This phrase sums up the doctrine which underlies his theory of value and indicates its connection with the theory of distribution. Ricardo had perceived that the supply and demand formula which would serve sufficiently in problems of exchange, or the fluctuations of market-price, could not be made to solve the more fundamental problem of distribution. We must look beneath the superficial phenomena and ask what is the nature of the structure itself: what is the driving force or the mainspring which works the whole mechanism. We seem, indeed, to be inquiring into the very origin of industrial organisation. The foundation of a sound doctrine comes from Adam Smith. Smith had said that in a primitive society the only rule would be that things should exchange in proportion to the labour of getting them. If it cost twice as much labour to kill a beaver as to kill a deer, one beaver would be worth two deer. In accepting this bit of what Smith's commentator, Dugald Stewart,[332] calls 'theoretical' or 'conjectural' history, Ricardo did not mean to state a historical fact. He was not thinking of actual Choctaws or Cherokees. The beaver was exchanged for the deer about the time when the primitive man signed the 'social contract.' He is a hypothetical person used for purposes of illustration and simplification. Ricardo is not really dealing with the question of origins; but he is not the less implying a theory of structure. It did not matter that the 'social contract' was historically a figment; it would serve equally well to explain government. It did not matter that actual savages may have exchanged beavers and deer by the help of clubs instead of competition in the market. The industrial fabric is what would have been had it been thus built up. It can be constructed from base to summit by the application of his formula. As in the imaginary state of deer and beaver, we have a number of independent persons making their bargains upon this principle of the equivalence of labour; and that principle is supposed to be carried out so that the most remote processes of the industrial machinery can be analysed into results of this principle. This gives a sufficient clue to the whole labyrinth of modern industry, and there is no need of considering the extinct forms of social structure, which we know to have existed, and under which the whole system of distribution took place under entirely different conditions.[333] A great change has taken place since the time of the deer and beaver: the capitalist has been developed, and has become the motive power. The labourer's part is passive; and the 'value' is fixed by the bargaining between the proprietors of 'accumulated labour,' forced by competition to make equal profits, instead of being fixed by the equitable bargain between the two hunters exchanging the products of their individual labour. Essentially, however, the principle is the same. In the last as in the first stage of society, things are