Accordinglyhegivesnoticethat，forthepurposesofhisbook，hewillassumethistobethecase，andmoneytobe’invariableinvalue。’31Wecanthus，ontheonehand，comparevaluesatdifferentperiods。Athinghasthesamevalueatalltimeswhichatalltimesrequires’thesamesacrificeoftoilandlabourtoproduceit，’32The’sacrifice’measuresthe’utility，’andwemayassumethatthesamelabourcorrespondsinallagestothesamepsychologicalunit，But，ontheotherhand，atanygivenperiodthingswillexchangeinproportiontothelabourofproducingthem。
　　ThisfollowsatoncefromRicardo’spostulates。Giventhesinglerateofwagesandprofits，andassumingthecapitalemployedtobeinthesameproportion，thingsmustexchangeinproportiontothequantityoflabouremployed；forifIgotthesamevaluebyemployingonelabourerasyougetbyemployingtwo，myprofitswouldbehigher。Ricardo，indeed，hastoallowformanycomplexitiesarisingfromthefactthatverydifferentquantitiesofcapitalarerequiredindifferentindustries；butthegeneralprincipleisgivenbythesimplestcase。Hencewehaveameasureofvalue，applicableatanygiventimeandincomparingdifferenttimes。Itimplies，again，whatM’Cullochsumsupasthe’fundamentaltheorem，’thatthevalueof’freelyproducedcommodities’dependsonthequantityoflabourrequiredfortheir’production。’Whatismadebytwomenisworthtwicewhatismadebyoneman。ThatgiveswhatM’Cullochcallsthe’cluetothelabyrinth。’
　　Thedoctrineleadstoapuzzle。
　　IfIcanmeasurethe’sacrifice，’canImeasurethe’utility’whichitgains?The’utility’ofanounceofgoldisnotsomething’objective’likeitsphysicalqualities，butvarieswiththevaryingwantsoftheemployer，Ironorcoalmaybeusedforaninfinitevarietyofpurposesandtheutilitywillbedifferentineach。Thethingmayderivepartofits’utility’fromitsrelationtootherthings。Theutilityofmyfoodisnotreallyseparatefromtheutilityofmyhat；forunlessIeatIcannotwearhats，mydesireforanyobject，again，ismodifiedbyallmyotherdesires，andevenifIcouldisolatea’desire’asapsychologicalunit，itwouldnotgivemeafixedmeasure。Twicethearticledoesnotgivetwicetheutility；adoublestimulusmayonlyaddasmallpleasureorconvertitintoagony。Theseandotherdifficultiesimplythehopelessnessofsearchingforthischimericalunitof’utility’whenconsideredasaseparatething。Itshiftsandescapesfromourhandsdirectlywegraspit。Ricardodiscussessomeofthesepointsinhisinterestingchapteron’ValueandRiches。’Gold，hesays，maycosttwothousandtimesmorethaniron，butitiscertainlynottwothousandtimesasuseful。33Suppose，again，thatsomeinventionenablesyoutomakemoreluxuriesbythesamelabour，youincreasewealthbutnotvalue。Therewillbe，say，twiceasmanyhats，buteachhatmayhavehalfitsformervalue。Therewillbemorethingstoenjoy，buttheywillonlyexchangeforthesamequantityofotherthings。Thatis，hesays，theamountof’riches’varies，whiletheamountofvalueisfixed。This，accordingtohim，provesthatvaluedoesnotvarywith’utility。’’Utility，’ashedeclaresinhisfirstchapter，is’absolutelyessentialtovalue，’butitis’notthemeasureofexchangeablevalue。’34Asolutionofthesepuzzlesmaybesoughtinanymoderntext-book。Ricardoescapesbyanapparentlyparadoxicalconclusion。Heisundertakinganimpossibleproblemwhenhestartsfromthebuyers’desireofan’utility，’thereforeheturnsfromthebuyerstothesellers。Thesellerhasapparentlyameasurableanddefinablemotive——thedesiretomakesomuchpercentonhiscapital。35Ricardo，unfortunately，speaksasthoughthetwopartiestothebargainsomehowrepresentedmutuallyexclusiveprocesses。’Supplyanddemand’determinethevalueof’monopolisedarticles，’butthecostofotherarticlesdependsnot’onthestateofdemandandsupply，’but’ontheincreasedordiminishedcostoftheirproduction。’36Why’not’and’but’?Ifsupplyanddemandcorrespondstothewholeplayofmotiveswhichdeterminesthebargain，thisislikesaying，accordingtotheoldillustration，thatwemustattributethewholeeffectofapairofscissorstoonebladeandnottotheother。Hisviewleadstotheapparentconfusionoftakingforthecauseofvaluenotourdesireforathing，butthesacrificewemustmaketoattainit。Bentham37said，forexample，thatRicardoconfused’cost’with’value。’Thedenialthatutilitymustinsomesenseorotherdeterminevalueperplexesanintelligibleandconsistentmeaning。
　　Itisclearlytrue，uponhispostulates，thatthevalueofgoods，otherthan’monopolised，’mustconformtothecostofproduction。Hespeaksasifheconfoundedanecessaryconditionwithan’efficientcause，’andasifoneoftwocorrectiveprocessescouldbeexplainedwithouttheother。
　　Butthefactthatthereisaconformity，howeverbroughtabout，wasenoughforhispurpose。Thedemandofbuyers，hewouldsay，determinestheparticulardirectionofproduction：itsettleswhetherhatsshouldbemadeofsilkorbeaver；whetherweshouldgrowcornorspincotton。Buttheultimateforceisthecapitalist’sdesireforprofit。Solongashecanraiselabourers’
　　necessariesbyemployingpartofhiscapital，hecanemploythelabourashechooses。Hecanalwaysproducewealth；allthewealthproducedcanbeexchanged，andthedemandalwaysbeequaltothesupply，sincethedemandismerelytheothersideofthesupply。Thebuyer’stastesdecidehowthecapitalshallbeapplied，butdoesnotsettlehowmuchwealththereshallbe，onlywhatparticularformsitshalltake。Somehoworotheritmustalwaysadjustitselfsothatthevalueofeachparticularkindshallcorrespondtothe’costofproduction。’Thecostofproductionincludesthetoolsandtherawmaterials，whicharethemselvesproductsofpreviouslabour。
　　Allcapitalitselfisultimatelytheproductoflabour，andthus，asRicardoincidentallysays，mayberegardedas’accumulatedlabour。’38
　　Thisphrasesumsupthedoctrinewhichunderlieshistheoryofvalueandindicatesitsconnectionwiththetheoryofdistribution。Ricardohadperceivedthatthesupplyanddemandformulawhichwouldservesufficientlyinproblemsofexchange，orthefluctuationsofmarket-price，couldnotbemadetosolvethemorefundamentalproblemofdistribution。Wemustlookbeneaththesuperficialphenomenaandaskwhatisthenatureofthestructureitself：whatisthedrivingforceorthemainspringwhichworksthewholemechanism。Weseem，indeed，tobeinquiringintotheveryoriginofindustrialorganisation，thefoundationofasounddoctrinecomesfromAdamSmith，Smithhadsaidthatinaprimitivesocietytheonlyrulewouldbethatthingsshouldexchangeinproportiontothelabourofgettingthem，ifitcosttwiceasmuchlabourtokillabeaverastokilladeer，onebeaverwouldbeworthtwodeer，inacceptingthisbitofwhatSmith’scommentator，DugaldStewart，39calls’theoretical’or’conjectural’history，Ricardodidnotmeantostateahistoricalfact。HewasnotthinkingofactualChoctawsorCherokees。Thebeaverwasexchangedforthedeeraboutthetimewhentheprimitivemansignedthe’socialcontract。’Heisahypotheticalpersonusedforpurposesofillustrationandsimplification。Ricardoisnotreallydealingwiththequestionoforigins；butheisnotthelessimplyingatheoryofstructure。
　　Itdidnotmatterthatthe’socialcontract’washistoricallyafigment；
　　itwouldserveequallywelltoexplaingovernment。Itdidnotmatterthatactualsavagesmayhaveexchangedbeaversanddeerbythehelpofclubsinsteadofcompetitioninthemarket。Theindustrialfabriciswhatwouldhavebeenhaditbeenthusbuiltup。Itcanbeconstructedfrombasetosummitbytheapplicationofhisformula。Asintheimaginarystateofdeerandbeaver，wehaveanumberofindependentpersonsmakingtheirbargainsuponthisprincipleoftheequivalenceoflabour；andthatprincipleissupposedtobecarriedoutsothatthemostremoteprocessesoftheindustrialmachinerycanbeanalysedintoresultsofthisprinciple。Thisgivesasufficientcluetothewholelabyrinthofmodernindustry，andthereisnoneedofconsideringtheextinctformsofsocialstructure，whichweknowtohaveexisted，andunderwhichthewholesystemofdistributiontookplaceunderentirelydifferentconditions，40Agreatchangehastakenplacesincethetimeofthedeerandbeaver：thecapitalisthasbeendeveloped，andhasbecomethemotivepower。Thelabourer’spartispassive；andthe’value’isfixedbythebargainingbetweentheproprietorsof’accumulatedlabour，’forcedbycompetitiontomakeequalprofits，insteadofbeingfixedbytheequitablebargainbetweenthetwohuntersexchangingtheproductsoftheirindividuallabour。Essentially，however，theprincipleisthe。same。Inthelastasinthefirststageofsociety，thingsareexchangedinproportiontothelabournecessarytoproducethem。Nowitisplainenoughthatsuchadoctrinecannotleadtoacompletesolutionoftheproblemofdistribution。Itwouldbeapalpablyinadequateaccountofhistoricalprocesseswhichhavedeterminedtheactualrelationofclasses。
　　Theindustrialmechanismhasbeendevelopedasapartofthewholesocialevolution；and，howeverimportanttheeconomicforces，theyhavebeeninextricablyblendedwithalltheotherforcesbywhichasocietyisbuiltup。Forthesamereason，Ricardo’stheoremwouldbeinadequate’sociologically，’orasaformulawhichwouldenableustopredictthefuturedistributionofwealth。Itomitsessentialfactorsintheprocess，andthereforesupposesforcestoactautomaticallyandinvariablywhichwillinfactbeprofoundlymodifiedinsocietiesdifferentlyorganisedandcomposedofindividualsdifferingincharacter。Theveryfundamentalassumptionsastotheelasticityofpopulation，andtheaccumulationofcapitalaswagesandprofitsfluctuate，areclearlynotabsolutetruths。Anincreaseofthecapitalist’sshare，forexample，attheexpenseofwages，mayleadtotheloweredefficiencyofthelabourer；and，insteadofthecompensatingprocesssupposedtoresultfromthestimulustoaccumulation，theactualresultmaybeageneraldegenerationoftheindustry。Or，again，thecapacityoflabourerstocombinebothdependsandreactsupontheirintelligenceandmoralcharacter，andwillprofoundlymodifytheresultsofthegeneralcompetition。41Suchremarks，nowfamiliarenough，areenoughtosuggestthatafullexplanationoftheeconomicphenomenawouldrequirereferencetoconsiderationswhichliebeyondthepropersphereoftheeconomist。Yettheeconomistmayurgethatheismakingafairandperhapsnecessaryabstraction。Hemayconsidertheforcestobeconstant，althoughhemaybefullyawarethattheassumptionrequirestobecorrectedwhenhisformulaareappliedtofacts。Hemayconsiderwhatistheplayatanygiventimeoftheoperationsofthemarket，thoughthemarketorganisationisitselfdependentuponthelargerorganisationofwhichitisaproduct。Hedoesnotprofitstodealin’sociology，’but’purepoliticaleconomy。’InthatmorelimitedspherehemayacceptRicardo’spostulates。Therateofwagesisfixedatanygivenmomentbythe’labourmarket。’Thatistheimmediateorganthroughwhichtheadjustmentiseffected。
　　Wagesriseandfalllikethepriceofcommodities，whenforanyreasonthenumberofhirersorthenumberofpurchasersvaries。The’supplyanddemand’formula，however，couldnot，asRicardosaw，besummarilyidentifiedwithlabourandcapital。Wemustgobehindtheimmediatephenomenatoconsiderhowtheyareregulatedbytheultimatemovingpower。Then，withthehelpofthetheoriesofpopulationandrent，wefindthatthewagesareoneproductofthewholeindustrialprocess。Wemustlookbeyondtheimmediatemarketfluctuationtotheeffectuponthecapitalistswhoconstitutethemarket。Theworldisconceivedasonegreatmarket，inwhichthemotivesofthecapitalistsupplythemotivepower；andthesharewhichgoestothelabourerisanincidentalorcollateralresultoftheworkingofthewholemachinery。Now，thoughthesociologistwouldsaythatthisisquiteinadequateforhispurpose，andthatwemustconsiderthewholesocialstructure，hemayalsoadmitthattheschemehasavalidityinitsownsphere。Itdescribestheactualworkingofthemechanismatanygiventime；
　　anditmaybethatinRicardo’stimeitgaveanapproximateaccountofthefacts。Tomakeitcomplete，itrequirestobeset，sotospeak，inamoregeneralframeworkoftheory；andwemaythenseethatitcannotgiveacompletesolution。Still，asaconsistentschemewhichcorrespondstotheimmediatephenomena，ithelpsustounderstandtheplayoftheindustrialforceswhichimmediatelyregulatethemarket。
　　Ricardo’spositionsuggestedadifferentlineofreply。Thedoctrinesthatcapitalis’accumulatedlabour’