malthus to ricardo
[Reply to 536.—Answered by 542]
E I Coll August 11th 1823
My dear Ricardo,
I am much obliged to you for your letter, and for shewing me that I had made a rash and unnecessary concession. I was deceived at the time I wrote to you by the strong case occurring to me of the food obtained by 20 men being divided amongst 10, owing to a great mortality or exportation of labourers. I did not then see that instead of profits there would, for that year, be a very great loss, and instead of any thing to be added on account of profits, there would be a great subtraction to be made from the labour employed in procuring the food, which would make the thing answer completely even on so extravagant a supposition. You were however inclined to draw much too large inferences from my concession than it would have warranted, if I had adhered to it. In fact it only supposed an exception in the case of a very violent and sudden change occurring in the interval between the time of the production of the food of the labourer, and the time of its being paid as wages, which would very rarely be so much as a year, and the effect of which would be quite at an end after that time had expired. The concession therefore would not apply either to any natural increase of population, or any retardation in the rate of it from prudence. But in reality I find that there is no occasion for any concession.
I do not find fault with your measure because it does not determine what proportion of the value of a commodity belongs to wages and what to profits. I do not consider my measure as determining this, although it is always equal to the two united; but I find fault with it, because it varies with the varying profits of other commodities and therefore cannot possibly measure with any tolerable accuracy these variations.
You say you cannot discover what the value of the precious metals in different countries can have to do with this question. This surprises me I own a good deal. You who have proposed a measure of value formed of the precious metals obtained in a particular way, appear to me to be imperatively bound to furnish your readers with the means of distinguishing between a high price of labour while money remains of the same value, and a high price occasioned by a low value of money. Would you really say that cloth and muslin were not dear in India where they cost four or five times as much labour as in England, and that the prodigious difference in the exchangeable value of the products of the same quantity of labour, were exclusively occasioned by the naturally low value of labour in India, although perhaps according to your own mode of estimating, it might not be easy to shew that labour was of lower value in India than in America. Indeed I believe that profits are higher in America, and therefore the value of labour in India ought to be lower. And though it may be true that the same sort of exchanges might take place, if there were no precious metals, yet we could form very little notion of what the rate of these exchanges would be, without a reference to actual facts, and these facts shew that this rate is most powerfully influenced by the proportion which money bears to labour in the places where the commodities are produced. As a political Economist are you not bound to shew whether this prodigious difference in the money price of labour in America and India is occasioned by the difference in the quantity of labour required to produce the wages in each country, or by a difference in the value of money; and further is it not to be expected that you should shew how to estimate the value of money in different countries?
You deny 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, yet it does not appear that the case you produce (though unusual as it involves a sudden change in the value of money) goes any way towards supporting your objection. You say, in substance, that having paid common wages one year, if corn becomes dear the next, and wages rise, the commodities will not command the quantity of labour stated in my proposition; but surely it will, if we estimate profits by the difference between the quantity of accumulated and immediate labour advanced to produce a commodity and the labour which it is worth when sold: and I would submit to you whether this is not a much more natural and correct mode of estimating profits, than even in money the value of which may have changed in that short interval. What sort of profits are those which when a man continues to employ the same quantity of labour in his business may leave him absolutely nothing to live upon. Let us suppose him to have employed ten labourers at 10£ a piece, and to sell his commodity for 110£, he will appear to have gained 10 per cent; but it will be obviously only a nominal not a real gain if he is obliged to pay 110£ for the same quantity of labour next year. Should this price of labour continue he must necessarily give up his business unless the money price of his commodity rises. This shews the absolute necessity of measuring value and profits in labour, not in money, whenever there is the least suspicion that money may have altered in value. But if we measure profits by the difference between the labour advanced and the labour which the commodity will command, and (excluding the variable article money) I would ask how we can estimate profits but upon the actual advances, which are acknowledged to be accumulated and immediate labour, then it appears to me to follow as clear as the sun, that if value as you say in the beginning of your letter is made up of labour and profits, the variable wages which command the same quantity of labour must be of the same value, because they will always have cost in their production the same quantity of labour, with the addition of the profits upon that labour. Your doctrine is that the value of wages rises when more labour is employed on their production. I quite agree with you that as far as that part of their value which resolves itself into the labour advanced is concerned, they do increase in value; but you have fallen into the important error of considering their value as made up of labour alone instead of being made up of labour and profits, as you justly say is the case with almost all commodities. But as the wages of labour like other commodities are unquestionably made up of labour and profits; I am utterly at a loss to conceive what view you are taking of the subject, when you say that you dont understand the connection between the invariability of labour as a measure of value, and my proposition which shews that as the positive value of the labour worked up in the wages of a given number of men increases, the positive value of the profits (the other component part of their whole value) diminishes exactly in the same degree. If these two propositions can properly be considered as having no connection with each other, I must have quite lost myself on these subjects, and can hardly hope to shew their connection by anything which I can say further. I will however just add, that they appear to me to have the same kind of connection as your proposition respecting the constant value of commodities produced in the same way as the precious metals, and a fall in the value of profits in the same degree as a rise in the money price of the same quantity of labour. In this case, which in a manner goes through your book, you make the fall of profits prevent that rise in the value of the commodity which would otherwise take place from what you state to be a rise in the value of the same quantity of labour. Allowing the premises I should allow that the connection was complete and satisfactory, and that such commodity would remain of the same value. Then why I would ask is there no connection between the constant value of the wages of the same quantity of labour, and that fall in the value of profits which prevents the rise which would otherwise take place in the wages of the same number of men from the increase in the quantity of labour required to produce them?
You observe “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 no doubt the fullest right to find fault with all my reasons; and I can honestly assure you that the more strictly you examine them the more you will please me; but I don’t think that I fairly lay open to the charge which you elsewhere seem to make of defining an increase of value to be an increased power of commanding labour, without giving reasons for it. The invariability of the value of labour is indeed my conclusion, but by no means the definition with which I set out. And this conclusion appears to me to follow in the strictest manner from the concessions which you and other Political Economists have made, and are indeed generally acknowledged. I own to you that after paying the greatest attention to all you have said I consider this conclusion as quite safe from you. If it be vulnerable at all, it must be from weapons which apply equally to your system and mine, and which deny the existence of absolute value; but this would unquestionably confuse one of the most important distinctions in political economy, and would be taking up a position which after all appears to me to be by no means tenable.
It is no doubt true that demand and supply are the real foundation of all exchangeable value, and that the only reason why labour is a correct measure of this value when nothing else is concerned, is that the supplies from the same kind and quantity of labour would on an average be in the same proportion to the demand for them; but if the labour in different countries or in different periods of the same country were very different in physical force, the products of the same number of days of these different kinds of labour would not be in the same proportion to the demand and would not therefore exchange with each other. But still it might without impropriety be said, that the products obtained by a person who worked only six hours a day would be scarcer and dearer in reference to the natural wants and numbers of the society than the products obtained by persons who worked 12 hours a day and that therefore it would be more proper to say that the products in the first case are dearer, than that labour is cheaper. Practically all the circumstances of this kind are taken into consideration in the two propositions I stated in my last letter, to which I do not now see any exceptions.
I am glad you are writing. I should like much to pay you a visit at Gatcomb, but fear I shall have no opportunity.
Kind regards Ever truly yrs
T R Malthus