at present concerning the deviations, whether occasional or permanent, of the market price of commodities from the natural price.

The natural price itself varies with the natural rate of each of its component parts, of wages, profit, and rent; and in every society this rate varies according to their circumstances, according to their riches or poverty, their advancing, stationary, or declining condition. I shall, in the four following chapters, endeavour to explain, as fully and distinctly as I can, the causes of those different variations.

First, I shall endeavour to explain what are the circumstances which naturally determine the rate of wages, and in what manner those circumstances are affected by the riches or poverty, by the advancing, stationary, or declining state of the society.

Secondly, I shall endeavour to show what are the circumstances which naturally determine the rate of profit, and in what manner too those circumstances are affected by the like variations in the state of the society.

Though pecuniary wages and profit are very different in the different employments of labour and stock; yet a certain proportion seems commonly to take place between both the pecuniary wages in all the different employments of labour, and the pecuniary profits in all the different employments of stock. This proportion, it will appear hereafter, depends partly upon the nature of the different employments, and partly upon the different laws and

policy of the society in which they are carried on. But though in many respects dependent upon the laws and policy, this proportion seems to be little affected by the riches or poverty of that society; by its advancing, stationary, or declining condition; but to remain the same or very nearly the same in all those different states. I shall, in the third place, endeavour to explain all the different circumstances which regulate this proportion.

In the fourth and last place, I shall endeavour to show what are the circumstances which regulate the rent of land, and which either raise or lower the real price of all the different substances which it produces.

157

NOTE

ON CHAPTERS V., VI., AND VII., Book I.

No branch of political economy has given occasion to more controversy than the subject of these three chapters; nor is there any concerning which so many different opinions still prevail. An intelligible account of all those different opinions would occupy far more room than could be here bestowed upon the subject. I shall, therefore, confine myself to a brief statement of that doctrine of exchangeable value which is now more commonly admitted to be correct, adding some account of a common objection to the views of Adam Smith.

Value is a term of relation: there is no such thing as positive value, any more than positive height or length.

Exchangeable value signifies the proportion in which different objects will exchange for one another.

Price signifies the exchangeable value of money with reference to all other objects, and by common consent, gives expression to the exchangeable value of all other objects.

But as money itself is an object of exchange, whatever determines the proportion in which objects

P

not money, exchange for one another, must also determine in what proportion such objects will exchange for money.

The question is, what determines the proportion in which different objects, including money, exchange for one another.

Whatever a man has produced, is worth to him the toil and trouble of producing it. Rather than produce anything to be disposed of for some other object which he wants, but which has cost another man less toil and trouble, he will himself produce that other object, and so obtain it with less toil and trouble. This is the law of competition. It follows, that when the law of competition has free play, the exchangeable value of different objects is determined by cost of production.

If, therefore, every object desired by man could be produced without limit as to quantity, and the greatest, with the same proportionate toil and trouble as the smallest quantity, the question of exchangeable value would be extremely simple; all commodities would exchange for one another in exact proportion to the toil and trouble of producing them at market. In that case, what had cost so much labour, or capital and labour combined, in any one employment, would exchange for what had cost the same amount of labour, or of capital and labour combined, in any other employment.

To this conclusion it has been objected, that labour itself varies in energy and skill, and that, therefore, it is absurd to set up labour as the stan

*

dard of exchangeable value *. The answer to the objection is given in two parts. In the first place, it is said, different degrees in the energy of labour are exactly the same thing as different quantities of labour: exchangeable value is measured not in days' labour but in toil and trouble. Secondly, superior skill costs antecedent trouble, and is therefore equal to more labour. Perhaps the answer with respect to different degrees of skill would have been more satisfactory, if allowance had been made for that circumstance under the following modification of the principle that cost of production is the true measure of exchangeable value.

In the long catalogue of objects which are the subject of human wants, there are many of which the quantity cannot be increased without limit, or even at all except by means of some increase in the cost of production. A great number of them are subject to some kind of monopoly; not to mention that Nature herself has everywhere set limits to the supply of food, and decreed that beyond a certain point the supply of food shall never be increased, except by means of greater proportionate toil and trouble for the additional quantity. How monopoly or a natural limit to production affects exchangeable value, will be shown by the following supposed case.

Let us suppose that corn which has cost two days' labour of a certain energy, exchanges for cloth which

*See, for an emphatic statement of this objection, Mr. Poulett Scrope's Principles of Political Economy, page 166.