I think, in many instances more valuable members of society than some of the productive laborers. A magistrate, who faithfully administers justice; a physician, who restores health; a clergyman, who teaches religion and morals; are certainly of more essential benefit to society than the confectioner or the perfumer, or any of those productive laborers who are employed in the fabrication of luxuries.

Mrs B. No doubt they are. I do not, however, consider luxuries as wholly devoid of advantage. In a future conversation we shall treat of the subject of expenditure; we shall then have an opportunity of examining how far luxury is beneficial, and under what circumstances it is prejudicial to the welfare of society.

CONVERSATION XV.

ON VALUE AND PRICE.

Of the value of commodities. Of the distinction between exchangeable value and price. Of utility considered as essential to value.-Of the cost of production, or natural value of commodities.-Of the component parts of the cost of production, rent, profit, and wages. Of their imperfection as a measure of value.

Of supply and demand. Of the component parts of the exchangeable value of commodities.-High price of commodities arising from scarcity.-Low price arising from excessive supply.-Low price arising from diminution of cost of production.

740. Does Mrs B. consider luxuries wholly devoid of advantage?

MRS B.

BEFORE we proceed to the subject of trade, it is necessary that you should understand what is meant by the value of commodities.

Caroline. That cannot be very difficult; it is one of the first things we learn.

Mrs B. What is learnt at an age when the understanding is not yet well developed, is not always well learnt. What do you understand by the value of commodities?

Caroline. We call things valuable which cost a great deal of money; a diamond necklace, for instance, is very valuable.

Mrs B. But if, instead of money, you gave in exchange for the necklace, silk or cotton goods, tea, sugar, or any other commodity, would you not still call the necklace valuable?

Caroline. Certainly I should; for, supposing the necklace to be worth 1000l., it is immaterial whether I give 1000l. in money, or 1000l. worth of anything else in exchange for it.

Mrs B. The value of a commodity is therefore estimated by the quantity of other things generally for which it will exchange, and hence it is frequently called exchangeable value.

Caroline. Or in other words, the price of a commodity.

Mrs B. No; price does not admit of so extensive a signification. The price of a commodity is its ex

741. What should be understood before proceeding to the subject of trade?——742. What answer does Caroline give to the question-What is to be understood by the value of commodities? -743. What case does Mrs B. suppose, in substituting some other article in the place of money? -744. How does Caroline illustrate this supposition ?--745. How does Mrs B. say the value of commodities is to be estimated?How does the price differ from the value of a commodity?

--746.

changeable value, estimated in money only. It is necessary that you should remember this distinction.

Caroline. But what is it that renders a commodity valuable? I always thought that its price was the cause of its value; but I begin to perceive that I was mistaken : for things are valuable independently of money; it is their real intrinsic value which induces people to give money for them.

Mrs B. Certainly; money cannot impart value to commodities; it is merely the scale by which their value is measured; as a yard measures a piece of cloth.

Caroline. I think the value of things must consist in their utility, for we commonly value a commodity according to the use we can make of it. Food, clothing, houses, carriages, furniture, have all their several uses.

Mrs B. That is very true; yet there are some things of the most general and important utility, such, for instance, as light, air, and water, which, however indispensable to our welfare, have no exchangeable value; nothing is given for them, nor can anything be obtained in exchange for them.

Caroline. No one will give anything for what is so plentiful, and so readily obtained that every one may have as much as he requires, without making any sacrifice; but as light, air, and water, are essential even to our existence, surely they should be esteemed valuable.

Mrs B. In political economy we can consider as valuable such commodities only as are susceptible of receiving a value in exchange; for this purpose the commodity must neither be produced in so unlimited a manner, nor so easily obtained that it may be had for nothing.

What

747. What gives value to commodities?---748. What is said of money in relation to the value of commodities ?----749. articles are mentioned which have no exchangeable value '—750, Why is this the case?---751. In political economy what objects

are considered valuable ?

It must on the contrary, be in such request that men are willing to give something for it. Thus clothes, houses, furniture, though certainly less useful than light, air, and water, have exchangeable value.

Nature works for us gratuitously; and when she supplies us with articles in such abundance that no labor is required to procure them, those articles have not exchangeable value: but no sooner does the labor of man become necessary to procure us the use and enjoyrnent of any commodity, than that commodity acquires a value ; either a price is paid for it in money, or other things are given in exchange for it. Light, air, and water, are the free and bountiful gifts of nature, but if a man constructs a lamp, we must pay for the light it diffuses: if we are indebted to his labors for a ventilator, or even a fan, we pay for the air they procure us; and when water is conveyed through pipes into our houses, raised by pumps, or brought to us in any manner by the art of man, a price is paid for it.

Caroline. Workmen must of course be paid for the labor they bestow, whether it be in the production of a commodity or merely in its conveyance. But it appears to me, Mrs B., that it is labor rather than utility that constitutes value, for however we may enjoy the utility, it is the labor we pay for.

Mrs B. That labor, you will observe, is valuable only if it gives utility to an object. Were a man to construct or fabricate commodities which had neither utility, curiosity, or beauty, the labor he bestowed upon them would give them no value, and if he exposed them for sale, he would find no purchasers.

752. How does nature work for us?---753. When does any particular commodity acquire a value ?- -754. What cases of illustration are given to show the difference between articles that have an exchangeable value and those which have not?--755. What does Caroline suppose gives value to a commodity rather than utility?

Caroline. That is true; but the words beauty and curiosity, which you have just used, have raised another objection in my mind, to utility being essential to value. I recollect your defining wealth, to be every article of utility, convenience, or luxury; wealth, no doubt, always implies value, but there are many articles of luxury that are perfectly devoid of utility, and which are valued either for their beauty, their curiosity, or their rarity. What for instance, is more valuable than diamonds? and yet they are of no use.

Mrs B. When we say that utility is essential to value, the expression is used in the most enlarged sense. Those who wear diamonds find them useful to gratify their vanity or pride, or to support their pride in life. The utility of luxuries must generally be considered in this point of view. I should, however, tell you, that Adam Smith distinguishes two kinds of value; the one arising from utility, the other from what can be obtained in exchange. He says, "The word value, it is to be observed, has two different meanings: it sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called value in use, the other value in exchange. The things which have the greatest value in use, have frequently little or no value in exchange; and, on the contrary, those that have the greatest value in exchange, have frequently little or no value in use. Nothing is more useful than water, but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond on the contrary, has scarce any value in use,

757. What does Caroline mention as possessing value, but is without utility?—758. When are we to say utility is essential to value?-759- In what sense are luxuries valuable?- -760. What distinction does Adam Smith make in the meaning of the term value?-761. What illustration does he give of the value in use, and the value in exchange?