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

We may also consider as a postulate which will be readily granted, that any given quantity of labour must be of the same value as the wages which command it, or for which it actually exchanges.

Of the two main elements of value, labour and profits, the former, particularly if we include, as we ought to do, accumulated as well as immediate labour, is much the largest and most powerful.

The great instrument of production is labour. There is no commodity nor implement used to assist manual exertions in which it does not enter as a condition of supply, and very few in which it does not enter very largely. If in the production of commodities and of the implements which assist in this production, no other ingredient were required than labour, and the interval between the exertion of the labour and its remuneration in the completed commodity were so inconsiderable that it might be entirely disregarded, it is certain that, as the same quantity of labour would have a constant tendency to produce commodities in the same relative proportion to each other, and to the demand for them, they would be found on an average to exchange with each other according to the quantity of labour which had been employed to obtain them.

Thus if ten mackerel were, on an average, obtained by the same quantity of labour as two soals, it would be necessary, in order to continue the supply of both in the market, that the value of a soal should be five times as great in the power of purchasing similar commodities, as the value of a mackerel; because if it were less, none would apply themselves to the catching of soals; and though it is quite certain that at any given period the relative value of soals and mackerel would be exclusively determined by the state of the demand and supply of each; and that they would, in consequence, often vary very considerably; yet it is as certain, that on the supposition of the hypothesis being correct, and that they both continued to be brought to market, each would on an average be supplied in such a quantity, compared with the demand for it, that a soal would ordinarily exchange for five mackerel, and the different quantities of labour required to produce them would, in this case, be a correct measure both of their natural and relative value in exchange.

Now supposing that the skill and power of the labourers were so to increase, that, in the same time and with the same personal exertions, they could obtain three soals and fifteen mackerel, it is obvious that the relative value of soals to mackerel would remain the same, but they would both have essentially altered their value compared with all those commodities which still required the same quantity of labour to produce the same supply of them. With regard to such commodities, soals and mackerel would have become of less value, and consequently they would have become of less value with regard to a given quantity of labour. The correct language in this case would be, not that labour had become dearer, but that soals and mackerel had become cheaper. And if the same increase of skill and power could be conceived to extend to all other commodities, and all commodities were similarly circumstanced as to their mode of production and bringing to market; it cannot be doubted, that though they might retain the same relative value compared with each other, they would all become more plentiful with regard to the wants of the society, and any given quantity of labour. And the correct language would still be, not that labour had become dearer, but that all commodities had become cheaper. This fall would be a fall in the absolute and natural value of commodities; and as long as labour alone was concerned in their production, and they were brought to market immediately, it would be allowed that the different quantities of labour employed upon them would be a correct measure both of their relative value compared with each other, and of their absolute and natural value in reference to the conditions of their supply. Their natural values would be exactly represented by the different quantities of labour worked up in them; while their natural prices would be these different quantities of labour estimated in money, according to the money price of the labour employed.

But at a very early period of society a considerable interval must elapse between the exertion of some sorts of labour and the completion of the article on which they are employed. And the next simplest form of production, beyond the result of mere labour, is that, where, in addition to the labour employed directly on the commodity and on the simple tools necessary to its production, the condition of the supply requires that a certain compensation be made in the final remuneration for the time which has elapsed from the period of the advances of the labour, to the period when the labourer, or capitalist, can be remunerated. This compensation, which equally applies to the formation of the capital, as to the products to be obtained by it, is the profit which must be paid on the advances of the labour, and is absolutely necessary to the encouragement of such advances.

But in this state of things commodities would cease to exchange with each other according to the quantity of labour employed upon them. Some commodities, on which the same quantity of accumulated and immediate labour had been employed, would be of a different exchangeable value, on account of the different quantity of profits which had entered into their composition; while others, on which different quantities of accumulated and immediate labour had been employed, might be of the same exchangeable value, on account of the greater quantity of profits of which they were composed being balanced by the smaller quantity of labour advanced to produce them.

In the earliest stages of society accumulations of capital are very rare, and profits may be extremely high, perhaps forty or fifty per cent. If under these circumstances the construction of a war canoe were to take two years before it were fit for use, it is evident that its value in exchange would be prodigiously enhanced by such profits. Compared with a number of deer which might have cost exactly the same quantity of accumulated and immediate labour to bring to market, the canoe would be seventy or eighty per cent. of greater value; and on the fall of profits from forty or fifty per cent. to ten per cent. in the progress of society, an object of this kind might fall in value sixty or seventy per cent. compared with such objects as deer or fish, without any difference in the quantity of labour employed upon either.

It is observed by Adam Smith that corn is an annual crop, butchers’ meat a crop which requires four or five years to grow; and consequently, if we compare two quantities of corn and beef which are of equal exchangeable value, it is certain that a difference of three or four additional years profit at fifteen per cent. upon the capital employed in the production of the beef would, exclusively of any other considerations, make up in value for a much smaller quantity of labour, and thus we might have two commodities of the same exchangeable value, while the accumulated and immediate labour of the one was forty or fifty per cent. less than that of the other. This is an event of daily occurrence in reference to a vast mass of the most important commodities in the country; and if profits were to fall from fifteen per cent. to eight per cent. the value of beef compared with corn would fall above twenty per cent.

When commodities are obtained by the assistance of a large proportion of fixed capital of a very durable nature, the advances are only consumed in part, and the whole produce of the accumulated and immediate labour employed must be considered as composed of the new produce obtained, together with the remainder of the fixed capital which is unconsumed.[B] In reference to the separate value of the new produce, this will be the same as if to the labour actually worked up in such produce were added the profits of the whole capital advanced. It sometimes happens that the proportion of value arising from these profits is very considerable; and commodities so produced will necessarily have much less labour worked up in them, and will be much more affected in their value by a rise or fall of profits, than those which are composed mainly of immediate labour.