effectual demand, or the demand of those who would be willing to pay the whole rent, profit, and wages necessary for preparing and bringing them thither, according to the ordinary rate at which they are paid in common vineyards. The whole quantity therefore can be disposed of to those who are willing to pay more, which necessarily raises the price above that of common wine. The difference is greater or less, according as the fashionableness or scarcity of the wine render the competition of the buyers more or less eager. Whatever it be, the greater part of it goes to the rent of the landlord. For though such vineyards are in general more carefully cultivated than most others, the high price of the wine seems to be, not so much the effect, as the cause of this careful cultivation." Now it is easy to see that this last sentence is entirely antagonistic to the whole of the rest of the system of Smith and Ricardo, and both doctrines cannot be true. In their general system they make it appear that Labour is the cause of Value: but here Smith has seen and acknowledged that it is Value which is the inducement to Labour. Now it is no more possible in Economics to adopt one of these doctrines to explain some phenomena, and to adopt the other doctrine to explain other phenomena, than it is in astronomy to explain some phenomena by the Ptolemaic hypothesis, and other phenomena by the Copernican: or in optics to explain some phenomena by the Corpuscular hypothesis, and other phenomena by the Wave theory. One or other doctrine must be universally true. It is perfectly clear that the latter doctrine is the true one, and the rest of the system is fallacious. So Whately says "In this as in so many other points in Political Economy, men are prone to confound cause and effect. It is not that pearls fetch a high price because men have dived for them; but, on the contrary, men dive for them because they fetch a high price." So also J. B. Say, who adopts the doctrine that Utility is the basis of value says 2 "Riches can only be valued by an exchange, by means of which their value is stated "_" You see that wealth does not depend on the species of the things or on their physical nature, but on a MORAL quality which every one 1 Lectures on Political Economy. Cours, part i., ch. 1. calls their value." And he also says '-" Value is purely a MORAL quality, and appears to depend on the fugitive and changeable will of men." And he elsewhere says that Demand is the first foundation of all value. Now it is strange indeed that so able a writer could not see the incongruity in making Value to be, in one place, the qualities of an object, and in others, a moral quality of the mind. So also Bastiat places the source of Value entirely in the mind. He says "Exchange does more than state and measure values, it gives them existence "-" The idea of Value came into the world the first time a man said to his brother: Do this for me, I will do that for you: they agreed upon it: because then it might for the first time be said, the two services exchanged were equal (se valent). . We labour to support, clothe, shelter, light, heal, protect, and instruct each other. Thence reciprocal services. We compare these service, we discuss them: we estimate their value: thence comes VALUE. 19. Hence we see that DEMAND is the sole Origin, Source, and Cause of Value. It is Demand, or Consumption, and not Labour which gives Value to a product. It is not the Labour which gives value to the product, but the Demand for the product which gives value to the Labour. HENCE IT IS NOT LABOUR WHICH IS THE CAUSE OF VALUE, but it is VALUE WHICH IS THE CAUSE OF, OR INDUCEMENT TO, Labour. Value then in its true sense signifies an Affection of the Mind, and not a Quality in an object, either natural, or the result of labour. The usual phrase is "I value so and so." It is the force of attraction between the mind and some external object. But an impotent desire of the mind, not manifested by any overt act, is not an Economical phenomenon. In order to enter into the science of Economics something must be done. But even the desire of a single mind is not sufficient to produce an act. A man may have things he wants to sell, but if no one will buy them, they have no value. He may wish to possess things offered for sale by others, but if they do not want, and will not take in exchange, what he offers, no exchange can take place. In order to constitute an exchange two persons must each produce something, and each must want what the other 1 Ibid. Considérations Générales. 2 Harmonies Economiques. De la Valeur. produces. And it is the reciprocal desire of each for the product of the other that gives rise to an exchange. Hence the concurrence of two minds is essential to produce an exchange, or an Economic phenomenon. Each one will try to give as little as he can of his own product, and get as much as he can of the other's product. Hence when the exchange ultimately takes place, the quantity exchanged by each measures the intensity of his desire to obtain possession of the product of the other. And hence the Quantity given by each is called THE Value of the other. 20. All production is founded upon speculation. Producers find out or think of what other people want, and then they produce. A constant supply of some things is wanted. Inventors hope that they may excite or create a desire, but it is no reason that people will buy, because others produce; and if none want or will buy what is produced, such an article has no value. All production, then, is founded on speculation, varying through all degrees of prudence, certainty, and risk. All producers speculate that there will not only be buyers who will want their products, but will want them to such a degree of intensity as to be willing to pay a sum at least sufficient to pay the cost of production, and a profit besides, sufficient to remunerate them for their time and trouble. Now, the powers of consumption generally speaking are limited, but in most cases the powers of production are more easily extended, and the amount of value, or the price, depends upon the proportion between the production, or the supply, and the number of persons who are willing to give an adequate price, or the consumption, and hence production must always be adjusted to consumption, and not the reverse. Hence, also, we have this fundamental truth that SPECULATION IS THE MOTHER OF PRODUCTION, BUT DEMAND IS THE ORIGIN of Value. 21. Labour is in no case, whatever, the cause or foundation of value. No amount of Labour, or cost of production, can ever bestow or ensure value. In all cases whatever, it is because articles have great value, that great labour or great expense is expended in producing them. It is, then, universally the RESULT, and the result only, which has value, whether that result be obtained by great or by little labour: although it is undoubtedly true, that valuable results are often associated with great labour or expense. Nevertheless, we must rigidly guard ourselves from thinking that it is the labour that confers the value. An able and skilful man may obtain a result of great value with comparatively little labour, and an inferior man may bestow many times the amount of labour, and never attain so valuable a result. No class of persons are so apt to estimate the value of a thing by the labour it has cost them as authors, and consequently it is a very common remark that authors are generally the worst judges of the relative value of their own performances. Archbishop Whately cautions an intended writer of the History of Logic thus, "he should possess the power of rightly estimating each according to its intrinsic importance, and not (as is very commonly done) according to the degree of laborious research it may have cost him." And this remark is of universal application. 22. We must also be on our guard against admitting a specious form of expression which J. B. Say uses-" Thus, without examining yet, why olive oil is worth 30 sous a pound at Marseilles, and 40 sous at Paris, I say that he who sends it from Marseilles to Paris adds 10 sous to the value of each pound of oil." "Products successively increase their value in passing through the hands of their different producers." It is never the producers that confer value, but the consumers; it is each successive consumer that confers the value. If it was the cost of transport that added to its value, it would necessarily follow that to send it back again from Paris to Marseilles would still further add to its value, and to send it backwards and forwards twenty times ought to add twenty times the cost to its value. The truth manifestly is that people incur the cost of transport because they expect that the difference of the value between the two places will repay the cost; but no cost of transport can really add to its value. Thus a Library or Museum may be brought up to London from the Country for sale, but the expenses of the transport do not add to the value of the books, but they are brought up to London because it is expected that their bigher value in London will repay the cost of bringing them there. 1 Traité d'Economie Politique, p. 101. 2 Ibid., p. 531. : To exemplify, and still further to enforce, the truth of this principle, we may take the case of diamonds and other precious stones. Their value depends entirely upon their rarity, and the extreme desire of rich persons to possess them, and has no appreciable relation to the labour of finding them. They have acquired a certain estimation in the eyes of men for certain reasons, and they are scarce, and it flatters the pride of men to be the possessors of rare articles. The finding of diamonds is a great hazard, and they are only found in a few places, and of certain sizes. If a few persons were to be so fortunate as to discover a few hundreds of diamonds of large size, their value would be immensely diminished all over the world; nor would it be possible to assign what proportion the labour of producing them would bear to their price. On the other hand, were a million of men to devote themselves to search for them, and if they searched in vain, and found none, that circumstance would not have the smallest effect in raising the value of a single diamond. So that the real truth is, that men are willing to devote themselves to search for diamonds, because they are of great value when found. A diamond is not valuable because a great deal of labour has been bestowed on finding it, but a man searches for diamonds because, though he may only find one at rare intervals, the value of it when found is so great, that it will repay him for a long course of unsuccessful labour. Thus, also, pearls are not dear because so many fishermen seek for them, but so many fishermen labour to find them, because they are highly esteemed, and rich people are willing to pay high prices for the pleasure of possessing them. Hence, we may say, that it is true of diamonds and pearls, and all that class of productions, that a great deal of labour is bestowed on producing them, because a high price is given for them; and that it is a mistake to say that a high price is given for them because a great deal of labour is bestowed on producing them. Sidney Smith was in a fever of anxiety to sell some jewels he had, to set up house, lest mankind should awake from their folly and refuse to buy these glittering baubles. No examples can be taken better than these to show the total want of any necessary relation between labour and value. 23. An attentive consideration of this last example is of the utmost importance, and is of universal application in Political |