necessary to keep this in view in using, as it will often be convenient to do the word price for the word value.

Now, if we double or treble all the quantities in the first line, or halve or quarter them, we cause no change of value-we have still the same series of equations, though it is expressed in proportionally higher or lower co-efficients of the quantities: the relative or proportional value of each item in the series to every other item remains quite unaltered. It is evident, therefore, that there can never be a general increase or a general decrease of all values. A rise in the value of one article must infer a fall in relation to that article in the value of some other article or articles.

This will be further illustrated by the second line of the table at date 2, in which, as compared with line 1, the value of all the equivalents in relation to one another, remains the same, except that of money. A quarter of wheat is still exchangeable for 100 lbs. of cotton, or for one coat, or for three hats, &c., &c., or for 10 x; but each of these items, though still equal to any other, is now equal to 60s. in money, instead of to 50s., as at the first date. The price or money value of each of the items has risen 10s. At date 2 money will buy one-sixth less of each of the other articles in the table, and each of the other articles will fetch onefifth more money than at date 1. The value of the articles in relation to money has risen; the value of money in relation to the articles has fallen. There can, in fact, be no rise in value of anything without a corresponding full in something else, and there can be no fall in value of one thing without a corresponding rise in something else.

At dates 3 and 4 there are variations in the equivalent values of the various articles as well as of money. For example: whereas at date 1, 100 lbs. of cotton are of equal value with 50s., at date 3, 75 lbs. of cotton are of equal value with 50s., which is the same thing as saying that 100 lbs. of cotton are worth £66. 13s. 4d.

In line 3, the value of cotton in money, in wheat, in coats, in hats, in gloves, and in x, is increased, less cotton sufficing to buy the same, or a greater quantity of money, wheat, coats, hats, gloves, and x; but the value of cotton in relation to labour is diminished, for as 75 lbs. cotton = two weeks' labour; 37 lbs. cotton = one week's labour; 112 lbs. cotton = three weeks' labour; it requires more cotton to buy the same quantity of labour as before; or as 75 lbs. cotton two weeks' labour; 1 lb. cotton = week's labour; 100 lbs. cotton = 200 week's labour: 100 lbs. cotton = 2 weeks' labour; the same quantity of cotton buys less labour than before.

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=

In line 4, as compared with line 1, the value of wheat all round is increased. A quarter of wheat brings more money, more hats, more coats, more labour, more gloves, more x, than in line 1.

As regards cotton, its money value, its coat value, its glove

value, its x value, remain unaltered as compared with date 1, its hat value is increased, its labour value and its wheat value are diminished.

Thus, the value of any commodity may rise in relation to some commodity or commodities at the same time that it falls in relation to some other commodity or commodities.

Mr. J. S. Mill has, as we have seen, defined exchange value as general purchasing power, and the definition has been currently adopted; but its adoption should be accompanied by this caveatthat the term "general purchasing power" does not really convey any very definite idea. There is, in fact, no such thing as general value. Every case of value is a particular relation of one commodity or economic quantity to another. Our table shows, at given dates, the wheat, cotton, coat, hat, labour, glove, and x value of money; and the value of each of these articles in terms successively of each of the other articles in the series, but it does not, and it cannot, show the general value of any of the items. You cannot possibly average the quantities of dissimilar articles, such as cotton, gloves, hats, coats, labour, x, and money, which a quarter of wheat may exchange for.

There is, in fact, no permanent or invariable standard of value, and the very nature of value as a relation is such that it can have no standard.

Money is certainly a common measure of value at the time and place of exchange; but vary the time or the place, or both, and price is no longer the measure of general value.

Money fluctuates in value. It is generally based on gold, or on silver. These metals fluctuate in value. We know that silver has diminished in value within the last few years. Professor Jevons has calculated that between 1789 and 1809 the value of gold fell in the ratio of 100 to 54; and that from 1809 to 1849 it rose again in the extraordinary ratio of 100 to 245, or by 145 per cent. It fell again when the increased supplies from Australia, and California, were poured into the markets of Europe.

Labour has been proposed by Adam Smith* and others as a standard of value; but we all know that not only is labour of various kinds most variously remunerated at the same time and place, but likewise that at the very same date labour of the same

"Labour, it appears evidently, is the only universal as well as the only accurate measure of value, or the only standard by which we can compare the values of different commodities, at all times and at all places. We cannot estimate, it is allowed, the real value of different commodities from century to century by the quantities of silver which were given for them. We cannot estimate it from year to year by the quantities of corn. By the quantities of labour we can, with the greatest accuracy, estimate it both from century to century and from year to year."-Wealth of Nations, Book I., ch. v.

kind is very variously remunerated at various places. Take, for example, the day's labour of a coolie in India and of a navvy in England. The wages of each are no doubt as much as he can get, and they are probably at least sufficient to furnish him with the bare necessities of existence; but the necessities of existence in India, food, drink, raiment, and housing, are very meagre compared with those necessities as they are commonly regarded in this country. We might as well build a house on shifting sand, as take labour or its wages as a standard for the comparison of values at distant times or distant places.

Wheat has been suggested by some theorists as a measure of comparative values at distant times, on the grounds (1) that a certain quantity of it is necessary to human existence, and (2) that it never can be produced beyond the demand for it. Now, these two reasons are both palpably erroneous. In some countries, Hindustan for example, many of the natives never taste wheat from one year's end to another In America, we know that wheat in abundant years has been produced in such quantities that the means of transit were insufficient for its transport, and the surplus crop was burnt for fuel.

The fact is, that the search for an invariable standard of value is as vain as the search for the philosopher's stone. It is the pursuit of a phantom which cannot possibly, in the nature of things, have any existence. We have seen that there can be no rise in the value of one thing without a fall in the value of something else. Nothing can be invariable in value unless everything else is also invariable; and thus the only condition in which there could be invariableness of value in any one article so as to qualify it to be a fixed standard of value, precludes the possibility of there being any variation of value in anything else to be measured by means of the supposed standard.

So much for the nature of value. We must now turn our attention to the various leading theories of value and the laws of value which are based thereon.

THE LABOUR THEORY OF VALUE.

The original, and still in a somewhat modified form, the common English theory of the cause of value is this: that all objects and services possessing value derive their value from the fact that labour has been bestowed upon them.

Locke.

Locke, in his "Essay on Civil Government," after showing that the foundation of the right of appropriating portions of the earth

and its products by private persons originated in the labour they bestowed upon them, says:

Nor is it so strange as perhaps before consideration it might appear that the property of labour should be able to overbalance the community of land; for it is labour, indeed, that puts the difference of value upon everything, and let any one consider what the difference is between an acre of land planted with tobacco or sugar, sown with wheat or barley, and an acre of the same land lying in common without any husbandry upon it; and he will see that the improvement of labour makes the far greater part of the value. I think it will be but a very modest computation to say that of the products of the earth useful to the life of man nine-tenths are the effects of labour; nay, if we will rightly estimate things as they come to our use, and cast up the several expenses about them,— what in them is purely owing to nature and what to labour-we shall find that in most of them ninety-nine hundredths are wholly to be put in the account of labour.

Adam Smith.

Adam Smith distinctly traces the origin of value to labour in the following passage:

In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for, or be worth, two deer. In this state of things, the whole produce of labour belongs to the labourer, and the quantity of labour commonly employed in acquiring or producing any commodity is the only circumstance which can regulate the quantity of labour which it ought commonly to purchase, command, or exchange for.-Wealth of Nations, Book I., chapter vi.

*

Further on he adds, however, that "In a civilised country there are but few commodities of which the exchangeable value arises from labour only, rent and profit contributing largely to that of the far greater part of them." Here Adam Smith in plain terms announces cost of production as the regulator of value. In the following chapter he proceeds to describe natural price as cost of production, plus ordinary rate of profit, and market price as the price actually realised, sometimes more, sometimes less than, and sometimes equal to natural price, the natural price being, "as it were, the central price to which the prices of all commodities are continually gravitating."

Ricardo.

Let us now turn to Ricardo; and it will be seen from the following brief extracts from his "Principles of Political Economy" that he is a most uncompromising advocate of the labour theory of value.

Mr. Ricardo divides commodities into two classes :—

Class 1. Those, 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, and 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.

Mr. Ricardo expressly excludes all articles of this class from his investigation. His words are:-In speaking of commodities, of their exchangeable value, and of the laws which regulate their relative prices, we mean always (class 2) such commodities only as can be increased in quantity by the exertion of human industry, and in the production of which competition operates without restraint. Of this class he says,--" That labour is really the foundation of the exchangeable value of all things, is a doctrine of the utmost importance in political economy, for from no source do so many errors and so much difference of opinion in that science proceed as from the vague ideas which are attached to the word value."

The following are passages in which he states his theory with crystalline clearness:

If the quantity of labour realized in commodities regulate their exchangeable value, every increase in the quantity of labour must augment the value of that commodity on which it is exercised as every diminution must lower it.

If a piece of cloth be now of the value of two pieces of linen, and if in ten years hence the ordinary value of a piece of cloth should be four pieces of linen, we may safely conclude that either more labour is required to make the cloth, or less to make the linen, or that both causes have operated.

In estimating the exchangeable value of stockings, we shall find that their value, comparatively with other things, depends on the total quantity of labour necessary to manufacture them and bring them to market.

Suppose two men employ 100 men each for a year in the construction of two machines, and another man employs the same number of men in cultivating corn; each of the machines at the end of the year will be of the same value as the corn, for they will each be produced by the same quantity of labour.

The labour of a million of men will always produce the same value (presumably in the same time).

The exchangeable value of all commodities, whether they be manufactured, or the produce of the mines, or the produce of land, is always regulated, not by the less quantity of labour that will suffice for their production under circumstances highly favourable and exclusively enjoyed by those who have peculiar facilities of production, but by the greater quantity of labour necessarily bestowed on their production by those who have no such facilities; by those who continue to produce them under the most unfavourable circumstances; meaning by the most unfavourable circumstances, the most unfavourable under which the quantity of produce required renders it necessary to carry on the production.