NOTE A (page 38).

Mr. Ricardo introduces his notion of real value in a somewhat obscure and indirect manner.

He gives us no formal preliminary definition or explanation of the term, and had not perhaps, at the outset, defined it clearly in his own mind, although the idea seems to have mingled itself with all his speculations. In the opening of his book, the only kinds of value which lie points out are value in use and value in exchange, as distinguished by Adam Smith ; the latter of which is defined to be the power of purchasing. At the third page, nevertheless, we find another kind of value introduced, without comment or explanation, in an extract from the Wealth of Nations. “The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people.”

[234] In adopting this passage, however, Mr. Ricardo makes no use of the new kind of value introduced to his readers, and we hear nothing more of real value, till he applies the epithet to the value of wages, in the sense mentioned in the text. See pages 11 and 12 of the Principles of Pol. Econ. and Taxation, third edition. At page 15 he introduces another kind of value, which he terms “absolute,” in a sense which I have not been able to seize, but this is only incidentally, and no consequences are deduced from it. At page 41 he says, “when commodities varied in relative value, it would be desirable to have the means of ascertaining which of them fell and which rose in real value.” This appears to be the first passage in which relative value and real value are fairly placed in contrast; and we gather from it, that the value, which lie calls real, is not of a relative nature. We subsequently come to the passage quoted in the text, wherein he uses the phrase real value as synonymous with the quantity of labour and capital employed in producing a commodity : whence it follows, that the real value of an object has no relation to the quantity of any other object which it will command, but solely to the cost of production, or rather it is the cost of production itself. If the cost of production is always the same, the real value is always the same.

It may perhaps be contended, that Mr. Ricardo had a right to use the term real value in any sense he chose, and that all which could be required of him was consistency in [235] its employment. Conceding this for the sake of argument, we may yet remark, that it is an apology inapplicable in the present case, because he had already given us his definition of value, and was therefore bound to adhere to it, by the very principle here supposed to be offered in extenuation.

If he had a right to use the term in any sense he pleased, he had no right to destroy the essence of his own definition by an epithet annexed to the term defined. His definition of the term, as the power of purchasing, makes it essentially relative to something to be purchased, and it is annihilating his own meaning to transmute value, by the force of an epithet, into something in which no relation of this kind is implied.

It may still possibly be urged, that Mr. Ricardo is not liable to the charge of having deviated from his definition of value, that he has strictly adhered to one meaning, and that the term real has not the neutralizing effect here assigned to it. If this were true, we might of course substitute the definition for the term, which would yield some curious results. The real value of an object in this case must be its real power of purchasing or commanding other objects in exchange; and we have already seen, that a power of commanding in exchange can be expressed only by a quantity of the commodity commanded. What then is the commodity in which real value can be expressed? Mr. Ricardo tells us, that the value of a thing in money, hats, coats, or corn, is only nominal value. In what commodity then shall [236] we express real value ? His answer must be, in none. This illustration is itself sufficient to show, that Mr. Ricardo's notion of real value is totally irreconcilable and incompatible with his previous definition of the only kind of value of which he professes to treat. The argument is short and conclusive : value, as the power of purchasing, can be expressed only by a quantity of the commodity to be purchased — real value cannot be so expressed — therefore value and real value are used in senses incompatible and contradictory.

In a foot-note to the text we have stated, that real value, as used by Mr. Ricardo, has no relation to any commodity unless it be to an imaginary one; namely, a commodity produced by an invariable quantity of labour. But it must be observed, that if we had such a commodity, it would still not enable Mr. Ricardo or any body else to furnish an expression of real value ; it would only enable him to express a variation in real value. For suppose gold to he such a commodity, and take any point of time, for example A. D. 1600: suppose further, an object A to be worth at that period so much gold, so much corn, so much cloth: in this case, the value of A in gold would have no more claim to the title of real value (even on Mr. Ricardo's or any other person's theory) than its value in corn or cloth. But we next compare the value of A in gold, corn, and cloth, in the year 1800, and we find that it is worth only half as much gold, although worth as much corn as before, [237] and worth more cloth. Here then, according to Mr. Ricardo's doctrine, A has fallen to half its former real value, because worth only half as much gold, which by the supposition is invariable in real value. But although we can tell how much A has fallen in real value, we are no nearer obtaining ail expression of real value than we were before. Still the value of A in gold would be no more its real value, than the value of A in corn or cloth. Hence it is plain, that real value, in Mr. Ricardo's sense, is not value in relation to any commodity whatever : consequently it does not mean power of purchasing, and Mr. Ricardo has used the word value, when coupled with the epithet real, in an acceptation which excludes the whole of his own definition.

The same remarks will apply to Mr. 'Malthus's notion of absolute value. “If we could suppose,” says he, “any object always to remain of the same value, the comparison of other commodities with this one would clearly show which had risen, which bad fallen, and which had remained the same. The value of any commodity, estimated in any measure of this kind, might with propriety be called its absolute or natural value,” &c. &c.— The Measure of Value stated and illustrated, page 2.

To pass over the inconsistency already exposed, of supposing a commodity to remain of the same value, and to take it as implying constancy in the circumstances of its production, it is evident, that, at an assigned period, the [238] value of any commodity A, in this invariable commodity which we may term x, would have no more right to the appellation of real value than the value of A in any other commodity. Assume another period, and the same remark would be applicable: if commodities had varied in the circumstances of their production, the change in their value to x would show such variation, which Mr. Malthus calls a variation in their absolute value, but still their value in x would not be absolute value, in Mr. Malthus's sense, any more than their value in B, C, or D.

It is to be remarked, that Mr. Ricardo is any thing but consistent in the use of the term under consideration, or of the doctrine which it implies.

In fact, the more I examine his writings, the more I am convinced that he had not formed any clear notions on the subject, that there was a radical confusion in his views regarding it.

It is only occasionally that he intimates to his readers that he is speaking of real value : in general he professes to be speaking of “exchangeable value,” sometimes of “relative value,” as contradistinguished from that which is “absolute” and “real.”

It is, in truth, curious to note the different kinds of value of which he speaks in the course of his speculations. The following enumeration will show how far he is entitled to credit for the precision of his language and ideas on this subject.

Value in use .............................. 1
Value in exchange, or exchangeable value 1,4.
Real Ditto .............................. 11, 41, 50.
Absolute Ditto .............................. 15.
Relative Ditto .............................. 15, 41.
Nominal Ditto .............................. 50.
Natural Ditto .............................. 80, 85.

If the view of the subject unfolded in these pages is at all correct, all these epithets (except perhaps the last) may be at once swept away. Even the adjunct exchangeable is tautological, the term value implying in itself a relation in exchange, or the power of commanding in exchange, and consequently any epithet which merely expresses the same idea being perfectly superfluous. The word, too, is ill adapted to convey the meaning imposed upon it. It is easy to understand what an exchangeable commodity is ; a commodity, namely, which is capable of being exchanged : and this is the proper meaning of the epithet; but what is meant by an exchangeable value is not so clear. The words import a value capable of being exchanged ; and although it is possible to speak of exchanging the value of A for the value of B without absolute absurdity, yet this is evidently not the sense in which the epithet is employed. All that is meant by it is value in exchange, and not value capable of being exchanged. The same epithet is sometimes [240] coupled with the term relation, in which case the impropriety is still more glaring. It would be difficult for the greatest ingenuity to find out any way in which the relation between two commodities can be capable of being exchanged. If it were permitted to introduce a new term, perhaps the epithet exchangive might be useful to mark the particular kind of relation which we are now obliged to designate by the phrase “relation in exchange.” The exchangive relation of a commodity would be less objectionable than the exchangeable relation; and if this term were adopted, it would supply a deficiency which most writers on political economy must have occasionally felt.

In the text, I have noticed the improper use of the terms real and nominal value, in our English economists only. The celebrated French writer, M. Say, commits precisely the same error.

“If different commodities,” says be, “have fallen in different ratios, some more, others less, it is plain they must have varied in relative value to each other. That which has fallen, stockings for instance, has changed its value relatively to that which has not fallen, as butcher's meat; and such as have fallen in equal proportion, like stockings and sugar in our hypothesis, have varied in real, though not in relative value.— There is this difference between a real and a relative variation of price ; that the former is a change of value, arising from an alteration of the charges of production; the latter, a change arising from [241] an alteration of the ratio of value of one particular commodity to other commodities.” — Treatise on Pol. Econ. translated by C. R. Prinsep, book ii, chap. 3.


NOTE B (page 61).

The source of such barren and paradoxical propositions as are noticed in the text, is to be found in the notion of real value; and that notion being conceded as a preliminary, these propositions logically follow from it. We must look for the original fallacy therefore in the motion itself, the intrinsic inconsistency of which has been already sufficiently exposed.


NOTE C (page 70).

To avoid misconception it may he necessary to state, that in this and the preceding chapter is has been intended simply to explain the nature of a rise in the value of labour and a rise in profits, not the causes on which they depend, or the way in which they actually take place. In maintaining that there is no inconsistency in supposing a simultaneous rise of labour and of profits, I profess not to enter into the question whether such a rise does ever or can ever take place, but contend solely, that in cases of improved productive power, the product might he so divided, that the rate of profits should be increased, while the value of labour was enhanced ; and that this would be ne-[242]cessarily the result, were the product divided in the way described in the hypothetical case adduced by Mr. Ricardo.


NOTE D (page 103).

The universality of the supposition, that a commodity must itself be invariable in order to serve as a measure of value, will appear from the following extracts.

“As a measure of quantity, such as the natural foot, fathom, or handful, which is continually varying in its own quantity, can never be an accurate measure of the quantity of other things ; so a commodity, which is itself continually varying in its own value, can never be an accurate measure of the value of other commodities. Equal quantities of labour at all times and places, may be said to be of equal value to the labourer. In his ordinary state of health, strength, and spirits, in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price which he pays must always be the same, whatever may be the quantity of goods which lie receives in return for it. Of these, indeed, it may sometimes purchase a greater and sometimes a smaller quantity ; but it is their value which varies, not that of the labour which purchases them.

At all times and places, that is dear which it is difficult to come at, or which it costs much labour to acquire; and that cheap which is to be had easily, or with very little la. bour. Labour alone, therefore, never varying in its own [243] value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared.” — Wealth of Nations, by Adam Smith, book i, chap. 5.

“That money, therefore, which constantly preserves an equal value, which poises itself, as it were, in a just equilibrium between the fluctuating proportion of the value of things, is the only permanent and equal scale by which value can be measured.” — An Inquiry into the Principles of Pol. Econ., by Sir James Stuart, book iii, chap. 1.

“Incapacities of the Metals to perform the Office of an invariable Measure of Value.” — Ibid. Title to chap. iii, book 3.

“As nothing can be a real measure of magnitude and quantity, which is subject to variations in its own dimensions, so nothing can be a real measure of the value of other commodities, which is constantly varying in its own value.” — An Inquiry into the Nature and Origin of Public Wealth, by the Earl of Lauderdale, page 25, second edit.

“Le principal caractère d'un [sic] mesure est d'être invariable. C'est en appliquant successivement une mesure invariable à des quantités variable [sic], qu'on peut se former une idée de leur [sic] rapports ; mais quand on applique une mesure variable à des quantités qui le sont aussi, on n'apprend rien. Une poignée, une coudée, ne sont pas des mesures propre [sic] à comparer les dimensions, puisqu'elles varient dans chaque individu; il en serait de même d'un nu-[244]méraire dont la valeur varierait, soit dans le même temps dans différens endroits, soit dans le même endroit dans différens temps; il ne pourrait guere servir à mesurer d'autres valeurs.” — Cours D'Economie Politique, par Henri Storch, Premiere Partie, liv. v, chap. 2.

“Silver is more valuable, when it will purchase a large quantity of commodities, than when it will purchase a smaller quantity. It cannot, therefore, serve as a measure, the first requisite of which is invariability.” — A Treatise on Pol. Econ., by J. B. Say, translated from the French, by C. R. Prinsep, book i, chap. 21.

“When commodities varied in relative value, it would be desirable to have the means of ascertaining which of them fell and which rose in real value, and this could be effected only by comparing them, one after another, with some invariable standard measure of value, which should itself be subject to none of the fluctuations to which other commodities are exposed.” — Principles of Pol. Econ. and Taxation, by D. Ricardo, Esq., page 42, third edition.

“Labour, like all other commodities, varies, from its plenty or scarcity compared with the demand for it, and at different times, and in different countries, commands very different quantities of the first necessary of life ; and further, from the different degrees of skill, and of assistance from machinery with which labour is applied, the products of labour are not in proportion to the quantity exerted. Consequently, labour, in any sense in which the term can [245] be applied, cannot he considered as an accurate and standard measure of real value in exchange.” — Principles of Pol. Econ., by Rev. T. R. Malthus, page 125.

It is to be remarked, that in the preceding passage, Mr. Malthus rejects labour as an accurate measure of value, because it is not invariable. In his pamphlet on this subject he has altered his views, and maintains labour to be an accurate measure, because it is invariable. In both cases he proceeds equally on the doctrine, that invariableness of value is necessary in a measure of value.

“A standard, by a reference to which we may ascertain the fluctuations in the exchangeable power of other things, must itself possess an exchangeable value fixed and unalterable.

“Nothing can be an accurate measure of value, except that which itself possesses an invariable value.”— An Essay on the Production of Wealth by R. Torrens, Esq., pages 56 and 59.

“There is no point so difficult to ascertain as a variation of value, because we have no fixed standard measure of value; neither nature nor art furnish us with a commodity, whose value is incapable of change; and such alone would afford us an accurate standard of value.”Conversations on Pol. Econ., by Mrs. Marcet, page 330.

“Money, that is, the precious metals in coin, serves practically as a measure of value, as is evident from what has immediately been said. A certain quantity of the precious [246] metal is taken as a known value, and the value of other things is measured by that value ; one commodity is twice, another thrice the value of such a portion of the metal, and so on.

“It is evident, however, that this can remain an accurate measure of value only if it remains of the same value itself. If a commodity, which was twice the value of an ounce of silver, becomes three times its value; we can only know what change has taken place in the value of this commodity, if we know that our measure is unchanged.” — Elements of Pol. Econ., by James Mill, Esq. second edit., page 108.

“A standard is that which stands still, while other things move, and by this means serves to indicate or measure the degree in which they have advanced or receded.*** And a standard of value must itself stand still, or be stationary in value.” — The Templars' Dialogues on Pol. Econ., London Magazine, May 1824, page 558.

“That great desideratum in political economy, an uniform measure of value.” — Observations on the Effects produced by the Expenditure of Government, by Wm. Blake, Esq.

It will not be thought uninteresting to examine what notions on the subject of a measure of value were entertained by so clear a thinker as Locke. He considered, that the value of commodities is determined by “the proportion of their quantity to the vent ;”that the vent of money being [247] always “ sufficient and more than enough,”— “ its quantity alone is enough to regulate and determine its value, without considering any proportion between its quantity and vent, as in other commodities.” Hence he argues, that so long as the quantity of money in a country remains the same, its value is invariable, and it will serve to measure the varying value of other things. In his own words —

“Money, whilst the same quantity of it is passing up and down the kingdom in trade, is really a standing measure of the falling and rising value of other things, in reference to one another : and the alteration of price is truly in them only. But if you increase or lessen the quantity of money current in traffic, in any place, then the alteration of value is in the money : and if, at the same time, wheat keep its proportion of vent to quantity, money, to speak truly, alters its worth, and wheat does not, though it sell for a greater or less price than it did before. For money, being looked upon as the standing measure of other commodities, men consider and speak of it still as if it were a standing measure, though, when it has varied its quantity, it is plain it is not.”

In this passage may be remarked the same error, that I have pointed out in other economists, of supposing an alteration in value can take place in one commodity, while the commodity compared with it remains the same ; “ money alters its worth and wheat does not.” Yet in the subsequent paragraph, the sound sense of this profound [248] reasoner carried him to the truth, although into some apparent inconsistency ; for be adds, “But the value or price of all commodities, amongst which money passing in trade is truly one, consisting in proportion, you alter this, as you do all other proportions, whether you increase one, or lessen the other.” — Considerations on the lowering of Interest and raising the Value of Money.

It may be further remarked on the former of these passages, that, taking him on his own theory, the measure which he describes, like the measures of other economists, would not enable us to ascertain any variations of value, for these are necessarily exhibited in the prices of commodities, but would indicate in which commodities the changes originated. While money remained unaltered as to the causes of value operating upon it, which it would do on his principles as long as it remained the same in quantity, all variations in the prices of commodities must necessarily proceed from alterations in the proportion between the quantities of such commodities and their vent, and this is all that, under the circumstances supposed, Mr. Locke's standing measure would show.

On reviewing this subject from first to last, it appears to me, that nearly the whole of the vagueness, confusion, and perplexity in which it has been involved, may be traced to an unconscious vacillation between two distinct ideas. There are evidently two senses in which the term measuring value is employed, and it is the unconscious passing [249] and repassing from one to the other, which has been the source of the mischief: one of these senses, and the only proper sense, is, ascertaining the mutual value of two commodities by their separate relations to a third ; the other is, ascertaining, when two commodities have varied in value, in which of them the variation has originated. The transition from one of these ideas to the other is, I think, perceptible in the doctrine examined in the text, that money is a good measure of value for commodities at the same time, but not for commodities at different times. In the first part of this proposition, the term measure is used in the former sense, and it is meant to assert, that the value of commodities to each other is shown by their prices, or values in money. In the latter part of the proposition, a transition is made to the second meaning, and it is intended to say, that the value of a commodity in money at different periods does not show whether there has been any alteration in the circumstances of its production ; whether any variation in its price has originated with it, or with the money in which its value is expressed. If we do not suppose this transition to be made, but that one sense is rigidly adhered to, the proposition is liable to all the objections brought against it in the text.

It is probably the latter construction of the term measure, under which invariableness has been so generally supposed requisite. But this, as is shown in the course of the present chapter, would not he invariableness of value, but in-[250]variableness of cost, or invariableness in the circumstances of production; and what would be measured by it would be that cost, or those circumstances, and not value.


NOTE E (page 133).

The reasoning in the text shows, that on the supposition that commoditities [sic] were to each other in value as the quantities of labour required to produce them, any commodity produced by labour alone, however variable the quantity of that labour, would enable us to ascertain all that Mr. Ricardo regards as to be derived exclusively from a commodity produced by an invariable quantity of labour ; provided a register were kept of the varying quantities of the producing labour required. In both cases, the prices of the standard (if we may so call it) at different periods, would he equally necessary. In the one case, the circumstance of invariableness in the labour expended would save the trouble of keeping such a register, and simplify our calculations ; but in the other case, the result would be attained, if not with equal ease, at least with equal certainty.


NOTE F (page 150).

The author of the Templars' Dialogues has also examined this table, but it appears to me that he has fallen [251] into some singular misconceptions of Mr. Malthus's meaning. At least he has construed it differently from what it is represented in the text, and consequently either he or myself must be in error — possibly the latter. I can only say, that I have been at pains to understand and scrupulous not to misrepresent the scope of Mr. Malthus's argument. At the same time I must confess, that with all the patient attention which I have given to the speculations of the latter, there are many parts of “The Measure of Value stated and illustrated” which I am unable to comprehend.


NOTE G (page 15).

It is to be observed, that many writers consider measuring and expressing value as the same thing. This is directly maintained by M. Say, in the following passage.

“Quant à la mesure de la valeur de deux objets qui sont en présence, leur deux valeurs se mesurent l'une par l'autre. Si l'on a dix livres de blé pour une livre de café, le café vaut dix fois autant que le blé ; et chacune de ces choses est la mesure de l'autre. La monnaie n'a à cet égard aucun priviIège. Trente sous sont la valeur d'une livre de café, et une livre de café marque la valeur des trentes [sic] sous aussi bien que les diverses choses que l'on peut acquérir avec cette monnaie.” — Note in M. Say's Edition (page 124, vol. 1) of “Cours d'Economie Politique, par Henri Storch.”

It is not correct, however, to regard these two opera-[252]tions as identical. To measure implies, either directly or indirectly, the ascertainment of a ratio between two objects by the intervention of a third. We say, it is true, that we have measured the length of a building, when we have found its ratio to a yard or a foot, but this is because the length of other objects in feet is known to us, and therefore, when we have the length of the building in feet, we have it in a common denomination : the ratio of the building to the foot, determines its place in the common scale ; or, in other words, determines its ratio to a variety of other objects. We should scarcely consider the length of a building to be measured, if its ratio was determined only to a staff or rod, the length of which in relation to any other object could not itself he ascertained.

In the same way, when we say the value of a commodity A is measured when expressed in money, it is because we know already the relations in value between money and a variety of other commodities, and therefore the value of A in money instantly determines its relation to all these objects. The idea of intermediation is still implied. But although to express the value of a commodity in money may thus be considered as equivalent to measuring it, we could not with propriety apply the latter term to the expression of the value of a commodity in another commodity of no known or ascertainable relation to any thing else.

The following passage from one of Locke's able tracts on [253] raising the value of money, so accurately describes the only process which can be termed with propriety measuring value, that I cannot resist the temptation of inserting it here in confirmation of my own views.

“By this measure of commerce, viz. the quantity of silver, men measure the value of all other things. Thus to measure what the value of lead is to wheat, and of either of them to a certain sort of linen cloth, the quantity of silver that each is valued at, or sells for, needs only be known ; for if a yard of cloth he sold for half an ounce of silver, a bushel of wheat for one ounce, and a hundred weight of lead for two ounces; any one presently sees and says, that a bushel of wheat is double the value of a yard of that cloth, and but half the value of an hundred weight of lead.” — Further Considerations concerning raising the Value of Money.


NOTE H (page 158).

Many of the strictures which have been made on Mr. Ricardo's writings, in this and other chapters, would be in some degree obviated if two things were conceded, namely, if we assumed that he was constantly speaking of real value, and if we were to grant him the absurdity which we have shown this expression to imply; or, in other words, if we were to consider it as importing cost of production, without relation to the power of commanding in exchange. But then, although some inconsistencies [254] would by this means be obviated or explained away, we should obtain in their place a number of others equally irreconcilable, and also a series of unmeaning and identical propositions. For instance, the proposition that a million of men always produced the same value, but not the same riches, would be reduced to this, that what a mil. lion of men produced always cost the labour of a million of men : a = a. The truth appears to be, that the idea of real value was seldom distinctly present to his mind, although there was almost constantly an obscure reference to it.


NOTE I (page 178).

In speaking sometimes of a commodity produced by an invariable quantity of labour as a measure, and sometimes of the labour itself in that character, Mr. Ricardo has in fact used the term in the two senses mentioned in note D, and passed from one to the other without being conscious of it. When he says, that a commodity produced by an invariable quantity of labour would serve to measure the variations of other things, his meaning, as we have before shown, amounts to this, that such a commodity would serve to indicate the variations in the cost of production, or producing labour of other commodities. But to employ the quantity of producing labour itself as a measure in this sense would be endeavouring to ascertain what is already [255] presupposed. When, therefore, he affirms labour itself to be a common measure of value, he makes a transition to the other sense of the phrase, and means, that when the quantities of labour respectively required to produce commodities are known, their values in relation to each other are thereby determined.

This distinction, constantly borne in mind, would, I am persuaded, throw great light upon the obscurity which clouds many discussions in political economy, and clearly show the source whence it has proceeded.


T H E   E N D .