VALUE signifies, in political economy, the quantity of labour, or of the product of labour, which will exchange for a given quantity of labour or of some other product thereof. It is necessary in the outset to distinguish utility from value, or, as Adam Smith expresses the distinction, "value in use" from "value in exchange." The utility of an article causes it to be an object of demand ; and without some real or imaginary utility an article will not have value ; or, in other words, no one will give other articles in exchange for it : but utility alone does not constitute value, except when there ie a limited and exclusive possession, which enables one man to refuse to others the enjoyment of any natural product without the payment of an equivalent or price.
It is the labour of man alone which in ordinary circumstances creates value. What all may enjoy alike without labour may indeed be most useful and necessary, but cannot be an object of exchange, and there fore is destitute of value. "The real price of every thing," says Adam Smith, "what everything really costs to the man who wants to acquire it, is the toil and trouble of it. What everything is really worth to the man who has acquired it, and who wants to dis pose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people." Hence the labour of man becomes the real measure of the exchangeable value of all commodities.
To illustrate the distinctive character of utility, and the effects of labour and of exclusive possession respectively upon value, suppose a party of settlers to occupy a tract of land, and to divide it amongst them in equal portions by lot. Suppose also that each settler has upon his own land timber, lime, and stone. They all need houses, and have the materials to build them with ; but the unaided labour of each man is unable to appropriate and apply the materials in the manner he desires. One man calls in the assistance of his neighbour, and by their joint labour a house is built ; and this service ho repays by helping his neighbour also to build a house. He can only repay him by labour, because the materials, though of the highest utility, are common to both, but need labour to make them available. It is clear that the timber, the lime, and the atone are in this case without value, and could not bo offered by one man in exchange for the labour of another. But suppose it should happen that all the timber, lime, and
gene in the whole district should 'be found in the portion of land allotted to one of the party. llere the materials would not only be objects of utility, but the limited and exclusive possession of them would endow them with value. The fortunate owner of them might say to his neighbours, " You shall not have any of my materials until you have first built me a house; but when you have each , worked for me a day, instead of repaying each of you with a day's labour myself, I will permit you to take the materials for building from my estate." Here the power of withholding the products of nature from others is productive of value, being equivalent to a certain quantity of labour. But even in this case it is labour which creates the value, and is the measure of exchange between the parties.
The great mass of commodities which are made the subject of exchange amongst men are produced by labour only, and are not affected by any exclusive possession whatever. With these therefore the quantity of labour used in their production is the measure of their real value. They will ordinarily exchange for other commodities upon which an equal quantity of labour has been expended; but there are circumstances which may affect their exchangeable value, while their real value or cost of production may remain the same. If a larger quantity of any article has been produced than there is an effective demand for, its exchangeable value is reduced ; if on the contrary, its supply is unequal to the demand, its value is raised. But these varia tions cannot He of long duration. Articles which do not repay the cost of production will soon cease to be produced, until the diminished supply has again raised their value ; and when articles bear a market value much' higher than their cost, production will be encouraged until the supply is not very wide of the demand. Any permanent altera tion, therefore, in the exchangeable value of one commodity as com pared with another, cannot be referred to these fluctuating and accidental causes, but must be the result of a change in the real value of one or the other, that is to say, in the quantity of labour required to produce it. The value of labour is always the same, but the value of the products of labour changes with circumstances.