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

To advert shortly to a few points on which there have been some differences of opinion.

On the subject of rents, such a standard would determine, among other things, that, as the increase in the value of corn is only measured by a decrease in the corn wages of labour, such increase of value is a very inconsiderable source of the increase of rents compared with improvements in agriculture; and on the same principle that, if tithes do not fall mainly on the labourer, the acknowledged diminution in the corn rents of the landlord, occasioned by tithes, cannot be balanced by an increase of their value, and that, consequently, tithes must fall mainly on the landlord.

On the subject of labour it would determine, that the increasing value of the funds destined for the maintenance of labour can alone occasion an increase in the demand for it, or the will and power to employ a greater number of labourers; and that it is consistent with theory, as well as general experience, that high corn wages, in proportion to the quantity of work done, should frequently occur with a very slack demand for labour;[M] or, in other words, that when the value of the whole produce falls from excess of supply compared with the demand, it cannot have the power of setting the same number of labourers to work.

On the subject of profits, it would show, that they are determined, not by the varying value of a given quantity of labour compared with the constant value of the commodities which it produces, but, as is more conformable to our experience, by the variable value of the commodities produced by a given quantity of labour, compared with the constant value of such labour; and that profits never, on any occasion, rise or fall, unless the value of the produce of a given quantity of labour rises or falls, either from the temporary or ordinary state of the demand and supply.

On the subject of the distinction between wealth and value, it would show, that though they are by no means the same, they are much more closely connected than they have of late been supposed to be; and that the best practical measure of the relative wealth of different countries would be the quantity of common labour which the value of the whole annual produce of each country would enable it to command at the actual price of the time, which in some rich countries might amount to above double the number of families actually employed, and in poor countries might not greatly exceed such number.

On the subject of foreign trade, it would show that its universally acknowledged effect in giving a stimulus to production, generally, is mainly owing to its increasing the value of the produce of a country’s labour by the extension of demand, before the value of its labour is increased by the increase of its quantity; and that the effect of every extension of demand, whether foreign or domestic, is always, as far as it goes, to increase the average rate of profits[N] till this increase is counteracted by a further accumulation of capital.

On the subject of the accumulation of capital it would show that if the increase of capital be measured by the increase of its materials, such as corn, clothing, &c., then it is obvious that the supply of these materials may, by saving, increase so rapidly, compared with labour and the wants of the effective demanders, that with a greater quantity of materials the capitalist will neither have the power nor the will to set in motion the same quantity of labour, and that consequently the progress of wealth will be checked; but that if the increase of capital be measured, as it ought to be, by the increase of its power to command labour, then accumulation so limited cannot possibly go on too fast.

On the general subject of demand and supply, it would show that they must be restored to their universal empire, both in reference to the prices of commodities, and the dependence of the progress of wealth on the due proportion maintained between them. If the cost of a commodity be considered as composed exclusively of the actual advances of the capital required for its production, which seems to be the most natural and correct mode of viewing it,[O] then it is obvious, that as both the prices and values of commodities are proportioned to these advances, with the addition of profits very variable in their amount, neither of them can be determined by these advances alone, or by the costs of production so defined. We must therefore have recourse to demand and supply. And on the other hand, if profits be included in the costs of production, then, as it follows, from the constancy of the value of labour, that ordinary profits are determined by the ordinary demand compared with the ordinary supply of the products of the same quantity of labour, the certain conclusion must be, that demand and supply enter powerfully into the costs of production according to this latter definition, and that therefore their dominion as to prices and value is absolutely universal.[P]

Nor would they be less so in their effect on the general progress of wealth. If commodities and the materials of capital increase faster than the effectual demand for them, profits fall prematurely, and capitalists are ruined without a proportionate benefit to the labouring classes, because an increasing demand for labour cannot go on under such circumstances. If the value of commodities and the materials of capital increase for some time without an increase of their quantity, the labouring classes must soon be supported on the lowest amount of food on which they will consent to keep up their actual number; and the main part of the population would suffer severely without any proportionate benefit to the capitalists; because the value of their capitals, measured by the labour which they can command, would shortly be incapable of further increase. In either of these cases a decided check would be given to the progress of wealth, which progress must necessarily be the greatest, when the joint product of the capitalist and labourer, which the state of the land and the skill with which it is worked enable them to obtain, is so divided between them, that in the progress of cultivation and improvement any unnecessary or premature fall either of profits or corn wages is prevented. But this can only be accomplished by a proper proportion of the supply to the demand, that is, by an accumulation so proportioned to the actual consumption of produce by those who can make an effectual demand for it, as to occasion the greatest permanent annual increase in the value of the materials of capital.

The reader of my last work, in which I laid down as my rule, to admit no principles of Political Economy as just which were inconsistent with general experience, will be aware that the conclusions to which I have here shortly adverted, as following necessarily from the constancy of the value of labour, are almost exactly the same as the conclusions of that work. And the reason is, that although at that time I did not think that the labour which a commodity would command could, with propriety, be considered as a standard measure of value, yet I thought it the nearest approximation to a standard of any one object known, and consequently applied it, on almost all occasions, to correct the errors arising from the application of more variable measures. The conclusions, therefore, of my former and present reasonings were likely to be nearly the same, although the premises might now admit of further correction and illustration, and the conclusions might be pronounced with greater precision and certainty.