Chapter 7 On the Components of Commodity Prices

In the early barbaric society before the accumulation of capital and the private ownership of land, the proportion of the amount of labor required to acquire various goods seems to be the only criterion for the mutual exchange of various goods.Generally speaking, for example, if a hunting people needs twice as much labor to kill a beaver as to kill a deer, then of course one beaver is exchanged for two deer.It is therefore quite natural, in general, that the produce of two days' labor is twice as valuable as that of one day's labor, and that of two o'clock labor is twice as valuable as that of one hour's labor.

If one kind of labor is more arduous than another, this greater hardship will naturally be taken into account.One hour of the produce of more arduous labour, is frequently exchanged for two ounces of less arduous labour. If some kind of labor requires extraordinary skill and intelligence, it is natural that a higher value should be attached to the produce of the man who has this skill, that is, more than is due to his labor time.The acquisition of this kind of skill often requires years of hard work, and the higher value given to the products of skilled people is only a reasonable remuneration for the labor and time required to acquire the skill.In advanced societies, especially hard work and especially skilled labor are generally taken into account in the wages of labor.In the early savage society, this consideration may have been made.

In this state of society the whole produce of labor belongs to the laborer himself.The quantity of labor which should normally be purchasable or commandable in a good is determined only by the quantity of labor generally required to acquire or produce it. Once capital has been accumulated in the hands of individuals, there are, of course, those who, in order to obtain a profit from the sale of the produce of labour, or from the value added by labour, to the working people, supply them with raw materials and means of subsistence. , and told them to work.In exchange for money, labor, or other goods, the price of a perfectly manufactured article, besides being sufficient to pay the price of raw materials and the wages of labour, must leave a part to give to the entrepreneur as the profit of the capital which he has invested in the enterprise.The value added by the labourer, therefore, to the raw material, is in this case divided into two parts, one of which pays the labourer's wages, and the other pays the employer the profit for the whole capital with which he advances raw materials and wages. .He would have no interest in employing labourers, if the produce of his labor could not be sold for more than the capital he advanced; Invest big and only invest small.

It may be said that the profit of capital is only another name for the wages of special labor, in other words, it is nothing more than the wages for supervising and directing this kind of labor.But profit is quite different from wages, they are governed by two quite different principles, and the profit of capital is not in proportion to the quantity, intensity, and skill of the labor called supervision and command.Profit is entirely governed by the value of the capital invested, and the amount of profit is exactly proportional to the size of the capital.Assume that there are two different manufactures in a certain place, each employing twenty laborers, with wages of fifteen pounds a year each, or three hundred pounds a year each, and that the ordinary annual profit on the capital of the manufacturing industry is 100 per cent. Ten.Let us also assume that the rough material worked up by the one party is worth only £700 a year;Taken together, the former invested no more than £1,000 a year in capital; the latter £7,300.The former entrepreneur, therefore, expects a profit of £100 a year; the latter expects a profit of £730 a year, calculated on ten per cent.Their profits, however different, are not very different, or even exactly the same, in their supervision and command.In many large factories the work of this kind is largely entrusted to one key clerk.The wages of this clerk justly express the value of that kind of labor which is supervised and directed.In determining the wages of the clerk, account is generally taken of not only his labor and skill, but also the responsibilities he bears; his wages, however, are not in constant proportion to the capital which he supervises and supervises.And the owner of this capital, who has little labor, wishes his profit to remain in a definite proportion to his capital.In the price of commodities, therefore, the profit of capital becomes a constituent which is quite different from the wages of labour, and is governed by quite different principles.

In this state, all the products of labor do not necessarily belong to the laborer, but mostly must be shared with the owner of capital who employs him.Nor can the quantity of labor generally employed in the acquisition or production of any one commodity determine, by itself, the quantity of labor which should generally be exchanged, commanded, or purchased for that commodity.It is evident that another factor must in some measure be determined, namely, the profit of the capital which advances the wages of that labour, and furnishes its materials. Once the land of a country has become completely private property, the landowner, like everyone else, wants to get something for nothing, and even demands a rent for the natural produce of the land.The trees in the forest, the grass in the field, and all kinds of natural fruits on the earth, in the era of common land, only need some effort to gather, but now in addition to effort, you have to pay a price.In order to collect these natural products, the laborer must pay a price and obtain the right to collect them; he must give to the landlord a part of the products he produces or collects.This part, or the price of this part, constitutes the rent of the land.In the prices of most commodities there is then a third component.

It must be noted that the real value of each of these three constituent parts is measured by the quantity of labor which each can purchase or command.Labor measures not only the value of that part of price resolved into labour, but also that part of price resolved into rent and profit. No matter what society you are in, commodity prices are ultimately decomposed into one or both of the three.All three constitute, to a greater or lesser degree, the prices of the great majority of commodities in advanced societies. Take grain prices, for example.Of these, a part goes to the landlord's rent, another part goes to the wages of the laborers employed in production and the maintenance of the livestock, and the third part goes to the farmers' profits.The whole price of corn consists either directly or finally of these three parts.It may be thought that the replenishment of the farmer's capital, that is, the consumption of livestock or other implements, should form a fourth component.But the price of all agricultural implements consists itself of these three parts.As far as the plow horse is concerned, it is the rent of the land for raising the horses, the wages of the horse herding labor, plus the profit of the capital that the farmers advance to pay the rent and wages.In the price of corn, therefore, although a part must be paid for the price of the plow-horses and their maintenance, yet the whole price consists, directly or finally, of three parts, rent, labor, and profit.

To the price of flour we must add to the price of corn the profit of the miller and the wages of his labourers; to the price of bread we must add the profit of the baker and his wages.But how much labor is required to transport the corn from the farm to the mill, and from the mill to the baker; and how much capital is required to advance the wages of this labor.The wages of this labor, and the profit of this stock, must also be added to the price of both commodities. The price of flax, like that of corn, is divided into three parts.The composition of the linen requires both the labor of the linenmen, spinners, weavers, bleachers, etc., and the employer who employs these laborers separately, and the capital invested separately, so that the wages of these various labours, and the various capitals The profit must also be added to the price of the linen.

The nearer is the manufacture of an article to completion, the greater will be the wage-profit part of its price, as compared with the rent part.With the progress of manufacturing, not only the number of profitable items increases, but also the manufacturers in the later stage get more profits than those in the previous stage.Because the latter requires more capital than the former.For example, the capital employed by the weavers must be greater than that employed by the spinners.For the capital which employs the weavers pays the wages of the weavers, as well as the capital which employs the weavers and their profits.Profit always maintains a definite proportion to capital.

Even in the most advanced societies, however, there are a few commodities whose prices can be divided only into two parts, the wages of labour, and the profits of stock, and still others whose prices consist solely of the wages of labour.The price of sea fish, for example, usually has only two components: one pays the labor of the fisherman, and the other pays the profit of the fishery capital.Sometimes, but very rarely, ground-rent is included in this price, as I shall show later.River fisheries, however, are often not the same as sea fisheries, at least in the greater part of Europe.The European salmon industry generally pays land rent.This rent, though strictly speaking not to be called rent of land, is undoubtedly a constituent part of the price of salmon, together with wages and profit.In some parts of Scotland a few poor men gather on the coast the little mottled stones which are commonly called Scotch agate.The price which the stone-cutters pay them is simply the wages of their labour, without any part of rent or profit.

In short, the whole price of whatever commodity must ultimately consist of one or both of those three parts.In the price of commodities, after deducting the rent of the land and the price of all the labor required for the production, manufacture, and transportation of commodities, the remainder must necessarily be attributed to profit. The price or exchange-value of every commodity, taken separately, consists of all or one of those three parts; taken together, the prices of all commodities, which constitute the whole annual produce of the labor of a country, necessarily consist of those three parts. , and is distributed among the different inhabitants of the country as labor wages, land rent, or capital profits.The whole thing, or the whole price of it, which is annually collected or produced by labor in the society, is thus distributed among some of the different members of the society.Wages, profit, and rent are the three fundamental sources of all revenue and all exchangeable value.All other income derives in the final analysis from one of these three incomes.

Whoever derives his income from his own resources must necessarily derive his income from his labour, capital, or land.Income from labor is called wages.The income from the employment of capital is called profit.There is capital that is not used by oneself, but is lent to others to obtain income. This income is called the interest or interest of money.Since the lender gives the borrower the opportunity to make a profit, the borrower pays interest as a reward.A part of the profit from the loan belongs, of course, to the borrower who invests it, and another part to the lender, who gives the borrower an opportunity of profit.Interest is always a by-product income, and so long as the borrower is not a prodigal who borrows to pay, the payment of interest must come from some other source of income, if not from the profit from the exercise of the loan.The revenue derived entirely from the land, called rent, belongs to the landlord.The income of the farmer derives partly from his labour, and partly from his stock.To him land is only the instrument by which he can obtain the wages of labour, and the profit of stock.All taxes, all income derived from taxes, all salaries, gratuities, and various annuities come from these three fundamental sources of income in the final analysis, and are directly or indirectly paid out of labor wages, capital profits, or land rent. These three different incomes, when they belong to separate persons, are easily distinguished; but when they belong to the same person, they are often confused with each other, at least in common parlance. The squire who cultivates a part of his land, after paying the expenses of cultivation, of course receives rent as a landlord and profit as an agriculturist.But he tends to call this whole proceeds in general terms profit, and thus confuses rent with profit, at least in the usual parlance.The planters of our country in North America and the West Indies, who, in large part, farm on their own land, often hear of the profits of their plantations, but seldom of the rent of their plantations. The average farmer rarely employs an overseer to direct the general work of the farm.They also usually do their own labor, such as plowing, raking, and so on.In the total harvest, therefore, the landowners are removed, and the remainder contains not only agricultural capital and its ordinary profits, but also their own wages due as laborers and overseers.But whatever remains after the capital has been recovered and the rent paid is collectively called profit.This so-called profit clearly includes wages.In this case, therefore, wages are again confused with profit. If an independent manufacturer possesses sufficient capital to purchase raw materials and maintain himself until the goods are on the market, then his income should be twofold: first, the wages he receives as a worker; second, as a boss Profit from selling workers' products.However, these two incomes are generally collectively referred to as profits.In this case also wages are confused with profit. A planter who cultivates plants by himself has three qualifications of landowner, farmer and laborer.His produce, therefore, pays to him alone the rent of the landlord, the profit of the farmer, and the wages of the labourer.But generally all his income is regarded as his labor income.In this case both rent and profit are again confused with wages. Since, in civilized countries, commodities whose exchange-value consists solely of labour, are extremely rare, and the exchange-values ​​of most commodities contain a great deal of profit and ground-rent, the quantity of labor which can be purchased or commanded by the whole annual produce of the labor of society is far greater than Far more than the amount of labor required for the production and transportation of products this year.If the whole quantity of labor which society could annually purchase were employed by it, the produce of the succeeding year would be of greater value than that of the former, because the quantity of labor would be greatly increased every year.In no country, however, does the whole annual produce maintain the industrious classes.In every country, the greater part of the produce is annually consumed by the idler classes.Whether the common or average value of the annual produce of a country increases, decreases, or remains unchanged from year to year, depends upon the proportion in which the annual produce of the country is annually distributed among these two classes of people.Chapter VII Of Commodities