[STUDY GROUP] Principles of Political Economy Chapter 1

[Amusing Scrotum]

I'm half way through Chapter 1 and making a few notes so that I can discuss it further later, but I read this and thought I should bring it up....


Originally posted by Ricardo+--> (Ricardo)No alteration in the wages of labour could produce any alteration in the relative value of these commodities; for suppose them to rise, no greater quantity of labour would be required in any of these occupations, but it would be paid for at a higher price, and the same reasons which should make the hunter and fisherman endeavour to raise the value of their game and fish, would cause the owner of the mine to raise the value of his gold. This inducement acting with the same force on all these three occupations, and the relative situation of those engaged in them being the same before and after the rise of wages, the relative value of game, fish, and gold, would continue unaltered. Wages might rise twenty per cent, and profits consequently fall in a greater or less proportion, without occasioning the least alteration in the relative value of these commodities. Now suppose, that with the same labour and fixed capital, more fish could be produced, but no more gold or game, the relative value of fish would fall in comparison with gold or game. If, instead of twenty salmon, twenty-five were the produce of one day's labour, the price of a salmon would be sixteen shillings instead of a pound, and two salmon and a half, instead of two salmon, would be given in exchange for one deer, but the price of deer would continue at £2 as before. In the same manner, if fewer fish could be obtained with the same capital and labour, fish would rise in comparative value. Fish then would rise or fall in exchangeable value, only because more or less labour was required to obtain a given quantity; and it never could rise or fall beyond the proportion of the increased or diminished quantity of labour required.[/b]

(Emphasis added.)

Now Ricardo does seem to contradict the part I emphasised later on ("Wages might rise twenty per cent....") but this first part basically says that should wages increase (to keep a healthy profit margin) price may rise too. And in response the price of other goods will rise, but the relative value (labour required) will stay the same.

He also backs this up earlier on....


Ricardo
If the hunter urged the plea of his paying a large proportion, or the value of a large proportion of his game for wages, as an inducement to the fisherman to give him more fish in exchange for his game, the latter would state that he was equally affected by the same cause; and therefore under all variations of wages and profits, under all the effects of accumulation of capital, as long as they continued by a day's labour to obtain respectively the same quantity of fish, and the same quantity of game, the natural rate of exchange would be one deer for two salmon.

So relative value will stay the same, but wages and profits can fluctuate. However been as (as Ricardo suggests) rising wages will be met with rising prices (not rising "exchange value"), therefore a wage increase (or for that matter decrease) could be pointless.

Basically (excuse the simplistic maths)....

If it takes 10 units of labour to produce 1 coat (and that labour costs £10) and it takes 20 units of labour to produce 1 scarf (and that labour costs £10 as well).

If the wages of the coat maker increased to £15 per coat, in time, the wages of the scarf maker would increase to £15 too. All the time the relative value (2 coats = 1 scarf) would remain the same even if the price increased to keep the profit margin the same.

Also outside of this, other necessities (bread, milk etc.) will increase in price to make sure that relative value stays the same.

Now I'm sure I've missed something here and my attempt at an explanation is crude at best, but the point I was making was that in effect couldn't fights for higher wages be pointless? ....if everything else will increase in price as a result (though relative value remains the same, 2 coats = 1 scarf etc.). Then increased wages become a superficial phenomena because "the market" will react.

This is probably outside the realms of what this Study Group is for, but the idea that increases in wages are meaningless seemed particularly interesting to me. What does everyone else think?

[DisIllusion]

but this first part basically says that should wages increase (to keep a healthy profit margin) price may rise too. And in response the price of other goods will rise, but the relative value (labour required) will stay the same.

If what Ricardo says is true, then the price for other goods is rising. What goods these are, Ricardo doesn't say. They could be luxuries like horse-drawn carriages or mansions, but they could also be necessities; such as food or shelter. If these are necessities that Ricardo is talking about whose price is rising, then the wages of the laborer, would of course, have to rise in order to meet their basic needs. True, the labor required is still the same, but the value of their goods or perhaps their currency is shifting around them. The situation that excerpt has shown seems to be a map to deflation, even if the goods stated aren't necessities.


So relative value will stay the same, but wages and profits can fluctuate. However been as (as Ricardo suggests) rising wages will be met with rising prices (not rising "exchange value"), therefore a wage increase (or for that matter decrease) could be pointless.

Not necessarily, it's the worker trying to keep up with the increase in prices around them. The worker wants goods, and the worker expects to earn enough in their labor to be able to get some of these goods.


If the wages of the coat maker increased to £15 per coat, in time, the wages of the scarf maker would increase to £15 too. All the time the relative value (2 coats = 1 scarf) would remain the same even if the price increased to keep the profit margin the same.

Once again, the scarf maker would want to earn more in order to keep up with the necessities. The coat maker's wages, would, in turn, rise again and the price of the necessities would rise. The hypothetical scarf maker would be continually playing a game of catch-up. The picturesque "dog chasing the bone hung over his face." This seems to me like another example on how to reach deflation quickly. As you and Ricardo stated, the relative value will always be the same. Even when the relative value expands exponentially. (i.e the price of 2 coats = the price of 1 scarf; the price of 200 coats = the price of 100 scarves) Even when the price of two coats becomes the price of two hundred when the goods cause the currency to lose value.


Now I'm sure I've missed something here and my attempt at an explanation is crude at best, but the point I was making was that in effect couldn't fights for higher wages be pointless?

Perhaps, but not in the situation described. The scarf maker will want to be able to survive and will want higher wages in order to keep up with the deflating economy. This is just one scenario though, I can hardly believe that one working class' wage increases, no matter how large, could cause a mass deflation on this scale.

[JKP]

He forgot one important factor: capitalism.

Rises in wages can be used to reclaim stolen surplus value, in other words to reduce exploitation. The capitalist could raise prices, but then he would be out competed; thus he reduces his rate of exploitation.

Rather simple, no?

[DisIllusion]

Originally posted by [email protected] 15 2006, 10:35 PM
He forgot one important factor: capitalism.

Rises in wages can be used to reclaim stolen surplus value, in other words to reduce exploitation. The capitalist could raise prices, but then he would be out competed; thus he reduces his rate of exploitation.

Rather simple, no?
Hahhahahaha.

That's the outside factors in a nutshell. Well said, comrade. You got your point through without frying your brain like I have. I'm going to call it a night. :lol:

[ComradeRed]

I flipped through my copy of Ricardo's Principles and I noted a similiar thing! Those of you in physics, this is an economical "action at a distance" :P

One note that I must emphasize is that we must follow Newton's advice: Do not feign any hypothesis! In other words, have a "controlled ignorance" on the issue (viz. on the myth of "supply and demand").

JKP rather elegantly summed up a Marxist view on the issue...but Ricardo does seem to initiate the bourgeois tradition of "ceteris paribus" (assuming everything else in the universe except what is being examined is constant) in economics. This is the reason why Ricardo's conclusions are remarkably anti-worker, pro-capitalist: he didn't understand that the economy is a system (rather similiar to a system of equations), and grossly misunderestimated its dynamics.

My point can be illustrated best by having a linear equation with two variables (for simplicity): x_{n}, y_{n}. The relationship is (say) 4x_{n}+3y_{n}=0 (this is arbitrary, and whether it works or not is irrelevant to my point).

If we replace x_{n} with x_{n}=.5x_{n+1}+2, Ricardo (as most bourgeois economists) predict that nothing will change. If you do the math the equations do change, the solutions are drastically different.

Try substituting it in: 4(.5x_{n+1}+2)+3y_{n}=2x_{n+1}+8+3y_{n}=0. This does not have the same solution! The first (if we hold y as the dependent variable, that is f(x)=y) becomes four thirds x_{n}. The second (holding y as the dependent variable again!) becomes two thirds x + eight thirds is equal to y (2/3 x + 8/3 = y). This is not the same!

I hope that math made sense, if not don't sweat it (I basically used a longwinded method to prove your points!).