Principles of Political Economy: Abridged with Critical, Bibliographical, and Explanatory Notes, and a Sketch of the History of Political Economy
John Stuart Mill · en
Now the second important question is, Is cost of production made
up of wages and profits, and is it true that the cost rises with a
rise of wages and profits? Certainly not. Wages and profits are
both higher in the United States than in England, but no one is so
absurd as to say that the cost of production of wheat (as above
explained) is higher here than there. It is exactly because cost
of production of wheat is lower in the United States that wages
and profits measured in wheat are higher here than in England.
Therefore, it can not be granted, as Mr. Mill expounds the
doctrine, that cost of production is made up of wages and profits.
When we speak of an increased cost of production of a given
article, we mean that its production requires more labor and
capital than before; and of a decrease in cost of production, that
it requires less labor and capital than before; meaning by “more
labor” that a given quality of labor is exerted for a longer or
shorter time, and by “more capital” that a greater or less
quantity of wealth abstained from is employed for a longer or
shorter time; or, in other words, that laborers and capitalists
undergo more or less sacrifice in exertion and abstinence,
respectively, to attain a given result. This is the contribution
to cost of production made by Mr. Cairnes, and briefly defined as
follows: “In the case of labor, the cost of producing a given
commodity will be represented by the number of average laborers
employed in its production—regard at the same time being had to
the severity of the work and the degree of risk it
involves—multiplied by the duration of their labors. In that of
abstinence, the principle is analogous; the sacrifice will be
measured by the quantity of wealth abstained from, taken in
connection with the risk incurred, and multiplied by the duration
of the abstinence.”(216)
This view of cost of production takes into consideration, in the
act of production, what Mr. Mill does not include, the cost, or
real sacrifice, to the laborer as well as to the capitalist. It
may, then, be well to state the relations of cost of production,
taken in this better sense, to value.