only exceed the earnings of others by an amount necessary to replace the sum expended on their training, together with the ordinary profits. That the excess is more than this, is suggested in Adam Smith's own proposition that it must be expected to replace the sum expended together with‘at least' the ordinary profits of an equally valuable capital1 If the excess were only just a fair return on the capital expended, we should sometimes find parents in doubt whether to make the investment or not, and sometimes find parents who deliberately thought better not to make the investment. But no one ever did hear of a parent who, having the power and the will to lay by a few hundred pounds for the benefit of his son, deliberately invested the amount in accumulative consols for him, and made him a bricklayer's labourer instead of using it to get him into some better paid employment. Ricardo mentions the subject of differences of wages in different employments only in order to say that the fact that some kinds of labour are 'more valuable' than others 'needs scarcely to be attended to' in comparing the value of the same commodity at different periods of time,' since ‘it operates equally at both periods': 2— 'In speaking,' he says, 'of labour as being the foundation of all value, and the relative quantity of labour as determining the relative value of commodities, I must not be supposed to be inattentive to the different qualities of labour and the difficulty of comparing an hour's, or a day's labour, in one employment with the same duration of labour in another. The estimation in which different qualities of labour are held comes soon to be adjusted in the market with sufficient precision for all practical purposes, and depends much on the comparative skill of the labourer and intensity of the labour performed. The scale, when once formed, is liable to little variation. If a day's labour of a working jeweller be more valuable than a day's labour of a common labourer, it has long ago been adjusted and placed in its proper position in the scale of value.'8 The meaning of this appears to be that, somenow or other, there is more labour in a day's labour in the better paid employments than in the worse paid. This is the only interpretation which will retain labour as 'the foundation of all 1 P. 46 a. 2 Principles, 1st ed. p. 13; 3d ed. in Works, p. 15 3 Ibid., 1st ed. pp. 12, 13; 3d ed. in Works, pp. 14, 15. value,' and it is confirmed by the fact that Ricardo quotes, in a footnote, a passage from Adam Smith in which occurs the sentence, 'There may be more labour in an hour's hard work than in two hours' easy business; or in an hour's application to a trade which it costs ten years' labour to learn, than in a month's industry at an ordinary and obvious employment.'1 Doubtless there' may be,' but the question is rather ‘Is the labour which brings in £1 a day eight times as much labour as the labour which brings in 2s. 6d. ?' Ricardo's view, adopted by Marx,2 plays a part in the history of Socialism; the history of Economics it is not important. in Malthus, in his Political Economy, says that differences of wages are accounted for in the easiest and most natural manner upon the principle of supply and demand': 'Superior artists are paid high on account of the scanty supply of such skill, whether occasioned by unusual labour or uncommon genius, or both. Lawyers, as a body, are not well remunerated, because the prevalence of other motives besides mere gain crowds the profession with candidates, and the supply is not regulated by the cost of the education.'8 He disapproves of Adam Smith's proposition that if one species of labour requires an uncommon degree of dexterity and ingenuity, the esteem which men have for such talents will give a value to their produce superior to what would be due to the time employed about it.' 4 James Mill, true to his principle of excluding, so far as possible, everything of human interest from his work, tells us nothing about the causes of differences of wages. M'Culloch, in the section which he inconsistently heads 'Equality of the wages of labour in different employments,' professes to show that the discrepancies that actually obtain in the rate of wages are all confined within certain limits-increasing or diminishing it only so far as may be necessary fully to equalise the unfavourable or favourable circumstances attending any employment,' but he does little more than quote 1 The passage is in Wealth of Nations, p. 14 a, Bk. 1. ch. v. (not ch. x. as Ricardo says in all his three editions). 2 See Capital (transl. by S. Moore and E. Aveling, 1887), vol. i. pp. 11, 12. Pp. 244, 245. From Wealth of Nations, Bk. 1. ch. vi. p. 22 a. Principles, p. 229. • Ibid., p. 230. Adam Smith's five circumstances. As to trustworthiness he merely copies Adam Smith's words, and makes no comment and no attempt to show that trust is a disadvantage which must be counterbalanced by high wages. As to the fifth circumstance the probability or improbability of success in an employment-he fails to understand Adam Smith's position. Adam Smith said that if any employment were 'evidently' more or less advantageous than the rest, people would either crowd into it or shun it, till its advantages returned to the ordinary level, and he put forward his five circumstances as things which either really or at least in the imaginations of men,' counterbalance differences of pecuniary wages. He believed that the generally ill-grounded hope of obtaining the great prizes of professions like the law or the army, was a circumstance which 'in the imaginations of men' counterbalanced low pecuniary wages. M'Culloch having omitted the proviso, either really or at least in the imaginations of men,' ought to have maintained that the real advantages of such professions are no less than the real advantages of other professions, but instead of doing so he follows Adam Smith in attempting to show that their real advantages are less. Senior, who says that his 'remarks will be chiefly a commentary on those of Adam Smith,' takes Adam Smith's five circumstances one by one, and makes a number of acute and interesting observations on their influence. He does not, however, make any attempt to improve the general theory of the subject. Wakefield seems to have been quite right when he said, in 1843, that Adam Smith's chapter on differences of wages and profits 'is allowed on all hands to be free from error, and to contain, even now, the only complete account of the subject to which it relates.'2 Dissatisfaction was first expressed by J. S. Mill: 'A well-known and very popular chapter of Adam Smith,' he said in his first edition, contains the best exposition yet given of this portion of the subject. I cannot indeed think his treatment so complete and exhaustive as it has sometimes been considered; but as far as it goes his analysis is on the whole successful.' 3 1 Political Economy, 8vo ed. p. 200 2 In his edition of the Wealth of Nations, vol. i. p. 328. In a later edition he altered 'on the whole successful,' to the less favourable tolerably successful.' He accepts Adam Smith's views with regard to the first, third, and fifth of the five circumstances, but with regard to the other two-trustworthiness and expense of training-he points out that there is a real inequality of all the advantages and disadvantages of the different employments. The superior wages earned in positions of trust are, he says, 'not a compensation for disadvantages inherent in the employment, but an extra advantage; a kind of monopoly price, the effect not of a legal, but of what has been termed a natural monopoly. If all labourers were trustworthy, it would not be necessary to give extra pay to working goldsmiths on account of the trust. The degree of integrity required being supposed to be uncommon, those who can make it appear that they possess it are able to take advantage of the peculiarity, and obtain higher pay in proportion to its rarity.'2 As regards the expense necessary in order to acquire proficiency in a skilled employment, he says that Adam Smith's principles account for an excess of earnings in the skilled employment sufficient to repay the expense with interest, but for nothing more, whereas 'there is a natural monopoly in favour of skilled labourers against the unskilled which makes the difference of reward exceed, sometimes in a manifold proportion, what is sufficient merely to equalise their advantages. If unskilled labourers had it in their power to compete with skilled by merely taking the trouble of learning the trade, the difference of wages could not exceed what would compensate them for that trouble at the ordinary rate at which labour is remunerated. But the fact that a course of instruction is required of even a low degree of costliness, or that the labourer must be maintained for a considerable time from other sources, suffices everywhere to exclude the great body of the labouring people from the possibility of any such competition.' 8 Competition is still more restricted, he adds, by the fact that into some employments, such as what are called 1 People's ed. p. 233 a. 2 Principles, Bk. II. chap. xiv. § 2, 1st ed. vol. i. p. 459; People's ed. p. 236 b. 3 Ibid. 1st ed. vol. i. pp. 460, 461; People's ed. p. 237 a, reading 'night' for 'could' in line 6. the liberal professions,' 'a person of what is considered too low a class of society is not easily admitted, and if admitted does not easily succeed.' 'So complete, indeed,' he concludes, has hitherto been the separation, so strongly marked the line of demarcation, between the different grades of labourers, as to be almost equivalent to an hereditary distinction of caste.'1 He expected these lines of demarcation to be broken through in the near future, owing to the changes,' which he looked on as 'now so rapidly taking place in usages and ideas,' and the general relaxation of conventional barriers,' together with 'the increased facilities of education which already are, and will be in a much greater degree, brought within the reach of all.' § 3. Distribution of Profits among Capitalists. The proportions in which the total profits made in a country are divided among the various capitalists must obviously depend chiefly on the proportions in which the total capital is divided among the various capitalists. With ordinary care and judgment, a millionaire will always make a larger income in an average year than a man whose capital is £100. The economists of our period, however, devoted little or no attention to the causes which determine the distribution of the capital of a country among its various holders. They made no comprehensive inquiry into the causes which lead to one man having £1,000,000 and another £100. Even J. S. Mill, when making drastic proposals for preventing the transmission of large fortunes from the dead to the living, offered no generalisations as to the accretion and subdivision of these fortunes. Consequently, the history of the theory of the distribution of profits among capitalists is practically confined to a history of generalisations about the causes which make equal capitals sometimes yield different profits, even when both are managed with average skill and judgment. 1 Principles, 1st ed. vol. i. p. 462; People's ed. p. 238 a. 2 Ibid. Bk. II. ch. ii. §§ 3, 4, 1st ed. vol. i. pp. 258-268; People's ed. pp. 135-140. |