(3.iii.24) The alteration of value, arising from a change in the quantity of labour required forproduction, is the most important; for if we could be sure, that the commodity chosen for ourmeasure of value was itself always produced under the same circumstances, that is, by the samequantity of immediate, and the same quantity of hoarded, labour, it would always answer thefollowing purposes: 1st, it would show, by every alteration in its power of purchasing acommodity produced by the same proportion of labour and capital, the alteration which hadtaken place in the cost of production of that commodity, or in that by which its value isregulated: and 2dly, it might be accommodated by calculation to the changes in value, producedby the alteration of wages and profits, in the case of commodities not produced by the sameproportions of labour and capital.
(3.iii.25) Thus, if gold were produced under the circumstances of case No. 1, by merelabour, picked up, for example, by the hand, from the beds of rivers, and always in equal quantity, inreturn for an equal quantity of labour, it would always be a measure, exactly and immediately, ofall commodities produced by pure labour. In the case, however, of a rise of wages, and a fall inthe profits of stock, gold would in these circumstances rise as compared with commoditiesproduced under the circumstances of case No. 2, though no alteration should have taken place inthe amount of the labour and capital required for their production. It is evident, therefore, that inthese circumstances, gold, fluctuating in value with every fluctuation in the wages of labour,would very imperfectly serve the purposes of a measure of value. If a contract, for example,were made, to pay an annuity of so much gold for twenty years, it might be 10 per cent. more, or10 per cent. less, at the end of that period, than it was at the beginning. Of labour it would all thetime command exactly the same quantity, but of all commodities produced by aid of capital itwould command a different quantity, and that, in proportion to the degree in which capital, notlabour, was the instrument of their production.
(3.iii.26) Though we can by strict analysis discover, that exchangeable value is proportionedto quantity of labour expended in production, there are three circumstances which prevent itsapplication as the measure of value.
(3.iii.27) In the first place, there are two kinds of labour employed in production, and thedegree in which the produce is shared between them often varies, and occasions as we have seen, acorresponding variation in the exchangeable values of' commodities produced by differentproportions of these two kinds of labour. In the next place, we have no practical means ofascertaining before hand the exact quantity of hoarded labour which goes to production, sincethe only measure we have of its quantity is the price which it brings. In the third place, labour isnot constant in its productive powers. If one day's labour produced always the same quantity ofgold, but not the same quantity of corn, or of cloth, the exchangeable value of gold would alterin respect to corn and cloth.
(3.iii.28) From these explanations it also appears, that nothing else can be applied as anaccurate measure of value.
(3.iii.29) Every commodity may be considered as produced under one of the three sets ofcircumstances specified above. If we take as our measure a commodity, produced under thecircumstances No. 1, the gold, for example, picked up by the hand, this will always purchase thesame quantity of pure labour, and of such commodities as are produced by the same quantity ofthat labour; but it will not purchase the same quantity of commodities which come to need moreor less of labour, nor the same quantity of the produce of hoarded labour, but less of it inproportion as wages rise, more as wages fall. Could we take as our measure a commodityproduced under the circumstances No. 3, that is, by hoarded labour alone, it would alwayspurchase the same quantity of the produce of hoarded labour, when no alteration had taken placein its productive powers, but less or more of the produce of immediate labour, according asprofits, the wages of hoarded labour, rose or fell. A commodity, produced under the mediumcircumstances, answers the purpose best; because by far the greater number of commodities areproduced under circumstances more nearly approaching to the medium than any of the extremes.
Gold, therefore, which is produced in these circumstances, and with less variation in the quantityof the two kinds of labour applied to its production, than almost any other commodity, has thisrecommendation among others, to be the medium of exchange, that it is less imperfect as ameasure of value than almost any other commodity, which could be taken. Such aberrations asare obvious, and capable of being in some degree foreseen, practical sagacity corrects by theproper allowances. This cannot be done when great and unexpected changes take place; andmuch disorder is the consequence.
Section IV. Occasions on Which it is the Interest of Nations toExchange Commodities with One Another (3.iv.1) We have already seen, that the benefits, derived from the division and skilfuldistribution of labour, form part of the motives which give rise to the exchange of commodities. Men willnot confine themselves to the production of one only of the various articles which contribute tothe well-being of the individual, unless they can, by its means, provide themselves with others.
