The Measure

Adam Smith drew the distinction at the very start of economics, and it has been half-forgotten ever since. Every thing, he wrote, has two prices. There is its nominal price — the sum of money it fetches — and there is its real price, which is something else entirely: “the toil and trouble of acquiring it.” Money is only the veil; behind it lies the true cost, paid in effort and time. “Labour,” he concluded, “is the real measure of the exchangeable value of all commodities” — and, he added, the first one: it was not by gold or silver but by labour that all the wealth of the world was originally purchased.¹1Adam Smith, Wealth of Nations (1776), Bk I ch. 5, ‘Of the Real and Nominal Price of Commodities.’ Smith’s claim that labour determines value — the classical labour theory — was later displaced by the marginalist view that value is subjective. What survives, and is used here, is the milder and sturdier claim: that labour-time is a measure of value, a yardstick, whatever sets the value being measured.

A caution is owed at once, for Smith meant more than this and overreached. He thought labour not only measured value but created it — the ‘labour theory of value’ — and on that point the economists who followed corrected him: a thing’s worth, they showed, is set by desire and scarcity at the margin, not by the sweat in it, or a diamond would be cheaper than water. So let us keep only the sober half of Smith’s insight, which no correction has touched: that whatever fixes the value of a thing, the cost of it to you, the buyer, is measurable in your labour — in the portion of your working life you must surrender to have it. Labour need not be the source of value to be its truest ruler.

Here is what that ruler means for a person who works. Your wage is a rate of exchange — so much money for so much of your life — and, like any exchange rate, it runs both ways. It turns your hours into money; and it turns money, all money, back into hours. Read the second direction and every price in the world quietly changes its dress. The coat does not cost two hundred pounds; it costs, at your wage, a day and a half of your life. The car does not cost a year’s salary; it costs a year. The house costs a decade. This is the time-price of a thing — the hours of work it takes to buy it — and it is a truer figure than the money price, because money is a shifting yardstick (inflation stretches it, currencies shrink it) while an hour of a human life is, near enough, a constant thing, the same for the Babylonian and for us.²2The ‘time-price’ of a good — the hours of labour required to earn its purchase — strips away the drift of money and currency. It is, in Smith’s sense, money turned back into the toil it stands for: as he put it, what we buy with money is ‘purchased by labour’ as surely as what we make with our own hands; the money merely ‘saves us this toil.’

Once seen, it cannot be unseen, and it changes the question one asks of a price. The question is no longer “can I afford this?” — a question about the balance in an account — but “is this worth the hours of my life it will cost?” — a question about the life itself. Every purchase is the spending of a portion of one’s allotted time, converted into money for convenience and then converted back into goods. The wage is merely the rate at the window where the two currencies, money and life, are exchanged.

The real price of a thing is the part of your life it costs.

Hold this ruler against history and a remarkable thing appears — the great, under-told fact of the modern age. Measured in money, prices only ever seem to rise; measured in life, in the hours of work a thing costs, the material world has grown astonishingly, almost unbelievably cheaper. The economist William Nordhaus showed it with the oldest human want there is: light. He traced the labour-price of illumination down the centuries — the hours of work it took to buy a fixed quantity of light — and found a collapse beyond anything the money figures suggest.³3William Nordhaus, ‘Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not’ (1996). The labour to buy 1,000 lumen-hours fell from roughly 41 hours (a Babylonian oil lamp) to about 5 hours (1800), to 13 minutes (1900), to under a second today. His larger point: ordinary price and real-wage indices badly undercount such gains, because they cannot see a new good arrive. To light an evening by a Babylonian oil lamp cost something like forty hours of labour; by a tallow candle around 1800, some five hours; by a gas or kerosene lamp in 1900, about thirteen minutes; and today, by an electric bulb, a fraction of a second. An hour of work now buys roughly three hundred and fifty thousand times the light it bought in Babylon. The labour that once purchased a single hour of light will now purchase a lifetime of it.

And it is not only light. The same collapse, if less extreme, has overtaken nearly every made thing — food, cloth, books, sugar, glass, a mile of travel, a word sent across the world. Each costs a small fraction of the life it cost a century or two ago. This is the deep reason the modern person is rich in a way no king once was: not because the numbers in the account are larger, but because the hours behind each thing are so few. Read in the currency of life, the made world has been, quietly and continuously, marked down.

But the same ruler tells a second story, harder and stranger, and an honest measure must report both. Not everything has cheapened. Some of the things that matter most — a house, a year of schooling, a course of medical care, the minding of a child or an aged parent — cost, in many places, more hours of life than they did a generation ago, not fewer. The reason was named by the economist William Baumol and is half a paradox: these are the things whose making cannot be sped up.⁴4Baumol’s ‘cost disease’ (Baumol and Bowen, 1966; The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t, 2012): in labour-intensive sectors — care, teaching, the arts — productivity cannot rise much, yet wages must keep pace with the rest of the economy, so their cost climbs. It is a major cause, though not the only one; affluence and administrative growth also drive service prices up. A string quartet takes as many player-hours to perform today as it did in 1800; a nurse can tend only so many patients, a teacher teach only so many children, however clever the age becomes. Where the loom and the chip multiply what an hour of work can make, the bedside and the classroom cannot — and so, as wages rise across the whole economy, the cost of these unspeedable things rises with them, climbing in hours even as the made things fall.

This is the quiet arithmetic behind a feeling common in our time: that of being materially flooded and yet somehow pressed — surrounded by cheap abundance while the few things that anchor a life, a home and health and the raising of children, drift further out of reach. The made things grew cheap; the cared-for things, and the things there is only so much of, grew dear. An age can be, at once, the richest there has ever been in goods and the most anxious in the things that goods cannot be turned into.

The made things grew cheap. The cared-for things grew dear.

For all its power, the ruler measures only what it can reach, and an honest hand must mark where it stops. The time-price tells, better than any money figure, how dear the buyable world is in hours of life — but much of a life is not buyable. It says nothing of the hours themselves once they are free: of leisure, of safety, of clean air and quiet, of love and meaning, none of which has a price in labour because none is for sale.⁵5The time-price reaches only what is bought and sold; it is mute on leisure, safety, environment, and meaning, and reports averages that can hide wide differences by income. A measure may be illuminating without being complete — the caution Kuznets pressed on national income applies no less here. And it speaks always in averages, which can lie by soothing: a thing whose time-price has fallen for the comfortable may have risen for the poor, who earn fewer pounds an hour and so pay more of their life for the same loaf. Nordhaus reached for light precisely because he distrusted the official measures; the lesson holds against his own. Every measure, the time-price included, is a lamp that lights one room and leaves the rest of the house dark.

So the measure is to be trusted as far as it sees and no further — which is far enough to overturn the gloomy folk-conviction that everything only ever gets worse, and not so far as to license the cheerful one that everything only ever gets better. It says, soberly, that the world of made things has grown astonishingly cheap in the one currency that counts, the hours of a life; that some of the dearest things have moved the other way; and that the truest material verdict on an age is got not by counting its money but by asking how much of a life its goods cost — a question money was invented, in part, to help us forget.

There is a word for the thing in which all other values are reckoned. Economists call it the numéraire — the unit of account, the one good against which every price is expressed, its own value taken as the fixed point so that all the rest can be measured from it.⁶6In the pure theory of exchange (Léon Walras and after), the numéraire is the commodity chosen as the unit of account, its own price set to one, in terms of which all other prices are stated. Money is the numéraire of daily life; the deeper one, Smith’s ‘first price,’ is labour — the toil for which money is only a receipt. In daily life money plays this part, and plays it well enough that we forget it is itself only a stand-in. For money’s value floats; it is measured against other things as surely as they are measured against it. The deeper numéraire, the one that does not float because it is the substance and not the symbol, is the one Smith pointed to at the beginning: human labour, human time. It is the measure beneath the measure — the unit in which money itself is finally denominated, for a pound is worth nothing except the minutes of living it can command or save.

And this is the name the folio has carried, plate upon plate, unexplained, at its head. For the wage is exactly where the two currencies meet — the rate at which a portion of a human life is turned into the price of everything else, and everything else into a portion of a human life. The wage is the numéraire made flesh. These pages have watched it measure value and sell time, stake trust and compel obedience, settle by power and bound the world of work and refuse, out of dignity, to fall; and under every one of those offices lies this last and first one — that the wage is the place where money is at length translated back into what it always stood for, which is a stretch of someone’s irreplaceable life. Everything you have ever bought, you bought with that.