ricardo to malthus
[Reply to 532.—Answered by 540]
[Gatcomb Park, 3 Aug. 1823]
My Dear Malthus
The value of almost all commodities is made up of labour and profits, but in chusing a measure of value it is not necessary that it should possess the property of determining what proportion of the value of the commodity measured belongs to wages, and what proportion belongs to profits. You make it a reproach on my proposed measure that it will not do this, and prefer your own because it will. Now as I do not think this quality essential to a measure of value, I shall not defend mine for not possessing this quality. This consideration appears to me wholly foreign to the question under discussion.
We agree I believe that nothing can be a measure of value which does not itself possess value. We agree too I believe that a measure of value to be a good one should itself be invariable, and further that in selecting one thing as a measure of value rather than another we are bound to shew some good reason for such selection, for if a good reason be not given the choice is altogether arbitrary. Now the measure proposed by you has value and therefore not to be objected against on account of any deficiency of that quality, but I do not think it is invariable and by the concession which you make in your last letter you appear to give up your measure, for you say that “you expressed yourself without sufficient care, when you intimated that if any number of labourers were imported or exported the value of labour would remain the same” This is a large concession indeed, and I think entirely subverts your measure, because if it be true of labourers exported or imported, it must be true also of labourers born or dying in the country. If by poor laws imprudent marriages are encouraged, and population becomes excessive the effect on the value of labour will be precisely the same as if labourers had been imported, and if an epidemic disorder break out, and many labourers die, it will be the same as if they were exported. Nay more, if the people be well educated, and be taught caution and foresight with regard to the increase of their numbers who shall say that the effect on the value of labour will not be the same as an exportation of labourers? You have I think been imprudent, which is much at variance with your usual practice, in conceding this point;—you allow us to enter into your fortress and spike all your guns. You add, indeed, “this will only be true after the supply comes to be affected by the increased or diminished number of labourers.” When will the supply not be affected by the increased or diminished number? What follows will not assist you, for you say “If the corn obtained by 20 men be divided among ten, then the value of the wages of 10 men will be less than the quantity of labour employed to produce them with the addition of profits and vice versa” What profits? they might have been 50 pct., and may from the circumstance mentioned be reduced to 5 pct.. You speak of profits in this place as if they were a fixed amount, and forget that they fall when wages rise. Besides I will not admit the extravagant supposition that the corn obtained by the labour of 20 men is bestowed as wages on 10 men, but I will suppose that the corn obtained by 20 men had been sufficient to command the labour of 30 men but that owing to a diminished supply of labour this same quantity of corn, obtained by the same number of men, is bestowed as wages on 22 men. In this case I ask you whether corn has fallen in value in the proportion of 30 to 22? If you say yes, then you do not admit that labour may rise in value in consequence of exporting labourers, and if you say no, there is an end of your measure, because you then acknowledge that commodities do not vary according to the quantity of labour they can command. I do not see how you are to extricate yourself from this dilemma. I cannot discover what the value of the precious metals, in different countries, can have to do with this question. A piece of cloth or a piece of muslin can command more labour in India than in England; on this we are agreed, but we are not agreed in our explanation of this fact. You say the piece of cloth, or muslin, is more valuable in India than in England and your proof is that it can command more labour in India. You would say so altho’ both cloth and muslin were exported from India to England, from the country where they are dear to the country where they are cheap. I, on the contrary, say that it is not the cloth and muslin which are dear in India and cheap in England but it is labour which is cheap in India and dear in England, and that cloth and muslin would come to England from India altho’ there were no such commodities as gold and silver on the face of the earth. I say further that you are bound to admit this by the concession which you have made, for you must admit that labour might be rendered cheap as effectually in England by prevailing on English labourers to be satisfied with the moderate remuneration of food paid in India as by the importation of labourers, and if you do not admit it I beg to ask why you refuse to do so;—I beg you to point out the distinction between a supply of labourers from abroad with a consequently reduced remuneration of food, and a supply of labourers from the principle of population and a consequent reduction in the remuneration paid in food. Can you be said to have given a good reason for the selection which you have made of a measure of value when it will not bear close examination. You have repeatedly said that a commodity on which a quantity of labour has been bestowed will always exchange for a like quantity, together with an additional quantity which will constitute the profits on the advances. Now this I consider to be your main proposition, and on its truth must depend, according to your own view, the correctness of your measure. Is it true then that every commodity exchanges for two quantities of labour, one equal to the quantity actually worked up in it, another equal to the quantity which the profits will command? I say it is not. This year corn is cheap, and I must give a certain quantity of it to procure the labour of ten men to be worked up in the commodity which I manufacture, but next year when I take my commodity to market, corn is dear and wages high, and therefore to procure a certain quantity of labour I must give more of my finished commodity than I should have given if corn had been plenty and wages low. If corn had been cheap and wages low, my profits would have been high, as it is they are low. I want to know, in these two cases whether the commodity does really exchange for the two specific quantities of labour mentioned above; you answer my question by saying that you always make a reserve of the first quantity, and all above it you call profits. But I contend that labour of one value has been expended on the commodity, and when it comes to market it is exchanged for labour of another value, and that is the sole reason why the balance, over and above the labour expended on it, is small. Why is it small but because the value of labour is high. No such thing, you say, labour never varies, and yet you cannot but confess that if corn had been abundant and if wages had remained the same , the manufactured commodity would have exchanged for a great deal more labour. You say “How comes it about that labour should remain of the same value in the progress of society, when it is known that it must require more labour to produce it”? you must mean “to produce the remuneration paid for it” and you add “the answer to this question is that as profits depend upon the proportion of the whole produce which goes to labour, it must necessarily happen that the increase of value occasioned by the additional quantity of labour will be exactly counterbalanced by the diminution in the amount of profits, leaving the value of labour the same.” I confess I cannot understand this answer. We are enquiring about the meaning which should be attached to the words “increase of value” “diminution of value”. You tell me that increase of value means an increased power of commanding labour: I deny that this definition is a correct one, because I deny the invariability of the standard measure you have chosen, and to prove its invariability you speak of the proportions in which the whole produce is divided, and that if wages have more profits have less; all which is true, but what connection do you prove between this proposition and the invariability in your measure of value? In your answer you use the words “increase of value”; that is to explain the meaning of the words required to be understood, by the use of the words themselves. You mistake McCulloch’s and my objection to your doctrine if you suppose it to be on account of its making the same quantity of labour of the same value, while the condition of the labourer is very different; we do not object to it on that account, because as you justly observe our own doctrines require the same admission, but we object to your saying, that from whatever cause it may arise that the labourers condition is deteriorated, he is always receiving the same value as wages. When our labourers are badly off, altho’ (we say) they have wages of the same value, profits must necessarily be very low; according to you wages would be of the same value whether profits were 2pct. or 50 pct.
I think I have shewn you that your long letter was acceptable by doing that which is really a difficult task to me, writing a longer one myself. I am however only labouring in my vocation, and trying to understand the most difficult question in Political Economy. All I have hitherto done is to convince myself more and more of the extreme difficulty of finding an unobjectionable measure of value. As far as I have yet been able to reflect upon McCulloch’s and Mill’s suggestion I am not satisfied with it. They make the best defence for my measure but they do not really get rid of all the objections. I believe however that tho’ not without fault it is the best.
I am sorry you could not spare a few days for a visit to us, if you will come to Gatcomb before we go to town I shall be very glad to see you.
I have been writing a few pages in favor of my project of a National Bank, with a view to prove that the nation would lose nothing in profits by abolishing the Bank of England, and that the sole effect of the change would be to transfer a part of the profits of the Bank to the national treasury.
Mrs. Ricardo unites with me in kind regards to Mrs. Malthus.