Letters of David Ricardo to Thomas Robert Malthus, 1810-1823 Part 21

MY DEAR MALTHUS,

After the most attentive consideration which I can give to your book[268], I cannot agree with you in considering labour, in the sense in which you use it, as a good measure of value. Neither can I discover exactly what connexion the constant labour necessary to produce the wages and profits on a commodity has with its value. If it be a good measure for one commodity, it must be for all commodities; and, as well as valuing wheat by the constant quant.i.ty of labour necessary to produce the particular quant.i.ty given to the workman, together with the profit of the farmer on that particular quant.i.ty, I might value cloth or any other thing by the same rule.

I know, indeed, that I might make out a table[269] precisely such as yours, in which the only alteration would be the word cloth instead of the word wheat, and you would probably then ask me whether your principle were not of universal application. I should answer that it contains in it that radical objection which you make against the proposed measure of your opponents. You may, if you please, arbitrarily select labour as a measure of value, and explain all the science of political economy by it, in the same way as any other man might select gold or any other commodity; but you can no more connect it with a principle or show its invariability than he could. Let me suppose that cloth could not be made in less than two years; the first line of my table must be altered, and the figures would stand in the following order:--

150, 100, 25 per cent. 7-1/2, 2-1/2, 10, 10, 15.

They would do so because ten pieces of cloth would, with the acc.u.mulation of profit for two years, be of the same value as a commodity, the result of the same quant.i.ty of labour, which could be produced in two years. I do not know how you will treat this objection, but in my opinion it is fatal to your whole theory.

I have the same objection to your measure, which I have always professed; you choose[270] a variable measure for an invariable standard. Who can say that a plague which should take off half our people would not alter the value of labour? We might, indeed, agree to transfer the variation to the commodities, and to say that they had fallen and not that labour had risen, but I can see no advantage in the change.

We might again discover modes by which the necessaries of the labourer might be produced with uncommon facility; and, in consequence of the stimulus which the good situation of the labourers might give to population, the reward of the labour in necessaries might be no higher than before; would it be right in this case, in which nothing had really altered but necessaries and labour, to say that they only had remained steadily at the same value, and, because a given quant.i.ty of corn or of labour will exchange only for (perhaps) 3/4 of the former quant.i.ty of linen, cloth, or money, to declare that it was the linen, cloth, or money which had risen in value, not labour and corn which had fallen?

Two countries are equally skilful and industrious; but in one the people live on the cheap food of potatoes, in the other on the dear food, wheat. You will allow that profits will be higher in the one country than the other. You will allow, too, that money may be nearly of the same value in both, if we choose anything else as a measure of value but labour. You will further agree that there might be an extensive trade between such countries. If a man sent a pipe of wine from the potato[271] country, which cost 100 and which might be sold at 110 in the wheat country, you would say that the wine was at a higher value in the country from which it was exported, merely because, in that country, it could command more labour. You would say this although the wine would not only exchange for more money but for more of every other commodity in the wheat country. I contend that this is a novelty which cannot be considered an improvement; it would confound all our usual notions, and would impose upon us the necessity of learning a new language. All mankind would say that wine was dearer in the wheat than in the potato country, and that labour was of less value in the latter. In page 31 there is a long pa.s.sage on the reason for choosing labour as a standard, with which I am not satisfied. A piece of cloth is 120 yards in length and is to be divided between _A_ and _B_; it is obvious that in proportion as much is given to _A_ less will be given to _B_ and vice versa. This will be true, although the value of the whole 120 yards be 100, 50, or 5. Is it not then a begging of the question to a.s.sume the constant value because the quant.i.ty is constant, and because it is always to be divided between two persons?

Allowing you your premises, I see very few instances in which I can quarrel with your conclusions. I agree with all you say concerning the glut of commodities; allow to you your measure, and it is impossible to differ in the result.

I hope soon to see you. I have hardly been able to find time to write this letter, I am so busily engaged. I am serving on a committee.

Ever yours, DAVID RICARDO.

NOTE.--The table referred to in this letter is the following:--

_Table ill.u.s.trating the invariable Value of Labour and its Results._

Table Key 1: Quarters of corn produced by 10 men or varying fertility of the soil.

2: Yearly corn wages to each labourer, determined by the demand and supply.

3: Advances in corn wages, or variable produce commanding the labour of 10 men.

4: Rate of profits under the foregoing circ.u.mstances.

5: Quant.i.ty of labour required to produce the wages of 10 men under the foregoing circ.u.mstances.

6: Quant.i.ty of profits on the advances of labour.

7: Invariable value of the wages of a given number of men.

8: Value of 100 qrs. of corn under the circ.u.mstances supposed.

9: Value of the product of the labour of 10 men under the circ.u.mstances supposed.

+-------------------------------------------------------------------+ 1 2 3 4 5 6 7 8 9 --------+-------+--------+-------+------+-----+----+-------+------- 150 qrs. 12 qrs. 120 qrs. 25 p.c. 8 2 10 833 125 150 13 130 1538 866 134 10 77 1153 150 10 100 50 66 34 10 10 15 140 12 120 1666 86 14 10 714 116 140 11 110 272 785 215 10 909 127 130 12 120 83 923 077 10 833 108 130 10 100 30 77 23 10 10 13 120 11 110 9 917 083 10 909 109 120 10 100 20 833 167 10 10 12 110 10 100 10 909 91 10 10 11 110 9 90 222 818 182 10 111 122 100 9 90 111 9 1 10 111 111 100 8 80 25 8 2 10 125 125 90 8 80 125 888 112 10 125 1125 +--------+-------+--------+-------+------+-----+----+-------+-------+

('Measure of Value,' p. 38.)

Columns 5 to 9 contain the debateable matter.

Lx.x.xIV.

LONDON, _28 May, 1823_.

MY DEAR MALTHUS,

I will, to the best of my power, state my objections to your arguments respecting the measure of value. You have yourself stated, as an objection to my view on this subject, that a commodity produced with labour and capital united, cannot be a measure of value for any other commodities than such as are produced precisely under the same circ.u.mstances, and in this I have agreed that you are substantially correct. If all commodities were produced in one day and by labour only without the a.s.sistance of capital, they would vary in proportion as the quant.i.ty of labour employed on their production increased or diminished.

If the same quant.i.ty of labour was constantly employed on the production of money, money would be an accurate measure of absolute value, and, if shrimps or nuts or any other thing rose or fell in such money, it would only be because more or less labour was employed in procuring them.

Under such circ.u.mstances every commodity which was the produce of a day's labour would naturally command a day's labour, and therefore the value of a commodity would be in proportion to the quant.i.ty of labour which it would command. But, though such a money would measure accurately the value of every commodity produced under circ.u.mstances exactly similar, it would not be an accurate measure of the value of other commodities produced with a large quant.i.ty of capital, employed for a length of time. In the case just supposed a quant.i.ty of shrimps would be as accurate a measure of value as a quant.i.ty of money produced by the same quant.i.ty of labour; but, when capital is employed and cloth is the product of labour and capital, you justly say that cloth is not a correct measure of the value of shrimps and of silver, picked up by labour alone, on the sea sh.o.r.e; and yet with singular inconsistency, as I cannot help thinking, you contend that the shrimps and the silver, picked up by labour alone on the sea sh.o.r.e, are accurate measures of the value of cloth. If you are right, then must cloth be also an accurate measure of value, because the thing measured must be as good a measure as the thing with which you measure. When I say that 4 and a quarter of wheat are of the same value, I can measure other values by the quarter of wheat as well as by the 4. You say: 'It is conceded that, when labour alone is concerned in the production of commodities, and there is no question of time, both the absolute and exchangeable values of such commodities may be accurately measured by the quant.i.ty of labour employed upon them.' Nothing can, I think, be more correct, and it is perfectly accordant with what I have been saying. Your mistake appears to me to be this: you show us that under certain conditions a certain commodity would be a measure of absolute value, and then you apply it to cases where the conditions are not complied with, and suppose it to be a measure of absolute value in those cases also. You appear to me, too, to deceive yourself when you think you prove your proposition, because your proof only amounts to this, that your measure is a good measure of exchangeable value but not of absolute value. You say: 'If the acc.u.mulated and immediate labour worked up in a commodity be of any a.s.sumed value, 100 for instance, and the profits of the value of 20, including the compound profits upon the labour worked up in the materials, the whole will be of the value of 120. Of this value 1/6 only belongs to profits, the rest or 5/6 may be considered as the product of pure labour.' This is quite true, whether we value the commodity by the quant.i.ty of labour actually employed upon it, by the quant.i.ty which it will command when brought to market, or by the quant.i.ty of money, or any other commodity, for which it is exchanged; 5/6, in all cases, will belong to the workmen and 1/6 to the master.

'Consequently the value of 5/6 of the produce is determined by the quant.i.ty of labour employed on the whole; and the value of the whole produce by the quant.i.ty of labour employed upon it with the addition of 1/6 of that quant.i.ty.' This is really saying no more than that, when profits are one sixth of the value of the whole commodity (in which no rent enters), the other 5/6 go to reward the labourers, and that the portion so going to the labourers may itself be resolved into labour and profits in the same proportion of 5 and 1. Five men produce six pieces of cloth, of which 5 are paid to them, the men; if profits fall one half, the men will receive 5-1/2 pieces, and then you say the cloth is of less value; but in what medium? In labour, you answer. You appear to me to advance a proposition that cloth is of less value when it will exchange for less labour, and to prove it by showing the fact, merely, that it actually does exchange for less labour.

You say: 'But, when labour is concerned, it follows from what has been conceded that the value of the produce is determined by the quant.i.ty of labour employed upon it.' By value here you mean absolute value; and then you immediately apply this measure of absolute value, which is only conceded in a particular case, to a general proposition, and say 'consequently;' consequently on what? On this particular case; 'consequently the value of 5/6 of the produce is determined by the quant.i.ty of labour employed on the whole,' that is to say 'consequently the quant.i.ty of labour which 5/6 of the produce will command is determined by the quant.i.ty of labour employed on the whole;' the same is true, in the same sense, of 5/6, 5/7, 5/8, 5/9 or of any other proportions in which the whole may be divided. My only object has been to show, and, if I am not mistaken, I have succeeded in showing, that a measure of value, which is only allowed to be accurate in a particular case where no capital is employed, is arbitrarily applied by you to cases where capital and time necessarily enter into the consideration.

I fear I have been guilty of many repet.i.tions. I shall not regret it, however, if I have made myself understood.

[The last sheet is wanting. The fragment on page 105 does not match this fragment.]

NOTE.--On 12th June, 1822, in one of Ricardo's most important speeches on Resumption (afterwards published as a pamphlet), he speaks of those who propose to make Corn, on a ten years' average, the standard of value instead of money. To prove gold more variable than corn, they and their authorities, Locke and Adam Smith are (he says) obliged to begin by supposing gold invariable. 'Unless the medium in which the price of corn is estimated could be a.s.serted to be invariable in its value, how could corn be said not to have varied in relative value? If they must admit the medium to be variable--and who could deny it?--then what became of the argument?'

Nothing is more difficult than to ascertain the variations in the value of money: 'To do so with any accuracy we should have an invariable measure of value; but such a measure we never had nor ever can have.' (Cf. Pol. Econ. and Tax. ch. i. -- 7, Works, p. 28.) But we can speak with accuracy of depreciation; we can see to it that the standard is always the same standard, and that our currency conforms to it, even if the standard itself may vary in value. (See Note to Letter x.x.xI.)

Lx.x.xV.

LONDON, _13 July, 1823_.

MY DEAR MALTHUS,

McCulloch and I did not settle the question of value before we parted,--it is too difficult a one to settle in a conversation; I heard everything he had to urge in favour of his view, and promised, during my holiday, to bestow a good deal of consideration on it. He means exactly what you say;--he does not contend that commodities exchange for each other according to the quant.i.ty of labour actually worked up in them, but he const.i.tutes a commodity the general measure, by which he estimates the value of all others. A pipe of wine kept for three years has no more labour worked up in it than a pipe of wine kept for a day, but he says the additional value on account of time must be estimated by the acc.u.mulations which a like amount of capital actively employed in the support of labour would make in the same time. An oak-tree which has been growing for 200 years has very little labour actually worked up in it, but its value is to be estimated by the acc.u.mulated capital which the original labour employed would give in the same time. He and you in fact differ as to your original measure. I think he could not give any other good reason for choosing a medium which requires labour and capital to produce it, rather than one which requires labour only, excepting that commodities in general require the combination of the two, and that a measure, to have any claim to be even an approximation to an accurate one, should itself be produced under circ.u.mstances somewhat similar to the commodities which it is to measure. If all things required precisely the same quant.i.ties of capital and labour, and for the same length of time, to produce them, any one of them would be an accurate measure of the rest; but this is not the case; the conditions admit of infinite variety, and therefore whichever we choose it can only be an approximation to truth, and we are bound to give good reasons for preferring it.

I should, indeed, be wanting in candour if I refused to admit that my money measure would not measure the quant.i.ty of labour worked up in commodities. I have admitted it over and over again. I am also ready to admit that your money measure will measure exactly the quant.i.ty of labour and profits together of which commodities are composed, but so will my money measure. Neither of them will measure the quant.i.ty of labour alone worked up in commodities, but they will both measure the quant.i.ty of labour and profits together of which commodities are composed. Suppose gold always to require the same quant.i.ty of labour, for one year, before it can be brought to market, will you say that all variations in wages and profits may not be estimated in this medium? You would indeed say that many of those variations would be ascribable to the variations in the value of the medium, and not to any alteration in the value of the thing measured, because you do not think that it is any proof of invariability in a commodity that it requires always the same quant.i.ty of labour, and the same duration of time to produce it. If I allow the justice of your objection, I am at liberty to apply the same to your medium. The same quant.i.ty of labour applied for a day will always produce the same given quant.i.ty of gold; gold is therefore an invariable measure, you say. I find this gold vary in relation to another commodity which always requires the same quant.i.ty of labour and capital to produce it; you say it is never the gold but it is always the commodity which varies, and, when you are asked why, you answer because labour never varies. Double the quant.i.ty of labour in a country or diminish it one half, always leaving the funds which are to employ it at precisely the same amount, and you tell us, notwithstanding the condition of the labourer is in the one case a very distressed one, in the other a very prosperous one, that the value of his labour has not varied. I cannot subscribe to the justness of this language. The question is whether you are right, not whether I am wrong. Suppose that a man in India could pick up in a day precisely the same quant.i.ty of gold as in England, and that all trade in provisions were forbid between the two countries. The small quant.i.ty of rice and clothing in India which are necessary for the support of a labourer would be of precisely the same value as the quant.i.ty of wheat and clothing necessary for a labourer in England. But this would not long continue. All manufactured commodities would be of a high comparative money value in India, and consequently we should export manufactured commodities and import gold; the reward of a labourer in England would come to be a much larger quant.i.ty of gold than he could actually pick up here. No gold would be then obtained in England but by means of importation. Under these circ.u.mstances you would say that money was of a low value in England, and you would be correct if all men agreed to const.i.tute labour the measure of value; but in this they do not agree, and, as we should find that at the very moment that gold was low, relatively to labour, in England, it was high relatively to manufactured commodities of every description, with which in fact gold would be purchased from India, if we took these commodities for the measure, we should be bound to say that gold was cheap in England and dear in India. You must remember that the point in dispute is whether labour be the correct measure of value; you must not then take the fact for granted, and then offer it as a proof of your correct conclusion.

We leave London for Gatcomb early to-morrow morning.... We shall have one bed disengaged if you and Mrs. Malthus will come over to us. I am sorry I cannot ask all your party.

Ever truly yours, DAVID RICARDO.

Lx.x.xVI[272]

[MINCHINHAMPTON, _Aug. 3, 1823_.]

MY DEAR MALTHUS,

The value of almost all commodities is made up of labour and profits, but in choosing a measure of value it is not necessary that it should possess the property of determining what proportion of the value of the commodity measured belongs to wages, and what proportion belongs to profits. You make it a reproach on my proposed measure that it will not do this, and prefer your own because it will. Now, as I do not think this quality essential to a measure of value, I shall not defend mine for not possessing this quality. This consideration appears to me wholly foreign to the question under discussion.

We agree, I believe, that nothing can be a measure of value which does not itself possess value. We agree too, I believe, that a measure of value to be a good one should itself be invariable, and further that in selecting one thing as a measure of value rather than another we are bound to show some good reason for such selection, for, if a good reason be not given, the choice is altogether arbitrary. Now the measure proposed by you has value, and therefore [is] not to be objected against on account of any deficiency of that quality; but I do not think it is invariable, and by the concession which you make in your last letter you appear to give up your measure, for you say that 'you expressed yourself without sufficient care, when you intimated that, if any number of labourers were imported or exported, the value of labour would remain the same.' This is a large concession indeed, and I think entirely subverts your measure, because, if it be true of labourers exported or imported, it must be true also of labourers born or dying in the country. If by poor laws imprudent marriages are encouraged and population becomes excessive, the effect on the value of labour will be precisely the same as if labourers had been imported; and, if an epidemic disorder break out and many labourers die, it will be the same as if they were exported. Nay more, if the people be well educated and be taught caution and foresight with regard to the increase of their numbers, who shall say that the effect on the value of labour will not be the same as an exportation of labourers? You have, I think, been imprudent, which is much at variance with your usual practice, in conceding this point, and you allow us to enter into your fortress and spike all your guns. You add indeed: 'This will only be true after the supply comes to be affected by the increased or diminished number of labourers.' When will the supply not be affected by the increased or diminished number? What follows will not a.s.sist you, for you say: 'If the corn obtained by twenty men be divided among ten, then the value of the wages of ten men will be less than the quant.i.ty of labour employed to produce them with the addition of profits, and vice versa.' What profits? They might have been 50 per cent., and may from the circ.u.mstance mentioned be reduced to 5 per cent. You speak of profits in this place as if they were a fixed amount, and forget that they fall when wages rise. Besides, I will not admit the extravagant supposition that the corn obtained by the labour of twenty men is bestowed as wages on ten men; but I will suppose that the corn obtained by twenty men had been sufficient to command the labour of thirty men, but that owing to a diminished supply of labour this same quant.i.ty of corn obtained by the same number of men is bestowed as wages on twenty-two men. In this case I ask you whether corn has fallen in value in the proportion of thirty to twenty-two? If you say Yes, then you do not admit that labour may rise in value in consequence of exporting labourers; and, if you say No, there is an end of your measure, because you then acknowledge that commodities do not vary according to the quant.i.ty of labour they can command. I do not see how you are to extricate yourself from this dilemma. I cannot discover what the value of the precious metals in different countries can have to do with this question. A piece of cloth or a piece of muslin can command more labour in India than in England; on this we are agreed, but we are not agreed in our explanation of this fact. You say the piece of cloth or muslin is more valuable in India than in England, and your proof is that it can command more labour in India. You would say so, although both cloth and muslin were exported from India to England, from the country where they are dear to the country where they are cheap. I, on the contrary, say that it is not the cloth and muslin which are dear in India and cheap in England, but it is labour which is cheap in India and dear in England, and that cloth and muslin would come to England from India although there were no such commodities as gold and silver on the face of the earth. I say further that you are bound to admit this by the concession which you have made, for you must admit that labour might be rendered cheap as effectually in England by prevailing on English labourers to be satisfied with the modest remuneration of food paid in India, as by the importation of labourers; and, if you do not admit it, I beg to ask why you refuse to do so. I beg you to point out the distinction between a supply of labourers from abroad, with a consequently reduced remuneration of food, and a supply of labourers from the principle of population, and a consequent reduction in the remuneration paid in food. Can you be said to have given a good reason for the selection which you have made of a measure of value when it will not bear close examination? You have repeatedly said that a commodity, on which a quant.i.ty of labour has been bestowed, will always exchange for a like quant.i.ty, together with an additional quant.i.ty which will const.i.tute the profits on the advances.

Now this I consider to be your main proposition, and on its truth must depend according to your own view the correctness of your measure. Is it true then that every commodity exchanges for two quant.i.ties of labour, one equal to the quant.i.ty actually worked up in it, another equal to the quant.i.ty which the profits will command? I say it is not. This year corn is cheap, and I must give a certain quant.i.ty of it to procure the labour of ten men to be worked up in the commodity which I manufacture; but next year, when I take my commodity to market, corn is dear and wages high, and therefore to procure a certain quant.i.ty of labour I must give more of my finished commodity than I should have given if corn had been plenty [_sic_] and wages low. If corn had been cheap and wages low, my profits would have been high; as it is, they are low. I want to know in these two cases whether the commodity does really exchange for the two specific quant.i.ties of labour mentioned above. You answer my question by saying that you always make a reserve of the first quant.i.ty, and all above it you call profits. But I contend that labour of one value has been expended on the commodity, and, when it comes to market, it is exchanged for labour of another value, and that is the sole reason why the balance, over and above the labour expended on it, is small. Why is it small but because the value of labour is high? No such thing, you say; labour never varies; and yet you cannot but confess that, if corn had been abundant and if wages had remained the same, the manufactured commodity would have exchanged for a great deal more labour. You say: 'How comes it about that labour should remain of the same value in the progress of society, when it is known that it must require more labour to produce it?' You must mean 'to produce the remuneration paid for it;'

and you add: 'The answer to this question is that, as profits depend upon the _proportion_ of the whole produce which goes to labour, it must necessarily happen that the increase of value occasioned by the additional quant.i.ty of labour will be exactly counterbalanced by the diminution in the amount of profits, leaving the value of labour the same.' I confess I cannot understand this answer. We are inquiring about the meaning which should be attached to the words 'increase of value,'

'diminution of value.' You tell me that increase of value means an increased power of commanding labour. I deny that this definition is a correct one, because I deny the invariability of the standard measure you have chosen; and to prove its invariability you speak of the proportion in which the whole produce is divided, and that, if wages have more, profits have less;--all which is true, but what connection do you prove between this proposition and the invariability in your measure of value? In your answer you use the words 'increase of value;' that is to explain the meaning of the words required to be understood by the use of the words themselves. You mistake McCulloch's and my objection to your doctrine if you suppose it to be on account of its making the same quant.i.ty of labour of the same value, while the condition of the labourer is very different; we do not object to it on that account, because, as you justly observe, our own doctrines require the same admission; but we object to your saying that, from whatever cause it may arise that the labourer's condition is deteriorated, he is always receiving the same value as wages. When _our_ labourers are badly off, although (we say) they have wages of the same value, profits must necessarily be very low; according to you wages would be of the same value whether profits were 2 per cent. or 50 per cent.

I think I have shown you that your long letter was acceptable by doing that which is really a difficult task to me, writing a longer one myself. I am, however, only labouring in my vocation and trying to understand the most difficult question in political economy. All I have hitherto done is to convince myself more and more of the extreme difficulty of finding an un.o.bjectionable measure of value. As far as I have yet been [able] to reflect upon McCulloch's and Mill's suggestion, I am not satisfied with it. They make the best defence for my measure[273], but they do not really get rid of all the objections. I believe however that, though not without fault, it is the best.