Phd. How so, X.? How so? Your own statement supposes that the laborer receives fifteen shillings for four days, instead of twelve shillings; that is, three shillings more. Now, if the price does not rise to meet this rise of labor, I demand to know whence the laborer is to obtain this additional three shillings. If the buyers of hats do not pay him in the price of hats, I presume that the buyers of shoes will not pay him. The poor devil must be paid by somebody.

X. You are facetious, my friend. The man must be paid, as you say; but not by the buyers of hats any more than by the buyers of shoes: for the price of hats cannot possibly rise in such a case, as I have said before. And, that I may demonstrate this, let us assume that when the labor spent on a hat cost twelve shillings, the rate of profits was fifty per cent.; it is of no consequence what rate be fixed on: assuming this rate, therefore, the price of a hat would, at that time, be eighteen shillings. Now, when the quantity of labor rose from four to five days, this fifth day would add three shillings to the amount of wages; and the price of a hat would rise in consequence from eighteen shillings to a guinea. On the other hand, when the value of labor rose from twelve shillings to fifteen shillings, the price of a hat would not rise by one farthing, but would still continue at eighteen shillings.

Phd. Again I ask, then, who is to pay the three shillings?

X. The three shillings will be paid out of profits.

Phd. What, without reimbursement?

X. Assuredly, without a farthing of reimbursement: it is Mr. Ricardo's doctrine that no variation in either profits or wages can ever affect the price; if wages rise or fall, the only consequence is, that profits must fall or rise by the same sum; so again, if profits rise or fall, wages must fall or rise accordingly.

Phd. You mean, then, to assert that, when the value of the labor rises (as in the first of your two cases) by three shillings, this rise must be paid out of the six shillings which had previously gone to profits.

X. I do; and your reason for questioning this opinion is, I am sure, because you think that no capitalist would consent to have his profits thus diminished, but would liberate himself from this increased expense by charging it upon the price. Now, if I prove that he cannot liberate himself in this way, and that it is a matter of perfect indifference to him whether the price rises or not, because in either case he must lose the three shillings, I suppose that I shall have removed the sole ground you have for opposing me.

Phd. You are right: prove this, X., "et eris mihi magnus Apollo."

X. Tell me, then, Phdrus, when the value of labor rises—in other words, when wages rise—what is it that causes them to rise?

Phd. Ay, what is it that causes them, as you say? I should be glad to hear your opinion on that subject.

X. My opinion is, that there are only two [Footnote: There is another case in which wages have a constant tendency to rise—namely, when the population increases more slowly than the demand for labor. But this case it is not necessary to introduce into the dialogue: first, because it is gradual and insensible in its operation; secondly, because, if it were otherwise, it would not disturb any part of the argument.] great cases in which wages rise, or seem to rise:

1. When money sinks in value; for then, of course, the laborer must have more wages nominally, in order to have the same virtually. But this is obviously nothing more than an apparent rise.

2. When those commodities rise upon which wages are spent. A rise in port wine, in jewels, or in horses, will not affect wages, because these commodities are not consumed by the laborer; but a rise in manufactured goods of certain kinds, upon which perhaps two fifths of his wages are spent, will tend to raise wages: and a rise in certain kinds of food, upon which perhaps the other three fifths are spent, will raise them still more. Now, the first case being only an apparent rise, this is the only case in which wages can be said really to rise.

Phd. You are wrong, X.; I can tell you of a third case which occurs to me whilst you are speaking. Suppose that there were a great deficiency of laborers in any trade,—as in the hatter's trade, for instance,—that would be a reason why wages should rise in the hatter's trade.

X. Doubtless, until the deficiency were supplied, which it soon would be by the stimulus of higher wages. But this is a case of market value, when the supply happens to be not on a level with the demand: now, throughout the present conversation I wish studiously to keep clear of any reference to market value, and to consider exclusively that mode of exchangeable value which is usually called natural value— that is, where value is wholly uninfluenced by any redundancy or deficiency of the quantity. Waiving this third case, therefore, as not belonging to the present discussion, there remains only the second; and I am entitled to say that no cause can really and permanently raise wages but a rise in the price of those articles on which wages are spent. In the instance above stated, where the hatter's wages rose from three shillings to three shillings and nine pence a day, some commodity must previously have risen on which the hatter spent his wages. Let this be corn, and let corn constitute one half of the hatter's expenditure; on which supposition, as his wages rose by twenty-five per cent., it follows that corn must have risen by fifty per cent. Now, tell me, Phdrus, will this rise in the value of corn affect the hatter's wages only, or will it affect wages in general?

Phd. Wages in general, of course: there can be no reason why hatters should eat more corn than any other men.

X. Wages in general, therefore, will rise by twenty-five per cent. Now, when the wages of the hatter rose in that proportion, you contended that this rise must be charged upon the price of hats; and the price of a hat having been previously eighteen shillings, you insisted that it must now be twenty-one shillings; in which case a rise in wages of twenty-five per cent, would have raised the price of hats about sixteen and one half per cent. And, if this were possible, two great doctrines of Mr. Ricardo would have been overthrown at one blow: 1st, that which maintains that no article can increase in price except from a previous increase in the quantity of labor necessary to its production: for here is no increase in the quantity of the labor, but simply in its value; 2d, that no rise in the value of labor can ever settle upon price; but that all increase of wages will be paid out of profits, and all increase of profits out of wages. I shall now, however, extort a sufficient defence of Mr. Ricardo from your own concessions. For you acknowledge that the same cause which raises the wages of the hatter will raise wages universally, and in the same ratio—that is, by twenty-five per cent. And, if such a rise in wages could raise the price of hats by sixteen and one half per cent., it must raise all other commodities whatsoever by sixteen and one half per cent. Now, tell me, Phdrus, when all commodities without exception are raised by sixteen arid one half per cent., in what proportion will the power of money be diminished under every possible application of it?

Phd. Manifestly by sixteen and one half per cent.

X. If so, Phdrus, you must now acknowledge that it is a matter of perfect indifference to the hatter whether the price of hats rise or not, since he cannot under any circumstances escape the payment of the three shillings. If the price should not rise (as assuredly it will not), he pays the three shillings directly; if the price were to rise by three shillings, this implies of necessity that prices rise universally (for it would answer no purpose of your argument to suppose that hatters escaped an evil which affected all other trades). Now, if prices rise universally, the hatter undoubtedly escapes the direct payment of the three shillings, but he pays it indirectly; inasmuch as one hundred and sixteen pounds and ten shillings is now become necessary to give him the same command of labor and commodities which was previously given by one hundred pounds. Have you any answer to these deductions?

Phd. I must confess I have none.

X. If so, and no answer is possible, then I have here given you a demonstration of Mr. Ricardo's great law: That no product of labor whatsoever can be affected in value by any variations in the value of the producing labor. But, if not by variations in its value, then of necessity by variations in its quantity, for no other variations are possible.

Phd. But at first sight, you know, variations in the value of labor appear to affect the value of its product: yet you have shown that the effect of such variations is defeated, and rendered nugatory in the end. Now, is it not possible that some such mode of argument may be applied to the case of variations in the quantity of labor?

X. By no means: the reason why all variations in the value of labor are incapable of transferring themselves to the value of its product is this: that these variations extend to all kinds of labor, and therefore to all commodities alike. Now, that which raises or depresses all things equally leaves their relations to each other undisturbed. In order to disturb the relations of value between A, B, and C, I must raise one at the same time that I do not raise another; depress one, and not depress another; raise or depress them unequally. This is necessarily done by any variations in the quantity of labor. For example, when more or less labor became requisite for the production of hats, that variation could not fail to affect the value of hats, for the variation was confined exclusively to hats, and arose out of some circumstance peculiar to hats; and no more labor was on that account requisite for the production of gloves, or wine, or carriages. Consequently, these and all other articles remaining unaffected, whilst hats required twenty- five per cent more labor, the previous relation between hats and all other commodities was disturbed; that is, a real effect was produced on the value of hats. Whereas, when hats, without requiring a greater quantity of labor, were simply produced by labor at a higher value, this change could not possibly disturb the relation between hats and any other commodities, because they were all equally affected by it. If, by some application of any mechanic or chemical discovery to the process of making candles, the labor of that process were diminished by one third, the value of candles would fall; for the relation of candles to all other articles, in which no such abridgment of labor had been effected, would be immediately altered: two days' labor would now produce the same quantity of candles as three days' labor before the discovery. But if, on the other hand, the wages of three days had simply fallen in value to the wages of two days,—that is, if the laborer received only six shillings for three days, instead of nine shillings,—this could not affect the value of candles; for the fall of wages, extending to all other things whatsoever, would leave the relations between them all undisturbed; everything else which had required nine shillings' worth of labor would now require six shillings' worth; and a pound of candles would exchange for the same quantity of everything as before. Hence, it appears that no cause can possibly affect the value of anything—that is, its exchangeable relation to other things—but an increase or diminution in the quantity of labor required for its production: and the prices of all things whatsoever represent the quantity of labor by which they are severally produced; and the value of A is to the value of B universally as the quantity of labor which produces A to the quantity of labor which produces B.

* * * * *

Here, then, is the great law of value as first explained by Mr. Ricardo. Adam Smith uniformly takes it for granted that an alteration in the quantity of labor, and an alteration in wages (that is, the value of labor), are the same thing, and will produce the same effects; and, hence, he never distinguishes the two cases, but everywhere uses the two expressions as synonymous. If A, which had hitherto required sixteen shillings' worth of labor for its production, should to-morrow require only twelve shillings' worth, Adam Smith would have treated it as a matter of no importance whether this change had arisen from some discovery in the art of manufacturing A, which reduced the quantity of labor required from four days to three, or simply from some fall in wages which reduced the value of a day's labor from four shillings to three shillings. Yet, in the former case, A would fall considerably in price as soon as the discovery ceased to be monopolized; whereas, in the latter case, we have seen that A could not possibly vary in price by one farthing.

Phd. In what way do you suppose that Adam Smith came to make so great an oversight, as I now confess it to be?

X. Mr. Malthus represents Adam Smith as not having sufficiently explained himself on the subject. "He does not make it quite clear," says Mr. Malthus, "whether he adopts for his principle of value the quantity of the producing labor or its value." But this is a most erroneous representation. There is not a chapter in the "Wealth of Nations" in which it is not made redundantly clear that Adam Smith adopts both laws as mere varieties of expression for one and the same law. This being so, how could he possibly make an election between two things which he constantly confounded and regarded as identical? The truth is, Adam Smith's attention was never directed to the question: he suspected no distinction; no man of his day, or before his day, had ever suspected it; none of the French or Italian writers on Political Economy had ever suspected it; indeed, none of them have suspected it to this hour. One single writer before Mr. Ricardo has insisted on the quantity of labor as the true ground of value; and, what is very singular, at a period when Political Economy was in the rudest state, namely, in the early part of Charles II's reign. This writer was Sir William Petty, a man who would have greatly advanced the science if he had been properly seconded by his age. In a remarkable passage, too long for quotation, he has expressed the law of value with a Ricardian accuracy: but it is scarcely possible that even he was aware of his own accuracy; for, though he has asserted that the reason why any two articles exchange for each other (as so much corn of Europe, suppose, for so much silver of Peru) is because the same quantity of labor has been employed on their production; and, though he has certainly not vitiated the purity of this principle by the usual heteronomy (if you will allow me a learned word),—that is, by the introduction of the other and opposite law derived from the value of this labor,— yet, it is probable that in thus abstaining he was guided by mere accident, and not by any conscious purpose of contradistinguishing the one law from the other; because, had that been his purpose, he would hardly have contented himself with forbearing to affirm, but would formally have denied the false law. For it can never be sufficiently impressed upon the student's mind, that it brings him not one step nearer to the truth to say that the value of A is determined by the quantity of labor which produces it, unless by that proposition he means that it is not determined by the value of the labor which produces it.

To return to Adam Smith: not only has he "made it quite clear" that he confounded the two laws, and had never been summoned to examine whether they led to different results, but I go further, and will affirm that if he had been summoned to such an examination, he could not have pursued it with any success until the discovery of the true law of Profits. For, in the case of the hats, as before argued, he would have said, "The wages of the hatter, whether they have been augmented by increased quantity of labor, or by increased value of labor, must, in any case, be paid." Now, what is the answer? They must be paid, but from what fund? Adam Smith knew of no fund, nor could know of any, until Mr. Ricardo had ascertained the true law of Profits, except Price: in either case, therefore, as Political Economy then stood, he was compelled to conclude that the fifteen shillings would be paid out of the price,—that is, that the whole difference between the twelve shillings and the fifteen shillings would settle upon the purchaser. But we now know that this will happen only in the case when the difference has arisen from increased labor; and that every farthing of the difference which arises from increased value of labor will be paid out of another fund, namely, Profits. But this conclusion could not be arrived at without the new theory of Profits (as will be seen more fully when we come to that theory); and thus one error was the necessary parent of another.

Here I will pause, and must beg you to pardon my long speeches in consideration of the extreme importance of the subject; for everything in Political Economy depends, as I said before, on the law of value; and I have not happened to meet with one writer who seemed fully to understand Mr. Ricardo's law, and still less who seemed to perceive the immense train of consequences which it involves.

Phd. I now see enough to believe that Mr. Ricardo is right; and, if so, it is clear that all former writers are wrong. Thus far I am satisfied with your way of conducting the argument, though some little confusion still clouds my view. But, with regard to the consequences you speak of, how do you explain that under so fundamental an error (as you represent it) many writers, but above all Adam Smith, should have been able to deduce so large a body of truth, that we regard him as one of the chief benefactors to the science?

X. The fact is, that his good sense interfered everywhere to temper the extravagant conclusions into which a severe logician could have driven him. [Footnote: The "Wealth of Nations" has never yet been ably reviewed, nor satisfactorily edited. The edition of Mr. Buchanan is unquestionably the best, and displays great knowledge of Political Economy as it stood before the revolution effected by Mr. Ricardo. But having the misfortune to appear immediately before that revolution, it is already to some degree an obsolete book. Even for its own date, however, it was not good as an edition of Adam Smith, its value lying chiefly in the body of original disquisitions which composed the fourth volume; for the notes not only failed to correct the worst errors of Adam Smith (which, indeed, in many cases is saying no more than that Mr. Buchanan did not forestall Mr. Ricardo), but were also deficient in the history of English finance, and generally in the knowledge of facts. How much reason there is to call for a new edition, with a commentary adapted to the existing state of the science, will appear on this consideration: the "Wealth of Nations" is the text-book resorted to by all students of Political Economy. One main problem of this science, if not the main problem (as Mr. Ricardo thinks), is to determine the laws which regulate Rents, Profits, and Wages; but everybody who is acquainted with the present state of the science must acknowledge that precisely on these three points it affords "very little satisfactory information." These last words are the gentle criticism of Mr. Ricardo: but the truth is, that not only does it afford very little information on the great heads of Rent, Profits, and Wages, but (which is much worse) it gives very false and misleading information.

P. S. September 27, 1854.—It is suggested to me by a friend, that in this special notice of Mr. Buchanan's edition, I shall be interpreted as having designed some covert reflection upon the edition of Adam Smith published by Mr. M'Culloch. My summary answer to any such insinuation is, that this whole paper was written in the spring of 1824, that is, thirty and a half years ago: at which time, to the best of my knowledge, Mr. M'Culloch had not so much as meditated any such edition. Let me add, that if I had seen or fancied any reason for a criticism unfriendly to Mr. M'Culloch, or to any writer whatever, I should not have offered it indirectly, but openly, frankly, and in the spirit of liberal candor due to an honorable contemporary.] At this very day, a French and an English economist have reared a Babel of far more elaborate errors on this subject; M. Say, I mean, and Mr. Malthus: both ingenious writers, both eminently illogical,—especially the latter, with whose "confusion worse confounded" on the subject of Value, if reviewed by some unsparing Rhadamanthus of logical justice, I believe that chaos would appear a model of order and light. Yet the very want of logic, which has betrayed these two writers into so many errors, has befriended them in escaping from their consequences; for they leap with the utmost agility over all obstacles to any conclusions which their good sense points out to them as just, however much at war with their own premises. With respect to the confusion which you complain of as still clinging to the subject, this naturally attends the first efforts of the mind to disjoin two ideas which have constantly been regarded as one. But, as we advance in our discussions, illustration and proof will gradually arise from all quarters, to the great principle of Mr. Ricardo which we have just been considering; besides which, this principle is itself so much required for the illustration and proof of other principles, that the mere practice of applying it will soon sharpen your eye to a steady familiarity with all its aspects.

* * * * *

DIALOGUE THE SECOND.

REDUCTIO AD ABSURDUM.

Phil. X., I see, is not yet come: I hope he does not mean to break his appointment, for I have a design upon him. I have been considering his argument against the possibility of any change in price arising out of a change in the value of labor, and I have detected a flaw in it which he can never get over. I have him, sir—I have him as fast as ever spider had a fly.

Phd. Don't think it, my dear friend: you are a dexterous retiarius; but a gladiator who is armed with Ricardian weapons will cut your net to pieces. He is too strong in his cause, as I am well satisfied from what passed yesterday. He'll slaughter you,—to use the racy expression of a friend of mine in describing the redundant power with which one fancy boxer disposed of another,—he'll slaughter you "with ease and affluence." But here he comes.—Well, X., you're just come in time. Philebus says that you are a fly, whilst he is a murderous spider, and that he'll slaughter you with "ease and affluence;" and, all things considered, I am inclined to think he will.

Phil. Phdrus does not report the matter quite accurately; however, it is true that I believe myself to have detected a fatal error in your argument of yesterday on the case of the hat; and it is this: When the value of labor rose by twenty-five per cent., you contended that this rise would be paid out of profits. Now, up to a certain limit this may be possible; beyond that it is impossible. For the price of the hat was supposed to be eighteen shillings: and the price of the labor being assumed originally at twelve shillings;— leaving six shillings for profits,—it is very possible that a rise in wages of no more than three shillings may be paid out of these profits. But, as this advance in wages increases, it comes nearer and nearer to that point at which it will be impossible for profits to pay it; since, let the advance once reach the whole six shillings, and all motive for producing hats will be extinguished; and let it advance to seven shillings, there will in that case be no fund at all left out of which the seventh shilling can be paid, even if the capitalist were disposed to relinquish all his profits. Now, seriously, you will hardly maintain that the hat could not rise to the price of nineteen shillings—or of any higher sum?

X. Recollect, Philebus, what it is that I maintain; assuredly the hat may rise to the price of nineteen shillings, or of any higher sum, but not as a consequence of the cause you assign. Taking your case, I do maintain that it is impossible the hat should exceed, or even reach, eighteen shillings. When I say eighteen shillings, however, you must recollect that the particular sum of twelve shillings for labor, and six shillings for profits, were taken only for the sake of illustration; translating the sense of the proposition into universal forms, what I assert is, that the rise in the value of the labor can go no further than the amount of profits will allow it: profits swallowed up, there will remain no fund out of which an increase of wages can be paid, and the production of hats will cease.

Phil. This is the sense in which I understood you; and in this sense I wish that you would convince me that the hat could not, under the circumstances supposed, advance to nineteen shillings or twenty shillings.

X. Perhaps, in our conversation on Wages, you will see this more irresistibly; you yourself will then shrink from affirming the possibility of such an advance as from an obvious absurdity; meantime, here is a short demonstration of it, which I am surprised that Mr. Ricardo did not use as the strongest and most compendious mode of establishing his doctrine.

Let it be possible that the hat may advance to nineteen shillings; or, to express this more generally, from x (or eighteen shillings)— which it was worth before the rise in wages—to x + y; that is to say, the hat will now be worth x + y quantity of money—having previously been worth no more than x. That is your meaning?

Phil. It is.

X. And if in money, of necessity in everything else; because otherwise, if the hat were worth more money only, but more of nothing besides, that would simply argue that money had fallen in value; in which case undoubtedly the hat might rise in any proportion that money fell; but, then, without gaining any increased value, which is essential to your argument.

Phil. Certainly; if in money, then in everything else.

X. Therefore, for instance, in gloves; having previously been worth four pair of buckskin gloves, the hat will now be worth four pair + y?

Phil. It will.

X. But, Philebus, either the rise in wages is universal or it is not universal. If not universal, it must be a case of accidental rise from mere scarcity of hands; which is the case of a rise in market value; and that is not the case of Mr. Ricardo, who is laying down the laws of natural value. It is, therefore, universal; but, if universal, the gloves from the same cause will have risen from the value of x to x + y.

Hence, therefore, the price of the hat, estimated in gloves, is = x + y.

And again, the price of the gloves, estimated in hats, is = x + y.

In other words, H - y = x. H + y = x. That is to say, H - y = H + y.

Phd. Which, I suppose, is an absurdity; and, in fact, it turns out, Philebus, that he has slaughtered you with "ease and affluence."

X. And this absurdity must be eluded by him who undertakes to show that a rise in the wages of labor can be transferred to the value of its product.

* * * * *

DIALOGUE THE THIRD.

[Et quiori sane animo feres, cum hic de primis agatur principiis, si superstitiose omnia examinavi,—viamque quasi palpando singulaque curiosius contrectando, lente me promovi et testudineo gradu. Video enim ingenium humanum ita comparatum esse—ut facilius longe quid consequens sit dispiciat, quam quid in natur primo verum; nostramque omnium conditionem non multum ab ill Archimedis abludere—Aos e so kai koiso tn gn. Ubi primum figamus pedem, inveniro multo magis satagimus, quam (ubi inveninius) ulterius progredi.—Henricus Morus in Epist. ad Cartesium.]

PRINCIPLE OF VALUE CONTINUED.

Phd. In our short conversation of yesterday, X., you parried an objection brought forward by Philebus in a way which I thought satisfactory. You reduced him to an absurdity, or what seemed such. In fact, I did verily believe that you had slaughtered Philebus; and so I told him. But we have since reconsidered the matter, and have settled it between ourselves that your answer will not do; that your "absurdity," in fact, is a very absurd absurdity. Philebus will tell you why. I, for my part, shall have enough to do to take care of a little argument of my own, which is designed to meet something that passed in our first dialogue. Now, my private conviction is, that both I and Philebus shall be cudgelled; I am satisfied that such will be the issue of the business. And my reason for thinking so is this,—that I already see enough to discern a character of boldness and determination in Mr. Ricardo's doctrines which needs no help from sneaking equivocations, and this with me is a high presumption that he is in the right. In whatever rough way his theories are tossed about, they seem always, like a cat, to light upon their legs. But, notwithstanding this, as long as there is a possibility that he may be in the wrong, I shall take it for granted that he is, and do my best to prove him so.

X. For which, Phdrus, I shall feel greatly indebted to you. We are told of Trajan, that, in the camp exercises, he not only tolerated hard blows, but courted them; "alacer virtute militum, et ltus quoties aut cassidi su aut clypeo gravior ictus incideret. Laudabat quippe ferientes, hortabaturque ut auderent." When one of our theatres let down an iron curtain upon the stage as a means of insulating the audience from any fire amongst the scenery, and sent men to prove the strength of this curtain by playing upon it with sledge-hammers in the sight and hearing of the public, who would not have laughed at the hollowness of the mummery, if the blows had been gentle, considerate, and forbearing? A "make-believe" blow would have implied a "make- believe" hammer and a "make-believe" curtain. No!—hammer away, like Charles Martel; "fillip me with a three-man beetle;" be to me a malleus hreticorum; come like Spenser's Talus—an iron man with an iron flail, and thresh out the straw of my logic; rack me; put me to the question; get me down; jump upon me; kick me; throttle me; put an end to me in any way you can.

Phd. I will, I will, my dear friend; anything to oblige you; anything for peace. So now tie yourself to the stake, whilst we bait you. And you begin, Philebus; unmuzzle.

Phil. I shall be brief. The case of the hat is what I stand upon; and, by the way, I am much obliged to you, X., for having stated the question in that shape; it has furnished me with a very manageable formula for recalling the principle at issue. The wages alter from two different causes—in one case, because there is the same quantity of labor at a different rate; in another case, because there is a different quantity at the same rate. In the latter case, it is agreed that the alteration settles upon price; in the former case you affirm that it will not: I affirm that it will. I bring an argument to prove it; which argument you attempt to parry by another. But in this counter argument of yours it strikes me that there lurks a petitio principii. Indeed, I am sure of it. For observe the course of our reasoning. I charge it upon your doctrine as an absurd consequence— that, if the increase of wages must be paid out of profits, then this fund will at length be eaten out; and as soon as it is, there will be no fund at all for paying any further increase; and the production must cease. Now, what in effect is your answer? Why, that as soon as profits are all eaten up, the production will cease. And this you call reducing me to an absurdity. But where is the absurdity? Your answer is, in fact, an identical proposition; for, when you say, "As soon as profits are absorbed," I retort, Ay, no doubt "as soon" as they are; but when will that be? It requires no Ricardo to tell us that, when profits are absorbed, they will be absorbed; what I deny is, that they ever can be absorbed. For, as fast as wages increase, what is to hinder price from increasing pari passu? In which case profits will never be absorbed. It is easy enough to prove that price will not increase, if you may assume that profits will not remain stationary. For then you have assumed the whole point in dispute; and after that, of course you have the game in your own hands; since it is self-evident that if anybody is made up of two parts P and W, so adjusted that all which is gained by either must be lost by the other, then that body can never increase.

Phd. Nor decrease.

Phil. No, nor decrease. If my head must of necessity lose as much weight as my trunk gains, and vice versa, then it is a clear case that I shall never be heavier. But why cannot my head remain stationary, whilst my trunk grows heavier? This is what you had to prove, and you have not proved it.

Phd. O! it's scandalous to think how he has duped us; his "reductio" turns out to the merest swindling.

X. No, Phdrus, I beg your pardon. It is very true I did not attempt to prove that your head might not remain stationary; I could not have proved this directly, without anticipating a doctrine out of its place; but I proved it indirectly, by showing that, if it were supposed possible, an absurdity would follow from that supposition. I said, and I say again, that the doctrine of wages will show the very supposition itself to be absurd; but, until we come to that doctrine, I content myself with proving that, let that supposition seem otherwise ever so reasonable (the supposition, namely, that profits may be stationary whilst wages are advancing), yet it draws after it one absurd consequence, namely, that a thing may be bigger than that to which it is confessedly equal. Look back to the notes of our conversation, and you will see that this is as I say. You say, Philebus, that I prove profits in a particular case to be incapable of remaining stationary, by assuming that price cannot increase; or, if I am called upon to prove that assumption—namely, that price cannot increase—I do it only by assuming that profits in that case are incapable of remaining stationary. But, if I had reasoned thus, I should not only have been guilty of a petitio principii (as you alleged), but also of a circle. Here, then, I utterly disclaim and renounce either assumption: I do not ask you to grant me that price must continue stationary in the case supposed; I do not ask you to grant me that profits must recede in the case supposed. On the contrary, I will not have them granted to me; I insist on your refusing both of these principles.

Phil. Well, I do refuse them.

Phd. So do I. I'll do anything in reason as well as another. "If one knight give a testril—" [Footnote: Sir Andrew Aguecheek, in "Twelfth Night."]

X. Then let us suppose the mines from which we obtain our silver to be in England.

Phd. What for? Why am I to suppose this? I don't know but you have some trap in it.

X. No; a Newcastle coal-mine, or a Cornwall tin-mine, will answer the purpose of my argument just as well. But it is more convenient to use silver as the illustration; and I suppose it to be in England simply to avoid intermixing any question about foreign trade. Now, when the hat sold for eighteen shillings, on Mr. Ricardo's principle why did it sell for that sum?

Phil. I suppose, because the quantity of silver in that sum is assumed to be the product of four days' labor in a silver-mine.

X. Certainly; because it is the product of the same quantity of labor as that which produced the hat. Calling twenty shillings, therefore, four ounces of silver, the hat was worth nine tenths of four ounces. Now, when wages advance from twelve shillings to fourteen shillings, profits (you allege) will not pay this advance, but price. On this supposition the price of the hat will now be—what?

Phil. Twenty shillings; leaving, as before, six shillings for profit.

X. Six shillings upon fourteen shillings are not the same rate of profit as six shillings upon twelve shillings; but no matter; it does not affect the argument. The hat is now worth four entire ounces of silver, having previously been worth four ounces minus a tenth of four ounces. But the product of four days' labor in a silver-mine must also advance in value, for the same cause. Four ounces of silver, which is that product, will now have the same power or value as 22.22s. had before. Consequently the four ounces of silver, which had previously commanded in exchange a hat and the ninth of a hat, will now command a hat and two ninths, fractions neglected. Hence, therefore, a hat will, upon any Anti-Ricardian theory, manifestly buy four ounces of silver; and yet, at the same time, it will not buy four ounces by one fifth part of four ounces. Silver and the denominations of its qualities, being familiar, make it more convenient to use that metal; but substitute lead, iron, coal, or anything whatsoever—the argument is the same, being in fact a universal demonstration that variations in wages cannot produce corresponding variations in price.

Phd. Say no more, X.; I see that you are right; and it's all over with our cause; unless I retrieve it. To think that the whole cause of the Anti-Ricardian economy should devolve upon me! that fate should ordain me to be the Atlas on whose unworthy shoulders the whole system is to rest! This being my destiny, I ought to have been built a little stronger. However, no matter. I heartily pray that I may prove too strong for you; though, at the same time, I am convinced I shall not. Remember, therefore, that you have no right to exult if you toss and gore me, for I tell you beforehand that you will. And, if you do, that only proves me to be in the right, and a very sagacious person; since my argument has all the appearance of being irresistible, and yet such is my discernment that I foresee most acutely that it will turn out a most absurd one. It is this: your answer to Philebus issues in this—that a thing A is shown to be at once more valuable and yet not more valuable than the same thing B. Now, this answer I take by the horns; it is possible for A to be more and yet not more valuable than the same thing. For example, my hat shall be more valuable than the gloves; more valuable, that is, than the gloves were: and yet not more valuable than the gloves; not more valuable, that is, than the gloves now are. So of the wages; all things preserve their former relations, because all are equally raised. This is my little argument. What do you think of it? Will it do?

X. No.

Phd. Why, so I told you.

X. I have the pleasure, then, to assure you that you were perfectly right. It will not do. But I understand you perfectly. You mean to evade my argument that the increase of wages shall settle upon profits; according to this argument, it will settle upon price, and not upon profits; yet again on price in such a way as to escape the absurdity of two relations of value existing between the very same things. But, Phdrus, this rise will be a mere metaphysical one, and no real rise. The hat, you say, has risen; but still it commands no more of the gloves, because they also have risen. How, then, has either risen? The rise is purely ideal.

Phd. It is so, X.; but that I did not overlook; for tell me—on Mr. Ricardo's principle, will not all things double their value simultaneously, if the quantity of labor spent in producing all should double simultaneously?

X. It will, Phdrus.

Phd. And yet nothing will exchange for more or less than before.

X. True; but the rise is not ideal, for all that, but will affect everybody. A pound of wheat, which previously bought three pounds of salt, will still buy three pounds; but, then, the salt-maker and the wheat-maker will have only one pound of those articles where before he had two. However, the difference between the two cases cannot fully be understood, without a previous examination of certain distinctions, which I will make the subject of our next dialogue; and the rather, because, apart from our present question, at every step we should else be embarrassed, as all others have been, by the perplexity attending these distinctions. Meantime, as an answer to your argument, the following consideration will be quite sufficient. The case which your argument respects is that in which wages are supposed to rise? Why? In consequence of a real rise in corn or something else. As a means of meeting this rise, wages rise; but the increased value of wages is only a means to an end, and the laborer cares about the rise only in that light. The end is—to give him the same quantity of corn, suppose. That end attained, he cares nothing about the means by which it is attained. Now, your ideal rise of wages does not attain this end. The corn has really risen; this is the first step. In consequence of this, an ideal rise follows in all things, which evades the absurdities of a real rise—and evades the Ricardian doctrine of profits; but, then, only by also evading any real rise in wages, the necessity of which (in order to meet the real rise in corn) first led to the whole movement of price. But this you will more clearly see after our next dialogue.

* * * * *

DIALOGUE THE FOURTH.

ON THE USE AND ABUSE OF TWO CELEBRATED DISTINCTIONS IN THE THEORY OF VALUE.

X. Now, gentlemen, I come to a question which on a double account is interesting: first, because it is indispensable to the fluency of our future progress that this question should be once for all decided; secondly, because it furnishes an experimentum crucis for distinguishing a true knowledge of Mr. Ricardo's theory from a spurious or half-knowledge. Many a man will accompany Mr. Ricardo thus far, and will keep his seat pretty well until he comes to the point which we have now reached—at which point scarcely one in a thousand will escape being unhorsed.

Phd. Which one most assuredly will not be myself. For I have a natural alacrity in losing my seat, and gravitate so determinately to the ground, that (like a Roman of old) I ride without stirrups, by way of holding myself in constant readiness for projection; upon the least hint, anticipating my horse's wishes on that point, and throwing myself off as fast as possible; for what's the use of taking the negative side in a dispute where one's horse takes the affirmative? So I leave it to Philebus to ride through the steeple-chase you will lead him; his be the honor of the day—and his the labor.

X. But that cannot be; Philebus is bound in duty to be dismounted, for the sake of keeping Mr. Malthus with many others in countenance. For at this point, Phdrus, more than at any other almost, there is a sad confusion of lords and gentlemen that I could name thrown out of the saddle pell-mell upon their mother earth.

Phil. "So they among themselves in pleasant vein Stood scoffing."

I suppose I may add—

"Heightened in their thoughts beyond All doubts of victory."

Meantime, what is it you allude to?

X. You are acquainted, I doubt not, Philebus, with the common distinction between real and nominal value; and in your judgment upon that distinction I presume that you adopt the doctrine of Mr. Malthus.

Phil. I do; but I know not why you should call it the doctrine of Mr. Malthus; for, though he has reurged it against Mr. Ricardo, yet originally it belongs to Adam Smith.

X. Not so, Philebus; a distinction between real and nominal value was made by Adam Smith, but not altogether the distinction of Mr. Malthus. It is true that Mr. Malthus tells us ("Polit. Econ.," p. 63) that the distinction is "exactly the same." But in this he is inaccurate; for neither is it exactly the same; nor, if it had been, could Mr. Malthus have urged it in his "Political Economy" with the same consistency as its original author. This you will see hereafter. But no matter; how do you understand the distinction?

Phil. "I continue to think," with Mr. Malthus, and in his words, "that the most proper definition of real value in exchange, in contradistinction to nominal value in exchange, is the power of commanding the necessaries and conveniences of life, including labor, as distinguished from the power of commanding the precious metals."

X. You think, for instance, that if the wages of a laborer should in England be at the rate of five shillings a day, and in France of no more than one shilling a day, it could not, therefore, be inferred that wages were at a high real value in England, or a low real value in France. Until we know how much food, &c., could be had for the five shillings in England, and how much in France for the one shilling, all that we could fairly assert would be, that wages were at a high nominal value in England and at a low nominal value in France; but the moment it should be ascertained that the English wages would procure twice as much comfort as the French, or the French twice as much as the English, we might then peremptorily affirm that wages were at a high real value in England on the first supposition, or in France on the second:—this is what you think?

Phil. It is, and very fairly stated, I think this, in common with Mr. Malthus; and can hold out but little hope that I shall ever cease to think it.

X. "Why, then, know this, Thou think'st amiss; And, to think right, thou must think o'er again." [Footnote: Suckling's well-known song.]

Phd. But is it possible that Mr. Ricardo can require me to abjure an inference so reasonable as this? If so, I must frankly acknowledge that I am out of the saddle already.

X. Reasonable inference? So far from that, there is an end of all logic if such an inference be tolerated. That man may rest assured that his vocation in this world is not logical, who feels disposed (after a few minutes' consideration) to question the following proposition,—namely: That it is very possible for A continually to increase in value—in real value, observe—and yet to command a continually decreasing quantity of B; in short, that A may acquire a thousand times higher value, and yet exchange for ten thousand times less of B.

Phd. Why, then, "chaos is come again!" Is this the unparadoxical Ricardo?

X. Yes, Phdrus; but lay not this unction to your old prejudices, which you must now prepare to part with forever, that it is any spirit of wilful paradox which is now speaking; for get rid of Mr. Ricardo, if you can, but you will not, therefore, get rid of this paradox. On any other theory of value whatsoever, it will still continue to be an irresistible truth, though it is the Ricardian theory only which can consistently explain it. Here, by the way, is a specimen of paradox in the true and laudable sense—in that sense according to which Boyle entitled a book "Hydrostatical Paradoxes;" for, though it wears a prim facie appearance of falsehood, yet in the end you will be sensible that it is not only true, but true in that way and degree which will oblige him who denies it to maintain an absurdity. Again, therefore, I affirm that, when the laborer obtains a large quantity of corn, for instance, it is so far from being any fair inference that wages are then at a high real value, that in all probability they are at a very low real value; and inversely I affirm, that when wages are at their very highest real value, the laborer will obtain the very smallest quantity of corn. Or, quitting wages altogether (because such an illustration would drive me into too much anticipation), I affirm universally of Y (that is, of any assignable thing whatsoever), that it shall grow more valuable ad infinitum, and yet by possibility exchange for less and less ad infinitum of Z (that is, of any other assignable thing).

Phd. Well, all I shall say is this,—am I in a world where men stand on their heads or on their feet? But there is some trick in all this; there is some snare. And now I consider—what's the meaning of your saying "by possibility"? If the doctrine you would force upon me be a plain, broad, straightforward truth, why fetter it with such a suspicious restriction?

X. Think, for a moment, Phdrus, what doctrine it is which I would force upon you; not, as you seem to suppose, that the quantity obtained by Y is in the inverse ratio of the value of Y; on the contrary, if that were so, it would still remain true that an irresistible inference might be drawn from the quantity purchased to the value of the thing purchasing, and vice versa, from the value of the thing purchasing to the quantity which it would purchase. There would still be a connection between the two; and the sole difference between my doctrine and the old doctrine would be this—that the connection would be no longer direct (as by your doctrine), but inverse. This would be the difference, and the sole difference. But what is it that I assert? Why, that there is no connection at all, or of any kind, direct or inverse, between the quantity commanded and the value commanding. My object is to get rid of your inference, not to substitute any new inference of my own. I put, therefore, an extreme case. This case ought by your doctrine to be impossible. If, therefore, it be not impossible, your doctrine is upset. Simply as a possible case, it is sufficient to destroy you. But, if it were more than a possible case, it would destroy me. For if, instead of demonstrating the possibility of such a case, I had attempted to show that it were a universal and necessary case, I should again be introducing the notion of a connection between the quantity obtained and the value obtaining, which it is the very purpose of my whole argument to exterminate. For my thesis is, that no such connection subsists between the two as warrants any inference that the real value is great because the quantity it buys is great, or small because the quantity it buys is small; or, reciprocally, that, because the real value is great or small, therefore the quantities bought shall be great or small. From, or to, the real value in these cases, I contend that there is no more valid inference, than from, or to, the nominal value with which it is contrasted.

Phil. Your thesis, then, as I understand it, is this: that if A double its value, it will not command double the quantity of B. I have a barouche which is worth about six hundred guineas at this moment. Now, if I should keep this barouche unused in my coach-house for five years, and at the end of this term it should happen from any cause that carriages had doubled in value, my understanding would lead me to expect double the quantity of any commodity for which I might then exchange it, whether that were money, sugar, besoms, or anything whatsoever. But you tell me—no. And vice versa, if I found that my barouche at the end of five years obtained for me double the quantity of sugar, or besoms, or political economists, which it would now obtain, I should think myself warranted in drawing an inference that carriages had doubled their value. But you tell me—no; "non valet consequentia."

X. You are in the right, Phdrus; I do tell you so. But you do not express my thesis quite accurately, which is, that if A double its value, it will not therefore command double the former quantity of B. It may do so; and it may also command five hundred times more, or five hundred times less.

Phd. O tempora! O mores! Here is my friend X., that in any other times would have been a man of incorruptible virtue; and yet, in our unprincipled age, he is content to barter the interests of truth and the "majesty of plain-dealing" for a brilliant paradox, or (shall I say?) for the glory of being reputed an accomplished disputant.

X. But, Phdrus, there could be little brilliancy in a paradox which in the way you understand it will be nothing better than a bold defiance of common sense. In fact, I should be ashamed to give the air of a paradox to so evident a truth as that which I am now urging, if I did not continually remind myself that, evident as it may appear, it yet escaped Adam Smith. This consideration, and the spectacle of so many writers since his day thrown out and at a fault precisely at this point of the chase, make it prudent to present it in as startling a shape as possible; in order that, the attention being thoroughly roused, the final assent may not be languid or easily forgotten. Suffer me, therefore, Phdrus, in a Socratic way, to extort an assent from your own arguments—allow me to drive you into an absurdity.

Phd. With all my heart; if our father Adam is wrong, I am sure it would be presumptuous in me to be right; so drive me as fast as possible.

X. You say that A, by doubling its own value, shall command a double quantity of B. Where, by A, you do not mean some one thing in particular, but generally any assignable thing whatever. Now, B is some assignable thing. Whatever, therefore, is true of A, will be true of B?

Phd. It will.

X. It will be true, therefore, of B, that, by doubling its own value, it will command a double quantity of A?

Phd. I cannot deny it.

X. Let A be your carriage; and let B stand for six hundred thousands of besoms, which suppose to express the value of your carriage in that article at this present moment. Five years hence, no matter why, carriages have doubled in value; on which supposition you affirm that in exchange for your barouche you will be entitled to receive no less than twelve hundred thousands of besoms.

Phd. I do; and a precious bargain I shall have of it; like Moses with his gross of shagreen spectacles. But sweep on, if you please; brush me into absurdity.

X. I will. Because barouches have altered in value, that is no reason why besoms should not have altered?

Phd. Certainly; no reason in the world.

X. Let them have altered; for instance, at the end of the five years, let them have been doubled in value. Now, because your assertion is this—simply by doubling in value, B shall command a double quantity of A—it follows inevitably, Phdrus, that besoms, having doubled their value in five years, will at the end of that time command a double quantity of barouches. The supposition is, that six hundred thousand, at present, command one barouche; in five years, therefore, six hundred thousand will command two barouches?

Phd. They will.

X. Yet, at the very same time, it has already appeared from your argument that twelve hundred thousand will command only one barouche; that is, a barouche will at one and the same time be worth twelve hundred thousand besoms, and worth only one fourth part of that quantity. Is this an absurdity, Phdrus?

Phd. It seems such.

X. And, therefore, the argument from which it flows, I presume, is false?

Phd. Scavenger of bad logic! I confess that it looks so.

Phil. You confess? So do not I. You die "soft," Phdrus; give me the cudgels, and I'll die "game," at least. The flaw in your argument, X., is this: you summoned Phdrus to invert his proposition, and then you extorted an absurdity from this inversion. But that absurdity follows only from the particular form of expression into which you threw the original proposition. I will express the same proposition in other terms, unexceptionable terms, which shall evade the absurdity. Observe. A and B are at this time equal in value; that is, they now exchange quantity for quantity. Or, if you prefer your own case, I say that one barouche exchanges for six hundred thousand besoms. I choose, however, to express this proposition thus: A (one barouche) and B (six hundred thousand besoms) are severally equal in value to C. When, therefore, A doubles its value, I say that it shall command a double quantity of C. Now, mark how I will express the inverted case. When B doubles its value, I say that it shall command a double quantity of C. But these two cases are very reconcilable with each other. A may command a double quantity of C at the same time that B commands a double quantity of C, without involving any absurdity at all. And, if so, the disputed doctrine is established, that a double value implies a double command of quantity; and reciprocally, that from a doubled command of quantity we may infer a doubled value.

X. A, and B, you say, may simultaneously command a double quantity of C, in consequence of doubling their value; and this they may do without absurdity. But how shall I know that, until I know what you cloak under the symbol of C? For if the same thing shall have happened to C which my argument assumes to have happened to B (namely, that its value has altered), then the same demonstration will hold; and the very same absurdity will follow any attempt to infer the quantity from the value, or the value from the quantity.

Phil. Yes, but I have provided against that; for by C I mean any assignable thing which has not altered its own value. I assume C to be stationary in value.

X. In that case, Philebus, it is undoubtedly true that no absurdity follows from the inversion of the proposition as it is expressed by you. But then the short answer which I return is this: your thesis avoids the absurdity by avoiding the entire question in dispute. Your thesis is not only not the same as that which we are now discussing; not only different in essence from the thesis which is now disputed; but moreover it affirms only what never was disputed by any man. No man has ever denied that A, by doubling its own value, will command a double quantity of all things which have been stationary in value. Of things in that predicament, it is self-evident that A will command a double quantity. But the question is, whether universally, from doubling its value, A will command a double quantity: and inversely, whether universally, from the command of a double quantity, it is lawful to infer a double value. This is asserted by Adam Smith, and is essential to his distinction of nominal and real value; this is peremptorily denied by us. We offer to produce cases in which from double value it shall not be lawful to infer double quantity. We offer to produce cases in which from double quantity it shall not be lawful to infer double value. And thence we argue, that until the value is discovered in some other way, it will be impossible to discover whether it be high or low from any consideration of the quantity commanded; and again, with respect to the quantity commanded—that, until known in some other way, it shall never be known from any consideration of the value commanding. This is what we say; now, your "C" contradicts the conditions; "until the value is discovered in some other way, it shall never be learned from the quantity commanded." But in your "C" the value is already discovered; for you assume it; you postulate that C is stationary in value: and hence it is easy indeed to infer that, because A commands double quantity of "C," it shall therefore be of double value; but this inference is not obtained from the single consideration of double quantity, but from that combined with the assumption of unaltered value in C, without which assumption you shall never obtain that inference.

Phd. The matter is clear beyond what I require; yet, X., for the satisfaction of my "game" friend Philebus, give us a proof or two ex abundanti by applying what you have said to cases in Adam Smith or others.

X. In general it is clear that, if the value of A increases in a duplicate ratio, yet if the value of B increases in a triplicate ratio, so far from commanding a greater quantity of B, A shall command a smaller quantity; and if A continually goes on squaring its former value, yet if B continually goes on cubing its former value, then, though A will continually augment in value, yet the quantity which it will command of B shall be continually less, until at length it shall become practically equal to nothing. [Footnote: The reader may imagine that there is one exception to this case: namely, if the values of A and B were assumed at starting to be = 1; because, in that case, the squares, cubes, and all other powers alike, would be = I; and thus, under any apparent alteration, the real relations of A and B would always remain the same. But this is an impossible and unmeaning case in Political Economy, as might easily be shown.] Hence, therefore, I deduce,

1. That when I am told by Adam Smith that the money which I can obtain for my hat expresses only its nominal value, but that the labor which I can obtain for it expresses its real value—I reply, that the quantity of labor is no more any expression of the real value than the quantity of money; both are equally fallacious expressions, because equally equivocal. My hat, it is true, now buys me x quantity of labor, and some years ago it bought x/2 quantity of labor. But this no more proves that my hat has advanced in real value according to that proportion, than a double money price will prove it. For how will Adam Smith reply to him who urges the double money value as an argument of a double real value? He will say—No; non valet consequentia. Your proof is equivocal; for a double quantity of money will as inevitably arise from the sinking of money as from the rising of hats. And supposing money to have sunk to one fourth of its former value, in that case a double money value—so far from proving hats to have risen in real value—will prove that hats have absolutely fallen in real value by one half; and they will be seen to have done so by comparison with all things which have remained stationary; otherwise they would obtain not double merely, but four times the quantity of money price. This is what Adam Smith will reply in effect. Now, the very same objection I make to labor as any test of real value. My hat now obtains x labor; formerly it obtained only one half of x. Be it so; but the whole real change may be in the labor; labor may now be at one half its former value; in which case my hat obtains the same real price; double the quantity of labor being now required to express the same value. Nay, if labor has fallen to one tenth of its former value, so far from being proved to have risen one hundred per cent. in real value by now purchasing a double quantity of labor, my hat is proved to have fallen to one fifth of its former value; else, instead of buying me only x labor, which is but the double of its former value (x/2), it would buy me 5 x, or ten times its former value.

Phil. Your objection, then, to the labor price, as any better expression of the real value than the money price, would be that it is an equivocal expression, leaving it doubtful on which side of the equation the disturbance had taken place, or whether on both sides. In which objection, as against others, you may be right; but you must not urge this against Adam Smith; because, on his theory, the expression is not equivocal; the disturbance can be only on one side of the equation, namely, in your hat. For as to the other side (the labor), that is secured from all disturbance by his doctrine that labor is always of the same value. When, therefore, your hat will purchase x quantity of labor instead of half x, the inference is irresistible that your hat has doubled its value. There lies no appeal from this; it cannot be evaded by alleging that the labor may have fallen, for the labor cannot fall.

X. On the Smithian theory it cannot; and therefore it is that I make a great distinction between the error of Adam Smith and of other later writers. He, though wrong, was consistent. That the value of labor is invariable, is a principle so utterly untenable, that many times Adam Smith abandoned it himself implicitly, though not explicitly. The demonstration of its variable value indeed follows naturally from the laws which govern wages; and, therefore, I will not here anticipate it. Meantime, having once adopted that theory of the unalterable value of labor, Adam Smith was in the right to make it the expression of real value. But this is not done with the same consistency by Mr. Malthus at the very time when he denies the possibility of any invariable value.

Phil. How so? Mr. Malthus asserts that there is one article of invariable value; what is more, this article is labor,—the very same as that formerly alleged for such by Adam Smith; and he has written a book to prove it.

X. True, Philebus, he has done so; and he now holds that labor is invariable, supposing that his opinions have not altered within the last twelve months. But he was so far from holding this in 1820 (at which time it was that he chiefly insisted on the distinction between nominal and real value), that he was not content with the true arguments against the possibility of an invariable value, but made use of one, as I shall soon show you, which involves what the metaphysicians call a non-ens—or an idea which includes contradictory and self-destroying conditions. Omitting, however, the inconsistency in the idea of real value as conceived by Mr. Malthus, there is this additional error engrafted upon the Smithian definition, that it is extended to "the necessaries and conveniences of life" in general, and no longer confined exclusively to labor. I shall, therefore, as another case for illustrating and applying the result of our dispute,

2. Cite a passage from Mr. Malthus' "Political Economy" (p. 59): "If we are told that the wages of day-labor in a particular country are, at the present time, fourpence a day, or that the revenue of a particular sovereign, seven or eight hundred years ago, was four hundred thousand pounds a year, these statements of nominal value convey no sort of information respecting the condition of the lower class of people in the one case, or the resources of the sovereign in the other. Without further knowledge on the subject, we should be quite at a loss to say whether the laborers in the country mentioned were starving or living in great plenty; whether the king in question might be considered as having a very inadequate revenue, or whether the sum mentioned was so great as to be incredible. [Footnote: Hume very reasonably doubts the possibility of William the Conqueror's revenue being four hundred thousand pounds a year, as represented by an ancient historian, and adopted by subsequent writers.—Note of Mr. Malthus.] It is quite obvious that in cases of this kind,—and they are of constant recurrence,—the value of wages, incomes, or commodities, estimated in the precious metals, will be of little use to us alone. What we want further is some estimate of a kind which may be denominated real value in exchange, implying the quantity of the necessaries and conveniences of life which those wages, incomes, or commodities, will enable the possessor of them to command."

In this passage, over and above the radical error about real value, there is also apparent that confusion, which has misled so many writers, between value and wealth; a confusion which Mr. Ricardo first detected and cleared up. That we shall not be able to determine, from the mere money wages, whether the laborers were "starving or living in great plenty," is certain; and that we shall be able to determine this as soon as we know the quantity of necessaries, etc., which those wages commanded, is equally certain; for, in fact, the one knowledge is identical with the other, and but another way of expressing it; we must, of course, learn that the laborer lived in plenty, if we should learn that his wages gave him a great deal of bread, milk, venison, salt, honey, etc. And as there could never have been any doubt whether we should learn this from what Mr. Malthus terms the real value, and that we should not learn it from what he terms the money value, Mr. Malthus may be assured that there never can have been any dispute raised on that point. The true dispute is, whether, after having learned that the laborer lived in American plenty, we shall have at all approximated to the appreciation of his wages as to real value: this is the question; and it is plain that we shall not. What matters it that his wages gave him a great deal of corn, until we know whether corn bore a high or a low value? A great deal of corn at a high value implies wages of a high value; but a great deal of corn at a low value is very consistent with wages at a low value. Money wages, it is said, leave us quite in the dark as to real value. Doubtless; nor are we at all the less in the dark for knowing the corn wages, the milk wages, the grouse wages, etc. Given the value of corn, given the value of milk, given the value of grouse, we shall know whether a great quantity of those articles implies a high value, or is compatible with a low value, in the wages which commanded them; but, until that is given, it has been already shown that the quantity alone is an equivocal test, being equally capable of coexisting with high wages or low wages.

Phil. Why, then, it passes my comprehension to understand what test remains of real value, if neither money price nor commodity price expresses it. When are wages, for example, at a high real value?

X. Wages are at a high real value when it requires much labor to produce wages; and at a low real value when it requires little labor to produce wages: and it is perfectly consistent with the high real value that the laborer should be almost starving; and perfectly consistent with the low real value that the laborer should be living in great ease and comfort.

Phil. Well, this may be true; but you must allow that it sounds extravagant.

X. Doubtless it sounds extravagant, to him who persists in slipping under his notion of value another and heterogeneous notion, namely, that of wealth. But, let it sound as it may, all the absurdities (which are neither few nor slight) are on the other side. These will discover themselves as we advance. Meantime, I presume that in your use, and in everybody's use, of the word value, a high value ought to purchase a high value, and that it will be very absurd if it should not. But, as to purchasing a great quantity, that condition is surely not included in any man's idea of value.

Phil. No, certainly; because A is of high value, it does not follow that it must purchase a great quantity; that must be as various as the nature of the thing with which it is compared. But having once assumed any certain thing, as B, it does seem to follow that, however small a quantity A may purchase of this (which I admit may be very small, though the value of A should be very great), yet it does seem to follow, from everybody's notion of value, that this quantity of B, however small at first, must continually increase, if the value of A be supposed continually to increase.

X. This may "seem" to follow; but it has been shown that it does not follow; for if A continually double its value, yet let B continually triple or quadruple its value, and the quantity of B will be so far from increasing, that it will finally become evanescent. In short, once for all, the formula is this: Let A continually increase in value, and it shall purchase continually more and more in quantity— than what? More than it did? By no means; but more than it would have done, but for that increase in value. A has doubled its value. Does it therefore purchase more than it did before of B? No; perhaps it purchases much less; suppose only one fourth part as much of B as it did before; but still the doubling of A's value has had its full effect; for B, it may happen, has increased in value eight-fold; and, but for the doubling of A, it would, instead of one fourth, have bought only one eighth of the former quantity. A, therefore, by doubling in value, has bought not double in quantity of what it bought before, but double in quantity of what it would else have bought.

The remainder of this dialogue related to the distinction between "relative" value, as it is termed, and "absolute" value; clearing up the true use of that distinction. But, this being already too long, the amount of it will be given hereafter, with a specimen of the errors which have arisen from the abuse of this distinction.

* * * * *

DIALOGUE THE FIFTH.

ON THE IMMEDIATE USES OF THE NEW THEORY OF VALUE.

X. The great law which governs exchangeable value has now been stated and argued. Next, it seems, we must ask, what are its uses? This is a question which you or I should not be likely to ask; for with what color of propriety could a doubt be raised about the use of any truth in any science? still less, about the use of a leading truth? least of all, about the use of the leading truth? Nevertheless, such a doubt has been raised by Mr. Malthus.

Phd. On what ground or pretence.

X. Under a strange misconception of Mr. Ricardo's meaning. Mr. Malthus has written a great deal, as you may have heard, against Mr. Ricardo's principle of value; his purpose is to prove that it is a false principle; independently of which, he contends that, even if it were a true principle, it would be of little use. [Footnote: Vide the foot-note to p. 54 of "The Measure of Value."]

Phd. Little use? In relation to what?

X. Ay, there lies the inexplicable mistake: of little use as a measure of value. Now, this is a mistake for which there can be no sort of apology; for it supposes Mr. Ricardo to have brought forward his principle of value as a standard or measure of value; whereas, Mr. Ricardo has repeatedly informed his reader that he utterly rejects the possibility of any such measure. Thus (at p. 10, edit. 2d), after laying down the conditio sine qu non under which any commodity could preserve an unvarying value, he goes on to say: "of such a commodity we have no knowledge, and consequently are unable to fix on any standard of value." And, again (at p. 343 of the same edition), after exposing at some length the circumstances which disqualify "any commodity, or all commodities together," from performing the office of a standard of value, he again states the indispensable condition which must be realized in that commodity which should pretend to such an office; and again he adds, immediately, "of such a commodity we have no knowledge." But what leaves this mistake still more without excuse is, that in the third edition of his book Mr. Ricardo has added an express section (the sixth) to his chapter on value, having for its direct object to expose the impossibility of any true measure of value. Setting aside, indeed, these explicit declarations, a few words will suffice to show that Mr. Ricardo could not have consistently believed in any standard or measure of value. What does a standard mean?

Phd. A standard is that which stands still whilst other things move, and by this means serves to indicate or measure the degree in which those other things have advanced or receded.

X. Doubtless; and a standard of value must itself stand still or be stationary in value. But nothing could possibly be stationary in value upon Mr. Ricardo's theory, unless it were always produced by the same quantity of labor; since any alteration in the quantity of the producing labor must immediately affect the value of the product. Now, what is there which can always be obtained by the same quantity of labor? Raw materials (for reasons which will appear when we consider Rent) are constantly tending to grow dearer [Footnote: "Constantly tending to grow dearer"—To the novice in Political Economy, it will infallibly suggest itself that the direct contrary is the truth; since, even in rural industry, though more tardily improving its processes than manufacturing industry, the tendency is always in that direction: agriculture, as an art benefiting by experience, has never yet been absolutely regressive, though not progressive by such striking leaps or sudden discoveries as manufacturing art. But, for all that, it still remains true, as a general principle, that raw materials won from the soil are constantly tending to grow dearer, whilst these same materials as worked up for use by manufacturing skill are constantly travelling upon an opposite path. The reason is, that, in the case of manufacturing improvements, no conquest made is ever lost. The course is never retrogressive towards the worse machinery, or towards the more circuitous process; once resigned, the inferior method is resigned forever. But in the industry applied to the soil this is otherwise. Doubtless the farmer does not, with his eyes open, return to methods which have experimentally been shown to be inferior, unless, indeed, where want of capital may have forced him to do so; but, as population expands, he is continually forced into descending upon inferior soils; and the product of these inferior soils it is which gives the ruling price for the whole aggregate of products. Say that soils Nos. 1, 2, 3, 4, had been hitherto sufficient for a nation, where the figures express the regular graduation downwards in point of fertility; then, when No. 5 is called for (which, producing less by the supposition, costs, therefore, more upon any given quantity), the price upon this last, No. 5, regulates the price upon all the five soils. And thus it happens that, whilst always progressive, rural industry is nevertheless always travelling towards an increased cost. The product of Nos. 1, 2, 3, 4, is continually tending to be cheaper; but when the cost of No. 5 (and so on forever as to the fresh soils required to meet a growing population) is combined with that of the superior soils, the quotient from the entire dividend, 1, 2, 3, 4, 5, is always tending gradually to a higher expression.] by requiring more labor for their production; manufactures, from the changes in machinery, which are always progressive and never retrograde, are constantly tending to grow cheaper by requiring less; consequently, there is nothing which, upon Mr. Ricardo's theory, can long continue stationary in value. If, therefore, he had proposed any measure of value, he must have forgotten his own principle of value.

Phil. But allow me to ask; if that principle is not proposed as a measure of value, in what character is it proposed?

X. Surely, Philebus, as the ground of value; whereas a measure of value is no more than a criterion or test of value. The last is simply a principium cognoscendi, whereas the other is a principium essendi.

Phil. But wherein lies the difference?

X. Is it possible that you can ask such a question? A thermometer measures the temperature of the air; that is, it furnishes a criterion for ascertaining its varying degrees of heat; but you cannot even imagine that a thermometer furnishes any ground of this heat. I wish to know whether a day's labor at the time of the English Revolution bore the same value as a hundred years after at the time of the French Revolution; and, if not the same value, whether a higher or a lower. For this purpose, if I believe that there is any commodity which is immutable in value, I shall naturally compare a day's labor with that commodity at each period. Some, for instance, have imagined that corn is of invariable value; and, supposing one to adopt so false a notion, we should merely have to inquire what quantity of corn a day's labor would exchange for at each period, and we should then have determined the relations of value between labor at the two periods. In this case, I should have used corn as the measure of the value of labor; but I could not rationally mean to say that corn was the ground of the value of labor; and, if I said that I made use of corn to determine the value of labor, I should employ the word "determine" in the same sense as when I say that the thermometer determines the heat—namely, that it ascertains it, or determines it to my knowledge (as a principium cognoscendi). But, when Mr. Ricardo says that the quantity of labor employed on A determines the value of A, he must of course be understood to mean that it causes A to be of this value, that it is the ground of its value, the principium essendi of its value; just as when, being asked what determines a stone to fall downwards rather than upwards, I answer that it is the earth's attraction, or the principle of gravitation, meaning that this principle causes it to fall downwards; and if, in this case, I say that gravitation "determines" its course downwards, I no longer use that word in the sense of ascertain; I do not mean that gravitation ascertains it to have descended; but that gravitation has causatively impressed that direction on its course; in other words, I make gravitation the principium essendi of its descent.

Phd. 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.

Phd. 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 Dialllos (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.