W* RURAL NEW-YORKER 
707 
A Primer of Economics 
By John J. Dillon 
Part XXIV 
VALUE DEFINED 
What is value? 
The value of a given commodity is the 
quantity of another commodity for which 
it will exchange. 
Among primitive people, the value de¬ 
pended on the quantity of labor required 
to produce it. If one man with fishing 
tackle regularly caught 20 fish in a day, 
and another with a trap caught 10 squir¬ 
rels, the value cf one squirrel must be 
two fish. If another man with a bow and 
arrow regularly killed 40 birds, the value 
of a fish would be two birds, and the value 
of a squirrel would be four birds. Of 
course, this would imply the normal re¬ 
sult of a day’s work in the different em¬ 
ployments. From this line of reasoning 
Adam Smith, David Ricardo and others 
laid down the principle that the value of 
a commodity depends on the quantity of 
labor necessary to produce it. Adam 
Smith says “The value of any commodity 
to the person that possesses it, and who 
means not to use or consume it himself, 
but to exchange it for other commodities, 
is equal to the quantity of labor which it 
enables him to purchase or command. La¬ 
bor, therefore, is the real measure of the 
exchangeable value of all commodities. 
Labor was the first price, the original pur¬ 
chase money that was paid for all things.” 
David Ricardo says : “The value of a com¬ 
modity or the quantity of any other com¬ 
modity for which it will exchange, de¬ 
pends on the relative quantity of labor 
which is necessary for its production, and 
not on the greater or less compensation 
which is paid for that labor.” 
Ricardo, however, explained that this 
principle is modified by the employment 
of machinery and other forms of capital. 
In the primitive and crude state of society 
it might be reasonably supposed that the 
fisherman, the trapper and the hunter 
supplied each his own food, shelter and 
implements, namely, fishing tackle, traps, 
and bow and arrows. This food and 
shelter and implements of their trade were 
capital, but they were also the fruits of 
labor, and so the price of the fish, the 
squirrels and the birds was labor, and 
the value of each was truly the quantity 
of labor required to produce them. 
In like manner, we might now trace the 
value of any commodity largely to the 
quantity of labor necessary to produce it. 
but the process would be more complex 
and interminable. A tailor makes a coat 
in three days. The cloth and the thread 
can be traced back to the labor that pro¬ 
duced them, but it goes back to the miller, 
the weaver, the spinner, the carder, and 
numerous other producers, all the way to 
the farmer who raised the sheep and the 
cotton. It. also involves the facilities of 
transportation, and all the implements 
and machinery and labor used to produce 
them. This would take us back to the 
forests and mines and machine shops and 
food-producing fields of the world. The 
tailor’s needles and scissors, and the house 
that shelters him would need to be traced 
in the same way. If one had the patience, 
it may be possible to trace the infinitesi¬ 
mal parts of labor represented in the long 
chain of machinery and tools and houses 
and raw material that contribute to the 
cost of the material in a coat, but the re¬ 
sult would hardly justify the pains. 
Value is simply an incident of our pres¬ 
ent distributive system. 
Capital is an agent in production un¬ 
der our industrial scheme. Therefore, it 
would seem that it would simplify the 
subject and avoid confusion by dividing 
the total labor necessary to make the 
coat into the labor expended directly on 
the coat, and the past labor represented 
in the materials, machinery, food and 
housing, all of which we now demoninate 
capital, and call it capital in economic 
analysis, as we do in practical business. 
The name of classification is not impor¬ 
tant if we understand the principles. Tn 
the primitive state, laud and its natural 
products were free, and lumber in the 
trees, and metal and coal in the mines 
were not factors in cost of production. 
The fish in the waters, the birds in the 
air and the squirrels in the forest were 
free to anyone who came to claim them. 
They are no longer so. They have been 
since appropriated and are factors in the 
cost of production now. Labor can no 
longer acquire them by “first occupancy” 
of them. They are already occupied, and 
the profit in them to the owner of them 
must be considered in the cost of pro¬ 
duction of the commodities, of which they 
form a part. It would seem then, that 
without at all disputing the principles 
laid down by the distinguished economists 
referred to. it would at this time, under 
the present system, be correct and more 
understandable to say that the value of a 
commodity depends on the amount of cap¬ 
ital consumed in it, and in the quantity 
of labor necessary to produce it. We 
must remember, however, that capital is 
the savings of labor of the past, plus some 
small profit accumulated in the process of 
developing raw material, and that the 
profit item in competitive business is only 
an infinitesimal part of the unit cost in 
production. Labor of the past (now 
converted into capital) and labor of the 
present, by hand and head, is the dom¬ 
inant factor in production. 
Is the amount of labor necessary to 
produce an article the basis on which it is 
exchanged for another article? 
In practice exchanges are not always 
made on the basis of the amount of labor 
required to produce each commodity in 
the transaction. If it were, there would 
be little to complain about in our eco¬ 
nomic system, provided of course that the 
skill and energy of the workman is consid¬ 
ered as well as his time. Trade unions 
and business and financial organizations 
are constantly working to secure advan¬ 
tage to themselves in the legislative cham¬ 
bers and fields of exchange. They secure 
laws and establish trade customs to serve 
their own advantage. When any one in¬ 
dustry or group attains an advantage in 
exchange, some other group or industry 
must suffer a corresponding disadvan¬ 
tage. In these exchange maneuvers the 
farmer is now the chief sufferer. When 
the exchange of the things he sells for 
money is completed )>y the purchase with 
the same money of the things he buys, 
from two to five hours of his skilled labor 
are exchanged for one hour of labor in the 
factory or shop. This is the fundamental 
wrong in the farm problem. The time is 
now approaching when the injustice cf it 
must react on the city population and on 
industry and trade. Farmers as a class 
are our best consumers. They hoard noth¬ 
ing. Every dollar they get goes back to 
the city for the things they need and con¬ 
sume. After they have borrowed to the 
limit of credit, they can buy only in pro¬ 
portion to what they sell. In the past 
they have bought on real and personal 
credit to supplement the purchases for 
annual production. Now, if the credit is 
exhausted, and it is in some sections, 
their ability to buy is limited to the 
amount of their sales. 
If the city continues to discourage farm 
production we will not only have a short, 
supply of food for the city population, but 
the city will have a surplus of manufac¬ 
tured goods, because the farmers will have 
nothing left to exchange for them. If 
farmers sell four billion dollars’ worth of 
produce, they can buy only four billion 
dollars’ worth of manufactured goods. 
With credit exhausted the factories can 
sell them no more, and nothing can save 
the city industries from decline except a 
return to the policies that will encourage 
a larger production on the farms. This 
must mean that the product of an honest 
day’s work on the farm will be accepted 
in exchange for the product of equal 
time and skill in the factory and shop. 
The farms have endured without the prac¬ 
tical recognition of this equitable prin¬ 
ciple of exchange. The cities cannot per¬ 
manently endure in violation of it. 
How then are values determined in 
practice? 
Values of commodities are determined 
bv comparison. If we can exchange a 
bushel of wheat for a pair of shoes, the 
value of a bushel of wheat is a pair of 
shoes. If we can exchange a bushel of 
corn for 25.8 grains of standard gold, then 
the value of the corn is 25.8 grains of 
standard gold, which is the United States 
money unit we call a dollar. 
Do values vary? 
Values may greatly vary in relation to 
each other. The value of a commodity 
may vary from one of two causes ; it may 
vary because of something relating to the 
commodity itself, or it may vary from 
some cause relating to the commodity for 
which it is exchanged. In the first ni- 
stance it is said to vary from an intrinsic 
cause; in the second from an extrinsic 
cause. 
If, normally, a bushel of wheat ex¬ 
changed for a pair of shoes of a certain 
grade, and if improvements of machinery 
and culture make it possible to double the 
yield of-wheat without increasing the cap¬ 
ital and labor, it would require two bush¬ 
els of wheat to equal the value of the 
shoes. Or if, for any reason, the cost of 
producing the wheat were doubled, then 
one bushel would exchange for two pairs 
of the shoes, there would be intrinsic 
causes for the wheat and extrinsic causes 
for the shoes. In like manner, a change* 
that would increase or decrease the cost 
of making the shoes in like proportions, 
would reverse the transaction, and in¬ 
crease or decrease the quantity of wheat 
that would be received in the exchange. 
This would be intrinsic causes in the 
shoes and extrinsic causes in the wheat. 
Does the term value always have the 
same meaning? 
Adam Smith defined two different mean¬ 
ings of value. One he calls value in use, 
the other value in exchange. The first 
signifies usefulness, the other power of 
purchase. A commodity like water or air 
is extremely useful, and yet has no value 
in exchange, simply because no one would 
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