(3) The quantity of labor required in the production of a commodity, which regulates its value, includes the labor employed in making the raw material, machinery and buildings (capital goods) used up in its production, as well as the labor directly applied to it. This proposition is copiously illustrated by examples drawn from primitive and modern industry, and commands immediate assent. It is obvious, when once stated, that the labor indirectly applied to the production of a commodity is no less _required_, if we are to obtain it, than that directly applied. 5. We have here an important consideration. If the labor _directly_ applied to the production of a commodity were all that is included in its labor-cost, the entrepreneur’s expenses, covering cost to him of machinery and raw material, would be too obviously out of proportion to the labor cost (as manifested in _his_ wages cost). But it is Ricardo’s intention to reduce the cost of capital goods to labor cost. The total labor cost of a commodity produced from capital and raw material is paid for by a series of entrepreneurs in their wages charges. Each entrepreneur exacts a “profit” for the time he has advanced the wages. It is in this way, as Ricardo sees it, that interest enters into entrepreneur’s costs. Does it destroy the force of labor cost as a regulator of exchange value? To make Ricardo’s answer to this question clear, it is necessary to refer first to what he has to say in Chapter IV of the _Principles_ on natural and market price. The term “Natural Price” has, it happens, a “philosophical” and an “empirical” significance. It is at best an inexact pair of words. Its empirical meaning is simply _normal value_, the excellent term for that value which, under competition, constitutes a center of oscillation for market values. Its “philosophical” meaning, as suggested a few times by Smith, is the _human_ cost of obtaining goods from the physical outer world. “Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased.” With this sort of natural or primary price Adam Smith’s empirical chapter on “Natural and Market Price” has nothing to do. This ought also to be true of Ricardo’s chapter (Chapter IV), because it is a chapter explaining how competition always forces the market-price toward a normal value.[58] It turns out in the end that this normal value is a sum of exchange value which is just sufficient to cover the _wages_ of labor and the _interest_ of capital required in production. This is never made clear. Malthus probably never understood Ricardo as meaning this. What we affirm is, that _his text_ means this when it is altered or rectified so as to give it the self-consistency which seems to lie within it.