of entrepreneur’s cost are not determined by the labor cost of producing the commodity. Thus the exchange value of a good is determined by its entrepreneur’s cost, but this latter is not determined by labor cost, and consequently the exchange value of the good is not determined by labor cost. The existence of rent and interest destroys the regulation of exchange values by labor cost. It must be kept in mind that all this is very much more explicit than what Adam Smith said. It signifies that the labor-cost philosophy of value cannot be true—perhaps Smith would say only that it is imperfect or not precisely true—because it is in conflict with a more certain empirical law of value, namely, the law of entrepreneur’s cost. Ricardo adopted the labor-cost philosophy of value virtually as a premise, and the most important parts of his reasoning on the subject are concerned with removing or minimizing the empirical difficulties with this philosophy.[200] In the end he admitted that interest is an element in that form of cost which exercises the most direct and compelling influence on exchange values. He made concessions, which pursued to their logical outcome, signify that the existence of interest throws the exchange values of goods out of proportion to their pure labor costs of production. We have seen how he put this concession in a peculiar and misleading manner.[201] As for rent of land, Ricardo hastens to repudiate Adam Smith’s admission that it also is a source of difficulty to the labor theory. He gets rid of rent by explaining that the exchange values of commodities are regulated by the quantity of labor required for production on the least fertile land in use, or the quantity required to produce the most expensive portions of the supplies. In modern phraseology, he urged that it is not the actual labor cost of a good but its marginal labor cost, which regulates its value. Ricardo himself used that fatally ambiguous formula, “rent does not enter into price.” Having removed rent by making the value determining cost marginal, and having minimized the difficulty of interest, Ricardo proceeded as if the labor theory were, for the sake of argument, intact.