Marx says the same, and concludes that the variations of the actual from the theoretical values cancel one another.[94] Both McCulloch and Marx were involved in a hopeless endeavor to overcome the difficulty of interest. 2. JAMES MILL. 4. James Mill held that value depends, in the first instance, on demand and supply, but ultimately upon cost of production.[95] Cost of production consists of cost in capital and labor combined, but the capital element can be reduced to labor, and in the last resort quantity of labor cost determines the exchange value of commodities.[96] But there is an argument which is brought to controvert this conclusion. “It is said that the exchangeable value of commodities is affected by time, without the intervention of labour; because, when profits of stock must be included, so much must be added for every portion of time which the production of one commodity requires beyond that of another.”[97] Mill takes the regular example of the cask of wine, worth twenty sacks of flour now—because it cost the same amount of labor—but worth more if kept in a cellar some years. Now, he says, the objection here is that there is an addition of value without an application of more labor, and that therefore quantity of labor does not regulate value. But “this objection is founded on a misapprehension with respect to the nature of profits. Profits are, in reality, the measure of quantity of labour; and the only measure of quantity of labour to which, in the case of capital, we can resort. This can be established by rigid analysis. If two commodities are produced, a bale of silk, for example, for immediate consumption, and a machine, which is an article of fixed capital; it is certain, that if the bale of silk and the machine were produced by the same quantity of labour, and in the same time, they would exactly exchange for one another: quantity of labour would clearly be the regulator of their value. But suppose that the owner of the machine, instead of selling it, is disposed to use it, for the sake of the profits which it brings; what is the real character and nature of his action? Instead of receiving the price of his machine all at once, he takes a deferred payment, so much per annum: he receives, in fact, an annuity, in lieu of the capital sum; an annuity fixed by the competition of the market, and which _is therefore an exact equivalent for the capital sum_. Whatever the proportion which the capital sum bears to the annuity, whether it be ten years’ purchase, or twenty years’ purchase, such a proportion is each year’s annuity of the original value of the machine. The conclusion therefore is incontrovertible: as the exchangeable value of the machine, had it been sold as soon as made, would have been the practical measure of the quantity of labour employed in making