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 commodity which resolves itself into labour, but of that which resolves itself into rent, and of that which resolves itself into profit.”[[44]] 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.[[45]]
Thus, if a hundred days’ labour be advanced for a year,[[45]] 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 authorities 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?