Profit is the difference between the Cost of Production of any product and its Value: or the Quantity it exchanges for Rate of Profit is the Amount of Profit made in some given Time Payment means anything whatever which is taken in exchange for anything else Discharge is equivalent to Payment Satisfaction is anything which is received as the final discharge and closing of any transaction Capital is any Economic Quantity used so as to produce a Profit Any Economic Quantity may be used as Capital There is no such thing as Absolute Capital Capital is said to be Fixed when it remains in the possession of the Capitalist, and he derives a Revenue from its use Capital is said to be Floating when he parts with it entirely in one operation, and it is restored to him in the Price of the Product There are Three Ambiguities in the Theory of Credit First Ambiguity. A Debt is not Money owed by the Debtor, but the Personal Duty to pay Money Second Ambiguity. The word Debt means the Creditor's Right of action, as well as the Debtor's Duty to pay ""Lend," Third Ambiguity. The words "Loan," and "Borrow" have Two distinct meanings: and denote Two distinct operations: which are distinguished in Latin as Mutuum and Commodatum Bank Notes and Bills of Exchange always represent Debts: and arise out of an Exchange Bills of Lading and Dock Warrants always are Rights or Titles to goods and arise out of a Bailment and not an Exchange : CHAPTER II THE THEORY OF VALUE Preliminary Remarks It is now definitively settled that, used as a technical term in Economics, the word Wealth means anything whatever whose Value can be measured in Money: or which can be bought and sold or exchanged: and that there are Three distinct kinds of Things which can be bought and sold. (1) Material Things : (2) Personal Qualities: (3) Abstract Rights It is also seen that the Value of any Economic Quantity is any other Economic Quantity for which it can be exchanged The Theory of Value is the investigation of the Laws which govern the numerical relations in which these Quantities will exchange The Complete Theory of Value comprehends— 1. The Definition of Value 2. The Origin, Cause, or Form of Value 3. The General Law of Value It has been already shewn that the complete Science of Economics comprehends Six distinct kinds of Exchanges; but as the business of Banking includes only two of these six kinds of Exchange, we shall consider only such portions of the Theory of Value as are necessary for our present subject: the complete Theory of Value is developed in our Elements of Economics Section I The Definition of Value 1. Value, in its true and original sense, is a Desire of the Mind: it means Esteem, or Estimation: As Glo'ster says, in Lear" In the division of the kingdom it appears not which of the Dukes he Values most So Troilus, in Troilus and Cressida― "For what is aught but as 'tis Valued ?" So Henry Esmond says-" There is some particular prize we all of us Value: and that every man of spirit will venture his life for " So J. B. Say says-" Value is a Moral Quality' 2. But such Value is not an Economic phenomenon. To bring Value into Economics it must be manifested in some tangible form a person must manifest his Desire, Demand, or Value for something else, by giving something in Exchange for it to acquire possession of it But as one person cannot gain possession of what another person possesses without giving him something in exchange for it which he Desires, Demands, and Values, it is evident that for an Exchange to take place Requires the Concur, rence of two Minds. It is not sufficient that the Demand or Value should exist on one side only. If one person desires to obtain possession of what another possesses, it is not sufficient to constitute a phenomenon of Value that he alone should desire it: he must offer in exchange for it something which that other person Desires or Demands. If a person brought a cargo of wine among a nation of teetotallers, no one would Desire or Demand it; no one would buy it: among such a people wine would have no Value: so, among a nation of nonsmokers, tobacco would have no Value: among a nation of vegetarians beef and mutton would have no Value. However much a person should wish to sell his product, if no one will buy it, it has no Value. For an Exchange, or a phenomenon of Value, to take place, there must be the Reciprocal Desire, or Demand of Two persons, each for the product of the other When, however, two persons each Desire or Demand to obtain the product of the other, and when they agree to exchange their respective products, each Product may be considered as the Measure of the desire of its owner to obtain possession of the product of the other. The two products, therefore, reciprocally measure the Desire of their possessors to obtain the product of the other and when these persons have agreed upon the Quantities of their products which are to be exchanged, the two products are said to be of equal Value. Each product is the Value, or the Demand for the other and this is the only kind of Value with which Economics is concerned : Hence it is obvious that in every phenomenon of Value, or Exchange, there must be two Demands and two Quantities and that the true Origin and Cause of Value is Reciprocal Demand Thus, let A and B be any two Economic Quantities which are exchanged at any instant: then we may say— Then B is the Value of A in terms of B; and A is the Value of B in terms of A Thus Aristotle says “ ἡ δ ̓ ἀξία λέγεται πρὸς τὰ ἐκτὸς ἀγαθά” "Now the term Value is used in reference to External things" So it is said in Roman Law Res tanti valet quanti vendi potest The Value of a thing is what it can be Sold for The Greek word for Value, acía, is derived from ayw, one of whose meanings is to Weigh, or, be of the weight of So Demosthenes, speaking of some golden goblets, says ́ayovσa ékáσrŋ μvâv”—“ each one weighing a mina." And he says of the sword of Mardonius“ ὃς ἦγε τριακοσίους δαρεικούς” -"which weighed three hundred Darics." Hence día always meant equality, Weight for Weight: as when two Quantities are put into a balance and are of equal weight So Morocco says, in the Merchant of Venice "Pause, Morocco, And Weigh thy Value with an even hand" So Le Trosne says, that Value is a new Quality which products acquire when men live in society "Products acquire, then, in the social state which arises from the community of men among each other, a new Quality. This Quality is Value, which makes products become Wealth "Value consists in the Relation of Exchange which takes place between such and such a product: between such a Quantity of one product and such a Quantity of another 66 'Price is the expression of Value: it is not separate in Exchange each thing is reciprocally the price of the merchandise: in a Sale the Price is in Money Hence it is clear that Value is a Ratio, or an Equation like Distance, or an Equation, it necessarily requires two objects The Value of a thing is always something External to itself. It is absolutely impossible to predicate that any Quantity has Value, without at the same time implying that it can be exchanged for something else: and, of course, everything that can be exchanged for it, is its Value in that commodity. Hence any Economic Quantity has as many Values as Quantities it can be exchanged for: and if it can be exchanged for nothing it has no Value Hence a single object cannot have Value. A single object cannot be Distant: and cannot be Equal. If an object is said to be Distant or Equal, we must ask-Distant from What? or-Equal to What? So, if any Quantity is said to have Value, we must ask-Value in What? And, as it is absurd to speak of Absolute or Intrinsic Distance; or Absolute or Intrinsic Equality; so it is equally absurd to speak of Absolute or Intrinsic Value |