Chapter I: General Outlines of the History of the Labor
Theory of Value.
1. The following history of the labor theory of value begins with Adam Smith,
not because it is supposed that Political Economy was born with the Wealth of
Nations, but because no other work written affords so convenient a starting-
point to the historian who has no desire to press his investigations into regions
too remote from modern interests.
After Adam Smith, the writers to be considered are Ricardo and Malthus,
McCulloch, James Mill and Torrens, Senior, John Stuart Mill, and Cairnes. In
the next great treatise after that of Cairnes, the Principles of Economics of
Marshall, there is nothing left of the labor theory of value, except a note at the
end of a chapter on the general theory of the equilibrium of supply and
demand.1 This note, “On Ricardo’s Theory of Value,” endeavors to state the
ultimate relations of cost, utility and value in such a manner that Ricardo’s
explanation of value is made to appear as a statement true as far as it goes,
which errs only in being incomplete, and which is completed, not refuted, by
the utility theory. This view will be taken up in the last chapter of the present
essay. But no separate chapter is devoted to Professor Marshall’s work,
because, as a matter of fact, the Ricardian labor theory finds no place in the
text of his Principles. From Smith to Cairnes, the list of writers given above
was selected as well calculated to exhibit the general line of development of
English political economy. No attempt has been made to discover writers
outside of this list, although it is not denied that such writers may not at present
receive due credit for their influence upon the development of economic
theory. Making no attempt at what might be called a discursive or extensive
study of the field, this history will be confined to an intensive study of the
chief writers. If it be found that certain of the above list of writers contributed
nothing but error to the theory of value — and such is the case with three of
them — even such a conclusion is deemed to be of historical value.
2. With the limits of our field thus defined, attention should first be called to a
fairly prevalent, but mistaken, impression regarding the so-called classical
labor theory of value. It is frequently assumed that this theory of value was a
simple and absolute dictum, supported in substantial unanimity by a
considerable body of writers, called collectively “the classical school.” There
is, no doubt, sufficient resemblance among these writers in their general
tendencies of thought to justify the term “classical school;” but with respect to
their views on the central problem of value, it is their differences of opinion
that at present need emphasis, just as it is these differences which take the
modern reader by surprise when he first undertakes a detailed study of their
writings. Instead of finding the minds of the early English economists
dominated by a single labor theory, having the merit of great directness and
simplicity, the historian of the theory is confronted with an appalling jumble of
ideas on
