Avoiding the larger task involved in the extensive study of the history of the theory of value in England, the present monograph has endeavored to interpret the labor theory as it passed through the minds of some nine economists beginning with Smith and ending with Cairnes. The history is that of a subjective-cost philosophy of value and the difficulties of its application to explain the facts of industry. According to this philosophy, or this ultimate explanation, utility is a condition essential to the existence of value, but cost or difficulty of attainment is the _essence_ of value. The idea was elucidated by a variety of figures of speech. Utility was conceived as a sort of resting-ground for value, but the height of value upon this ground, the value as an _amount_, was held to be determined by or measured by cost of production. Thus Ricardo wrote to J. B. Say: The utility of things is incontestably the _foundation_ of their value, but the degree of their utility cannot be the measure of their value.... The difficulty of [a thing’s] production is the sole measure of its value.[198] Karl Marx was accustomed to speak of value as “a congelation of human labor,” and to speak of a useful object, or an object made useful in the process of production, as a sort of receptacle for value. In his involved “philosophical” account of value, as we termed it, Adam Smith taught that the value, or “real worth,” of a good is measured equally well by the amount of labor which it has cost to produce, or by the labor which it can command in exchange. When, however, Adam Smith turns his attention to the proximate principles of value in the actual competitive market, we find him confessing that the theory which he first developed applies without modification only to a primitive state of society, without land rent and interest on capital. In this primitive state the amount of labor which a commodity costs determines the amount of labor which it can command in exchange. Under the conditions of advanced society, the rent of land and the “profits of stock” must come out of the exchange value of the product, and the labor cost of the latter, which is paid for by wages, no longer determines its value.[199] If we take advantage of modern terminology, and throw Adam Smith’s theory into our own words, we make its precise significance clearer. It means virtually that the exchange value of a good in the fully developed social economy is determined by its _entrepreneur’s_ or _money_ cost of production, so far as it is determined by cost at all. Competition must be perfect to enable cost to determine actual values. Entrepreneur’s cost is composed of expenditures for wages of the labor, rent of the land, and “profits” of the capital necessary for production. The labor cost of producing the commodity determines only the amount of the wages cost to the entrepreneur. The other elements helping to make the total