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Title: On The Principles of Political Economy, and Taxation

Author: David Ricardo

Release Date: July 31, 2010 [EBook #33310]
[This file last updated January 20, 2011]

Language: English


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ON

THE PRINCIPLES

OF

POLITICAL ECONOMY,

AND

TAXATION.

BY DAVID RICARDO, Esq.

LONDON:

JOHN MURRAY, ALBEMARLE-STREET

1817.

J. M^{c}CREERY. Printer,

Black Horse Court, London.




PREFACE.


The produce of the earth--all that is derived from its surface by the
united application of labour, machinery, and capital, is divided among
three classes of the community; namely, the proprietor of the land, the
owner of the stock or capital necessary for its cultivation, and the
labourers by whose industry it is cultivated.

But in different stages of society, the proportions of the whole produce
of the earth which will be allotted to each of these classes, under the
names of rent, profit, and wages, will be essentially different;
depending mainly on the actual fertility of the soil, on the
accumulation of capital and population, and on the skill, ingenuity, and
instruments employed in agriculture.

To determine the laws which regulate this distribution, is the principal
problem in Political Economy: much as the science has been improved by
the writings of Turgot, Stuart, Smith, Say, Sismondi, and others, they
afford very little satisfactory information respecting the natural
course of rent, profit, and wages.

In 1815, Mr. Malthus in his "Inquiry into the Nature and Progress of
Rent," and a Fellow of University College, Oxford, in his "Essay on the
Application of Capital to Land," presented to the world, nearly at the
same moment, the true doctrine of rent; without a knowledge of which it
is impossible to understand the effect of the progress of wealth on
profits and wages, or to trace satisfactorily the influence of taxation
on different classes of the community, particularly when the commodities
taxed are the productions immediately derived from the surface of the
earth. Adam Smith, and the other able writers to whom I have alluded,
not having viewed correctly the principles of rent, have, it appears to
me, overlooked many important truths, which can only be discovered after
the subject of rent is thoroughly understood.

To supply this deficiency, abilities are required of a far superior cast
to any possessed by the writer of the following pages; yet after having
given to this subject his best consideration--after the aid which he has
derived from the works of the above-mentioned eminent writers--and after
the valuable experience which a few late years, abounding in facts, have
yielded to the present generation--it will not, he trusts, be deemed
presumptuous in him to state his opinions on the laws of profits and
wages, and on the operation of taxes. If the principles which he deems
correct should be found to be so, it will be for others more able than
himself to trace them to all their important consequences.

The writer, in combating received opinions, has found it necessary to
advert more particularly to those passages in the writings of Adam Smith
from which he sees reason to differ; but he hopes it will not on that
account be suspected that he does not, in common with all those who
acknowledge the importance of the science of Political Economy,
participate in the admiration which the profound work of this
celebrated author so justly excites.

The same remark may be applied to the excellent works of M. Say, who not
only was the first, or among the first, of continental writers, who
justly appreciated and applied the principles of Smith, and who has done
more than all other continental writers taken together, to recommend the
principles of that enlightened and beneficial system to the nations of
Europe; but who has succeeded in placing the science in a more logical,
and more instructive order; and has enriched it by several discussions,
original, accurate, and profound. [1] The respect, however, which the
author entertains for the writings of this gentleman, has not prevented
him from commenting with that freedom which he thinks the interests of
science require, on such passages of the "Economie Politique," as
appeared at variance with his own ideas.




CONTENTS.


CHAP. Page

I. _On Value_ 1

II. _On Rent_ 49

III. _On the Rent of Mines_ 77

IV. _On Natural and Market Price_ 82

V. _On Wages_ 90

V*. _On Profits_ 116

VI. _On Foreign Trade_ 146

VII. _On Taxes_ 186

VIII. _Taxes on Raw Produce_ 194

VIII*. _Taxes on Rent_ 221

IX. _Tithes_ 225

X. _Land-Tax_ 232

XI. _Taxes on Gold_ 247

XII. _Taxes on Houses_ 262

XIII. _Taxes on Profits_ 269

XIV. _Taxes on Wages_ 285

XV. _Taxes on other Commodities than Raw Produce_ 330

XVI. _Poor Rates_ 354

XVII. _On Sudden Changes in the Channels of Trade_ 363

XVIII. _Value and Riches, their Distinctive Properties_ 377

XIX. _Effects of Accumulation on Profits and Interest_ 398

XX. _Bounties on Exportation, and Prohibitions
of Importation_ 417

XXI. _On Bounties on Production_ 449

XXII. _Doctrine of Adam Smith concerning the Rent of Land_ 458

XXIII. _On Colonial Trade_ 476

XXIV. _On Gross and Net Revenue_ 491

XXV. _On Currency and Banks_ 499

XXVI. _On the comparative Value of Gold, Corn, and Labour,
in Rich and in Poor Countries_ 527

XXVII. _Taxes paid by the Producer_ 538

XXVIII. _On the Influence of Demand and Supply on Prices_ 542

XXIX. _Mr. Malthus's Opinions on Rent_ 549




CHAPTER I.

ON VALUE.


It has been observed by Adam Smith, that "the word Value has two
different meanings, and sometimes expresses the utility of some
particular object, and sometimes the power of purchasing other goods
which the possession of that object conveys. The one may be called
_value in use_; the other, _value in exchange_. The things," he
continues, "which have the greatest value in use, have frequently little
or no value in exchange; and, on the contrary, those which have the
greatest value in exchange, have little or no value in use. " Water and
air are abundantly useful; they are indeed indispensable to existence,
yet, under ordinary circumstances, nothing can be obtained in exchange
for them. Gold, on the contrary, though of little use compared with air
or water, will exchange for a great quantity of other goods.

Utility then is not the measure of exchangeable value, although it is
absolutely essential to it. If a commodity were in no way useful,--in
other words, if it could in no way contribute to our gratification,--it
would be destitute of exchangeable value, however scarce it might be, or
whatever quantity of labour might be necessary to procure it.

Possessing utility, commodities derive their exchangeable value from two
sources: from their scarcity, and from the quantity of labour required
to obtain them.

There are some commodities, the value of which is determined by their
scarcity alone. No labour can increase the quantity of such goods, and
therefore their value cannot be lowered by an increased supply. Some
rare statues and pictures, scarce books and coins, wines of a peculiar
quality, which can be made only from grapes grown on a particular soil,
of which there is a very limited quantity, are all of this description.
Their value is wholly independent of the quantity of labour originally
necessary to produce them, and varies with the varying wealth and
inclinations of those who are desirous to possess them.

These commodities, however, form a very small part of the mass of
commodities daily exchanged in the market. By far the greatest part of
those goods which are the objects of desire, are procured by labour; and
they may be multiplied, not in one country alone, but in many, almost
without any assignable limit, if we are disposed to bestow the labour
necessary to obtain them.

In speaking then of commodities, of their exchangeable value, and of the
laws which regulate their relative prices, we mean always such
commodities only as can be increased in quantity by the exertion of
human industry, and on the production of which competition operates
without restraint.

In the early stages of society, the exchangeable value of these
commodities, or the rule which determines how much of one shall be
given in exchange for another, depends solely on the comparative
quantity of labour expended on each.

"The real price of every thing," says Adam Smith, "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. " "Labour was the first
price--the original purchase-money that was paid for all things. " Again,
"in that early and rude state of society, which precedes both the
accumulation of stock and the appropriation of land, the proportion
between the quantities of labour necessary for acquiring different
objects, seems to be the only circumstance which can afford any rule for
exchanging them for one another. If among a nation of hunters, for
example, it usually cost twice the labour to kill a beaver which it does
to kill a deer, one beaver should naturally exchange for, or be worth
two deer. It is natural that what is usually the produce of two days',
or two hours' labour, should be worth double of what is usually the
produce of one day's, or one hour's labour. "[2]

That this is really the foundation of the exchangeable value of all
things, excepting those which cannot be increased by human industry, is
a doctrine of the utmost importance in political economy; for from no
source do so many errors, and so much difference of opinion in that
science proceed, as from the vague ideas, which are attached to the word
value.

If the quantity of labour realized in commodities, regulate their
exchangeable value, every increase of the quantity of labour must
augment the value of that commodity on which it is exercised, as every
diminution must lower it.

Adam Smith, who so accurately defined the original source of
exchangeable value, and who was bound in consistency to maintain, that
all things became more or less valuable in proportion as more or less
labour was bestowed on their production, has himself erected another
standard measure of value, and speaks of things being more or less
valuable, in proportion as they will exchange for more or less of this
standard measure. Sometimes he speaks of corn, at other times of labour,
as a standard measure; not the quantity of labour bestowed on the
production of any object, but the quantity which it can command in the
market: as if these were two equivalent expressions, and as if because a
man's labour had become doubly efficient, and he could therefore produce
twice the quantity of a commodity, he would necessarily receive twice
the former quantity in exchange for it.

If this indeed were true, if the reward of the labourer were always in
proportion to what he produced, the quantity of labour bestowed on a
commodity, and the quantity of labour which that commodity would
purchase, would be equal, and either might accurately measure the
variations of other things: but they are not equal; the first is under
many circumstances an invariable standard, indicating correctly the
variations of other things; the latter is subject to as many
fluctuations as the commodities compared with it. Adam Smith, after most
ably shewing the insufficiency of a variable medium, such as gold and
silver, for the purpose of determining the varying value of other
things, has himself, by fixing on corn or labour, chosen a medium no
less variable.

Gold and silver are no doubt subject to fluctuations, from the discovery
of new and more abundant mines; but such discoveries are rare, and their
effects, though powerful, are limited to periods of comparatively short
duration. They are subject also to fluctuation, from improvements in the
skill and machinery with which the mines may be worked; as in
consequence of such improvements, a greater quantity may be obtained
with the same labour. They are further subject to fluctuation from the
decreasing produce of the mines, after they have yielded a supply to the
world, for a succession of ages. But from which of these sources of
fluctuation is corn exempted? Does not that also vary, on one hand, from
improvements in agriculture, from improved machinery and implements
used in husbandry, as well as from the discovery of new tracts of
fertile land, which in other countries may be taken into cultivation,
and which will affect the value of corn in every market where
importation is free? Is it not on the other hand subject to be enhanced
in value from prohibitions of importation, from increasing population
and wealth, and the greater difficulty of obtaining the increased
supplies, on account of the additional quantity of labour which the
cultivation of inferior lands requires? Is not the value of labour
equally variable; being not only affected, as all other things are, by
the proportion between the supply and demand, which uniformly varies
with every change in the condition of the community, but also by the
varying price of food and other necessaries, on which the wages of
labour are expended?

In the same country double the quantity of labour may be required to
produce a given quantity of food and necessaries at one time, that may
be necessary at another, and a distant time; yet the labourer's reward
may possibly be very little diminished. If the labourer's wages at the
former period, were a certain quantity of food and necessaries, he
probably could not have subsisted if that quantity had been reduced.
Food and necessaries in this case will have risen 100 per cent. if
estimated by the _quantity_ of labour necessary to their production,
while they will scarcely have increased in value, if measured by the
quantity of labour for which they will _exchange_.

The same remark may be made respecting two or more countries. In America
and Poland, a year's labour will produce much more corn than in England.
Now, supposing all other necessaries to be equally cheap in those three
countries, would it not be a great mistake to conclude, that the
quantity of corn awarded to the labourer, would in each country be in
proportion to the facility of production?

If the shoes and clothing of the labourer, could, by improvements in
machinery, be produced by one fourth of the labour now necessary to
their production, they would probably fall 75 per cent. ; but so far is
it from being true, that the labourer would thereby be enabled
permanently to consume four coats, or four pair of shoes, instead of
one, that his wages would in no long time be adjusted by the effects of
competition, and the stimulus to population, to the new value of the
necessaries on which they were expended. If these improvements extended
to all the objects of the labourer's consumption, we should find him
probably at the end of a very few years, in possession of only a small,
if any, addition to his enjoyments, although the exchangeable value of
those commodities, compared with any other commodity, in the manufacture
of which no such improvement were made, had sustained a very
considerable reduction; and though they were the produce of a very
considerably diminished quantity of labour.

It cannot then be correct, to say with Adam Smith, "that as labour may
sometimes _purchase_ a greater, and sometimes a smaller quantity of
goods, it is their value which varies, not that of the labour which
purchases them;" and therefore, "that labour _alone never varying in
its own 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;"--but it is correct to say, as Adam Smith had previously said,
"that the proportion between the quantities of labour necessary for
acquiring different objects, seems to be the only circumstance which can
afford any rule for exchanging them for one another;" or in other words,
that it is the comparative quantity of commodities which labour will
produce, that determines their present or past relative value, and not
the comparative quantities of commodities, which are given to the
labourer in exchange for his labour.

If any one commodity could be found, which now and at all times required
precisely the same quantity of labour to produce it, that commodity
would be of an unvarying value, and would be eminently useful as a
standard by which the variations of other things might be measured. Of
such a commodity we have no knowledge, and consequently are unable to
fix on any standard of value. It is, however, of considerable use
towards attaining a correct theory, to ascertain what the essential
qualities of a standard are, that we may know the causes of the
variation in the relative value of commodities, and that we may be
enabled to calculate the degree in which they are likely to operate.

* * * * *

In speaking however of labour, as being the foundation of all value, and
the relative quantity of labour as determining the relative value of
commodities, I must not be supposed to be inattentive to the different
qualities of labour, and the difficulty of comparing an hour's, or a
day's labour, in one employment, with the same duration of labour in
another. The estimation in which different qualities of labour are held,
comes soon to be adjusted in the market with sufficient precision for
all practical purposes, and depends much on the comparative skill of the
labourer, and intensity of the labour performed. The scale, when once
formed, is liable to little variation. If a day's labour of a working
jeweller be more valuable than a day's labour of a common labourer, it
has long ago been adjusted, and placed in its proper position in the
scale of value. [3]

In comparing therefore the value of the same commodity, at different
periods of time, the consideration of the comparative skill and
intensity of labour, required for that particular commodity, needs
scarcely to be attended to, as it operates equally at both periods. One
description of labour at one time is compared with the same description
of labour at another; if a tenth, a fifth, or a fourth, has been added
or taken away, an effect proportioned to the cause will be produced on
the relative value of the commodity.

If a piece of cloth be now of the value of two pieces of linen, and if,
in ten years hence, the ordinary value of a piece of cloth should be
four pieces of linen, we may safely conclude, that either more labour is
required to make the cloth, or less to make the linen, or that both
causes have operated.

As the inquiry to which I wish to draw the reader's attention, relates
to the effect of the variations in the relative value of commodities,
and not in their absolute value, it will be of little importance to
examine into the comparative degree of estimation in which the different
kinds of human labour are held. We may fairly conclude, that whatever
inequality there might originally have been in them, whatever the
ingenuity, skill, or time necessary for the acquirement of one species
of manual dexterity more than another, it continues nearly the same
from one generation to another; or at least, that the variation is very
inconsiderable from year to year, and therefore, can have little effect
for short periods on the relative value of commodities.

"The proportion between the different rates both of wages and profit in
the different employments of labour and stock, seems not to be much
affected, as has already been observed, by the riches or poverty, the
advancing, stationary, or declining state of the society. Such
revolutions in the public welfare, though they affect the general rates
both of wages and profit, must in the end affect them equally in all
different employments. The proportion between them therefore must remain
the same, and cannot well be altered, at least for any considerable
time, by any such revolutions. "[4]

It will be seen by the extract which I have made in page 4, from the
"Wealth of Nations," that though Adam Smith fully recognized the
principle, that the proportion between the quantities of labour
necessary for acquiring different objects, is the only circumstance
which can afford any rule for our exchanging them for one another, yet
he limits its application to "that early and rude state of society,
which precedes both the accumulation of stock and the appropriation of
land;" as if, when profits and rent were to be paid, they would have
some influence on the relative value of commodities, independent of the
mere quantity of labour that was necessary to their production.

Adam Smith, however, has no where analyzed the effects of the
accumulation of capital, and the appropriation of land, on relative
value. It is of importance, therefore, to determine how far the effects
which are avowedly produced on the exchangeable value of commodities, by
the comparative quantity of labour bestowed on their production, are
modified or altered by the accumulation of capital and the payment of
rent.

First, as to the accumulation of capital. Even in that early state to
which Adam Smith refers, some capital, though possibly made and
accumulated by the hunter himself would be necessary to enable him to
kill his game. Without some weapon, neither the beaver nor the deer
could be destroyed, and therefore the value of these animals would be
regulated, not solely by the time and labour necessary to their
destruction, but also by the time and labour necessary for providing the
hunter's capital, the weapon, by the aid of which their destruction was
effected.

Suppose the weapon necessary to kill the beaver, were constructed with
much more labour than that necessary to kill the deer, on account of the
greater difficulty of approaching near to the former animal, and the
consequent necessity of its being more true to its mark; one beaver
would naturally be of more value than two deer, and precisely for this
reason, that more labour would on the whole be necessary to its
destruction.

All the implements necessary to kill the beaver and deer might belong to
one class of men, and the labour employed in their destruction might be
furnished by another class; still, their comparative prices would be in
proportion to the actual labour bestowed, both on the formation of the
capital, and on the destruction of the animals. Under different
circumstances of plenty or scarcity of capital, as compared with labour,
under different circumstances of plenty or scarcity of the food and
necessaries essential to the support of men, those who furnished an
equal value of capital for either one employment or for the other, might
have a half, a fourth, or an eighth of the produce obtained, the
remainder being paid as wages to those who furnished the labour; yet
this division could not affect the relative value of these commodities,
since whether the profits of capital were greater or less, whether they
were 50, 20, or 10 per cent. , or whether the wages of labour were high
or low, they would operate equally on both employments.

If we suppose the occupations of the society extended, that some provide
canoes and tackle necessary for fishing, others the seed and rude
machinery first used in agriculture, still the same principle would hold
true, that the exchangeable value of the commodities produced would be
in proportion to the labour bestowed on their production; not on their
immediate production only, but on all those implements or machines
required to give effect to the particular labour to which they were
applied.

If we look to a state of society in which greater improvements have been
made, and in which arts and commerce flourish, we shall still find that
commodities vary in value conformably with this principle: in estimating
the exchangeable value of stockings, for example, we shall find that
their value, comparatively with other things, depends on the total
quantity of labour necessary to manufacture them, and bring them to
market. First, there is the labour necessary to cultivate the land on
which the raw cotton is grown; secondly, the labour of conveying the
cotton to the country where the stockings are to be manufactured, which
includes a portion of the labour bestowed in building the ship in which
it is conveyed, and which is charged in the freight of the goods;
thirdly, the labour of the spinner and weaver; fourthly, a portion of
the labour of the engineer, smith, and carpenter, who erected the
buildings and machinery, by the help of which they are made; fifthly,
the labour of the retail dealer, and of many others, whom it is
unnecessary further to particularize. The aggregate sum of these various
kinds of labour, determines the quantity of other things for which these
stockings will exchange, while the same consideration of the various
quantities of labour which have been bestowed on those other things,
will equally govern the portion of them which will be given for the
stockings.

To convince ourselves that this is the real foundation of exchangeable
value, let us suppose any improvement to be made in the means of
abridging labour in any one of the various processes through which the
raw cotton must pass, before the manufactured stockings come to the
market, to be exchanged for other things; and observe the effects which
will follow. If fewer men were required to cultivate the raw cotton, or
if fewer sailors were employed in navigating, or shipwrights in
constructing the ship, in which it was conveyed to us; if fewer hands
were employed in raising the buildings and machinery, or if these when
raised, were rendered more efficient, the stockings would inevitably
fall in value, and consequently command less of other things. They
would fall, because a less quantity of labour was necessary to their
production, and would therefore exchange for a smaller quantity of those
things in which no such abridgment of labour had been made.

Economy in the use of labour never fails to reduce the relative value of
a commodity, whether the saving be in the labour necessary to the
manufacture of the commodity itself, or in that necessary to the
formation of the capital, by the aid of which it is produced. In either
case the price of stockings would fall, whether there were fewer men
employed as bleachers, spinners, and weavers, persons immediately
necessary to their manufacture; or as sailors, carriers, engineers, and
smiths, persons more indirectly concerned. In the one case, the whole
saving of labour would fall on the stockings, because that portion of
labour was wholly confined to the stockings; in the other, a portion
only would fall on the stockings, the remainder being applied to all
those other commodities, to the production of which the buildings,
machinery, and carriage, were subservient.

In every society the capital which is employed in production, is
necessarily of limited durability. The food and clothing consumed by the
labourer, the buildings in which he works, the implements with which his
labour is assisted, are all of a perishable nature. There is however a
vast difference in the time for which these different capitals will
endure: a steam-engine will last longer than a ship, a ship than the
clothing of the labourer, and the clothing of the labourer longer than
the food which he consumes.

According as capital is rapidly perishable, and requires to be
frequently reproduced, or is of slow consumption, it is classed under
the heads of circulating, or of fixed capital. A brewer, whose buildings
and machinery are valuable and durable, is said to employ a large
portion of fixed capital: on the contrary, a shoemaker, whose capital
is chiefly employed in the payment of wages, which are expended on food
and clothing, commodities more perishable than buildings and machinery,
is said to employ a large proportion of his capital as circulating
capital.

Two trades then may employ the same amount of capital; but it may be
very differently divided with respect to the portion which is fixed, and
that which is circulating.

Again two manufacturers may employ the same amount of fixed, and the
same amount of circulating capital; but the durability of their fixed
capitals may be very unequal. One may have steam engines of the value of
10,000_l. _ the other, ships of the same value.

Besides the alteration in the relative value of commodities, occasioned
by more or less labour being required to produce them, they are also
subject to fluctuations from a rise of wages, and consequent fall of
profits, if the fixed capitals employed be either of unequal value, or
of unequal duration.

Suppose that in the early stages of society, the bows and arrows of the
hunter were of equal value, and of equal durability, with the canoe and
implements of the fisherman, both being the produce of the same quantity
of labour. Under such circumstances the value of the deer, the produce
of the hunter's day's labour, would be exactly equal to the value of
the fish, the produce of the fisherman's day's labour. The comparative
value of the fish and the game, would be entirely regulated by the
quantity of labour realised in each; whatever might be the quantity of
production, or however high or low general wages or profits might be. If
for example the canoes and implements of the fisherman were of the value
of 100_l. _ and were calculated to last for ten years, and he employed
ten men, whose annual labour cost 100_l. _ and who in one day obtained by
their labour twenty salmon: If the weapons employed by the hunter were
also of 100_l. _ value and calculated to last ten years, and if he also
employed ten men, whose annual labour cost 100_l. _ and who in one day
procured him ten deer; then the natural price of a deer would be two
salmon, whether the proportion of the whole produce bestowed on the men
who obtained it, were large or small. The proportion which might be paid
for wages, is of the utmost importance in the question of profits; for
it must at once be seen, that profits would be high or low, exactly in
proportion as wages were low or high; but it could not in the least
affect the relative value of fish and game, as wages would be high or
low at the same time in both occupations. If the hunter urged the plea
of his paying a large proportion, or the value of a large proportion of
his game for wages, as an inducement to the fisherman to give him more
fish in exchange for his game, the latter would state that he was
equally affected by the same cause; and therefore under all variations
of wages and profits, under all the effects of accumulation of capital,
as long as they continued by a day's labour to obtain respectively the
same quantity of fish, and the same quantity of game, the natural rate
of exchange would be, one deer for two salmon.

If with the same quantity of labour a less quantity of fish, or a
greater quantity of game were obtained, the value of fish would rise in
comparison with that of game. If, on the contrary, with the same
quantity of labour a less quantity of game, or a greater quantity of
fish was obtained, game would rise in comparison with fish.

If there were any other commodity which was invariable in its value,
requiring at all times, and under all circumstances, precisely the same
quantity of labour to obtain it, we should be able to ascertain, by
comparing the value of fish and game with this commodity, how much of
the variation was to be attributed to a cause which affected the value
of fish, and how much to a cause which affected the value of game.

Suppose money to be that commodity. If a salmon were worth 1_l. _ and a
deer 2_l. _ one deer would be worth two salmon. But a deer might become
of the value of three salmon, for more labour might be required to
obtain the deer, or less to get the salmon, or both these causes might
operate at the same time. If we had this invariable standard, we might
easily ascertain in what degree either of these causes operated. If
salmon continued to sell for 1_l. _ whilst deer rose to 3_l. _ we might
conclude that more labour was required to obtain the deer. If deer
continued at the same price of 2_l. _ and salmon sold for 13_s. _ 4_d. _ we
might then be sure that less labour was required to obtain the salmon;
and if deer rose to 2_l. _ 10_s. _ and salmon fell to 16_s. _ 8_d. _ we
should be convinced that both causes had operated in producing the
alteration of the relative value of these commodities.

No alteration in the wages of labour could produce any alteration in the
relative value of these commodities; for if profits were 10 per cent. ,
then to replace the 100_l. _ circulating capital with 10 per cent.
profit, there must be a return of 110_l. _: to replace the equal portion
of fixed capital, when profits are at the rate of 10 per cent. there
should be annually received 16. 27_l. _; for, the present value of an
annuity of 16. 27_l. _ for ten years, when money is at 10 per cent. , is
100_l. _; consequently all the game of the hunter should annually sell
for 126. 27_l. _ But the capital of the fisherman being the same in
quantity, and divided in the same proportion into fixed and circulating
capital, and being also of the same durability, he, to obtain the same
profits, must sell his goods for the same value. If wages rose 10 per
cent.
_Taxes paid by the Producer_ 538

XXVIII. _On the Influence of Demand and Supply on Prices_ 542

XXIX. _Mr. Malthus's Opinions on Rent_ 549




CHAPTER I.

ON VALUE.


It has been observed by Adam Smith, that "the word Value has two
different meanings, and sometimes expresses the utility of some
particular object, and sometimes the power of purchasing other goods
which the possession of that object conveys. The one may be called
_value in use_; the other, _value in exchange_. The things," he
continues, "which have the greatest value in use, have frequently little
or no value in exchange; and, on the contrary, those which have the
greatest value in exchange, have little or no value in use. " Water and
air are abundantly useful; they are indeed indispensable to existence,
yet, under ordinary circumstances, nothing can be obtained in exchange
for them. Gold, on the contrary, though of little use compared with air
or water, will exchange for a great quantity of other goods.

Utility then is not the measure of exchangeable value, although it is
absolutely essential to it. If a commodity were in no way useful,--in
other words, if it could in no way contribute to our gratification,--it
would be destitute of exchangeable value, however scarce it might be, or
whatever quantity of labour might be necessary to procure it.

Possessing utility, commodities derive their exchangeable value from two
sources: from their scarcity, and from the quantity of labour required
to obtain them.

There are some commodities, the value of which is determined by their
scarcity alone. No labour can increase the quantity of such goods, and
therefore their value cannot be lowered by an increased supply. Some
rare statues and pictures, scarce books and coins, wines of a peculiar
quality, which can be made only from grapes grown on a particular soil,
of which there is a very limited quantity, are all of this description.
Their value is wholly independent of the quantity of labour originally
necessary to produce them, and varies with the varying wealth and
inclinations of those who are desirous to possess them.

These commodities, however, form a very small part of the mass of
commodities daily exchanged in the market. By far the greatest part of
those goods which are the objects of desire, are procured by labour; and
they may be multiplied, not in one country alone, but in many, almost
without any assignable limit, if we are disposed to bestow the labour
necessary to obtain them.

In speaking then of commodities, of their exchangeable value, and of the
laws which regulate their relative prices, we mean always such
commodities only as can be increased in quantity by the exertion of
human industry, and on the production of which competition operates
without restraint.

In the early stages of society, the exchangeable value of these
commodities, or the rule which determines how much of one shall be
given in exchange for another, depends solely on the comparative
quantity of labour expended on each.

"The real price of every thing," says Adam Smith, "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. " "Labour was the first
price--the original purchase-money that was paid for all things. " Again,
"in that early and rude state of society, which precedes both the
accumulation of stock and the appropriation of land, the proportion
between the quantities of labour necessary for acquiring different
objects, seems to be the only circumstance which can afford any rule for
exchanging them for one another. If among a nation of hunters, for
example, it usually cost twice the labour to kill a beaver which it does
to kill a deer, one beaver should naturally exchange for, or be worth
two deer. It is natural that what is usually the produce of two days',
or two hours' labour, should be worth double of what is usually the
produce of one day's, or one hour's labour. "[2]

That this is really the foundation of the exchangeable value of all
things, excepting those which cannot be increased by human industry, is
a doctrine of the utmost importance in political economy; for from no
source do so many errors, and so much difference of opinion in that
science proceed, as from the vague ideas, which are attached to the word
value.

If the quantity of labour realized in commodities, regulate their
exchangeable value, every increase of the quantity of labour must
augment the value of that commodity on which it is exercised, as every
diminution must lower it.

Adam Smith, who so accurately defined the original source of
exchangeable value, and who was bound in consistency to maintain, that
all things became more or less valuable in proportion as more or less
labour was bestowed on their production, has himself erected another
standard measure of value, and speaks of things being more or less
valuable, in proportion as they will exchange for more or less of this
standard measure. Sometimes he speaks of corn, at other times of labour,
as a standard measure; not the quantity of labour bestowed on the
production of any object, but the quantity which it can command in the
market: as if these were two equivalent expressions, and as if because a
man's labour had become doubly efficient, and he could therefore produce
twice the quantity of a commodity, he would necessarily receive twice
the former quantity in exchange for it.

If this indeed were true, if the reward of the labourer were always in
proportion to what he produced, the quantity of labour bestowed on a
commodity, and the quantity of labour which that commodity would
purchase, would be equal, and either might accurately measure the
variations of other things: but they are not equal; the first is under
many circumstances an invariable standard, indicating correctly the
variations of other things; the latter is subject to as many
fluctuations as the commodities compared with it. Adam Smith, after most
ably shewing the insufficiency of a variable medium, such as gold and
silver, for the purpose of determining the varying value of other
things, has himself, by fixing on corn or labour, chosen a medium no
less variable.

Gold and silver are no doubt subject to fluctuations, from the discovery
of new and more abundant mines; but such discoveries are rare, and their
effects, though powerful, are limited to periods of comparatively short
duration. They are subject also to fluctuation, from improvements in the
skill and machinery with which the mines may be worked; as in
consequence of such improvements, a greater quantity may be obtained
with the same labour. They are further subject to fluctuation from the
decreasing produce of the mines, after they have yielded a supply to the
world, for a succession of ages. But from which of these sources of
fluctuation is corn exempted? Does not that also vary, on one hand, from
improvements in agriculture, from improved machinery and implements
used in husbandry, as well as from the discovery of new tracts of
fertile land, which in other countries may be taken into cultivation,
and which will affect the value of corn in every market where
importation is free? Is it not on the other hand subject to be enhanced
in value from prohibitions of importation, from increasing population
and wealth, and the greater difficulty of obtaining the increased
supplies, on account of the additional quantity of labour which the
cultivation of inferior lands requires? Is not the value of labour
equally variable; being not only affected, as all other things are, by
the proportion between the supply and demand, which uniformly varies
with every change in the condition of the community, but also by the
varying price of food and other necessaries, on which the wages of
labour are expended?

In the same country double the quantity of labour may be required to
produce a given quantity of food and necessaries at one time, that may
be necessary at another, and a distant time; yet the labourer's reward
may possibly be very little diminished. If the labourer's wages at the
former period, were a certain quantity of food and necessaries, he
probably could not have subsisted if that quantity had been reduced.
Food and necessaries in this case will have risen 100 per cent. if
estimated by the _quantity_ of labour necessary to their production,
while they will scarcely have increased in value, if measured by the
quantity of labour for which they will _exchange_.

The same remark may be made respecting two or more countries. In America
and Poland, a year's labour will produce much more corn than in England.
Now, supposing all other necessaries to be equally cheap in those three
countries, would it not be a great mistake to conclude, that the
quantity of corn awarded to the labourer, would in each country be in
proportion to the facility of production?

If the shoes and clothing of the labourer, could, by improvements in
machinery, be produced by one fourth of the labour now necessary to
their production, they would probably fall 75 per cent. ; but so far is
it from being true, that the labourer would thereby be enabled
permanently to consume four coats, or four pair of shoes, instead of
one, that his wages would in no long time be adjusted by the effects of
competition, and the stimulus to population, to the new value of the
necessaries on which they were expended. If these improvements extended
to all the objects of the labourer's consumption, we should find him
probably at the end of a very few years, in possession of only a small,
if any, addition to his enjoyments, although the exchangeable value of
those commodities, compared with any other commodity, in the manufacture
of which no such improvement were made, had sustained a very
considerable reduction; and though they were the produce of a very
considerably diminished quantity of labour.

It cannot then be correct, to say with Adam Smith, "that as labour may
sometimes _purchase_ a greater, and sometimes a smaller quantity of
goods, it is their value which varies, not that of the labour which
purchases them;" and therefore, "that labour _alone never varying in
its own 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;"--but it is correct to say, as Adam Smith had previously said,
"that the proportion between the quantities of labour necessary for
acquiring different objects, seems to be the only circumstance which can
afford any rule for exchanging them for one another;" or in other words,
that it is the comparative quantity of commodities which labour will
produce, that determines their present or past relative value, and not
the comparative quantities of commodities, which are given to the
labourer in exchange for his labour.

If any one commodity could be found, which now and at all times required
precisely the same quantity of labour to produce it, that commodity
would be of an unvarying value, and would be eminently useful as a
standard by which the variations of other things might be measured. Of
such a commodity we have no knowledge, and consequently are unable to
fix on any standard of value. It is, however, of considerable use
towards attaining a correct theory, to ascertain what the essential
qualities of a standard are, that we may know the causes of the
variation in the relative value of commodities, and that we may be
enabled to calculate the degree in which they are likely to operate.

* * * * *

In speaking however of labour, as being the foundation of all value, and
the relative quantity of labour as determining the relative value of
commodities, I must not be supposed to be inattentive to the different
qualities of labour, and the difficulty of comparing an hour's, or a
day's labour, in one employment, with the same duration of labour in
another. The estimation in which different qualities of labour are held,
comes soon to be adjusted in the market with sufficient precision for
all practical purposes, and depends much on the comparative skill of the
labourer, and intensity of the labour performed. The scale, when once
formed, is liable to little variation. If a day's labour of a working
jeweller be more valuable than a day's labour of a common labourer, it
has long ago been adjusted, and placed in its proper position in the
scale of value. [3]

In comparing therefore the value of the same commodity, at different
periods of time, the consideration of the comparative skill and
intensity of labour, required for that particular commodity, needs
scarcely to be attended to, as it operates equally at both periods. One
description of labour at one time is compared with the same description
of labour at another; if a tenth, a fifth, or a fourth, has been added
or taken away, an effect proportioned to the cause will be produced on
the relative value of the commodity.

If a piece of cloth be now of the value of two pieces of linen, and if,
in ten years hence, the ordinary value of a piece of cloth should be
four pieces of linen, we may safely conclude, that either more labour is
required to make the cloth, or less to make the linen, or that both
causes have operated.

As the inquiry to which I wish to draw the reader's attention, relates
to the effect of the variations in the relative value of commodities,
and not in their absolute value, it will be of little importance to
examine into the comparative degree of estimation in which the different
kinds of human labour are held. We may fairly conclude, that whatever
inequality there might originally have been in them, whatever the
ingenuity, skill, or time necessary for the acquirement of one species
of manual dexterity more than another, it continues nearly the same
from one generation to another; or at least, that the variation is very
inconsiderable from year to year, and therefore, can have little effect
for short periods on the relative value of commodities.

"The proportion between the different rates both of wages and profit in
the different employments of labour and stock, seems not to be much
affected, as has already been observed, by the riches or poverty, the
advancing, stationary, or declining state of the society. Such
revolutions in the public welfare, though they affect the general rates
both of wages and profit, must in the end affect them equally in all
different employments. The proportion between them therefore must remain
the same, and cannot well be altered, at least for any considerable
time, by any such revolutions. "[4]

It will be seen by the extract which I have made in page 4, from the
"Wealth of Nations," that though Adam Smith fully recognized the
principle, that the proportion between the quantities of labour
necessary for acquiring different objects, is the only circumstance
which can afford any rule for our exchanging them for one another, yet
he limits its application to "that early and rude state of society,
which precedes both the accumulation of stock and the appropriation of
land;" as if, when profits and rent were to be paid, they would have
some influence on the relative value of commodities, independent of the
mere quantity of labour that was necessary to their production.

Adam Smith, however, has no where analyzed the effects of the
accumulation of capital, and the appropriation of land, on relative
value. It is of importance, therefore, to determine how far the effects
which are avowedly produced on the exchangeable value of commodities, by
the comparative quantity of labour bestowed on their production, are
modified or altered by the accumulation of capital and the payment of
rent.

First, as to the accumulation of capital. Even in that early state to
which Adam Smith refers, some capital, though possibly made and
accumulated by the hunter himself would be necessary to enable him to
kill his game. Without some weapon, neither the beaver nor the deer
could be destroyed, and therefore the value of these animals would be
regulated, not solely by the time and labour necessary to their
destruction, but also by the time and labour necessary for providing the
hunter's capital, the weapon, by the aid of which their destruction was
effected.

Suppose the weapon necessary to kill the beaver, were constructed with
much more labour than that necessary to kill the deer, on account of the
greater difficulty of approaching near to the former animal, and the
consequent necessity of its being more true to its mark; one beaver
would naturally be of more value than two deer, and precisely for this
reason, that more labour would on the whole be necessary to its
destruction.

All the implements necessary to kill the beaver and deer might belong to
one class of men, and the labour employed in their destruction might be
furnished by another class; still, their comparative prices would be in
proportion to the actual labour bestowed, both on the formation of the
capital, and on the destruction of the animals. Under different
circumstances of plenty or scarcity of capital, as compared with labour,
under different circumstances of plenty or scarcity of the food and
necessaries essential to the support of men, those who furnished an
equal value of capital for either one employment or for the other, might
have a half, a fourth, or an eighth of the produce obtained, the
remainder being paid as wages to those who furnished the labour; yet
this division could not affect the relative value of these commodities,
since whether the profits of capital were greater or less, whether they
were 50, 20, or 10 per cent. , or whether the wages of labour were high
or low, they would operate equally on both employments.

If we suppose the occupations of the society extended, that some provide
canoes and tackle necessary for fishing, others the seed and rude
machinery first used in agriculture, still the same principle would hold
true, that the exchangeable value of the commodities produced would be
in proportion to the labour bestowed on their production; not on their
immediate production only, but on all those implements or machines
required to give effect to the particular labour to which they were
applied.

If we look to a state of society in which greater improvements have been
made, and in which arts and commerce flourish, we shall still find that
commodities vary in value conformably with this principle: in estimating
the exchangeable value of stockings, for example, we shall find that
their value, comparatively with other things, depends on the total
quantity of labour necessary to manufacture them, and bring them to
market. First, there is the labour necessary to cultivate the land on
which the raw cotton is grown; secondly, the labour of conveying the
cotton to the country where the stockings are to be manufactured, which
includes a portion of the labour bestowed in building the ship in which
it is conveyed, and which is charged in the freight of the goods;
thirdly, the labour of the spinner and weaver; fourthly, a portion of
the labour of the engineer, smith, and carpenter, who erected the
buildings and machinery, by the help of which they are made; fifthly,
the labour of the retail dealer, and of many others, whom it is
unnecessary further to particularize. The aggregate sum of these various
kinds of labour, determines the quantity of other things for which these
stockings will exchange, while the same consideration of the various
quantities of labour which have been bestowed on those other things,
will equally govern the portion of them which will be given for the
stockings.

To convince ourselves that this is the real foundation of exchangeable
value, let us suppose any improvement to be made in the means of
abridging labour in any one of the various processes through which the
raw cotton must pass, before the manufactured stockings come to the
market, to be exchanged for other things; and observe the effects which
will follow. If fewer men were required to cultivate the raw cotton, or
if fewer sailors were employed in navigating, or shipwrights in
constructing the ship, in which it was conveyed to us; if fewer hands
were employed in raising the buildings and machinery, or if these when
raised, were rendered more efficient, the stockings would inevitably
fall in value, and consequently command less of other things. They
would fall, because a less quantity of labour was necessary to their
production, and would therefore exchange for a smaller quantity of those
things in which no such abridgment of labour had been made.

Economy in the use of labour never fails to reduce the relative value of
a commodity, whether the saving be in the labour necessary to the
manufacture of the commodity itself, or in that necessary to the
formation of the capital, by the aid of which it is produced. In either
case the price of stockings would fall, whether there were fewer men
employed as bleachers, spinners, and weavers, persons immediately
necessary to their manufacture; or as sailors, carriers, engineers, and
smiths, persons more indirectly concerned. In the one case, the whole
saving of labour would fall on the stockings, because that portion of
labour was wholly confined to the stockings; in the other, a portion
only would fall on the stockings, the remainder being applied to all
those other commodities, to the production of which the buildings,
machinery, and carriage, were subservient.

In every society the capital which is employed in production, is
necessarily of limited durability. The food and clothing consumed by the
labourer, the buildings in which he works, the implements with which his
labour is assisted, are all of a perishable nature. There is however a
vast difference in the time for which these different capitals will
endure: a steam-engine will last longer than a ship, a ship than the
clothing of the labourer, and the clothing of the labourer longer than
the food which he consumes.

According as capital is rapidly perishable, and requires to be
frequently reproduced, or is of slow consumption, it is classed under
the heads of circulating, or of fixed capital. A brewer, whose buildings
and machinery are valuable and durable, is said to employ a large
portion of fixed capital: on the contrary, a shoemaker, whose capital
is chiefly employed in the payment of wages, which are expended on food
and clothing, commodities more perishable than buildings and machinery,
is said to employ a large proportion of his capital as circulating
capital.

Two trades then may employ the same amount of capital; but it may be
very differently divided with respect to the portion which is fixed, and
that which is circulating.

Again two manufacturers may employ the same amount of fixed, and the
same amount of circulating capital; but the durability of their fixed
capitals may be very unequal. One may have steam engines of the value of
10,000_l. _ the other, ships of the same value.

Besides the alteration in the relative value of commodities, occasioned
by more or less labour being required to produce them, they are also
subject to fluctuations from a rise of wages, and consequent fall of
profits, if the fixed capitals employed be either of unequal value, or
of unequal duration.

Suppose that in the early stages of society, the bows and arrows of the
hunter were of equal value, and of equal durability, with the canoe and
implements of the fisherman, both being the produce of the same quantity
of labour. Under such circumstances the value of the deer, the produce
of the hunter's day's labour, would be exactly equal to the value of
the fish, the produce of the fisherman's day's labour. The comparative
value of the fish and the game, would be entirely regulated by the
quantity of labour realised in each; whatever might be the quantity of
production, or however high or low general wages or profits might be. If
for example the canoes and implements of the fisherman were of the value
of 100_l. _ and were calculated to last for ten years, and he employed
ten men, whose annual labour cost 100_l. _ and who in one day obtained by
their labour twenty salmon: If the weapons employed by the hunter were
also of 100_l. _ value and calculated to last ten years, and if he also
employed ten men, whose annual labour cost 100_l. _ and who in one day
procured him ten deer; then the natural price of a deer would be two
salmon, whether the proportion of the whole produce bestowed on the men
who obtained it, were large or small. The proportion which might be paid
for wages, is of the utmost importance in the question of profits; for
it must at once be seen, that profits would be high or low, exactly in
proportion as wages were low or high; but it could not in the least
affect the relative value of fish and game, as wages would be high or
low at the same time in both occupations. If the hunter urged the plea
of his paying a large proportion, or the value of a large proportion of
his game for wages, as an inducement to the fisherman to give him more
fish in exchange for his game, the latter would state that he was
equally affected by the same cause; and therefore under all variations
of wages and profits, under all the effects of accumulation of capital,
as long as they continued by a day's labour to obtain respectively the
same quantity of fish, and the same quantity of game, the natural rate
of exchange would be, one deer for two salmon.

If with the same quantity of labour a less quantity of fish, or a
greater quantity of game were obtained, the value of fish would rise in
comparison with that of game. If, on the contrary, with the same
quantity of labour a less quantity of game, or a greater quantity of
fish was obtained, game would rise in comparison with fish.

If there were any other commodity which was invariable in its value,
requiring at all times, and under all circumstances, precisely the same
quantity of labour to obtain it, we should be able to ascertain, by
comparing the value of fish and game with this commodity, how much of
the variation was to be attributed to a cause which affected the value
of fish, and how much to a cause which affected the value of game.

Suppose money to be that commodity. If a salmon were worth 1_l. _ and a
deer 2_l. _ one deer would be worth two salmon. But a deer might become
of the value of three salmon, for more labour might be required to
obtain the deer, or less to get the salmon, or both these causes might
operate at the same time. If we had this invariable standard, we might
easily ascertain in what degree either of these causes operated. If
salmon continued to sell for 1_l. _ whilst deer rose to 3_l. _ we might
conclude that more labour was required to obtain the deer. If deer
continued at the same price of 2_l. _ and salmon sold for 13_s. _ 4_d. _ we
might then be sure that less labour was required to obtain the salmon;
and if deer rose to 2_l. _ 10_s. _ and salmon fell to 16_s. _ 8_d. _ we
should be convinced that both causes had operated in producing the
alteration of the relative value of these commodities.

No alteration in the wages of labour could produce any alteration in the
relative value of these commodities; for if profits were 10 per cent. ,
then to replace the 100_l. _ circulating capital with 10 per cent.
profit, there must be a return of 110_l. _: to replace the equal portion
of fixed capital, when profits are at the rate of 10 per cent. there
should be annually received 16. 27_l. _; for, the present value of an
annuity of 16. 27_l. _ for ten years, when money is at 10 per cent. , is
100_l. _; consequently all the game of the hunter should annually sell
for 126. 27_l. _ But the capital of the fisherman being the same in
quantity, and divided in the same proportion into fixed and circulating
capital, and being also of the same durability, he, to obtain the same
profits, must sell his goods for the same value. If wages rose 10 per
cent. and consequently 10 per cent. more circulating capital were
required in each trade, it would equally affect both employments. In
both, 210_l. _ instead of 200_l. _ would be required in order to produce
the former quantity of commodities; and these would sell precisely for
the same money, namely 126. 27_l. _: they would therefore be at the same
relative value, and profits would be equally reduced in both trades.

The prices of the commodities would not rise, because the money in which
they are valued is by the supposition of an invariable value, always
requiring the same quantity of labour to produce it.

If the gold mine from which money was obtained were in the same country,
in that case, after the rise of wages, 210_l. _ might be necessary to be
employed, as capital, to obtain the same quantity of metal that 200_l. _
obtained before: for the same reason that the hunter and fisherman
required 10_l. _ in addition to their capitals, the miner would require
an equal addition to his. No greater quantity of labour would be
required in any of these occupations, but it would be paid for at a
higher price, and the same reasons which should make the hunter and
fisherman endeavour to raise the value of their game and fish, would
cause the owner of the mine to raise the value of his gold. This
inducement acting with the same force on all these three occupations,
and the relative situation of those engaged in them being the same
before and after the rise of wages, the relative value of game, fish,
and gold, would continue unaltered. Wages might rise twenty per cent. ,
and profits consequently fall in a greater or less proportion, without
occasioning the least alteration in the relative value of these
commodities.

Now suppose, that with the same labour and fixed capital, more fish
could be produced, but no more gold or game, the relative value of fish
would fall in comparison with gold or game. If, instead of twenty
salmon, twenty-five were the produce of one day's labour, the price of a
salmon would be sixteen shillings instead of a pound, and two salmon and
a half, instead of two salmon, would be given in exchange for one deer,
but the price of deer would continue at 2_l. _ as before. In the same
manner, if fewer fish could be obtained with the same capital and
labour, fish would rise in comparative value. Fish then would rise or
fall in exchangeable value, only because more or less labour was
required to obtain a given quantity; and it never could rise or fall
beyond the proportion of the increased or diminished quantity of labour
required.

If we had then an invariable standard, by which we could measure the
variation in other commodities, we should find that the utmost limit to
which they could permanently rise, was proportioned to the additional
quantity of labour required for their production; and that unless more
labour were required for their production, they could not rise in any
degree whatever. A rise of wages would not raise them in money value,
nor relatively to any other commodities, the production of which
required no additional quantity of labour, which employed the same
proportion of fixed and circulating capital, and fixed capital of the
same durability. If more or less labour were required in the production
of the other commodity, we have already stated that this will
immediately occasion an alteration in its relative value, but such
alteration is owing to the altered quantity of requisite labour, and not
to the rise of wages.

If the fixed and circulating capitals were in different proportions, or
if the fixed capital were of different durability, then the relative
value of the commodities produced, would be altered in consequence of a
rise of wages.

First, when the fixed and circulating capitals were in different
proportions, suppose that instead of 100_l. _ fixed capital and 100_l. _
circulating capital, the hunter should employ 150_l. _ fixed capital and
50_l. _ circulating capital, and that the fisherman should on the
contrary employ only 50_l. _ fixed capital and 150_l. _ circulating
capital.


If profits be 10 per cent. , the hunter must
sell his goods for 79_l. _ 8_s. _ For,
To replace his circulating capital
of 50_l. _ with a profit of 10 per
cent. would require a value of 55_l. _

To replace his fixed capital with
10 per cent. profit, the present
value of an annuity for ten years
of 24. 4_l. _ at 10 per cent. being
150_l. _ 24. 4_l. _
------
79. 4_l. _


If profits be 10 per cent. , the fisherman
must sell his goods for 173_l. _ 2_s. _ 7_d. _
To replace his circulating capital
of 150_l. _ with 10 per cent. profit 165_l. _
To replace his fixed capital with
10 per cent. profit, one-third of
the hunter's 8. 13
------
173. 13_l. _


Now if wages rise, although neither of these commodities should require
more labour for their production, yet their relative value will be
altered. Suppose wages to rise 6 per cent.