§ 6. Occasional Elements in Cost of Production; taxes and ground-rent.

Cost of Production consists of several elements, some of which are constant and universal, others occasional. The universal elements of cost of production are the wages of the labor, and the profits of the capital. The occasional elements are taxes, and any extra cost occasioned by a scarcity value of some of the requisites. Besides the natural and necessary elements in cost of production—labor and profits—there are others which are artificial and casual, as, for instance, a tax. The taxes on hops and malt are as much a part of the cost of production of those articles as the wages of the laborers. The expenses which the law imposes, as well as those which the nature of things imposes, must be reimbursed with the ordinary profit from the value of the produce, or the things will not continue to be produced. But the influence of taxation on value is subject to the same conditions as the influence of wages and of profits. It is not [pg 276] general taxation, but differential taxation, that produces the effect. If all productions were taxed so as to take an equal percentage from all profits, relative values would be in no way disturbed. If only a few commodities were taxed, their value would rise; and if only a few were left untaxed, their value would fall.

But the case in which scarcity value chiefly operates in adding to cost of production is the case of natural agents. These, when unappropriated, and to be had for the taking, do not enter into the cost of production, save to the extent of the labor which may be necessary to fit them for use. Even when appropriated, they do not (as we have already seen) bear a value from the mere fact of the appropriation, but only from scarcity—that is, from limitation of supply. But it is equally certain that they often do bear a scarcity value.

No one can deny that rent sometimes enters into cost of production [of other than agricultural products]. If I buy or rent a piece of ground, and build a cloth-manufactory on it, the ground-rent forms legitimately a part of my expenses of production, which must be repaid by the product. And since all factories are built on ground, and most of them in places where ground is peculiarly valuable, the rent paid for it must, on the average, be compensated in the values of all things made in factories. In what sense it is true that rent does not enter into the cost of production or affect the value of agricultural produce will be shown in the succeeding chapter.

These occasional elements in cost of production, such as taxes, insurance, ground-rent, etc., are to be considered as just so much of an increase in the quantity of capital required for the operation involved in the particular production, and, consequently, result in an increased cost of production, because there is either more abstinence, or abstinence for a longer time, to be rewarded. These elements, therefore, if they are not universal (or common to all articles), will affect the exchange value of commodities, wherever there is a free competition.

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