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• An Essay On the Influence of a Low Price of Corn On the Profits of Stock 1815
• Proposals For an Economical and Secure Currency 1816
• Section I: In the Medium of Circulation—cause of Uniformity Is Cause of Goodness
• Section II: Use of a Standard Commodity—objections to It Considered
• Section III: The Standard, Its Imperfections—variations Below Without Allowance of the Countervailing Variations Above the Standard, Their Effects— Correspondence With the Standard the Rule For Paper Money
• Section IV: An Expedient to Bring the English Currency As Near As Possible to Perfection
• Section V: A Practice Which Creates a Great Mass of Mercantile Inconvenience— Remedy Proposed
• Section VI: The Public Services of the Bank Excessively Overpaid—remedy Proposed
• Section VII: Bank Profits and Savings—misapplication—proposed Remedy
• Appendix
• Funding System an Article In the Supplement to the Fourth, Fifth and Sixth Editions of the Encyclopaedia Britannica 1820
• On Protection to Agriculture 1822
• Introduction
• Section I: On Remunerating Price
• Section II: On the Influence of a Rise of Wages On the Price of Corn
• Section III: On the Effects of Taxes Imposed On a Particular Commodity
• Section IV: On the Effect of Abundant Crops On the Price of Corn
• Section V: On the Effect Produced On the Price of Corn By Mr. Peel’s Bill For Restoring the Ancient Standard
• Section VI: On the Effects of a Low Value of Corn On the Rate of Profits
• Section VII: Under a System of Protecting Duties Established With a View to Give the Monopoly of the Home Market to the Home Grower of Corn, Prices Cannot Be Otherwise Than Fluctuating
• Section VIII: On the Project of Advancing Money On Loan, to Speculators In Corn, At a Low Interest
• Section IX: Can the Present State of Agricultural Distress Be Attributed to Taxation?
• Conclusion
• Appendix (a.): At a Court of Directors At the Bank. On Thursday 20th May 1819.
• Plan For the Establishment of a National Bank
• Notes From Ricardo’s Manuscripts 1818–1823
• Fragments On Torrens Concerning Value 1818
• Note On Fragments On Torrens
• (a 1): [ricardo On Torrens]
• (a 2): [torrens On Ricardo]
• (b): [an Entry In Ricardo’s Commonplace Book]
• A Note On Prices and Taxation 1821
• On Blake’s ‘observations On the Effects Produced By the Expenditure of Government’ 1823
• Note On the Papers On Blake
• [notes On Blake’s ‘observations On the Effects Produced By the Expenditure of Government’ 1823 With Blake’s Replies]
• [an Unfinished Review of Blake’s ‘observations On … the Expenditure of Government’ 1823]
• Absolute Value and Exchangeable Value 1823
• Appendix
• The ‘ingenious Calculator’
• Bullion Report.

FRAGMENTS ON TORRENS CONCERNING VALUE 1818

NOTE ON FRAGMENTS ON TORRENS

Notes (A 1) and (A 2) are written, in the handwriting of Ricardo and Torrens respectively, on separate sheets of note-paper, and were found among the Mill-Ricardo papers.

The commonplace book containing the parallel passages (B) is in Ricardo’s Papers. This item was published in Minor Papers on the Currency Question, 1809–1823, Baltimore, The Johns Hopkins Press, 1932. The page references, which in the original are to ed. 1 of Ricardo’s Principles, have been adjusted to the pagination of Vol. I of the present edition; words underlined in the MS have been printed in italics.

(A 1)

[Ricardo on Torrens]

According to Major Torrens supposition 5 days labour are necessary to produce a certain quantity of flax and 90 days labour are further required to make that flax into Cambric.

To make the coarse linen he supposes that 40 days labour are necessary to procure the flax and 20 additional days to work it into linen.

Under these circumstances I say that the cambric will have a value superior to the linen in the proportion of 95 to 60.

Major Torrens says that before society is divided into the two classes of capitalists and labourers the cambric will be twice the value of the linen, but after such division it will be of equal value,1 and therefore he contends that the principle which I endeavor to establish of commodities being valuable only in proportion to the labour necessary to produce them, when the fixed capital of the manufacturer is of the same value and of equal duration is not true.

To support his opinion Major T supposes that men having all the requisites to work should employ their labour not on the commodity which is ultimately to be produced but on some other nowise necessary to its production.

Thus he supposes that the manufacturers of cambric employ their labour in producing food, and while consuming the food they manufacture their flax into cambric; but as this is not the most economical course for the manufacturers to pursue Major Torrens should shew why they should follow it; why when they had 50 days subsistence they should rather employ men in producing subsistence than in producing cambric, the commodity they intend to sell in the market.

Suppose the Capitalist to have at his command 95 days labour, and that the materials mentioned would produce 100 yards of cambric; he can at once produce them, for it is acknowledged that 5 days labour will produce the flax, and 90 will manufacture the flax into cambric.

The manufacturer of coarse linen requiring also by the supposition 60 days labour to produce 100 yards, viz. 40 for the flax, and 20 for the manufacture of the flax into linen; 95 days labour will give him 158 yards, consequently the value of cambric will be to that of linen as 158 to 100—or as 95 to 60.

But the same quantity will be given when society is divided into two classes if the circumstances are as here supposed, for either the two capitals will be of equal or of unequal value. If equal the returns must be equal which can only be while 95 yards of linen will exchange for 60 yards of cambric,—if unequal the returns must be unequal and must be in the proportion of 95 to 60 to yield the same number of yards and give to each capitalist the same rate of profit.

But the circumstances here supposed never take place, a man having 50 days labour at his disposal cannot produce flax, and then cambric; for though 5 days labour only may be necessary to produce the flax, of which the cambric is made, he must probably wait 6, 9 or 12 months before he can add the labour to it necessary to make cambric.

It is therefore requisite to consider the case as stated by Major Torrens where he supposes that two men have equal capitals each of the value of 100 days subsistence—the capital of one consisting of flax of the value of 10 days subsistence and food of the value of 90 days subsistence; the capital of the other consisting of flax of the value of 80 days subsistence, and of food of the value of 20 days subsistence. Will not these commodities says Major T be of equal value being the products of equal capitals? I answer yes.1 But continues Major T if you agree that they will be of equal value is it not evident that they are not the result of the same quantity of labour, you yourself having shewn that one required only 60 days labour the other 95? To which I answer that the proposition in my book requires that they should be of equal value although there be different quantities of labour employed in their production, because in this case the raw material in both manufactures2 is really fixed capital of equal duration, but of unequal value. That employed in the production of linen being 8 times more valuable, than that employed in the production of the cambric.

[It appears then that every thing is fixed capital which is employed on production except that which resolves itself into wages. If with a capital of £1000 I manufacture commodities made of Iron that part of my capital only can be considered as circulating which is exclusively devoted to the payment of wages.]1

To shew this, let us take a strong case. Suppose 5 mens labour to be employed for a year in making iron; it will sell not only for the labour which produced it, but for as much more as the profits on the capital which employed the 5 days labour; suppose this profit to be added to the capital, and to employ 6 men for the next year in producing the same commodity; and that this be sold and the profit added to the capital, and so on for twenty years; and that at the end of that period, the iron produced will sell for £100. Suppose now another man possessing a capital equal to the employment of 5 men for a year, should make them work in planting a piece of ground, which affords no rent, with acorns. It is evident that at the end of twenty years, the wood growing on his land should be of the value of £100; for as he started with a capital equal to that of the man who employed the labour he could command on iron, and as the capitals had in both cases accumulated for 20 years without affording any advantage in the interim to their owners, their results must be equal to afford the same profits. Now the whole quantity of labour realized in the wood is only that of 5 men for a year, that employed on the iron very considerably exceeds the labour of 100 men employed for a year. Here then are two commodities of equal value one of which is the production of more than 5 times the quantity of labour employed on the production of the other.

Now supposing Iron to be necessary in one manufacture and wood in another, altho’ their cost should be equal, and all other parts of the circulating capital of the manufacturers, who work on these commodities as raw material be also equal, and the prices of their finished commodities be equal, yet those finished commodities would be the result of un-equal quantities of labour, because unequal quantities were necessary to the production of the raw materials of each. Thus suppose a cutler to employ a capital of £1000—£100 of which consisted of steel1 , and an upholsterer to employ an equal capital of £1000—£100 of which consisted of wood, the steel made by the cutler in one year, and the furniture made by the upholsterer in the same time would2 sell for the same money, but as the iron employed would contain much more labour than the wood, the finished commodity in iron would continue in its finished state to represent more labour than the finished commodity in wood, altho the same quantity of circulating capital had been subsequently employed on them. In the same way it might be proved that a carpenter and upholsterer employing the same amount of capitals but an unequal value of wood as their raw material, though they would sell their finished goods for the same money, yet those goods would represent different quantities of labour. This last is Major Torrens case and is in my opinion completely answered by shewing that in the production of the raw material different quantities of fixed capital were used.

(A 2)

[Torrens on Ricardo]

If there is any surplus in the form either of profit or of rent the labour of a man must produce more than the subsistence of a man. I will therefore say for the sake of illustration that a days labour produces two days subsistence.

A has a capital produced by 50 days labour and consisting of subsistence for 90 and flax equivalent to subsistence for 10 and employs 90 labourers in converting the flax into lace; B has a capital produced by 50 days labour and consisting of subsistence for 10 and flax equivalent to subsistence for 90 and employs 10 labourers in converting the flax into coarse cloth.

Now in this case the lace and the cloth will be of equal value because they are the results of the employment of equivalent capitals and the results of equivalent capitals must be equivalent otherwise the profits of stock will not be equal.

But though the lace and the cloth are of equal value they are not the products of equal quantities of labour. The subsistence and material advanced for [the]1 production of the lace was raised by 50 days labour [and 90] days were employed in working it up; while [the] subsistence and material advanced for the production of the cloth was raised by 50 days labour and only 10 days were employed in working it up. In the one case 140 days labour are employed; in the other case only 60 days labour are employed.

Ricardo objects to this case and says that I should not take into the calculation the labour employed on producing the subsistence. I do not admit the validity of this objection but for argument I concede the point and throw out the labour which produces the subsistence. The case then stands thus. To prepare the lace 90 days labour are employed on material produced by 5, to prepare the cloth 10 days labour are employed upon material produced by 45 days labour. Yet still the value of the lace and the cloth must be equal because the two articles cannot be produced but by the expenditure of equivalent capitals.

(B)

[An Entry in Ricardo’s Commonplace Book]

Major Torrens under the signature of R in the Edinburgh Magazine for Oct^r. 1818 has observed as follows on Mr. Ricardo’s doctrine respecting exchangeable value

Dr. Smith says that “in that rude state of society which precedes both the accumulation of stock, and the appropriation of land, the proportion 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 costs

In Mr. Ricardo’s book on the Principles of Political Economy in which his doctrine of value is given he says as follows

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.

Page [12]

Though Adam Smith fully 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.”

Smith however limits this principle to the first and rudest period of society, and contends, that as soon as stock accumulates in the hands of particular persons who set industrious people to work by supplying them with subsistence and materials, the quantity of labour commonly employed in acquiring or producing any commodity is not the only circumstance which can regulate its exchangeable value in the market. This limitation of the principle is represented as a great and fundamental error by Mr. Ricardo, who contends that in the most advanced periods of society, as well as in that rude and simple state which 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 precedes the accumulation of stock, and the separation of the community into capitalists and labourers, the labour bestowed upon production is the only foundation of exchangeable value.

This is the radical difference between Dr. Smith and Mr. Ricardo.

Mr. Ricardo admits, that when equal capitals are of different degrees of durability, the products of equal quantities of labour will not be of equal value; and this he states as an exception to his general principle, that the labour expended on production determines exchangeable value: But as equal capitals seldom possess precisely equal degrees of durability, this, instead of limiting what he calls the general principle, subverts it altogether, and proves, that the relative worth of all things is determined, not by the quantities of labour required to procure them, but by the universally operating law of competition,

the accumulation of capital, and the payment of rent.

Page [22–3, n.]

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 capital employed be either of unequal value, or of unequal duration.

Page [53]

Thus we see, that with every rise of wages, in proportion as the capital employed in any occupation, consists of circulating capital, its produce will be of greater relative value than the goods produced in another occupation where a less proportion of circulating, and a greater proportion of fixed capital are employed.

Page [58]

It appears, then, that in proportion to the quantity and which equalises the profits of stock, and, consequently, renders the results obtained from the employment of equal capitals of equal value in exchange.

No proposition, physical or moral, can admit of a more rigid demonstration than the principles laid down by Dr. Smith, that, after stock has accumulated in the hands of particular persons who set industrious people to work by advancing them wages and material the quantity of labour employed in production is not the circumstance which determines the exchangeable value of commodities. durability of the fixed capital employed in any kind of production, the relative prices of those commodities on which such capital is employed, will vary inversely as wages; they will fall as wages rise.

Page [62–3]

It appears then that the accumulation of capital by occasioning different proportions of fixed and circulating capital to be employed in different trades, and by giving different degrees of durability to such fixed capital, introduces a considerable modification to the rule, which is of universal application in the early states of society.

Page [66]

[1 ]To understand how Torrens may have reached these results in the missing note to which Ricardo is replying, it must be kept in mind that (as appears from the sequel in Ricardo’s Note and from Torrens’s reply to it) he was assuming: (a) that one day’s labour produces two days’ subsistence, (b) that ‘a capital’ consisting entirely of subsistence is used in the first year to produce both the raw material and the subsistence which are required to manufacture the finished product in the second year. The quantity of labour necessary to produce a commodity is treated by him as including the labour employed during the first year in producing the subsistence consumed by workers in the second year.

On this calculation the cambric requires twice as much labour to produce as does the coarse linen (cambric: 5 days’ labour for producing flax + 45 days’ labour for producing subsistence for the second year + 90 days’ labour for manufacture = 140 days’ labour; coarse linen: 40 for flax + 10 for subsistence + 20 for manufacture = 70 days’ labour). But both the cambric and the coarse linen are produced by equal initial capitals: namely, 50 days’ subsistence in each case (5 + 45 and 40 + 10).

Ricardo, however, does not count the labour employed in producing the subsistence for the second year as part of the labour required to produce cambric and coarse linen; and accordingly arrives at a value-ratio of 95:60 (i.e. 5 + 90 for the former and 40 + 20 for the latter).

[1 ]There is attached here a footnote: ‘See Note 1’, but the note referred to is not extant.

[2 ]‘in both manufactures’ is ins.

[1 ]This paragraph is deleted.

[1 ]‘in its rude state’ is del. here.

[2 ]‘would’ replaces ‘ought to’.

[1 ]MS torn here and below.