CHAPTER 15 
DirrereNCcES IN LaBor Costs! 
TuE principle of comparative advantage or comparative costs 
has bulked large in our theoretical analysis. What confirmation 
or verification of its significance is supplied by the facts? 
In one respect we are much hampered in the search for pertinent 
facts. The data on costs which are most abundant are quite 
inapplicable. They are accountant’s figures; that is, figures on 
money costs, on expenses of production, supply prices. The 
principle of comparative advantage or comparative costs, however, 
has regard to the quantities of labor needed for a given physical 
output. Labor cost in this sense is a matter of no concern at all 
to the accountant, and ordinarily of equally small concern in the 
business man’s reckoning of profit and loss. It is “labor cost” 
in quite a different sense from that which is sought in business 
figuring. What the business man and his accountants mean by 
labor cost would be better described for our purposes by such a 
term as “wages expense’’ — the amount of money paid out in 
wages for a given unit of product. 
The labor costs of the accountant and business man (wages 
expenses), it is true, might conceivably be converted into labor 
costs of the kind significant for the present inquiries. They could 
be so converted by reckoning also the money rates of wages per 
hour or per day. If these money rates of wages are known, the 
conversion would seem to be no troublesome matter. Yet in 
fact it is troublesome. The instances are rare in which the two 
sets of figures needed — wages expenses per unit of product on the 
one hand, wages paid per unit of labor (hour or day) on the other 
1 The substance of this chapter appeared as an article in the Quarterly Journal 
of Economics for November, 1924 (Vol. 39). 
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