Front Page Titles (by Subject) Chapter VII.: ON THE DEFINITION AND APPLICATION OF TERMS, BY MR. MACCULLOCH, IN HIS PRINCIPLES OF POLITICAL ECONOMY. - Definitions in Political Economy
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Chapter VII.: ON THE DEFINITION AND APPLICATION OF TERMS, BY MR. MACCULLOCH, IN HIS “PRINCIPLES OF POLITICAL ECONOMY.” - Thomas Robert Malthus, Definitions in Political Economy 
Definitions in Political Economy (London: John Murray, 1827).
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ON THE DEFINITION AND APPLICATION OF TERMS, BY MR. MACCULLOCH, IN HIS “PRINCIPLES OF POLITICAL ECONOMY.”
However incautious Mr. Ricardo and Mr. Mill may have been in the definition and application of their terms, I fear it will be found that Mr. Macculloch has been still more so; and that, instead of growing more careful, the longer he considers the subject, he seems to be growing more rash and inconsiderate.
The expositors of any science are in general desirous of calling into their service definite and appropriate terms; and for this purpose their main object is to look for characteristic differences, not partial resemblances. Mr. Macculloch, on the other hand, seems to be only looking out for resemblances: and proceeding upon this principle, he is led to confound material with immaterial objects; productive with unproductive labour; capital with revenue; the food of the labourer with the labourer himself; production with consumption; and labour with profits.
That this is not an exaggerated view of what has been stated by Mr. Macculloch, in his Principles of Political Economy, any person who reads the work with attention may satisfy himself.
Mr. Macculloch’s definition of wealth, which he considers as quite unexceptionable, is, “those articles or products which possess exchangeable value, and are either necessary, useful, or agreeable.”*
It is not, perhaps, quite unexceptionable to use the term value in a definition of wealth. It is something like explaining ignotum per ignotius. But independently of this objection, the definition is so worded, that it is left in doubt whether immaterial gratifications are meant to be included in it. They are not in general designated by the terms articles or products; and it is only made clear that it is intended to include them by a collateral remark on my definition of wealth, which I confine specifically to material objects, and by a subsequent definition of productive labour, which is made to include every gratification derived from human exertion.
Mr. Macculloch, in the article on Political Economy which he published in the Supplement to the Encyclopædia Britannica, had excluded these kinds of gratification from his definition of wealth, and had given such reasons for this exclusion, as would fully have convinced me of its propriety, if I had not been convinced before. He observes that, “if political economy were to embrace a discussion of the production and distribution of all that is useful and agreeable, it would include within itself every other science; and the best Encyclopædia would really be the best treatise on political economy. Good health is useful and delightful, and therefore, on this hypothesis, the science of wealth ought to comprehend the science of medicine: civil and religious liberty are highly useful, and therefore the science of wealth must comprehend the science of politics: good acting is agreeable, and therefore, to be complete, the science of wealth must embrace a discussion of the principles of the histrionic art, and so on. Such definitions are obviously worse than useless. They can have no effect but to generate confused and perplexed notions respecting the objects and limits of the science, and to prevent the student ever acquiring a clear and distinct idea of the inquiries in which he is engaged.”*
On these grounds he confined wealth to material products; but, in the same treatise, he included, in his definition of productive labour, all those sources of gratification which he had, with such good reason, excluded from his definition of wealth. When he had done this, however, he could not but be struck with the inconsistency of saying that wealth consisted exclusively of material products, and yet that all labour was equally productive of wealth, whether it produced material products or not. To get rid of this inconsistency, he has now altered his definition, by leaving out the term material products; and it remains to be seen, whether in so doing he has not essentially deviated from the most obvious rules which should direct us in defining our terms.
His definition of wealth, as explained by what he subsequently says of productive labour, now includes all the gratifications derived from menial service and followers, whatever may be their number.
Now let us suppose two fertile countries with the same population and produce, in one of which it was the pride and pleasure of the landlords to employ their rents chiefly in maintaining menial servants and followers, and in the other, chiefly in the purchase of manufactures and the products of foreign commerce. It is evident that the different results would be nearly what I described in speaking of the consequences of the definition of the Economists. In the country, where the tastes and habits of the landlords led them to prefer material conveniencies and luxuries, there would, in the first place, be in all probability a much better division of landed property; secondly, supposing the same agricultural capital, there would be a very much greater quantity of manufacturing and mercantile capital; and thirdly, the structure of society would be totally different. In the one country, there would be a large body of persons living upon the profits of capital; in the other, comparatively a very small one: in the one, there would be a large middle class of society; in the other, the society would be divided almost entirely between a few great landlords and their menials and dependents: in the one country, good houses, good furniture, good clothes, and good carriages, would be in comparative abundance; while in the other, these conveniencies would be confined to a very few.
Now, I would ask, whether it would not be the grossest violation of all common language, and all common feelings and apprehensions, to say that the two countries were equally rich?
Mr. Macculloch, however, has discovered that there is a resemblance between the end accomplished by the menial servant or dependent, and by the manufacturer or agriculturist. He says, “The end of all human exertion is the same; that is, to increase the sum of necessaries, comforts, and enjoyments; and it must be left to the judgment of every one to determine what proportion of these comforts he will have in the shape of menial services, and what in the shape of material products.”*
It will, indeed, be readily allowed, that even the third footman who stands behind a coach, and seems only to add to the fatigue of the horses and the wear and tear of the carriage, is still employed to gratify some want or wish of man, in the same manner as the riband maker or the lace maker. It will further be readily allowed, that it is by no means politic to interfere with individuals in the modes of spending their incomes. But does it at all follow from this, that if these different kinds of labour have very different effects on society in regard to wealth, as the term is understood by the great mass of mankind, that they should not be distinguished by different appellations, in order to facilitate the explanation of these different effects? Mr. Macculloch might unquestionably discover some resemblance between the salt and the meat which it seasons: they both contribute, when used in proper proportions, to compose a palatable and nutritive meal, and in general we may leave it to the taste and discretion of the individual to determine these proportions; but are we on that account to confound the two substances together, and to affirm that they are equally nutritive? Are we to define and apply our terms in such a way as to make it follow from our statements, that, if the individual were to compound his repast of half salt and half meat, it would equally conduce to his health and strength?
But Mr. Macculloch states, that a taste for the gratifications derived from the unproductive labourers of Adam Smith “has exactly the same effect upon national wealth as a taste for tobacco, champagne, or any other luxury.”* This may be directly denied, unless we define wealth in such a manner as will entitle us to say that the enjoyments derived by a few great landlords, from the parade of menial servants and followers, will tell as effectually in an estimate of wealth as a large mass of manufacturers and foreign commodities. But when M. Chaptal endeavoured to estimate the wealth of France, and Mr. Colquhoun that of England, we do not find the value of these enjoyments computed in any of their tables. And certainly, if wealth means what it is understood to mean in common conversation and in the language of the highest authorities in the science of Political Economy, no effects on national wealth can or will be more distinct than those which result from a taste for material conveniencies and luxuries, and a taste for menial servants and followers. The exchange of the ordinary products of land for manufactures, tobacco, and champagne necessarily generates capital; and the more such exchanges prevail the more do those advantages prevail which result from the growth of capital and a better structure of society; while an exchange of necessaries for menial services, beyond a certain limited amount, obviously tends to check the growth of capital, and, if pushed to a considerable extent, to prevent accumulation entirely, and to keep a country permanently in a semi-barbarous state.
Mr. Macculloch, when not under the influence of his definition, justly observes, that “the great practical problem, involved in that part of the science of political economy which treats of the production of wealth, must resolve itself into a discussion of the means whereby the greatest amount of necessary, useful, and desirable products may be obtained with the least possible quantity of labour.”* But among the unproductive labourers of Adam Smith there is no room for such saving of labour. The pre-eminent advantages to be derived from capital, machinery, and the division of labour, are here almost entirely lost; and in most instances the saving of labour would defeat the very end in view, namely, the parade of attendance, and the pride of commanding a numerous body of followers.
Now, if the employment of the labour required to produce material conveniencies and luxuries necessarily occasions the creation and distribution of capital, and, further, affords room for all the advantages resulting from the saving of labour and the most extended use of machinery; while the employment of the labour, called by Adam Smith unproductive, is necessarily cut off from all these benefits, I would ask whether these two circumstances alone do not form a sufficiently marked line of distinction amply to justify the classification of Adam Smith; and the utility of such a classification, in explaining the causes of the wealth of nations, is most obvious and striking.
So difficult is it, consistently, to maintain a definition which contradicts the common usage of language, and the common feelings of mankind, that I have not the least doubt, if Mr. Macculloch himself were to travel through two countries of the kind before described, that is, one flourishing in manufactures and commerce, and the other, though with the same population and food, furnishing little more to the great mass of its people than panem et Circenses, he would call the latter poor, and the former comparatively rich.
Now, what must have been the cause of this difference? Adam Smith would give a simple, sufficient, and most intelligible reason for it. He would say, that the number and powers of those whom he had called productive labourers, had been much greater in one country than in the other. This seems to be a clear and satisfactory explanation. How Mr. Macculloch could explain the matter according to doctrines which make no difference between the different kinds of labour, I am utterly at a loss to conjecture* .
Perhaps, however, he would say, upon recollection, that his definition of wealth did not oblige him to allow that there would really be any difference in the wealth of these two countries. In that case, I think it may be very safely said that his definition of wealth violates all the most obvious rules for the definition and application of terms. It is opposed to the meaning of the term wealth as used in common conversation; it is opposed to the meaning of the term wealth as applied by the writers of the highest authority in political economy; it is so far from removing the little difficulties which had attended former definitions of wealth and productive labour, that it very greatly aggravates them; it so contradicts our common habits and feelings, that it is scarcely possible to maintain it with consistency.
Mr. Macculloch’s definition of capital has exactly the same kind of character as his definition of wealth, namely, that of being so extended as to destroy all precision, and to confound objects which had before been most usefully separated, with a view to the explanation of the causes of the wealth of nations. The alteration of a definition seems with Mr. Macculloch to be a matter of very slight consequence. The following passage is certainly a most extraordinary one. “The capital of a country may be defined to be that portion of the produce of industry existing in it, which can be made directly available, either to the support of human existence, or to the facilitating of production. This definition differs from that given by Dr. Smith, which has been adopted by most other economists. The whole produce of industry belonging to a country, is said to form its stock; and its capital is supposed to consist of that portion only of its stock, which is employed in the view of producing some species of commodities. The other portion of the stock of a country, or that which is employed to maintain its inhabitants, without any immediate view to production, has been denominated its revenue, and is not supposed to contribute anything to the increase of its wealth.”
“These distinctions seem to rest on no good foundations. Portions of stock employed without any immediate view to production, are often by far the most productive. The stock, for example, that Arkwright and Watt employed in their own consumption, and without which they could not have subsisted, was laid out as revenue; and yet it is quite certain that it contributed infinitely more to increase their own wealth, as well as that of the country, than any equal quantity of stock expended on the artisans in their service. It is always extremely difficult to say whether any portion of stock is, or is not, productively employed; and any definition of capital which involves the determination of this point, can only serve to embarrass and obscure a subject that is otherwise abundantly simple. In our view of the matter, it is enough to constitute an article capital, if it can either directly contribute to the support of man, or assist him in appropriating or producing commodities; but the question respecting the mode of employing an article ought certainly to be held to be, what it obviously is, perfectly distinct from the question whether that article is capital. For any thing that we can à priori know to the contrary, a horse yoked to a gentleman’s coach may be just as productively employed as if he were yoked to a brewer’s dray, though it is quite plain, that whatever difference may really obtain in the two cases, the identity of the horse is not affected; he is equally possessed, in the one case as well as the other, of the capacity to assist in production, and so long as he possesses that capacity, he ought to be viewed, independently of all other considerations, as a portion of the capital of the country.”*
If these doctrines were admitted, there would be an end, at once, of all classifications, and of all those appropriate designations which so essentially assist us, in explaining what is going forward in society. If the distinction between the whole mass of the products of a country, and those parts of it which are applied to perform particular functions, rests on no solid foundation, it may be asked, on what better foundation does the distinction between the mass of the male population of a country, and the classes of lawyers, physicians, manufacturers, and agriculturists rest? They all equally come under the general denomination of men; but particular classes are most usefully distinguished by particular appellations founded on the particular functions which they generally perform.
The bread which I consume myself, or give to a menial servant, is a part of the general produce of the country, and may not be different from that which is advanced to a manufacturer or agriculturist. When I or my servant consume the bread, it performs a most necessary and important service, no less than the maintenance of life and health; but in obtaining this service my wealth is pro tanto diminished. On the other hand, if I give the same kind of bread as wages to a manufacturer or agricultural labourer, it will not, with regard to me, perform so necessary an office as before, but it will perform an essentially different one with regard to my wealth, it will increase my wealth instead of diminishing it. In an inquiry into the causes of the wealth of nations, does not this difference in the functions which the same advances perform require to be marked by a particular appellation?
Accordingly, both in the language of common conversation and of the best writers, revenue and capital have always been distinguished; by revenue being understood, that which is expended with a view to immediate support and enjoyment, and by capital, that which is expended with a view to profit. But in the language of Mr. Macculloch, in the passage above quoted, it is the capacity to perform particular functions, and not the habitual performance of them, that justifies particular designations. A coach-horse, drawing a chariot in the Park, has the capacity of being employed in a brewer’s dray or a farmer’s waggon: “whatever difference may really obtain in the two cases, the identity of the horse is not affected; he is equally possessed, in the one case as in the other, of the capacity to assist in production; and so long as he possesses that capacity, he ought to be viewed, independently of all other considerations, as a portion of the capital of the country.”
This appears to me to be very little different from saying that a man who is capable of being made to perform the functions of a judge ought to be denominated a judge; because, whether he sits on the bench or in the court below, the identity of the man is the same; he is equally possessed, in the one case as well as the other, of the capacity to assist in the decision of causes, and so long as he possesses that capacity he ought to be viewed, independently of all other considerations, as one of the judges of the country. It is said, that the French are astonished at the small number of judges in England. If this kind of comprehensive nomenclature were adopted, their wonder would soon cease.
The whole of the incomes of every person in a society, in whatever way they may be actually employed, might be employed, as far as they would go, directly in the support of man. Consequently, according to the definitions of Mr. Macculloch, all incomes are capital. But he is not satisfied even with this very unusually-extended meaning of the term. He can trace a resemblance between a working man and a working horse, and is, consequently, led to say, “However extended the sense previously attached to the term capital may at first sight appear, I am satisfied that it ought to be interpreted still more comprehensively. Instead of understanding by capital all that portion of the produce of industry extrinsic to man, which may be applicable to his support, and to the facilitating of production, there does not seem to be any good reason why man himself should not, and very many why he should, be considered as forming a part of the national capital. Man is as much the produce of labour as any of the machines constructed by his agency; and it appears to us, that in all economical investigations he ought to be considered in precisely the same point of view.”*
That there is some resemblance between a working man and a working horse cannot for a moment be doubted; but is that sufficient reason why they should be confounded together under the name of capital? The question is not whether there is a partial resemblance between these two objects, but whether there is a characteristic difference; and surely there is a sufficient distinction in all economical investigations between a free man, and the horse, the machine, or the food which he uses, to warrant a different designation, especially when one of the greatest objects of all economical investigations, and certainly the most worthy, has been how to secure at all times a full sufficiency of the produce of industry extrinsic to man as compared with man himself.
It has been hitherto usual to say, that the happiness of the labouring classes of society depends chiefly upon the rate at which the capital of the country increases, compared with its population; but if the capital of the country includes its population, there is no meaning in the statement. Yet hardly any writer that I know of has more frequently made this statement than Mr. Macculloch himself. Nothing, indeed, can show more strikingly the extreme difficulty of maintaining consistently new and unusual definitions, than the frequency with which he seems to be compelled to use terms in their old and accustomed sense, notwithstanding the different definitions which he has given of them.
Thus, in his very peculiar and most untenable argument on the effects of absenteeism in Ireland, one of the reasons which he gives, why the absence of the landlords does not diminish the wealth of that country is, that they do not remove any capital from it, but merely what they would spend on their own gratifications. If, however, the definition of the capital of a country, as stated by Mr. Macculloch, be “that portion of the produce of industry existing in it which can be made directly available either to the support of human existence or to the facilitating of production,” it follows necessarily that they remove a considerable quantity of capital, as it will hardly be denied that the corn, cattle, and butter produced from their estates (which, after all the mystery about bills of exchange is done away, are practically the main articles exported to England for the payment of their rents) may be made directly available to the support of human existence.
Mr. Macculloch is also disposed to recommend emigration as one of the best means of relieving the distress of Ireland, by altering the proportion between capital and labour; but if, according to him, in all economical discussions, man is to be considered as capital, precisely like the machine which he uses or the food which he consumes, the emigration of a portion of the population will be to deprive the country of a portion of its capital, which has always been considered as most pernicious. Whatever, therefore, may be the merits or demerits of Mr. Macculloch’s reasoning on these subjects, independently of his definitions, it is obvious that the application of his definitions at once destroys it.
It need hardly be repeated, that in all the less strict sciences, definitions and classifications are seldom perfect and complete; but no reasonable man will refuse to take advantage of an imperfect instrument which is essentially useful, if no other more perfect one can be obtained. If it be found useful, with a view to an explanation of the causes of the wealth of nations, to make a distinction between the labours of agriculturists and manufactures, as compared with menial servants, followers, and buffoons, the utility of this distinction is not destroyed, though its perfect accuracy may be impeached, because, in a few instances, the labour of the menial servant is very similar to that of the productive labourer. The classification is formed upon the general character and general effects of one sort of industry as compared with another; and if, in these respects, the line of distinction is sufficiently marked, it is mere useless cavilling to dwell upon particular instances.*
But even in the very case on which Mr. Macculloch lays his principal stress, the difference is such as fully to warrant a different classification. It is, no doubt, true that, to have a fire in an attic in London, it is equally necessary that the coals should be brought up stairs from the cellar, as that they should be brought up from the bottom of the coalmine to the surface: it is equally true that there is some resemblance between carrying coals from the bottom of a house to the top, and carrying them from the bottom of a mine to the top; but there is still a most decided and characteristic difference in the two cases.
The miner is paid by the owner or worker of the mine, for the express purpose of increasing his wealth; the value of the miner’s labour is, therefore, charged with a profit upon the price of the coals; and the result of it would regularly enter into any estimate of national wealth. But when the same owner or worker of coal-mines pays a menial servant for bringing coals up from the yard to the drawing-room, he pays him for the express purpose of facilitating and rendering more convenient and agreeable, the consumption of that wealth which he had obtained through the instrumentality of the miner. The two instruments are used for purposes distinctly different, one to assist in obtaining wealth, the other to assist in consuming it. In an inquiry into the causes of the wealth of nations, I cannot easily conceive a more distinct and useful line of demarcation.
On the same principle, if it be found useful with a view to explanations, to distinguish, by a different name, the stock destined for immediate consumption, from the stock employed or kept, with a view to profit, surely we must not wait to investigate the peculiar talents of each individual, before we venture to characterise the nature of his expenditure; and if we find such men as Arkwright and Watt* most naturally and properly reserving, for their immediate consumption, the means of keeping up a handsome or splendid establishment for the gratification of themselves, their family, and their friends, make an exception in their favour, and call such an expenditure an outlay of capital, instead of a consumption of revenue, as we should call it in the case of all ordinary persons. Such an inquiry would impose a duty upon the writers in political economy, which it would be perfectly absurd to attempt to fulfil, as it would quite defeat the end of the proposed classifications; and with regard to the distinguished characters adverted to, it would surely be most unnecessary. In an estimate of national wealth, the genius of a Newton or a Milton is necessarily underrated, which only shows that there are other sources of admiration and delight besides wealth. But such men as Arkwright and Watt are quite safe in the hands of the political economist. The result of their genius and labour is exactly of that description which is estimated in the very great addition which it makes to the capital and revenue of the country, in the most natural and ordinary acceptation of these terms. And when the effects of their genius have been estimated in this way, it would not only lead to inextricable difficulty, but it would be obviously a double entry, to estimate, in addition, the value of the men as extraordinary machines. It would be like estimating the value of a commodity produced by a skilful artificer, and then adding his high wages, and putting both into an estimate of national wealth.
But it is difficult to say what may not be called wealth, or what labour may not be called productive, in Mr. Macculloch’s nomenclature. According to his view of the subject, any sort of exertion, or any sort of consumption which tends, however indirectly, to encourage production, ought to be denominated productive; and before we venture to call the most trivial sort of exercise or amusement, such as blowing bubbles, or building houses of cards unproductive, we must wait to see whether the person so employed does not work the harder for it afterwards.* But, not to mention the impossibility of any, the most useful classification, if such doctrines were admitted, and we were required to wait the result in each particular case, and make exceptions accordingly, I will venture to affirm, that if we once break down the distinction between the labour which is so directly productive of wealth as to be estimated in the value of the object produced, and the labour or exertion, which is so indirectly a cause of wealth, that its effect is incapable of definite estimation, we must necessarily introduce the greatest confusion into the science of political economy, and render the causes of the wealth of nations inexplicable. There is no kind of exertion or amusement which may not, upon this principle, be called productive. Walking, riding, driving, card-playing, billiard-playing, &c. &c. may all be, indirectly, causes of production; and according to Mr. Macculloch, “it is very like a truism, to say, that what is a cause of production must be productive.”*
But of all the indirect causes of production, the most powerful, beyond all question, is consumption.
If man were not to consume, how scanty, comparatively, would be the produce of the earth. Consumption, therefore, is the main fundamental cause of production; and if we are to put indirect causation on a footing with direct causation, as suggested by Mr. Macculloch, we must rank in the same class, the manufacturer and the billiard player, the producer and the consumer.
It is impossible that the science of political economy should not most essentially suffer from such a confusion of terms. Nothing can be clearer, than that, with a view to any thing like precision, and the means of intelligible explanation, it is absolutely necessary to designate by a different name the labour which is directly productive of wealth, from that which merely encourages it.
Another most extraordinary and inconceivable misnomer of Mr. Macculloch is, the extension of the term labour to all the operations of nature, and every variety of profits.
Adam Smith, and all other writers, who have happened to fall in my way, have meant, by the term labour, when unaccompanied by any specific adjunct, the exertions of human beings; and by the term wages of labour, the remuneration, whether in produce or money, paid to those human beings for their exertions. When Mr. Ricardo stated, that commodities exchanged with each other according to the quantity of labour worked up in them, there cannot be the least doubt that he meant the quantity of human labour immediately employed in their production, together with that portion of human labour worked up in the fixed and circulating capitals consumed in aiding such production. And it is undoubtedly true, referring merely to the relation of one commodity to another, and supposing all other things the same; that is, supposing profits to be the same, the proportion of fixed and circulating capitals to be the same, and the duration of the fixed capitals and the times of the returns of the circulating capitals the same, that then the relative values of the commodities will be determined by the quantity of human labour worked up in each.
But Mr. Macculloch could not but see that it was scarcely possible to take up two commodities, of different kinds, in which all these things would be the same, and, consequently, that such a supposition would be so inapplicable to the mass of commodities, as to be perfectly useless; and yet, without such a supposition, the proposition would be obviously false.
Instead, however, of correcting Mr. Ricardo’s proposition, as he was naturally called upon to do, by adding to the human labour worked up in the commodity, any other element which was found ordinarily to affect its value, and calling it by its ordinary name, he chose to retain Mr. Ricardo’s language, but entirely to alter its meaning. There is nothing that may not be proved by a new definition. A composition of flour, milk, suet, and stones in a plum-pudding; if by stones be meant plums. Upon this principle, Mr. Macculloch undertakes to show, that commodities do really exchange with each other according to the quantity of labour employed upon them; and it must be acknowledged, that in the instances which he has chosen he has not been deterred by apparent difficulties. He has taken the bull by the horns. The cases are nearly as strong as that of the plum-pudding.*
They are the two following—namely, that the increase of value which a cask of wine acquires, by being kept a certain number of years untouched in a cellar, is occasioned by the increased quantity of labour employed upon it; and that an oak tree of a hundred years’ growth, worth 25l., which may not have been touched by man, beast, or machine for a century, derives its whole value from labour.
Mr. Macculloch acknowledges that Mr. Ricardo was inclined to modify his grand principle, that the exchangeable value of commodities depended on the quantity of labour required for their production, so far as to allow that the additional exchangeable value that is sometimes given to commodities, by keeping them after they have been purchased or produced until they become fit to be used, was not to be considered as an effect of labour, but as an equivalent for the profits which the capital laid out on the commodities would have yielded had it been actually employed.* This was looking at the subject in the true point of view, and showing that he would not get out of the difficulty by changing the meaning of the term labour; but Mr. Macculloch says—
“I confess, however, notwithstanding the hesitation I cannot but feel in differing from so great an authority, that I see no good reason for making this exception. Suppose, to illustrate the principle, that a cask of new wine, which cost 50l., is put into a cellar, and that at the end of twelve months it is worth 55l., the question is, whether ought the 5l. of additional value given to the wine to be considered as a compensation for the time the 50l. worth of capital has been locked up, or ought it to be considered as the value of additional labour actually laid out on the wine. I think that it ought to be considered in the latter point of view, and for this, as it appears to me a most satisfactory and conclusive reason, that if we keep a commodity, as a cask of wine which has not arrived at maturity, and on which therefore a change or effect is to be produced, it will be possessed of additional value at the year’s end; whereas, had we kept a cask of wine which had already arrived at maturity, and on which no beneficial or desirable effect could be produced for a hundred or a thousand years, it would not have been worth a single additional farthing. This seems to prove incontrovertibly that the additional value acquired by the wine during the period it has been kept in the cellar is not a compensation or return for time, but for the effect or change that has been produced on it. Time cannot of itself produce any effect, it merely affords space for really efficient causes to operate; and it is therefore clear, that it can have nothing to do with the value.”*
On this passage it should be remarked, in the first place, that the question stated in it is not the main question in reference to the new meaning which Mr. Macculloch must give to the term labour, in order to make out his proposition. He acknowledges that the increased value acquired by the wine is either owing to the operation of nature during the year in improving its quality, or to the profits acquired by the capitalist for being deprived for a year from using his capital of 50l. in any other way. But in either case Mr. Macculloch’s language is quite unwarranted. When he uses the expression, “additional labour actually laid out upon the wine,” who could possibly imagine that, instead of meaning human labour, he meant the processes carried on by nature in a cask of wine during the time that it is kept. This is at once giving an entirely new meaning to the term labour.
But, further, it is most justly stated by Mr. Ricardo, that when the powers of nature can be called into action in unlimited abundance, she always works gratis; and her processes never add to the value, though they may add very greatly to the utility of the objects to which they are applied.
This truth is also fully adopted and strongly stated by Mr. Macculloch himself. “All the rude products (he says) and all the productive powers and capacities of nature are gratuitously offered to man. Nature is not niggardly or parsimonious; she neither demands nor receives an equivalent for her favours. An object which it does not require any portion of labour to appropriate or to adapt to our use may be of the very highest utility, but as it is the free gift of nature, it is utterly impossible it can be possessed of the smallest value.”* Consequently, as the processes which are carrying on in the cask of wine, while it is kept, are unquestionably the free gift of nature, and are at the service of all who want them, it is utterly impossible, even if their effects were ten times greater than they are, that they should add in the smallest degree to the price of the wine. It is, no doubt, perfectly true, as stated by Mr. Macculloch, that if wine were not improved by keeping, it would not be worth a single additional farthing after being kept a hundred or even a thousand years. But this proves nothing but that, in that case, no one would ever think of keeping wine longer than was absolutely necessary for its convenient sale or convenient consumption.
The improvement which wine derives from keeping is unquestionably the cause of its being kept; but when on this account the wine-merchant has kept his wine, the additional price which he is enabled to put upon it is regulated upon principles totally distinct from the average degree of improvement which the wine acquires. It is regulated exclusively, as stated by Mr. Ricardo, by the average profits which the capital engaged in keeping the wine would have yielded if it had been actively employed; and that this is the regulating principle of the additional price, and not the degree of improvement, is quite certain: because it would be universally allowed that if, in the case supposed by Mr. Macculloch, the ordinary rate of profits had been 20 per cent., instead of 10 per cent., a cask of new wine, worth 50l., after it had been kept a year, would have been increased in value 10l. instead of 5l., although the processes of nature and the improvement of the wine were precisely the same in the two cases; and there cannot be the least doubt, as I said before, that if the quality of wine, by a year’s keeping, were ordinarily improved in a degree ten times as great as at present, the prices of wines would not be raised; because, if they were so raised, all wine-merchants who sold kept wines would be making greater profits than other dealers.
Nothing then can be clearer than that the additional value of the kept wine is derived from the additional amount of profits of which it is composed, determined by the time for which the capital was advanced and the ordinary rate of profits.
The value of the oak tree of a hundred years’ growth is derived, in a very considerable degree, from the same cause; though, in rich and cultivated countries, where alone it could be worth 25l., rent would necessarily form a part of this value.
If the number of acorns necessary on an average to rear one good oak were planted by the hand of man, they would be planted on appropriated land; and as land is limited in quantity, the powers of vegetation in the land cannot be called into action by every one who is in possession of acorns, in the same way as the improving operations of nature may be called into action by every person who possesses a cask of wine. But setting this part of the value aside, and supposing the acorns to be planted at a certain expense, it is quite clear, that almost the whole of the remaining value would be derived from the compound interest or profits upon the advances of the labour required for the first planting of the acorns, and the subsequent protection of the young trees. A much larger part, therefore, of the final value of the tree than of the final value of the wine would be owing to profits.
Now, if we were to compare an oak tree, worth 25l., with a quantity of hardware worth the same sum, the value of which was chiefly made up of human labour; and as the reason why these two objects were of the same value, were to state that the same quantity of labour had been worked up in them—we should obviously state a direct falsity, according to the common usage of language; and nothing could make the statement true, but the magical influence of a new meaning given to the term labour. But to make labour mean profits, or fermentation, or vegetation, or rent, appears to me quite as unwarrantable as to make stones mean plums.
To measure profits by labour is totally a different thing. Adam Smith always keeps wages, profits, and rent quite distinct; and when he mentions one of them, never thinks of including in the same term any other. But he observes, that “labour measures the value not only of that part of the price of a commomodity which resolves itself into labour, but of that which resolves itself into rent, and of that which resolves itself into profit.”* This is perfectly just; and, in particular, nothing can be more natural and obvious than to measure by labour the increase of value which commodities derive from profits; because profits are a per centage upon the advances, and the main original advances in the great mass of commodities are the necessary quantity of labour.*
Thus, if a hundred days’ labour be advanced for a year, in order to produce a commodity, and the rate of profits be 10 per cent., it is impossible in any way to represent so correctly the increase of value which the commodity derives from profits as by adding 10 per cent., or whatever may be the rate of profits, to the quantity of labour actually employed, and saying, that the completed commodity when sold would be worth ten days’ labour more than the quantity of labour worked up in it. On the other hand, if we were ignorant of the rate of profits, but found that a hundred days’ labour advanced for a year would produce a commodity which would ordinarily sell for the value of one hundred and ten days, we might safely conclude that ordinary profits were 10 per cent.
Now, if we were to compare two commodities, on each of which a hundred days’ labour had been employed, and one of them could be brought to market immediately, the other in not less time than a year, it is quite obvious, that we could not say that they would exchange with each other according to the quantity of labour worked up in them; but we evidently could say, that they would exchange with each other according to the quantity of labour and of profits worked up in them, and that one of them would be 10 per cent. more valuable than the other, because profits had added the value of ten days’ labour to the labour actually employed upon the one; while there being no profits in the other, its value was only in proportion to the labour actually employed upon it.
And in general, while the slightest examination of what is passing around us must convince us that commodities, under deduction of rent and taxes, do not ordinarily exchange with each according to the quantity of human labour worked up in them, the same examination will convince us that, under the same deduction, they do ordinarily exchange with each other, according to the quantity of human labour and of profits worked up in them; and further, that the quantity of human labour worked up in them, with the profits upon the advances for the time that they have been advanced, is correctly measured by the quantity of human labour of the same kind which the commodity so composed will ordinarily command.
We must carefully, therefore, distinguish between measuring profits by labour, and meaning profits by labour; and while the first is obviously justifiable, and may be in the highest degree useful, it must be allowed, that the latter contradicts all the most obvious rules for the use of terms: it contradicts the usage of common conversation: it contradicts the highest authoritics in the science of political economy: it embarrasses all explanations; and it cannot be maintained with consistency.
Though Mr. Macculloch’s work affords other instances of a want of attention, on a point so important in all philosophical discussions, as appropriate and consistent definitions, I will only notice further, his use of the term real. He applies it to wages, in two senses entirely different.
In part iii. p. 294, he says, “But if the variation in the rate of wages be real, and not nominal, that is, if the labourer be getting either a greater or less proportion of the produce of his industry, or a greater or less quantity of money of invariable value, this will not happen.” Here, it is evident that Mr. Macculloch applies the term real to wages, in the sense of proportional wages, that is, as Mr. Ricardo applied it.
In part iii. p. 365, Mr. Macculloch says, “If the productiveness of industry were to diminish, proportional wages might rise, notwithstanding that real wages, or the absolute amount of the produce of industry falling to the share of the labourer, might be diminished. Here, the term real wages is used as synonymous with the absolute amount of produce falling to the share of the labourer, that is, in the sense in which Adam Smith has applied it.
I have already observed, that Adam Smith’s application of the term real wages, to the absolute quantity of the produce earned by the labourer, seems to be a most natural one; and Mr. Ricardo’s application of the same term to the proportion of the produce earned by the labourer, a most unnatural one. Mr. Macculloch, therefore, was quite right, in introducing the term proportionate wages, to express Mr. Ricardo’s meaning; but why not adhere to it? Why should he, in some places, mean, by real wages, proportionate wages, and, in other places, something totally different.
In the application of the term real to value, Mr. Macculloch adopts the meaning of Mr. Ricardo. He says, indeed, “that it is to Mr. Ricardo’s sagacity, in distinguishing between the quantity of labour required to produce commodities, and the quantity of labour for which they will exchange, and in showing, that while the first is undeniably correct as a measure of their real, and generally speaking, of their exchangeable values, the second, instead of being an equivalent proposition, is requently opposed to the first, and consequently, quite inaccurate, that the science is indebted for one of its greatest improvements.”*
I should be sorry to think that Mr. Ricardo’s services to the science of political economy should rest principally upon the frail foundation, on which they are here placed; a foundation, which, as we have seen, Mr. Macculloch himself cannot defend, without totally altering the meaning of Mr. Ricardo’s words.
This is evident, in various passages of Mr. Macculloch’s work. In his section on value, part ii. p. 216, he thus expresses himself: “assuming the toil and trouble of acquiring any thing to be the measure of its real value, or of the esteem in which it is held by its possessor.” Again, he says, p. 219, “the real value of a commodity, or the estimation in which it is held by its possessor, is measured or determined by the quantity of labour required to produce or obtain it.”
In these two passages, he obviously identifies the real value of a commodity with the estimation in which it is held. But, surely, in this case, the term real must be applied as Adam Smith applies it, and not as Mr. Ricardo applies it? Can it be contended for a moment, that a commodity, which, on account of the necessary remuneration for profits, sells for ten per cent. above the value of the human labour worked up in it, is not held in higher estimation, than a commodity which sells for ten per cent. less, on account of the value of the labour employed upon it not having been increased by profits? Would it not be absolutely certain, that if the latter could be obtained by the sacrifice of a hundred days’ labour, it would be necessary to make the sacrifice of a hundred and ten days’ labour, or some equivalent for it, in order to obtain the former? Consequently it follows necessarily, that if the real value of a commodity be considered as synonymous with the estimation in which it is held, such value must be measured by the quantity of labour which it will command, and not the quantity worked up in it.
Mr. Macculloch thus states Mr. Ricardo’s main proposition:* “a commodity, produced by a certain quantity of labour, will, in the state of the market now supposed, (that is, when the market is not affected by either real or artificial monopolies, and when the supply of commodities is equal to the effectual demand,) uniformly exchange for, or buy any other commodity, produced by the same quantity of labour.”
Now, if the term labour be taken in the sense in which it is used by Mr. Ricardo, the proposition is contradicted by universal experience. If, on the other hand, the term labour be considered as including profits, the proposition is true; but only because it is a totally different one from that of Mr. Ricardo, owing to a most unwarrantable perversion of terms.
It appears, then, on the whole, that although Mr. Macculloch has at different times compared Adam Smith to Newton and to Locke, he has, in the definition and application of his terms, differed from him on almost all the most important subjects of Political Economy,—in the definition of wealth, the definition of capital, the definition of productive and unproductive labour, the definition of profits, the definition of labour simply, and the definition of real value, though, in the last instance, it is rather professedly than substantially.*
However highly I may respect the authority of Adam Smith, and however inconvenient at first a great change of terms and meanings must necessarily be, yet if it could be made out that such changes would essentially facilitate the explanation and improvement of the science of political economy, I should have been the last to oppose them. But after considering them with much attention, I own I feel the strongest conviction that they are eminently the reverse of being useful, with a view to an explanation of the nature and causes of the wealth of nations; or, in more modern, though not more appropriate phrase, the production, distribution, and consumption of wealth.
I have too much respect for Mr. Macculloch to suppose that he has differed from Adam Smith on so many points with the intention of giving to his work a greater air of originality. This is, no doubt, a feeling which not unfrequently operates in favour of changes; but I do not think it did on the present occasion. I should rather suppose that he adopted them in consequence of seeing some objections to Adam Smith’s definitions, without being sufficiently aware that, in the less stric sciences, nothing is so easy as to find some objection to a definition, and nothing so difficult as to substitute an unobjectionable one in its place.
Whether the definitions substituted for those of Adam Smith on the present occasion have removed the objections to them which Mr. Macculloch may have felt, I cannot be a competent judge; but even supposing them to have done this, I think I can confidently affirm that they have left other objections, beyond all comparison greater and more embarrassing. And on this point I would beg those of my readers who are inclined to pay attention to these subjects, seriously and candidly to trace the consequences to the science of political economy, in regard to its explanation and practical application, of adopting Mr. Macculloch’s definitions. They are not, indeed, all his own; but the very extraordinary extension which he has given to the term capital, the making of no distinction between directly productive consumption and consumption that is only indirectly productive; and the extension of the term labour, without any adjunct, to mean profits, fermentation, and vegetation, belong, I believe, exclusively to Mr. Macculloch; and, I think, it will be found that they are beyond the rest strikingly calculated to introduce uncertainty and confusion into the science.
The tendency of some of our most popular writers to innovate without improving, and their marked inattention to facts, leading necessarily to differences of opinion and uncertainty of conclusion, have been the main causes which have of late thrown some discredit on the science of political economy Nor can this be a matter of much surprise though it may be of regret.
At a period, when all the merchants of our own country, and many in others, find the utmost difficulty in employing their capitals so as to obtain ordinary profits, they are repeatedly told that, according to the principles of political economy, no difficulty can ever be found in employing capital, if it be laid out in the production of the proper articles; and that any distress which they may have suffered is exclusively owing to a wrong application of their capital, such as “the production of cottons, which were not wanted, instead of broad cloths, which were wanted.”* They are, further, gravely assured, that if they find any difficulty in exchanging what they have produced, for what they wish to obtain for it, “they have an obvious resource at hand; they can abandon the production of the commodities which they do not want, and apply themselves directly to the production of those that they do want, or of substitutes for them;”† and this consolatory recommendation is perhaps addressed to a merchant who is desirous of obtaining, by the employment of his capital at the ordinary rate of profits, such an income as will enable him to get a governess for his daughters, and to send his boys to school and college.
At such times, assertions like these, and the proposal of such a remedy, appear to me little different from an assertion, on supposed philosophical principles, that it cannot rain, when crowds of people are getting wet through, and the proposal to go without clothes in order to prevent the inconvenience arising from a wet coat. If assertions so contrary to the most glaring facts, and remedies so preposterously ridiculous, in a civilized country,* are said to be dictated by the principles of political economy, it cannot be matter of wonder that many have little faith in them. And till the theories of popular writers on political economy cease to be in direct opposition to general experience; and till some steadiness is given to the science by a greater degree of care among its professors, not to alter without improving,—it cannot be expected that it should attain that general influence in society which (its principles being just) would be of the highest practical utility.
[* ] Principles of Political Economy, part i. p. 5.
[* ] These remarks were principally directed against Lord Lauderdale’s definition of wealth—all that man desires as useful and delightful to him; but they apply with nearly equal force to Mr. Macculloch’s present definition, which is limited to those objects which possess exchangeable value. According to Mr. Macculloch’s own statement, health is purchased from the physician, and the gratification derived from acting from the actor; and it must be allowed that it is impossible to enjoy the benefits of civil and religious liberty without paying those who administer a good government. It has been said by Mr. Hallam, with some truth, that the liberties of England were chiefly obtained by successive pur chases from the crown.
[* ] Principles of Polit. Econ., part iv. p. 406.
[* ] Principles of Polit. Econ., part iv. p. 410.
[* ] Principles of Polit. Econ., part ii. p. 71. This language has absolutely no meaning, if all labour be equally productive in regard to national wealth.
[* ] Mr. Macculloch dwells very much upon the extreme importance of accumulation to the increase of national wealth. But how are the gratifications afforded by menial servants to be accumulated?
[* ] Principles of Polit. Econ., part ii. p. 92.
[* ] Principles of Polit. Econ., part ii. p. 114.
[* ] This is very justly stated in Mr. Mill’s “Elements of Political Economy,” ch. iv. sec. i. p. 219, 2d edit.: both Mr. Ricardo and Mr. Mill, indeed, fully allow the distinction between productive and unproductive labour. M. Say, though he calls the labour of the menial servant productive, makes a distinction between the labour which is productive of material products and the labour which is productive of immaterial products. Of the latter products he says, “En favorisant leur multiplication, on ne fait rien pour la richesse, on ne fait que pour la consommation.”—Table Analytique, liv. i. ch. 13. This is a most characteristic difference; and though I prefer the classification of Adam Smith, as more simple, I should allow that, on these principles, the causes of the wealth of nations may be clearly explained. But I own myself utterly at a loss to conceive how they can be explained, if all labour be considered as equally productive.
[* ] Elem. of Polit. Econ. part ii. p. 93.
[* ] Princip. of Polit. Econ., part iv. p. 409.
[* ] Princip. of Polit. Econ., part iv. p. 411.
[* ] Principles of Polit. Econ., part iii., pp. 313, 317.
[* ] Principles of Polit. Econ., part iii. p. 313.
[* ] Principles of Polit. Econ., part iii. p. 313.
[* ] Principles of Polit. Econ., part ii. p. 69.
[* ] Wealth of Nations, b. i. c. vi.
[* ] It must always be recollected, that the advance of a certain number of days’ labour necessarily involves the wages paid for them, however these wages may vary in quantity. But the essential advance is the quantity of labour, not the quantity of money or corn.
[* ] Principles of Polit. Econ., part iii. p. 223. This is a most remarkable passage to come from Mr. Macculloch, who, though he agrees with Mr. Ricardo in words, has, in reality, deserted him, and agrees in substance with Adam Smith. According to the new meaning, which Mr. Macculloch has given to the term profits—the quantity of labour required to produce a commodity, is precisely equal to the quantity of labour for which it will ordinarily exchange, and certainly not equal to what Mr. Ricardo meant by the quantity of labour bestowed upon it.
[* ] Principles of Polit. Econ., part iii. s. 1. p. 221.
[* ] A person who uses a term in a particular sense practically defines it in that sense. Mr. Macculloch sometimes makes what have hitherto always been considered as profits mean labour; and sometimes makes labour, when used simply without any adjunct, mean fermentation, vegetation, or profits.
[* ] Macculloch’s Principles of Polit. Econ., part ii. p. 189.
[† ] Id. p. 190.
[* ] I own I want words to express the astonishment I feel at the proposal of such a remedy. A man, under the intoxication of what he conceives to be a new and important discovery, may be excused for occasionally making a rash statement; but that a proposal directly involving the discontinuance of the division of labour should, in a civilized country, be repeated over and over again by succeeding writers, and considered as an obvious resource in a sudden fall of profits, absolutely passes my comprehension. What a strange and most inapt illustration too, is it to talk about the possessors of broad cloths wanting to change them for silks! Who ever heard of a great producer of any commodity wishing to obtain an equivalent for it in some one other sort of completed commodity? If he is to produce what he wants, it must not be silks, but raw materials, tools, corn, meat, coats, hats, shoes and stockings, &c. &c.; and this is the obvious resource which is at hand in a glut!!!