NOTES:
1。LogicofPoliticalEconomy，p。13。
2。AdamSmith，whointroducedtheexpression"effectualdemand"，
employedittodenotethedemandofthosewhoarewillingand
abletogiveforthecommoditywhathecallsitsnaturalprice，
thatis，thepricewhichwillenableittobepermanently
producedandbroughttomarket。——SeehischapteronNaturaland
MarketPrice（booki。ch。7）
3。"Thepriceofcorninthiscountryhasrisenfrom100to200
percentandupwards，whentheutmostcomputeddeficiencyofthe
cropshasnotbeenmorethanbetweenone—sixthandone—third
belowanaverage，andwhenthatdeficiencyhasbeenrelievedby
foreignsupplies。Ifthereshouldbeadeficiencyofthecrops
amountingtoone—third，withoutanysurplusfromaformeryear，
andwithoutanychanceofreliefbyimportation，thepricemight
risefive，six，oreventenfold。"——Tooke’sHistoryofPrices，
vol。i。pp。13—5。
4。SeeTooke，andtheReportoftheAgriculturalCommitteeof
1821。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3:Distribution
Chapter3
OfCostofProductioninItsRelationtoValue
1。Whentheproductionofacommodityistheeffectoflabour
andexpenditure，whetherthecommodityissusceptibleof
unlimitedmultiplicationornot，thereisaminimumvaluewhich
istheessentialconditionofitsbeingpermanentlyproduced。The
valueatanyparticulartimeistheresultofsupplyanddemand;
andisalwaysthatwhichisnecessarytocreateamarketforthe
existingsupply。Butunlessthatvalueissufficienttorepaythe
CostofProduction，andtoafford，besides，theordinary
expectationofprofit，thecommoditywillnotcontinuetobe
produced。Capitalistswillnotgoonpermanentlyproducingata
loss。Theywillnotevengoonproducingataprofitlessthan
theycanliveon。Personswhosecapitalisalreadyembarked，and
cannotbeeasilyextricated，willpersevereforaconsiderable
timewithoutprofit，andhavebeenknowntopersevereevenata
loss，inhopeofbettertimes。Buttheywillnotdoso
indefinitely，orwhenthereisnothingtoindicatethattimesare
likelytoimprove。Nonewcapitalwillbeinvestedinan
employment，unlesstherebeanexpectationnotonlyofsome
profit，butofaprofitasgreat（regardbeinghadtothedegree
ofeligibilityoftheemploymentinotherrespects）ascanbe
hopedforinanyotheroccupationatthattimeandplace。When
suchprofitisevidentlynottobehad，ifpeopledonotactually
withdrawtheircapital，theyatleastabstainfromreplacingit
whenconsumed。Thecostofproduction，togetherwiththeordinary
profit，maythereforebecalledthenecessaryprice，orvalue，of
allthingsmadebylabourandcapital。Nobodywillinglyproduces
intheprospectofloss。Whoeverdoesso，doesitundera
miscalculation，whichhecorrectsasfastasheisable。
Whenacommodityisnotonlymadebylabourandcapital，but
canbemadebytheminindefinitequantity，thisNecessaryValue，
theminimumwithwhichtheproducerswillbecontent，isalso，if
competitionisfreeandactive，themaximumwhichtheycan
expect。Ifthevalueofacommodityissuchthatitrepaysthe
costofproductionnotonlywiththecustomary，butwithahigher
rateofprofit，capitalrushestoshareinthisextragain，and
byincreasingthesupplyofthearticle，reducesitsvalue。This
isnotameresuppositionorsurmise，butafactfamiliarto
thoseconversantwithcommercialoperations。Wheneveranewline
ofbusinesspresentsitself，offeringahopeofunusualprofits，
andwheneveranyestablishedtradeormanufactureisbelievedto
beyieldingagreaterprofitthancustomary，thereissuretobe
inashorttimesolargeaproductionorimportationofthe
commodity，asnotonlydestroystheextraprofit，butgenerally
goesbeyondthemark，andsinksthevalueasmuchtoolowasit
hadbeforebeenraisedtoohigh;untiltheoversupplyis
correctedbyatotalorpartialsuspensionoffurtherproduction。
Asalreadyintimated，（1*）thesevariationsinthequantity
produceddonotpresupposeorrequirethatanypersonshould
changehisemployment。Thosewhosebusinessisthriving，increase
theirproducebyavailingthemselvesmorelargelyoftheir
credit，whilethosewhoarenotmakingtheordinaryprofit，
restricttheiroperations，and（inmanufacturingphrase）work
shorttime。Inthismodeissurelyandspeedilyeffectedthe
equalization，notofprofitsperhaps，butoftheexpectationsof
profit，indifferentoccupations。
Asageneralrule，then，thingstendtoexchangeforone
anotheratsuchvaluesaswillenableeachproducertoberepaid
thecostofproductionwiththeordinaryprofit;inotherwords，
suchaswillgivetoallproducersthesamerateofprofiton
theiroutlay。Butinorderthattheprofitmaybeequalwherethe
outlay，thatis，thecostofproduction，isequal，thingsmuston
theaverageexchangeforoneanotherintheratiooftheircost
ofproduction:thingsofwhichthecostofproductionisthe
same，mustbeofthesamevalue。Foronlythuswillanequal
outlayyieldanequalreturn。Ifafarmerwithacapitalequalto
1000quartersofcorn，canproduce1200quarters，yieldinghim
aprofitof20percent;whateverelsecanbeproducedinthe
sametimebyacapitalof1000quarters，mustbeworth，thatis，
mustexchangefor，1200quarters，otherwisetheproducerwould
gaineithermoreorlessthan20percent。
AdamSmithandRicardohavecalledthatvalueofathing
whichisproportionaltoitscostofproduction，itsNatural
Value（oritsNaturalPrice）。Theymeantbythis，thepointabout
whichthevalueoscillates，andtowhichitalwaystendsto
return;thecentrevalue，towardswhich，asAdamSmithexpresses
it，themarketvalueofathingisconstantlygravitating;and
anydeviationfromwhichisbutatemporaryirregularity，which，
themomentitexists，setsforcesinmotiontendingtocorrect
it。Onanaverageofyearssufficienttoenabletheoscillations
ononesideofthecentrallinetobecompensatedbythoseonthe
other，themarketvalueagreeswiththenaturalvalue;butit
veryseldomcoincidesexactlywithitatanyparticulartime。The
seaeverywheretendstoalevel;butitneverisatanexact
level;itssurfaceisalwaysruffledbywaves，andoftenagitated
bystorms。Itisenoughthatnopoint，atleastintheopensea，
ispermanentlyhigherthananother。Eachplaceisalternately
elevatedanddepressed;buttheoceanpreservesitslevel。
2。Thelatentinfluencebywhichthevaluesofthingsare
madetoconforminthelongruntothecostofproduction，isthe
variationthatwouldotherwisetakeplaceinthesupplyofthe
commodity。Thesupplywouldbeincreasedifthethingcontinued
tosellabovetheratioofitscostofproduction，andwouldbe
diminishedifitfellbelowthatratio。Butwemustnottherefore
supposeittobenecessarythatthesupplyshouldactuallybe
eitherdiminishedorincreased。Supposethatthecostof
productionofathingischeapenedbysomemechanicalinvention，
orincreasedbyatax。Thevalueofthethingwouldinalittle
time，ifnotimmediately，fallintheonecase，andriseinthe
other;anditwoulddoso，becauseifitdidnot，thesupply
wouldintheonecasebeincreased，untilthepricefell，inthe
otherdiminished，untilitrose。Forthisreason，andfromthe
erroneousnotionthatvaluedependsontheproportionbetweenthe
demandandthesupply，manypersonssupposethatthisproportion
mustbealteredwheneverthereisanychangeinthevalueofthe
commodity;thatthevaluecannotfallthroughadiminutionofthe
costofproduction，unlessthesupplyispermanentlyincreased;
norrise，unlessthesupplyispermanentlydiminished。Butthis
isnotthefact:thereisnoneedthatthereshouldbeanyactual
alterationofsupply;andwhenthereis，thealteration，if
permanent，isnotthecause，buttheconsequenceofthe
alterationinvalue。If，indeed，thesupplycouldnotbe
increased，nodiminutioninthecostofproductionwouldlower
thevalue:butthereisbynomeansanynecessitythatitshould。
Themerepossibilityoftensuffices;thedealersareawareof
whatwouldhappen，andtheirmutualcompetitionmakesthem
anticipatetheresultbyloweringtheprice。Whethertherewill
beagreaterpermanentsupplyofthecommodityafterits
productionhasbeencheapened，dependsonquiteanotherquestion，
namely，onwhetheragreaterquantityiswantedatthereduced
value。Mostcommonlyagreaterquantityiswanted，butnot
necessarily。"Aman，"saysMrDeQuincey，（2*）"buysanarticle
ofinstantapplicabilitytohisownpurposesthemorereadilyand
themorelargelyasithappenstobecheaper。Silkhandkerchiefs
havingfallentohalf—price，hewillbuy，perhaps，inthreefold
quantity;buthedoesnotbuymoresteam—enginesbecausethe
priceislowered。Hisdemandforsteam—enginesisalmostalways
predeterminedbythecircumstancesofhissituation。Sofarashe
considersthecostatall，itismuchmorethecostofworking
thisenginethanthecostuponitspurchase。Buttherearemany
articlesforwhichthemarketisabsolutelyandmerelylimitedby
apre—existingsystem，towhichthosearticlesareattachedas
subordinatepartsormembers。Howcouldweforcethedialsor
facesoftimepiecesbyartificialcheapnesstosellmore
plentifullythantheinnerworksormovementsofsuchtimepieces？
Couldthesaleofwine—vaultsbeincreasedwithoutincreasingthe
saleofwine？Orthetoolsofshipwrightsfindanenlargedmarket
whilstshipbuildingwasstationary？……Offertoatownof3000
inhabitantsastockofhearses，nocheapnesswilltemptthattown
intobuyingmorethanone。Offerastockofyachts，thechief
costliesinmanning，victualling，repairing;nodiminutionupon
themerepricetoapurchaserwilltemptintothemarketanyman
whosehabitsandpropensitieshadnotalreadydisposedhimto
suchapurchase。Soofprofessionalcostumeforbishops，lawyers，
studentsatOxford。"Nobodydoubts，however，thatthepriceand
valueofallthesethingswouldbeeventuallyloweredbyany
diminutionoftheircostofproduction;andloweredthroughthe
apprehensionentertainedofnewcompetitors，andanincreased，
supply。thoughthegreathazardtowhichanewcompetitorwould
exposehimself，inanarticlenotsusceptibleofanyconsiderable
extensionofitsmarket，wouldenabletheestablisheddealersto
maintaintheiroriginalpricesmuchlongerthantheycoulddoin
anarticleofferingmoreencouragementtocompetition。
Again，reversethecase，andsupposethecostofproduction
increased，asforexamplebylayingataxonthecommodity。The
valuewouldrise;andthat，probably，immediately。Wouldthe
supplybediminished？Onlyiftheincreaseofvaluediminished
thedemand。Whetherthiseffectfollowed，wouldsoonappear，and
ifitdid，thevaluewouldrecedesomewhat，fromexcessof
supply，untiltheproductionwasreduced，andwouldthenrise
again。Therearemanyarticlesforwhichitrequiresavery
considerableriseofprice，materiallytoreducethedemand;in
particular，articlesofnecessity，suchasthehabitualfoodof
thepeople;inEngland，wheatenbread:ofwhichthereisprobably
almostasmuchconsumed，atthepresentcostprice，asthere
wouldbewiththepresentpopulationatapriceconsiderably
lower。Yetitisespeciallyinsuchthingsthatdearnessorhigh
priceispopularlyconfoundedwithscarcity。Foodmaybedear
fromscarcity，asafterabadharvest;butthedearness（for
example）whichistheeffectoftaxation，orofcornlaws，has
nothingwhatevertodowithinsufficientsupply:suchcausesdo
notmuchdiminishthequantityoffoodinacountry。itisother
thingsratherthanfoodthatarediminishedinquantitybythem，
since，thosewhopaymoreforfoodnothavingsomuchtoexpend
otherwise，theproductionofotherthingscontractsitselftothe
limitsofasmallerdemand。
Itis，therefore，strictlycorrecttosay，thatthevalueof
thingswhichcanbeincreasedinquantityatpleasure，doesnot
depend（exceptaccidentally，andduringthetimenecessaryfor
productiontoadjustitself，）upondemandandsupply;onthe
contrary，demandandsupplydependuponit。Thereisademandfor
acertainquantityofthecommodityatitsnaturalorcostvalue，
andtothatthesupplyinthelongrunendeavourstoconform。
Whenatanytimeitfailsofsoconforming，itiseitherfrom
miscalculation，orfromachangeinsomeoftheelementsofthe
problem:eitherinthenaturalvalue，thatis，inthecostof
production;orinthedemand，fromanalterationinpublictaste
orinthenumberorwealthoftheconsumers。Thesecausesof
disturbanceareveryliabletooccur，andwhenanyoneofthem
doesoccur，themarketvalueofthearticleceasestoagreewith
thenaturalvalue。Thereallawofdemandandsupply，the
equationbetweenthem，stillholdsgood:ifavaluedifferent
fromthenaturalvaluebenecessarytomakethedemandequalto
thesupply，themarketvaluewilldeviatefromthenaturalvalue;
butonlyforatime;forthepermanenttendencyofsupplyisto
conformitselftothedemandwhichisfoundbyexperienceto
existforthecommoditywhensellingatitsnaturalvalue。Ifthe
supplyiseithermoreorlessthanthis，itissoaccidentally，
andaffordseithermoreorlessthantheordinaryrateofprofit;
which，underfreeandactivecompetition，cannotlongcontinueto
hethecase。
Torecapitulate:demandandsupplygovernthevalueofall
thingswhichcannotbeindefinitelyincreased;exceptthateven
forthem，whenproducedbyindustry，thereisaminimumvalue，
determinedbythecostofproduction。Butinallthingswhich
admitofindefinitemultiplication，demandandsupplyonly
determinetheperturbationsofvalue，duringaperiodwhich
cannotexceedthelengthoftimenecessaryforalteringthe
supply。Whilethusrulingtheoscillationsofvalue，they
themselvesobeyasuperiorforce，whichmakesvaluegravitate
towardsCostofProduction，andwhichwouldsettleitandkeepit
there，iffreshdisturbinginfluenceswerenotcontinuityarising
tomakeitagaindeviate。Topursuethesamestrainofmetaphor，
demandandsupplyalwaysrushtoanequilibrium，butthe
conditionofstableequilibriumiswhenthingsexchangeforeach
otheraccordingtotheircostofproduction，or，inthe
expressionwehaveused，whenthingsareattheirNaturalValue。
NOTES:
1。Supra，p。407。
2。LogicofPoliticalEconomy，pp。230—1。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3:Distribution
Chapter4
UltimateAnalysisofCostofProduction
1。ThecomponentelementsofCostofProductionhavebeenset
forthintheFirstPartofthisenquiry。（1*）Theprincipalof
them，andsomuchtheprincipalastobenearlythesole，we
foundtobeLabour。Whattheproductionofathingcoststoits
producer，oritsseriesofproducers，isthelabourexpendedin
producingit。Ifweconsiderastheproducerthecapitalistwho
makestheadvances，thewordLabourmaybereplacedbytheword
Wages:whattheproducecoststohim，isthewageswhichhehas
hadtopay。Atthefirstglanceindeedthisseemstobeonlya
partofhisoutlay，sincehehasnotonlypaidwagesto
labourers，buthaslikewiseprovidedthemwithtools，materials，
andperhapsbuildings。Thesetools，materials，andbuildings，
however，wereproducedbylabourandcapital;andtheirvalue，
likethatofthearticletotheproductionofwhichtheyare
subservient，dependsoncostofproduction，whichagainis
resolvableintolabour。Thecostofproductionofbroadclothdoes
notwhollyconsistinthewagesofweavers;whichaloneare
directlypaidbytheclothmanufacturer。Itconsistsalsoofthe
wagesofspinnersandwoolcombers，and，itmaybeadded，of
shepherds，allofwhichtheclothierhaspaidforinthepriceof
yarn。Itconsiststooofthewagesofbuildersandbrickmakers，
whichhehasreimbursedinthecontractpriceoferectinghis
factory。Itpartlyconsistsofthewagesofmachine—makers，
iron—founders，andminers。Andtothesemustbeaddedthewages
ofthecarrierswhotransportedanyofthemeansandappliances
oftheproductiontotheplacewheretheyweretobeused，and
theproductitselftotheplacewhereitistobesold。
Thevalueofcommodities，therefore，dependsprincipally（we
shallpresentlyseewhetheritdependssolely）onthequantityof
labourrequiredfortheirproduction;includingintheideaof
production，thatofconveyancetothemarket。"Inestimating，"
saysRicardo，（2*）"theexchangeablevalueofstockings，for
example，weshallfindthattheirvalue，comparativelywithother
things，dependsonthetotalquantityoflabournecessaryto
manufacturethemandbringthemtomarket。First，thereisthe
labournecessarytocultivatethelandonwhichtherawcottonis
grown;secondly，thelabourofconveyingthecottontothe
countrywherethestockingsaretobemanufactured，which
includesaportionofthelabourbestowedinbuildingtheshipin
whichitisconveyed，andwhichischargedinthefreightofthe
goods;thirdly，thelabourofthespinnerandweaver;fourthly，a
portionofthelabouroftheengineer，smith，andcarpenter，who
erectedthebuildingsandmachinerybythehelpofwhichtheyare
made;fifthly，thelabouroftheretaildealerandofmany
others，whomitisunnecessaryfurthertoparticularize。The
aggregatesumofthesevariouskindsoflabour，determinesthe
quantityofotherthingsforwhichthesestockingswillexchange，
whilethesameconsiderationofthevariousquantitiesoflabour
whichhavebeenbestowedonthoseotherthings，willequally
governtheportionofthemwhichwillbegivenforthestockings。
"Toconvinceourselvesthatthisistherealfoundationof
exchangeablevalue，letussupposeanyimprovementtobemadein
themeansofabridginglabourinanyoneofthevariousprocesses
throughwhichtherawcottonmustpassbeforethemanufactured
stockingscometothemarkettobeexchangedforotherthings;
andobservetheeffectswhichwillfollow。Iffewermenwere
requiredtocultivatetherawcotton，oriffewersailorswere
employedinnavigating，orshipwrightsinconstructing，theship
inwhichitwasconveyedtous;iffewerhandswereemployedin
raisingthebuildingsandmachinery，orifthese，whenraised，
wererenderedmoreefficient;thestockingswouldinevitablyfall
invalue，andcommandlessofotherthings。Theywouldfall，
becausealessquantityoflabourwasnecessarytotheir
production，andwouldthereforeexchangeforasmallerquantity
ofthosethingsinwhichnosuchabridgementoflabourhadbeen
made。
"Economyintheuseoflabourneverfailstoreducethe
relativevalueofacommodity，whetherthesavingbeinthe
labournecessarytothemanufactureofthecommodityitself，or
inthatnecessarytotheformationofthecapital，bytheaidof
whichitisproduced。Ineithercasethepriceofstockingswould
fall，whethertherewerefewermenemployedasbleachers，
spinners，andweavers，personsimmediatelynecessarytotheir
manufacture;orassailors，carriers，engineers，andsmiths，
personsmoreindirectlyconcerned。Intheonecase，thewhole
savingoflabourwouldfallonthestockings，becausethat
portionoflabourwaswhollyconfinedtothestockings;inthe
other，aportiononlywouldfallonthestockings，theremainder
beingappliedtoallthoseothercommodities，totheproduction
ofwhichthebuildings，machinery，andcarriage，were
subservient。"
2。ItwillhavebeenobservedthatRicardoexpresseshimself
asifthequantityoflabourwhichitcoststoproducea
commodityandbringittomarket，weretheonlythingonwhich
itsvaluedepended。Butsincethecostofproductiontothe
capitalistisnotlabourbutwages，andsincewagesmaybeeither
greaterorless，thequantityoflabourbeingthesame;itwould
seemthatthevalueoftheproductcannotbedeterminedsolelyby
thequantityoflabour，butbythequantitytogetherwiththe
remuneration;andthatvaluesmustpartlydependonwages。
Inordertodecidethispoint，itmustbeconsidered，that
valueisarelativeterm:thatthevalueofacommodityisnota
nameforaninherentandsubstantivequalityofthethingitself，
butmeansthequantityofotherthingswhichcanbeobtainedin
exchangeforit。Thevalueofonething，mustalwaysbe
understoodrelativelytosomeotherthing，ortothingsin
general。Nowtherelationofonethingtoanothercannotbe
alteredbyanycausewhichaffectsthembothalike。Ariseor
fallofgeneralwagesisafactwhichaffectsallcommoditiesin
thesamemanner，andthereforeaffordsnoreasonwhytheyshould
exchangeforeachotherinoneratherthaninanotherproportion。
Tosupposethathighwagesmakehighvalues，istosupposethat
therecanbesuchathingasgeneralhighvalues。Butthisisa
contradictioninterms:thehighvalueofsomethingsis
synonymouswiththelowvalueofothers。Themistakearisesfrom
notattendingtovalues，butonlytoprices。Thoughthereisno
suchthingasageneralriseofvalues，thereissuchathingas
ageneralriseofprices。Assoonasweformdistinctlytheidea
ofvalues，weseethathighorlowwagescanhavenothingtodo
withthem;butthathighwagesmakehighprices，isapopularand
widely—spreadopinion。Thewholeamountoferrorinvolvedinthis
propositioncanonlybeseenthoroughlywhenwecometothe
theoryofmoney;atpresentweneedonlysaythatifitbetrue，
therecanbenosuchthingasarealriseofwages;forifwages
couldnotrisewithoutaproportionalriseofthepriceof
everything，theycouldnot，foranysubstantialpurpose，riseat
all。Thissurelyisasufficientreductioadabsurdum，andshows
theamazingfollyofthepropositionswhichmayanddobecome，
andlongremain，accrediteddoctrinesofpopularpolitical
economy。Itmustberememberedtoothatgeneralhighprices，even
supposingthemtoexist，canbeofnousetoaproduceror
dealer，consideredassuch;foriftheyincreasehismoney
returns，theyincreaseinthesamedegreeallhisexpenses。There
isnomodeinwhichcapitalistscancompensatethemselvesfora
highcostoflabour，throughanyactiononvaluesorprices。It
cannotbepreventedfromtakingitseffectonlowprofits。Ifthe
labourersreallygetmore，thatis，gettheproduceofmore
labour，asmallerpercentagemustremainforprofit。Fromthis
LawofDistribution，restingasitdoesonalawofarithmetic，
thereisnoescape。ThemechanismofExchangeandPricemayhide
itfromus，butisquitepowerlesstoalterit。
3。Although，however，generalwages，whetherhighorlow，do
notaffectvalues，yetifwagesarehigherinoneemploymentthan
another，oriftheyriseandfallpermanentlyinoneemployment
withoutdoingsoinothers，theseinequalitiesdoreallyoperate
uponvalues。Thecauseswhichmakewagesvaryfromoneemployment
toanother，havebeenconsideredinaformerchapter。Whenthe
wagesofanemploymentpermanentlyexceedtheaveragerate，the
valueofthethingproducedwill，inthesamedegree，exceedthe
standarddeterminedbymerequantityoflabour。Things，for
example，whicharemadebyskilledlabour，exchangeforthe
produceofamuchgreaterquantityofunskilledlabour;forno
reasonbutbecausethelabourismorehighlypaid。If，through
theextensionofeducation，thelabourerscompetenttoskilled
employmentweresoincreasedinnumberastodiminishthe
differencebetweentheirwagesandthoseofcommonlabour，all
thingsproducedbylabourofthesuperiorkindwouldfallin
value，comparedwiththingsproducedbycommonlabour，andthese
mightbesaidthereforetoriseinvalue。Wehavebeforeremarked
thatthedifficultyofpassingfromoneclassofemploymentstoa
classgreatlysuperior，hashithertocausedthewagesofall
thoseclassesoflabourerswhoareseparatedfromoneanotherby
anyverymarkedbarrier，todependmorethanmightbesupposed
upontheincreaseofthepopulationofeachclassconsidered
separately;andthattheinequalitiesintheremunerationof
labouraremuchgreaterthancouldexistifthecompetitionof
thelabouringpeoplegenerallycouldbebroughtpracticallyto
bearoneachparticularemployment。Itfollowsfromthisthat
wagesindifferentemploymentsdonotriseorfall
simultaneously，butare，forshortandsometimesevenforlong
periods，nearlyindependentofoneanother。Allsuchdisparities
evidentlyaltertherelativecostsofproductionofdifferent
commodities，andwillthereforebecompletelyrepresentedin
theirnaturaloraveragevalue。
Itthusappearsthatthemaximlaiddownbysomeofthebest
politicaleconomists，thatwagesdonotenterintovalue，is
expressedwithgreaterlatitudethanthetruthwarrants，orthan
accordswiththeirownmeaning。Wagesdoenterintovalue。The
relativewagesofthelabournecessaryforproducingdifferent
commodities，affecttheirvaluejustasmuchastherelative
quantitiesoflabour。Itistrue，theabsolutewagespaidhaveno
effectuponvalues;butneitherhastheabsolutequantityof
labour。Ifthatweretovarysimultaneouslyandequallyinall
commodities，valueswouldnotbeaffected。If，forinstance，the
generalefficiencyofalllabourwereincreased，sothatall
thingswithoutexceptioncouldbeproducedinthesamequantity
asbeforewithasmalleramountoflabour，notraceofthis
generaldiminutionofcostofproductionwouldshowitselfinthe
valuesofcommodities。Anychangewhichmighttakeplaceinthem
wouldonlyrepresenttheunequaldegreesinwhichtheimprovement
affecteddifferentthings;andwouldconsistincheapeningthose
inwhichthesavingoflabourhadbeenthegreatest，whilethose
inwhichtherehadbeensome，butalesssavingoflabour，would
actuallyriseinvalue。Instrictness，therefore，wagesoflabour
haveasmuchtodowithvalueasquantityoflabour:andneither
Ricardonoranyoneelsehasdeniedthefact。Inconsidering，
however，thecausesofvariationsinvalue，quantityoflabouris
thethingofchiefimportance;forwhenthatvaries，itis
generallyinoneorafewcommoditiesatatime，butthe
variationsofwages（exceptpassingfluctuations）areusually
general，andhavenoconsiderableeffectonvalue。
4。Thusfaroflabour，orwages，asanelementincostof
production。Butinouranalysis，intheFirstBook，ofthe
requisitesofproduction，wefoundthatthereisanother
necessaryelementinitbesideslabour。Thereisalsocapital;
andthisbeingtheresultofabstinence，theproduce，orits
value，mustbesufficienttoremunerate，notonlyallthelabour
required，buttheabstinenceofallthepersonsbywhomthe
remunerationofthedifferentclassesoflabourerswasadvanced。
ThereturnforabstinenceisProfit。Andprofit，wehavealso
seen，isnotexclusivelythesurplusremainingtothecapitalist
afterhehasbeencompensatedforhisoutlay，butforms，inmost
cases，nounimportantpartoftheoutlayitself。The
flax—spinner，partofwhoseexpensesconsistsofthepurchaseof
flaxandofmachinery，hashadtopay，intheirprice，notonly
thewagesofthelabourbywhichtheflaxwasgrownandthe
machinerymade，buttheprofitsofthegrower，theflax—dresser，
theminer，theironfounder，andthemachine—maker。Allthese
profits，togetherwiththoseofthespinnerhimself，wereagain
advancedbytheweaver，inthepriceofhismaterial，linenyarn:
andalongwiththemtheprofitofafreshsetofmachine—makers，
andoftheminersandiron—workerswhosuppliedthemwiththeir
metallicmaterial。Alltheseadvancesformpartofthecostof
productionoflinen。Profits，therefore，aswellaswages，enter
intothecostofproductionwhichdeterminesthevalueofthe
produce。
Value，however，beingpurelyrelative，cannotdependupon
absoluteprofits，nomorethanuponabsolutewages，butupon
relativeprofitsonly。Highgeneralprofitscannot，anymorethan
highgeneralwages，beacauseofhighvalues，becausehigh
generalvaluesareanabsurdityandacontradiction。Insofaras
profitsenterintothecostofproductionofallthings，they
cannotaffectthevalueofany。Itisonlybyenteringina
greaterdegreeintothecostofproductionofsomethingsthanof
others，thattheycanhaveanyinfluenceonvalue。
Forexample，wehaveseenthattherearecauseswhich
necessitateapermanentlyhigherrateofprofitincertain
employmentsthaninothers。Theremustbeacompensationfor
superiorrisk，trouble，anddisagreeableness。Thiscanonlybe
obtainedbysellingthecommodityatavalueabovethatwhichis
duetothequantityoflabournecessaryforitsproduction。If
gunpowderexchangedforotherthingsinnohigherratiothanthat
ofthelabourrequiredfromfirsttolastforproducingit，no
onewouldsetupapowder—mill。Butchersarecertainlyamore
prosperousclassthanbakers，anddonotseemtobeexposedto
greaterrisks，sinceitisnotremarkedthattheyareoftener
bankrupts。Theyseem，therefore，toobtainhigherprofits，which
canonlyarisefromthemorelimitedcompetitioncausedbythe
unpleasantness，andtoacertaindegree，theunpopularity，of
theirtrade。Butthishigherprofitimpliesthattheyselltheir
commodityatahighervaluethanthatduetotheirlabourand
outlay。Allinequalitiesofprofitwhicharenecessaryand
permanent，arerepresentedintherelativevaluesofthe
commodities。
5。Profits，however，mayentermorelargelyintothe
conditionsofproductionofonecommoditythanofanother，even
thoughtherebenodifferenceintherateofprofitbetweenthe
twoemployments。Theonecommoditymaybecalledupontoyield
profitduringalongerperiodoftimethantheother。Theexample
bywhichthiscaseisusuallyillustratedisthatofwine。
Supposeaquantityofwine，andaquantityofcloth，madeby
equalamountsoflabour，andthatlabourpaidatthesamerate。
Theclothdoesnotimprovebykeeping;thewinedoes。Suppose
that，toattainthedesiredquality，thewinerequirestobekept
fiveyears。Theproducerordealerwillnotkeepit，unlessat
theendoffiveyearshecansellitforasmuchmorethanthe
cloth，asamountstofiveyears’profit，accumulatedatcompound
interest。Thewineandtheclothweremadebythesameoriginal
outlay。Herethenisacaseinwhichthenaturalvalues，
relativelytooneanother，oftwocommodities，donotconformto
theircostofproductionalone，buttotheircostofproduction
plussomethingelse。Unless，indeed，forthesakeofgenerality
intheexpression，weincludetheprofitwhichthewine—merchant
foregoesduringthefiveyears，inthecostofproductionofthe
wine:lookinguponitasakindofadditionaloutlay，overand
abovehisotheradvances，forwhichoutlayhemustbeindemnified
atlast。
Allcommoditiesmadebymachineryareassimilated，atleast
approximately，tothewineintheprecedingexample。In
comparisonwiththingsmadewhollybyimmediatelabour，profits
entermorelargelyintotheircostofproduction。Supposetwo
commodities，AandB，eachrequiringayearforitsproduction，
bymeansofacapitalwhichwewillonthisoccasiondenoteby
money，andsupposetobe1000l。Aismadewhollybyimmediate
labour，thewhole1000l。beingexpendeddirectlyinwages。Bis
madebymeansoflabourwhichcosts500l。andamachinewhich
cost500l。，andthemachineiswornoutbyoneyear’suse。The
twocommoditieswillbeexactlyofthesamevalue;which，if
computedinmoney，andifprofitsare20percentperannum，will
be1200l。Butofthis1200l。，inthecaseofA，only200l。，or
one—sixth，isprofit:whileinthecaseofBthereisnotonly
the200l。，butasmuchof500l。（thepriceofthemachine）as
consistedoftheprofitsofthemachine—maker;which，ifwe
supposethemachinealsotohavetakenayearforitsproduction，
isagainone—sixth。SothatinthecaseofAonlyone—sixthof
theentirereturnisprofit，whilstinBtheelementofprofit
comprisesnotonlyasixthofthewhole，butanadditionalsixth
ofalargepart。
Thegreatertheproportionofthewholecapitalwhich
consistsofmachinery，orbuildings，ormaterial，oranything
elsewhichmustbeprovidedbeforetheimmediatelabourcan
commence，themorelargelywillprofitsenterintothecostof
production。Itisequallytrue，thoughnotsoobviousatfirst
sight，thatgreaterdurabilityintheportionofcapitalwhich
consistsofmachineryorbuildings，haspreciselythesameeffect
asagreateramountofit。Aswejustsupposedoneextremecase，
ofamachineentirelywornoutbyayear’suse，letusnow
supposetheoppositeandstillmoreextremecaseofamachine
whichlastsforever，andrequiresnorepairs。Inthiscase，
whichisaswellsuitedforthepurposedofillustrationasifit
wereapossibleone，itwillbeunnecessarythatthemanufacturer
shouldeverberepaidthe500l。whichhegaveforthemachine，
sincehehasalwaysthemachineitself，worth500l。;buthemust
bepaid，asbefore，aprofitonit。ThecommodityB，therefore，
whichinthecasepreviouslysupposedwassoldfor1200l。of
whichsum1000l。weretoreplacethecapitaland200l。were
profit，cannowbesoldfor700l。，being500l。toreplacewages，
and200l。profitontheentirecapital。Profit，therefore，enters
intothevalueofBintheratioof200l。outof700l。，being
two—seventhsofthewhole，or284/7percent，whileinthecase
ofA，asbefore，itentersonlyintheratioofone—sixth，or16
2/3percent。Thecaseisofcoursepurelyideal，sinceno
machineryorotherfixedcapitallastsforever;butthemore
durableitis，theneareritapproachestothisidealcase，and
themorelargelydoesprofitenterintothereturn。If，for
instance，amachineworth500l。losesone—fifthofitsvalueby
eachyear’suse，l00l。mustbeaddedtothereturntomakeup
thisloss，andthepriceofthecommoditywillbe8OOl。Profit
thereforewillenterintoitintheratioof200l。to800l。，or
one—fourth，whichisstillamuchhigherproportionthan
one—sixth，or200l。in1200l。，asincaseA。Fromtheunequal
proportioninwhich，indifferentemployments，profitsenterinto
theadvancesofthecapitalist，andthereforeintothereturns
requiredbyhim，twoconsequencesfollowinregardtovalue。One
is，thatcommoditiesdonotexchangeintheratiosimplyofthe
quantitiesoflabourrequiredtoproducethem;notevenifwe
allowfortheunequalratesatwhichdifferentkindsoflabour
arepermanentlyremunerated。Wehavealreadyillustratedthisby
theexampleofwine:weshallnowfurtherexemplifyitbythe
caseofcommoditiesmadebymachinery。Suppose，asbefore，an
articleAmadebyathousandpounds’worthofimmediatelabour。
ButinsteadofB，madeby500l。worthofimmediatelabouranda
machineworth500l。，letussupposeC，madeby500l。worthof
immediatelabourwiththeaidofamachinewhichhasbeen
producedbyanother500l。worthofimmediatelabour:themachine
requiringayearformaking，andwornoutbyayear’suse;
profitsbeingasbefore20percent。AandCaremadebyequal
quantitiesoflabour，paidatthesamerate:Acosts1000l。worth
ofdirectlabour;C，only500l。worth，whichhoweverismadeup
to1000l。bythelabourexpendedintheconstructionofthe
machine。Iflabour，oritsremuneration，werethesoleingredient
ofcostofproduction，thesetwothingswouldexchangeforone
another。Butwilltheydoso？Certainlynot。Themachinehaving
beenmadeinayearbyanoutlayof500l。，andprofitsbeing20
percent，thenaturalpriceofthemachineis600l。:makingan
additional100l。whichmustbeadvanced，overandabovehisother
expenses，bythemanufacturerofC，andrepaidtohimwitha
profitof20percent。While，therefore，thecommodityAissold
for1200l。，Ccannotbepermanentlysoldforlessthan1320l。
Asecondconsequenceis，thateveryriseorfallofgeneral
profitswillhaveaneffectonvalues。Notindeedbyraisingor
loweringthemgenerally，（which，aswehavesooftensaid，isa
contradictionandanimpossibility）:butbyalteringthe
proportioninwhichthevaluesofthingsareaffectedbythe
unequallengthsoftimeforwhichprofitisdue。Whentwothings，
thoughmadebyequallabour，areofunequalvaluebecausetheone
iscalledupontoyieldprofitforagreaternumberofyearsor
monthsthantheother;thisdifferenceofvaluewillbegreater
whenprofitsaregreater，andlesswhentheyareless。Thewine
whichhastoyieldfiveyears’profitmorethanthecloth，will
surpassitinvaluemuchmoreifprofitsare40percent，thanif
theyareonly20。ThecommoditiesAandC，which，thoughmadeby
equalquantitiesoflabour，weresoldfor1200l。and1320l。，a
differenceof10percent，would，ifprofitshadbeenonlyhalf
asmuch，havebeensoldfor1100l。and1155l。，adifferenceof
only5percent。
Itfollowsfromthis，thatevenageneralriseofwages，when
itinvolvesarealincreaseinthecostoflabour，doesinsome
degreeinfluencevalues。Itdoesnotaffecttheminthemanner
vulgarlysupposed，byraisingthemuniversally。Butanincrease
inthecostoflabour，lowersprofits;andthereforelowersin
naturalvaluethethingsintowhichprofitsenterinagreater
proportionthantheaverage，andraisesthoseintowhichthey
enterinalessproportionthantheaverage。Allcommoditiesin
theproductionofwhichmachinerybearsalargepart，especially
ifthemachineryisverydurable，areloweredintheirrelative
valuewhenprofitsfall;or，whatisequivalent，otherthingsare
raisedinvaluerelativelytothem。Thistruthissometimes
expressedinaphraseologymoreplausiblethansound，bysaying
thatariseofwagesraisesthevalueofthingsmadebylabour，
incomparisonwiththosemadebymachinery。Butthingsmadeby
machinery，justasmuchasanyotherthings，aremadebylabour，
namely，thelabourwhichmadethemachineryitself:theonly
differencebeingthatprofitsentersomewhatmorelargelyinto
theproductionofthingsforwhichmachineryisused，thoughthe
principalitemoftheoutlayisstilllabour。Itisbetter，
therefore，toassociatetheeffectwithfallofprofitsthanwith
riseofwages;especiallyasthislastexpressionisextremely
ambiguous，suggestingtheideaofanincreaseofthelabourer’s
realremuneration，ratherthanofwhatisalonetothepurpose
here，namely，thecostoflabourtoitsemployer。
6。Besidesthenaturalandnecessaryelementsincostof
production—labourandprofits—thereareotherswhichare
artificialandcasual，asforinstanceatax。Thetaxonmaltis
asmuchapartofthecostofproductionofthatarticleasthe
wagesofthelabourers。Theexpenseswhichthelawimposes，as
wellasthosewhichthenatureofthingsimposes，mustbe
reimbursedwiththeordinaryprofitfromthevalueofthe
produce，orthethingswillnotcontinuetobeproduced。Butthe
influenceoftaxationonvalueissubjecttothesameconditions
astheinfluenceofwagesandofprofits。Itisnotgeneral
taxation，butdifferentialtaxation，thatproducestheeffect。If
allproductionsweretaxedsoastotakeanequalpercentagefrom
allprofits，relativevalueswouldbeinnowaydisturbed。If
onlyafewcommoditiesweretaxed，theirvaluewouldrise:andif
onlyafewwereleftuntaxed，theirvaluewouldfall。Ifhalf
weretaxedandtheremainderuntaxed，thefirsthalfwouldrise
andthelastwouldfallrelativelytoeachother。Thiswouldbe
necessaryinordertoequalizetheexpectationofprofitinall
employments，withoutwhichthetaxedemploymentswould
ultimately，ifnotimmediately，beabandoned。Butgeneral
taxation，whenequallyimposed，andnotdisturbingtherelations
ofdifferentproductionstooneanother，cannotproduceany
effectonvalues。
Wehavethusfarsupposedthatallthemeansandappliances
whichenterintothecostofproductionofcommodities，are
thingswhoseownvaluedependsontheircostofproduction。Some
ofthem，however，maybelongtotheclassofthingswhichcannot
beincreasedadlibituminquantity，andwhichtherefore，ifthe
demandgoesbeyondacertainamount，commandascarcityvalue。
Thematerialsofmanyoftheornamentalarticlesmanufacturedin
Italyarethesubstancescalledrosso，giallo，andverdeantico，
which，whethertrulyorfalselyIknownot，areassertedtobe
solelyderivedfromthedestructionofancientcolumnsandother
ornamentalstructures;thequarriesfromwhichthestonewas
originallycutbeingexhausted，ortheirlocalityforgotten。（3*）
Amaterialofsuchanature，ifinmuchdemand，mustbeata
scarcityvalue;andthisvalueentersintothecostof
production，andconsequentlyintothevalue，ofthefinished
article。Thetimeseemstobeapproachingwhenthemorevaluable
furswillcomeundertheinfluenceofascarcityvalueofthe
material。Hithertothediminishingnumberoftheanimalswhich
producethem，inthewildernessesofSiberia，andonthecoasts
oftheEsquimauxSea，hasoperatedonthevalueonlythroughthe
greaterlabourwhichhasbecomenecessaryforsecuringanygiven
quantityofthearticle，since，withoutdoubt，byemploying
labourenough，itmightstillbeobtainedinmuchgreater
abundanceforsometimelonger。
Butthecaseinwhichscarcityvaluechieflyoperatesin
addingtocostofproduction，isthecaseofnaturalagents。
These，whenunappropriated，andtobehadforthetaking，donot
enterintocostofproduction，savetotheextentofthelabour
whichmaybenecessarytofitthemforuse。Evenwhen
appropriated，theydonot（aswehavealreadyseen）bearavalue
fromthemerefactoftheappropriation，butonlyfromscarcity，
thatis，fromlimitationofsupply。Butitisequallycertain
thattheyoftendobearascarcityvalue。Supposeafallof
water，inaplacewheretherearemoremillswantedthanthereis
water—powertosupplythem，theuseofthefallofwaterwill
haveascarcityvalue，sufficienteithertobringthedemanddown
tothesupply，ortopayforthecreationofanartificialpower，
bysteamorotherwise，equalinefficiencytothewater—power。
Anaturalagentbeingapossessioninperpetuity，andbeing
onlyserviceablebytheproductsresultingfromitscontinued
employment，theordinarymodeofderivingbenefitfromits
ownershipisbyanannualequivalent，paidbythepersonwhouses
it，fromtheproceedsofitsuse。Thisequivalentalwaysmight
be，andgenerallyis，termedrent。Thequestion，therefore，
respectingtheinfluencewhichtheappropriationofnatural
agentsproducesonvalues，isoftenstatedinthisform:Does
RententerintoCostofProduction？andtheanswerofthebest
politicaleconomistsisinthenegative。Thetemptationisstrong
totheadoptionofthesesweepingexpressions，evenbythosewho
areawareoftherestrictionswithwhichtheymustbetaken;for
thereisnodenyingthattheystampageneralprinciplemore
firmlyonthemind，thanifitwerehedgedroundintheorywith
allitspracticallimitations。Buttheyalsopuzzleandmislead，
andcreateanimpressionunfavourabletopoliticaleconomy，asif
itdisregardedtheevidenceoffacts。Noonecandenythatrent
sometimesentersintocostofproduction。IfIbuyorrenta
pieceofground，andbuildaclothmanufactoryonit，the
ground—rentformslegitimatelyapartofmyexpensesof
production，whichmustberepaidbytheproduct。Andsinceall
factoriesarebuiltonground，andmostoftheminplaceswhere
groundispeculiarlyvaluable，therentpaidforitmust，onthe
average，becompensatedinthevaluesofallthingsmadein
factories。Inwhatsenseitistruethatrentdoesnotenterinto
thecostofproductionoraffectthevalueofagricultural
produce，willbeshowninthesucceedingchapter。
NOTES:
1。Supra，pp。31—2。
2。PrinciplesofPoliticalEconomyandTaxation，ch。1，sect。3。
3。Someofthesequarries，Ibelieve，havebeenrediscovered，and
areagainworked。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3:Distribution
Chapter5
OfRent，inItsRelationtoValue
1。Wehaveinvestigatedthelawswhichdeterminethevalueof
twoclassesofcommodities:thesmallclasswhich，beinglimited
toadefinitequantity，havetheirvalueentirelydeterminedby
demandandsupply，savethattheircostofproduction（ifthey
haveany）constitutesaminimumbelowwhichtheycannot
permanentlyfall;andthelargeclass，whichcanbemultipliedad
libitumbylabourandcapital，andofwhichthecostof
productionfixesthemaximumaswellastheminimumatwhichthey
canpermanentlyexchange。Butthereisstillathirdkindof
commoditiestobeconsidered:thosewhichhave，notone，but
severalcostsofproduction:whichcanalwaysbeincreasedin
quantitybylabourandcapital，butnotbythesameamountof
labourandcapital;ofwhichsomuchmaybeproducedatagiven
cost，butafurtherquantitynotwithoutagreatercost。These
commoditiesformanintermediateclass，partakingofthe
characterofboththeothers。Theprincipalofthemis
agriculturalproduce。Wehavealreadymadeabundantreferenceto
thefundamentaltruth，thatinagriculture，thestateoftheart
beinggiven，doublingthelabourdoesnotdoubletheproduce;
thatifanincreasedquantityofproduceisrequired，the
additionalsupplyisobtainedatagreatercostthanthefirst。
Whereahundredquartersofcornareallthatisatpresent
requiredfromthelandsofagivenvillage，ifthegrowthof
populationmadeitnecessarytoraiseahundredmore，eitherby
breakingupworselandnowuncultivated，orbyamoreelaborate
cultivationofthelandalreadyundertheplough，theadditional
hundred，orsomepartofthematleast，mightcostdoubleor
trebleasmuchperquarterastheformersupply。