The new school has, according to Malthus, three main principles. The first is, that what determines value is the quantity of labour that a thing costs to make,—the second, that supply and demand do not as a rule affect values,—and the third, that fertility of soil and not competition regulates the rate of profits. The new school thinks that profits enter so little into the price of an article that they may be neglected altogether in the computation of the causes of value. But (says Malthus) the value of a stone wall would be due, nearly all of it, to labour, and the value of a cask of old wine kept for twenty or thirty years would be largely due to profits. £50 worth of stone wall would have much more labour “worked up in it” than £50 worth of old wine. It is not sufficient to answer that profits are simply accumulated wages. As well say that five is another name for four. Ricardo himself introduced many qualifications into his own statement that value is due to labour. The principle (he confessed) was modified by the use of machinery and by the unequal durability of capital.[634] Malthus admits the truth of Ricardo’s dogma that profits and wages can only increase at each other’s expense, and he even applies this principle of Ricardo’s in a new way to the facts of the commercial depression that had prevailed since the peace.[635] It was universally allowed there had been a less demand for labour and a great fall in wages, but, it was also allowed, a much greater fall in profits; so that wages while lower in gross amount bore a higher proportion to profits than before. The reason was that, while the competition of labourers was great, the competition of capitalists with capitalists was still greater. The result was a universal fall of prices; the wages, though relatively greater, were absolutely less in amount, and the demand for labour would have been greater if prices had risen and the capitalist had got greater returns to his capital. Malthus would not go farther than this, and the Ricardian doctrine needs to be otherwise applied to yield the doctrine of a wages fund. It was applied in some such way as follows:—Competition drives prices down to the cost of production; this means that at any given time the sum total of profits and wages cannot be more than they actually are, and both are kept down by competition to their minimum; the masters could not give higher wages without cutting down their profits, the men could not get less wages without either starving or being driven to seek other employments. Malthus does not so apply his doctrines. To him, what fixes the sum total of wages and profits is not the cost of production, but the demand for the thing produced; not the labour spent on a thing, but the labour that others are willing to give for it; and the cause of value is not cost, but demand acting with supply. Ricardo, who prefers to confine his theories to natural value, allows that the state of the demand and supply raises