Volume 2 — THE TEMPLARS' DIALOGUES.

DIALOGUES.

ORIGINAL ADVERTISEMENT, IN APRIL, 1824.

I have resolved to fling my analysis of Mr. Ricardo's system into the form of Dialogues. A few words will suffice to determine the principles of criticism which can fairly be applied to such a form of composition on such a subject. It cannot reasonably be expected that dialogues on Political Economy should pretend to the appropriate beauty of dialogues as dialogues, by throwing any dramatic interest into the parts sustained by the different speakers, or any characteristic distinctions into their style. Elegance of this sort, if my time had allowed of it, or I had been otherwise capable of producing it, would have been here misplaced. Not that I would say even of Political Economy, in the words commonly applied to such subjects, that "Ornari res ipsa negat, contenta doceri:" for all things have their peculiar beauty and sources of ornament—determined by their ultimate ends, and by the process of the mind in pursuing them. Here, as in the processes of nature and in mathematical demonstrations, the appropriate elegance is derived from the simplicity of the means employed, as expressed in the "Lex Parcimoniæ" ("Frustra fit per plura, quod fieri fas erat per pauciora"), and other maxims of that sort. This simplicity, however, must be looked for in the order and relation of the thoughts, and in the steps through which they are trained to lead into each other, rather than in any anxious conciseness as to words; which, on the contrary, I have rather sought to avoid in the earlier Dialogues, in order that I might keep those distinctions longer before the reader from which all the rest were to be derived. For he who has fully mastered the doctrine of Value is already a good political economist. Now, if any man should object, that in the following dialogues I have uniformly given the victory to myself, he will make a pleasant logical blunder: for the true logic of the case is this: Not that it is myself to whom I give the victory; but that he to whom I give the victory (let me call him by what name I will) is of necessity myself; since I cannot be supposed to have put triumphant arguments into any speaker's mouth, unless they had previously convinced my own understanding. Finally, let me entreat the reader not to be impatient under the disproportionate length (as he may fancy it) of the opening discussions on Value: even for its own sake, the subject is a matter of curious speculation; but in relation to Political Economy it is all in all; for most of the errors (and, what is much worse than errors, most of the perplexities) prevailing in this science take their rise from this source. Mr. Ricardo is the first writer who has thrown light on the subject; and even he, in the last edition of his book, still found it a "difficult" one (see the Advertisement to the Third Edition). What a Ricardo has found difficult, cannot be adequately discussed in few words; but, if the reader will once thoroughly master this part of the science, all the rest will cost him hardly any effort at all.

* * * * *

INTRODUCTORY DIALOGUE.

(SPEAKERS THROUGHOUT THE DIALOGUES ARE PHÆDRUS, PHILEBUS, AND X. Y. Z.)

Phædrus. This, Philebus, is my friend X. Y. Z., whom I have long wished to introduce to you; he has some business which calls him into this quarter of the town for the next fortnight; and during that time he has promised to dine with me; and we are to discuss together the modern doctrines of Political Economy; most of which, he tells me, are due to Mr. Ricardo. Or rather, I should say, that I am to become his pupil; for I pretend to no regular knowledge of Political Economy, having picked up what little I possess in a desultory way amongst the writers of the old school; and, out of that little, X. obligingly tells me that three fourths are rotten. I am glad, therefore, that you are in town at this time, and can come and help me to contradict him. Meantime X. has some right to play the tutor amongst us; for he has been a regular student of the science: another of his merits is, that he is a Templar as well as ourselves, and a good deal senior to either of us.

Philebus. And for which of his merits is it that you would have me contradict him?

Phæd. O, no matter for his merits, which doubtless are past all computation, but generally as a point of hospitality. For I am of the same opinion as M——, a very able friend of mine in Liverpool, who looks upon it as criminal to concede anything a man says in the process of a disputation: the nefarious habit of assenting (as he justly says) being the pest of conversation, by causing it to stagnate. On this account he often calls aside the talking men of the party before dinner, and conjures them with a pathetic earnestness not to agree with him in anything he may advance during the evening; and at his own table, when it has happened that strangers were present who indulged too much in the habit of politely assenting to anything which seemed to demand no particular opposition, I have seen him suddenly pause with the air of the worst-used man in the world, and exclaim, "Good heavens! is there to be no end to this? Am I never to be contradicted? I suppose matters will soon come to that pass that my nearest relations will be perfidiously agreeing with me; the very wife of my bosom will refuse to contradict me; and I shall not have a friend left on whom I can depend for the consolations of opposition."

Phil. Well, Phædrus, if X. Y. Z. is so much devoted as you represent to the doctrines of Mr. Ricardo, I shall perhaps find myself obliged to indulge your wishes in this point more than my own taste in conversation would lead me to desire.

X. And what, may I ask, is the particular ground of your opposition to Mr. Ricardo?

Phæd. I suppose that, like the man who gave his vote against Aristides, because it wearied him to hear any man surnamed the just, Philebus is annoyed by finding that so many people look up to Mr. Ricardo as an oracle.

Phil. No: for the very opposite reason; it is because I hear him generally complained of as obscure, and as ambitiously paradoxical; two faults which I cannot tolerate: and the extracts from his writings which I have seen satisfy me that this judgment is a reasonable one.

Phæd. In addition to which, Philebus, I now recollect something which perhaps weighs with you still more, though you have chosen to suppress it; and that is, that you are a disciple of Mr. Malthus, every part of whose writings, since the year 1816 (I am assured), have had one origin—jealousy of Mr. Ricardo, "quem si non aliqua nocuisset, mortuus esset."

X. No, no, Phædrus; we must not go so far as that; though undoubtedly it is true that Mr. Malthus has often conducted his opposition in a most vexatious and disingenuous manner.

Phil. How so? In what instance? In what instance?

X. In this, for one. Mr. Malthus, in his "Political Economy" (1820), repeatedly charged Mr. Ricardo with having confounded the two notions of "cost" and "value:" I smile, by the way, when I repeat such a charge, as if it were the office of a Ricardo to confound, or of a Malthus to distinguish: but

"Non usque adeo permiscuit imis Longus summa dies, ut non—si voce Metelli Serventur leges—malint a Cæsare tolli."

[Footnote: For the sake of the unclassical reader, I add a prose translation:—Not to such an extent has the lapse of time confounded things highest with things lowest, as that—if the laws can be saved only by the voice of a Metellus—they would not rather choose to be abolished by a Cæsar.]

Phil. "Imis!" Why, I hope, if Mr. Ricardo may do for the Cæsar of the case, Mr. Malthus is not therefore to be thought the Metellus. "Imis," indeed!

X. As to this, he is: his general merits of good sense and ingenuity we all acknowledge; but for the office of a distinguisher, or any other which demands logic in the first place, it is impossible to conceive any person below him. To go on, however, with my instance:— this objection of Mr. Malthus' about "cost" and "value" was founded purely on a very great blunder of his own—so great, that (as I shall show in its proper place) even Mr. Ricardo did not see the whole extent of his misconception: thus much, however, was plain, that the meaning of Mr. Malthus was, that the new doctrine of value allowed for wages, but did not allow for profits; and thus, according to the Malthusian terminology, expressed the cost but not the value of a thing. What was Mr. Ricardo's answer? In the third edition of his book (p. 46), he told Mr. Malthus that, if the word "cost" were understood in any sense which excluded profits, then he did not assert the thing attributed to him; on the other hand, if it were understood in a sense which included profits, then of course he did assert it; but, then, in that sense Mr. Malthus himself did not deny it. This plain answer was published in 1821. Will it be believed that two years after (namely, in the spring of 1823), Mr. Malthus published a pamphlet, in which he repeats the same objection over and over again, without a hint that it had ever met with a conclusive explanation which it was impossible to misunderstand? Neither must it be alleged that Mr. Malthus might not have seen this third edition; for it is the very edition which he constantly quotes in that pamphlet.

Phæd. What say you to this, my dear Philebus? You seem to be in perplexity.

X. But an instance of far greater disingenuousness is this: Mr. Ricardo, after laying down the general law of value, goes on to state three cases in which that law will be modified; and the extraordinary sagacity with which he has detected and stated these modifications, and the startling consequences to which they lead, have combined to make this one of the most remarkable chapters in his books. Now, it is a fact, gentlemen, that these very restrictions of his own law—so openly stated as restrictions by Mr. Ricardo—are brought forward by Mr. Malthus as so many objections of his own to upset that law. The logic, as usual, is worthy of notice; for it is as if, in a question about the force of any projectile, a man should urge the resistance of the air, not as a limitation of that force, but as a capital objection to it. What I here insist on, however, is its extreme disingenuousness. But this is a subject which it is unpleasant to pursue; and the course of our subject will of itself bring us but too often across the blunders and misstatements of Mr. Malthus. To recur, therefore, to what you objected about Mr. Ricardo—that he was said to be paradoxical and obscure—I presume that you use the word "paradoxical" in the common and improper sense, as denoting what has a specious air of truth and subtlety, but is in fact false; whereas I need not tell you that a paradox is the very opposite of this—meaning in effect what has a specious air of falsehood, though possibly very true; for a paradox, you know, is simply that which contradicts the popular opinion—which in too many cases is the false opinion; and in none more inevitably than in cases as remote from the popular understanding as all questions of severe science. However, use the word in what sense you please, Mr. Ricardo is no ways interested in the charge. Are my doctrines true, are they demonstrable? is the question for him; if not, let them be overthrown; if that is beyond any man's power, what matters it to him that the slumbering intellect of the multitude regards them as strange? As to obscurity, in general it is of two kinds—one arising out of the writer's own perplexity of thought; which is a vicious obscurity; and in this sense the opponents of Mr. Ricardo are the obscurest of all economists. Another kind—

Phæd. Ay, now let us hear what is a virtuous obscurity.

X. I do not say, Phædrus, that in any case it can be meritorious to be obscure; but I say that in many cases it is very natural to be so, and pardonable in profound thinkers, and in some cases inevitable. For the other kind of obscurity which I was going to notice is that which I would denominate elliptical obscurity; arising, I mean, out of the frequent ellipsis or suppression of some of the links in a long chain of thought; these are often involuntarily suppressed by profound thinkers, from the disgust which they naturally feel at overlaying a subject with superfluous explanations. So far from seeing too dimly, as in the case of perplexed obscurity, their defect is the very reverse; they see too clearly; and fancy that others see as clearly as themselves. Such, without any tincture of confusion, was the obscurity of Kant (though in him there was also a singular defect of the art of communicating knowledge, as he was himself aware); such was the obscurity of Leibnitz (who otherwise was remarkable for his felicity in explaining himself); such, if any, is the obscurity of Ricardo; though, for my own part, I must acknowledge that I could never find any; to me he seems a model of perspicuity. But I believe that the very ground of his perspicuity to me is the ground of his apparent obscurity to some others, and that is—his inexorable consistency in the use of words; and this is one of the cases which I alluded to in speaking of an "inevitable obscurity;" for, wherever men have been accustomed to use a word in two senses, and have yet supposed themselves to use it but in one, a writer, who corrects this lax usage, and forces them to maintain the unity of the meaning, will always appear obscure; because he will oblige them to deny or to affirm consequences from which they were hitherto accustomed to escape under a constant though unconscious equivocation between the two senses. Thus, for example, Mr. Ricardo sternly insists on the true sense of the word Value, and (what is still more unusual to most men) insists on using it but in one sense; and hence arise consequences which naturally appear at once obscure and paradoxical to M. Say, to Mr. Malthus, to the author of an Essay on Value; [Footnote: I forget the exact title; but it was printed for Hunter, St. Paul's Church-yard.] and to all other lax thinkers, who easily bend their understandings to the infirmity of the popular usage. Hence, it is not surprising to find Mr. Malthus complaining ("Polit. Econ.," p. 214) of "the unusual application of common terms" as having made Mr. Ricardo's work "difficult to be understood by many people;" though, in fact, there is nothing at all unusual in his application of any term whatever, but only in the steadiness with which he keeps to the same application of it.

Phil. These distinctions of yours on the subject of obscurity I am disposed to think reasonable; and, unless the contrary should appear in the course of our conversations, I will concede them to be applicable to the case of Mr. Ricardo; his obscurity may be venial, or it may be inevitable, or even none at all (if you will have it so). But I cannot allow of the cases of Kant and Leibnitz as at all relevant to that before us. For, the obscurity complained of in metaphysics, etc., is inherent in the very objects contemplated, and is independent of the particular mind contemplating, and exists in defiance of the utmost talents for diffusing light; whereas the objects about which Political Economy is concerned are acknowledged by all persons to be clear and simple enough, so that any obscurity which hangs over them, must arise from imperfections in the art of arranging and conveying ideas on the part of him who undertakes to teach it.

X. This I admit: any obscurity which clouds Political Economy, unless where it arises from want of sufficient facts, must be subjective; whereas the main obscurity which besets metaphysics is objective; and such an obscurity is in the fullest sense inevitable. But this I did not overlook; for an objective obscurity it is in the power of any writer to aggravate by his own perplexities; and I alleged the cases of Kant and Leibnitz no further than as they were said to have done so; contending that, if Mr. Ricardo were at all liable to the same charge, he was entitled to the same apology; namely, that he is never obscure from any confusion of thought, but, on the contrary, from too keen a perception of the truth, which may have seduced him at times into too elliptic a development of his opinions, and made him impatient of the tardy and continuous steps which are best adapted to the purposes of the teacher. For the fact is, that the laborers of the Mine (as I am accustomed to call them), or those who dig up the metal of truth, are seldom fitted to be also laborers of the Mint—that is, to work up the metal for current use. Besides which, it must not be forgotten that Mr. Ricardo did not propose to deliver an entire system of Political Economy, but only an investigation of such doctrines as had happened to be imperfectly or erroneously stated. On this account, much of his work is polemic; and presumes, therefore, in the reader an acquaintance with the writers whom he is opposing. Indeed, in every chapter there is an under reference, not to this or that author only, but to the whole current of modern opinions on the subject, which demands a learned reader who is already master of what is generally received for truth in Political Economy.

Phil. Upon this statement it appears at any rate that Mr. Ricardo's must be a most improper book as an elementary one. But, after all, you will admit that even amongst Mr. Ricardo's friends there is a prevailing opinion that he is too subtle (or, as it is usually expressed, too theoretic) a writer to be safely relied on for the practical uses of legislation.

X. Yes. And, indeed, we are all so deeply indebted to English wisdom on matters where theories really are dangerous, that we ought not to wonder or to complain if the jealousy of all which goes under that name be sometimes extended to cases in which it is idle to suppose any opposition possible between the true theory and the practice. However, on the whole question which has been moved in regard to Mr. Ricardo's obscurity or tendency to paradox or to over refinement and false subtlety, I am satisfied if I have won you to any provisional suspension of your prejudices; and will now press it no further— willingly leaving the matter to be settled by the result of our discussions.

Phæd. Do so, X.; and especially because my watch informs me that dinner—an event too awfully practical to allow of any violation from mere sublunary disputes—will be announced in six minutes; within which space of time I will trouble you to produce the utmost possible amount of truth with the least possible proportion of obscurity, whether "subjective" or "objective," that may be convenient.

X. As the time which you allow us is so short, I think that I cannot better employ it than in reading a short paper which I have drawn up on the most general distribution of Mr. Ricardo's book; because this may serve to guide us in the course of our future discussions.

Mr. Ricardo's Principles of Political Economy consisted in the second edition of thirty-one chapters, to which, in the third edition, was added another, making thirty-two. These thirty-two chapters fall into the following classification:—Fourteen are on the subject of Taxation, namely, the eighth to the eighteenth, [Footnote: The eleventh is on Tithes; and the eighteenth on Poor Rates; but these of course belong to the subject of Taxation properly defined. The present Lord Chancellor (late Earl of Eldon) said on some cause which came before him about a year ago, that Tithes were unjustly called a Tax; meaning only that Tithes were not any arbitrary imposition of the government, but claimed by as good a tenure as any other sort of property. In this doctrine no doubt the Chancellor was perfectly right; and only wrong in supposing that any denial of that doctrine is implied by the Political Economists in calling Tithes a Tax; which, on the true definition of a Tax (as I shall show hereafter), they certainly are.] inclusively, the twenty- second, twenty-third, and twenty-ninth; and these may be entirely omitted by the student, and ought at any rate to be omitted on his first examination of the work. For, though Mr. Ricardo has really been not the chief so much as the sole author of any important truths on the subject of Taxation, and though his fourteen chapters on that head are so many inestimable corollaries from his general doctrines, and could never have been obtained without them, yet these general doctrines have no sort of reciprocal dependency upon what concerns Taxation. Consequently, it will greatly lighten the burden to a student if these fourteen chapters are sequestered from the rest of the work, and reserved for a separate and after investigation, which may furnish a commentary on the first. The chapters on Taxation deducted, there remain, therefore, seventeen in the second edition, or eighteen in the third. These contain the general principles, but also something more— which may furnish matter for a second subtraction. For, in most speculations of this nature it usually happens that, over and above the direct positive communication of new truths, a writer finds it expedient (or, perhaps, necessary in some cases, in order to clear the ground for himself) to address part of his efforts to the task of meeting the existing errors; hence arises a division of his work into the doctrinal or affirmative part, and the polemic [Footnote: Polemic.—There is an occasional tendency in the use and practice of the English language capriciously to limit the use of certain words. Thus, for instance, the word condign is used only in connection with the word punishment; the word implicit is used only (unless by scholars, like Milton) in connection with faith, or confidence. So also putative is restricted most absurdly to the one sole word, father, in a question of doubtful affiliation. These and other words, if unlocked from their absurd imprisonment, would become extensively useful. We should say, for instance, "condign honors," "condign rewards," "condign treatment" (treatment appropriate to the merits)—thus at once realizing two rational purposes: namely, giving a useful function to a word, which at present has none; and also providing an intelligible expression for an idea which otherwise is left without means of uttering itself, except through a ponderous circumlocution. Precisely in the same circumstances of idle and absurd sequestration stands the term polemic. At present, according to the popular usage, this word has some fantastic inalienable connection with controversial theology. There cannot be a more childish chimera. No doubt there is a polemic side or aspect of theology; but so there is of all knowledge; so there is of every science. The radical and characteristic idea concerned in this term polemic is found in our own parliamentary distinction of the good speaker, as contrasted with the good debater. The good speaker is he who unfolds the whole of a question in its affirmative aspects, who presents these aspects in their just proportions, and according to their orderly and symmetrical deductions from each other. But the good debater is he who faces the negative aspects of the question, who meets sudden objections, has an answer for any momentary summons of doubt or difficulty, dissipates seeming inconsistencies, and reconciles the geometrical smoothness of a priori abstractions with the coarse angularities of practical experience. The great work of Ricardo is of necessity, and almost in every page, polemic; whilst very often the particular objections or difficulties to which it replies are not indicated at all—being spread through entire systems, and assumed as precognita that are familiar to the learned student.] or negative part. In Mr. Ricardo's writings, all parts (as I have already observed) have a latent polemic reference; but some, however, are more directly and formally polemic than the rest; and these may be the more readily detached from the main body of the work, because (like the chapters on Taxation) they are all corollaries from the general laws, and in no case introductory to them. Divided on this principle, the eighteen chapters fall into the following arrangement:

Chap. Affirmative Chapters. 1. 4. on Value; 30.

2. on Rent; 3.

5. on Wages; 6. on Profits; 7. on Foreign Trade; 19. on Sudden Changes in Trade; 21. on Accumulation; 25. on Colonial Trade; 27. on Currency and Banks; 31. on Machinery.

Chap. Negative (or Polemic) Chapters. 20. on Value and Riches: against Adam Smith, Lord Lauderdale, M. Say; 24. Rent of Land: against Adam Smith; 26. Gross and Net Revenue: against Adam Smith; 28. Relations of Gold, Corn, and Labor, under certain circumstances: against A. Smith; 32. Rent: against Mr. Malthus.

Deducting the polemic chapters, there remain thirteen affirmative or doctrinal chapters; of which one (the twenty-seventh), on Currency, &c., ought always to be insulated from all other parts of Political Economy. And thus, out of the whole thirty-two chapters, twelve only are important to the student on his first examination; and to these I propose to limit our discussions.

Phæd. Be it so, and now let us adjourn to more solemn duties.

* * * * *

DIALOGUE THE FIRST.

ON THE ELEMENTARY PRINCIPLE OF POLITICAL ECONOMY.

Phæd. To cut the matter short, X. Y. Z., and to begin as near as possible to the end—is there any one principle in Political Economy from which all the rest can be deduced? A principle, I mean, which all others presuppose; but which itself presupposes none.

X. There is, Phædrus; such a principle exists in the doctrine of Value—truly explained. The question from which all Political Economy will be found to move—the question to which all its difficulties will be found reducible—is this: What is the ground of exchangeable value? My hat, for example, bears the same value as your umbrella; double the value of my shoes; four times the value of my gloves; one twentieth of the value of this watch. Of these several relations of value, what is the sufficient cause? If they were capricious, no such science as that of Political Economy could exist; not being capricious, they must have an assignable cause; this cause—what is it?

Phæd. Ay, what is it?

X. It is this, Phædrus; and the entire merit of the discovery belongs to Mr. Ricardo. It is this; and listen with your whole understanding: the ground of the value of all things lies in the quantity (but mark well that word "quantity") of labor which produces them. Here is that great principle which is the corner- stone of all tenable Political Economy; which granted or denied, all Political Economy stands or falls. Grant me this one principle, with a few square feet of the sea-shore to draw my diagrams upon, and I will undertake to deduce every other truth in the science.

Phæd. Take it and welcome. It would be impossible for most people to raise a cabbage out of the sea-shore, though the sand were manured by principles the noblest. You, therefore, my dear friend, that promise to raise from it, not a cabbage, but a system of Political Economy, are doubly entitled to your modicum of sand, and to your principle beside; which last is, I dare say, a very worthy and respectable principle, and not at all the worse for being as old as my great-grandfather.

X. Pardon me, Phædrus; the principle is no older than the first edition of Mr. Ricardo's book; and when you make me this concession so readily under the notion that you are conceding nothing more than has long been established, I fear that you will seek to retract it, as soon as you are aware of its real import and consequences.

Phæd. In most cases, X., I should hesitate to contradict you peremptorily upon a subject which you have studied so much more closely than myself; but here I cannot hesitate; for I happen to remember the very words of Adam Smith, which are—

X. Substantially the same, you will say, as those which I have employed in expressing the great principle of Mr. Ricardo: this is your meaning, Phædrus; and excuse me for interrupting you; I am anxious to lose no time; and therefore let me remind you, as soon as possible, that "the words" of Adam Smith cannot prove any agreement with Mr. Ricardo, if it appears that those words are used as equivalent and convertible at pleasure with certain other words not only irreconcilable with Mr. Ricardo's principle, but expressing the very doctrine which Mr. Ricardo does, and must in consistency, set himself to oppose. Mr. Ricardo's doctrine is, that A and B are to each other in value as the quantity of labor is which produces A to the quantity which produces B; or, to express it in the very shortest formula by substituting the term base, as synonymous with the term producing labor, All things are to each other in value as their bases are in quantity. This is the Ricardian law: you allege that it was already the law of Adam Smith; and in some sense you are right; for such a law is certain to be found in the "Wealth of Nations." But, if it is _ex_plicitly affirmed in that work, it is also _im_plicitly denied: formally asserted, it is virtually withdrawn. For Adam Smith everywhere uses, as an equivalent formula, that A and B are to each other in value as the value of the labor which produces A to the value of the labor which produces B.

Phæd. And the formula for Mr. Ricardo's law is, if I understand you, that A and B are to each other in value not as the value, but as the quantity of the labor which produces A to the quantity which produces B.

X. It is.

Phæd. And is it possible that any such mighty magic can lurk in the simple substitution of quantity for value? Surely, X., you are hair-splitting a little in this instance, and mean to amuse yourself with my simplicity, by playing off some logical legerdemain upon me from the "seraphic" or "angelic" doctors.

X. The earnestness and good faith of my whole logic and reasoning will soon become a pledge for me that I am incapable of what you call hair-splitting; and in this particular instance I might appeal to Philebus, who will tell you that Mr. Malthus has grounded his entire opposition to Mr. Ricardo on the very distinction which you are now treating as aërial. But the fact is, you do not yet perceive to what extent this distinction goes; you suppose me to be contending for some minute and subtle shades of difference; so far from that, I mean to affirm that the one law is the direct, formal, and diametrical negation of the other: I assert in the most peremptory manner that he who says, "The value of A is to the value of B as the quantity of labor producing A is to the quantity of labor producing B," does of necessity deny by implication that the relations of value between A and B are governed by the value of the labor which severally produces them.

Phil. X. is perfectly right in his distinction. You know, Phædrus, or you soon will know, that I differ from X. altogether on the choice between the two laws: he contends that the value of all things is determined by the quantity of the producing labor; I, on the other hand, contend that the value of all things is determined by the value of the producing labor. Thus far you will find us irreconcilable in our difference; but this very difference implies that we are agreed on the distinction which X. is now urging. In fact, so far are the two formulae from presenting merely two different expressions of the same law, that the very best way of expressing negatively Mr. Ricardo's law (namely, A is to B in value as the quantities of the producing labor) would be to say, A is not to B in value as the values of the producing labor.

Phæd. Well, gentlemen, I suppose you must be right; I am sure you are by the logic of kings, and "according to the flesh;" for you are two to one. Yet, to my poor glimmering understanding, which is all I have to guide me in such cases, I must acknowledge that the whole question seems to be a mere dispute about words.

X. For once, Phædrus, I am not sorry to hear you using a phrase which in general is hateful to my ears. "A mere dispute about words" is a phrase which we hear daily; and why? Is it a case of such daily occurrence to hear men disputing about mere verbal differences? So far from it, I can truly say that I never happened to witness such a dispute in my whole life, either in books or in conversation; and indeed, considering the small number of absolute synonymes which any language contains, it is scarcely possible that a dispute on words should arise which would not also be a dispute about ideas (that is, about realities). Why, then, is the phrase in every man's mouth, when the actual occurrence must be so very uncommon? The reason is this, Phædrus: such a plea is a "sophisma pigri intellectus," which seeks to escape from the effort of mind necessary for the comprehending and solving of any difficulty under the colorable pretext that it is a question about shadows, and not about substances, and one therefore which it is creditable to a man's good sense to decline; a pleasant sophism this, which at the same time flatters a man's indolence and his vanity. For once, however, I repeat that I am not sorry to hear such a phrase in your mouth, Phædrus: I have heard it from you before; and I will frankly tell you that you ought to be ashamed of such a plea, which is becoming to a slothful intellect, but very unbecoming to yours. On this account, it gives me pleasure that you have at length urged it in a case where you will be obliged to abandon it. If that should happen, remember what I have said; and resolve never more to shrink effeminately from the toil of an intellectual discussion under any pretence that it is a verbal dispute. In the present case, I shall drive you out of that conceit in less time than it cost you to bring it forward. For now, Phædrus, answer me to one or two little questions which I will put. You fancy that between the expressions "quantity of producing labor" and "value of producing labor" there is none but a verbal difference. It follows, therefore, that the same effect ought to take place whether the value of the producing labor be altered or its quantity.

Phæd. It does.

X. For instance, the production of a hat such as mine has hitherto cost (we will suppose) four days' labor, at three shillings a day: now, without any change whatsoever in the quantity of labor required for its production, let this labor suddenly increase in value by twenty-five per cent. In this case, four days' labor will produce a hat as heretofore; but the value of the producing labor being now raised from three shillings a day to three shillings and nine pence, the value of the total labor necessary for the production of a hat will now be raised from twelve shillings to fifteen shillings. Thus far, you can have nothing to object?

Phæd. Nothing at all, X. But what next?

X. Next, let us suppose a case in which the labor of producing hats shall increase, not in value (as in the preceding case), but in quantity. Labor is still at its old value of three shillings a day; but, from increased difficulty in any part of the process, five days' labor are now spent on the production of a hat instead of four. In this second case, Phædrus, how much will be paid to the laborer?

Phæd. Precisely as much as in the first case: that is, fifteen shillings.

X. True: the laborer on hats receives fifteen shillings in the second case as well as in the first; but in the first case for four days' labor, in the second for five: consequently, in the second case, wages (or the value of labor) have not risen at all, whereas in the first case wages have risen by twenty-five per cent.

Phæd. Doubtless: but what is your inference?

X. My inference is as follows: according to yourself and Adam Smith, and all those who overlook the momentous difference between the quantity and the value of labor, fancying that these are mere varieties of expression for the same thing, the price of hats ought, in the two cases stated, to be equally raised, namely, three shillings in each case. If, then, it be utterly untrue that the price of hats would be equally raised in the two cases, it will follow that an alteration in the value of the producing labor, and an alteration in its quantity, must terminate in a very different result; and, consequently, the one alteration cannot be the same as the other, as you insisted.

Phæd. Doubtless.

X. Now, then, let me tell you, Phædrus, that the price of hats would not be equally raised in the two cases: in the second case, the price of a hat will rise by three shillings, in the first case it will not rise at all.

Phæd. How so, X.? How so? Your own statement supposes that the laborer receives fifteen shillings for four days, instead of twelve shillings; that is, three shillings more. Now, if the price does not rise to meet this rise of labor, I demand to know whence the laborer is to obtain this additional three shillings. If the buyers of hats do not pay him in the price of hats, I presume that the buyers of shoes will not pay him. The poor devil must be paid by somebody.

X. You are facetious, my friend. The man must be paid, as you say; but not by the buyers of hats any more than by the buyers of shoes: for the price of hats cannot possibly rise in such a case, as I have said before. And, that I may demonstrate this, let us assume that when the labor spent on a hat cost twelve shillings, the rate of profits was fifty per cent.; it is of no consequence what rate be fixed on: assuming this rate, therefore, the price of a hat would, at that time, be eighteen shillings. Now, when the quantity of labor rose from four to five days, this fifth day would add three shillings to the amount of wages; and the price of a hat would rise in consequence from eighteen shillings to a guinea. On the other hand, when the value of labor rose from twelve shillings to fifteen shillings, the price of a hat would not rise by one farthing, but would still continue at eighteen shillings.

Phæd. Again I ask, then, who is to pay the three shillings?

X. The three shillings will be paid out of profits.

Phæd. What, without reimbursement?

X. Assuredly, without a farthing of reimbursement: it is Mr. Ricardo's doctrine that no variation in either profits or wages can ever affect the price; if wages rise or fall, the only consequence is, that profits must fall or rise by the same sum; so again, if profits rise or fall, wages must fall or rise accordingly.

Phæd. You mean, then, to assert that, when the value of the labor rises (as in the first of your two cases) by three shillings, this rise must be paid out of the six shillings which had previously gone to profits.

X. I do; and your reason for questioning this opinion is, I am sure, because you think that no capitalist would consent to have his profits thus diminished, but would liberate himself from this increased expense by charging it upon the price. Now, if I prove that he cannot liberate himself in this way, and that it is a matter of perfect indifference to him whether the price rises or not, because in either case he must lose the three shillings, I suppose that I shall have removed the sole ground you have for opposing me.

Phæd. You are right: prove this, X., "et eris mihi magnus Apollo."

X. Tell me, then, Phædrus, when the value of labor rises—in other words, when wages rise—what is it that causes them to rise?

Phæd. Ay, what is it that causes them, as you say? I should be glad to hear your opinion on that subject.

X. My opinion is, that there are only two [Footnote: There is another case in which wages have a constant tendency to rise—namely, when the population increases more slowly than the demand for labor. But this case it is not necessary to introduce into the dialogue: first, because it is gradual and insensible in its operation; secondly, because, if it were otherwise, it would not disturb any part of the argument.] great cases in which wages rise, or seem to rise:

1. When money sinks in value; for then, of course, the laborer must have more wages nominally, in order to have the same virtually. But this is obviously nothing more than an apparent rise.

2. When those commodities rise upon which wages are spent. A rise in port wine, in jewels, or in horses, will not affect wages, because these commodities are not consumed by the laborer; but a rise in manufactured goods of certain kinds, upon which perhaps two fifths of his wages are spent, will tend to raise wages: and a rise in certain kinds of food, upon which perhaps the other three fifths are spent, will raise them still more. Now, the first case being only an apparent rise, this is the only case in which wages can be said really to rise.

Phæd. You are wrong, X.; I can tell you of a third case which occurs to me whilst you are speaking. Suppose that there were a great deficiency of laborers in any trade,—as in the hatter's trade, for instance,—that would be a reason why wages should rise in the hatter's trade.

X. Doubtless, until the deficiency were supplied, which it soon would be by the stimulus of higher wages. But this is a case of market value, when the supply happens to be not on a level with the demand: now, throughout the present conversation I wish studiously to keep clear of any reference to market value, and to consider exclusively that mode of exchangeable value which is usually called natural value— that is, where value is wholly uninfluenced by any redundancy or deficiency of the quantity. Waiving this third case, therefore, as not belonging to the present discussion, there remains only the second; and I am entitled to say that no cause can really and permanently raise wages but a rise in the price of those articles on which wages are spent. In the instance above stated, where the hatter's wages rose from three shillings to three shillings and nine pence a day, some commodity must previously have risen on which the hatter spent his wages. Let this be corn, and let corn constitute one half of the hatter's expenditure; on which supposition, as his wages rose by twenty-five per cent., it follows that corn must have risen by fifty per cent. Now, tell me, Phædrus, will this rise in the value of corn affect the hatter's wages only, or will it affect wages in general?

Phæd. Wages in general, of course: there can be no reason why hatters should eat more corn than any other men.

X. Wages in general, therefore, will rise by twenty-five per cent. Now, when the wages of the hatter rose in that proportion, you contended that this rise must be charged upon the price of hats; and the price of a hat having been previously eighteen shillings, you insisted that it must now be twenty-one shillings; in which case a rise in wages of twenty-five per cent, would have raised the price of hats about sixteen and one half per cent. And, if this were possible, two great doctrines of Mr. Ricardo would have been overthrown at one blow: 1st, that which maintains that no article can increase in price except from a previous increase in the quantity of labor necessary to its production: for here is no increase in the quantity of the labor, but simply in its value; 2d, that no rise in the value of labor can ever settle upon price; but that all increase of wages will be paid out of profits, and all increase of profits out of wages. I shall now, however, extort a sufficient defence of Mr. Ricardo from your own concessions. For you acknowledge that the same cause which raises the wages of the hatter will raise wages universally, and in the same ratio—that is, by twenty-five per cent. And, if such a rise in wages could raise the price of hats by sixteen and one half per cent., it must raise all other commodities whatsoever by sixteen and one half per cent. Now, tell me, Phædrus, when all commodities without exception are raised by sixteen arid one half per cent., in what proportion will the power of money be diminished under every possible application of it?

Phæd. Manifestly by sixteen and one half per cent.

X. If so, Phædrus, you must now acknowledge that it is a matter of perfect indifference to the hatter whether the price of hats rise or not, since he cannot under any circumstances escape the payment of the three shillings. If the price should not rise (as assuredly it will not), he pays the three shillings directly; if the price were to rise by three shillings, this implies of necessity that prices rise universally (for it would answer no purpose of your argument to suppose that hatters escaped an evil which affected all other trades). Now, if prices rise universally, the hatter undoubtedly escapes the direct payment of the three shillings, but he pays it indirectly; inasmuch as one hundred and sixteen pounds and ten shillings is now become necessary to give him the same command of labor and commodities which was previously given by one hundred pounds. Have you any answer to these deductions?

Phæd. I must confess I have none.

X. If so, and no answer is possible, then I have here given you a demonstration of Mr. Ricardo's great law: That no product of labor whatsoever can be affected in value by any variations in the value of the producing labor. But, if not by variations in its value, then of necessity by variations in its quantity, for no other variations are possible.

Phæd. But at first sight, you know, variations in the value of labor appear to affect the value of its product: yet you have shown that the effect of such variations is defeated, and rendered nugatory in the end. Now, is it not possible that some such mode of argument may be applied to the case of variations in the quantity of labor?

X. By no means: the reason why all variations in the value of labor are incapable of transferring themselves to the value of its product is this: that these variations extend to all kinds of labor, and therefore to all commodities alike. Now, that which raises or depresses all things equally leaves their relations to each other undisturbed. In order to disturb the relations of value between A, B, and C, I must raise one at the same time that I do not raise another; depress one, and not depress another; raise or depress them unequally. This is necessarily done by any variations in the quantity of labor. For example, when more or less labor became requisite for the production of hats, that variation could not fail to affect the value of hats, for the variation was confined exclusively to hats, and arose out of some circumstance peculiar to hats; and no more labor was on that account requisite for the production of gloves, or wine, or carriages. Consequently, these and all other articles remaining unaffected, whilst hats required twenty- five per cent more labor, the previous relation between hats and all other commodities was disturbed; that is, a real effect was produced on the value of hats. Whereas, when hats, without requiring a greater quantity of labor, were simply produced by labor at a higher value, this change could not possibly disturb the relation between hats and any other commodities, because they were all equally affected by it. If, by some application of any mechanic or chemical discovery to the process of making candles, the labor of that process were diminished by one third, the value of candles would fall; for the relation of candles to all other articles, in which no such abridgment of labor had been effected, would be immediately altered: two days' labor would now produce the same quantity of candles as three days' labor before the discovery. But if, on the other hand, the wages of three days had simply fallen in value to the wages of two days,—that is, if the laborer received only six shillings for three days, instead of nine shillings,—this could not affect the value of candles; for the fall of wages, extending to all other things whatsoever, would leave the relations between them all undisturbed; everything else which had required nine shillings' worth of labor would now require six shillings' worth; and a pound of candles would exchange for the same quantity of everything as before. Hence, it appears that no cause can possibly affect the value of anything—that is, its exchangeable relation to other things—but an increase or diminution in the quantity of labor required for its production: and the prices of all things whatsoever represent the quantity of labor by which they are severally produced; and the value of A is to the value of B universally as the quantity of labor which produces A to the quantity of labor which produces B.

* * * * *

Here, then, is the great law of value as first explained by Mr. Ricardo. Adam Smith uniformly takes it for granted that an alteration in the quantity of labor, and an alteration in wages (that is, the value of labor), are the same thing, and will produce the same effects; and, hence, he never distinguishes the two cases, but everywhere uses the two expressions as synonymous. If A, which had hitherto required sixteen shillings' worth of labor for its production, should to-morrow require only twelve shillings' worth, Adam Smith would have treated it as a matter of no importance whether this change had arisen from some discovery in the art of manufacturing A, which reduced the quantity of labor required from four days to three, or simply from some fall in wages which reduced the value of a day's labor from four shillings to three shillings. Yet, in the former case, A would fall considerably in price as soon as the discovery ceased to be monopolized; whereas, in the latter case, we have seen that A could not possibly vary in price by one farthing.

Phæd. In what way do you suppose that Adam Smith came to make so great an oversight, as I now confess it to be?

X. Mr. Malthus represents Adam Smith as not having sufficiently explained himself on the subject. "He does not make it quite clear," says Mr. Malthus, "whether he adopts for his principle of value the quantity of the producing labor or its value." But this is a most erroneous representation. There is not a chapter in the "Wealth of Nations" in which it is not made redundantly clear that Adam Smith adopts both laws as mere varieties of expression for one and the same law. This being so, how could he possibly make an election between two things which he constantly confounded and regarded as identical? The truth is, Adam Smith's attention was never directed to the question: he suspected no distinction; no man of his day, or before his day, had ever suspected it; none of the French or Italian writers on Political Economy had ever suspected it; indeed, none of them have suspected it to this hour. One single writer before Mr. Ricardo has insisted on the quantity of labor as the true ground of value; and, what is very singular, at a period when Political Economy was in the rudest state, namely, in the early part of Charles II's reign. This writer was Sir William Petty, a man who would have greatly advanced the science if he had been properly seconded by his age. In a remarkable passage, too long for quotation, he has expressed the law of value with a Ricardian accuracy: but it is scarcely possible that even he was aware of his own accuracy; for, though he has asserted that the reason why any two articles exchange for each other (as so much corn of Europe, suppose, for so much silver of Peru) is because the same quantity of labor has been employed on their production; and, though he has certainly not vitiated the purity of this principle by the usual heteronomy (if you will allow me a learned word),—that is, by the introduction of the other and opposite law derived from the value of this labor,— yet, it is probable that in thus abstaining he was guided by mere accident, and not by any conscious purpose of contradistinguishing the one law from the other; because, had that been his purpose, he would hardly have contented himself with forbearing to affirm, but would formally have denied the false law. For it can never be sufficiently impressed upon the student's mind, that it brings him not one step nearer to the truth to say that the value of A is determined by the quantity of labor which produces it, unless by that proposition he means that it is not determined by the value of the labor which produces it.

To return to Adam Smith: not only has he "made it quite clear" that he confounded the two laws, and had never been summoned to examine whether they led to different results, but I go further, and will affirm that if he had been summoned to such an examination, he could not have pursued it with any success until the discovery of the true law of Profits. For, in the case of the hats, as before argued, he would have said, "The wages of the hatter, whether they have been augmented by increased quantity of labor, or by increased value of labor, must, in any case, be paid." Now, what is the answer? They must be paid, but from what fund? Adam Smith knew of no fund, nor could know of any, until Mr. Ricardo had ascertained the true law of Profits, except Price: in either case, therefore, as Political Economy then stood, he was compelled to conclude that the fifteen shillings would be paid out of the price,—that is, that the whole difference between the twelve shillings and the fifteen shillings would settle upon the purchaser. But we now know that this will happen only in the case when the difference has arisen from increased labor; and that every farthing of the difference which arises from increased value of labor will be paid out of another fund, namely, Profits. But this conclusion could not be arrived at without the new theory of Profits (as will be seen more fully when we come to that theory); and thus one error was the necessary parent of another.

Here I will pause, and must beg you to pardon my long speeches in consideration of the extreme importance of the subject; for everything in Political Economy depends, as I said before, on the law of value; and I have not happened to meet with one writer who seemed fully to understand Mr. Ricardo's law, and still less who seemed to perceive the immense train of consequences which it involves.

Phæd. I now see enough to believe that Mr. Ricardo is right; and, if so, it is clear that all former writers are wrong. Thus far I am satisfied with your way of conducting the argument, though some little confusion still clouds my view. But, with regard to the consequences you speak of, how do you explain that under so fundamental an error (as you represent it) many writers, but above all Adam Smith, should have been able to deduce so large a body of truth, that we regard him as one of the chief benefactors to the science?

X. The fact is, that his good sense interfered everywhere to temper the extravagant conclusions into which a severe logician could have driven him. [Footnote: The "Wealth of Nations" has never yet been ably reviewed, nor satisfactorily edited. The edition of Mr. Buchanan is unquestionably the best, and displays great knowledge of Political Economy as it stood before the revolution effected by Mr. Ricardo. But having the misfortune to appear immediately before that revolution, it is already to some degree an obsolete book. Even for its own date, however, it was not good as an edition of Adam Smith, its value lying chiefly in the body of original disquisitions which composed the fourth volume; for the notes not only failed to correct the worst errors of Adam Smith (which, indeed, in many cases is saying no more than that Mr. Buchanan did not forestall Mr. Ricardo), but were also deficient in the history of English finance, and generally in the knowledge of facts. How much reason there is to call for a new edition, with a commentary adapted to the existing state of the science, will appear on this consideration: the "Wealth of Nations" is the text-book resorted to by all students of Political Economy. One main problem of this science, if not the main problem (as Mr. Ricardo thinks), is to determine the laws which regulate Rents, Profits, and Wages; but everybody who is acquainted with the present state of the science must acknowledge that precisely on these three points it affords "very little satisfactory information." These last words are the gentle criticism of Mr. Ricardo: but the truth is, that not only does it afford very little information on the great heads of Rent, Profits, and Wages, but (which is much worse) it gives very false and misleading information.

P. S. September 27, 1854.—It is suggested to me by a friend, that in this special notice of Mr. Buchanan's edition, I shall be interpreted as having designed some covert reflection upon the edition of Adam Smith published by Mr. M'Culloch. My summary answer to any such insinuation is, that this whole paper was written in the spring of 1824, that is, thirty and a half years ago: at which time, to the best of my knowledge, Mr. M'Culloch had not so much as meditated any such edition. Let me add, that if I had seen or fancied any reason for a criticism unfriendly to Mr. M'Culloch, or to any writer whatever, I should not have offered it indirectly, but openly, frankly, and in the spirit of liberal candor due to an honorable contemporary.] At this very day, a French and an English economist have reared a Babel of far more elaborate errors on this subject; M. Say, I mean, and Mr. Malthus: both ingenious writers, both eminently illogical,—especially the latter, with whose "confusion worse confounded" on the subject of Value, if reviewed by some unsparing Rhadamanthus of logical justice, I believe that chaos would appear a model of order and light. Yet the very want of logic, which has betrayed these two writers into so many errors, has befriended them in escaping from their consequences; for they leap with the utmost agility over all obstacles to any conclusions which their good sense points out to them as just, however much at war with their own premises. With respect to the confusion which you complain of as still clinging to the subject, this naturally attends the first efforts of the mind to disjoin two ideas which have constantly been regarded as one. But, as we advance in our discussions, illustration and proof will gradually arise from all quarters, to the great principle of Mr. Ricardo which we have just been considering; besides which, this principle is itself so much required for the illustration and proof of other principles, that the mere practice of applying it will soon sharpen your eye to a steady familiarity with all its aspects.

* * * * *

DIALOGUE THE SECOND.

REDUCTIO AD ABSURDUM.

Phil. X., I see, is not yet come: I hope he does not mean to break his appointment, for I have a design upon him. I have been considering his argument against the possibility of any change in price arising out of a change in the value of labor, and I have detected a flaw in it which he can never get over. I have him, sir—I have him as fast as ever spider had a fly.

Phæd. Don't think it, my dear friend: you are a dexterous retiarius; but a gladiator who is armed with Ricardian weapons will cut your net to pieces. He is too strong in his cause, as I am well satisfied from what passed yesterday. He'll slaughter you,—to use the racy expression of a friend of mine in describing the redundant power with which one fancy boxer disposed of another,—he'll slaughter you "with ease and affluence." But here he comes.—Well, X., you're just come in time. Philebus says that you are a fly, whilst he is a murderous spider, and that he'll slaughter you with "ease and affluence;" and, all things considered, I am inclined to think he will.

Phil. Phædrus does not report the matter quite accurately; however, it is true that I believe myself to have detected a fatal error in your argument of yesterday on the case of the hat; and it is this: When the value of labor rose by twenty-five per cent., you contended that this rise would be paid out of profits. Now, up to a certain limit this may be possible; beyond that it is impossible. For the price of the hat was supposed to be eighteen shillings: and the price of the labor being assumed originally at twelve shillings;— leaving six shillings for profits,—it is very possible that a rise in wages of no more than three shillings may be paid out of these profits. But, as this advance in wages increases, it comes nearer and nearer to that point at which it will be impossible for profits to pay it; since, let the advance once reach the whole six shillings, and all motive for producing hats will be extinguished; and let it advance to seven shillings, there will in that case be no fund at all left out of which the seventh shilling can be paid, even if the capitalist were disposed to relinquish all his profits. Now, seriously, you will hardly maintain that the hat could not rise to the price of nineteen shillings—or of any higher sum?

X. Recollect, Philebus, what it is that I maintain; assuredly the hat may rise to the price of nineteen shillings, or of any higher sum, but not as a consequence of the cause you assign. Taking your case, I do maintain that it is impossible the hat should exceed, or even reach, eighteen shillings. When I say eighteen shillings, however, you must recollect that the particular sum of twelve shillings for labor, and six shillings for profits, were taken only for the sake of illustration; translating the sense of the proposition into universal forms, what I assert is, that the rise in the value of the labor can go no further than the amount of profits will allow it: profits swallowed up, there will remain no fund out of which an increase of wages can be paid, and the production of hats will cease.

Phil. This is the sense in which I understood you; and in this sense I wish that you would convince me that the hat could not, under the circumstances supposed, advance to nineteen shillings or twenty shillings.

X. Perhaps, in our conversation on Wages, you will see this more irresistibly; you yourself will then shrink from affirming the possibility of such an advance as from an obvious absurdity; meantime, here is a short demonstration of it, which I am surprised that Mr. Ricardo did not use as the strongest and most compendious mode of establishing his doctrine.

Let it be possible that the hat may advance to nineteen shillings; or, to express this more generally, from x (or eighteen shillings)— which it was worth before the rise in wages—to x + y; that is to say, the hat will now be worth x + y quantity of money—having previously been worth no more than x. That is your meaning?

Phil. It is.

X. And if in money, of necessity in everything else; because otherwise, if the hat were worth more money only, but more of nothing besides, that would simply argue that money had fallen in value; in which case undoubtedly the hat might rise in any proportion that money fell; but, then, without gaining any increased value, which is essential to your argument.

Phil. Certainly; if in money, then in everything else.

X. Therefore, for instance, in gloves; having previously been worth four pair of buckskin gloves, the hat will now be worth four pair + y?

Phil. It will.

X. But, Philebus, either the rise in wages is universal or it is not universal. If not universal, it must be a case of accidental rise from mere scarcity of hands; which is the case of a rise in market value; and that is not the case of Mr. Ricardo, who is laying down the laws of natural value. It is, therefore, universal; but, if universal, the gloves from the same cause will have risen from the value of x to x + y.

Hence, therefore, the price of the hat, estimated in gloves, is = x + y.

And again, the price of the gloves, estimated in hats, is = x + y.

In other words, H - y = x. H + y = x. That is to say, H - y = H + y.

Phæd. Which, I suppose, is an absurdity; and, in fact, it turns out, Philebus, that he has slaughtered you with "ease and affluence."

X. And this absurdity must be eluded by him who undertakes to show that a rise in the wages of labor can be transferred to the value of its product.

* * * * *

DIALOGUE THE THIRD.

[Et æquiori sane animo feres, cum hic de primis agatur principiis, si superstitiose omnia examinavi,—viamque quasi palpando singulaque curiosius contrectando, lente me promovi et testudineo gradu. Video enim ingenium humanum ita comparatum esse—ut facilius longe quid consequens sit dispiciat, quam quid in naturà primo verum; nostramque omnium conditionem non multum ab illà Archimedis abludere—Aos æe so kai koiso tæn gæn. Ubi primum figamus pedem, inveniro multo magis satagimus, quam (ubi inveninius) ulterius progredi.—Henricus Morus in Epist. ad Cartesium.]

PRINCIPLE OF VALUE CONTINUED.

Phæd. In our short conversation of yesterday, X., you parried an objection brought forward by Philebus in a way which I thought satisfactory. You reduced him to an absurdity, or what seemed such. In fact, I did verily believe that you had slaughtered Philebus; and so I told him. But we have since reconsidered the matter, and have settled it between ourselves that your answer will not do; that your "absurdity," in fact, is a very absurd absurdity. Philebus will tell you why. I, for my part, shall have enough to do to take care of a little argument of my own, which is designed to meet something that passed in our first dialogue. Now, my private conviction is, that both I and Philebus shall be cudgelled; I am satisfied that such will be the issue of the business. And my reason for thinking so is this,—that I already see enough to discern a character of boldness and determination in Mr. Ricardo's doctrines which needs no help from sneaking equivocations, and this with me is a high presumption that he is in the right. In whatever rough way his theories are tossed about, they seem always, like a cat, to light upon their legs. But, notwithstanding this, as long as there is a possibility that he may be in the wrong, I shall take it for granted that he is, and do my best to prove him so.

X. For which, Phædrus, I shall feel greatly indebted to you. We are told of Trajan, that, in the camp exercises, he not only tolerated hard blows, but courted them; "alacer virtute militum, et lætus quoties aut cassidi suæ aut clypeo gravior ictus incideret. Laudabat quippe ferientes, hortabaturque ut auderent." When one of our theatres let down an iron curtain upon the stage as a means of insulating the audience from any fire amongst the scenery, and sent men to prove the strength of this curtain by playing upon it with sledge-hammers in the sight and hearing of the public, who would not have laughed at the hollowness of the mummery, if the blows had been gentle, considerate, and forbearing? A "make-believe" blow would have implied a "make- believe" hammer and a "make-believe" curtain. No!—hammer away, like Charles Martel; "fillip me with a three-man beetle;" be to me a malleus hæreticorum; come like Spenser's Talus—an iron man with an iron flail, and thresh out the straw of my logic; rack me; put me to the question; get me down; jump upon me; kick me; throttle me; put an end to me in any way you can.

Phæd. I will, I will, my dear friend; anything to oblige you; anything for peace. So now tie yourself to the stake, whilst we bait you. And you begin, Philebus; unmuzzle.

Phil. I shall be brief. The case of the hat is what I stand upon; and, by the way, I am much obliged to you, X., for having stated the question in that shape; it has furnished me with a very manageable formula for recalling the principle at issue. The wages alter from two different causes—in one case, because there is the same quantity of labor at a different rate; in another case, because there is a different quantity at the same rate. In the latter case, it is agreed that the alteration settles upon price; in the former case you affirm that it will not: I affirm that it will. I bring an argument to prove it; which argument you attempt to parry by another. But in this counter argument of yours it strikes me that there lurks a petitio principii. Indeed, I am sure of it. For observe the course of our reasoning. I charge it upon your doctrine as an absurd consequence— that, if the increase of wages must be paid out of profits, then this fund will at length be eaten out; and as soon as it is, there will be no fund at all for paying any further increase; and the production must cease. Now, what in effect is your answer? Why, that as soon as profits are all eaten up, the production will cease. And this you call reducing me to an absurdity. But where is the absurdity? Your answer is, in fact, an identical proposition; for, when you say, "As soon as profits are absorbed," I retort, Ay, no doubt "as soon" as they are; but when will that be? It requires no Ricardo to tell us that, when profits are absorbed, they will be absorbed; what I deny is, that they ever can be absorbed. For, as fast as wages increase, what is to hinder price from increasing pari passu? In which case profits will never be absorbed. It is easy enough to prove that price will not increase, if you may assume that profits will not remain stationary. For then you have assumed the whole point in dispute; and after that, of course you have the game in your own hands; since it is self-evident that if anybody is made up of two parts P and W, so adjusted that all which is gained by either must be lost by the other, then that body can never increase.

Phæd. Nor decrease.

Phil. No, nor decrease. If my head must of necessity lose as much weight as my trunk gains, and vice versa, then it is a clear case that I shall never be heavier. But why cannot my head remain stationary, whilst my trunk grows heavier? This is what you had to prove, and you have not proved it.

Phæd. O! it's scandalous to think how he has duped us; his "reductio" turns out to the merest swindling.

X. No, Phædrus, I beg your pardon. It is very true I did not attempt to prove that your head might not remain stationary; I could not have proved this directly, without anticipating a doctrine out of its place; but I proved it indirectly, by showing that, if it were supposed possible, an absurdity would follow from that supposition. I said, and I say again, that the doctrine of wages will show the very supposition itself to be absurd; but, until we come to that doctrine, I content myself with proving that, let that supposition seem otherwise ever so reasonable (the supposition, namely, that profits may be stationary whilst wages are advancing), yet it draws after it one absurd consequence, namely, that a thing may be bigger than that to which it is confessedly equal. Look back to the notes of our conversation, and you will see that this is as I say. You say, Philebus, that I prove profits in a particular case to be incapable of remaining stationary, by assuming that price cannot increase; or, if I am called upon to prove that assumption—namely, that price cannot increase—I do it only by assuming that profits in that case are incapable of remaining stationary. But, if I had reasoned thus, I should not only have been guilty of a petitio principii (as you alleged), but also of a circle. Here, then, I utterly disclaim and renounce either assumption: I do not ask you to grant me that price must continue stationary in the case supposed; I do not ask you to grant me that profits must recede in the case supposed. On the contrary, I will not have them granted to me; I insist on your refusing both of these principles.

Phil. Well, I do refuse them.

Phæd. So do I. I'll do anything in reason as well as another. "If one knight give a testril—" [Footnote: Sir Andrew Aguecheek, in "Twelfth Night."]

X. Then let us suppose the mines from which we obtain our silver to be in England.

Phæd. What for? Why am I to suppose this? I don't know but you have some trap in it.

X. No; a Newcastle coal-mine, or a Cornwall tin-mine, will answer the purpose of my argument just as well. But it is more convenient to use silver as the illustration; and I suppose it to be in England simply to avoid intermixing any question about foreign trade. Now, when the hat sold for eighteen shillings, on Mr. Ricardo's principle why did it sell for that sum?

Phil. I suppose, because the quantity of silver in that sum is assumed to be the product of four days' labor in a silver-mine.

X. Certainly; because it is the product of the same quantity of labor as that which produced the hat. Calling twenty shillings, therefore, four ounces of silver, the hat was worth nine tenths of four ounces. Now, when wages advance from twelve shillings to fourteen shillings, profits (you allege) will not pay this advance, but price. On this supposition the price of the hat will now be—what?

Phil. Twenty shillings; leaving, as before, six shillings for profit.

X. Six shillings upon fourteen shillings are not the same rate of profit as six shillings upon twelve shillings; but no matter; it does not affect the argument. The hat is now worth four entire ounces of silver, having previously been worth four ounces minus a tenth of four ounces. But the product of four days' labor in a silver-mine must also advance in value, for the same cause. Four ounces of silver, which is that product, will now have the same power or value as 22.22_s_. had before. Consequently the four ounces of silver, which had previously commanded in exchange a hat and the ninth of a hat, will now command a hat and two ninths, fractions neglected. Hence, therefore, a hat will, upon any Anti-Ricardian theory, manifestly buy four ounces of silver; and yet, at the same time, it will not buy four ounces by one fifth part of four ounces. Silver and the denominations of its qualities, being familiar, make it more convenient to use that metal; but substitute lead, iron, coal, or anything whatsoever—the argument is the same, being in fact a universal demonstration that variations in wages cannot produce corresponding variations in price.

Phæd. Say no more, X.; I see that you are right; and it's all over with our cause; unless I retrieve it. To think that the whole cause of the Anti-Ricardian economy should devolve upon me! that fate should ordain me to be the Atlas on whose unworthy shoulders the whole system is to rest! This being my destiny, I ought to have been built a little stronger. However, no matter. I heartily pray that I may prove too strong for you; though, at the same time, I am convinced I shall not. Remember, therefore, that you have no right to exult if you toss and gore me, for I tell you beforehand that you will. And, if you do, that only proves me to be in the right, and a very sagacious person; since my argument has all the appearance of being irresistible, and yet such is my discernment that I foresee most acutely that it will turn out a most absurd one. It is this: your answer to Philebus issues in this—that a thing A is shown to be at once more valuable and yet not more valuable than the same thing B. Now, this answer I take by the horns; it is possible for A to be more and yet not more valuable than the same thing. For example, my hat shall be more valuable than the gloves; more valuable, that is, than the gloves were: and yet not more valuable than the gloves; not more valuable, that is, than the gloves now are. So of the wages; all things preserve their former relations, because all are equally raised. This is my little argument. What do you think of it? Will it do?

X. No.

Phæd. Why, so I told you.

X. I have the pleasure, then, to assure you that you were perfectly right. It will not do. But I understand you perfectly. You mean to evade my argument that the increase of wages shall settle upon profits; according to this argument, it will settle upon price, and not upon profits; yet again on price in such a way as to escape the absurdity of two relations of value existing between the very same things. But, Phædrus, this rise will be a mere metaphysical one, and no real rise. The hat, you say, has risen; but still it commands no more of the gloves, because they also have risen. How, then, has either risen? The rise is purely ideal.

Phæd. It is so, X.; but that I did not overlook; for tell me—on Mr. Ricardo's principle, will not all things double their value simultaneously, if the quantity of labor spent in producing all should double simultaneously?

X. It will, Phædrus.

Phæd. And yet nothing will exchange for more or less than before.

X. True; but the rise is not ideal, for all that, but will affect everybody. A pound of wheat, which previously bought three pounds of salt, will still buy three pounds; but, then, the salt-maker and the wheat-maker will have only one pound of those articles where before he had two. However, the difference between the two cases cannot fully be understood, without a previous examination of certain distinctions, which I will make the subject of our next dialogue; and the rather, because, apart from our present question, at every step we should else be embarrassed, as all others have been, by the perplexity attending these distinctions. Meantime, as an answer to your argument, the following consideration will be quite sufficient. The case which your argument respects is that in which wages are supposed to rise? Why? In consequence of a real rise in corn or something else. As a means of meeting this rise, wages rise; but the increased value of wages is only a means to an end, and the laborer cares about the rise only in that light. The end is—to give him the same quantity of corn, suppose. That end attained, he cares nothing about the means by which it is attained. Now, your ideal rise of wages does not attain this end. The corn has really risen; this is the first step. In consequence of this, an ideal rise follows in all things, which evades the absurdities of a real rise—and evades the Ricardian doctrine of profits; but, then, only by also evading any real rise in wages, the necessity of which (in order to meet the real rise in corn) first led to the whole movement of price. But this you will more clearly see after our next dialogue.

* * * * *

DIALOGUE THE FOURTH.

ON THE USE AND ABUSE OF TWO CELEBRATED DISTINCTIONS IN THE THEORY OF VALUE.

X. Now, gentlemen, I come to a question which on a double account is interesting: first, because it is indispensable to the fluency of our future progress that this question should be once for all decided; secondly, because it furnishes an experimentum crucis for distinguishing a true knowledge of Mr. Ricardo's theory from a spurious or half-knowledge. Many a man will accompany Mr. Ricardo thus far, and will keep his seat pretty well until he comes to the point which we have now reached—at which point scarcely one in a thousand will escape being unhorsed.

Phæd. Which one most assuredly will not be myself. For I have a natural alacrity in losing my seat, and gravitate so determinately to the ground, that (like a Roman of old) I ride without stirrups, by way of holding myself in constant readiness for projection; upon the least hint, anticipating my horse's wishes on that point, and throwing myself off as fast as possible; for what's the use of taking the negative side in a dispute where one's horse takes the affirmative? So I leave it to Philebus to ride through the steeple-chase you will lead him; his be the honor of the day—and his the labor.

X. But that cannot be; Philebus is bound in duty to be dismounted, for the sake of keeping Mr. Malthus with many others in countenance. For at this point, Phædrus, more than at any other almost, there is a sad confusion of lords and gentlemen that I could name thrown out of the saddle pell-mell upon their mother earth.

Phil. "So they among themselves in pleasant vein Stood scoffing."

I suppose I may add—

"Heightened in their thoughts beyond All doubts of victory."

Meantime, what is it you allude to?

X. You are acquainted, I doubt not, Philebus, with the common distinction between real and nominal value; and in your judgment upon that distinction I presume that you adopt the doctrine of Mr. Malthus.

Phil. I do; but I know not why you should call it the doctrine of Mr. Malthus; for, though he has reurged it against Mr. Ricardo, yet originally it belongs to Adam Smith.

X. Not so, Philebus; a distinction between real and nominal value was made by Adam Smith, but not altogether the distinction of Mr. Malthus. It is true that Mr. Malthus tells us ("Polit. Econ.," p. 63) that the distinction is "exactly the same." But in this he is inaccurate; for neither is it exactly the same; nor, if it had been, could Mr. Malthus have urged it in his "Political Economy" with the same consistency as its original author. This you will see hereafter. But no matter; how do you understand the distinction?

Phil. "I continue to think," with Mr. Malthus, and in his words, "that the most proper definition of real value in exchange, in contradistinction to nominal value in exchange, is the power of commanding the necessaries and conveniences of life, including labor, as distinguished from the power of commanding the precious metals."

X. You think, for instance, that if the wages of a laborer should in England be at the rate of five shillings a day, and in France of no more than one shilling a day, it could not, therefore, be inferred that wages were at a high real value in England, or a low real value in France. Until we know how much food, &c., could be had for the five shillings in England, and how much in France for the one shilling, all that we could fairly assert would be, that wages were at a high nominal value in England and at a low nominal value in France; but the moment it should be ascertained that the English wages would procure twice as much comfort as the French, or the French twice as much as the English, we might then peremptorily affirm that wages were at a high real value in England on the first supposition, or in France on the second:—this is what you think?

Phil. It is, and very fairly stated, I think this, in common with Mr. Malthus; and can hold out but little hope that I shall ever cease to think it.

X. "Why, then, know this, Thou think'st amiss; And, to think right, thou must think o'er again." [Footnote: Suckling's well-known song.]

Phæd. But is it possible that Mr. Ricardo can require me to abjure an inference so reasonable as this? If so, I must frankly acknowledge that I am out of the saddle already.

X. Reasonable inference? So far from that, there is an end of all logic if such an inference be tolerated. That man may rest assured that his vocation in this world is not logical, who feels disposed (after a few minutes' consideration) to question the following proposition,—namely: That it is very possible for A continually to increase in value—in real value, observe—and yet to command a continually decreasing quantity of B; in short, that A may acquire a thousand times higher value, and yet exchange for ten thousand times less of B.

Phæd. Why, then, "chaos is come again!" Is this the unparadoxical Ricardo?

X. Yes, Phædrus; but lay not this unction to your old prejudices, which you must now prepare to part with forever, that it is any spirit of wilful paradox which is now speaking; for get rid of Mr. Ricardo, if you can, but you will not, therefore, get rid of this paradox. On any other theory of value whatsoever, it will still continue to be an irresistible truth, though it is the Ricardian theory only which can consistently explain it. Here, by the way, is a specimen of paradox in the true and laudable sense—in that sense according to which Boyle entitled a book "Hydrostatical Paradoxes;" for, though it wears a primâ facie appearance of falsehood, yet in the end you will be sensible that it is not only true, but true in that way and degree which will oblige him who denies it to maintain an absurdity. Again, therefore, I affirm that, when the laborer obtains a large quantity of corn, for instance, it is so far from being any fair inference that wages are then at a high real value, that in all probability they are at a very low real value; and inversely I affirm, that when wages are at their very highest real value, the laborer will obtain the very smallest quantity of corn. Or, quitting wages altogether (because such an illustration would drive me into too much anticipation), I affirm universally of Y (that is, of any assignable thing whatsoever), that it shall grow more valuable ad infinitum, and yet by possibility exchange for less and less ad infinitum of Z (that is, of any other assignable thing).

Phæd. Well, all I shall say is this,—am I in a world where men stand on their heads or on their feet? But there is some trick in all this; there is some snare. And now I consider—what's the meaning of your saying "by possibility"? If the doctrine you would force upon me be a plain, broad, straightforward truth, why fetter it with such a suspicious restriction?

X. Think, for a moment, Phædrus, what doctrine it is which I would force upon you; not, as you seem to suppose, that the quantity obtained by Y is in the inverse ratio of the value of Y; on the contrary, if that were so, it would still remain true that an irresistible inference might be drawn from the quantity purchased to the value of the thing purchasing, and vice versa, from the value of the thing purchasing to the quantity which it would purchase. There would still be a connection between the two; and the sole difference between my doctrine and the old doctrine would be this—that the connection would be no longer direct (as by your doctrine), but inverse. This would be the difference, and the sole difference. But what is it that I assert? Why, that there is no connection at all, or of any kind, direct or inverse, between the quantity commanded and the value commanding. My object is to get rid of your inference, not to substitute any new inference of my own. I put, therefore, an extreme case. This case ought by your doctrine to be impossible. If, therefore, it be not impossible, your doctrine is upset. Simply as a possible case, it is sufficient to destroy you. But, if it were more than a possible case, it would destroy me. For if, instead of demonstrating the possibility of such a case, I had attempted to show that it were a universal and necessary case, I should again be introducing the notion of a connection between the quantity obtained and the value obtaining, which it is the very purpose of my whole argument to exterminate. For my thesis is, that no such connection subsists between the two as warrants any inference that the real value is great because the quantity it buys is great, or small because the quantity it buys is small; or, reciprocally, that, because the real value is great or small, therefore the quantities bought shall be great or small. From, or to, the real value in these cases, I contend that there is no more valid inference, than from, or to, the nominal value with which it is contrasted.

Phil. Your thesis, then, as I understand it, is this: that if A double its value, it will not command double the quantity of B. I have a barouche which is worth about six hundred guineas at this moment. Now, if I should keep this barouche unused in my coach-house for five years, and at the end of this term it should happen from any cause that carriages had doubled in value, my understanding would lead me to expect double the quantity of any commodity for which I might then exchange it, whether that were money, sugar, besoms, or anything whatsoever. But you tell me—no. And vice versa, if I found that my barouche at the end of five years obtained for me double the quantity of sugar, or besoms, or political economists, which it would now obtain, I should think myself warranted in drawing an inference that carriages had doubled their value. But you tell me—no; "non valet consequentia."

X. You are in the right, Phædrus; I do tell you so. But you do not express my thesis quite accurately, which is, that if A double its value, it will not therefore command double the former quantity of B. It may do so; and it may also command five hundred times more, or five hundred times less.

Phæd. O tempora! O mores! Here is my friend X., that in any other times would have been a man of incorruptible virtue; and yet, in our unprincipled age, he is content to barter the interests of truth and the "majesty of plain-dealing" for a brilliant paradox, or (shall I say?) for the glory of being reputed an accomplished disputant.

X. But, Phædrus, there could be little brilliancy in a paradox which in the way you understand it will be nothing better than a bold defiance of common sense. In fact, I should be ashamed to give the air of a paradox to so evident a truth as that which I am now urging, if I did not continually remind myself that, evident as it may appear, it yet escaped Adam Smith. This consideration, and the spectacle of so many writers since his day thrown out and at a fault precisely at this point of the chase, make it prudent to present it in as startling a shape as possible; in order that, the attention being thoroughly roused, the final assent may not be languid or easily forgotten. Suffer me, therefore, Phædrus, in a Socratic way, to extort an assent from your own arguments—allow me to drive you into an absurdity.

Phæd. With all my heart; if our father Adam is wrong, I am sure it would be presumptuous in me to be right; so drive me as fast as possible.

X. You say that A, by doubling its own value, shall command a double quantity of B. Where, by A, you do not mean some one thing in particular, but generally any assignable thing whatever. Now, B is some assignable thing. Whatever, therefore, is true of A, will be true of B?