“Suppose, he observes, that we had such a commodity as Mr. Ricardo requires for a standard: suppose, for instance, all commodities to be produced by labour alone, and silver to be produced by an invariable quantity of labour. In this case, silver would be, according to Mr. Ricardo, a perfect measure of value. But in what sense? What is the function performed? Silver, even if invariable in its producing labour, will tell us nothing of the value of other commodities. Their relations in value to silver, or their prices, must be ascertained in the usual way; and, when ascertained, we shall certainly know the values of commodities in relation to each other; but in all this, there is no assistance derived from the producing labour of silver being a constant quantity.”[[75]]
I have already described the function which silver would have to perform in this case, namely, either to measure the different powers of purchasing possessed by commodities at different periods, or to measure the different degrees of estimation in which they were held at these different periods.
Now, in the first place, with regard to the general power of purchasing, can it be denied for a moment, that, granting all the premises, as the author does hypothetically, silver, so produced, would be, beyond comparison, a better measure of the power of purchasing generally, than silver as it has been actually produced? It would be secured from that greatest source of variation in the general power of purchasing occasioned by the variation in its own producing labour; and an ounce of such silver would command much more nearly the same quantity of labour and commodities, for four or five hundred years together, than an ounce of silver derived from mines of greatly varying fertility.
Secondly, with regard to the estimation in which a commodity is held, it is not easy to conceive a more complete measure. If all commodities were produced by labour alone, and exchanged with each other according to the producing labour; and if silver were produced by an invariable quantity of labour, the quantity of silver given for a commodity in the market at different periods, would express almost accurately the relative estimation in which it was held at these periods; because it would express at once the relative sacrifice which people were willing to make, in order to obtain such a commodity at these different periods; the relative conditions of the supply, or elementary costs of production, of such commodity at these periods; and the proportion of the produce to the producer, or the relative state of the demand, as compared with the supply of such commodity at these different periods. And if the value of a commodity means, as the author has told us in the first sentence of his book, the esteem in which it is held, Mr. Ricardo’s measure would certainly do all which he proposed it should do; and this specifically on account of its invariability in relation to the estimation in which it was held.
It would not merely indicate, as the author states, in which of two commodities varying in relation to each other, at different periods, the variation had taken place;[[76]] but it would express the precise amount of the variation; that is, if it appeared by documents that the price of a yard of cloth of a certain quality four hundred years ago was twenty shillings, and its price at present was only ten shillings, it would follow, that the estimation in which it was held, or its value, had fallen one-half; because, as all commodities are, by the supposition, produced by labour alone, the sacrifice with which it could be obtained, the necessary conditions of its supply, or the elementary costs of its production, had diminished one-half.
The variations of a commodity, in relation to this kind of standard, would further show, with great exactness, the variations in its power of commanding all those commodities which had not altered in the conditions of their supply, or the elementary costs of production. If a commodity rose or fell in this standard price, at different periods, it would necessarily rise or fall exactly in the same proportion in its power of commanding, in exchange, all those commodities which had not altered in the conditions of their supply, or their elementary costs of production.
But still, it will be readily acknowledged, that, even granting all that the author has granted hypothetically to Mr. Ricardo, it is not true that such silver would be an accurate measure of the general power of purchasing. Although the circumstance of its invariability, in regard to its producing labour, would give it a prodigious superiority over all other commodities even in this respect, yet, as the producing labour of many commodities may vary in the progress of society, it is quite impossible that the same quantity of any one object can, through successive periods, represent the same general power of purchasing. This is universally allowed; and as it would be clearly desirable to have one rather than two definitions of value, the question is, whether, both on this account, and on account of the universal language and practice of society, for short periods, it would not be decidedly better to confine the term value of a commodity, when used generally, to the estimation in which it is held, determined by the state of the supply compared with the demand, and ordinarily by the elementary costs of production, rather than to its general power of purchasing. There is very nearly an accurate measure of the former; it is universally acknowledged that there cannot be an accurate measure of the latter; and further, it is most important to remark that, in adopting the former, our language would much more nearly coincide with the ordinary language of society in referring to variations of value, than if we adopted the latter.
As a matter of fact, when a rise in the value of hops or of corn is spoken of, who ever thinks about the changes which may have taken place in the values of iron, flax, or cabbages? For short periods, we consider money as nearly a correct measure of the values of commodities, as well as of their prices; and if hops and corn have risen in this measure, we do not hesitate to say that their values have risen, without the least reference to cloths, calicoes, or cambrics. This is a clear proof that, in general, when we speak of the variations in the values of commodities, we do not measure them by the variations in their general power of purchasing, but by some sort of standard which we think better represents the varying estimation in which they are held, determined at all times by the state of the supply compared with the demand, and, on an average, by the elementary costs of production.
The only variations in the general power of a commodity to purchase, which are susceptible of a distinct and definite measure, are those which arise from causes which affect the commodity itself, and not from the causes which affect the innumerable articles against which it is capable of being exchanged. In speaking, therefore, of the variations in the value of particular commodities, it is not only more accordant with the accustomed meaning attached to the expression, but absolutely necessary with a view to precision, to consider them as exclusively proportioned to, and measured by, the amount of the causes of value operating upon themselves.
Mr. Ricardo, therefore, quite consistently with his own hypothesis, considers a commodity, the producing labour of which has doubled, as having increased to double its former value. It has increased in relation to a standard which, according to him, is the sole cause of value; it will command just double the quantity of all those commodities which have not altered in their producing value; and if it will not command just double the quantity of other commodities, it is not because it will not command just double the value which it did before, but because, on account of the changes in the producing labour of the other commodities, double the quantity of them has become more or less than double the value.