to get them with many.
62. The cost and value of things, however difficult to determine accurately, are thus both dependent on ascertainable physical circumstances.28
But their price is dependent on the human will.
Such and such a thing is demonstrably good for so much. And it may demonstrably be had for so much.
But it remains questionable, and in all manner of ways questionable, whether I choose to give so much.29
This choice is always a relative one. It is a choice to give a price for this, rather than for that;—a resolution to have the thing, if getting it does not involve the loss of a better thing. Price depends, therefore, not only on the cost of the commodity itself, but on its relation to the cost of every other attainable thing.
Farther. The power of choice is also a relative one. It depends not merely on our own estimate of the thing, but on everybody else's estimate; therefore on the number and force of the will of the concurrent buyers, and on the existing quantity of the thing in proportion to that number and force.
Hence the price of anything depends on four variables.
(1.) Its cost.
(2.) Its attainable quantity at that cost.
(3.) The number and power of the persons who want it.
(4.) The estimate they have formed of its desirableness.
Its value only affects its price so far as it is contemplated in this estimate; perhaps, therefore, not at all.
63. Now, in order to show the manner in which price is expressed in terms of a currency, we must assume these four quantities to be known, and the "estimate of desirableness," commonly called the Demand, to be certain. We will take the number of persons at the lowest. Let A and B be two labourers who "demand," that is to say, have resolved to labour for, two articles, a and b. Their demand for these articles (if the reader likes better, he may say their need) is to be conceived as absolute, their existence depending on the getting these two things. Suppose, for instance, that they are bread and fuel, in a cold country, and let a represent the least quantity of bread, and b the least quantity of fuel, which will support a man's life for a day. Let a be producible by an hour's labour, but b only by two hours' labour.
Then the cost of a is one hour, and of b two (cost, by our definition, being expressible in terms of time). If, therefore, each man worked both for his corn and fuel, each would have to work three hours a day. But they divide the labour for its greater ease.30 Then if A works three hours, he produces 3 a, which is one a more than both the men want. And if B works three hours, he produces only 1-1/2 b, or half of b less than both want. But if A work three hours and B six, A has 3 a, and B has 3 b, a maintenance in the right proportion for both for a day and half; so that each might take half a day's rest. But as B has worked double time, the whole of this day's rest belongs in equity to him. Therefore the just exchange should be, A giving two a for one b, has one a and one b;—maintenance for a day. B giving one b for two a, has two a and two b; maintenance for two days.
But B cannot rest on the second day, or A would be left without the article which B produces. Nor is there any means of making the exchange just, unless a third labourer is called in. Then one workman, A, produces a, and two, B and C, produce b:—A, working three hours, has three a;—B, three hours, 1-1/2 b;—C, three hours, 1-1/2 b. B and C each give half of b for a, and all have their equal daily maintenance for equal daily work.
To carry the example a single step farther, let three articles, a, b, and c be needed.
Let a need one hour's work, b two, and c four; then the day's work must be seven hours, and one man in a day's work can make 7 a, or 3-1/2 b, or 1-3/4 c.
Therefore one A works for a, producing 7 a; two B's work for b, producing 7 b; four C's work for c, producing 7 c.
A has six a to spare, and gives two a for one b, and four a for one c. Each B has 2-1/2 b to spare, and gives 1/2 b for one a, and two b for one c.
Each C has 3/4 of c to spare, and gives 1/2 c for one b, and 1/4 of c for one a.
And all have their day's maintenance.
Generally, therefore, it follows that if the demand is constant,31 the relative prices of things are as their costs, or as the quantities of labour involved in production.
64. Then, in order to express their prices in terms of a currency, we have only to put the currency into the form of orders for a certain quantity of any given article (with us it is in the form of orders for gold), and all quantities of other articles are priced by the relation they bear to the article which the currency claims.
But the worth of the currency itself is not in the slightest degree founded more on the worth of the article which it either claims or consists in (as gold) than on the worth of every other article for which the gold is exchangeable. It is just as accurate to say, "so many pounds are worth an acre of land," as "an acre of land is worth so many pounds." The worth of gold, of land, of houses, and of food, and of all other things, depends at any moment on the existing quantities and relative demands for all and each; and a change in the worth of, or demand for, any one, involves an instantaneously correspondent change in the worth of, and demand for, all the rest;—a change as inevitable and as accurately balanced (though often in its process as untraceable) as the change in volume of the outflowing river from some vast lake, caused by change in the volume of the inflowing streams, though no eye can trace, nor instrument detect, motion, either on its surface, or in the depth.
65. Thus, then, the real working power or worth of the currency is founded on the entire sum of the relative estimates formed by the population of its possessions; a change in this estimate in any direction (and therefore every change in the national character), instantly alters the value of money, in its second great function of commanding labour. But we must always carefully and sternly distinguish between this worth of currency, dependent on the conceived or appreciated value of what it represents, and the worth of it, dependent on the existence of what it represents. A currency is true, or false, in proportion to the security with which it gives claim to the possession of land, house, horse, or picture; but a currency is strong or weak,32 worth much, or worth little, in proportion to the degree of estimate in which the nation holds the house, horse, or picture which is claimed. Thus the power of the English currency has been, till of late, largely based on the national estimate of horses and of wine: so that a man might always give any price to furnish choicely his stable, or his cellar; and receive public approval therefor: but if he gave the same sum to furnish his library, he was called mad or a biblio-maniac. And although he might lose his fortune by his horses, and his health or life by his cellar, and rarely lost either by his books, he was yet never called a Hippo-maniac nor an Oino-maniac; but only Biblio-maniac, because the current worth of money was understood to be legitimately founded on cattle and wine, but not on literature. The prices lately given at sales for pictures and MSS. indicate some tendency to change in the national character in this respect, so that the worth of the currency may even come in time to rest, in an acknowledged manner, somewhat on the state and keeping of the Bedford missal, as well as on the health of Caractacus or Blink Bonny; and old pictures
There is, therefore, observe, no such thing as cheapness (in the common use of that term), without some error or injustice. A thing is said to be cheap, not because it is common, but because it is supposed to be sold under its worth. Everything has its proper and true worth at any given time, in relation to everything else; and at that worth should be bought and sold. If sold under it, it is cheap to the buyer by exactly so much as the seller loses, and no more. Putrid meat, at twopence a pound, is not "cheaper" than wholesome meat at sevenpence a pound; it is probably much dearer; but if, by watching your opportunity, you can get the wholesome meat for sixpence a pound, it is cheaper to you by a penny, which you have gained, and the seller has lost. The present rage for cheapness is either, therefore, simply and literally a rage for badness of all commodities, or it is an attempt to find persons whose necessities will force them to let you have more than you should for your money. It is quite easy to produce such persons, and in large numbers; for the more distress there is in a nation, the more cheapness of this sort you can obtain, and your boasted cheapness is thus merely a measure of the extent of your national distress.
There is, indeed, a condition of apparent cheapness, which we have some right to be triumphant in; namely, the real reduction in cost of articles by right application of labour. But in this case the article is only cheap with reference to its
A form of immediate cheapness results, however, in many cases, without distress, from the labour of a population where food is redundant, or where the labour by which the food is produced leaves much idle time on their hands, which may be applied to the production of "cheap" articles.
All such phenomena indicate to the political economist places where the labour is unbalanced. In the first case, the just balance is to be effected by taking labourers from the spot where pressure exists, and sending them to that where food is redundant. In the second, the cheapness is a local accident, advantageous to the local purchaser, disadvantageous to the local producer. It is one of the first duties of commerce to extend the market, and thus give the local producer his full advantage.
Cheapness caused by natural accidents of harvest, weather, &c., is always counterbalanced, in due time, by natural scarcity, similarly caused. It is the part of wise government, and healthy commerce, so to provide in times and places of plenty for times and places of dearth, as that there shall never be waste, nor famine.
Cheapness caused by gluts of the market is merely a disease of clumsy and wanton commerce.
Price has been already defined (p. 9) to be the quantity of labour which the possessor of a thing is willing to take for it. It is best to consider the price to be that fixed by the possessor, because the possessor has absolute power of refusing sale, while the purchaser has no absolute power of compelling it; but the effectual or market price is that at which their estimates coincide.
This "greater ease" ought to be allowed for by a diminution in the times of the divided work; but as the proportion of times would remain the same, I do not introduce this unnecessary complexity into the calculation.
Compare
[That is to say, the love of money is founded first on the intenseness of desire for given things; a youth will rob the till, now-a-days, for pantomime tickets and cigars; the "strength" of the currency being irresistible to him, in consequence of his desire for those luxuries.]
