FromthesedifficultiesRicardoescapesbyanothermethod。Malthus’stheoryofpopulationgiveshimwhatherequires。The’naturalpriceoflabour’asdistinguishedfromits’marketprice’is，asheasserts，’thatpricewhichisnecessarytoenablethelabourers，onewithanother，tosubsistandperpetuatetheirracewithouteitherincreaseordiminution。’19Thisisthetrue’naturalprice，’aboutwhichthe’marketprice’oscillates。Anincreaseofcapitalmayraisewagesforatimeabovethenaturalprice，butanincreaseofpopulationwillbringbackthepreviousrate。Ricardowarnsus，indeed，thatthisnaturalpriceoflabourisnottoberegardedassomething’absolutelyfixedandconstant。’20Itvariesindifferenttimesandcountries，andeveninthesamecountryatdifferenttimes。AnEnglishcottagernowpossesseswhatwouldoncehavebeenluxuries。Ricardoadmitsagain21thatthewagesofdifferentclassesoflabourersmaybedifferent，althoughhedoesnotconsiderthatthisfactaffectshisargument。Wemayallowforitbyconsideringtheskilledlaboureras2or1½；labourersrolledintoone。Theassumptionenableshimtogetoutofaviciouscircle。
　　Heisseekingtodiscovertheproportionsinwhichproducewillbedividedbetweenthetwoclasses，andwhichcooperateintheproduction。The’demandandsupply’principlemayshowthatanincreaseofcapitalwilltendtoincreasewages，buteventhattendency，ashecarefullypointsout，canonlybeadmittedsubjecttocertainimportantreservations。Inanycase，ifitexplainstemporaryfluctuations，itwillnotascertainthepointroundwhichthefluctuationstakeplace。Butthetwovariables，wagesandprofit，areclearlyconnected，andifwecanonceassumethatoneofthesevariablesisfixedbyanindependentlaw，wemayexplaininwhatwaytheotherwillbefixed。Havinggotridof’rent，’theremainingproducehastobedividedbetweenwagesandprofit。Iftheproducebefixed，thegreatertheshareofthelabourerthelesswillbetheshareofthecapitalist，andviceversa。Butthelabourer’sshareagainisdeterminedbytheconsiderationthatitmustbesuchastoenablehimtokeepupthepopulation。Thecapitalistwillgetthesurplusproduceafterallowingtothelabourerthesharesodetermined。Everythingturnsultimatelyuponthis’naturalprice’——theconstantwhichunderliesallthevariations。
　　Oneotherpointisimplied。
　　Thepopulationislimited，aswesee，bythenecessityofraisingsuppliesoffoodfrominferiorsoils。Moreover，thisisthesolelimit。Adifferentviewhadbeentakenwhichgreatlyexercisedtheorthodoxeconomists。Itwasgenerallyadmittedthatintheprogressofsocietytherateofprofitdeclined。AdamSmithexplainedthisbyarguingthat，ascapitalincreased，thecompetitionofcapitalistsloweredtherate。TothisitwasrepliedasbyWestthatthoughcompetitionequalisedprofits，itcouldnotfixtherateofprofit。Thesimpleincreaseofcapitaldoesnotprovethatitwillbelessprofitablyemployed。Theeconomistshadconstantlytoargueagainsttheterriblepossibilityofageneral’glut。’Theconditionofthingsatthepeacehadsuggestedthisalarm。Themischiefwasascribedto’over-production’andnottomisdirectedproduction。Thebestcureforourevils，assomepeoplethought，wouldbetoburnallthegoodsinstock。
　　Onthisversionoftheargument，itwouldseemthatanincreaseofwealthmightbeequivalenttoanincreaseofpoverty。Toconfutethedoctrineinthisform，itwasonlynecessarytohaveamoreintelligentconceptionofthetruenatureofexchange。AsJamesMillhadarguedinhispamphletagainstSpence，everyincreaseofsupplyisalsoanincreaseofdemand。
　　Themorethereistosell，themorethereistobuy。Theerrorinvolvedinthetheoryofa’glut’istheconfusionbetweenatemporarydislocationofthemachineryofexchange，whichcanandwillberemediedbyanewdirectionofindustry，andtheimpossiblecaseofanexcessofwealthingeneral。22Malthusneverquiteclearedhismindofthiserror，andRicardohadtoarguethepointwithhim。Abundanceofcapitalcannotbyitself，hesays，’makecapitallessindemand。’The’demandforcapitalisinfinite。’23Thedeclineintherateofprofit，therefore，dependsuponanothercause。
　　’If，witheveryaccumulationofprofit，wecouldtackapieceoffreshfertilelandtoourisland，profitswouldneverfall。’24Fertileland，however，islimited。Wehavetoresorttoinferiorsoil，andthereforetoemploycapitalatalessadvantage。InthePrinciplesheenforcesthesamedoctrinewiththehelpofSay，whohadshown’mostsatisfactorily’
　　thatanyamountofcapitalmightbeemployed。25If，inshort，labourandcapitalwerealwaysequallyefficient，therewouldbenolimittotheamountproducible。Ifthesupplyoffoodandrawmaterialscanbemultiplied，wealthcanbemultipliedtoanyamount。Theadmittedtendencyofprofitstofallmustthereforebeexplainedsimplyandsolelybythegrowingdifficultyofproducingthefoodandtherawmaterial。
　　Ricardo’sdoctrine，then，isMalthuscarriedoutmorelogically。Takeanationinastateofindustrialequilibrium。Theproduceoftheworstsoiljustsupportsthelabourer，andleavesaprofittothecapitalist。Thelabourergetsjustenoughtokeepuphisnumberstothestandard；thecapitalistjustenoughprofittoinducehimtokeepupthecapitalwhichsupportsthelabourer。Sincetherecanbeonlyonerateofwagesandonlyonerateofprofit，thisfixesthesharesintowhichthewholeproduceofthenationisdivided，afterleavingtothelandlordthesurplusproduceofthemorefertilesoils。
　　Acceptingthisschemeasastarting-point，wegetamethodforcalculatingtheresultsofanychanges。Wecanseehowataximposeduponrentsorprofitsorwageswillaffecttheclasseswhicharethusrelated；howimprovementsincultivationormachinery，oranewdemandforourmanufactures，willact，assumingtheconditionsimpliedinthisindustrialorganisation；how，inshort，anydisturbanceofthebalancewillwork，soastoproduceanewequilibrium。Ricardoexertsallhisingenuityinworkingouttheproblemwhich，withthehelpofafewassumptions，becomesmathematical，thearithmeticalillustrationswhichheemployedforthepurposebecameanuisanceinthehandsofhisdisciples。Theyareveryusefulascheckstogeneralstatements，butlendthemselvessoeasilytothetacitintroductionoferroneousassumptionsasoftentogiveatotallyfalseairofprecisiontotheresults。HappilyIneednotfollowhimintothatregion，andmayomitanyconsiderationofthelogicalvalueofhisdeductions。Imustbecontenttosaythat，sofarasheisright，hissystemgivesaneconomiccalculusforworkingouttheultimateresultofassignedeconomicchanges。Thepivotofthewholeconstructionisthe’marginofcultivation’——thepointatwhichthefoodforapressingpopulationisraisedatthegreatestdisadvantages。
　　’Profits，’ashesays，26’dependonhighandlowwages；wagesonthepriceofnecessaries；andthepriceofnecessarieschieflyonthepriceoffood，becauseallotherrequisitesmaybeincreasedalmostwithoutlimit。’
　　Ricardotakestheactualconstitutionofsocietyforgranted。Thethreefolddivisionintolandowners，capitalists，andlabourersisassumedasultimate，Forhimthatisasmuchafinalfactastoachemistitisafinalfactthatairandwaterarecomposedofcertainelements。Eachclassrepresentscertaineconomiccategories。
　　Thelandlordsitsstillandabsorbstheoverflowofwealthcreatedbyothers。
　　Thelaboureractsaveryimportantbutinonerespectapurelypassivepart。Hiswholemeansofsubsistenceareprovidedbythecapitalist，andadvancedtohimintheshapeofwages。Hisshareintheprocessisconfinedtomultiplyinguptoafixedstandard。Thecapitalististhereallyactiveagent。Thelabourerissimplyoneoftheimplementsusedinproduction。
　　Hiswagesarepartofthecapitalist’s’costsofproduction。’Thecapitalistvirtuallyraiseslabourers，onemaysay，solongasraisingthemisprofitable，justasheraiseshorsesforhisfarm，Ricardo，infact，pointsoutthatinsomecasesitmaybeforthefarmer’sinteresttosubstitutehorsesformen。27Ifitbeessentialtoanyproductthatthereshouldbeacertainnumberoflabourersoracertainnumberofhorses，thatnumberwillbeproduced。Butwhentheexpensebecomesexcessive，andinthecaseoflabourersthathappensasworsesoilshavetobebrokenupforfood，thecheckisprovidedthroughitseffectupontheaccumulationofcapital。
　　That，therefore，becomestheessentialpoint。Thewholeaimofthelegislatorshouldbetogivefacilitiesfortheaccumulationofcapital，andthewaytodothatistoabstainfromallinterferencewiththefreeplayoftheindustrialforces。Thetest，forexample，ofthegoodnessofatax——orratherofitscomparativefreedomfromtheevilsofeverytax——isthatitshouldpermitofaccumulationbyinterferingaslittleaspossiblewiththetendencyofthecapitaltodistributeitselfinthemostefficientway。
　　III。VALUEANDLABOUR
　　Tosolvethedistributionproblem，then，itisnecessarytogetbehindthemerefluctuationsofthemarket，andtoconsiderwhataretheultimateforcesbywhichthemarketisitselfgoverned。Whateffecthasthisuponthetheoryofthemarketitself?Thisleadstoafamousdoctrine。
　　Accordingtohisdisciple，M’Culloch，Ricardo’sgreatmeritwasthathe’laiddownthefundamentaltheoremofthescienceofvalue。’Hethusclearedupwhathadbeforebeenanyimpenetrablemystery，’andshowedthetruerelationsofprofit，wages，andprices，28Ricardo’stheoryofvalue，again，wasastarting-pointofthechiefmodernSocialisttheories。Itmarked，ashasbeensaid，29thepointatwhichthedoctrineoftherightsofmanchangesfromapurelypoliticaltoaneconomicaltheory。Ricardoremarksinhisfirstchapterthatthevaguenessoftheoriesofvaluehasbeenthemostfertilesourceofeconomicerrors。Headmittedtotheendofhislifethathehadnotfullyclearedupthedifficulty。Moderneconomistshaverefutedandrevisedanddiscussed，and，letushope，nowmadeeverythingquiteplain。TheyhavecertainlyshownthatsomeofRicardo’spuzzlesimpliedconfusionssingularinsokeenathinker。Thatmayserveasawarningagainstdogmatism。
　　Boysinthenextgenerationwillprobablybeaskedbyexaminerstoexposethepalpablefallaciesofwhattousseemtobedemonstrabletruths。Atanyrate，Imusttrytoindicatethecriticalpointasbrieflyaspossible。
　　Theword’value，’inthefirstplace，hasvaryingmeanings，whichgiveanopportunityforwritersoftext-bookstoexhibittheirpowersoflucidexposition，thevalueofathinginonesenseiswhatitwillfetch；thequantityofsomeotherthingforwhichitisactuallyexchangedinthemarket。Inthatsense，asRicardoincidentallyobserves，30thewordbecomesmeaninglessunlessyoucansaywhatistheotherthing。Itisself-contradictorytospeakasifathingbyitselfcouldhaveaconstantoranyvalue，Value，however，maytakeadifferentsense，itistheeconomicequivalentofthe’utility’ofBentham’s’felicificcalculus。’Itmeansthe’lotofpleasure’
　　whichcausesathingtobedesirable，Ifwecouldtellhowmanyunitsofutilityitcontainedwecouldinfertherateofexchangeforotherthings。
　　Thevalueofanything’inuse’willcorrespondtothenumberofunitsofutilitywhichitcontains；andthingswhichhavethesamequantityof’utilities’
　　willhavethesame’exchangeablevalue，’Ricardocanthusconsidertheoldproblemoffinding’aninvariablemeasureofvalue。’Hepointsoutthedifficultyoffindinganyparticularthingwhichwillservethepurpose，inasmuchastherelationsofeverythingtoeverythingelseareconstantlyvarying。Hethereforeproposestomakeuseofanimaginarymeasure。Ifgoldwerealwaysproducedunderexactlythesamecircumstances，withthesamelabourandthesamecapital，itwouldserveapproximatelyforastandard。