Cyclopædia of Political Science, Political Economy, and the Political History of the United States

Edited by: Lalor, John J.
(?-1899)
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First Pub. Date
1881
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New York: Maynard, Merrill, and Co.
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1899
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Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
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V


VALUE

III.288.1

VALUE. The notion of value is one fundamental in political economy; but unfortunately there is no politico-economical idea which requires so much effort of the power of attention and so much patience to be thoroughly understood. The reason of this is, that the phenomenon to which it relates is purely relative, and consequently difficult to characterize. In order to acquire a just and precise idea of value, we must therefore enter into explanations of some length.

III.288.2

—The things whose possession is necessary, useful or agreeable to us, are numerous and various; and we can obtain those which we ourselves need only by parting with others of which we have the disposal. Hence exchanges, which, by determining in what quantity one thing is accepted or delivered in return for another, have the effect of establishing a relation of value among all things. Can you, for example, get one hectolitre of wine for one hectolitre of wheat? If you can, the fact that you can, assigns to these two products their relative value. They figure in the exchange as equal quantities, and the one has the same value as the other. Suppose that from some cause, however, we have to give, not one hectolitre, but 120 litres of wheat for one hectolitre of wine; this establishes a new ratio between the quantities exchanged, and the values are no longer the same. The value which the wheat possessed relatively to the wine fell just in proportion to the increase in the number of litres to be delivered in exchange for one hectolitre of wine; the value of the wine, on the contrary, increased in proportion to the diminution in the quantity of it to be furnished in order to procure one hectolitre of wheat. What one of the products has lost in value the other has gained, and this in exactly the same proportion. What we have just said of wine and wheat, is true of all possible products. They all give rise to exchanges, and each of them obtains a value founded on the quantity either of another product, or, in general, of the other products for which it can at any given moment be exchanged.

III.288.3

—The advance of civilization long since did away with barter. The more numerous and diverse products became, the more men realized the necessity of choosing one of them to serve as a medium of exchange; and coined money was chosen for this office, because it possesses certain qualities in a greater degree than any other. Money is one of those things which men desire because of the services which they render, and for which, when in need of them, they give a certain amount of other things. This fact, while it gives to money a certain value in each of the other products, gives also to each of these a value in money; determined by the amount which is required to procure them. Thus, the amount of money which all these products command, i.e., the price which is given for them, constitutes a common denominator of the value which they have in commercial transactions, and it is only necessary to compare their prices to know their relative value. If a hat is worth three dollars, this price, compared with that of sugar, of cloth, of a plow, or of any object whatever, shows how much of these different products can be obtained for it, and consequently what value hats acquire from the quantity either of some particular product or of other products in general which their possession confers the power of acquiring. The existence of an intermediary which assures to the values attached to the various products a term of comparison equally applicable to them all, and which renders it easy to follow the fluctuations in their values, is an immense advantage. But it is important to bear in mind that prices and values are very distinct things. (See PRICES.) Prices express only the quantity of coined money which each product is worth, and this quantity is subject to changes which have their own special causes, but which, while they modify prices, have no influence on the relation of values that exists between the products themselves. Thus we see everything in value is relative. It is the relation existing between two things exchanged, a relation which depends upon the respective quantities which each must deliver to the other in order that the exchange may be made on equal conditions, a relation of which (from the very fact that these conditions must be equal) one of the terms (wherever there is a relation, there must be at least two terms) can not be affected in any sense whatever, without the other term being affected at the same moment in a contrary sense. It is essential that this purely relative character of value be clearly understood, if we would not fall into a multitude of economic errors, so great a part does value play in the speculative part of the science. Among the many consequences which flow from the idea of the relativeness of value, there are two which we will single out, if only to throw a little more light on a subject naturally intricate and abstract: one is, that there are only values, and there is no such thing as a collective value, formed by the union of particular values, susceptible of division, degree or measure; the other is, that there can be no such thing as a general rise or fall of values. And in fact, the values in things being only the expression of the quantity of other things which can be obtained in exchange for them, it is impossible that values should increase in the one case without diminishing in the other. The moment it becomes necessary to give more wheat in order to have a given quantity of wine, we give less wine to procure a given quantity of wheat. The fall in the value of wheat produces the rise in the value of wine, and it is thus in all exchanges. There is no rise of values which does not suppose a fall, and in like manner no fall which does not suppose a rise.

III.288.4

—It has taken much time and reflection to free the theory of value from the complications which rendered it uncertain and obscure. In vain did the first economists examine the question; they did not succeed in presenting its solution under forms sufficiently clear and precise. It would be wrong to blame them for this. To the difficulties met with in the analysis and definition of every relation (ratio), when neither of its terms has anything fixed in it, there were added others, in the case of these first economists, caused by the very imperfection of the language they were obliged to use. In common parlance, the word value had different significations. It was used indifferently to designate, at one time, the degree of utility inherent in the use of things; at another, the power of acquisition which these things possessed with regard to other things; at another still, their money price. Hence came, in the ideas suggested by the word value, associations which prevented people from noting differences and distinctions between these ideas, without the noting of which it was impossible to reduce them all to their essential meaning.

III.288.5

—What economists first thought of was the necessity of attaching to the word value qualifying terms intended to characterize each of the meanings which it owed to usage. The French economists of the last century resolved to apply the term usual value (valeur usuelle) to that quality which gives things the capacity directly to satisfy the wants of those who possess them, and venal value (valeur vénale) to those qualities which give things that capacity only by means of exchange. This was the course taken by Adam Smith also. What the physiocrates called usual value, he designated as value in use, and value in exchange what they called, less correctly, venal value. The moment people introduced into science two distinct meanings for the word value, instead of reserving it, as the most eminent economists do now, to express only the ratio of quantity between things exchanged, it became necessary to make use of adjectives to determine which of the two significations they intended to give to the word, each time they used it. But even this care could not sufficiently obviate the grave inconvenience of using one and the same generic term to express qualities and circumstances which in themselves have nothing in common. Conceptions which involved the idea of value remained undecided; men's minds were confused by applying the idea of one kind of value to another, and the way was opened to confusions which seriously impaired the progress and authority of the science.

III.288.6

—It will be necessary to call attention to several of these confusions by reason of the place which they occupy in the writings of the older economists, and which they have retained even in the works of some of their successors. Some observations upon the most serious of these confusions will serve, on the one hand, to guard us against certain errors into which it is easy to fall, and on the other, by showing what value is not, will make it easier to perceive what it really is.

III.288.7

—We will mention only those which it is important to call attention to. We may consider them as follows: the confusion of value with price; the confusion of value with certain circumstances by which it is influenced; the confusion of value with wealth; and, as a consequence of this last, confusion in the search for an undiscoverable measure of value.

III.288.8

—It was easy, and even natural, to a certain extent, to confound values and prices, since, considering them from product to product, the ones serve to measure the others. In the ordinary course of facts we begin by exchanging the products which we have to dispose of, for their value in money, then we give the amount of money received for the other things which we wish to procure, and it is certain that the value in money of these things really corresponds to their relative value. An article that is worth two dollars in money is worth twice as much as that which is worth only one dollar, and if the exchange were made in kind, we would have to give double the quantity of one to obtain the other. But we must bear in mind that prices merely express the relation that exists between the quantities for which money, and other products, are reciprocally placed in the balance, and this relation remains subject to the empire of circumstances which may affect the disposable quantity of money. If money is abundant, it will be more freely offered for each of the products which it is used to purchase; then its value decreases, and prices rise. If money, on the contrary, becomes scarce, less of it will be given in exchange for other things in commercial transactions, its value will increase, and prices, on the contrary, will fall. Thus, unlike values, which can neither increase nor decrease simultaneously, prices, which are the simple results of the comparative value of money and all other products against which it is exchanged, undergo fluctuations peculiar to themselves, and they may all rise or fall at once. The confusion of prices and values has been the unfortunate cause of rendering nations which were not wanting in scientific worth, singularly obscure. It has led economists to conclude from prices to values, and from values to prices, to suppose them governed by the same laws, and subject to the same accidents, and to attribute to the amount of prices, an influence which it should not have Hence proceeded errors which deservedly esteemed economists have not always avoided, and of which the works of Ricardo himself afford but too many examples.

III.288.9

—One of the most frequent confusions, and one which, by its generality, has proved much more prejudicial to the science, is that which confounds value with some of the circumstances that concur in giving value to things. This is the immediate result of the many different acceptations given to the word value. Writers employed the expressions "value in use" and "value in exchange"; thenceforth it was natural that people should imagine that there must exist between the two kinds of value some secret affinity, some link or bond of union covered by some higher principle, common to both, and they set to work to find that principle. Adam Smith believed he discovered it in materiality and duration: Ricardo, in labor; J. B. Say, in utility; others, in rarity, etc., etc. The inevitable consequence was, that they mistook the very nature of value, and forgot its origin and character; and nevertheless, among the masters of political economy, only a few of the more recent have succeeded in completely escaping from an illusion produced by the use of an inexact and vicious terminology.

III.288.10

—The observations suggested by these errors are applicable to all such affinity except rarity. What is value? As we have already said, it is simply a ratio of quantity between products exchanged, and it is perfectly clear that it can not be found outside of this relation. Doubtless, when, in order to obtain a product, we consent to give others which belong to us in exchange for it, what determines us to do so is some quality in the product itself which pleases us, and which is not to be found, or which is found only in a smaller proportion, in those which we give in return for it. This is the reason for every exchange that is made: there would be no exchange if all things possessed the same qualities, and could procure for us the same enjoyments, and satisfy the same wants; and it is surprising that this simple remark did not suffice to prevent men from connecting with this or that particular quality of things the principle of their value.

III.288.11

—There are things which in order to answer to the wants in view of which we seek them, should possess materiality and duration; there are others which must have absorbed a great deal of labor in their making, and others again which must be susceptible of immediate consumption: we exchange them for one another because our wants and our tastes are different, and because, if to build a house, we must have materials whose duration will resist the ravages of time; we must have, in order to feed ourselves, bread and meat, which do not last, and for our recreation, theatrical representations, concerts and amusements, which produce but a passing emotion, and leave no trace except in our remembrance.

III.288.12

—Utility is essential to the value of things, in this general sense, that we give nothing for any of them but upon condition of finding, in their possession or in the use which we make of them, some pleasure or enjoyment; it may be well to recall, however, that the nature of the wants which they are intended to satisfy has no influence on the more or the less of value which attaches to them. We must first provide for the most imperious necessities of life, and obtain the means of satisfying them; but, this once done, each one takes into consideration other consumers, and this consideration is ampler in proportion as he can accord them more. The wants of the intellect and of the heart, love of the arts, taste for luxury, the promptings of pride or vanity—all concur in determining the esteem in which things are held; and it is not uncommon for men to pay for a flower, or ribbon, or the pleasure of hearing a violinist, for instance, a price equivalent to a considerable quantity of the products without which we would have to suffer the deadly attacks of cold or hunger.

III.288.13

—What gives at times an immense value to products, whose deprivation causes neither inconvenience nor physical suffering, is the price that is put upon them by those who are able to obtain them, and the sacrifices men make in order to possess them. There are men rich enough to gratify their every fancy; and, no matter what the things which their fancy craves, these things from the moment they are sought after and there is a demand for them, acquire, equally with other objects, a real value, based upon the amount of other things which men give in order to obtain them. Although there is nothing that is indifferent in the feelings and tastes which dictate the employment of wealth, from the standpoint of morality, of the future and of social progress, nothing can prevent the objects which serve to gratify frivolous and even blamable desires from having the value of the objects for which they can be exchanged.

III.288.14

—Among other consequences following the opinion that value should have a fundamental principle in one of the material qualities inherent in things, there is one consequence which has given rise to so many controversies, that we can not pass it over in silence here. It has been asked whether it were possible that immaterial things, acts, efforts, services, which are not realized under a tangible and durable form, could have a value; and a goodly number of writers have answered in the negative. The services of governments, of magistrates, of the clergy, of physicians, and of members of the bar; instruction given by masters, professors and artists—all these and many other similar things have been declared without real value; and this despite the fact that it was very evident that those who felt the want of these services did not hesitate to give, in order to obtain them, large quantities of things to which value was attributed because of their materiality. This erroneous opinion has now, however, but few adherents. It is recognized that nothing which men prize sufficiently to give a price for, can be devoid of value, and that those things which are called immaterial have, like all other things, a value proportioned to the quantity of each of the different things which they put those who dispose of such immaterial products in a way to procure for themselves. This error regarding immaterial services has not been confined to the question of value; we meet with it also in essays upon production, wealth and labor.

III.288.15

—Rarity deserves special mention. It is not, like materiality, duration, labor, or utility, a quality substantially incorporated in things, it is merely the effect of a disproportion between the quantity in demand and the quantity obtainable, and it, therefore, exercises an effectual influence on the value of the things of which it is either the ordinary or the accidental lot. What causes rarity is the impossibility of increasing a thing at the pleasure of those who wish to obtain it; hence they vie for its possession, and give in exchange for its a much larger quantity of other things than they would if it were more abundant. This it is that assures a very great value to certain products which are found in small number;-this it is also which for a moment gives an extraordinary value to the most common products, such as wine, wheat, wool, cloth, or glass, when, by some accident, the want of them is felt. But rarity, besides being at all times an evil, is, like value itself, only the effect of a relation, and can exist only on condition that it (rarity) does not become general. When bread is more scarce than usual, it acquires an increase of value, but this increase it acquires only because the products given in exchange for it lose in relation to it some of their own proper value, and lose this only because they retain their accustomed abundance. If they became rare or scarce at the same time and in the same proportion as bread, the relation between the quantities exchanged would have suffered no alteration, and their respective values would have remained the same. Rarity acts only privately, only to the extent that it is confined to certain products in opposition to others; and to elevate rarity into the dignity of the general principle of value, is to make a strange mistake; for it is evident, that if rarity extended at the same time to everything offered in exchange, its effects would disappear immediately.

III.288.16

—The confusions between value and wealth do not lead to consequences of so much importance. They spring from correlations which have a real existence, and it is easy to explain them. Private wealth is in proportion to the value of the things of which it is made up. Lands, houses, capital, merchandise, in a word, everything which belongs to individuals, is susceptible of exchange, and consequently possesses the value resulting from the amount of things of another kind which it can be used to obtain. In order to know, therefore, the amount of his wealth it will be sufficient for an individual to ascertain the value in money, the price, of each of the things which he possesses, and then to compare the sum of these prices with what it will enable him to procure in other things. But the correlation between private wealth and the value of the different elements of which it is made up, does not extend to real, positive and general wealth. This latter constitutes a whole, and for want of a term of comparison (because it is not exchangeable) it can not be estimated in any manner. If the things comprised in the sphere which general wealth embraces have all the value which is conferred on each one of them by its particular power of acquisition with regard to other things, the same can not be said of the mass; for this mass admits of no comparison which would permit us to assign it a value, and it would be vain to attempt to find, in the variable relations of exchange that exist between its constitutive parts, an expression which would cover them all. Hence we must have recourse to circumstances entirely foreign to the value which the elements of general wealth receive solely from the exchanges to which they give rise, if we wish to estimate the extent of the wealth of nations in general, or of a nation considered separately.

III.288.17

—However, it will not be without some utility to explain still more the differences which necessarily distinguish value from wealth. Wealth, taken in its aggregate, is the possession of those things by means of which men attain to the satisfaction of their wants, and the more abundant these things are, the greater wealth is. Therefore, it is by its ratio to the wants which it is destined to satisfy, that we must estimate wealth, and this ratio can not be affected by the ratios which exist between the things that constitute it. Not that wealth can increase without modifying the preexisting ratios of value. Wealth increases only to the extent that the efforts of labor, becoming more ingenious and more fruitful, produce a greater amount of some one of those things whose use is either necessary, agreeable or useful to us; from which it follows that this thing offered and delivered in exchange for others in a greater quantity than before, loses something of its relative value, and causes these other things to gain in relative value. Thus every advance in wealth has the effect of reducing the value of the products which it increases, and of raising the value of the products on which it has no effect. This is an eminently beneficial change to the people among whom it takes place; but from the point of view of value the change has no effect, because the value of each thing depends on relations one of whose terms can not increase without the others decreasing.

III.288.18

—It is so difficult for the mind to see in value only the effect of a ratio of exchange, that for a long time most of the economists were preoccupied with the idea of discovering some measure for it. This was a seeking for the impossible. It would have been necessary to find a value to measure value, and where could a value be found which was not itself the result of a ratio, and, because the result of a ratio, as changeable and variable as the other values to which it was sought to make it serve as a comparative measure or standard? But the search for this measure of value has been so common that we can not pass it over without remark.

III.288.19

—Among the things which have attracted attention as specially fitted to serve as a measure of values, coined money, human labor and wheat have been accorded the preference. But it was not given to any one of the three to act as such measure better than the others. When money was taken as the measure of values, it was indeed possible to find what was the value in money of each product at a given moment, and thus to find a comparative term applicable to all products; but it was not possible to discover in money itself a fixed value protected from the variations which are the effects of causes operating on the quantities of the products which have just come into the market to be exchanged one against the other. It was plain that gold and silver, of which money is made, like all other products, varied in value, according to their greater or less abundance in the market, and that they had a very unequal power of acquisition at different epochs, and were also subject to the empire of circumstances, which at one time rendered their extraction more costly, and at others made their consumption greater or more necessary.

III.288.20

—And so of human labor, in which Smith had placed the origin of value, and which he had pointed out as the one thing which afforded its most exact measure. Human labor is unquestionably an element in all production of wealth; but it in no wise follows that its value is absolute, and, that in the relation which it holds to the things against which it is exchanged, it constitutes a term fixed and constant. On the contrary, labor is more or less in demand, and is better or worse compensated at different periods; this is clearly demonstrated by the frequent fluctuations of wages.

III.288.21

—As to wheat, two reasons caused it to be considered that it might serve as a measure of value. One of them was the supposition that the same quantity of wheat must have served at all times to satisfy equal wants of nutrition per individual; the other was the supposition that alimentary products must have preserved, in exchanges, a fixed value, since such products have the power always to create for themselves the demand necessary to correspond to the extent of their supply. The first of these suppositions is erroneous; for wheat is far from having been at all times and in the same quantity an object of man's consumption; the second is true only within certain limits, and in what concerns not any special product, but the aggregate of all the products which minister to the wants of subsistence. Be this as it may, the value of wheat is, and always will be, a relative one, dependent upon the action of circumstances, among which we may reckon the extension and progress of agriculture, and the amount of manufactured products for which it can be exchanged, an amount which tends to increase in proportion as the labor required to produce them increases in power and skill.

III.288.22

—The efforts made by economists to discover a measure of value, prove how difficult it is to disentangle the idea of value itself from the complications by which it is surrounded, and with which it presents itself to the mind. Many writers, even of our own day, have not succeeded in doing so, and it would be easy to cite comparatively recent works in which tendencies to suppose in things the existence of an absolute value still subsist. We must of course make due allowance for the lack of precision in the form under which every fact of relation manifests itself to the mind; but even more allowance must be made for the imperfection of the terminology in use. So long as the word value is used in different senses, we expose ourselves to a confusion of ideas, and the wisest plan would be to take a decided stand in this matter. John Stuart Mill proposes to use the word value to express only the effect of the relation in virtue of which products are bartered one for another, in proportion of such and such a quantity of the one against such and such a quantity of other things. There is nothing more necessary in the interest of science, nor is there anything easier. We have the word price to designate the value of things in coined money; we have the terms immediate or direct utility, and other expressions to designate what is so improperly called value in use. It is easy to reserve for each thing an expression which maintains in language the distinction itself, the special sense which belongs to it.

III.288.23

—Let it be distinctly understood, therefore, that through the rest of this article we shall use the word value only in its real sense. It shall be used to express only the quantity either of a thing or of the things in general which a thing serves to obtain; in other words, the power of acquisition which it exercises by means of exchange.

III.288.24

—Upon what conditions may things be considered to possess value? On what foundations does the property which renders them exchangeable, rest? What are the circumstances which determine in what quantity one thing shall be given for another? The meaning of the word value once clearly determined, these questions become simple, and are easily solved.

III.288.25

—First of all, it is plain that nothing is exchangeable except upon condition, first, of possessing qualities which render it desirable, and second, of being obtainable only at the cost of some effort and pains. No one gives any of those things which every one may have without labor, and value belongs only to those things whose possession costs labor and fatigue. The man who wishes to obtain a thing compares the satisfaction which it will afford him with the sacrifices he must make to obtain it, and decides to part with such or such a quantity of other things which belong to him, in order to procure it. It matters little what motives prompt him to acquire it, whether an imperative want, a frivolous taste, or a simple caprice, the thing has the value at the moment of what he consents to give for it. The diamond for which a value equal to a thousand hectolitres of grain is offered and accepted, has as much value as these thousand hectolitres. In like manner, a hundred kilogrammes of salt are worth no more than the lesson of a dancing master, or the service of a hair dresser, if the price paid for the lesson or the service is sufficient to enable us to buy the same quantity of salt.

III.288.26

—The qualities which render things desirable, the impossibility of obtaining them without personal labor, or without giving in exchange for them other things which have cost personal labor: such are the conditions which confer value on things. The extent or the measure of the value of a thing depends upon the greater or less difficulty which those who covet or need it find in procuring it. It is this that makes the momentary value of a thing depend upon the relation existing between its supply and the demand for it. If a product is not to be found in sufficient quantity to supply all the demand for it, those who desire it enter into competition for its possession; they give in exchange for it more of other products, or of the money with which other products are bought, and, as a consequence, its value rises. If the contrary happens, that is, if a product enters the market in a greater abundance than there is a demand for, its value falls. Those who possess it can not keep it forever; they are obliged to dispose of it, in order to procure other things which are necessary to them, and find themselves constrained, in parting with it, to be content with a smaller quantity of the products they receive in return. Thus it is the condition of supply and demand which assigns to each thing its power of acquisition over other things. All things increase in value when the demand for them is greater than the supply of them; all diminish in value when the supply of them is greater than the demand for them; hence the variations of price to which things are subject, variations which, by expressing the differences that arise in the sums of money against which those things which experience them are exchanged, express like differences in the quantities of other things which these sums enable one to obtain.

III.288.27

—Besides, it must be remarked that the demand for a thing naturally extends or contracts in proportion to the modifications which its value undergoes. When there is a lack of a product it grows dearer; and as then there are many persons to be found whose desire to procure it is checked by the increase of the sacrifices which they must make to obtain it, the demand, checked by its increase in value, is restrained within the limits set by value itself. In like manner, when the price of a thing decreases, purchasers increase in number, and its value descends only to the point necessary that such a product may be found in the market in a quantity proportioned to the supply. Hence the fluctuations of value occasioned by the changes in the relation of supply and demand, have for effect the maintenance of an equality between the two terms of that relation; that is, an equilibrium between supply and demand.

III.288.28

—We must not, however, infer from this fact that there exists any proportionality whatever between the movements of value and the differences in quantity of the things supplied. Everything depends, in the effect produced on the value of the goods, whether by the increase or the decrease of the supply, on the nature of these goods, and on the kind of wants they are intended to satisfy. All goods are not equally necessary to life; and if there are some the demand for which is greatly curtailed because their value has risen even ever so little, there are others, the demand for which people are not nearly so free to lessen. The value of wheat doubles the moment the quantity that can be delivered decreases one-fifth, and is trebled, when this quantity is reduced one-fourth. Wine does not increase in value in the same proportion when the quantity supplied diminishes, for the reason that its consumption is less indispensable; and the products which it is still easier to do without increase in value much less than wine when their supply diminishes. On the other hand, the qualities which render products more or less easy to keep in the state required for use, exert a sensible influence upon the decrease in their value. In case of an extraordinary or superabundant harvest, there are crops which are abandoned to the first comer who wishes to take them, because the owner can not utilize them all himself, and because the price at which he is compelled to sell them will not pay the cost of transferring them to the nearest market. What we are warranted to assert is this, that value is fixed by the relation existing between supply and demand; that it usually increases or decreases in such a way as to equilibrate the two terms of that relation, but in no wise in proportions conformable to the differences expressed in the figure of the quantities supplied.

III.288.29

—How decisive soever the influence exercised by the momentary state of supply and demand may be, the value of things has none the less its own raison d'étre, and a measure which, in despite of the accidents which serve to expand or contract it, constantly tends to return to its normal dimensions. Vainly do the fluctuations of supply and demand succeed one another in contrary directions, these fluctuations necessarily end by compensating one for the other, and the point at which they meet marks the natural value of things.

III.288.30

—What assigns a natural value to things is the fact that it costs something to produce them; that is, the onerosity which attaches to their production. This is true of all things, except of those the quantity of which can not be increased, or which can not be sufficiently increased to keep up with the demand for them. With this one exception, all things are exchanged against one another in accordance with the amount of cost necessary to fashion them for the use of, and to transport them to, the consumer. Those which cost most are exchanged in a lesser numeric quantity, against those which cost less, and thus the differences in their costs of production of various articles are balanced. (See COST OF PRODUCTION.)

III.288.31

—Before attempting to show that this can not be otherwise, we must first recall what constitutes the cost of production. This cost is twofold: part of the cost of production is constant and unavoidable, and enters, though in unequal amounts, into all production; part is accidental, arising from artificial or special causes, and does not attach to all production. The first part of the cost of production here referred to consists in the expenses of labor and in the expenses attached to the employment of capital. There is nothing whose production does not require a certain amount of both these expenses. In the productions of the humblest artisan, days of labor and the consumption of capital under various forms, figure. Raw material has been purchased and transformed; tools and implements have been deteriorated; there have been risks and losses which must be covered; and, in addition to all this, there is the interest which must be paid on the capital employed: it is necessary that the thing produced should be exchanged on such conditions as shall restore to the producer the wages due to his own personal labor, as well as the wages due to the labor of his workmen, if he employs any, and the profit required to bring back to him the portion of capital which he was obliged to sacrifice during the course of his labor. Suppose a product, which, in order to reach the consumer, costs six francs for workmen's wages, and four francs in profits for the preservation of, and interest on, the capital invested in it; the natural value of this product will be the sum of these two amounts; that is, ten francs. Thus the natural value of various products depends upon the proportion in which wages and profits enter into the sum total of their cost of production. All products tend to exchange one against another in proportion to this natural value; and this natural value is the value which continues to subsist for all products as their mean value, whatever departures from such mean value the momentary fluctuations caused by the variations of supply and demand may make in it.

III.288.32

—The reason of this is plain. No industry could subsist if the commodities and goods which it furnishes the public were not taken at the price which the cost of production requires. An industry which could not recover in full the total of its outlay would soon fail. Hence from the moment that any product ceases to exchange against other products in a quantity sufficient to balance the expenses which must be borne by those who make it, we notice that its manufacture begins to be restricted; and the restriction does not stop until it reaches the point at which the reduction in the supply of the product causes it to regain the value in which it was lacking. On the contrary, if a product receives in other products more than the equivalent of its real cost, the profits assured to those who deal in it cause a speedy increase in its production, and the increase in the amount offered very soon deprives it of its value to the extent that such value is exaggerated. Thus it is that the value in things, whenever it departs from its natural point, is finally brought back to it. Competition diminishes in industries which are not sufficiently remunerative, and the supply diminishes with it; competition increases in those industries which are uncommonly remunerative; labor and capital abandon industries which are losing, to engage in those which are gaining; and, owing to this continual change, the value respectively of the products exchanged continues to be, or becomes again, in the case of all products, the value determined by the amount of the cost incurred in their production.

III.288.33

—We do not mean to say that all products of the same kind, considered apart from all others, obtain in exchange merely the equivalent of their own cost in other products. Far from it; there are some which obtain much more, and for this reason: the quantity of each product which can and should be produced is determined by the demand for it, and its value always rises high enough to assure its supply in that quantity. But the conditions of labor are not in all respects equal or similar. They are less favorable in some places than in others, and when these places are called upon to furnish the market a contingent, without which the supply would be inadequate, it is the expenses which production necessitates in those places that determine the general value of products. It follows that this value corresponds, not to an average cost, but to the cost of the part of the product which reaches the market after having required the greatest amount of the different costs. In the actual state of demand that portion has its outlet just as the others have, and among similar products it is the dearest which regulate the value of all, thus adding to those which are cheaper a value greater than their cost of production. This fact is deserving of all the more attention, because many modern writers have overlooked it when discussing the large profits reaped by certain producers, and still more frequently when discussing the subject of rent.

III.288.34

—It is, for instance, a common opinion that the rent of land contributes to raise the price of the means of subsistence, and that it would be otherwise under combinations different from those which up to the present time have governed property. Nothing, however, could be more decidedly false. Like all other products, those of the soil owe their value to the demand for them. All lands are not equally fertile; they can not all produce on the same conditions, and whenever the wants of consumption are such that recourse must be had to lands of inferior quality, their products must necessarily be paid for at a price which will compensate for the cost attached to the cultivation of such lands. In a country like France, in which wheat has, on an average, a value of a little more than eighteen francs per hectolitre, there are lands on which its value is not twelve, and on these lands the excess of the value for which the wheat is exchanged over the costs at which it is harvested is a rent which accrues to the owners of these lands. But this rent has no influence upon the accrued value to cereals; it is simply the effect of that value. The population of France could not do without that part of the wheat crop which could not be produced at a cost less than eighteen francs per hectolitre, and it is this part which assigns to the other parts their natural value. If the demand for the means of subsistence should increase to such an extent as to require the cultivation of lands on which wheat could not be produced except at an average cost of twenty francs per hectolitre, its value would rise still higher, and with it the rent which the land paid to those who owned it.

III.288.35

—The superaddition of value, which the wants of consumption confer, as compared with the products of their cost, or the products of the major part of the land, exists also in the case of a multitude of different industries. Thus it is the cost of extracting ore from those mines in which such cost is greatest, but whose product is necessary in order to meet the demand, which fixes the value of the ore. The same is true in manufacturing industries; the demand for the articles which they produce raises the value of these articles to a figure necessary to pay for the products of those manufacturing industries which are carried on, it matters not for what reason, at the greatest expense; and the higher net cost which is peculiar to these latter, assures to the articles of all the other industries a value which exceeds the real amount of their cost of production.

III.288.36

—But, if the value of the things which are susceptible of indefinite increase finds its rule and measure in the cost of the production of those of them which in order to reach the people who want them cost most, it is otherwise with the value of the things whose quantity it is impossible to increase at the desire or whim of the public. Their rarity exercises an influence on the value of the latter; and raises their value in a proportion which has no relation whatever with what they cost or did cost to produce. A work of art from the hands of one of the old masters, the autograph of an historic personage, or some object which he used during his lifetime, a jewel, a piece of armor, a bronze, a statue found under the lava of Pompeii or among the ruins of Athens or Rome, has an immense value; and there are persons who, to obtain one of these products, would part with a quantity of things in which had been invested a thousand times more wages and profit on capital than was invested originally in the product they purchase. In like manner precious stones, pearls of the first water, gold and silver and other precious metals, possess a value far in excess of what it cost to discover and extract them. Nature did not create them in sufficient quantity to satisfy the desires of all. So also, wines, fruits and tobaccos of certain choice brands, which possess special qualities that cause them to be eagerly sought after, possess in exchange a value far superior to that which their cost of production would give them. They can not be increased; their supply has forced limits; and the desire of obtaining them induces people to give much more for them than it costs to produce them.

III.288.37

—Besides rarity, there are artificial circumstances which affect the value of things and help to increase it beyond what the cost of production would warrant. Such are taxes (except taxes on land, in so far as they affect only the rent), monopolies and restrictions on the freedom of trade. Every tax has the inevitable effect of increasing the price of the merchandise or product upon which it is imposed. The person who pays the tax must be reimbursed; he adds the amount of the tax to what the article costs him, and in exchange he receives back the amount which he paid the state in addition to the natural value of the thing. Such are the effects on the value of things of the taxes levied on them before they reach the consumer, no matter for what reason, at what moment or under what form such taxes are levied. The treasury of the state can levy nothing on them without increasing the cost of their production, and consequently without increasing in an equal measure the value for which they are sold. The effect of monopolies is equally pronounced, and more lamentable. Monopolies are of different kinds; some are established for the benefit of the state, and serve as a source of revenue for it. Of this kind is the monopoly on tobacco in France; the government alone purchases the product in the crude state, manufactures it, and furnishes it for sale at a price which assures the state an annual revenue. Whatever superaddition of value such monopolies give to the products which they affect, is warranted if they serve to relieve a country of other taxes which would cause still greater inconveniences, and this must be borne in mind when considering these monopolies. Patents also constitute a monopoly in favor of the patentees; they may be a just remuneration for the labor and sacrifice to which an invention was due; but it is only by exaggerating the value of the patented article that they exercise any influence. Producers who are free from all competition are masters of the market, and it is an easy matter for them so to manage as to sell only at a large profit on the cost of production. The exclusion of foreign merchandise, through custom house duties intended to reserve the home market for home producers, has to a certain extent the same effect as patents. Consumers are forced to pay a higher price for the protected products than they can be bought for elsewhere, and are subjected to sacrifices which could and should be spared them. This alteration of the natural relations of value between exchangeable products is a real evil; nothing could be more prejudicial to the proper employment of productive forces, and thereby to the progress of social power and wealth. Such acts can be justified only by the necessity of defraying public expenses; but the products whose cost of production and value are to be artificially increased by the imposition of duties, should be carefully selected. The more these products are necessary for the satisfaction of wants common to all, the less those classes who consume scarcely any other products, and who have only the labor of their hands to give in exchange therefor, will have of them, and the more difficult it will be for them to reach that degree of well-being without which their condition can not be improved.

III.288.38

—Value, relative in its very essence, and based for each thing solely upon the quantity of another thing, or of other things in general, which it enables one to obtain, can not be affected by any of the circumstances which act equally upon all things at once. Its elements are labor and capital. It is the very quantity of these two things which every product absorbs before becoming a fit object of consumption that fixes its relative value; and no matter what the rate of wages or profits in a country may be, as the relations of exchange between the products can not be changed by that rate, neither can values be changed thereby. This is not the case, however, when the rate of one of the elements of production only is modified, and this because all products do not contain it in a like proportion. When wages increase, the value of those things into whose cost of production it more largely enters, naturally rises, and the value of those which require less manual labor than capital is comparatively lessened. The contrary is true when the rate of profits increases. In this case, those things whose cost absorbs more capital than labor increase in value, and obtain a greater quantity of other things in exchange. Such fluctuations in the respective value of things are of frequent occurrence, and when they happen it is easy to determine their cause. It will be noticed, however, that, in the ordinary course of facts, there are things whose value tends to fall gradually. These things are those whose manufacture requires more capital. The reason of this is, that, as civilization advances, capital accumulates in such a way that those who possess it are forced to content themselves with smaller profits.

III.288.39

—Such are the laws which govern value, and preside over its distribution among things. Value is not a quality incorporated in things, but is for each product the effect of a relation of exchange, the effect of the quantity of other products it serves to obtain; and this relation is determined, at any given moment, by supply and demand. But, while supply and demand regulate the values of the moment, there is, none the less, for those things whose number may be increased indefinitely at man's pleasure, a natural value, which, despite all the fluctuations to which that value is subject, always prevails in the end. This natural value results from the cost of production, and is determined by the amount of labor and capital employed in the production. A clear understanding of these general principles suffices to enable us to solve all questions pertaining to value, no matter how complicated they may seem to be.

HIPPOLYTE PASSY.

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