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liable to be interrupted by the opening of a new mine, or a new fishery, of superior quality to some of those already in use. The first effect of such an incident is an increase of the supply; which of course lowers the value to call forth an increased demand. This reduced value may be no longer sufficient to remunerate the worst of the existing mines or fisheries, and these may consequently be abandoned. If the superior mines or fisheries, with the addition of the one newly opened, produce as much of the commodity as is required at the lower value corresponding to their lower cost of production, the fall of value will be permanent, and there will be a corresponding fall in the rents of those mines or fisheries which are not abandoned. In this case, when things have permanently adjusted themselves, (the result will be, that the scale of qualities which supply the market will have been cut short at the lower end, while a new insertion will have been made in the scale at some point higher up; and the worst mine or fishery in use—the one which regulates the rents of the superior qualities and the value of the commodity —will be a mine or fishery of better quality than that by which they were previously regulated.

Land is used for other purposes than agriculture, especially for residence; and when so used, yields a rent, determined by principles similar to those already laid down. The ground rent of a building, and the rent of a garden or park attached to it, will not be less than the rent which the same land would afford in agriculture: but may be greater than this to an indefinite amount: the surplus being either in consideration of beauty or of convenience, the convenience often consisting in superior facilities for pecuniary gain. Sites of remarkable beauty are generally limited in supply, and therefore, if in great demand, are at a scarcity value. Sites superior only in convenience, are governed as to their value by the ordinary principles of rent. The ground rent of a house in a small village is but little higher than the rent of a similar patch of


ground in the open fields: but that of a shop in Cheapside will exceed these, by the whole amount at which people estimate the superior facilities of moneymaking in the more crowded place. The rents of wharfage, dock and harbour room, water-power, and many other privileges, may be analysed on similar principles.

§ 4. Cases of extra profit analogous to rent, are more frequent in the transactions of industry than is sometimes supposed. Take the case, for example, of a patent, or exclusive privilege for the use of a process by which cost of production is lessened. If the value of the product continues to be regulated by what it costs to those who are obliged to persist in the old process, the patentee will make an extra profit equal to the advantage which his process possesses over theirs. This extra profit is essentially similar to rent, and sometimes even assumes the form of it; the patentee allowing to other producers the use of his privilege, in consideration of an annual payment. So long as he, and those whom he associates in the privilege, do not produce enough to supply the whole market, so long the original cost of production, being the necessary condition of producing a part, will regulate the value of the whole; and the patentee will be enabled to keep up his rent to a full equivalent for the advantage which his process gives him. In the commencement indeed he will probably forego a part of this advantage for the sake of underselling others: the increased supply which he brings forward will lower the value, and make the trade a bad one for those who do not share in the privilege: many of whom therefore will gradually retire, or restrict their operations, or enter into arrangements with the patentee. As his supply increases theirs will diminish, the value meanwhile continuing slightly depressed. But if he stops short in his operations before the market is wholly supplied by the new process, things will again adjust themselves to what was the natural value before the invention was made, and the benefit of the improvement will accrue solely to the patentee.

The extra gains which any producer or dealer obtains through superior talents for business, or superior business arrangements, are very much of a similar kind. If all his competitors had the same advantages, and used them, the benefit would be transferred to their customers, through the diminished value of the article: he only retains it for himself because he is able to bring his commodity to market at a lower cost, while its value is determined by a higher. All advantages, in fact, which one competitor has over another, whether natural or acquired, whether personal or the result of social arrangements, bring the commodity, so far, into the Third Class, and assimilate the possessor of the advantage to a receiver of rent. Wages and profits represent the universal elements in production, while rent may be taken to represent the differential and peculiar: any difference in favour of certain producers, or in favour of production in certain circumstances, being the source of a gain, which, though not called

rent unless paid periodically by ono person to another, is governed by laws entirely the same with it. The price paid for a differential advantage in producing a commodity, cannot enter into the general cost of production of the commodity.

A commodity may, no doubt, in some contingencies, yield a rent even under the most disadvantageous circumstances of its production; but only when it is, for the time, in the condition of those commodities which are absolutely limited in supply, and is therefore selling at a scarcity value; which never is, nor has been, nor can be, a permanent condition of any of the great rent-yielding commodities: unless through their approaching exhaustion, if they are mineral products (coal . for example), or through an increase of population, continuing after a further increase of production becomes impossible; a contingency, which the almost inevitable progress of human culture and improvement in the long interval which has first to elapse, forbids us to consider as probable.



§ 1. We have now attained a favourable point for looking back, and taking a simultaneous view of the space which we have traversed since the commencement of the present Book. The following are the principles of the theory of Value, so far as we have yet ascertained them.

I. Value is a relative term. The value of a thing means the quantity of some other thing, or of things in general, which it exchanges for. The values of all things can never, theretfore, rise or fall simultaneously. There 3s no such thing as a general rise or a general fall of values. Every rise of value supposes a fall, and every fall a rise.

IL Ihe temporary or market value

of a thing depends on the demand and supply; rising as the demand rises, and falling as the supply rises. The demand, however, varies with the value, being generally greater when the thing is cheap than when it is dear; and the value always adjusts itself in such a manner, that the demand is equal to the supply.

IH. Besides their temporary valne, things have also a permanent, or as it may be called, a Natural Value, to which the market value, after every variation, always tends to return; and the oscillations compensate for one another, so that, on the average, commodities exchange at about their natural value.

IV. The natural value of some things "is a scarcity value: but most things naturally exchange for one another in the ratio of their cost of production, or at what may be termed their Cost Value.

V. The things which are naturally and permanently at a scarcity value, are those of which the supply cannot be increased at all, or not sufficiently to satisfy the whole of the demand .which would exist for them at their cost value.

VI. A monopoly value means a flcarcity value. Monopoly cannot give a value to anything, except through a limitation of the supply.

VII. Every commodity of which the *upply can he indefinitely increased by labour and capital, exchanges for other things proportionally to the cost necessary for producing and bringing to market the most costly portion of the supply required. The natural value is synonymous with the Cost Value, and the cost value of a thing, means the cost value of the most Costly portion of it.

VIII. Cost of Production consists of several elements, some of which are constant and universal, others occasional. The universal elements of -cost of production are, the wages of the labour, and the profits of the capital. The occasional elements are, taxes, and any extra cost occasioned by a scarcity value of some of the requisites.

IX. Kent is not an element in the cost of production of the commodity which yields it: except in the cases, (rather conceivable than actually existing) in which it results from, and represents, a scarcity value. But when land capable of yielding rent in agriculture is applied to some other purpose, the rent which it would have yielded is an element in the cost of production of the commodity which it is employed to produce.

X. Omittingthe occasional elements; things which admit of indefinite increase, naturally and permanently exchange for each other according to the comparative amount of wages which must be paid for producing them, and the comparative amount of profits which must be obtained by the capitalists who pay those wages.

XI. The comparative amount of wages does not depend on what wages are in themselves. High wages do not make high values, nor low wages low values. The comparative amount of wages depends partly on the comparative quantities of labour required, and partly on the comparative rates of its remuneration.

XII. So, the comparative rate of profits does not depend on what profits are in themselves; nor do high or low profits make high or low values. It depends partly on the comparative lengths of time during which the capital is employed, and partly on the comparative rate of profits in different eu.. ployments.

Xln. If two things are made by the same quantity of labour, and that labour paid at the same rate, and if the wages of the labourer have to be advanced for the same space of time, and the nature of the employment does not require that there be a permanent difference in their rate of profit; then, whether wages and profits be high or low, and whether the quantity of labour expended be much or little, these two things will, on the average, exchange for one another.

XIV. If one of the two things commands, on the average, a greater value than the other, the cause must be that it requires for its production either a greater quantity of labour, or a kind of labour permanently paid at a higher" rate; or that the capital, or part of ths capital, which supports that labour, must be advanced for a longer period; or lastly, that the production is attended with some circumstance which requires to be compensated by a permanently higher rate of profit.

XV. Of these elements, the quantity of labour required for the production is the most important: the effect of the others is smaller, though none of them are insignificant.

XVI. The lower profits are, the less important become the minor elements of cost of production, and the less do commodities deviate from a value proportioned to the quantity and quality of the labour required for their production.

XVII. But every fall of profits lowers, in some degree, the cost value of things made with much or durable machinery, and raises that of things made by hand; and every rise of profits does the reverse.

§ 2. Such is the general theory of Exchange Value. It is necessary, however, to remark that this theory contemplates a system of production carried on by capitalists for profit, and not by labourers for subsistence. In proportion as we admit this last supposition —and in most countries we must admit it, at least in respect of agricultural produce, to a very great extent—such of the preceding theorems as relate .to the dependence of value on cost of production will require modification. Those theorems are all grounded on the supposition, that the producer's object and aim is to derive a profit from his capital. This granted, it follows that he must sell his commodity at the price which will afford the ordinary rate of profit, that is to say, it must exchange for other commodities at its cost value. But the peasant proprietor, the metayer, and even the peasant-farmer or allotment-holder—. the labourer, under whatever name, producing on his own account—is seeking, not an investment for his little capital, but an advantageous employment for his time and labour. His disbursements, beyond his own maintenance and that of his family, are so small, that nearly the whole proceeds of the sale of the produce are wages of labour. When he and his family have been fed from the produce of the farm (and perhaps clothed with materials grown thereon, and manufactured in the family) he may, in respect of the supplementary remuneration derived from the sale of the surplus produce, be compared to those labourers who, deriving their subsistence from an independent source, can afford to sell their labour at any price which is to their minds worth the exertion. A peasant, who supports himself and his family with one portion of his produce, will often sell the remainder very much

below what would be its cost value to the capitalist.

There is, however, even in this case, a minimum, or inferior limit, of value. The produce which he carries to market, must bring in to him the value of all necessaries which he is compelled to purchase; and it must enable him to pay his rent. Bent, under peasant cultivation, is not governed by the principles set forth in the chapters immediately preceding, but is either determined by custom, as in the case of metayers, or, if fixed by competition, depends on the ratio of population to land. Bent, therefore, in this case, is an element of cost of production. The peasant must work until he has cleared his rent and the price of all purchased necessaries. After this, he will go on working only if he can sell the produce for such a price as will overcome his aversion to labour.

The minimum just mentioned is what the peasant must obtain in exchange for the whole of his surplus produce. But inasmuch as this surplus is not a fixed quantity, but may be either greater or less according to the degree of his industry, a minimum value for the whole of it does not give any minimum value for a definite quantity of the commodity. In this state of things, therefore, it can hardly be said, that the value depends at all on cost of production. It depends entirely on demand and supply, that is, on the proportion between the quantity of surplus food which the peasants choose to produce, and the numbers of the non-agricultural, or rather of the non-peasant population. If the buying class were numerous and the growing class lazy, food might be permanently at a scarcity price. I am not aware that this case has anywhere a real existence. If the growing class is energetic and industrious, and the buyers few, food will be extremely cheap. This also is a rare case, though some parts of France perhaps approximate to it. The common cases are, either that, as in Ireland until lately, the peasant class is indolent and the buyers few, or the peasants industrious and the town population numerous and opulent, as in Belgium, the north of Italy, and parts of Germany. The price of the produce will adjust itself to these varieties of circumstances, unless modified, as in many cases it is, by the competition of producers who are not peasants, or by the prices of foreign markets.

§ 3. Another anomalous case is that of slave-grown produce: which presents, however, by no means the same degree of complication. The slaveowner is a capitalist, and his inducement to production consists in a profit on his capital. This profit must amount to the ordinary rate. In respect to his expenses, he is in the same position as if his slaves were free labourers working with their present efficiency, and were hired with wages equal to their present cost. If the cost is less in proportion to the work done, than the wages of free labour would be, so much the greater are his profits: but if all other producers in the country possess the same advantage, the values of com

modities will not be at all affected by it. The only case in which they can be affected, is when the privilege of cheap labour is confined to particular branches of production, free labourers at proportionally higher wages being employed in the remainder. In this case, as in all cases of permanent inequality between the wages of different employments, prices and values receive the impress of the inequality. Slavegrown will exchange for non-slavegrown commodities in a less ratio than that of the quantity of labour required for their production; the value of the former will be less, of the latter greater, than if slavery did not exist.

The further adaptation of the theory of value to the varieties of existing or possible industrial systems may be left with great advantage to the intelligent reader. It is well said by Montesquieu, "It is not always advisable so completely to exhaust a subject, as to leave nothing to be done by the reader. The important thing is not to be read, but to excite the reader to thought."*



§ 1. Having proceeded thus far in ascertaining the general laws of Value, without introducing the idea of money (except occasionally for illustration), it is time that we should now superadd that idea, and consider in what manner the principles of the mutual interchange of commodities are affected by the use of what is termed a Medium of Exchange.

In order to understand the manifold functions of a Circulating Medium, there is no better way than to consider what are the principal inconveniences which we should experience if we had not such a medium. The first and most obvious would be the want of a common measure for values of different sorts. If a tailor had only coats, and wanted to buy bread or a

horse, it would be very troublesome to ascertain how much bread he ought to obtain for a coat, or how many coats he should give for a horse. The calculation must be recommenced on different data, every time he bartered his coat for a different kind of article; and there could be no current price, or regular quotations of value. Whereas now each thing has a current price in money, and he gets over all difficulties by reckoning his coat at 41. or b1., and a four-pound loaf at 6d. or Id. As it is much easier to compare different lengths by expressing them in a common language of feet and inches, so it is much easier to compare values by means of a common language of pounds, shillings, and pence. In no * Spirit qfLaxt% conclusion of book xi.

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