The author has said a great deal in good set phrase about the false analogy involved in the application of the term measure to the value of commodities at different periods; and gravely states the difference between measuring length at different periods and measuring value.
I was not aware that people were ignorant of this difference. As I said before, whenever mention is made of the value of a commodity at different periods, I have always thought that a reference has been intended either to its general power of purchasing, or to something calculated to express the estimation in which it was held at these different periods, founded on the state of its supply compared with the demand, or the elementary costs of its production.
But if the term has been generally understood in this way, people must have been fully aware that value was essentially different from length: they would know perfectly well that a piece of cloth of a yard long would continue to be a yard long when it was sent to China; but that its value, that is, its general power of purchasing in China, or the estimation in which it was held there, would probably be essentially altered. But allowing this most marked distinction, and that the value of a commodity cannot be so well defined, and its variations so accurately measured, as the length of a commodity—where is the false analogy of endeavouring to measure these variations as well as we can? We cannot certainly describe the wealth of a merchant, nor measure the increase of his wealth during the last four years, with the same exactness as we can describe the height of a boy, and measure the amount of his growth during the same period. We can perform the latter operation with the most perfect precision by means of a foot-rule. The nature of wealth, and the best instruments used to measure its increase, are such, that the same precision is unattainable; but there is no false analogy involved in the process of measuring the wealth of a merchant at one time with his wealth four years before, by the number of pounds sterling which he possesses now, as compared with the number of pounds sterling he possessed at the former period. What false analogy is involved in applying money to measure the value of the advances of a manufacturer, as compared with the value of his returns, in order to estimate his profits? and what can the author mean by saying, that no relation of value can exist between commodities at different periods;[[71]] and that it is a case where money has no function to perform?
Notwithstanding such assertions, we see every day the most perfect conviction prevailing among all agriculturists, merchants, manufacturers, and shopkeepers, and among all writers on political economy, except the author, that to estimate the relation of commodities, at different periods, in regard to their general power of purchasing, and particularly the power of purchasing labour, the main instrument of production, is a most important function, which it is peculiarly desirable to have performed; and that, for moderately short periods, money does perform this function with very tolerable accuracy. And for this specific reason; that, for moderately short periods, a given quantity of money will represent, more nearly than any other commodity, the general power of purchasing, and particularly the power of setting labour in motion, so vital to the capitalist. It will approach, in short, more nearly than any other commodity, to that invariability which the author thinks so utterly useless in a measure of value, and the very mention of which seems to excite his indignation.[[72]]
It is, in fact, by means of this same steadiness of value in the precious metals, which they derive from their great durability, and the consequent uniformity of their supply in the market, that they are enabled to perform their most important functions. Hops, or corn, as before stated, will measure the relative values of commodities at the same time and place; but let the author or reader attempt to estimate the profits of a capitalist in hops or corn, by the excess of the value of his advances above the value of his returns so estimated, and he will soon be bewildered. If a very plentiful year of corn were to succeed to a comparatively scarce one, the farmer, estimating both his outgoings and incomings in the corn of each year, might appear to gain above fifty per cent., while, in reality, he might have lost, and might not be able, without trenching on his capital, to employ as many men on his farm as the year before. On the other hand, if a comparatively scarce year were to succeed to a plentiful one, his profits, estimated in corn, might appear to be less than nothing, and yet he might have been an unusual gainer, in reference to his general power of purchasing labour and other commodities, except corn. If the hop-planter were to estimate his advances and returns in hops, it is obvious that the results would be of the same kind, but aggravated in degree.
It must be allowed, then, that the commercial world have acted most wisely in selecting, for their practical measure of value, a commodity which is not only peculiarly convenient in its form, but is, in general, subject only to slow changes of value; and possesses, therefore, that steadiness in its power of purchasing labour and commodities, without which, all confidence in carrying on mercantile enterprises, of any duration, would be at an end.
But though the precious metals are a very useful and excellent measure of value for those periods, within which almost all mercantile transactions are begun and completed; yet, as Adam Smith very justly observes, they are not so for very long periods; not because there is no function for them to perform, but because, in the course of four hundred years, they are found to lose that uniformity of value, which, in general, they retain so well during four years.
I can by no means, therefore, agree with the author, when he says, speaking of the precious metals, that, “in regard to measuring or comparing value, there is no operation that can be intelligibly described, or consistently imagined, but may be performed by the media of which we are in possession.”[[73]] Surely, to measure the relative power of a commodity over labour and the mass of other commodities, at different and distant times, is an operation which may be both consistently imagined, and intelligibly described; yet it is quite certain, that, in regard to distant periods, the precious metals will not perform this well. Would the author himself venture to say, that the general power of purchasing possessed by an ounce of silver in the time of Edward the Third, was not very much greater than the general power of purchasing possessed by an ounce of silver in the time of George the Fourth; or, that the same quantity of agricultural labour, at these two periods, would not much more nearly have represented the same general power of purchasing? The author seems equally unfortunate when he launches out in praise of the precious metals as a measure of value, as when he says that they do not perform this function better than corn.
It will be observed that, in speaking of the values of commodities, at different periods, as meaning their different powers of purchasing at those periods, the kind of value referred to is, exclusively, value in exchange. And, in reference to value in exchange, exclusively, it appears to be of the utmost importance to the language of political economy, to distinguish between the power of purchasing generally, and the power of purchasing any one commodity.
But it must not be imagined that when the estimation in which a commodity is held at different periods is referred to, as determined at the time by the state of the supply compared with the demand, and ordinarily by the natural and necessary conditions of its supply, or by the elementary costs of its production, which are equivalent expressions, that value in exchange is lost sight of. Yet the author is continually falling into this kind of misapprehension, and into a total forgetfulness of his first account of the meaning of value, in his examination of Mr. Ricardo’s views, as to the uses of a measure of value, in which, he says, a singular confusion of thought is to be discovered.[[74]]