The Measure of Value Stated and Illustrated / With an Application of it to the Alterations in the Value of the English Currency since 1790

by T. R. Malthus

This shows how greatly the natural value of commodities depends upon the average state of the demand and supply, and completely confirms the position in my last work, that the only difference between natural and market prices is, that the former are regulated by the average and ordinary relations of the demand to the supply, and the latter, when they differ from the former, upon the accidental and extraordinary relations of the demand to the supply.

Fifthly, it follows, from the constant value of labour, that,

Given the value of money in different countries, the natural prices of commodities, in which the same quantities of labour have been employed, will depend upon the rate and quantity of profits.

Given the rate and quantity of profits, and the value of money, the natural prices of commodities in different countries will depend upon the quantity of labour employed upon them.

And given the quantity of labour employed on them, and the rate and quantity of profits, the natural prices of commodities will depend upon the value of money.

But in reality none of the ingredients of natural or money price are given, excepting the natural value of labour, and consequently the money prices of commodities which regulate the ordinary rate at which different countries exchange their commodities with each other, will be determined partly by the quantity of labour employed upon them, partly by the ordinary rate of profits, and partly by the value of money.

The value of metallic money, it has before been stated, while it continues to be obtained by the same quantity of labour and capital, must always fall with the fall of profits, and will consequently have a strong tendency to fall with the progress of cultivation and improvement; but as few nations comparatively have mines of their own, the supplies which they obtain of the precious metals must be purchased by their exportable commodities; and these are produced and exported under such a variety of circumstances, in respect to cost, and the value of the same amount of the precious metals is further so much affected by the demand for corn and labour, the state of credit, paper currencies, taxation, and other circumstances, that no rule can safely be laid down on the subject.

Generally the value of money is the lowest in the richest and most manufacturing countries; but this is not always the case; and a country which raises an abundance of raw produce at a small expense of labour and profits, while its money value is kept up by a ready sale for it in foreign markets, and a continued demand for labour, may have the value of its money very low, although it is not rich or manufacturing. This is the case with the United States of America, where, owing to the low value of money, or high money price of labour, there are no doubt some commodities which, though produced by a less value of labour and profits, cannot be exported to England on account of the higher value of money in England; while we know that there are many other products which are obtained by so much a smaller quantity of labour and profits as more than to counterbalance the higher value of money in England, or the higher money price of labour in the United States.

In the same manner there are no doubt many commodities which, though obtained in England by a much less quantity of labour and profits than in India, cannot be exported to that country on account of the very high value of money in India; while, on the other hand, there are a few commodities in England in which the saving of labour and the effects of capital and skill have been so great, as to allow of their exportation from a country where the money wages of labour are two shillings a day, to one where they are only fourpence; that is, from a country where the value of money is six times lower than in the country to which the commodities are sent.

On the same principle, commodities may be imported from India into England, although the same commodities might be produced in England by a much less quantity of labour and profits, the low value of money in England more than compensating the greater quantity of labour and profits employed in India.