9. Ricardo’s way of describing the interest difficulty is unnecessarily round-about, but a more important point is that it is positively misleading. He must mean that interest and wages together make up entrepreneur’s costs. In the cost of producing one commodity interest will be a certain fraction of the whole; in the cost of producing another commodity it will be a different fraction. Now, says Ricardo, if the general rate of interest or of wages rises or falls, it will affect the total cost of production of two such commodities in different degrees.[67] Thus a rise or fall of the general rate of wages of labor is a cause of variation of the exchange ratios of products, as well as the cause of changes in the quantity of labor required to produce them. This statement is misleading, because the existence of interest throws the entrepreneur’s costs, and consequently the normal values of commodities, out of proportion to their labor costs without any reference to _variations_ in the general rates of interest or of wages. _At any given time_ values are already out of proportion to labor costs, whether or not there be a future change of the ratio of wages; yet Ricardo is misled in his illustrations to assume the proportionality before the wages rate changes.[68] The origin of Ricardo’s indirection in explaining the law of entrepreneur’s costs lies in the preconceptions of the “philosophical” account of value. To be precise, it is due to Ricardo’s quarrel with one of Smith’s two “philosophical” standards, namely, the labor-command standard. According to this standard, if wages rise or fall, the amount of a given commodity required to command a day of labor in exchange falls or rises. Smith said, in effect, that the “exchangeable value” of commodities in general falls when wages rise. He could not have meant pure exchange value by this, but Ricardo took him at his word, and proceeded to show that when the exchange ratio between day labor and a commodity alters, the exchange value of the labor may change just as much as that of the commodity. Therefore he concluded early in his chapter that the exchange value of commodities depends on the comparative quantity of labor required for their production, and not (as Adam Smith said) on the greater or less compensation which is paid for that labor.[69] On account of this dispute, he is led to state the qualification of the labor-cost law, due to interest, in terms of variation of the compensation of labor. That is, he qualifies slightly his original statement against Smith. The false philosophy that labor cost is the _essence_ of value exercised an influence upon the statement of the empirical law of costs which was truly baleful in English political economy. Its effect on terminology reached at least into the writings of John Stuart Mill, who sometimes referred to cost of production as being composed of _labor and profits_![70] Either wages and