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more complicated economical workings of society. This error has been, I conceive, fatal to the systems, as systems, of the three distinguished economists to whom I before referred, Malthus, Chalmers, and Sismondi; all of whom have admirably conceived and explained several of the elementary theorems of political economy, but this fatal misconception has spread itself like a veil between them and the more difficult portions of the subject, not suffering one ray of light to penetrate. Still more is this same confused idea constantly crossing and bewildering the speculations of minds inferior to theirs. It is but justice to two eminent names, to call attention to the

fact, that the merit of having placed this most important point in its true light, belongs principally, on the Continent, to the judicious J. B. Say, and in this country to Mr. Mill; who (besides the conclusive exposition which he gave of the subject in his Elements of Political Economy) had set forth the correct doctrine with great force and clearness in an early pamphlet, called forth by a temporary controversy, and entitled, "Commerce Defended;" the first of his writings which attained any celebrity, and which he prized more as having been his first introduction to the rriendship of David Bicardo, the most valued and most intimate friendship of bis life.

CHAPTER XV.

OF A MEASUEE OP VALUE.

§ 1. There has been much discussion among political economists respecting a Measure of Value. An importance has been attached to the subject greater than it deserved, and what has been written respecting it has contributed not a little to the reproach of logomachy, which is brought, with much exaggeration, but not altogether without ground, against the speculations of political economists. It is necessary, however, to touch upon the subject, if only to show how little there is to be said on it.

A Measure of Value, in the ordinary sense of the word measure, would mean, something, by comparison with which we may ascertain what is the value of any other thing. When we consider farther, that value itself is relative, and that two things are necessary to- constitute it, independently of the third thing which is to measure it; we may define a Measure of Value to be something, by comparing with which any two other things, we may infer their value in relation to one another.

In this sense, any commodity will serve as a measure of value at a given time and place; since we can always

infer the proportion in which things exchange for one another, when we know the proportion in which each exchanges for any third thing. To serve as a convenient measure of value is one of the functions of the commodity selected as a medium of exchange. It is in that commodity that the values of all other things are habitually estimated. We say that one thing is worth 11., another 31.; and it is then known without express statement, that one is worth two-thirds of the other, or that the things exchange for one another in the proportion of 2 to 3. Money is a complete measure of their value.

But the desideratum sought by political economists is not a measure of the value of things at the same time and place, but a measure of the value of the same thing at different times and places: something by comparison with which it may be known whether any given thing is of greater or less value now than a century ago, or in this country than in America or China. And for this also, money, or any other commodity, will serve quite as well aa at the same time and place, provided we can obtain the same data; provided we are able to compare with the measure not one commodity only, but the two or more which are necessary to the idea of value. If wheat is now 40s. the quarter, and a fat sheep the same, and if in the time of Henry the Second wheat was 20s., and a sheep 10s., we know that a quarter of wheat was then worth two sheep, and is now only worth one, and that the value therefore of a sheep, estimated in wheat, is twice as great as it was then; quite independently of the value of money at the two periods, either in relation to those two articles (in respect to both of which we suppose it to have fallen), or to other commodities, in respect to which we need not make any supposition.

What seems to be desired, however, by writers on the subject, is some means of ascertaining the value of a commodity by merely comparing it with the measure, without referring it specially to any other given commodity. They would wish to be able, from the mere fact that wheat is now 40s. the quarter, and was formerly 20s., to decide whether wheat has varied in its value, and in what degree, without selecting a second commodity, such as a sheep, to compare it with; because they are desirous of knowing, not how much wheat has varied in value relatively to sheep, but how much it has varied relatively to things in general.

The first obstacle arises from the necessary indefiniteness of the idea of general exchange value—value in relation not to some one commodity, but to commodities at large. Even if we knew exactly how much a quarter of wheat would have purchased at the earlier period, of every marketable article considered separately, and that it will now purchase more of some things and less of others, we should often find it impossible to say whether it had risen or fallen in relation to things in general. How much more impossible when we only know how it has varied in relation to the measure. To enable the money price of a thing at two different periods to measure the quantity of things in general which it will exchange for, the same sum of money must correspond at both periods

to the same quantity of things in general, that is, money must always have the same exchange value, the same general purchasing power. Now, not only is this not true of money, or of any other commodity, but we cannot even suppose any state of circumstances in which it would be true.

§2. A measure of exchange value, therefore, being impossible, writers have formed a notion of something, under the name of a measure of value, which would be more properly termed a measure of cost of production. They have imagined a commodity invariably produced by the same quantity of labour: to which supposition it is necessary to add, that the fixed capital employed in the production must bear always the same proportion to the wages of the immediate labour, and must be always of the same durability: in short, the same capital must be advanced for the same length of time, so that the element of value which consists of profits, as well as that which consists of wages, may be unchangeable. We should then have a commodity always produced under one and the same combination of all the circumstances which affect permanent value. Such a commodity would be by no means constant in its exchange value; for (even without reckoning the temporary fluctuations arising from supply and demand) its exchange value would be altered by every change in the circumstances of production of the things against which it was exchanged. But if there existed such a commodity, we should derive this advantage from it, that whenever any other thing varied permanently in relation to it, we should know that the cause of variation was not in it, but in the other thing. It would thus be fitted to serve as a measure, not indeed of the value of other things, but of their cost of production. If a commodity acquired a greater permanent purchasing power in relation to the invariable commodity, its cost of production must have become greater; and in the contrary case, less. This measure of cost, is what political economists have generally meant by a measure of value.

But a measure of cost, though perfectly conceivable, can no more exist in fact, than a measure of exchange value. There is no commodity which is invariable in its cost of production. Gold and silver are the least variable, but even these are liable to changes in their cost of production, from the exhaustion of old sources of supply, the discovery of new, and improvements in the mode of working. If we attempt to ascertain the changes in the cost of production of any commodity from the changes in its money price, the conclusion will require to be corrected by the best allowance we can make for the intermediate changes in the cost of the production of money itself.

Adam Smith fancied that there were two commodities peculiarly fitted to serve as a measure of value: corn, and labour. Of corn, he said that although its value fluctuates much from year to year, it does not vary greatly from century to century. This we now know to be an error: corn tends to rise in cost of production with every increase of population, and to fall with every improvement in agriculture, either in the country itself, or in any foreign country from which it draws a portion of its supplies. The supposed constancy of the cost of the production of corn depends on the maintenance of a complete equipoise between these antagonizing forces, an equipoise which, if ever realized, can only be accidental. With respect to labour as a measure of value, the language of Adam Smith is not uniform. He sometimes speaks of it as a good measure only for short periods, saying that the value of labour (or wages) does not vary much from year to year, though it does from generation to generation. On other occasions he speaks as if labour were intrinsically the most proper measure of value, on the ground that one day's ordinary muscular exertion of one man, may be looked upon as always, to him, the same amount of effort or sacrifice. But this proposition, whether in itself admissible or not, discards the idea of 'exchange value altogether, substituting

a totally different idea, more analogous to value in use. If a day's labour will purchase in America twice as much of ordinary consumable articles as in England, it seems a vain subtlety to insist on saying that labour is of the same value in both countries, and that it is the value of the other things which is different. Labour, in this case, may be correctly said to be twice as valuable, both in the market and to the labourer himself, in America as in England.

If the object were to obtain an approximate measure by which to estimate value in use, perhaps nothing better could be chosen than one day's subsistence of an average man, reckoned in the ordinary food consumed by the class of unskilled labourers. K in any country a pound of maize flour will support a labouring man for a day, a thing might be deemed more or less valuable in proportion to the number of pounds of maize flour it exchanged for. If one thing, either by itself or by what it would purchase, could maintain a labouring man for a day, and another could maintain him for a week, there would be some reason in saying that the one was worth, for ordinary human uses, seven times as much as the other. But this would not measure the worth of the thing to its possessor for his own purposes, which might be greater to any amount, though it could not be less, than the worth of the food which the thing would purchase.

The idea of a Measure of Value must not be confounded with the idea of the regulator, or determining principle, of value. When it is said by Ricardo and others, that the value of a thing is regulated by quantity of labour, they do not mean the quantity of labour for which the thing will exchange, but the quantity required for producing it. This, they mean to affirm, determines its value; causes it be of the value it is, and of no other. But when Adam Smith and Malthus say that labour is a measure of value, they do not mean the labour by which the thing was or can be made, but the quantity of labour which it will exchange for, or purchase; in other words, the value of the thing, estimated in labour. And they do not

mean that this regulates the general exchange value of the thing, or has any effect in determining ./hat that value shall be, but only ascertains what it is, and whether and how much it varies

from time to time and from place to. place. To confound these two ideas, would be much the same thing as to overlook the distinction between the. thermometer and the fire.

CHAPTER XVI.

Or SOME PECULIAR CASES OP VALUE.

§ 1. The general laws of value, in all the more important cases of the interchange of commodities in the same country, have now been investigated. AVe examined, first, the case of monopoly, in which the value is determined by either a natural or an artificial limitation of quantity, that is, by demand and supply: secondly, the case of free competition, when the article can be produced in indefinite quantity at the same cost; in which case the permanent value is determined by the cost of production, and only the fluctuations by supply and demand : thirdly, a mixed case, that of the articles which can be produced in indefinite quantity, but not at the same cost; in which case the permanent value is determined by the greatest cost which it is necessary to incur in order to obtain the required supply. And lastly, we have found that money itself is a commodity of the third class; that its value, in a state of freedom, is governed by the same laws as the values of other commodities of its class: and that prices, therefore, follow the same laws as values.

From this it appears that demand and supply govern the fluctuations of values and prices in all cases, and the permanent values and prices of all things of which the supply is determined by any agency other than that of free competition: but that, under the regime of competition, things are, on the average, exchanged for each other at such values, and sold at such prices, as afford equal expectation of advantage to all classes of producers; which can only be when things ex

change for one another in the ratio of their cost of production.

It is now, however, necessary to take notice of certain cases, to which, from their peculiar nature, this law of exchange value is inapplicable.

It sometimes happens that two different commodities have what may be termed a joint cost of production. They are both products of the same operation, or set of operations, and the outlay is incurred for the sake of both together, not part for one and part for the other. The same outlay would have to be incurred for either of the two, if the other were not wanted or used at all. There are not a few instances of commodities thus associated in their production. For example, coke and coal-gas are both produced from the same material, and by the same operation. In a more partial sense, mutton and wool are an example: beef, hides, and tallow: calves and dairy produce: chickens and eggs. Cost of production can have nothing to do with deciding the value of the associated commodities relatively to each other. It only decides their joint value. The gas and the coke together have to repay the expenses of their production,, with the ordinary profit. To do this, a given quantity of gas, together with the coke which is the residuum of its manufacture, must exchange for other things in the ratio of their joint cost of production. But how much of the remuneration of the producer shall bo derived from the coke, and how much from the gas, remains to be decidedCost of production does not determine their prices, but the sum of their prices. A principle is wanting to apportion.the expenses of production between the two.

Since cost of production here fails us, we must revert to a law of value anterior to cost of production, and more fundamental, the law of demand and supply. The law is, that the demand tor a commodity varies with its value, and that the value adjusts itself so that the demand shall be equal to the supply. This supplies the principle of repartition which we are in quest of.

Suppose that a certain quantity of gas is produced and sold at a certain price, and that the residuum of coke is offered at a price which, together with that of the gas, repays the expenses with the ordinary rate of profit. Suppose, too, that at the price put upon the gas and coke respectively, the whole of the gas finds an easy market, without either surplus or deficiency, but that purchasers cannot be found for all the coke corresponding to it. The coke will be offered at a lower price in order to force a market. But this lower price, together with the price of gas, will not be remunerating: the manufacture, as a whole, will not pay its expenses with the ordinary profit, and will not, on these terms, continue to be carried on. The gas, therefore, must be sold at a higher price, to make up for the deficiency on the coke. The demand consequently contracting, the production will be somewhat reduced; and prices will become stationary when, by the joint effect of the rise of gas and the fall of coke, so much less of the first is sold, and so much more of the second, that there is now a market for all the coke which results from the existing extent of the gas manufacture.

Or suppose the reverse case; that more coke is wanted at the present prices than can be supplied by the operations required by the existing demand for gas. Coke, being now in deficiency, will rise in price. The whole operation will yield more than the nsual rate of profit, and additional capital will be attracted to the manufacture. The unsatisfied demand for coke will be supplied; but this cannot be done without increasing the supply of gas too; and as the existing demand was fully |

supplied already, an increased quantity can only find a market by lowering the price. The result will be that the two together will yield the return required by their joint cost of production, but that more of this return than before will be furnished by the coke, and' loss by the gas. Equilibrium will be attained when the demand for each article fits so well with the demand for the other, that the quantity required of each is exactly as much as is generated in producing the quantity required of the other. If there is any surplus or deficiency on either side; if there is a demand for coke, and not a demand for all the gas produced along with it, or vice versa; the values and prices of the two things will so readjust themselves that both shall find a market.

When, therefore, two or more commodities have a joint cost of production, their natural values relatively to each other are those which will create a demand for each, in the ratio of the quantities in which they are sent forth by the productive process. This theorem is not in itself of any great importance: but the illustration it affords of the law of demand, and of the mode in which, when cost of production fails to be applicable, the other principle steps in to supply the vacancy, is worthy of particular attention, as we shall find in the next chapter but one that something very similar takes place in cases of much greater moment.

§ 2. Another case of value which merits attention, is that of the different kinds of agricultural produce. This is rather a more complex question than the last, and requires that attention should be paid to a greater number of influencing circumstances.

The case would present nothing peculiar, if different agricultural products were either grown indiscriminately and with equal advantage on the same soils, or wholly on different soils. The difficulty arises from two things: first, that most soils are fitter for one kind of produce than another, without being absolutely unfit for any; and secondly, the rotation of crops.

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