Part 1
THE
MEASURE OF VALUE
STATED AND ILLUSTRATED,
WITH
AN APPLICATION OF IT TO THE ALTERATIONS IN
THE VALUE OF THE ENGLISH CURRENCY
SINCE 1790.
—♦—
BY THE REV. T. R. MALTHUS, M.A. F.R.S.
PROFESSOR OF HISTORY AND POLITICAL ECONOMY IN THE EAST INDIA COLLEGE, HERTFORDSHIRE.
LONDON: JOHN MURRAY, ALBEMARLE STREET. MDCCCXXIII.
London: Printed by C. Roworth, Bell-yard, Temple-bar.
THE MEASURE OF VALUE.
It is generally allowed that the word value, in common language, has two different meanings; one, value in use, the other, value in exchange; the first expressing merely the usefulness of an object in supplying the most important wants of mankind, without reference to its power of commanding other objects in exchange; and the second expressing the power of commanding other objects in exchange, without reference to its usefulness in supplying the most important wants of mankind.
It is obviously value in the last sense, not the first, with which the science of Political Economy is mainly concerned.
But the power of one object to command another in exchange, or in other words the power of purchasing, may obviously arise either from causes affecting the object itself, or the commodities against which it is exchanged.
In the one case, the value of the object itself may properly be said to be affected; in the other, only the value of the commodities which it purchases; and if we could suppose any object always to remain of the same value, the comparison of other commodities with this one would clearly show, which had risen, which had fallen, and which had remained the same. The value of any commodity estimated in a measure of this kind might with propriety be called its absolute or natural value; while the value of a commodity estimated in others which were liable to variation, whether they were one or many, could only be considered as its nominal or relative value, that is, its value in relation to any particular commodity, or to commodities in general.
That a correct measure of the power of purchasing generally, or of commanding such important commodities as the necessaries and conveniences of life, in whatever way such power might arise, would be very desirable, cannot for a moment be doubted, as it would at once enable us to form a just estimate and comparison of wages, salaries, and revenues, in all countries, and at all periods. But when we consider what such a measure implies, we must feel certain that no one object exists, or can be supposed to exist, with such qualities as would fit it to become a standard measure of this kind. It would imply steadiness of value, not merely in one object, but in a great number, which is contrary to all theory and experience.
Whether there is any object, which, though it cannot measure the power of purchasing generally under the varying facilities of production and varying state of the demand and supply by which different commodities are affected, may be a correct measure of absolute and natural value as above described, is the specific object of the present inquiry.
It follows directly, from the principles of Adam Smith, that the conditions of the supply of the great mass of commodities are, that the returns should be sufficient to pay the wages, profits and rents necessary to their production. If these payments be made in money at the ordinary rates of the time, they form what Adam Smith calls their natural prices. Money however we know is variable. But if for money we substitute the objects necessary to give the producer the same power of production and accumulation as the natural money prices would have commanded, such returns maybe considered as the natural conditions of the supply of commodities, and may with propriety be denominated their natural value, in contradistinction to their natural price.
Of these three conditions of supply, or elements of natural value, the two first are obviously the most important. They are not only the sole conditions of supply in those early stages of society before the appropriation of land has taken place, but they continue to be so in reference to large classes of objects in the most advanced stages of improvement; and it is now generally acknowledged that even the main vegetable food of an improving country, which is the foundation of wages, must necessarily be of the same value as that part of the produce which is almost exclusively resolvable into wages and profits, and pays very little rent.
We cannot therefore essentially err in assuming for the present that the natural value of objects in their more simple forms is composed of labour and profits,[A] and the effect of any portion of rent, or of other ingredients which are sometimes added to these elements, may be allowed for subsequently.
We may also consider as a postulate which will be readily granted, that any given quantity of labour must be of the same value as the wages which command it, or for which it actually exchanges.
Of the two main elements of value, labour and profits, the former, particularly if we include, as we ought to do, accumulated as well as immediate labour, is much the largest and most powerful.
The great instrument of production is labour. There is no commodity nor implement used to assist manual exertions in which it does not enter as a condition of supply, and very few in which it does not enter very largely. If in the production of commodities and of the implements which assist in this production, no other ingredient were required than labour, and the interval between the exertion of the labour and its remuneration in the completed commodity were so inconsiderable that it might be entirely disregarded, it is certain that, as the same quantity of labour would have a constant tendency to produce commodities in the same relative proportion to each other, and to the demand for them, they would be found on an average to exchange with each other according to the quantity of labour which had been employed to obtain them.
Thus if ten mackerel were, on an average, obtained by the same quantity of labour as two soals, it would be necessary, in order to continue the supply of both in the market, that the value of a soal should be five times as great in the power of purchasing similar commodities, as the value of a mackerel; because if it were less, none would apply themselves to the catching of soals; and though it is quite certain that at any given period the relative value of soals and mackerel would be exclusively determined by the state of the demand and supply of each; and that they would, in consequence, often vary very considerably; yet it is as certain, that on the supposition of the hypothesis being correct, and that they both continued to be brought to market, each would on an average be supplied in such a quantity, compared with the demand for it, that a soal would ordinarily exchange for five mackerel, and the different quantities of labour required to produce them would, in this case, be a correct measure both of their natural and relative value in exchange.
Now supposing that the skill and power of the labourers were so to increase, that, in the same time and with the same personal exertions, they could obtain three soals and fifteen mackerel, it is obvious that the relative value of soals to mackerel would remain the same, but they would both have essentially altered their value compared with all those commodities which still required the same quantity of labour to produce the same supply of them. With regard to such commodities, soals and mackerel would have become of less value, and consequently they would have become of less value with regard to a given quantity of labour. The correct language in this case would be, not that labour had become dearer, but that soals and mackerel had become cheaper. And if the same increase of skill and power could be conceived to extend to all other commodities, and all commodities were similarly circumstanced as to their mode of production and bringing to market; it cannot be doubted, that though they might retain the same relative value compared with each other, they would all become more plentiful with regard to the wants of the society, and any given quantity of labour. And the correct language would still be, not that labour had become dearer, but that all commodities had become cheaper. This fall would be a fall in the absolute and natural value of commodities; and as long as labour alone was concerned in their production, and they were brought to market immediately, it would be allowed that the different quantities of labour employed upon them would be a correct measure both of their relative value compared with each other, and of their absolute and natural value in reference to the conditions of their supply. Their natural values would be exactly represented by the different quantities of labour worked up in them; while their natural prices would be these different quantities of labour estimated in money, according to the money price of the labour employed.
But at a very early period of society a considerable interval must elapse between the exertion of some sorts of labour and the completion of the article on which they are employed. And the next simplest form of production, beyond the result of mere labour, is that, where, in addition to the labour employed directly on the commodity and on the simple tools necessary to its production, the condition of the supply requires that a certain compensation be made in the final remuneration for the time which has elapsed from the period of the advances of the labour, to the period when the labourer, or capitalist, can be remunerated. This compensation, which equally applies to the formation of the capital, as to the products to be obtained by it, is the profit which must be paid on the advances of the labour, and is absolutely necessary to the encouragement of such advances.
But in this state of things commodities would cease to exchange with each other according to the quantity of labour employed upon them. Some commodities, on which the same quantity of accumulated and immediate labour had been employed, would be of a different exchangeable value, on account of the different quantity of profits which had entered into their composition; while others, on which different quantities of accumulated and immediate labour had been employed, might be of the same exchangeable value, on account of the greater quantity of profits of which they were composed being balanced by the smaller quantity of labour advanced to produce them.
In the earliest stages of society accumulations of capital are very rare, and profits may be extremely high, perhaps forty or fifty per cent. If under these circumstances the construction of a war canoe were to take two years before it were fit for use, it is evident that its value in exchange would be prodigiously enhanced by such profits. Compared with a number of deer which might have cost exactly the same quantity of accumulated and immediate labour to bring to market, the canoe would be seventy or eighty per cent. of greater value; and on the fall of profits from forty or fifty per cent. to ten per cent. in the progress of society, an object of this kind might fall in value sixty or seventy per cent. compared with such objects as deer or fish, without any difference in the quantity of labour employed upon either.
It is observed by Adam Smith that corn is an annual crop, butchers’ meat a crop which requires four or five years to grow; and consequently, if we compare two quantities of corn and beef which are of equal exchangeable value, it is certain that a difference of three or four additional years profit at fifteen per cent. upon the capital employed in the production of the beef would, exclusively of any other considerations, make up in value for a much smaller quantity of labour, and thus we might have two commodities of the same exchangeable value, while the accumulated and immediate labour of the one was forty or fifty per cent. less than that of the other. This is an event of daily occurrence in reference to a vast mass of the most important commodities in the country; and if profits were to fall from fifteen per cent. to eight per cent. the value of beef compared with corn would fall above twenty per cent.
When commodities are obtained by the assistance of a large proportion of fixed capital of a very durable nature, the advances are only consumed in part, and the whole produce of the accumulated and immediate labour employed must be considered as composed of the new produce obtained, together with the remainder of the fixed capital which is unconsumed.[B] In reference to the separate value of the new produce, this will be the same as if to the labour actually worked up in such produce were added the profits of the whole capital advanced. It sometimes happens that the proportion of value arising from these profits is very considerable; and commodities so produced will necessarily have much less labour worked up in them, and will be much more affected in their value by a rise or fall of profits, than those which are composed mainly of immediate labour.
Thus, if a commodity were produced by the aid of accumulated labour in machinery worth £2,000, the annual wear and tear of which was one-twentieth, or £100, and the labour employed on cheap materials and in the working of the machinery were worth £200, while profits were 20 per cent. then the value of the labour worked up in the commodity would be £100 added to £200, equal to £300; and the whole capital advanced being £2,300, the profits upon it would be £460, which, added to £300 would make the whole value of the produce £760. Compared with a commodity of equal value which had been produced without fixed capital, and had yet been brought to market in the same time and with the same rate of profits, it would contain less than half of the labour worked up in it; while, if profits were to fall from 20 per cent. to 10 per cent. the value of the commodity would fall in the proportion of from £760 to £530, or, if profits had been 10 per cent. and were to rise to 20 per cent. the value of the commodity would rise in the proportion of from £530 to £760, or above 42 per cent., without any change in the quantity of labour employed.[C]
It must be allowed, then, that whenever two elements are necessary to the supply, and enter into the composition of commodities, their value cannot depend exclusively upon one of them, except by accident, or when the other can be considered as a given or common quantity. But it is universally acknowledged, that the great mass of commodities in civilized and improved countries is made up at the least of two elements--labour and profits; consequently, the exchangeable value of commodities into which these two elements enter as the conditions of their supply, will not depend exclusively upon the quantity of labour employed upon them, except in the very peculiar cases when both the returns of the advances and the proportions of fixed and circulating capitals are exactly the same.
It cannot, then, be said with any thing like an approximation towards correctness, that the labour worked up in commodities is the measure of their exchangeable value.
But if to the accumulated and immediate labour worked up in commodities, we add the profits upon the whole advances for the time that they are advanced, we shall then make the proper allowance for the other element of value, and may expect to obtain a more accurate measure. If we had estimated the value of the labour advanced in money, or any other medium, we should of course estimate the profits in the same medium, and the natural price of the commodity estimated in such medium, would obviously be equal to the price of the accumulated and immediate labour expended on the commodity, together with the ordinary profits estimated upon such advances. But if, with a view to the natural conditions of supply, we consider only the quantity of labour advanced, without reference to any other medium, we must of course estimate the profits in quantity of labour also, which will give us an amount of labour in proportion to which commodities will be found to exchange with each other, just in the same way as they would exchange with each other according to the quantity of labour employed on them, if labour had been the sole ingredient which had entered into their composition.
Thus, if a hundred days labour were employed upon a commodity, at two shillings a day, and the average interval between the advance of such wages and the period when the commodity could be brought to sale were a year, and profits were 20 per cent. the price of the commodity would be £12, while the price of a commodity which had cost the same quantity of labour of the same kind, and could be brought to market immediately, would be only £10. And it is equally certain, that, if putting money or any other medium of exchange out of the question, we had estimated the profits for a year upon the advances of the hundred days labour actually employed, we should obtain a quantity of labour which, compared with the labour employed on the commodity sold immediately, would be in the proportion of 120 to 100, and expressing the relative conditions of supply, would accurately measure the rate at which the two commodities obtained under these different circumstances would exchange with each other.
It appears, then, that in the same country, and at the same time, the exchangeable value of those commodities which can be resolved into labour and profits alone, would be accurately measured by the quantity of labour which would result from adding to the accumulated and immediate labour actually worked up in them the varying amount of the profits on all the advances estimated in labour. But this must necessarily be the same as the quantity of labour which they will command, as appears from the instances above stated, and will be more fully shown farther on; and where the precious metals may be considered for short periods as of a uniform value, the conformity of this measure with the proportions of money prices at which commodities would be exchanging all around us, might daily be brought to the test of experience and be established beyond the possibility of doubt.
It will be said, perhaps, that in the same place, and at the same time, almost every commodity may be considered as an accurate measure of the relative value of others, and that what is true of labour in this respect is true of cloth, cotton, iron, or any other article. Any two commodities which, at the same time, and in the same place, will purchase or command the same quantity of cloth, cotton, or iron, of a given quality, will have the same relative value, or will exchange with each other.
This will be readily granted, if we take the same time and place exactly, and consider only relative value; but not if either any latitude be allowed as to time and place, or if we consider, as it is our object to do, not merely relative, but absolute and natural value. Cloth, cotton, iron, and similar commodities, are subject to vary most essentially in a single year, or even month, so that the manufacturer who could obtain for his goods the same quantity of cloth as he could the year before, would be very little likely to obtain the same quantity of other articles. But even supposing that these articles and the product of the capitalist were to continue of the same relative value to each other, he might still be quite unable to carry on his business. The conditions of the supply of commodities do not require that they should retain always the same relative values, but that each should retain its proper _natural_ value, or the means of obtaining those objects which will continue to the producer the same power of production and accumulation. If the advances of capitalists consisted specifically in cloth, then these advances would always have the effect required in production; and as profits are calculated upon the advances necessary to production, whatever they may be, the quantity of cloth advanced, with the addition of the ordinary profits estimated also in quantity of cloth, would represent both the natural and relative value of the commodity. But the specific advances of capitalists do not consist of cloth, but of labour; and as no other object whatever can represent a given quantity of labour, it is obvious that labour stands quite alone in this respect, and that it is the quantity of _labour_ which a commodity will command, and not the quantity of any other commodity, which can represent the conditions of its supply, or its natural value.[D]
It will be allowed, then,
First, that when commodities are obtained by labour alone, and sold immediately, they will, on an average, exchange with each other according to the quantity of labour employed upon them.
Secondly, that when profits are concerned, and differ either in rate or quantity, commodities can no longer exchange with each other, according to the quantity of labour employed upon them, except by accident.
Thirdly, that the quantity of accumulated and immediate labour applied to their production, must, in all the less complex cases, form the advances on which profits may be correctly calculated.
And, fourthly, that when profits are calculated upon these advances, a quantity of labour is obtained, according to which it is found, by experience, that commodities do exchange with each other in the same country; and, further, that this quantity of labour not only expresses correctly their value in exchange with each other, but their absolute and natural value in reference to the conditions of their supply.
* * * * *
In proceeding to consider what takes place in different countries where the value of the precious metals is very different, it will readily be acknowledged, that the rate at which commodities exchange with each other is not proportioned to the labour which has been employed upon them, with the addition of profits. And it is quite certain, that they cannot be proportioned to the quantity of labour alone of which they are composed. We know, from experience, that the commodities of different countries are actually exchanged with each other according to their money prices at the time. These prices must be determined partly by those natural elements of value which determine the rate at which commodities exchange with each other, and the natural conditions of their supply in each country, and partly by the different value of the precious metals in different situations, which must necessarily have a most powerful effect on the rate at which foreign commodities are exchanged.
Knowing then the elements of the natural and relative value of commodities in the same country, if we knew also the difference in the value of money in different countries, we should know at once the rate at which the commodities of different countries would exchange with each other.
Now there is no supposition but one, relating to the value of money in different countries, which, combined with the natural elements of the value of produce in each, would constitute the present natural prices of commodities in these countries, or the rates at which they actually exchange with each other. This is the supposition that the differences in the value of money in different countries are proportioned to the differences in the money prices of agricultural labour.[E]