average prices must continue stationary, or about which market prices must oscillate, until the cost of production be increased or diminished. If any great discovery were made in agriculture-such a discovery, for instance, as would reduce the cost of cultivation a half, the price of agricultural produce would fall in the same proportion, and would continue to sell at that reduced rate until the increase of population had forced recourse to soils of a decreasing degree of fertility. Whenever this took place, prices would again rise. Why is the price of corn almost invariably higher in this country than in France? Is it because we have a greater demand for it, or because of the greater cost of production in this country ?

A pound weight of gold is at present worth about fifteen pounds of silver. It cannot, however, be said that this is a consequence of the demand for gold being greater than the demand for silver, for the reverse is the fact. Neither can it be said to be a consequence of an absolute scarcity of gold, for those who choose to pay a sufficient price for it may obtain it in any quantity they please. The cause of this difference in the price of the two metals consists entirely in the circumstance of its costing about fifteen times as much to produce a pound of gold as to produce a pound of silver. That this is really the case, is plain from the admitted fact, that the producers of gold do not gain any greater profit than the producers of silver, iron, lead, or any other metal. They have no monopoly of its production. Every individual who chooses may send capital to Brazil, and become a producer of gold; and wherever this is the case, the principle of competition will always force the product to be sold at such a price as will just pay the expenses of its production and no more. Were a gold mine discovered of equal productiveness with the silver mines, the production of gold would immediately become the most advantageous of all businesses; an immense supply of that metal would, in consequence, be thrown upon the market, and its price would, in a very short period, be reduced to the same level as silver.

If a set of men were brought together from various countries, ignorant of each other's wants, and of the labour and expense required to produce the commodities which we may suppose each of them to possess, these commodities would be bought and sold according to the relative wants and fancies of the parties. Under such circumstances, a pound of gold might be given for a pound of iron, and a gallon of wine for a gallon of small beer. As soon, however, as a system of commercial intercourse has been established, and as the wants of society and the powers of production come to be well and generally known, an end is put to this arbitrary method of bartering. Thousands of sellers then enter the market. But when such is the case, it is no longer possible to sell a pound of iron for a pound of gold; and why?-because the producers of iron will undersell each other until they have, by their

competition, reduced its exchangeable value, or price, to the level of the cost of its production. This is, in every civilized society, the pivot on which exchangeable value always turns. It is usual for voyagers, who touch at countries occupied by savages, to obtain commodities from them in exchange for toys or trinkets, which it cost infinitely less to produce; but in all civilized and commercial countries, the proportion in which, generally speaking, one commodity exchanges for another, will depend exclusively on the comparative cost of their production.

Thus, then, it appears, that no variation of demand, if it be unaccompanied by a variation in the cost of production, can have any lasting influence on price. If the cost of production 'be diminished, price will be equally diminished, though the demand should be increased to any conceivable extent. If the cost of production be increased, price will be equally increased, though the demand should sink to the lowest possible limit.

It must always be 'remembered, that this reasoning applies to the case of those commodities only on which competition is allowed to operate without restraint, and whose quantity can be indefinitely increased by the application of fresh capital and industry to their production. But there are circumstances under which the supply of commodities is strictly limited; and when such is the case, their price is no longer determined by the cost of their production, but by the degree of their real or supposed utility, compared with the means and necessities of the buyers. In a desert or a besieged city, a pound of bread might be worth more than a pound of gold.* And though artificial monopolies are.rarely carried to so very oppressive a height, the same principle holds with respect to the value of all commodities produced under them. When a particular individual, or class of individuals, obtains the exclusive privilege of manufacturing certain species of goods, the operation of the principle of competition is suspended with respect to them, and their price must, therefore, entirely depend on the proportion in which they are brought to market compared with the demand. If monopolists supplied the market liberally, or kept it always as fully stocked with commodities as it would have been had there been no monopoly, the commodities produced by them would sell at their natural price, and the monopoly would have no farther disadvantage than the exclusion of the public from an employment which every one ought to have the power to carry on. In point of fact, however, the market is seldom or never fully supplied with commodities pro

* Pliny, (Hist. Nat. lib. 8. cap. 57.), and Valerius Maximus, (lib. 7. cap. 6.), relate that, during the siege of Casilinum by Hannibal, the scarcity of provisions became so extreme, that a rat was sold for 200 denarii! They add, that the seller had the worst of the bargain, having died of hunger, while the rat was the means of preserving the life of the buyer. Avaro enim, says Valerius, fame consumpto, manubris sordium suarum frui non licuit; æqui animi vir, ad salutarem impensam faciendam; care quidem, verum necessarie, comparato cibo vixit.

duced under a monopoly. All classes of producers endeavour to procure the highest possible price for their commodities; and those who are protected, by means of a monopoly, against the risk of being undersold by others, either keep the market understocked, or supply it with inferior articles, or both. Under such circumstances, the price of commodities, if they cannot be easily smuggled from abroad, or clandestinely produced at home, is elevated to the highest point to which the competition of the buyers can raise it; and may, in consequence, amount to five, ten, or twenty times the sum it would amount to were competition permitted to operate in their production and sale. The will and power of the purchasers to offer a high price forms the only limit to the rapacity of monopolists.

Besides the commodities produced under artificial monopolies, there is another class whose quantity cannot be increased by the operation of human industry, and whose price is not, therefore, dependent on the cost of their production. Ancient statues, vases, and gems, the pictures of the great masters, some species of wines which can be produced in limited quantities only from soils of a particular quality and exposure, and a few other commodities, belong to this class. As their supply cannot be increased, their price must vary inversely as the demand, and is totally unaffected by any other circumstance.

But with these exceptions, which, when compared to the mass of commodities, are but few and unimportant, wherever industry is unrestricted and competition allowed to operate, the average price of the various products of art and industry, always coincides with the cost of their production. When a fall takes place in the market price of any commodity, we cannot say whether that fall is really advantageous, or whether a part of the wealth of the producers be not gratuitously transferred to the consumers, until we learn whether the cost of production has been equally diminished. If this is the case, the fall of price will not have been disadvantageous to the producers, and will be permanent; but if this has not been the case-if the cost of production continues the same, the fall must have been injurious to the producers, and prices will, in consequence, speedily attain their former level. In like manner, no rise of prices can be permanent, except when the cost of production has been proportionally increased. If that cost has remained stationary, or has not increased in a corresponding ratio, prices will decline as soon as the ephemeral causes of enhancement have disappeared.

The extreme importance of having correct opinions respecting the regulating principle of price, and the discordant and erroneous opinions that are still so exceedingly prevalent with regard to it, will, I hope, be deemed a sufficient apology for the length of the previous remarks, and for the insertion of the following paragraph from the Histoire de

la Monnoie of the Marquis Garnier, in which the doctrine now laid down is enforced with equal ability and eloquence :

'Mais les producteurs tendent continuellement à régler la quantité des productions sur la somme des demandes ; ils ne resteront pas audessous de ce point, sans être tentés d'accroître la masse de leurs produits; et ils ne peuvent le dépasser sans s'exposer à perdre. Ces deux quantités, celle des produits et celle des demandes, s'efforcent donc à se mettre en équilibre l'une avec l'autre. Il existe donc un point de repos vers lequel elles gravitent chacune de son côté ; un point qui est leur niveau, et c'est ce point qui constitue le prix naturel de la chose vénale. Quelle est la limite au-delà de laquelle le producteur ne peut porter la quantité de ses produits? C'est le prix naturel; car, s'il ne peut obtenir ce prix pour tout son produit, il sera en perte. Quelle est la borne des demandes du consommateur? C'est le prix naturel; car il ne veut pas donner plus que l'équivalent de ce qu'il reçoit. Si, par une découverte, ou par un perfectionnement de l'industrie, le producteur est mis à même d'établir l'article sur lequel il s'exerce à moins de temps et de dépense, alors le prix naturel baissera, mais aussi la somme des demandes accroîtra dans une proportion pareille, parce que plus de consommateurs seront en état de payer ce prix naturel, moins élevé que l'ancien. Le prix naturel sera toujours, pour chaque chose vénale, la limite commune au-delà de laquelle la somme des demandes de cette chose el la quantité de sa production ne devront plus faire de progrès. Quand le prix courant est le prix naturel, le producteur et le consommateur se donnent réciproquement l'équivalent de ce qu'ils reçoivent. Quand le prix courant s'écarte du prix naturel, ou c'est la consommation qui souffre au profit de la production, ou c'est la production qui souffre au profit de la consommation. Cet état de souffrance ne peut durer, et de-là procèdent les variations du prix courant. Ces variations, que Smith a expliquées et analysées avec une si parafaite lucidité, ne sont autre chose que les efforts pour revenir au prix naturel. Tenter d'expliquer ces variations, sans reconnaître l'existence d'un prix naturel, ce serait vouloir expliquer les oscillations du pendule sans convenir de sa tendance vers un centre de gravitation; ce serait supposer un effort sans but et sans mobile; ce serait admettre le mouvement et nier le repos; enfin, en voyant les phénomènes du cours des fluides et de l'equilibre des solides, ce serait contester les lois du niveau et de la pesanteur. Si les choses vénales n'ont point de prix naturel, alors les mouvemens de la circulation seront dirigés par une force aveugle et inconnue; les prix moyens ne seront plus que le résultat de chances purement fortuites; il n'y aura plus d'équivalent réel; les valeurs n'auront plus de mesure naturelle; l'économie politique ne pourra plus aspirer à être au rang des sciences, puisqu'elle manquera du caractère essentiel qui les constitue telles, et que les faits dont elle traite ne seront plus fondés sur les lois immuables de la nature.' (V. i. Intro. p. 62.)

Having thus shown that the cost of production is the sole regulating principle of exchangeable value and price, I shall now proceed to investigate the elements which enter into and constitute this cost.*

SECTION IV.-Commodities belong, in the earliest stage of society, exclusively to the Labourers-Quantity of Labour required for their Production, the only principle which then determines their Exchangeable Value.

We have previously seen, that there is no period in the progress of society, from its earliest infancy to its highest pitch of civilisation and refinement, in which any individual, who does not belong to some one or other of the classes of labourers, landlords, or capitalists, ever participates directly in the produce of industry. But there are states of society in which that produce belongs exclusively to one only of these classes; and others in which it belongs to two of them, to the exclusion of the third. The reason is, that in the earliest stages of society, there is little or no capital accumulated, and the distinction between labourers and capitalists is, in consequence, unknown; and that, in all newly settled and unappropriated countries, abundance of fertile land may be obtained without paying any rent to a landlord.

In that remote period preceding the establishment of a right of property in land, and the accumulation of capital or stock-when men roamed, without any settled habitations, over the surface of the earth, and existed by means of that labour only that was required to appropriate the spontaneous productions of the soil, the whole produce of labour belonged to the labourer, and the quantity of labour expended in procuring different articles, must plainly have formed the only standard by which their relative worth, or exchangeable value, could be estimated. 'If among a nation of hunters,' says Adam Smith, ‘it usually costs twice the labour to kill a beaver that it does to kill a deer, one beaver would naturally exchange for or be worth two deer. It is natural, that what is usually the produce of two days' or two hours' labour, should be worth double of what is usually the produce of one day's or one hour's labour.

'If the one species of labour should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labour in the one way, frequently exchanges for that of two hours' labour in the other.

'Or if the one species of labour requires an uncommon degree of dexterity and ingenuity, the esteem which men have for such talents

*Mr. Took has, in his excellent work On High and Low Prices,-a work replete with curious and important information,-given a very complete analysis and exposition of the influence of variations in the demand for and supply of commodities on their price-whether these variations arise from changes in the seasons or in the value of money, from a spirit of speculation, from the caprices of fashion, the influence of war, &c,