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worth more at one time than another. We take occasion to say here, that, whenever we use the term price alone, real price is meant.

Adam Smith pronounces labour to be the original source of all exchangeable value. “ Labour," he says, “was the first price, the original purchase money, paid for all things. This is egregious error. There are many exchangeable values with which labour has had nothing to do. A coal mine, for example, is often discovered upon a gentleman's estate. The value of that coal mine before the coal is extracted (a real, exchangeable value) was never paid for by the labour of any one. There are innumerable other values of this description, which, in distinction from artificial values, we may term natural values. What price was ever paid for these? They are granted to man without cost. A far greater number of objects, however, are invested with all their value, or at least have much added to that which they originally possessed, by human agency in the application of power, either mental or physical, and, if physical, either animate or inanimate. All power is value, and all value is power. It is by the mutual co-operation of values, and their operation upon each other, that every additional value is created. Valuable materials and valuable power are granted to us by the Great Author of Nature, and we are urged by our own interest in the gratification of our desires to make an industrious and wise disposal of these means of happiness.

As, with Adam Smith, labour is the sole source of value, so it is the sole measure of price. In carrying out this notion, he is led to the exhibition of a fine piece of absurdity. He says, in one place : " Labour is the sole measure of the exchangeable value of all commodities." A few pages further on, it occurs to him that it is common to speak of the price of labour. He defines the real price of this as “the quantity of the necessaries and conveniences of life which are given for it." So, then, labour is the real price of the necessaries and conveniences of life, and the necessaries and conveniences of life are the real price of labour! We shall hardly gain any vantage ground by definition in a circle like this.

Price is distinguished into natural and market or current price, by Smith, Say, and others. What Smith means by natural price is nothing more nor less than the cost of production, as we are inclined to believe, though his confused and varying statements will not allow certainty on this point. He says that when a commodity is sold at its natural price, it is "sold precisely for what it is worth, or for what it really cost the person

"Wealth of Nations, book i.c. 5.
2 Wealth of Nations, book i. c. 5.

3 Ibid.

who brings it to market." He includes, however, in this cost all the labour expended, either by others, or by the person himself, in producing the commodity, and bringing it to market.

It is apparent from what we have said, that Smith makes value, cost, and price, all one. They are all measured, according to him, by the amount of labour involved. It is an indisputable corollary from these positions, that no increase of value ever took place on this earth, or is possible. According to him, the natural price of every thing is the same as its cost, its cost the same as its value, its value the same as the value of the labour expended in its production ; and the natural price, cost, or value of labour is what is consumed in its performance, or the subsistence of the labourer accumulated by former labour. Clearly, then, as much value is always consumed on one side as is created on the other. Nor will the result be altered in cases when prices vary from what Smith calls the natural price ; for the value created by labour will still be the same, and what is gained by one party, from the variation in price, must be lost by another.

It is strange that Adam Smith should not have been struck with some of the absurdities arising from his positions. He gravely asserts that labour never varies in value; that, when a man supposes labour to be of higher value at one time, or place, than at another, “ in reality it is goods which are cheap in the one case, and dear in the other." He does not, however, appear to be aware of an obvious but absurd inference from this statement, viz., that all products on which the same amount of labour has been bestowed must be of equal value, so that it is of no consequence to enquire whether the labour was wisely bestowed or not.

In these remarkable notions concerning labour and yalue, Smith has been followed generally by Ricardo and others in England and the United States.

It is our firm belief that there is really a valid distinction between natural and market price; but we think that it has not yet been developed. Let us attempt a more accurate analysis.

We have said that all additional value is created by the mutual operation of previously existing values. These previously existing values are property, so far as it has been possible to make them so. Thus a man's mental and physical energy constitute a value which is his own property. So, too, material substances which possess principles of energy themselves, or on which human or other energy is exerted, are values which have been appropriated so far as possible. There is no occasion for investigating here the manner in which that appro


Wealth of Nations, book i. c. 7.

2 Ibid., book i. c. 5.

priation has been made. Its validity is generally acknowledged. All these values, thus the objects of property, have a price set upon them. Now, in our opinion, a proper definition of natural price is, such amount of value as is fairly referable to the justly appropriated productive agency that, in connection with other agency, procured the article upon which the price is set. We will present a simple illustration. If two men expend an equal quantity of labour alone upon any article in which they had before an equal right of property, and their labour is equally valuable, the natural price to be paid by one to the other, for exclusive possession of the result, would be one half the value of that result. It is clear that this natural price may be either below, equal to, or above the value possessed before the labour was exerted upon it. If the labour be so directed as to diminish the original value, the natural price of the result must be less than the original value ; if so as not to alter it at all, the same as that value ; if, as is commonly the case, so as to increase the value, the natural price must rise above it.

In most, if not all, cases of actual occurrence, this natural price depends on such intricate and delicate circumstances, that it cannot be ascertained with precision. Who can, with unerring discernment, refer the different component parts of any value to the different agencies from which they sprang ?

We come now to market or current price. The signification of these terms is evident. They denote the price which is, or can be, obtained for a thing from buyers generally ; its actual common price. The laws which regulate market price are very different from those which regulate what we have termed natural price, and the two accordingly almost always differ.

In market price a distinction is to be observed between cash and credit price. The latter is always higher than the former; in part on account of the risk which credit involves, and in part on account of the actual loss of value to the seller from the delay to which he is subjected before he can enjoy the use of the price. “The later the payment is, the less it is,” says Ulpian, a celebrated Roman jurist.

Aside from this distinction, the chief influences which cause market price to vary from natural price, are comprehended under the general principles termed, by writers on political economy, the principle of supply and demand. While the natural price continues the same, the operation of this principle is as follows :—Whatever increases the proportion of the supply of any article to the demand for it, diminishes its market price ; whatever increases the proportion of the demand to the supply, increases its market price. The causes which operate to aug

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Leg. 12, ff. De verb. signif.

ment or lessen the intensity of demand, or supply, are very various. It would be too long an investigation to trace them here. The different proportions of supply and demand effect alterations in the market price through competition. When the supply is greater than the demand, the competition of sellers lowers prices ; when the demand is greater than the supply, the competition of buyers raises it. The competition of sellers often reduces the market price below what we have called the natural price; the competition of buyers often raises it above the natural price. This reduction or elevation, however, is but temporary, since, when the market price is high, there is an inducement to effort for the purpose of increasing the supply, and when it is low the supply is gradually diminished, productive agency being directed to some more profitable result.

There are cases in which the free operation of these principles is very much restricted, as, e. g., in the case of monopolies, whether natural, legal, customary, or other. The price of tain Spanish and French wines, for instance, is very exorbitant, because they can be produced only in particular vineyards or districts, the ownership of which may be called a natural monopoly of the wines. Were it not for this monopoly, the price would be speedily reduced by competition. Legal and other monopolies, of every description, the number of which, in most civilized countries, is very great, have an analogous tendency. The price which, as before said, is sometimes paid for air, water, or light, is a monopoly price. This tendency of all monopolies to elevate price is, to a greater or less extent, checked by other influences.

There is one important fact which may seem inexplicable on the principles we have stated concerning demand and supply, and which is, we believe, really inexplicable in consistency with the statements of Smith, Say, and other writers. It is well known that increased demand for an article sometimes reduces its price; and this, though the proportion of the supply to the demand may remain exactly the same, and though, therefore, on the principles of the writers referred to, the price also should remain exactly the same. Thus a mechanic in a populous village, who enjoys what is vulgarly called a good run of custom, will sell the articles which he manufactures at a considerably lower price than a fellow-mechanic does in a less thriving village where there is less demand for them. How can we account for this fact? On recurring to our remarks concerning the operations of supply and demand, it may be seen that we threw in a preliminary restriction upon the universal application of the principles we were about to state, by saying, “ Where the natural price continues the same, the operation of these principles is as follows.” It is this restriction which permits a con


sistent explanation of the fact just noticed, which, so far as we can see, is inexplicable on the unlimited principles of Smith, Say, and others, who represent that increased demand, when the supply is proportionably increased, produces no effect at all upon price. We have described price as being the value demanded in exchange for other value, and natural price as being such amount of value as is fairly referable to the justly appropriated productive agency employed in procuring that for which the price is paid. Since natural price is founded only on productive agency which is appropriable (appropriable value and exchangeable value being the same), it necessarily follows that if the appropriable agency in the production of any article be diminished by the use of productive agency not appropriable, the natural price of that article is diminished in proportion. Such diminution of appropriable agency, for example, is effected by the very important arrangement denominated division of labour. The appropriable agency termed labour remaining the same, by the agency of mere classification a much greater product is effected. The natural price of the product therefore falls. The case is the same as to all improvements in the mere modes of applying productive agency. When any principle whatever, be it a principle of mind, or a principle of matter, which is not appropriable, or, in other words, which possesses no exchangeable value, is made use of in production to the diminution of necessary appropriable agency, natural price is proportionably diminished. The instance which we adduced, relating to the mechanic, may therefore be explained by the consideration that the greater the number of articles which he manufactures the less appropriable productive agency is consumed in the manufacture of any one. This truth, which is familiarly known among all classes of people, is referable to various causes. An important one is, that practice makes the same powers more efficient. Others will at once suggest themselves to our readers. In this way, then, the natural price is diminished, and, if the influences which create the variation between the natural and market price remain the same, the market price must be likewise diminished. It is clear, too, that, even though additional influence be exerted to elevate the market price, it will still be depressed, if that influence is more than counterbalanced by the influence which reduces the natural price.

It is important to observe, however, that even when an improvement in production is effected, the market price sometimes continues the same, because the improvement is kept secret by the producer. For example, he who discovers some important chemical principle may apply it to production, and refuse to share his discoveries with any one. All power which is kept secret falls of course under the head of appropriated power ;

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