst the bonds of the narrow dogmatism of the Economists, that nothing but the material products of the earth are Wealth. In conformity with the doctrine which the author of the Eryxias had taught 2100 years before him, he recognised that Labour is Wealth, that it is a marketable commodity which may be bought and sold, and whose value may be measured in money. He has a long investigation of the Laws which govern Wages, or the price of Labour; thereby making Labour a most important department of Economics, which no one before him had done,

and which at the present day excites more discussion than any other department of Economics.

3. He demonstrates that the labour of merchants, traders, and artisans is productive, and enriches a nation; contrary to the doctrines of the Economists, who held that agricultural labour alone is productive.

4. He included Bank Notes, Bills of Exchange, &c., under the title of Circulating Capital, thus admitting that Credit is Capital. Now Bank Notes, Bills of Exchange, &c., are one class of Rights: they are Rights of Action, Credits, or Debts. He thus enlarged Economics to include all the three orders of Exchangeable, or Economic Quantities, as the ancients had done.

He has besides a multitude of sagacious observations, which are too numerous to be specified in a general outline of the science, such as the present.

In a broad and general way, his defects are

1. The title of the work conveys no intelligible idea of its scope and purpose. It is only by a critical investigation that it is seen that it is the Theory of Value, as Whately has pointed out.

2. It has no clear and distinct settlement of Definitions, by which only a science can be constructed, and by which propositions can be affirmed or denied. His definitions of Wealth and Value, to name only the two fundamental terms of the science, are quite contradictory and irreconcileable, and the doctrines founded on them are a mass of confusion and contradictions.

3. He never had any idea that there can be only a single General Law of Value governing all the phenomena of commerce or exchanges. He has a multitude of Theories of Value, which is contrary to the fundamental principles of Natural Philosophy.

4. That though he extended the term, Productive Labour, to include the labour of merchants, traders, and artisans, he restricted the term to labour which realises itself in some material product which endures after the labour is ended. Whereas Productive Labour, as was seen by the Economists, means Labour which produces a Profit. Thus, Productive Labour means Profitable Labour, and all Labour which produces a profit is productive, no matter whether it is embodied in a material product or not. Thus all labourers, who earn an income, and make a profit by their labour, no matter of what kind it may be, are productive; all labourers who produce anything whatever which is wanted, demanded, and paid for, are productive labourers.

H