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