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_X_. Think, for a moment, Phaedrus, 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, Phaedrus; 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.
_Phaed_. 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, Phaedrus, 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, Phaedrus, in a Socratic way, to extort an assent from your own arguments--allow me to drive you into an absurdity.
_Phaed_. 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?
_Phaed_. It will.
_X_. It will be true, therefore, of B, that, by doubling its own value, it will command a double quantity of A?
_Phaed_. I cannot deny it.
_X_. Let A be your carriage; and let B stand for six hundred thousands of besoms, which suppose to express the value of your carriage in that article at this present moment. Five years hence, no matter why, carriages have doubled in value; on which supposition you affirm that in exchange for your barouche you will be entitled to receive no less than twelve hundred thousands of besoms.
_Phaed_. I do; and a precious bargain I shall have of it; like Moses with his gross of shagreen spectacles. But sweep on, if you please; brush me into absurdity.
_X_. I will. Because barouches have altered in value, that is no reason why besoms should _not_ have altered?
_Phaed_. Certainly; no reason in the world.
_X_. Let them have altered; for instance, at the end of the five years, let them have been doubled in value. Now, because your assertion is this--simply by doubling in value, B shall command a double quantity of A--it follows inevitably, Phaedrus, that besoms, having doubled their value in five years, will at the end of that time command a double quantity of barouches. The supposition is, that six hundred thousand, at present, command one barouche; in five years, therefore, six hundred thousand will command two barouches?
_Phaed_. They will.
_X_. Yet, at the very same time, it has already appeared from your argument that twelve hundred thousand will command only one barouche; that is, a barouche will at one and the same time be worth twelve hundred thousand besoms, and worth only one fourth part of that quantity. Is this an absurdity, Phaedrus?
_Phaed_. It seems such.
_X_. And, therefore, the argument from which it flows, I presume, is false?
_Phaed_. Scavenger of bad logic! I confess that it looks so.
_Phil_. You confess? So do not I. You die "soft," Phaedrus; give me the cudgels, and I'll die "game," at least. The flaw in your argument, X., is this: you summoned Phaedrus to invert his proposition, and then you extorted an absurdity from this inversion. But that absurdity follows only from the particular form of expression into which you threw the original proposition. I will express the same proposition in other terms, unexceptionable terms, which shall evade the absurdity.
Observe. A and B are at this time equal in value; that is, they now exchange quantity for quantity. Or, if you prefer your own case, I say that one barouche exchanges for six hundred thousand besoms. I choose, however, to express this proposition thus: A (one barouche) and B (six hundred thousand besoms) are severally equal in value to C. When, therefore, A doubles its value, I say that it shall command a double quantity of C. Now, mark how I will express the inverted case. When B doubles its value, I say that it shall command a double quantity of C.
But these two cases are very reconcilable with each other. A may command a double quantity of C at the same time that B commands a double quantity of C, without involving any absurdity at all. And, if so, the disputed doctrine is established, that a double value implies a double command of quantity; and reciprocally, that from a doubled command of quantity we may infer a doubled value.
_X_. A, and B, you say, may simultaneously command a double quantity of C, in consequence of doubling their value; and this they may do without absurdity. But how shall I know _that_, until I know what you cloak under the symbol of C? For if the same thing shall have happened to C which my argument assumes to have happened to B (namely, that its value has altered), then the same demonstration will hold; and the very same absurdity will follow any attempt to infer the quantity from the value, or the value from the quantity.
_Phil_. Yes, but I have provided against _that_; for by C I mean any assignable thing which has _not_ altered its own value. I assume C to be stationary in value.
_X_. In that case, Philebus, it is undoubtedly true that no absurdity follows from the inversion of the proposition as it is expressed by you. But then the short answer which I return is this: your thesis avoids the absurdity by avoiding the entire question in dispute. Your thesis is not only not the same as that which we are now discussing; not only different in essence from the thesis which is _now_ disputed; but moreover it affirms only what _never_ was disputed by any man. No man has ever denied that A, by doubling its own value, will command a double quantity of all things which have been stationary in value. Of things in that predicament, it is self-evident that A will command a double quantity. But the question is, whether universally, from doubling its value, A will command a double quantity: and inversely, whether universally, from the command of a double quantity, it is lawful to infer a double value. This is asserted by Adam Smith, and is essential to his distinction of nominal and real value; this is peremptorily denied by us. We offer to produce cases in which from double value it shall not be lawful to infer double quantity. We offer to produce cases in which from double quantity it shall _not_ be lawful to infer double value. And thence we argue, that _until_ the value is discovered in some other way, it will be impossible to discover whether it be high or low from any consideration of the quantity commanded; and again, with respect to the quantity commanded--that, _until_ known in some other way, it shall never be known from any consideration of the value commanding. This is what we say; now, your "C" contradicts the conditions; "_until_ the value is discovered in some other way, it shall never be learned from the quantity commanded." But in your "C" the value is already discovered; for you assume it; you postulate that C is stationary in value: and hence it is easy indeed to infer that, because A commands double quantity of "C," it shall therefore be of double value; but this inference is not obtained from the single consideration of double quantity, but from _that_ combined with the assumption of unaltered value in C, without which assumption you shall never obtain that inference.
_Phaed_. The matter is clear beyond what I require; yet, X., for the satisfaction of my "game" friend Philebus, give us a proof or two _ex abundanti_ by applying what you have said to cases in Adam Smith or others.
_X_. In general it is clear that, if the value of A increases in a duplicate ratio, yet if the value of B increases in a triplicate ratio, so far from commanding a greater quantity of B, A shall command a smaller quantity; and if A continually goes on squaring its former value, yet if B continually goes on cubing its former value, then, though A will continually augment in value, yet the quantity which it will command of B shall be continually less, until at length it shall become practically equal to nothing. [Footnote: The reader may imagine that there is one exception to this case: namely, if the values of A and B were assumed at starting to be = 1; because, in that case, the squares, cubes, and all other powers alike, would be = I; and thus, under any apparent alteration, the real relations of A and B would always remain the same. But this is an impossible and unmeaning case in Political Economy, as might easily be shown.] Hence, therefore, I deduce,
1. That when I am told by Adam Smith that the money which I can obtain for my hat expresses only its _nominal_ value, but that the labor which I can obtain for it expresses its _real_ value--I reply, that the quantity of labor is no more any expression of the real value than the quantity of money; both are equally fallacious expressions, because equally equivocal. My hat, it is true, now buys me _x_ quantity of labor, and some years ago it bought _x/2_ quantity of labor. But this no more proves that my hat has advanced in real value according to that proportion, than a double _money_ price will prove it. For how will Adam Smith reply to him who urges the double money value as an argument of a double real value? He will say--No; non valet consequentia. Your proof is equivocal; for a double quantity of money will as inevitably arise from the sinking of money as from the rising of hats. And supposing money to have sunk to one fourth of its former value, in that case a double money value--so far from proving hats to have risen in real value--will prove that hats have absolutely fallen in real value by one half; and they will be seen to have done so by comparison with all things which have remained stationary; otherwise they would obtain not double merely, but four times the quantity of money price. This is what Adam Smith will reply in effect. Now, the very same objection I make to labor as any test of real value. My hat now obtains _x_ labor; formerly it obtained only one half of _x_. Be it so; but the whole real change may be in the labor; labor may now be at one half its former value; in which case my hat obtains the same real price; double the quantity of labor being now required to express the same value. Nay, if labor has fallen to one tenth of its former value, so far from being proved to have risen one hundred per cent. in real value by now purchasing a double quantity of labor, my hat is proved to have fallen to one fifth of its former value; else, instead of buying me only _x_ labor, which is but the double of its former value (_x/2_), it would buy me 5 _x_, or ten times its former value.
_Phil_. Your objection, then, to the labor price, as any better expression of the _real_ value than the money price, would be that it is an equivocal expression, leaving it doubtful on which side of the equation the disturbance had taken place, or whether on both sides. In which objection, as against others, you may be right; but you must not urge this against Adam Smith; because, on his theory, the expression is not equivocal; the disturbance can be only on one side of the equation, namely, in your hat. For as to the other side (the labor), _that_ is secured from all disturbance by his doctrine that labor is always of the same value. When, therefore, your hat will purchase _x_ quantity of labor instead of half _x_, the inference is irresistible that your hat has doubled its value. There lies no appeal from this; it cannot be evaded by alleging that the labor may have fallen, for the labor cannot fall.
_X_. On the Smithian theory it cannot; and therefore it is that I make a great distinction between the error of Adam Smith and of other later writers. He, though wrong, was consistent. That the value of labor is invariable, is a principle so utterly untenable, that many times Adam Smith abandoned it himself implicitly, though not explicitly. The demonstration of its variable value indeed follows naturally from the laws which govern wages; and, therefore, I will not here anticipate it. Meantime, having once adopted that theory of the unalterable value of labor, Adam Smith was in the right to make it the expression of real value. But this is not done with the same consistency by Mr. Malthus at the very time when he denies the possibility of any invariable value.
_Phil_. How so? Mr. Malthus asserts that there is one article of invariable value; what is more, this article is labor,--the very same as that formerly alleged for such by Adam Smith; and he has written a book to prove it.
_X_. True, Philebus, he has done so; and he _now_ holds that labor is invariable, supposing that his opinions have not altered within the last twelve months. But he was so far from holding this in 1820 (at which time it was that he chiefly insisted on the distinction between nominal and real value), that he was not content with the true arguments against the possibility of an invariable value, but made use of one, as I shall soon show you, which involves what the metaphysicians call a _non-ens_--or an idea which includes contradictory and self-destroying conditions. Omitting, however, the inconsistency in the idea of _real_ value as conceived by Mr.
Malthus, there is this additional error engrafted upon the Smithian definition, that it is extended to "the necessaries and conveniences of life" in general, and no longer confined exclusively to labor. I shall, therefore, as another case for illustrating and applying the result of our dispute,
2. Cite a passage from Mr. Malthus' "Political Economy" (p. 59): "If we are told that the wages of day-labor in a particular country are, at the present time, fourpence a day, or that the revenue of a particular sovereign, seven or eight hundred years ago, was four hundred thousand pounds a year, these statements of nominal value convey no sort of information respecting the condition of the lower class of people in the one case, or the resources of the sovereign in the other. Without further knowledge on the subject, we should be quite at a loss to say whether the laborers in the country mentioned were starving or living in great plenty; whether the king in question might be considered as having a very inadequate revenue, or whether the sum mentioned was so great as to be incredible. [Footnote: Hume very reasonably doubts the possibility of William the Conqueror's revenue being four hundred thousand pounds a year, as represented by an ancient historian, and adopted by subsequent writers.--Note of Mr. Malthus.] It is quite obvious that in cases of this kind,--and they are of constant recurrence,--the value of wages, incomes, or commodities, estimated in the precious metals, will be of little use to us alone. What we want further is some estimate of a kind which may be denominated real value in exchange, implying the quantity of the necessaries and conveniences of life which those wages, incomes, or commodities, will enable the possessor of them to command."
In this passage, over and above the radical error about real value, there is also apparent that confusion, which has misled so many writers, between _value_ and _wealth_; a confusion which Mr.
Ricardo first detected and cleared up. That we shall not be able to determine, from the mere money wages, whether the laborers were "starving or living in great plenty," is certain; and that we _shall_ be able to determine this as soon as we know the quantity of necessaries, etc., which those wages commanded, is equally certain; for, in fact, the one knowledge is identical with the other, and but another way of expressing it; we must, of course, learn that the laborer lived in plenty, if we should learn that his wages gave him a great deal of bread, milk, venison, salt, honey, etc. And as there could never have been any doubt whether we should learn _this_ from what Mr. Malthus terms the real value, and that we should _not_ learn it from what he terms the money value, Mr. Malthus may be assured that there never can have been any dispute raised on that point. The true dispute is, whether, after having learned that the laborer lived in American plenty, we shall have at all approximated to the appreciation of his wages as to real value: this is the question; and it is plain that we shall not. What matters it that his wages gave him a great deal of corn, until we know whether corn bore a high or a low value? A great deal of corn at a high value implies wages of a high value; but a great deal of corn at a low value is very consistent with wages at a low value. Money wages, it is said, leave us quite in the dark as to real value. Doubtless; nor are we at all the less in the dark for knowing the corn wages, the milk wages, the grouse wages, etc.
_Given_ the value of corn, _given_ the value of milk, _given_ the value of grouse, we shall know whether a great quantity of those articles implies a high value, or is compatible with a low value, in the wages which commanded them; but, _until_ that is given, it has been already shown that the quantity alone is an equivocal test, being equally capable of coexisting with high wages or low wages.
_Phil_. Why, then, it passes my comprehension to understand what test remains of real value, if neither money price nor commodity price expresses it. When are wages, for example, at a high real value?
_X_. Wages are at a high real value when it requires much labor to produce wages; and at a low real value when it requires little labor to produce wages: and it is perfectly consistent with the high real value that the laborer should be almost starving; and perfectly consistent with the low real value that the laborer should be living in great ease and comfort.
_Phil_. Well, this may be true; but you must allow that it sounds extravagant.
_X_. Doubtless it sounds extravagant, to him who persists in slipping under his notion of value another and heterogeneous notion, namely, that of wealth. But, let it sound as it may, all the absurdities (which are neither few nor slight) are on the other side.
These will discover themselves as we advance. Meantime, I presume that in your use, and in everybody's use, of the word value, a high value ought to purchase a high value, and that it will be very absurd if it should not. But, as to purchasing a great quantity, that condition is surely not included in any man's idea of value.
_Phil_. No, certainly; because A is of high value, it does not follow that it must purchase a great quantity; that must be as various as the nature of the thing with which it is compared. But having once assumed any certain thing, as B, it does seem to follow that, however small a quantity A may purchase of this (which I admit may be very small, though the value of A should be very great), yet it does seem to follow, from everybody's notion of value, that this quantity of B, however small at first, must continually increase, if the value of A be supposed continually to increase.
_X_. This may "seem" to follow; but it has been shown that it does not follow; for if A continually double its value, yet let B continually triple or quadruple its value, and the quantity of B will be so far from increasing, that it will finally become evanescent. In short, once for all, the formula is this: Let A continually increase in value, and it shall purchase continually more and more in quantity-- than what? More than it did? By no means; but more than it would have done, but for that increase in value. A has doubled its value. Does it _therefore_ purchase more than it did before of B? No; perhaps it purchases much less; suppose only one fourth part as much of B as it did before; but still the doubling of A's value has had its full effect; for B, it may happen, has increased in value eight-fold; and, but for the doubling of A, it would, instead of one fourth, have bought only one eighth of the former quantity. A, therefore, by doubling in value, has bought not double in quantity of what it bought before, but double in quantity of what it would else have bought.
The remainder of this dialogue related to the distinction between "relative" value, as it is termed, and "absolute" value; clearing up the true use of that distinction. But, this being already too long, the amount of it will be given hereafter, with a specimen of the errors which have arisen from the abuse of this distinction.
DIALOGUE THE FIFTH.
ON THE IMMEDIATE USES OF THE NEW THEORY OF VALUE.
_X_. The great law which governs exchangeable value has now been stated and argued. Next, it seems, we must ask, what are its uses? This is a question which you or I should not be likely to ask; for with what color of propriety could a doubt be raised about the use of any truth in any science? still less, about the use of a leading truth? least of all, about the use of _the_ leading truth? Nevertheless, such a doubt _has_ been raised by Mr. Malthus.
_Phaed_. On what ground or pretence.