2. The writer of the present essay has already acknowledged his indebtedness to Professor von Wieser for suggestion of the means of interpreting the main lines of the history of the labor theory. Professor von Wieser’s terse judgment of Ricardo’s writings on value is contained in the following sentences: “What, then, did Ricardo attempt? His whole endeavor exhausted itself in trying to show that the philosophical and the empirical theories of Adam Smith—both of which, indeed, in taking up this position he had to clear and carry further—did not contradict each other so much as at first sight would appear.”[48] The manner of putting this is objectionable, in that it implies, I believe, an improper subordination of Ricardo’s theory to that of Smith. While Ricardo quotes Smith freely, his exposition of the subject of value is in no sense a summary and criticism of Smith’s views. On the contrary, he writes with a remarkably independent spirit. It is, nevertheless, true that the principal part of the reasoning of Ricardo is concerned with the adaptation of the empirical account of value to the philosophical, that is, to the philosophical account as he understands it. These two accounts are almost inextricably entangled in Ricardo’s work, but their disentanglement is the sole method of exhibiting the ultimate purport of his reasonings. For, in essence, his theory is as follows: The value of those things whose value is subject to an ascertainable principle depends on their cost of production in human labor. (The value of pure scarcity goods which cannot be increased in quantity by the application of common human labor simply “varies with the varying wealth and inclinations of those who are desirous to possess them.”[49] If subject to no law of value, these goods are also, in Ricardo’s view, unimportant.) Labor cost is the kernel of value, so far as it seems to have a kernel. This is the philosophical account. Smith’s labor-command measure is condemned at the outset. There is little doubt that labor is here conceived as disutility, though Ricardo does not pause to discuss the concept of labor. But Ricardo’s theory ends as an empirical doctrine, in which labor-cost figures as the regulator of exchange value only because it is conceived to be the all-important element which governs the amount of entrepreneur’s expenses of production. Smith abandoned the labor-cost regulator for real society because he observed that the “necessary price” of a market commodity, or the price determined by its entrepreneur’s cost of production, must cover payments for rent of land and interest on capital as well as wages of labor. Not so Ricardo. He holds fast to the labor-cost standard, upon the belief that rent does not “enter into” this necessary price, and that the taking of interest causes only a negligible variation of money cost from proportionality with labor cost. The discussion of this variation is the most involved part of his writings.