"Measured by the price of labour, therefore, gold has unquestionably depreciated; and can anybody suggest a better measure for testing the issue?"
The fallacy of using labour in any form as a test of value was pointed out in the chapter on value. That the labour a commodity will purchase is not in any way a standard of value, as between two different periods, has been shown by almost every economist from Ricardo down to the present time.
The above quotations, in connection with the following from the same article, bring to light an important phase of the subject, which it may be well to make clear. Mr. Wells remarks:--
"A decline in prices, by reason of an impairment of the ability of the people of any country to purchase and consume, through poverty or pestilence or by reason of the misapplication of labour and capital, _i.e._ waste, ... is certainly an evil. But a decline in prices caused by greater economy and effectiveness in manufacture and greater skill and economy in distribution, in place of being a calamity, is a blessing and a benefit to all mankind."
With growing knowledge, and the advancement of the arts and sciences, there is a continual improvement in methods of production and distribution, enabling the same amount of labour to produce and distribute to consumers a far greater amount of commodities in general than it formerly could. This has been conclusively shown in detail by a mass of statistics in Mr. Wells' book. The question arises, to whom should this increased product properly belong?
For the purpose of this inquiry the community may be considered as divided into three separate classes, according to the source from which their principal income is derived; viz.--
(1) Labourers,--including all whose income is principally derived from their work, of hand or brain, whether as wages, salaries, or products directly created.
(2) Employers of labour,--including all whose income is mainly derived from investments of capital directly in productive enterprises in the widest sense of the term,--those who take the risks of business incident to the doing of the work of the community.
(3) Money lenders,--those whose income is derived from interest on loans; who, not wishing to take the risks and cares of active business, prefer to loan their capital to others who will do so, accepting as their share of the profits a definite amount as interest.