Samuel Bailey and the Subversion of the Classical Theory of Value: A Note

This note deals with the rôle Bailey played in the subversion of the Classical theory of value. It is argued that there was one crucial element which he contributed to this development, viz. the distinction of commodities into three classes, each having its own law of value: the identification of an intermediate class, made of ‘Commodities, in the production of which some persons possess greater facilities than the rest of the community, and which therefore the competition of the latter cannot increase, except at a greater cost’, paved the way to the conception (which however Bailey did not achieve) that there may be a functional relationship between unit cost of production and quantity produced; this would eliminate a major stumbling block which the condition price equal cost constituted for a supply and demand theory of value: for demand to have an influence on price determination, unit costs of production cannot be fixed, but must vary with the quantity produced.