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• Advertisement to the Second Edition.
• Memoir of Robert Malthus.
• Principles of Political Economy.
• Introduction.
• Book I
• Chapter I.: Of the Definitions of Wealth and of Productive Labour.
• Section I.—: On the Definitions of Wealth.
• Section II.—: On Productive Labour.
• Chapter II.: On the Nature, Causes, and Measures of Value.
• Section I.—: On the Different Sorts of Value.
• Section II.—: Of Demand and Supply As They Affect Exchangeable Value.
• Section III.—: Of the Cost of Production As Affected By the Demand and Supply, and On the Mode of Representing Demand.
• Section IV.—: Of the Labour Which Has Been Employed On a Commodity Considered As a Measure of Its Exchangeable Value.
• Section V.—: Of the Labour Which a Commodity Will Command, Considered As a Measure of Value In Exchange.
• Section VI.—: On the Practical Application of the Measure of Value, and Its General Use and Advantages.
• Section VII.—: On the Variations In the Value of Money In the Same, and Different Countries.
• Chapter III.: Of the Rent of Land.
• Section I.—: Of the Nature and Causes of Rent.
• Section II.—: On the Necessary Separation of the Rent of Land From the Profits of the Cultivator and the Wages of the Labourer.
• Section III.—: Of the Causes Which Tend to Raise Rents In the Ordinary Progress of Civilized and Improved Societies.
• Section IV.—: Of the Causes Which Tend to Lower Rents.
• Section V.—: On the Dependance of the Actual Quantity of Produce Obtained From the Land, Upon the Existing Prices of Produce, and Existing Rents, Under the Same Agricultural Skill and the Same Value of Money.
• Section VI.—: Of the Connexion Between Great Comparative Wealth, and a High Comparative Price of Raw Produce.
• Section VII.—: On the Causes Which May Mislead the Landlord In Letting His Lands, to the Injury Both of Himself and the Country.
• Section VIII.—: On the Strict and Necessary Connection of the Interests of the Landlord and of the State.
• Section IX.—: General Remarks On the Surplus Produce of the Land.
• Chapter IV.: Of the Wages of Labour.
• Section I.—: On the Definition of the Wages of Labour, and Their Dependance Upon Supply and Demand.
• Section II.—: Of the Causes Which Principally Affect the Habits of the Labouring Classes.
• Section III.—: Of the Causes Which Principally Influence the Demand For Labour, and the Increase of the Population.
• Section IV.—: A Review of the Corn Wages of Labour From the Reign of Edward III.
• Section V.—: On the Conclusions to Be Drawn From the Preceding Review of the Prices of Corn and Labour During the Five Last Centuries.
• Chapter V.: Of the Profits of Capital.
• Section I.—: Of the Nature of Profits, and the Mode In Which They Are Estimated.
• Section II.—: Of the Limiting Principle of Profits.
• Section III.—: Of the Regulating Principle of Profits.
• Section IV.—: Of Profits As Affected By the Causes Practically In Operation.
• Section V. —: Remarks On Mr. Ricardo’s Theory of Profits.
• Chapter VI.: Of the Distinction Between Wealth and Value.
• Book II.
• Chapter I.: On the Progress of Wealth.
• Section I.—: Statement of the Particular Object of Inquiry.
• Section II.—: Of the Increase of Population Considered As a Stimulus to the Continued Increase of Wealth.
• Section III.—: Of Accumulation, Or the Saving From Revenue to Add to Capital, Considered As a Stimulus to the Increase of Wealth.
• Section IV.—: Of the Fertility of the Soil, Considered As a Stimulus to the Continued Increase of Wealth.
• Section V.—: Of Inventions to Save Labour, Considered As a Stimulus to the Continued Increase of Wealth.
• Section VI.—: Of the Necessity of a Union of the Powers of Production With the Means of Distribution, In Order to Ensure a Continued Increase of Wealth.
• Section VII.—: Of the Distribution Occasioned By the Division of Landed Property Considered As the Means of Increasing the Exchangeable Value of the Whole Produce.
• Section VIII.—: Of the Distribution Occasioned By Commerce, Internal and External, Considered As the Means of Increasing the Exchangeable Value of Produce.
• Section IX.—: Of the Distribution Occasioned By Personal Services and Unproductive Consumers, Considered As the Means of Increasing the Exchangeable Value of the Whole Produce.
• Section X.—: Application of Some of the Preceding Principles to the Distresses of the Labouring Classes Since 1815, With General Observations.

Section VII.—

On the Variations in the Value of Money in the same, and different Countries.

Money is beyond all question the most convenient practical measure of value; and while its relation to labour is known and constant, it fully answers the purpose required: It is, however, subject to variation like all other products; but this variation is for the most part so slow, that for short periods, as we have stated, its value has been considered as nearly constant.

We cannot be surprised therefore, that writers in tracing the causes of the rise or fall of the values of particular commodities in the progress of society, should be inclined, with a view to illustration, to suppose this constancy permanent, in order that they might have a standard to refer to. It was specifically with this view that Mr. Ricardo proposed that gold should be considered as produced always in a particular and uniform manner so as to prevent it from deviating, except in a very trifling degree, from a uniform value.

“If then, (he observes) I may suppose myself to be possessed of a standard so nearly approaching to an invariable one, the advantage is, that I shall be enabled to speak of the variations of other things without embarrassing myself on every occasion with the consideration of the possible alteration in the value of the medium in which price and value are estimated.”

“To facilitate then the object of this enquiry, although I fully allow that money made of gold is subject to most of the variations of other things, I shall suppose it to be invariable, and therefore all alterations in price to be occasioned by some alterations in the value of the commodity of which I may be speaking.”*

But if, as suggested by Mr. Ricardo, we adopt money obtained under such circumstances as to render profits an element of its value, it is obvious that such a measure must vary with the commodities to be measured when profits either rise or fall.

We may reasonably enough suppose, by way of illustration, that a given quantity of bullion is always obtained by the same quantity of labour, while other commodities may require different quantities, because the circumstance of certain commodities in the progress of society requiring more or less labour in their production, does not necessarily prevent a particular commodity from requiring only the same quantity. But this is not true in regard to the rate of profits, which applies to all commodities, and is allowed to be nearly the same in all the different employments of capital. We cannot then make the supposition, that the capitals employed in obtaining the precious metals always yield 10 per cent., while the capitals engaged in other employments of the same country vary from 20 per cent. to 5 per cent. It is quite certain therefore, that an article chosen for a standard measure of value must not consist of profits as one of its elements. Gold obtained by labour alone, without profits would far more completely than on any other supposition, measure the variations in the values of all other commodities.

It may perhaps be dangerous to dwell much upon any supposition respecting a mode of obtaining the precious metals, which is essentially different from the truth, because high and low prices under such a supposition will be different from the high and low prices of common language, yet the same terms being used, it will be extremely difficult to avoid confusion. But as Mr. Ricardo was disposed to overlook this objection, and thought that it would on the whole facilitate inquiry, if he were allowed to consider gold as invariable in value, he was surely bound to adopt such a supposition in regard to the mode of obtaining it, as would make it approach the nearest to the invariability required; and it cannot be doubted that this would be best accomplished by supposing the same quantity of gold always to be obtained by the same quantity of labour, without the aid of any advances but the food of a single day; instead of which he has supposed gold to be “produced with such proportions of the two kinds of capital as approach the nearest to the average quantity employed in the production of most commodities.”* He is of course compelled to acknowledge in the outset, that a measure so constituted, “would be a perfect measure of value for all things produced under the same circumstances precisely as itself, but for no others.” But what a prodigious concession this is! What a full and entire acknowledgment is it at once that the measure can be of no use. It is really almost like proposing a measure of length which will measure no other commodities than those formed of the same materials with itself.*

What we want is, something to measure the values of commodities under all the variations to which they may be subject; whether their value consists almost wholly in the profits of fixed capitals, or in the labour employed by circulating capitals, whether the commodity is completed for sale in two or three days, or two or three years: whether it is composed in part of other ingredients, such as rents, tythes and taxes, or is made up exclusively of labour and profits; and whether its value is determined by the accidental, or by the ordinary state of the demand and the supply. Now gold obtained by an uniform quantity of labour alone, without capital, would measure all these variations. This then is the measure which Mr. Ricardo, when looking for as near an approximation to a standard measure of value as could be theoretically conceived, should have adopted. And of course, if it seems successful with a view to illustration, to assume that the precious metals are invariable in their value in a particular country; they must be considered as obtained by labour without capital, and as always therefore bearing the same constant relation to labour.

It may be proper however to observe, that this constancy in the money price of labour, can only be a supposition adopted for the sake of illustration; because money is practically obtained by accumulated labour and profits, as well as immediate labour and profits, which render profits a necessary condition of its supply; and consequently if the same quantity of labour continue to be applied, while profits rise or fall, money must rise or fall like all other commodities in the same predicament.

With a view to distinguish the necessary tendency to a fall in the value of money occasioned by the accumulation of capital, the progress of cultivation, and the fall of profits, from the incidental fall occasioned by the varying fertility of the mines, and the possession of an abundance of exportable commodities, it might be useful to distinguish the differences in the value of money into two kinds: first, that which is occasioned by the high or low rate of profit, arising from the progress of capital and cultivation, and which may be denominated the necessary cause of the high or low value of money; and secondly, that which is occasioned by the varying fertility of the mines, the skill with which they are worked, the difficulty or facility of communication with them, and the deficiency or abundance of exportable commodities, which may be denominated the incidental causes of the high or low value of money. These two different kinds of causes will sometimes act in conjunction, and sometimes in opposition, and it may not always be easy to distinguish their separate effects; but as these effects have really a different origin, it is important to keep them as separate as we can.

The marks which distinguish a fall in the value of the precious metals, arising from what has been called the necessary cause, are, a rise in the money prices of corn, raw produce, and labour, without a general rise in the prices of wrought commodities. All of them, indeed, so far as they are composed of raw products, will have a tendency to rise; but in a large class of commodities, this tendency to rise will be much more than counterbalanced by the effect of the fall of profits. Some, therefore, will rise and some will fall according to the nature of the capitals employed upon them, compared with those which produce money; and while the money prices of corn and labour very decidedly increase, the prices of wrought commodities taken on an average, might possibly remain not far from the same.

On the other hand, when the value of money falls from the incidental causes above noticed, without a fall of profits, there will be a tendency to a proportionate rise of all commodities, as well as corn and labour, though in some cases it may take a considerable time before the proportionate rise of all objects are completed. This was remarked, at the time of the influx of the precious metals, from the discovery of the American mines, and also on the issue of an abundant paper currency, during the war which terminated in 1815.

As a necessary consequence of the distinction above made, it may be of use to recollect, that whenever a fall in the value of money takes place, without a fall in the rate of profits, an event which is generally open to observation, it is to be attributed to the incidental causes affecting the relations of money and labour, and not to that which is connected with the accumulation of capital, and the necessity of taking poorer land into cultivation, without improvements in agriculture.

It is certain, however, that those causes operating upon the value of money in different countries and periods, which I have called incidental, are much more powerful and prominent than those which take place necessarily in the progress of society, from the fall of profits. Even in such a country as the United States, where capital is scarce and profits are comparatively high, the fall of profits, which will certainly occur, in the progress of wealth and population, will probably be more than counterbalanced by the effect of a diminution in the facility of producing exportable commodities. And in reference to the fuller peopled countries of Europe, there is no room for such a fall of profits as can approach to the effects which have arisen, and may yet arise from the increased fertility of the mines; or the diminished quantity of labour, which in a particular country, owing to superior skill and machinery, is required to purchase the precious metals, while the cost of obtaining them at the mines of America, and the quantity imported into the whole of Europe remain nearly the same.

The effects of this last cause have never been sufficiently appreciated. It is a just and most important observation of Mr. Ricardo, that, “Gold and silver having been chosen for the general medium of circulation, are by the competitions of commerce distributed in such proportions amongst the different countries of the world, as to accommodate themselves to the natural traffic which would take place if no such metals existed, and the trade between countries was purely a trade of barter.”* This distribution is effected by the varying state of the exchanges. If one country possesses peculiar advantages in regard to its exportable commodities, its exchanges will for a time be steadily in its favour, and an influx of the precious metals will take place till the rise in the money price of labour balances the peculiar advantages, and a trade of barter is restored.† On the other hand, if a country loses its advantages in regard to exportable commodities, it will lose a portion of its precious metals by an adverse exchange, and the fall of prices will continue till the reduced money price of labour balances the disadvantages, and the trade of barter returns.

It is on this principle that the different value of money in different countries is accounted for. As Mr. Ricardo most justly observes, “it will explain to us why the prices of home commodities, and those of great bulk, though of comparatively small value, are, independently of other causes, higher in those countries where manufactures flourish. Of two countries having precisely the same population, and the same quantity of land, of equal fertility in cultivation, with the same knowledge too of agriculture, the prices of raw produce will be the highest in that where the greater skill and the better machinery is used in the manufacture of exportable commodities. The rate of profits will probably differ but little; for wages, or the real reward of the labourer, may be the same in both; but those wages, as well as raw produce, will be rated higher in money in that country into which, from the advantages attending their skill and machinery, an abundance of money is imported in exchange for their goods.”

The following passage, which occurs in the same chapter of Mr. Ricardo’s work, is so just, and so well calculated to dispel some unfortunate prejudices which at present prevail, that I cannot resist the temptation of bringing it afresh before the public.*

“An improvement in the facility of working the mines, by which the precious metals may be produced with a less quantity of labour, will sink the value of money generally. It will then exchange for fewer commodities in all countries; but when any particular country excels in manufactures, so as to occasion an influx of money towards it, the value of money will be lower, and the prices of corn and labour will be relatively higher in that country than in any other.

“This lower value of money will not be indicated by the exchange; bills may be negotiated at par, although the prices of corn and labour should be ten, twenty, or thirty per cent. higher in one country than another.† Under the circumstances supposed, such a difference of prices is the natural order of things; and the exchange can only be at par when a sufficient quantity of money is introduced into the country excelling in manufactures, so as to raise the price of its corn and labour.”*

If this doctrine be true, and I most firmly believe it is, it appears that a rise in the money price of corn and labour is a necessary consequence of commercial prosperity; and though I would distinctly allow, that in reference to our own country at present the corn laws keep the prices of corn and labour higher than they would be, if things were left to take their natural course: yet still it is unquestionable, that the actual prices of corn and labour indicate a low value of money, and not a high value of corn, and that they operate in a totally different way from taxes on the labouring classes.

It is certainly true that the money wages of independent labour, notwithstanding their fall of late years, are higher in this country than in any other country in Europe, and there is every reason to believe that the English labourer with his money earnings can purchase as great a quantity of wheat as any European labourer of the same description. If this be so, it is a distinct proof that the higher price of corn in this country, as compared with the continent, is not at present owing to a greater difficulty of obtaining it, but to a higher scale of money prices, or lower value of money, which operates upon all commodities, though it is more than counterbalanced in that class of commodities where skill and superior machinery have most prevailed, and it is of these that our principal exports will naturally consist.

In all cases it is of the greatest use and importance to distinguish between a rise or fall in the value of money, and a rise or fall in the values of other commodities. As long as the varying prices of other commodities do not affect the money price of the standard labour in any country, we may consider the value of money as remaining the same, and attribute the relative variations between money and commodities to causes exclusively affecting the commodities, such as the cheapness of products arising from the improvements in machinery, or their dearness from an increased elementary cost of production. But if the money price of the standard labour rises generally, it is a sign that the elementary cost of obtaining money has fallen, and that a smaller sum of labour, profits, rent, and taxes, is given to obtain a certain quantity of it. If, on the other hand, the money price of labour falls, it is a sign that the elementary cost of obtaining money has risen, and that a greater sum of labour, profits, rent, and taxes, must be given to obtain the same quantity of it. And we should be aware that these effects may be, and frequently are produced by causes operating in the first instance on commodities.

This has been practically exemplified in this country of late years. The raised price of corn, commencing with the year 1795, and continuing, with but few exceptions, till 1813, occasioned necessarily a rise in the money price of labour. Without such a rise, the conditions of the supply of the quantity of labour demanded would not have been fulfilled; and the great relative superiority of our manufacturing industry at that time over the rest of Europe enabled us to maintain our exchanges under such a high money price of labour. While this high price continued in the standard labour of the country, with a price of manufacturing labour generally proportioned to it, it is hardly possible to deny that the elementary cost of obtaining bullion in this country was diminished, whatever might be the case in other countries, or whatever might be the costs of producing bullion at the mouths of the mines from which it was obtained. The fact that the quantity of manufactures which would purchase an ounce of gold would, under the circumstances supposed, purchase a smaller quantity of standard labour than usual, proves at once the fact, that the elements in the cost of obtaining gold in England, consisting of labour, profits, rents, and taxes, were, taken altogether, less in value than before, or, in other words, that the elementary cost of obtaining gold in England had diminished.

On the same principle it follows, that the cost of obtaining gold in England has since decidedly increased. Owing to the great fall in the prices of manufactured goods, a greater quantity of them is required to purchase a given quantity of gold—greater than in proportion to the cheapness arising from increased skill, and improvements in machinery. Consequently, such goods so exchanged for gold contain a greater value of English labour, profits, rents, and taxes; and the cost of obtaining gold in England has unquestionably increased.

How far this increased cost of obtaining bullion may have been aggravated by circumstances, which are known to have diminished considerably the supplies from the American mines since 1810, it is not easy to calculate. It has been said that, reckoning the defalcation at the highest, it would bear so small a proportion to the whole quantity of bullion in the world, that it could hardly be expected to have a perceptible effect. But the annual supplies of bullion, though they would operate slowly, even in those countries which were most in the way of receiving them, would still operate much more powerfully than in the proportion which they might bear to the whole mass of bullion in the world. We have good reason to believe that it was a very long time before even the great discovery of the mines of America began to operate sensibly on India, China, Tartary, and other parts of Asia, where no inconsiderable part of the bullion of the world is either slowly circulating, or is buried in the earth. It cannot be doubted that the active part of the commercial world might be powerfully influenced by the varying supply of the American mines, while central Asia was scarcely sensible of any change.

No very satisfactory conclusion, therefore, can be drawn respecting the cause of the late rise in the value of money in the greater part of Europe, and the United States of America, from the smallness of the defalcation in the mines, as compared with the whole mass of bullion in the world.

On the other hand, it must be owned that the circumstance of gold having increased in the cost of its production about as much as silver, without our being able to trace an equal defalcation in its supply, seems to indicate that other causes have been more powerful than the state of the mines of gold and silver; and the object of this digression is to shew that such causes are frequently more efficient in altering the value of the precious metals, especially in particular countries, than moderate changes in the state of their annual supply from the mines.

Adam Smith has justly observed, that the natural effect of the increase of wealth is to raise the value of the precious metals; and it is quite certain that a great increase of produce and population, supposing the supplies of the precious metals, and all other circumstances affecting currency, to remain the same, would render bullion scarcer compared with the demand, and occasion the necessity of its being bought at a greater elementary cost.

Now it is well known that since the war which terminated in 1815, there has been a very great increase of produce and population in most of the countries of the commercial world, and from the necessity that has occurred of withdrawing a great part of the paper which was in circulation in these countries during the war, and the frequent failure of credit from overspeculation subsequently, there is reason to think that the great increase of produce and population has not been balanced by a proportionate increase of currency and credit; and under these circumstances a fall in the prices of produce and labour was inevitable.

As long as the price of labour was not affected by these low prices of commodities, the elementary cost of obtaining the precious metals would not be increased. Although more cottons would be given for an ounce of gold, this would be merely giving a larger quantity of an article which had fallen in the cost of obtaining it, and the elementary cost of obtaining gold might remain the same; but as soon as the price of the standard labour began generally to fall, more labour must be given for the same quantity of silver, and the elementary cost of producing the precious metals would necessarily rise; and in the actual state of things it seems almost impossible to deny that such an increase of their value has really taken place.

In all conclusions, however, relating to variations of value, it would be unreasonable to expect that they can be ascertained with the same precision as the variations of length and weight. Neither the object to be measured, nor the instrument of measurement comes within the pale of that certainty which belongs to the stricter sciences. A given length is the same all over the world; but the estimation in which a commodity is held, its elementary cost of production, and the state of its supply compared with the demand is liable to vary at every different place, and in every different period. The standard labour also in different countries is neither the same in different districts, nor does it at all times bear the same relation to other kinds of labour; and it is not always easy to ascertain its money price, particularly when it is in the act of rising or falling, and the change is not completed. Yet notwithstanding these drawbacks, as great confusion would be occasioned by not distinguishing value from price, as all political economists are constantly in the habit of using the term value; and as we cannot speak of a rise or fall of value with any consistency, without some kind of measure of it, it is surely of the greatest use at once to adopt that measure which beyond all comparison approaches the nearest to accuracy, and which in fact may be said to be exclusively capable of measuring value in the sense in which the term is in practice most frequently applied.

Labour is in this respect entirely distinct from all the products of labour, and the selection of it as a measure of the difficulty of obtaining possession of a commodity in the place where such commodity is estimated, seems to be pointed out by the nature of things, and cannot be called arbitrary.

A measure, to whatever it may be applied, must itself increase or decrease according to quantity. The standard labour of a country which is actually employed, and in the district where the demand is made for it, is the only object the value of which is proportioned to its quantity, under the greatest differences both in place and time, both in different countries and in different periods of the same country.

CHAPTER III.

OF THE RENT OF LAND.

[* ] Mr. Ricardo, in the first edition of his work (page 11) has given the following description of an invariable measure of value. “If any one commodity could be found, which now, and at all times required precisely the same quantity of labour to produce it, that commodity would be of unvarying value, and would be eminently useful as a standard by which the variations of other things might be measured. Of such a commodity we have no knowledge, and consequently are unable to fix on any standard of value. It is, however, of considerable use towards attaining a correct theory, to ascertain what the essential qualities of a standard are, that we may know the causes of the variations in the relative values of commodities; and that we may be enabled to calculate the degree in which they are likely to operate.”

Nothing can be more just and satisfactory than this passage; but unfortunately it was given up.

[* ] Principles of Political Economy, ch. I. sec. vi. p. 44, 3rd. edition.

[* ] The obvious defect of such a measure is, that, whether applied to commodities produced under the same circumstances as itself, or to any others, it can never measure the variations to which they are subject occasioned by the general rise or fall of profits, because it must itself necessarily vary in that respect precisely as they do.—Ed.

[* ] Principles of Political Economy, ch. vii. p. 143, 3rd edit.

[† ] Practically in countries where a large part of the currency consists of paper, the actual influx of bullion is continually checked by an increased issue of bank notes and bills of exchange; but as long as there is no difference between paper and gold, the effect in lowering the value of money is precisely the same. Repeated experience appears to have shewn us that in the case of a brisk demand, no difficulty is ever found in furnishing the means of a considerable rise of prices in some classes of commodities, without any tendency to a fall in others. Currency is always at hand. The important question is, whether the exchanges can be maintained under such prices; and we know too well that they have often risen higher than the exchanges would allow so as to keep paper and gold together.

[* ] I have always considered the first part of Mr. Ricardo’s chapter (vii) on foreign trade as essentially erroneous; but the greater part of the chapter is not only new, but unquestionably true, and of the highest importance.

[† ] Mercantile men are too apt to measure the value of money in different countries by the difference in the exchanges, which merely measures the rate at which the money of one country exchanges for the money of another, and has little to do with the elementary cost of money, or the difficulty of obtaining it in each country, or even with the power of purchasing the mass of those commodities which are least liable to change in their cost of production. Of all commodities, those which are exported are the most liable to changes in the cost of their production, and are therefore the last which should be referred to with any view to a measure of the value of money.

In my first publication on rent in the shape of a pamphlet, which appeared in 1815, two years before the first edition of Mr. Ricardo’s work came out, the following passage occurs in a note:

“The precious metals are always tending to a state of rest, or such a state of things as to make their movement unnecessary. But when this state of rest has been nearly attained, and the exchanges of all countries are nearly at par, the value of the precious metals in different countries estimated in corn and labour, or in the mass of commodities, is far indeed from being the same. To be convinced of this, it is only necessary to look at England, France, Poland, Russia, and India, when the exchanges are at par.”

In reality, the quantity of money in each country is determined by the quantity wanted to maintain its general exchanges at par; and the greater are the advantages of any country in regard to its exportable commodities, the more money will it retain, and the higher will be the price of its corn and labour, when its exchanges are at par. If England should lose her advantages in this respect, her corn and labour would fall to the level of the rest of Europe, in spite of any corn laws that could be imagined.

[* ] Ch. vii. p. 156, 3rd edit.