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 frequently opposed to the first, and consequently, quite inaccurate, that the science is indebted for one of its greatest improvements.”[[46]]
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:[[47]] “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.[[48]]
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 strict 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.