Front Page Titles (by Subject) Section I.—: On the different sorts of Value. - Principles of Political Economy
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Section I.—: On the different sorts of Value. - Thomas Robert Malthus, Principles of Political Economy 
Principles of Political Economy (London: W. Pickering, 1836).
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On the different sorts of Value.
Most writers in treating of value, have considered it as having two different meanings; one, value in use, and the other, value in exchange. We are not, however, much in the habit of applying the term in the first of these two senses. We do not often hear of the value of air and water, although they are bodies in the highest degree useful, and indeed essentially necessary to the life and happiness of human beings. Yet it may be admitted that the term, taken perhaps in a metaphorical, rather than in a literal sense, may imply, and is sometimes used to imply, whatever is in any way beneficial to us, and in this sense may apply without impropriety to an abundant spring of water, or to a fine air, although no question could arise respecting their value in exchange.
As this meaning therefore of the word value has already been admitted by many writers into the vocabulary of political economy, it may not be worth while to reject it; and it need only be observed, that as the application of the word value in this way, is very much less frequent than in the other, it should never appear alone, but should always be marked by the addition in use.
Value in exchange is the relation of one object to some other or others in exchange. To determine this relation accurately in any particular case, an actual exchange must take place; and every exchange must imply not only the power and will to give some object in exchange for one more wanted, but a reciprocal desire in the party possessing the commodity wanted, for the commodity or the labour proposed to be exchanged for it.
When this reciprocal desire exists, the rate at which the exchange is made, or the portion of one object which is given for an assigned portion of the other, will depend upon the estimation in which each is held by the parties concerned, founded on the desire to possess, and the difficulty of procuring possession of it.
Owing to the necessary difference of the desires of individuals, and their powers of producing, or purchasing, it is probable that the contracts thus made were, in the first instances, very different from each other. Among some individuals it might be agreed to give six pounds of bread for a pound of venison, and among others only two. But the man who was ready and willing to give six pounds of bread for a pound of venison, if he heard of a person at a little distance who would take two pounds for the same quantity, would of course not continue to give six; and the man who would consent to give a pound of venison for only two pounds of bread, if he could any where else obtain six, would not continue to make an exchange by which he could obtain only two.
After a certain time it might be expected that a sort of average would be formed, founded on all the offers of bread, compared with all the offers of venison; and thus, as is very happily described by Turgot, a current relative value of all commodities in frequent use would be established.
It would be known not only that a pound of venison was worth four pounds of bread, but that it was also worth perhaps a pound of cheese, a quarter of a peck of wheat, a quart of wine, a certain portion of leather, &c. &c. each of an average quality, the estimation in which each of these several objects was ordinarily held by the society, being determined by the ordinary desires of individuals to possess it, and the ordinary difficulty of procuring possession of it.
Each commodity would in this way measure the relative values of all others, and would in its turn be measured by any one of them. Each commodity would also be a representative of value. The possessor of a quart of wine might consider himself in possession of a value equal to four pounds of bread, a pound of cheese, a certain portion of leather, &c. &c. and thus each commodity would, with more or less accuracy and convenience, possess two essential properties of money, that of being both a representative and a measure of value.
But long before it is conceivable that this general valuation of commodities, with regard to each other should have taken place to any considerable extent, or with any tolerable degree of accuracy, a great difficulty in making exchanges, and in the determination of relative value would be constantly recurring from the want of a reciprocal demand. The possessor of venison might want bread, but the possessor of bread to whom he applied might not want venison, or not that quantity of it which the owner would wish to part with. This want of reciprocal demand would occasion in many instances, and in places not very remote from each other, the most unequal exchanges, and except in large fairs or markets where a great quantity and variety of commodities were brought together, would seem almost to preclude the possibility of any thing like such a general average valuation as has been just described.
Every man, therefore, in order to secure this reciprocal demand, would endeavour, as is justly stated by Adam Smith, so to carry on his business, as to have by him, besides the produce of his own particular trade, some commodity for which there was so general and constant a demand, that it would scarcely ever be refused in exchange for what he wanted. In order that each individual in a society should be furnished with that share of the whole produce, to which he is entitled, by his wants and powers, it is not only necessary that there should be some measure of this share, but some medium by which he can obtain it in the quantity and at the time best suited to him.
The constantly recurring want of some such medium occasioned the use of various commodities for this purpose in the early periods of society.
Of these, cattle seem to have been the most general. Among pastoral nations, they are not only kept without difficulty or loss by those who obtain them, but as they form the principal possessions and wealth of society in this stage of its progress, they must naturally have been the subject of frequent exchanges, and their exchangeable value in consequence compared with other commodities would be pretty generally known.
It seems to be quite necessary indeed that the commodity chosen for a medium of exchange should, in addition to the other qualities which may fit it for that purpose, be in such frequent use that the estimation in which it was held, founded on the desire to possess it, and the difficulty of obtaining it, should be tolerably well established.
A curious and striking proof of this is, that notwithstanding the peculiar aptitude of the precious metals to perform the functions of a medium of exchange, they had not been used for that purpose in Mexico at the period of its conquest by the Spaniards, although these metals were in some degree of plenty as ornaments, and although the want of some medium of exchange was clearly evinced by the use of the nuts of cacao for that purpose.*
It is probable, that as the practice of smelting and refining the ores of the precious metals had not yet been resorted to, the supply of them was not sufficiently steady, nor was the use of them sufficiently general, or the degree of difficulty with which they were obtained sufficiently known, to fit them for the purpose required.
In Peru, where the precious metals were found by the Spaniards in much greater abundance, the practice of smelting and refining the richest ores had begun to prevail, although no shafts had been sunk to any depth in the earth.† But in Peru the state of property was so peculiar, and there was so little commerce of any kind, that a medium of exchange seems not to have been called for; at least there is no account of the use of either of the precious metals, or of any other commodity in the capacity of money.
In the old world the art of smelting and refining the ores of gold, silver, and copper, seems to have been known to some of the most improved nations of which we have accounts, from the earliest ages; and as soon as the means used to obtain these metals, and a certain accumulation of them had rendered their supply in the market steady, and they had been introduced into common use in the shape of ornaments and utensils, their other peculiar and appropriate qualities, such as their durability, divisibility, uniformity of substance, and great value in a small compass would naturally point them out as the best commodity that could be selected to answer the purpose of a medium of exchange, and measure of value.
But when they were adopted as the general measure of value, it would follow, of course, that all other commodities would be most frequently compared with this measure. The nominal value of a commodity is strictly speaking its value in any one commodity named; but as the precious metals are on almost all occasions the commodity named, or intended to be named, the nominal value of a commodity, when no object is specifically referred to, is always understood to mean its value in exchange for the precious metals.
This sort of value has been usefully designated by the name of price. It is, properly speaking, another term for nominal value; and as such we may apply it to any particular commodity named, and say price in corn, price in cloth, or price in any other article, with which we wish to compare any given object; but whenever it occurs without the above additions, it is always understood to mean the value of a commodity estimated in the precious metals, or in the currencies of different countries which profess to represent them.
The introduction of a measure which determined the nominal and relative values of commodities with a medium which would be readily accepted by all persons, was a most important step in the progress of society, and tended to facilitate exchanges and stimulate production to an extent which, without such an instrument, would have been perfectly impossible.
It is very justly observed by Adam Smith, that it is the nominal value of goods, or their prices only, which enter into the consideration of the merchant.* It matters very little to him whether a hundred pounds, or the goods which he purchases with this sum, will command more or less of the labour, or of the necessaries and conveniences of life in Bengal than in London. What he wants is an instrument by which he can obtain the commodities in which he deals, and estimate the relative values of his sales and purchases. His returns come to him wherever he lives; and whether it be in London or Calcutta, or whether they come to him in goods, bills, or bullion, his gain will be in proportion to the excess of their money value above the amount which he has expended to obtain them. The variations which may take place in the value of money during the short period of a mercantile transaction will, in general, be so inconsiderable, that they may safely be neglected.
But though the precious metals are an accurate and unexceptionable measure of value at the same place, and nearly at the same time; and in those parts of the world where they are in general use answer the important purpose of determining the rate at which the products of the most distant countries shall exchange with each other, when brought to the same spot, and thus give the greatest encouragement to the production and distribution of wealth throughout the commercial world; yet we know from experience, that at different periods and in different countries, they are liable to great changes of value owing to the greater or less fertility of the mines, or the greater or less facility of purchasing them; and that consequently given portions of them will, in many cases, express most imperfectly the difficulty of obtaining possession of the numerous objects for which they may be exchanged.
If we are told that a certain quantity of cloth in a particular country will exchange for ten ounces of silver, or that the revenue of a particular sovereign, seven or eight hundred years ago, was £400,000 a year, these statements of nominal value do not tell us whether the cloth is obtained with facility or difficulty, or whether the resources of the sovereign are abundant or scanty. Without further information on the subject, we should be quite at a loss to say, whether it would be necessary to sacrifice the worth of ten days labour to obtain the cloth, or a hundred days; whether the king in question might be considered as having a very inadequate revenue; or whether the sum mentioned was so great as to be incredible.*
It is quite obvious that in cases of this kind, and they are of constant recurrence, the values of commodities or incomes estimated in the precious metals, or in other commodities which are subject to considerable variations in the difficulty of obtaining them, may imply an increase or decrease of value merely in name, and would be of little use to us alone.
What we want further to know, is the estimation in which the cloth and money were held in the country, and at the time in question, founded on the desire to possess, and the difficulty of obtaining possession of them.
It is truly stated by Mr. Senior, that in comparing two commodities together, the power of one to purchase the other must depend upon two sets of causes, that is, upon the causes which affect the desire to possess, and the difficulty of obtaining possession of one of them, and the causes which affect the desire to possess, and the difficulty of obtaining possession of the other. The causes which affect the desire to possess, and the difficulty of obtaining possession of any one commodity, may with propriety be denominated the intrinsic causes of its power of purchasing; because the more these causes increase, the greater power will the commodity possess of purchasing all those objects which continue to be obtained with the same facility. The causes which affect the desire to possess, and the difficulty of obtaining possession of all the different commodities with which the first commodity might be exchanged, may with propriety be denominated the extrinsic causes of its power of purchasing; because while the desire to possess, and the difficulty of obtaining possession of the first commodity remains precisely the same, its power of purchasing other commodities may vary in any degree, owing to the variations in the desire to possess, and the difficulty of obtaining possession of all the other commodities with which it might be exchanged, that is, owing to causes extrinsic to those which operate on the first commodity.
Now it is obvious that these extrinsic causes must, from their nature, and the variety of commodities to which they would apply, be almost innumerable; and though it would certainly be desireable to have some measure of the power of purchasing the mass of commodities, or at least the principal necessaries and conveniences of life, as it would enable us to form an estimate of the wealth of those persons who were in possession of particular commodities, or of certain revenues in money, yet when we consider what such a measure implies, we must feel assured that no one object exists, or can be supposed to exist with such qualities as would fit it to become a standard measure of this kind. It would imply steadiness in the desire to possess, and the difficulty of obtaining possession, not merely of one object, but of a great variety of objects, which is contrary to all theory and experience.
But even if such a measure were attainable, though it might be very desireable as a measure of wealth, it would not be a measure of value according to the most general use of the term.
When it is said that the exchangeable value of a commodity is proportioned to its general power of purchasing,* if the expression has any definite meaning, it must imply that while a commodity continues to purchase the same quantity of the mass of commodities, it continues of the same exchangeable value. If it will purchase more, it rises proportionally in value, if it will purchase less, it falls proportionally in value.
Now let us suppose, what is continually occurring, that from improvements in machinery, the fall of profits, and the increase of skill both in manufactures and agriculture, a large mass of manufactured articles can be obtained with much greater facility than before, while the increase of skill in agriculture prevents any increase in the difficulty of obtaining raw produce, can it be asserted with any semblance of correctness, that an object which under these changes would command the same quantity of agricultural and manufactured products of the same kind, and each in the same proportion as before, would be practically considered by the society as of the same exchangeable value. On the supposition here made, no person would hesitate for a moment to say, that cottons had fallen in value, that linen had fallen in value, that silks had fallen in value, that cloth had fallen in value, &c. and it would be a direct contradiction in terms, to add that an object which would purchase only the same quantity of all these articles, which had confessedly fallen in value, had not itself fallen in value.
The general power of purchasing, therefore, possessed by a particular commodity, cannot with any sort of propriety be considered as representing the variations in its exchangeable value, according to the most usual meaning attached to the term. The exchangeable value of a commodity can only be proportioned to its general power of purchasing so long as the commodities with which it is exchanged continue to be obtained with the same facility. But as it is known by experience that no considerable mass of commodities ever continues to be obtained with the same facility, it is observable that when we speak of the variations in the exchangeable value of a particular commodity, we refer almost invariably to its power of purchasing arising from intrinsic causes.
That this is so, is incontrovertibly proved by the manner in which we practically estimate the variations of value by money. In the same places, and for short periods, money is universally considered as a correct measure of value in the ordinary sense in which the term is used. If from any cause whatever the members of the society are willing and able to make a greater sacrifice in money, in order to obtain a particular commodity, we say that it has risen in value, without stopping to inquire into the state of other commodities. If corn be dear, on account of a deficient supply, we say that corn has risen in value; but if we still pay the same money for our coats, shirts, and shoes, we never think of saying that they have fallen in value, although on account of the rise in a great mass of raw produce, they will have diminished most essentially in their general power of purchasing. The corn is said to have risen in exchangeable value, because its power of purchasing has been affected by a cause intrinsic to the article itself, namely, a deficiency of its supply. The coats, shirts, and shoes, are said to have remained of the same value, because their supply, compared with the demand, appears to have remained the same, and nothing has operated to increase or diminish their power of purchasing arising from intrinsic causes. In neither case do we trouble ourselves about the extrinsic causes of their power of purchasing. During the short periods in which we consider the value of money as nearly constant, we invariably refer to the power of particular commodities to command, at different times, different quantities of money, as expressing distinctly the variations in their exchangeable values. But as a rise or fall of a commodity in money during the periods in which money is considered as constant, cannot indicate any other variations than those which arise from intrinsic causes, it follows necessarily, that when we refer to the variations in the values of commodities, in the ordinary sense in which the term is used, we refer exclusively to their purchasing power arising from intrinsic causes, or to that kind of value which may be denominated their intrinsic value in exchange.
If then we continue to apply the term value in the first sense mentioned, we shall have three sorts of value:
1. Value in use, which may be defined to be the intrinsic utility of an object.
2. Nominal value in exchange, or price, which, unless something else is specifically referred to, may be defined to be the value of commodities estimated in the precious metals.
3. Intrinsic value in exchange, which may be defined to be the power of purchasing arising from intrinsic causes, in which sense, the value of an object is understood when nothing further is added.* This definition is precisely equivalent to—The estimation in which a commodity is held, founded on the desire to possess, and the difficulty of obtaining possession of it; and accords entirely with the definition of the exchangeable value of a commodity, given in my work On definitions in Political Economy, namely,—The estimation in which a commodity is held at any place and time, determined in all cases by the state of the supply compared with the demand, and ordinarily by the elementary cost of production.
[* ] Robertson’s America, Vol. iii. Book vii. page 215.
[† ] Ibid. page 252.
[* ] Book I, ch. v. p. 55; 6th edit.
[* ] Hume very reasonably doubts the possibility of William the Conqueror’s revenue being £400,000 a year, as represented by an ancient historian, and adopted by subsequent writers.
[* ] Adam Smith defines the value of an object in exchange to be, “the power of purchasing other goods, which the possession of that object conveys.” Book I. ch. iv. p. 42; 6th edit.
[* ] There has been no more fruitful source of error in the very elements of political economy, than the not distinguishing between the power of purchasing generally, and the power of purchasing arising from intrinsic causes; and it is of the highest importance to be fully aware that, practically, when the rise or fall in the value of a commodity is referred to, its power of purchasing arising from extrinsic causes is always excluded.