Joseph Shield Nicholson

“ It follows, then, that, in order to compare the relative values of two commodities, A and B, freely produced in a modern industrial society, we must take into account, first of all, the relative wages and relative profits, and the relative amounts of labour and capital employed. If the producers of A are skilled workmen, and if the return to the capital is uncertain, whilst in the case of B the labour is unskilled and profit steady, then the value of A will be higher than that of B, supposing each produced by the same amount of capital and the same quantity of labour. ”

“ Thus on the negative side competition implies that the economic interests of the persons concerned are attained neither by combination, nor by law, nor by custom. Again, it is also assumed, in making competition the principal distributing force of the national income, that every person knows what his real interests are, and that there is perfect mobility of labour both from employment to employment and from place to place. Without these assumptions the wages-fund would not be evenly distributed according to the quantity of labour. ”

“ If we regard labour as a commodity and wages as the price paid for it, then we may say that the price will be so adjusted that the quantity demanded will be made equal to the quantity offered at that price,—the agency by which the equation is reached being competition. ”

“ If, however, we turn to the great classes of employments in which the labour is embodied in a material product, we find on examination that wages vary with prices in a real and not merely in an illusory sense. Suppose, for example, that, owing to a great increase in the foreign demand for British produce, a rise in prices takes place, there will be a corresponding rise in nominal wages, and in all probability a rise in real wages. ”

“ If the producer of any article is obtaining more than the usual rate of profit, he at once provokes competition, and thus even the dread of this possible competition may keep down prices. This is often expressed by saying that the potential supply affects prices almost as much as the actual supply. It thus becomes obvious that, as regards freely produced commodities the production of which may be extended indefinitely at the same or at a decreasing cost, the value tends to conform to the minimum cost of production, and that any other value is consequently unstable. ”

“ In a modern society whether or not a capitalist will supply capital to labour depends on the rate of profit expected, and this again depends proximately on the course of prices. But the theory as stated can only consider profits and prices as acting in an indirect roundabout manner upon wages. If profits are high then more capital can be accumulated and there is a larger wages-fund, and if prices are high there may be some stimulus to trade, but the effect on real wages is considered to be very small. In fact Mill writes it down as a popular delusion that high prices make high wages. ”

“ In the last resort production will not be carried on unless labour and capital receive a sufficient reward and the sufficient reward is the normal value of the factors of production. But when we are comparing the relative values of commodities and are seeking to explain, for example, how it is that for long periods of time these relative values are stable, or conform to some regular law, we have to break up the elements of value into the constituents of the expenses of the various factors of production. ”

“ Thus the ultimate elements in the real cost of production are the toil and trouble and irksomeness of labour and of saving. But this toil and trouble will not be submitted to unless in any particular case the fair reward of industrial competition is forthcoming. However much pleasure a good workman may take in his work or a prudent man in his savings, in the industrial world as at present constituted both labour and capital will be attracted towards the point of highest reward (compare Wages) ”

“ There can be no doubt that, in discussing any practical problem as to the changes in the relative value of any particular thing, it is desirable to take the changes in price as the basis, and much confusion and cumbrousness of expression would have been avoided in the theory of the subject if, to adapt a phrase of Cournot’s, money had by Mill and others been used to oil the wheels of thought, just as in practice it is used to oil the wheels of trade. ”

“ Again, as regards the amount of capital competing for labour, the reality of the cause admits of no dispute, at any rale in any modern society. The force of this element is perhaps best seen by taking a particular case and assuming that the general wages-fund of the country is divided into a number of smaller wages-funds. Take, for example, the wages of domestic servants when the payment of wages is made simply for the service rendered. We may fairly assume that the richer classes of the community practically put aside so much of their revenue for the payment of the wages of their servants. ”

“ There are thousands of occupations of various kinds, and at first sight it may seem impossible to determine, in a manner sufficiently accurate for any useful purpose, an average or general rate of wages, especially if we attempt to take real and not merely nominal wages. At the same time, in estimating the progress of the working-classes, or in comparing their relative positions in different countries, it is necessary to use this conception of a general rate of wages in a practical manner. ”

“ And thus we arrive at the development of Adam Smith's introductory statement, namely, that the produce of labour constitutes the natural recompense or wages of labour. The most important omission of the wages-fund theory is that it fails to take account of the quantity produced and of the price obtained for the product. If we bring in these elements, we find that there are several other causes to be considered besides capital, population and competition. ”

“ But, as several American economists have pointed out, in new countries especially every increase in the number of labourers may be accompanied by a more than proportionate increase in the produce and thus in the wages of labour. Again, the older view was that capital must be first accumulated in order afterwards to be divided up into wages, as if apparently agriculture was the normal type of industry, and the workers must have a store to live on until the new crop was grown and secured. ”

“ The man who does not in some shape or other lend his capital upon “ usury ” is, in the modern world, generally considered as lacking in his duty to himself or his family. The change in the moral attitude towards usury is perhaps best expressed by saying that in ancient times so much of the lending at interest was associated with cruelty and hardship that all lending was branded as immoral (or all interest was usury in the moral sense) , whilst at present so little lending takes place, comparatively, except on commercial principles, that all lending is regarded as free from an immoral taint. ”

“ The existence of a certain amount of fixed capital practically implies the constant employment of a certain amount of labour.
Nor is the second proposition perfectly true, namely, that there are always a certain number of labourers who must work independently of the rate of wages. For the returns of pauperism and other statistics show that there is always a proportion of “floating” labour sometimes employed and sometimes not. Again, although, as Adam Smith says, man is of all luggage the most difficult to be transported, still labour as well as capital may be attracted to foreign fields. ”

“ For, as soon as it is assumed that industrial competition is the principal economic force in the distribution of the wealth of a community—and this is in reality the fundamental assumption of modern economic science,—a distinction must be drawn between the most general causes which affect all wages and the particular causes which lead to differences of wages in different employments. ”

“ This two-fold progressive character of invention operates in favour of the laborer—in the first place, because in most cases the increased cheapness of the commodity consequent on the use of machinery causes a corresponding extension of the market and the amount produced, and thus there may be no actual diminution of employment even temporarily; and secondly, if the improvement takes place slowly, there is time for the absorption of the redundant labour in other employments. ”

“ We have to-day a complete, minute, and voluminous code for the protection of labour: buildings must be kept pure of effluvia; dangerous machinery must be fenced; children and young persons must not clean it while in motion; their hours are not only limited but fixed; continuous employment must not exceed a given number of hours, varying with the trade but prescribed by the law in given cases ”

“ At the same time, however, it can hardly be questioned that through the unions nominal wages have on the whole risen at the expense of profits—that is to say, that combinations of labourers can make better bargains than individuals. But the debatable margin which may make either extra profits or extra wages is itself small, and the principal direct effect of trade unions is to make wages fluctuate with prices, a rise at one time being compensated by a fall at another. ”

“ In one parish the poor-rate had swallowed up the whole value of the land, which was going out of cultivation, a fact which has an obvious bearing on land nationalization as a remedy for low wages. The labourers became careless, inefficient and improvident. Those who were in regular receipt of relief were often better off (in money) than independent labourers. But the most important consequence was that the real wages obtained were, in spite of the relief, lower than otherwise they would have been, and a striking proof was given that wages are paid out of the produce of labour. ”

“ Demand must be defined as the quantity of any article demanded at some particular price, it being assumed of course that the bidder of the price can meet his engagements, or, as is sometimes said, that the demand is an effectual demand. It is quite clear that by demand we cannot simply mean desire to possess, because in a sense every one desires everything, and the less the means of payment so much greater in general is the desire. ”

“ The determination of relative wages depends on the constitution of these groups and their relations to one another. Under any given social conditions there must be differences of wages in different employments, which may be regarded as permanent until some change occurs in the conditions; in other words, certain differences of wages are stable or normal, whilst others depend simply on temporary fluctuations in demand and supply. ”

“ It has been well observed by Passyl that the principal effect of various land laws is to increase or diminish the amount of the gross produce, which in Ricardian phraseology would mean to extend or contract the margin of cultivation. It thus appears that it is not always true to say that the payment of rent makes no real difference to the general public, and that it is simply a necessary method of equalizing farmers profits. ”

“ The supply of labour, for example, is in many ways on a different footing from the supply of commodities. The causes which the wages-fund theory emphasizes too exclusively are after all verae causae, and must always be taken into account. There can be no doubt, for example, that under certain conditions a rapid increase in the labouring population may cause wages to fall, just as a rapid decline may make them rise. ”

“ The wages-fund is distributed amongst the labourers solely by means of competition, masters competing with one another for labour, and labourers with one another for work, and thus the average rate of wages depends on the proportion between wage-capital and population. It follows then, according to this view, that wages can only rise either owing to an increase of capital or a diminution of population, and this accounts for the exaggerated importance attached by Mill to the Malthusian theory of population. ”

“ However much the price rises, so long as people have the means they must consume a certain amount of necessaries, but, however much the price falls, the limit of consumption of bread, for example, must soon be reached. On the other hand, a great fall in price of many luxuries may cause an enormous increase in the demand, whilst a great rise may almost destroy the demand. The rate of charge-the quantity demanded according to the changes in price-is referred to as elasticity of demand. ”

“ For he will apply his own labour and capital at a less return on his own land. There can be little doubt that very many important improvements made by landowners have yielded less than the ordinary rate of profit, just as peasant proprietors obtain a poor return by way of wages for their own labour. A landowner cultivating his own land has the whole margin of economic rent to fall back upon, but a farmer has to pay his rent as a first charge. ”

“ Under the system of production on a large scale for foreign markets, with widely extended division of labour, it seems impossible to adjust accurately the supply to the demand, and there are in consequence constant fluctuations in the employment of labour. ”

“ It will be observed, however, that cost of production "only determines values by operating through the actual or potential supply, and thus that the law of demand and supply is fundamental. Once a thing is made, the actual cost of production has no influence on its value, except as indicating the conditions of future possible supply. ”

“ In other words, the actual rate of wages obtained in any particular occupation depends partly on causes affecting that group compared with others, and partly on the general conditions which determine the relations between labour, capital and production over the whole area in which the industrial competition is effective. ”