Another common opinion, which is only partially true, is that wages vary with the price of food, rising when it rises and falling when it falls. In times of scarcity, people generally compete more violently for employment, and lower the labour market against themselves. But dearness or cheapness of food, when of a permanent character, may affect wages. If food grows permanently dearer without a rise of wages, a greater number of children will prematurely die, and thus wages will ultimately be higher; but only because the number of people will be smaller than if food had remained cheap. Certain rare circumstances excepted, high wages imply restraints on population.
As the wages of the labourer are the remuneration of labour, so the profits of the capitalist are properly the remuneration of abstinence. They are what he gains by forbearing to consume his capital for his own uses and allowing it to be consumed by productive labourers for their uses. Of these gains, however, a part only is properly an equivalent for the use of the capital itself; namely, so much as a solvent person would be willing to pay for the loan of it. This, as everybody knows, is called interest. What a person expects to gain who superintends the employment of his own capital is always more than this. The rate of profit greatly exceeds the rate of interest. The surplus is partly compensation for risk and partly remuneration for the devotion of his time and labour. Thus, the three parts into which profit may be regarded as resolving itself, may be described, respectively, as interest, insurance, and wages of superintendence.
The requisites of production being labour, capital, and natural agents, the only person besides the labourer and the capitalist whose consent is necessary to production is he who possesses exclusive power over some natural agent. The land is the principal natural agent capable of being so appropriated, and the consideration paid for its use is called rent.
It is at once evident that rent is the effect of a monopoly. If all the land of the country belonged to one person he could fix the rent at his pleasure. The whole people would be dependent on his will for the necessaries of life. But even when monopolised—in the sense of being limited in quantity—land will command a price only if it exists in less quantity than the demand, and no land ever pays rent unless, in point of fertility and situation, it belongs to those superior kinds which exist in less quantity than the demand.
Any land yields just so much more than the ordinary profits of stock as it yields more than what is returned by the worst land in cultivation. The surplus is what is paid as rent to the landlord. The standard of rent, therefore, is the excess of the produce of any land beyond what would be returned to the same capital if employed on the worst land in cultivation, or, generally, in the least advantageous circumstances.
III.—Of Exchange and Value
Of the two great departments of political economy, the production of wealth and its distribution, value has to do with the latter alone. The conditions and laws of production would be unaltered if the arrangements of society did not depend on, or admit of, exchange.
Value always means in political economy value in exchange, the command which its possession gives over purchasable commodities in general; whereas, by the price of a thing is understood its value in money.
That a thing may have value in exchange two conditions are necessary. It must be of some use—that is, it must conduce to some purpose, and secondly, there must be some difficulty in its attainment. This difficulty is of three kinds. It may consist in an absolute limitation of supply, as in the case of wines which can be grown only in peculiar circumstances of soil, climate, and exposure; in the labour and expense requisite to produce the commodity; or, thirdly, the limitation of the quantity which can be produced at a given cost, to which class agricultural produce belongs, increased production beyond a certain limit entailing increased cost.