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Phćd. I understand your distinction; and in which sense do you say that Mr. Malthus has used the term Measure of Value—in the sense of a ground, or of a criterion?
X. In both senses; he talks of it as "accounting for" the value of A, in which case it means a ground of value; and as "estimating" the value of A, in which case it means a criterion of value. I mention these expressions as instances; but, the truth is, that, throughout his essay entitled "The Measure of Value Stated and Illustrated" and throughout his "Political Economy" (but especially in the second chapter, entitled "The Nature and Measures of Value"), he uniformly confounds the two ideas of a ground and a criterion of value under a much greater variety of expressions than I have time to enumerate.
Phil. But, admitting that Mr. Malthus has proceeded on the misconception you state, what is the specific injury which has thence resulted to Mr. Ricardo?
X. I am speaking at present of the uses to be derived from Mr. Ricardo's principle of value. Now, if it had been proposed as a measure of value, we might justly demand that it should be "ready and easy of application," to adopt the words of Mr. Malthus ("Measure of Value," p. 54); but it is manifestly not so; for the quantity of labor employed in producing A "could not in many cases" (as Mr. Malthus truly objects) "be ascertained without considerable difficulty;" in most cases, indeed, it could not be ascertained at all. A measure of value, however, which cannot be practically applied, is worthless; as a measure of value, therefore, Mr. Ricardo's law of value is worthless; and if it had been offered as such by its author, the blame would have settled on Mr. Ricardo; as it is, it settles on Mr. Malthus, who has grounded an imaginary triumph on his own gross misconception. For Mr. Ricardo never dreamed of offering a standard or fixed measure of value, or of tolerating any pretended measure of that sort, by whomsoever offered.
Thus much I have said for the sake of showing what is not the use of Mr. Ricardo's principle in the design of its author; in order that he may be no longer exposed to the false criticism of those who are looking for what is not to be found, nor ought to be found, [Footnote: At p. 36 of "The Measure of Value" (in the footnote), this misconception as to Mr. Ricardo appears in a still grosser shape; for not only does Mr. Malthus speak of a "concession" (as he calls it) of Mr. Ricardo as being "quite fatal" to the notion of a standard of value,—as though it were an object with Mr. Ricardo to establish such a standard,—but this standard, moreover, is now represented as being gold. And what objection does Mr. Malthus make to gold as a standard? The identical objection which Mr. Ricardo had himself insisted on in that very page of his third edition to which Mr. Malthus refers.] in his work. On quitting this part of the subject, I shall just observe that Mr. Malthus, in common with many others, attaches a most unreasonable importance to the discovery of a measure of value. I challenge any man to show that the great interests of Political Economy have at all suffered for want of such a measure, which at best would end in answering a few questions of unprofitable curiosity; whilst, on the other hand, without a knowledge of the ground on which value depends, or without some approximation to it, Political Economy could not exist at all, except as a heap of baseless opinions.
Phćd. Now, then, having cleared away the imaginary uses of Mr. Ricardo's principle, let us hear something of its real uses.
X. The most important of these I expressed in the last words I uttered: That without which a science cannot exist is commensurate in use with the science itself; being the fundamental law, it will testify its own importance in the changes which it will impress on all the derivative laws. For the main use of Mr. Ricardo's principle, I refer you therefore to all Political Economy. Meantime, I will notice here the immediate services which it has rendered by liberating the student from those perplexities which previously embarrassed him on his first introduction to the science; I mention two cases by way of specimen.
1. When it was asked by the student what determined the value of all commodities, it was answered that this value was chiefly determined by wages. When again it was asked what determined wages, it was recollected that wages must generally be adjusted to the value of the commodities upon which they were spent; and the answer was in effect that wages were determined by the value of commodities. And thus the mind was entangled in this inextricable circle—that the price of commodities was determined by wages, and wages determined by the price of commodities. From this gross Diallćlos (as the logicians call it), or see-saw, we are now liberated; for the first step, as we are now aware, is false: the value of commodities is not determined by wages; since wages express the value of labor; and it has been demonstrated that not the value but the quantity of labor determines the value of its products.
2. A second case, in which Mr. Ricardo's law has introduced a simplicity into the science which had in vain been sought for before, is this: all former economists, in laying down the component parts of price, had fancied it impossible to get rid of what is termed the raw material as one of its elements. This impossibility was generally taken for granted: but an economist of our times, the late Mr. Francis Horner, had (in the Edinburgh Review) expressly set himself to prove it. "It is not true," said Mr. Horner, "that the thing purchased in every bargain is merely so much labor: the value of the raw material can neither be rejected as nothing, nor estimated as a constant quantity." Now, this refractory element is at once, and in the simplest way possible, exterminated by Mr. Ricardo's reformed law of value. Upon the old system, if I had resolved the value of my hat into wages and profits, I should immediately have been admonished that I had forgotten one of the elements: "wages, profits, and raw material, you mean," it would have been said. Raw material! Well, but on what separate principle can this raw material be valued? or on what other principle than that on which the hat itself was valued? Like any other product of labor, its value is determined by the quantity of labor employed in obtaining it; and the amount of this product is divided between wages and profits as in any case of a manufactured commodity. The raw material of the hat suppose to be beaver: if, then, in order to take the quantity of beavers which are necessary to furnish materials for a thousand hats, four men have been employed for twenty-five days, then it appears that the raw material of a thousand hats has cost a hundred days' labor, which will be of the same value in exchange as the product of a hundred days' labor (previously equated and discounted as to its quality) in any other direction; as, for example, if a hundred days' labor would produce two thousand pairs of stockings of a certain quality, then it follows that the raw material of my hat is worth two pairs of such stockings. And thus it turns out that an element of value (which Mr. Horner and thousands of others have supposed to be of a distinct nature, and to resist all further analysis) gives way before Mr. Ricardo's law, and is eliminated; an admirable simplification, which is equal in merit and use to any of the rules which have been devised, from time to time, for the resolution of algebraic equations.
Here, then, in a hasty shape, I have offered two specimens of the uses which arise from a better law of value; again reminding you, however, that the main use must lie in the effect which it will impress on all the other laws of Political Economy. And reverting for one moment, before we part, to the difficulty of Philebus about the difference between this principle as a principium cognoscendi or measure, and a principium essendi or determining ground, let me desire you to consider these two essential marks of distinction: 1. that by all respectable economists any true measure of value has been doubted or denied as a possibility: but no man can doubt the existence of a ground of value; 2. that a measure is posterior to the value; for, before a value can be measured or estimated, it must exist: but a ground of value must be antecedent to the value, like any other cause to its effect.
* * * * *
DIALOGUE THE SIXTH
ON THE OBJECTIONS TO THE NEW LAW OF VALUE
X. The two most eminent economists [Footnote: The reader must continue to remember that this paper was written in 1824.] who have opposed the Ricardian doctrines are Mr. Malthus and Colonel Torrens. In the spring of 1820 Mr. Malthus published his "Principles of Political Economy," much of which was an attack upon Mr. Ricardo; and the entire second chapter of eighty-three pages, "On the Nature and Measures of Value," was one continued attempt to overthrow Mr. Ricardo's theory of value. Three years afterwards he published a second attack on the same theory in a distinct essay of eighty-one pages, entitled, "The Measure of Value Stated and Illustrated." In this latter work, amongst other arguments, he has relied upon one in particular, which he has chosen to exhibit in the form of a table. As it is of the last importance to Political Economy that this question should be settled, I will shrink from nothing that wears the semblance of an argument: and I will now examine this table; and will show that the whole of the inferences contained in the seventh, eighth, and ninth columns are founded on a gross blunder in the fifth and sixth; every number in which columns is falsely assigned.
MR. MALTHUS' TABLE ILLUSTRATING THE INVARIABLE VALUE OF LABOR AND ITS RESULTS
(From p. 38 of "The Measure of Value Stated and Illustrated." London: 1823.)
N. B.—The sole change which has been made in this reprint of the original Table is the assigning of names (Alpha, Beta, etc.) to the several cases, for the purpose of easier reference and distinction.
CASE. 1 2 3 4 5 6 7 8 9
Alpha… 150 12 120 25 8 2 10 8.33 12.5
Beta…. 150 13 130 15.38 8.66 1.34 10 7.7 11.53
Gamma… 150 10 100 50 6.6 3.4 10 10 15
Delta… 140 12 120 16.66 8.6 1.4 10 7.14* 11.6
Epsilon. 140 11 110 27.2 7.85 2.15 10 9.09 12.7
Zeta…. 130 12 120 8.3 9.23 0.77 10 8.33 10.8
Eta….. 130 10 100 30 7.7 2.3 10 10 13
Theta… 120 11 110 9 9.17 0.83 10 9.09 10.9
Iota…. 120 10 100 20 8.33 1.67 10 10 12
Kappa… 110 10 100 10 9.09 0.91 10 10 11
Lambda.. 110 9 90 22.2 8.18 1.82 10 11.1 12.2
My…… 100 9 90 11.1 9 1 10 11.1 11.1
Ny…… 100 8 80 25 8 2 10 12.5 12.5
Xi…… 90 8 80 12.5 8.88 1.12 10 12.5 11.25
1.—Quarters of Corn produced by Ten Men. 2.—Yearly Corn Wages to each Laborer. 3.—Yearly Corn Wages of the whole Ten Men. 4.—Rate of Profits under the foregoing Circumstances. 5.—Quantity of Labor required to produce the Wages of Ten Men. 6.—Quantity of Profits on the Advance of Labor. 7.—Invariable Value of the Wages of a given Number of Men. 8.—Value of 100 Quarters of Corn under the varying Circumstances supposed. 9.—Value of the Product of the Labor of Ten Men under the Circumstances supposed.
[Footnote: *This is an oversight on the part of Mr. Malthus, and not an error of the press; for 7.14 would be the value of the 100 quarters on the supposition that the entire product of the ten men (namely, 140 quarters) went to wages; but the wages in this case (Delta) being 120 quarters, the true value on the principle of this table is manifestly 8.33.]
SECTION I
Phćd. Now, X., you know that I abhor arithmetical calculations; besides which, I have no faith in any propositions of a political economist which he cannot make out readily without all this elaborate machinery of tables and figures. Under these circumstances, I put it to you, as a man of feeling, whether you ought to inflict upon me this alarming pile of computations; which, by your gloomy countenance, I see that you are meditating.
X. Stop, recollect yourself: not I it is, remember, that impose this elaborate "table" upon you, but Mr. Malthus. The yoke is his. I am the man sent by Providence to lighten this yoke. Surrender yourself, therefore, to my guidance, Phćdrus, and I will lead you over the hill by so easy a road that you shall never know you have been climbing. You see that there are nine columns; that, I suppose, does not pass your skill in arithmetic. Now, then, to simplify the matter, begin by dismissing from your attention every column but the first and the last; fancy all the rest obliterated.
Phćd. Most willingly; it is a heavenly fancy.
X. Next look into the first column, and tell me what you see there.
Phćd. I see "lots" of 150s and 140s, and other ill-looking people of the same description.
X. Well, these numbers express the products of the same labor on land of different qualities. The quantity of labor is assumed to be always the same; namely, the labor of ten men for a year (or one man for ten years, or twenty men for half a year, etc.). The producing labor, I say, is always the same; but the product is constantly varying. Thus, in the case Alpha the product is one hundred and fifty quarters; in the cases Delta and Epsilon, when cultivation has been compelled by increasing population to descend upon inferior land, the product of equal labor is no more than one hundred and forty quarters; and in the case Iota it has fallen to one hundred and twenty quarters. Now, upon Mr. Ricardo's principle of valuation, I demand to know what ought to be the price of these several products which vary so much in quantity.
Phćd. Why, since they are all the products of the same quantity of labor, they ought all to sell for the same price.
X. Doubtless; not, however, of necessity for the same money price, since money may itself have varied, in which case the same money price would be really a very different price; but for the same price in all things which have not varied in value. The Xi product, therefore, which is only ninety quarters, will fetch the same real price as the Alpha or Gamma products, which are one hundred and fifty. But, by the way, in saying this, let me caution you against making the false inference that corn is at the same price in the case Xi as in the case Alpha or Gamma; for the inference is the very opposite; since, if ninety quarters cost as much as one hundred and fifty, then each individual quarter of the ninety costs a great deal more. Thus, suppose that the Alpha product sold at four pounds a quarter, the price of the whole would be six hundred pounds. Six hundred pounds, therefore, must be the price of Xi, or the ninety quarters; but that is six pounds, thirteen shillings, four pence, a quarter. This ought to be a needless caution; yet I have known economists of great name stand much in need of it.
Phćd. I am sure I stand in need of it, and of all sort of assistance, for I am "ill at these numbers." But let us go on; what you require my assent to, I understand to be this: that all the different quantities of corn expressed in the first column will be of the same value, because they are all alike the product of ten men's labor. To this I do assent; and what next? Does anybody deny it?
X. Yes, Mr. Malthus: he asserts that the value will not be always the same; and the purpose of the ninth column is to assign the true values; which, by looking into that column, you may perceive to be constantly varying: the value of Alpha, for instance, is twelve and five tenths; the value of Epsilon is twelve and seven tenths; of Iota, twelve; and of Xi, eleven and twenty-five one-hundredths.
Phćd. But of what? Twelve and five tenths of what?
X. Of anything which, though variable, has in fact happened to be stationary in value; or, if you choose, of anything which is not variable in value.
Phćd. Not variable! But there is no such thing.
X. No! Mr. Malthus, however, says there is; labor, he asserts, is of unalterable value.
Phćd. What! does he mean to say, then, that the laborer always obtains the same wages?
X. Yes, the same real wages; all differences being only apparently in the wages, but really in the commodity in which the wages are paid. Let that commodity be wheat; then, if the laborer receives ten quarters of wheat in 1800, and nine in 1820, that would imply only that wheat was about eleven per cent, dearer in the latter year. Or let money be that commodity; then, if the laborer receives this century two shillings, and next century three shillings, this simply argues that money has fallen in value by fifty per cent.
Phćd. Why, so it may; and the whole difference in wages may have arisen in that way, and be only apparent. But, then, it may also have arisen from a change in the real value of wages; that is, on the Ricardian principle, in the quantity of labor necessary to produce wages. And this latter must have been the nature of the change, if Alpha, Iota, Xi, etc., should be found to purchase more labor; in which case Mr. Ricardo's doctrine is not disturbed; for he will say that Iota in 1700 exchanges for twelve, and Kappa in 1800 for eleven, not because Kappa has fallen in that proportion (for Kappa, being the product of the same labor as Iota, cannot fall below the value of Iota), but because the commodity for which they are exchanged has risen in that proportion.
X. He will; but Mr. Malthus attempts to bar that answer in this case, by alleging that it is impossible for the commodity in question (namely, labor) to rise or to fall in that or in any other proportion. If, then, the change cannot be in the labor, it must be in Alpha, Beta, etc.; in which case Mr. Ricardo will be overthrown; for they are the products of the same quantity of labor, and yet have not retained the same value.
Phćd. But, to bar Mr. Ricardo's answer, Mr. Malthus must not allege this merely; he must prove it.
X. To be sure; and the first seven columns of this table are designed to prove it. Now, then, we have done with the ninth column, and also with the eighth; for they are both mere corollaries from all the rest, and linked together under the plain rule of three. Dismiss these altogether; and we will now come to the argument.
SECTION II
The table is now reduced to seven columns, and the logic of it is this: the four first columns express the conditions under which the three following ones are deduced as consequences; and they are to be read thus, taking the case Alpha by way of example: Suppose that (by column one) the land cultivated is of such a quality that ten laborers produce me one hundred and fifty quarters of corn; and that (by column two) each laborer receives for his own wages twelve quarters; in which case (by column three) the whole ten receive one hundred and twenty quarters; and thus (by column four) leave me for my profit thirty quarters out of all that they have produced; that is, twenty-five per cent. Under these conditions, I insist (says Mr. Malthus) that the wages of ten men, as stated in column three, let them be produced by little labor or much labor, shall never exceed or fall below one invariable value expressed in column seven; and, accordingly, by looking down that column, you will perceive one uniform valuation of 10. Upon this statement, it is manifest that the whole force of the logic turns upon the accuracy with which column three is valued in column seven. If that valuation be correct, then it follows that, under all changes in the quantity of labor which produces them, wages never alter in real value; in other words, the value of labor is invariable.
Phćd. But of course you deny that the valuation is correct?
X. I do, Phćdrus; the valuation is wrong, even on Mr. Malthus' or any other man's principles, in every instance; the value is not truly assigned in a single case of the whole fourteen. For how does Mr. Malthus obtain this invariable value of ten? He resolves the value of the wages expressed in column three into two parts; one of which, under the name "labor," he assigns in column five; the other, under the name "profits," he assigns in column six; and column seven expresses the sum of these two parts; which are always kept equal to ten by always compensating each other's excesses and defects. Hence, Phćdrus, you see that—as column seven simply expresses the sum of columns five and six—if those columns are right, column seven cannot be wrong. Consequently, it is in columns five and six that we are to look for the root of the error; which is indeed a very gross one.
Phil. Why, now, for instance, take the case Alpha, and what is the error you detect in that?
X. Simply, this—that in column five, instead of eight, the true value is 6.4; and in column six, instead of two, the true value is 1.6; the sum of which values is not ten, but eight; and that is the figure which should have stood in column seven.
Phil. How so, X.? In column five Mr. Malthus undertakes to assign the quantity of labor necessary (under the conditions of the particular case) to produce the wages expressed in column three, which in this case Alpha are one hundred and twenty quarters. Now, you cannot deny that he has assigned it truly; for, when ten men produce one hundred and fifty (by column one)—that is, each man fifteen—it must require eight to produce one hundred and twenty; for one hundred and twenty is eight times fifteen. Six men and four tenths of a man, the number you would substitute, could produce only ninety-six quarters.
X. Very true, Philebus; eight men are necessary to produce the one hundred and twenty quarters expressed in column three. And now answer me: what part of their own product will these eight producers deduct for their own wages?
Phil. Why (by column two), each man's wages in this case are twelve quarters; therefore the wages of the eight men will be ninety- six quarters.
X. And what quantity of labor will be necessary to produce these ninety-six quarters?
Phil. Each man producing fifteen, it will require six men's labor, and four tenths of another man's labor.
X. Very well; 6.4 of the eight are employed in producing the wages of the whole eight. Now tell me, Philebus, what more than their own wages do the whole eight produce?
Phil. Why, as they produce in all one hundred and twenty quarters, and their own deduction is ninety-six, it is clear that they produce twenty-four quarters besides their own wages.
X. And to whom do these twenty-four quarters go?
Phil. To their employer, for his profit.
X. Yes; and it answers the condition expressed in column four; for a profit of twenty-four quarters on ninety-six is exactly twenty- five per cent. But to go on—you have acknowledged that the ninety-six quarters for wages would be produced by the labor of 6.4 men. Now, how much labor will be required to produce the remaining twenty-four quarters for profits?
Phil. Because fifteen quarters require the labor of one man (by column one), twenty-four will require the labor of 1.6.
X. Right; and thus, Philebus, you have acknowledged all I wish. The object of Mr. Malthus is to ascertain the cost in labor of producing ten men's wages (or one hundred and twenty quarters) under the conditions of this case Alpha. The cost resolves itself, even on Mr. Malthus' principles, into so much wages to the laborers, and so much profit to their employer. Now, you or I will undertake to furnish Mr. Malthus the one hundred and twenty quarters, not (as he says) at a cost of ten men's labor (for at that cost we could produce him one hundred and fifty quarters by column one), but at a cost of eight. For six men and four tenths will produce the whole wages of the eight producers; and one man and six tenths will produce our profit of twenty-five per cent.
Phćd. The mistake, then, of Mr. Malthus, if I understand it, is egregious. In column five he estimates the labor necessary to produce the entire one hundred and twenty quarters—which, he says, is the labor of eight men; and so it is, if he means by labor what produces both wages and profits; otherwise, not. Of necessity, therefore, he has assigned the value both of wages and profits in column five. Yet in column six he gravely proceeds to estimate profits a second time.
X. Yes; and, what is still worse, in estimating these profits a second time over, he estimates them on the whole one hundred and twenty; that is, he allows for a second profit of thirty quarters; else it could not cost two men's labor (as by his valuation it does); for each man in the case Alpha produces fifteen quarters. Now, thirty quarters added to one hundred and twenty, are one hundred and fifty. But this is the product of ten men, and not the wages of ten men; which is the amount offered for valuation in column three, and which is all that column seven professes to have valued.
