Page:The Economic Journal Volume 1.djvu/112

 92 The fertility of this master mind is strangely shown in the fact that his writings contain the germ of the Physiocratic doctrine of taxation as well as the germ of Smith's doctrine of the production of wealth and the measure of value. 'Labour,' he had said, 'puts the difference of value on everything,' or as he corrects it, 'labour makes the far greater part of the value of things we enjoy,' but Adam Smith uses the principle in its most absolute form. In the first sentence of The Wealth of Nations, labour is spoken of as if it were the sole source of value, and therefore it is subsequently used as s measure of value. Against all this Pownall protested. 'Labour is not the measure of value but the mixture of the labour and the objects laboured upon which produces the composite value. The labour must remain unproductive, unless it hath some object whereon to exert itself.' There is no one commodity,' he adds, 'that will measure all others, but that all are to one another in their reciprocal value alternate measures, and that gold and silver is only the most common and most general, almost the universal measure.' 'Correlative value between commodities must depend upon, and derive from reciprocal higgling of bargain and sale, and are not measured by labour.' In accordance with this principle he urges that 'as there is no real measure of value so I think there is no fixed natural rate of value or real price distinct from the market price.'

(c) Similar criticisms were urged in a much less friendly spirit by Mr. Simon Gray in his own name, and under the somewhat thin disguise of George Purves. He is specially bitter on Adam Smith's distinction between productive and unproductive labour. He considered that Adam Smith's phraseology tended to foment class hatreds, as it seemed to represent all other classes as paupers who subsisted as mere drones and at the expense of the manual labourers. He argues in opposition that all labour is either directly or indirectly productive, and that the real question is who are more and who are less productive? But his chief point is that the cause of wealth lies not in mere labour, but in effective demand, a doctrine for which he argues with much acuteuess. There are necessary limitations which he does not sufficiently take into account, such as the law of diminishing return from