544.: ricardo to mcculloch1[Reply to 541.—Answered by 546] - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 9 Letters 1821-1823 
The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 9 Letters 1821-1823.
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ricardo to mcculloch
[Reply to 541.—Answered by 546]
Gatcomb Park 21 Augt. 1823
My Dear Sir
You will have received two more letters which have passed between Mr. Malthus and me on the subject of his measure of value, and which I sent to you a few days ago. I fear that you will not agree with either of us, but will still contend for the mathematical accuracy of the measure which you and I both prefer. I do not see the great difference you mention between the circumstances which determine the exchangeable value of commodities, and the medium of that value. I agree with you that if you are to measure value you must measure it by the agency of some one commodity or other possessed of value,—that is what Mr. Malthus and we all propose to do, and the only difference between us is respecting the circumstances which are to determine the value,—the invariable value, of the commodity which we chuse for our measure. Is it not clear then that as soon as we are in possession of the knowledge of the circumstances which determine the value of commodities, we are enabled to say what is necessary to give us an invariable measure of value? We all acknowledge too, that 2/, with its annual accumulations, at a compound rate of profit, will at last yield £100, and should do so to preserve the equality of profits, but I question the propriety of calling these accumulated profits by the name of labour, and of saying that the commodity so worth a hundred pounds was valuable in proportion to the quantity of labour bestowed upon it. The tree which originally cost 2/-for labour and becomes in aftertime of the value of £100, has never strictly more than 2/worth of labour employed on it.
A commodity, produced by the labour of one man in 52 weeks, is, and ought to be, more valuable than another produced by 52 men in one week. Yes, you say, because a capital employed for the 52 weeks gives more employment to labour than the capital employed for one, but there are in fact only equivalent quantities of labour in these 2 commodities. You explain this by saying that you estimate the labour bestowed on a commodity by the labour bestowed on the capital or agent by which the commodity is produced. This I think is Torrens mode of estimating value, for it is in fact saying that commodities are valuable according to the value of the capital employed on their production, and the time for which it is so employed. This is a different thing from saying that commodities are valuable according to the quantity of labour worked up in them. I do not however agree with either proposition, and I would ask what means you have of ascertaining the equal value of capitals? You say, “if it requires a capital of £1000 to set the muscles of the mason in motion who builds me a house, and if it also requires £1000 to set fermentation, purification and all the other processes in motion which produce me a cask of wine, is it not plain that both the house and the cask of wine cost the same quantity of labour, if they are produced in the same time? and is it not also plain that if it requires different times to produce them it can only be because different quantities of labour are wrought up in them?[”] This does not appear to me so plain. You assume that these equal quantities of capital now worth £1000 each will always be of equal value, but nothing is more probable than that one shall become more valuable than the other. These capitals are not the same in kind—what will employ one set of workmen, is not precisely the same as will employ another set, and if they themselves are produced in unequal times they are subject to the same fluctuations as other commodities. Till you have fixed the criterion by which we are to ascertain value, you can say nothing of equal capitals, for what is equal to day may be unequal in a year. The question is, What are the circumstances which are necessary to give invariability to any commodity, for that ought to be the character of our measure. This is the test to which all measures of value must be brought, and to which I must submit any measure you may propose. If you said “Of all commodities I know, that one in which labour enters for a certain time, and which always requires the same quantity of labour, is the best measure of value”, I should agree with you, but you must not propose it as one against which no objection can be reasonably made, for if you did, Malthus might retort on you the argument I use to him, and say if your commodity is a good measure for my shrimps, or for my gold picked up by daily labour on the sea shore, why is not my measure, (shrimps, or gold so picked up) a good measure for yours? To me it appears that we have a choice only amongst imperfect measures, and that we cannot have a perfect one, for there is no such thing in nature. When we measure the length of a piece of linen we measure length only, and we measure it by a commodity which has length that is invariable, but value is compounded of two elements wages and profit mixed up in all imaginable proportions; it is in vain, therefore, to attempt to measure accurately, unless your measure agrees precisely in the proportions of wages and profits with the commodity measured. A commodity which has wages in it alone, and no profits, and this is Malthus’s measure, is not an accurate measure for commodities which have both labour and profits in them. All we can do is to make the best choice amongst confessedly imperfect measures, and I should have no hesitation in chusing Malthus’s if the number of commodities produced by labour alone were the most numerous, but as the contrary is the fact, as the great mass of commodities is produced by the union of labour and capital for a certain length of time, I have nothing to amend in the choice I have made; I consider it a mean; Malthus’s is at one extreme of the scale, old oak trees are at the other. In one there is nothing but labour, in the other there is nothing but accumulations of capital from profits with scarcely any labour whatever, and therefore they are both unfit measures of value. I have not come to this conclusion without a great deal of reflection but I am quite open to conviction if you have any thing powerful to urge in favor of your view. Suppose wine and cloth to be both made in a year, with the same quantity of capital, and that a pipe of wine newly made and a certain quantity of cloth are each worth £50. Suppose profits to be 50 pct. pr. Annm: a pipe of wine kept one year after it is made will be worth 75£, kept two years it will be worth £112. 10—but the piece of cloth will always be worth £50. Now if profits fall to 5 pct. cloth and wine just made will be the same as before, each of the value of £50—but wine kept one year will be worth £52 10, and if kept two years it will be worth £55 2. 3 The value of the capitals employed is precisely the same, the quantity of labour employed is also the same, and while the time is the same the value of the finished commodity is also the same. When we see commodities thus vary on account of an alteration in profits, would it be right to assert that there was no other cause of variation but the greater or less quantity of labour necessary to produce them. Practically commodities vary very little on account of an alteration of profits, because profits, generally, vary very inconsiderably; but we are not less bound on that account to acknowledge that if profits did vary so would commodities.
I never had any doubt of Mr. Blake’s being wrong; I am glad that the papers I sent you from Mr. Tooke were useful in shewing how the fact really was respecting the exchange with America.—
I shall be anxious to see your article on Taxation. Let me hear from you soon.
Very truly Yours