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18.: MALTHUS’S MEASURE OF VALUE MORNING CHRONICLE, 5 SEPT., 1823, P. 2 - John Stuart Mill, The Collected Works of John Stuart Mill, Volume XXII - Newspaper Writings December 1822 - July 1831 Part I 
The Collected Works of John Stuart Mill, Volume XXII - Newspaper Writings December 1822 - July 1831 Part I, ed. Ann P. Robson and John M. Robson, Introduction by Ann P. Robson and John M. Robson (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1986).
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MALTHUS’S MEASURE OF VALUE
Thomas Robert Malthus (1766-1834) was a political economist whose views, especially on population, were often discussed by Mill. This lengthy review is headed “The Measure of Value Stated and Illustrated, with an Application of It to the Alterations in the Value of the English Currency since 1790, by the Rev. T.R. Malthus, M.A. F.R.S. [London:] Murray, 1823.” It is described in Mill’s bibliography as “A review of Mr. Malthus’s pamphlet on the ‘Measure of Value’ which appeared in the Chronicle of 5th September 1823”
(MacMinn, p. 3).
when two commodities vary in their relative value, it is often necessary to obtain information of two things. First, the extent of the variation—this may easily be determined, without calling in the assistance of a third commodity. So far, therefore, there is no need of a measure. But it may also be desirable to know whether the cause of the variation is in the one article or in the other, or if in both, to what degree it is in each. And here it is, that a Measure of Value is chiefly useful.
If a commodity can be found exempt from the influence of all causes of variation, such a commodity may safely be taken as a measure. If any article varies in value with respect to it, we shall know that the cause of variation cannot be in the measure, and must, therefore, be wholly in the other commodity.
The received opinion, however, is, that no such commodity is to be found, every article being subject, not only to temporary, but also to permanent causes of variation.
Mr. Malthus is of a different opinion; we shall proceed to give an outline of his argument.
Commodities, he says, will not be produced, unless their value is sufficient to pay the wages, profits, and rents, necessary to their production. Rent, however, is paid only for a certain class of commodities, and of these, the value is regulated by that part of the produce which is almost exclusively resolvable into wages and profits, and pays very little rent.
The natural value, therefore, of commodities, is composed of labour and profits.
If labour were the only requisite to production, and if the interval between the exertion of the labour and its remuneration in the completed commodity were inconsiderable, commodities would, on an average, exchange with each other according to the quantity of labour employed in producing them. [Pp. 3-6.]
But two circumstances, he says, render this rule inaccurate, in all cases different from that which we just supposed.
1. A considerable interval must elapse between the exertion of some sorts of labour, and the completion of the article on which they are employed. If A and B are two commodities produced by equal labour, but requiring different intervals of time; the values of the two commodities must be different in order to yield the same rate of profits.
2. Capital being accumulated labour, it follows that when fixed capital comes to be employed, the immediate labour expended on a commodity, together with the wear and tear which the fixed capital has undergone in its production, may be considered as the amount of labour expended on the commodity. Suppose this amount to be the same for two articles, yet as the profits must be charged upon the whole capital, whether all consumed in the production or not, it follows, that if the amount of fixed capital is unequal for the two commodities, the values must also be different, as there are unequal amounts of profit to pay. [Pp. 8-12.]
Having for these reasons set aside the doctrine, that the values of commodities depend upon the quantities of labour expended in producing them, Mr. Malthus proceeds to state what he considers as the correct expression. Value, he says, depends upon labour and profits. [P. 14.] Two commodities exchange for one another, although the one is produced by less labour than the other, provided the deficiency of labour is compensated by the greater amount of profits.
If this be true, it follows that whatever is capable of measuring labour and profits, is fitted to be an accurate measure of value. Such a measure Mr. Malthus thinks he has found in the quantity of labour which a commodity will purchase in the market. This, he says, is equal to the quantity of labour expended in its production, together with the ordinary profits. This, therefore, is an accurate measure of value. [Pp. 15-16.]
Such is the outline of Mr. Malthus’s argument. The remainder of his work consists of illustrations and applications.
For duly appreciating the merits of this doctrine, it is necessary to have clear conceptions with regard to the nature of profits. Under ordinary circumstances, the labourer and the capitalist being the only persons whose services are requisite for the production of commodities, they alone can have any claim upon the commodities when produced. The joint produce of labour and capital is therefore divided between the labourer and the capitalist, between wages and profits. The whole, indeed, of the produce usually appears to belong to the capitalist; but this is only because he has purchased the labourer’s share. Whatever is paid to the labourer, to obtain his co-operation in the work of production, is to be considered as the labourer’s share of the produce, paid however in advance. What remains is the share of the capitalist, usually called his profits.
After this preliminary explanation we must readily assent to the first position of Mr. Malthus, that value is composed of labour and profits, since, if we may trust his own explanation, he only means that the produce, or what amounts to the same thing, its value, composes wages and profits; in other words, that it is divided between the labourer and the capitalist. Thus understood, the position is self-evident, and has never been disputed by any political economist.
We cannot so readily admit the second position, that value depends upon labour and profits. The opinion now generally received among political economists is that value depends upon the quantity of labour expended in production. To this expression Mr. Malthus objects, because it does not include a particular fact, namely, the difference of values, which is occasioned by difference in the quickness of the returns, or in the proportion of fixed capital.
The fact itself is indisputable; nor is it less certain, that the expression does not include it. But it may be annexed as a modification; and such must be its fate, unless some expression shall be devised, which shall include this and all other facts, without being liable to any other objection.
Tried by this test, Mr. Malthus’s expression appears to us objectionable. It expresses much more than is intended.
When we say that value depends upon labour, we mean, that according as the quantity of labour expended in producing a commodity is increased or diminished, ceteris paribus, its value rises or falls. In like manner, if we say that value depends, wholly or partially, upon profits, it is implied, that when profits rise values shall rise; when profits fall, values shall fall. But if profits rise or fall, the variation must be, not in some particular profits, but in all profits. This is universally acknowledged. Mr. Malthus’s expression therefore implies, that a rise or fall of profits raises or lowers all values; which is impossible: for values are relative, and the rise of some values imports the fall of others.
Having thus shewn what Mr. M.’s expression really means, let us consider what he intends it to mean; and let us remember that the sole basis of his doctrine is a case of difference in values, arising from a difference in profits. What is meant to be expressed therefore is, that not absolute profits, but differences of profits, and these not in the rate, but in the total amount of profits, as compared with the immediate expenditure, have some influence on values. This is all which Mr. Malthus’s fact can be made to prove; but this is no more than the fact itself, and by no method of reasoning can the fact be made to prove any thing more than itself. It is, therefore, totally inadequate to form the basis of a new theory of value, and can only be admitted as a modification of the old one. But, as a modification, it has been universally received among political economists, and is much more fully stated by Mr. Ricardo, the principal supporter of the old theory, than by Mr. Malthus or any other opponent of that theory.1
For these reasons, Mr. M.’s second position appears to us unsupported by sufficient proof. Other considerations, of equal strength, also present themselves in opposition to it. To say that value depends upon profits, seeing that profits are the capitalist’s share of the produce, is to say that the value of the whole produce depends upon the proportion in which it is divided between the labourer and the capitalist. This doctrine would appear scarcely to merit a serious refutation.
The doctrine concerning a measure of value, which Mr. Malthus builds upon premises so unsound, it may appear unnecessary, after what has been said, formally to refute. We cannot, however, refrain from offering a few remarks on this part also of Mr. M.’s doctrine.
The measure of value, as proposed by Mr. Malthus, is the quantity of labour which an article commands in the market; because, says he, this includes the labour expended in production, together with ordinary profits.
Mr. M. has indeed shewn, which is not difficult, that labour possesses this property, but he has not shewn that it is peculiar to labour. It would appear, that not labour merely, but cloth, and all other commodities, are on a par in this respect. If the quantity of labour which a commodity will purchase, includes the labour expended in production, together with profits, the quantity of cloth which it will purchase does the like, for, by the very supposition, it is of the same value.
Mr. M. has anticipated this objection, and has provided the following answer:
If the advances of capitalists consisted specifically in cloth, then these advances would always have the effect required in production; and as profits are calculated upon the advances necessary to production, whatever they may be, the quantity of cloth advanced, with the addition of the ordinary profits, estimated also in quantity of cloth, would represent both the natural and relative value of the commodity. But the specific advances of capitalists do not consist of cloth but of labour.
In point of fact, however, the advances of capitalists do not consist of labour—they consist of wages; that is, of the food, clothing, and lodging of the labourer, and if capital is called accumulated labour, this only means, that it is the accumulated produce of labour. Any of the necessaries of life must, therefore, if this argument be correct, be equally fitted with labour to be a measure of value.
It is, however, really immaterial whether the advances are in one commodity or in another. Whatever be the nature of the returns—be they in Corn, in Cloth, or in any other commodity, they must always be such as to repay the expences of production, together with the ordinary profits of stock; or, to use Mr. M.’s expression, they must include labour and profits. Labour, therefore, in this respect, possesses no advantage over any other commodity.
If, indeed, Mr. M. could prove that no causes of variation can operate upon labour, his position would be established without farther trouble. But this, we apprehend, is impossible. There are two causes which operate upon the value of labour; first, a variation in the relative amount of population and capital; this tends to alter the real reward of the labourer; and 2dly, a variation in the cost of producing the articles consumed by the labourer; this tends to change its value. So long as labour shall be subject to the influence of these causes, so long will it be liable to variations, and therefore equally unfit with almost any commodity to be an accurate measure of value.
Mr. M. admits that the labourer receives, at different times, very different quantities of produce; but this variable amount of produce, he affirms to be constant in value; an assertion, at least in appearance, contradictory to all our experience. In support of this allegation, he argues as follows. The reward of the labourer has been itself produced by labour, and its value, therefore, is resolvable into labour and profits. But if the quantity of labour employed in producing it be increased, profits must fall; if it be diminished, profits must rise, and so as to leave the sum absolutely constant. The value of wages, therefore, is constant. [Pp. 26-8.]
The remark which obviously suggests itself is that, like some of the former arguments, so also this, if it proves any thing, proves too much. There is no reason here given why labour, rather than any other commodity, should be the measure. If it be true of the produce, which is the labourer’s reward, that its value is composed of labour and profits, it must, we apprehend, be equally true of all other commodities. It may with equal justice be argued, that any amount, constant or variable, of corn, of cloth, or of iron, is always of the same value.
For if the quantity of labour employed in producing it be increased, so that a greater share of the completed commodity must go to wages, there obviously remains a smaller share for profits. Does this prove that the value of the commodity is constant? Certainly not: for value does not depend upon the proportion in which the produce is divided between the labourer and the capitalist; it depends upon the demand and supply of the market, regulated and limited by cost of production.
The whole chain of reasoning depends upon this position, that the value of the labourer’s reward resolves itself into labour and profits. Wages, we have seen to be, that share of the produce which is allotted to the labourer, purchased, however, beforehand by the capitalist. What, therefore, is true of the labourer’s share, when purchased by the capitalist, would also be true of it, if the commodity were actually divided between them. Let us make this supposition. The value of the labourer’s share cannot then be said to be made up of labour and profits, since profits do not enter into it, being wholly on the side of the capitalist. Suppose now the labour necessary for producing the commodity to increase, the value of the labourer’s share can no longer remain constant, since the increase of labour cannot be balanced by a fall of profits. But if the labourer’s share is not constant in value, when he waits to receive it until the production is completed; neither can it be constant, when he receives it beforehand in the shape of wages.
Mr. Malthus, however, subjoins a numerical table, by which he thinks he has proved the value of wages to be constant. This table he prefaces by the following obscure paragraph:
If, instead of referring to commodities generally, we refer to the variable quantity of produce which under different circumstances forms the wages of a given number of labourers, we shall find that the variable quantity of labour required to obtain this produce, will always exactly agree with the proportion of the whole produce which goes to labour; because, however variable may be the amount of this produce, it will be divided into a number of parts equal to the number of labourers which it will command; and as the first set of labourers who produced these wages may be considered as having been paid at the same rate as the second set, whose labour the produce commands, it is obvious that if to obtain the produce which commands ten labourers, 6, 7, 8, or 9 labourers be required, the proportion of the produce which goes to labour, in these different cases, will be 6/10, 7/10, 8/10, or 9/10, leaving 4/10, 3/10, 2/10, or 1/10 for profits.
As far as the above paragraph has any meaning, it appears to be this:—If the labour of six men is required to produce the wages of ten, what remains for profits must be equal to the wages of four: if the labour of seven men is required to produce the wages of ten, profits will be equal to the wages of three; and so on. But this, one would imagine, scarcely needs a long paragraph, and a table which fills a whole page to prove it. Let us see, however, the inference which he builds upon it. If the labour required to obtain the produce be increased, then, says he, profits will fall, so as to leave the value of the whole produce constant. Why is it constant? Because, if wages are 6/10ths, profits are 4/10ths: if wages are 7/10ths, profits are 3/10ths; if wages are 8/10ths, profits are 2/10ths; and so on. Now the sum of 6/10ths and 4/10ths, the sum of 7/10ths and 3/10ths, and the sum of 8/10ths and 2/10ths, are all equal. Equal to what? to 10/10ths. The value, therefore, of the produce is constant, because it is always equal to 10/10ths of the produce, that is, to itself!
The same identical proposition, and nothing more, results from Mr. Malthus’s redoubtable table, from which we extract part of several of the columns. [P. 38.]
From these elaborate computations he proves that the wages of ten men are in value always equal to ten. To ten quarters of corn, or ten suits of clothing? No.—To ten of what? This we shall see. The number 8 in the second column represents a certain quantity of labour, the labour, namely, of eight men; the number 2 in the next column represents the labour of two men; the number 10, therefore, which is obtained by adding the 8 and the 2, represents the labour of ten men; and Mr. Malthus informs us that the wages of ten men are invariable in value, because they are always equal in value to the labour of ten men! In other words, the wages of a day’s labour are always of the same value, because they are the wages of a day’s labour!
It is therefore evident that the whole of Mr. Malthus’s argument is a begging of the question. His object is to prove that labour is an accurate measure of value, because the value of wages is invariable. But in order to prove this, he covertly assumes labour as the standard; and then, of course, he can easily prove that the wages of ten men, as compared with labour, are always of the same value, because they can always purchase the labour of ten men. But although wages are invariable in value with respect to labour, they are not invariable with respect to commodities in general.
If Mr. Malthus had stated his premises and his conclusion, in the simple form in which we have now stated them, no one could have been misled by so palpable a petitio principii.—But many who can see through a fallacy, in a concise and clear piece of argument, are not able to resist a long succession of obscure paragraphs, and a numerical table of no less than nine columns.
To us, therefore, Mr. M. appears to have entirely failed in proving that labour, as a measure of value, is preferable to any other commodity.
The principle itself being erroneous, we shall give no more than a hasty view of the applications.
“1. On the subject of rents,” says he, “such a standard would determine, among other things, that as the increase in the value of corn is only measured by a decrease in the corn wages of labour, such increase of value is a very inconsiderable source of the increase of rents compared with improvements in agriculture.” (P. 54.) It is difficult to trace the connexion between the premises and the conclusion of this argument. However, the whole must fall to the ground, as the premises themselves are erroneous. There may be an increase in the value of corn, without any decrease in corn wages. When corn rises permanently in exchangeable value, the wages of labour almost uniformly rise along with it. The rise of wages is indeed less than that of corn, but it bears a very considerable proportion to it. The most important practical errors must therefore be the consequence of estimating the rise in corn by a comparison with labour, a commodity which always rises along with it.
“2. If tithes do not fall mainly on the labourer, the acknowledged diminution in the corn rents of the landlord, occasioned by tithes, cannot be balanced by an increase of their value, and consequently tithes must fall mainly on the landlord.” (Pp. 54-5.)—Another most important practical mistake. Corn rents, indeed, are diminished by tithes. But if the exchangeable value of corn is raised, the landlord is indemnified. And although corn may not rise as compared with labour—and therefore, by Mr. Malthus, may be said not to have risen at all—there can be no doubt that, with reference to commodities in general, it has risen, and the landlord, consequently, is indemnified.
The next paragraph we transcribe, as a specimen of the obscure and disjointed mode of reasoning which Mr. Malthus has adopted.
As one consequence of his doctrine concerning the measure of value, he states,
that the increasing value of the funds destined for the maintenance of labour can alone occasion an increase in the demand for it, or the will and power to employ a greater number of labourers; and that it is consistent with theory, as well as general experience, that high corn wages, in proportion to the work done, should frequently occur with a very slack demand for labour; or, in other words, that when the value of the whole produce falls from excess of supply compared with the demand, it cannot have the power of setting the same number of labourers to work.
This is Mr. M.’s favourite doctrine of over-production.2 A more mischievous doctrine, we think, has scarcely ever been broached in political economy: since, if we are liable to have too large a produce, a Government must be highly praiseworthy, which in its loving kindness steps forward to relieve us of one part of this insupportable burden. On other occasions, Mr. M. has adduced, in proof of this doctrine, arguments which have at least the merit of being intelligible. That, however, which is couched in the above paragraph, would require the exercise of no small sagacity in its interpretation, were not this task happily rendered unnecessary by the utter unmeaningness of the phrase upon which the whole argument, such as it is, appears to turn. “The value of the whole produce falls.” What does this mean? The exchangeable value? No: for the whole produce can have no exchangeable value, as it is never, at least collectively, exchanged. Any other kind of value? But with no other kind have we any thing to do. By value, we uniformly mean exchangeable value. This is the only legitimate use of the term.
There is another paragraph in proof of the same position.
If the increase of capital be measured by the increase of its materials, such as corn, clothing, &c. then it is obvious that the supply of these materials may, by saving, increase so rapidly, compared with labour and the wants of the effective demanders, that with a greater quantity of materials, the capitalist will neither have the power nor the will to set in motion the same quantity of labour, and that consequently the progress of wealth will be checked, but that if the increase of capital be measured as it ought to be, by the increase of its power to command labour, then accumulation so limited, cannot possibly go on too fast.
The above assertion, for there is no attempt at argument, may easily be disproved; but this is not the place for it. The difficulty is, to see why Mr. M. should have given this as a consequence of his doctrine concerning the measure of value, between which and this paragraph we can see no sort of connexion. If, however, it be such a consequence, it must fall with the doctrine which supports it.
Soon after, he continues, “If commodities and the materials of capital increase faster than the effectual demand for them [faster than labour, we presume, he means], profits fall prematurely, and capitalists are ruined, without a proportionate benefit to the labouring classes, because an increasing demand for labour cannot go on under such circumstances.” (P. 59.) Again, we ask, what has this to do with the measure of value? As, however, it can be refuted in few words, we will not grudge the necessary space.
Why do profits fall prematurely? Because, from the increase of capital faster than labour, wages rise. There is no other cause which can lower profits. And yet, in the same breath, Mr. M. tells us, that there is no proportionate benefit to the labouring classes!
If this case were to happen, the only consequence would be, that accumulation would cease to go on at this enormous rate, and would be continued only at the same rate with the increase of population. If Mr. M. confines to this case his doctrine of over-production, we may make the concession with perfect safety.
On the subject of foreign trade, it [the doctrine of the measure] would shew that its universally acknowledged effect in giving a stimulus to production, generally, is mainly owing to its increasing the value of the produce of a country’s labour, by the extension of demand, before the value of its labour is increased by the increase of its quantity; and that the effect of every extension of demand, whether foreign or domestic, is always, as far as it goes, to increase the average rate of profits till this increase is counteracted by a further accumulation of capital.
Many and important are the errors contained in this short paragraph. But it would be loss of time to point them out, as all the proof which Mr. M. has given falls to the ground with his doctrine of the measure. All which he himself asserts is, that if that doctrine is true, these applications are also true.
In another paragraph, Mr. M. says, that value does not depend upon cost of production, because value is proportioned, not to the advances merely, but to the advances, together with variable profits. That allowance is to be made for all cases of difference in the amount of profits, as compared with immediate expenditure, is allowed on all hands; but the necessity of this modification does not authorize our rejecting the general expression, unless Mr. Malthus can point out a better one, which he has not even attempted to do, but has contented himself with saying that, “we must have recourse to demand and supply.” [P. 58.] But this is to stop short at the surface of the science. What regulates supply? Surely it is the cost of production, and if we cannot find an accurate expression in one word, or in two, we are not for that reason to content ourselves with a superficial view of the subject.
There are two or three other paragraphs of too little importance to require a refutation. The last and most elaborate of Mr. M.’s applications relates to the variations in the currency. He dissents from those who think that paper was depreciated no more than to the extent of the difference between its value and that of bullion; because, he says, when compared with labour, it had fallen to a greater extent. [P. 67.] Those, therefore, who think that Mr. Malthus has failed in proving that the value of labour is constant, will not be prevented, by any thing which is here stated (though here too there are tables [p. 75]) from attributing to labour, and not to the currency, the whole of the depreciation with respect to labour, over and above the difference between the market and mint prices of gold.
[1 ]David Ricardo, On the Principles of Political Economy and Taxation, Chap. i, “On Value,” passim.
[2 ]See, e.g., Malthus, An Inquiry into the Nature and Progress of Rent (London: Murray, and Johnson, 1815), pp. 8-17, and Principles of Political Economy (London: Murray, 1820), pp. 63-72.