Front Page Titles (by Subject) The Origin of Value. - The Theory of Political Economy
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The Origin of Value. - William Stanley Jevons, The Theory of Political Economy 
The Theory of Political Economy (London: Macmillan, 1888) 3rd ed.
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The Origin of Value.
The preceding pages contain, if I am not mistaken, an explanation of the nature of value which will, for the most part, harmonise with previous views upon the subject. Ricardo has stated, like most other economists, that utility is absolutely essential to value; but that "possessing utility, commodities derive their exchangeable value from two sources: from their scarcity, and from the quantity of labour required to obtain them."1 Senior, again, has admirably defined wealth, or objects possessing value, as "those things, and those things only, which are transferable, are limited in supply, and are directly or indirectly productive of pleasure or preventive of pain." Speaking only of things which are transferable, or capable of being passed from hand to hand, we find that two of the clearest definitions of value recognise utility and scarcity as the essential qualities. But the moment that we distinguish between the total utility of a mass of commodity and the degree of utility of different portions, we may say that it is scarcity which prevents the fall in the final degree of utility. Bread has the almost infinite utility of maintaining life, and when it becomes a question of life or death, a small quantity of food exceeds in value all other things. But when we enjoy our ordinary supplies of food, a loaf of bread has little value, because the utility of an additional loaf is small, our appetites being satiated by our customary meals.
I have pointed out the excessive ambiguity of the word Value, and the apparent impossibility of using it safely. When intended to express the mere fact of certain articles exchanging in a particular ratio, I have proposed to substitute the unequivocal expression—ratio of exchange. But I am inclined to believe that a ratio is not the meaning which most persons attach to the word Value. There is a certain sense of esteem or desirableness, which we may have with regard to a thing apart from any distinct consciousness of the ratio in which it would exchange for other things. I may suggest that this distinct feeling of value is probably identical with the final degree of utility. While Adam Smith's often-quoted value in use is the total utility of a commodity to us, the value in exchange is defined by the terminal utility, the remaining desire which we or others have for possessing more.
There remains the question of labour as an element of value. Economists have not been wanting who put forward labour as the cause of value, asserting that all objects derive their value from the fact that labour has been expended on them; and it is thus implied, if not stated, that value will be proportional to labour. This is a doctrine which cannot stand for a moment, being directly opposed to facts. Ricardo disposes of such an opinion when he says:1 "There are some commodities, the value of which is determined by their scarcity alone. No labour can increase the quantity of such goods, and therefore their value cannot be lowered by an increased supply. Some rare statues and pictures, scarce books and coins, wines of a peculiar quality, which can be made only from grapes grown on a particular soil, of which there is a very limited quantity, are all of this description. Their value is wholly independent of the quantity of labour originally necessary to produce them, and varies with the varying wealth and inclinations of those who are desirous to possess them."
The mere fact that there are many things, such as rare ancient books, coins, antiquities, etc., which have high values, and which are absolutely incapable of production now, disperses the notion that value depends on labour. Even those things which are producible in any quantity by labour seldom exchange exactly at the corresponding values.1 The market price of corn, cotton, iron, and most other things is, in the prevalent theories of value, allowed to fluctuate above or below its natural or cost value. There may, again, be any discrepancy between the quantity of labour spent upon an object and the value ultimately attaching to it. A great undertaking like the Great Western Railway, or the Thames Tunnel, may embody a vast amount of labour, but its value depends entirely upon the number of persons who find it useful. If no use could be found for the Great Eastern steamship, its value would be nil, except for the utility of some of its materials. On the other hand, a successful undertaking, which happens to possess great utility, may have a value, for a time at least, far exceeding what has been spent upon it, as in the case of the Atlantic cable. The fact is, that labour once spent has no influence on the future value of any article: it is gone and lost for ever. In commerce bygones are for ever bygones; and we are always starting clear at each moment, judging the values of things with a view to future utility. Industry is essentially prospective, not retrospective; and seldom does the result of any undertaking exactly coincide with the first intentions of its promoters.
But though labour is never the cause of value, it is in a large proportion of cases the determining circumstance, and in the following way:—Value depends solely on the final degree of utility. How can we vary this degree of utility?—By having more or less of the commodity to consume. And how shall we get more or less of it?—By spending more or less labour in obtaining a supply. According to this view, then, there are two steps between labour and value. Labour affects supply, and supply affects the degree of utility, which governs value, or the ratio of exchange. In order that there may be no possible mistake about this all-important series of relations. I will re-state it in a tabular form, as follows:—
Cost of production determines supply.
Supply determines final degree of utility.
Final degree of utility determines value.
But it is easy to go too far in considering labour as the regulator of value; it is equally to be remembered that labour is itself of unequal value. Ricardo, by a violent assumption, founded his theory of value on quantities of labour considered as one uniform thing. He was aware that labour differs infinitely in quality and efficiency, so that each kind is more or less scarce, and is consequently paid at a higher or lower rate of wages. He regarded these differences as disturbing circumstances which would have to be allowed for; but his theory rests on the assumed equality of labour. This theory rests on a wholly different ground. I hold labour to be essentially variable, so that its value must be determined by the value of the produce, not the value of the produce by that of the labour. I hold it to be impossible to compare à priori the productive powers of a navvy, a carpenter, an iron-puddler, a schoolmaster, and a barrister. Accordingly, it will be found that not one of my equations represents a comparison between one man's labour and another's. The equation, if there is one at all, is between the same person in two or more different occupations. The subject is one in which complicated action and reaction takes place, and which we must defer until after we have described, in the next chapter, the Theory of Labour.
THEORY OF LABOUR
[]Principles of Political Economy and Taxation, 3d ed., p. 2.
[]On the Principles of Political Economy and Taxation, 3d ed., 1821, p. 2.
[]Mr. W. L. Sargant, in his Recent Political Economy, 8vo, London, 1867, p. 99, states that contracts have been made to manufacture the Enfield Rifle, of identically the same pattern, at prices ranging from 70s. each down to 20s., or even lower. The wages of the workmen varied from 40s. or 50s. down to 15s. a week. Such an instance renders it obvious that it is scarcity which governs value, and that it is the value of the produce which determines the wages of the producers.