(3) But by 'labour' Ricardo did not mean only that labour which has been immediately occupied upon the manufacture of a particular article. The term covers all the labour that has indirectly as well as directly contributed to the product, including all that has been devoted to the creation of the capital with which the process may have been assisted.
Their comparative prices [in the case of the beaver and deer] would be in proportion to the actual labour bestowed, both on the formation of the capital and on the destruction of the animals.[2]
If we suppose the occupations of the society extended... still the same principle would hold true, that the exchangeable value of the commodities produced would be in proportion to the labour bestowed on their production; not on their immediate production only, but on all those implements or machines required to give effect to the ... labour.... [3]
The clearest exposition of this view is to be found in James Mill, who sums it up in the two propositions that 'Capital is hoarded labour.,' and that 'Profits are simply remuneration for labour.'[4] His illustration from machinery is especially significant, as showing the way in which the doctrines of the Ricardian school suggested the later Socialist formulation:
A man has a machine, the produce of 100 days' labour. In applying it, the owner undoubtedly applies labour, though in a secondary sense, by applying that which could not have been had but through the medium of labour. This machine, let us suppose, is calculated to last exactly ten years. One-tenth of the fruits of 100 days' labour is thus expended every year; which is the same thing in the view of cost and value, as saying that 10 days' labour have been expended. The owner is to be paid for the 100 days' labour which the machine cost him, at the rate of so much per annum, that is by an annuity for ten years, equivalent to the original value of the machine.[5]
Marx says exactly the same; though his application is different.
