O N   M E T H O D S   O F   E S T I M A T I N G   V A L U E .


THE discussion respecting the measurement of value naturally leads to the consideration of the methods of estimating value. To measure and to estimate value are often considered as implying the same operation, and are used indiscriminately. The explanation, however, of the former, which I have given in a preceding chapter, establishes a useful distinction between them. By measuring value I mean finding the mutual relation of two commodities by their separate relations to a third. Estimating value is the same thing as expressing it*, except that [153] the latter Is more appositely used in regard to a single definite portion of a commodity, or at least in the simpler cases of valuation; while the former may be appropriated to cases of greater complexity, where we compute the value of a mass or number of commodities. When I say a yard of cloth is worth twenty shillings, or a pound, I express the value of the cloth in relation to silver. When I say that 1000 yards of cloth, 500 quarters of corn, and 20 tons of iron, are worth 3000 guineas, I estimate the value of these articles in gold. If it is necessary to establish a distinction between expressing and estimating value, it may therefore be stated to be, that the latter involves the idea of computation, which is not necessarily implied in the former. The distinction, however, is not essential, and the indiscriminate use of the terms can scarcely lead to error.

Mr. Ricardo frequently insists, that if by improvements in the methods of production the whole produce of a country were doubled, while the labour employed remained the same, this doubled produce would be only of the same [154] aggregate value as the former produce, while each individual commodity would have fallen fifty per cent. in value. It is obvious, however, that the truth of this and similar positions entirely depends on the medium in which we estimate value. Suppose, for the sake of simplification, that the country had no foreign commerce, and produced its own money: then if all commodities (money of course included) were produced in double quantity, the effect would be, that while the value of the aggregate would be doubled, the value of each individual commodity. would remain as before. For by the value of an individual commodity we mean its power of commanding other things in exchange. If a pair of stockings were formerly worth a shilling, it would still be worth a shilling. Every commodity would in the same way continue to be exchanged in the same quantity against every other commodity. So far as to the value of individual commodities. With regard to the aggregate, value being in strict propriety a relation existing amongst the several parts, it cannot be predicated of the whole, ex-[155]cept in reference to some of its parts. If the value of the whole means any thing, it can be only its value estimated or computed in some individual commodity; and in this sense, as the quantity of every thing would be doubled, the aggregate value would be doubled. If a pair of stockings continued to be worth a shilling, 2000 pair, which would now be produced for every thousand pair previously, would be worth 2000 shillings; and thus, with regard to every other commodity, we should have a double value in shillings, and the sum of all these values would be double.

Labour is the only thing in relation to which any commodity would not necessarily appear to be of the same value*, but here we are of course leaving labour out of consideration. On the sup-[156]position that all commodities were doubled in quantity, this is the result, in whichever of the commodities or parts we choose to estimate the whole. But if any one commodity is supposed to be produced in the same quantity by the same labour as before, and the whole of the other commodities are estimated in this one, it will be true enough, that the whole produce continues of the same value, while the parts have fallen one half*. From this it is evident, that in all such cases the result depends on the commodity chosen as the medium of estimation. As by value we always imply value in something, a commodity may be said by one person to rise, and by another to fall, and with equal truth, if they speak with tacit reference to different commodities; but a general affirmation of this nature is worse than useless. The assertion of a rise or fall in any thing should be accompanied by a mention of the commo-[157]dity in relation to which it has thus varied, or, at all events, the commodity should be clearly indicated by the tenour of the language employed. Otherwise, two disputants in Political Economy may share the fate of the two knights, who fell sacrifices to their obstinacy in maintaining, the one that a shield was of gold, the other that it was of silver, both being equally correct in their assertions, and their difference arising, as a thousand differences arise, from the simple circumstance of having looked at opposite sides of the same object.

The present subject may be further elucidated by citing a passage from Mr. Ricardo. “The labour of a million of men in manufactures,” says he, “will always produce the same value, but will not always produce the same riches. By the invention of machinery, by improvements in skill, by a better division of labour, or by the discovery of new markets, where more advantageous exchanges may be made, a million of men may produce double or treble the amount of riches, of necessaries, conve-[158]niences, and amusements, in one state of society, that they could produce in another, but they will not on that account add any thing to value; for every thing rises or falls in value in proportion to the facility or difficulty of producing it, or, in other words, in proportion to the quantity of labour employed on its production*.”

All this may be safely pronounced unmeaning and nugatory. It conveys no information, nor can we judge of its correctness or inaccuracy, till we know what is the commodity, in relation to which it is meant to assert, that the product of the labour of this million of men will always prove of the same value, or in other words, until we are told what is the commodity employed as a medium of estimation. If these men produce treble the quantity of all articles of exchange whatever, then the aggregate value of the product of their labour will be treble,

[159] estimated in any article we please. If any articles still require the same labour, and we estimate the rest in these, then the aggregate value will remain the same.

In the sequel of the passage above cited, Mr. Ricardo maintains, that when the labour of a certain number of men, formerly capable of producing 1000 pair of stockings, becomes by inventions in machinery productive of 2000 pair, the value of the general mass of commodities will be diminished, because the stockings manufactured before the improvement must fall to the level of the new goods. This again depends on the mode of estimation. Estimated in stockings, the aggregate value of the general mass of commodities would rise; estimated in any thing else it would fall: and although it may seem ludicrous to talk of estimating the value of all commodities in stockings, the principle is still the same as if gold or any other commodity happened to be the medium of valuation.

Hence it appears, that these propositions, [160] which carry so profound and paradoxical an air, really amount to nothing but this, that a commodity may rise or fall in relation to one commodity and not to another, and therefore that the estimation of commodities in different media will necessarily yield different results.

It may be here remarked, that Mr. Ricardo employs the term estimate in a manner altogether incorrect. In the preceding pages it has been shown, that we can express the value of a commodity only by the quantity of some other commodity, for which it will exchange. Now if to estimate has the same meaning as to express value, with the accessory idea of computation annexed, it follows that we can estimate value only in the same manner. Should we therefore at any time employ labour as the medium of estimation, it must be the labour for which a commodity will exchange. But Mr. Ricardo speaks of estimating commodities by the labour which is required to produce them. Nor is this to be regarded merely as a verbal inaccuracy, for it appears to have led [161] him into that erroneous method of estimating the value of labour, which has been already pointed out. It may be said, at least, that a clear apprehension of the precise meaning of the term would have been incompatible with his doctrine on the real value of wages, if not with the fundamental error which runs through his speculations, and of which his doctrine on the subject of the real value of wages is but a ramification.