The Online Library of Liberty

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• Introduction
• Principles of Political Economy
• Introduction
• Chapter I: On the Definitions of Wealth and Productive Labour
• Chapter II: On the Nature and Measures of Value
• Chapter III: Of the Rent of Land
• Chapter IV: Of the Wages of Labour
• Chapter V: Of the Profits of Capital
• Chapter VI: Of the Distinction Between Wealth and Value
• Chapter VII: On the Immediate Causes of the Progress of Wealth

chapter vi

Of the Distinction between Wealth and Value

[A country possessing the greatest abundance of commodities without labour might be rich without exchangeable value.

But in the real state in which man is placed on earth, wealth and exchangeable value are more nearly connected than they have sometimes been supposed to be.

When more commodities of the same quality are obtained by improved machinery at the same cost, the distinction between wealth and value is obvious; yet even here the possessor of the increased quantity is only richer with a view to consumption, not to exchange.

In comparing objects of different kinds, there is no other way of estimating the degree of wealth which they confer, than by the relative estimation in which they are held, evinced by their relative exchangeable values.]

Wealth, however, it will be allowed, does not always increase in proportion to the increase of value; because an increase of value may sometimes take place under an actual diminution of the necessaries, conveniences and luxuries of life;(194) but neither does it increase in proportion to the mere quantity of what comes under the denomination of wealth, because the various articles of which this quantity is composed may not be so propor-|tioned to the wants and powers of the society as to give them their proper value.

[Wealth depends partly upon the quantity of produce, and partly upon such adaptation of it to the wants and powers of the society as to give it the greatest value.

But where wealth and value are the most nearly connected, is, in the necessity of the latter to the production of the former.

It is the value of commodities, or the sacrifice which people are willing to make in order to obtain them, that, in the actual state of things, may be said to be the sole cause of the existence of wealth in any quantity.]

In short, the market prices of commodities are the immediate causes of all the great movements of society in the production of wealth, and these market prices always express clearly and unequivocally the exchangeable value of commodities at the time and place in which they are exchanged, and differ only from natural and necessary prices as the actual state of the demand and supply, with regard to any particular article, may differ from the ordinary and average state.

The reader of course will observe that in using | the term value, or value in exchange, I always mean it to be understood in that enlarged and, as I conceive, accustomed and correct sense, according to which I endeavoured to explain and define it in the Second Chapter of this work, and never in the confined sense in which it has been lately applied by Mr. Ricardo, as depending exclusively upon the actual quantity of labour employed in production.* Understood in this latter sense, value, certainly, has not so intimate a connection with wealth. In comparing two countries together of different degrees of fertility, or in comparing an agricultural with a manufacturing and commercial country, their relative wealth would be very different from the proportion of labour employed by each in production; and certainly the increasing quantity of labour necessary to produce any commodity would be very far indeed from being a stimulus to its increase. In this sense therefore wealth and value are very different.

But if value be understood in the sense in which it is most generally used, and according to which | I have defined it, wealth and value, though certainly not always the same, will appear to be very nearly connected; and in making an estimate of wealth, it must be allowed to be as grave an error to consider quantity without reference to value, as to consider value without reference to quantity. |

[* ]Mr. Ricardo says, (ch. xx. p. [275].) “That commodity is alone invariable, which at all times requires the same sacrifice of toil and labour to produce it.” What does the term “invariable” mean here? It cannot mean invariable in its exchangeable value; because Mr. Ricardo has himself allowed that commodities which have cost the same sacrifice of toil and labour will very frequently not exchange for each other.(195) As a measure of value in exchange this standard is much more variable than those which he has rejected; and in what other sense it is to be understood, it is not easy to say.