at home, may be elevated to the highest point to which the competition of the buyers can raise it; and may, consequently, amount to five, ten, or twenty times the sum it would amount to, were competition permitted to operate on their production and sale. The will and the 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, the supply of which cannot be increased by means 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 varieties of wine produced in limited quantities on soils of a particular quality and exposure, and a few other commodities, belong to this class. As their supply cannot be increased, their price varies as the demand, and is independent on any other circumstance.

But with these exceptions, which, when compared to the mass of commodities, are of no great importance, 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 places in the market price of a commodity, we cannot say whether it 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 be equally diminished. If this be the case, the fall of price will not be disadvantageous to the producers, and will be permanent; but if this be not the case -if the cost of production continue the same, the fall must be injurious to the producers, and prices will, in consequence, speedily regain their former level. In like manner, no rise of prices can be permanent, unless the cost of production be 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.

CHAPTER III.

Influence of Mercantile Speculations on Price-Difference between Speculation and Gambling —Speculations in Corn beneficial to the Public, but dangerous to the Dealers — Imitative Speculation— Influence of Knowledge on Speculation.

THE proposition so universally assented to, that market prices depend upon the proportion which the supply of commodities bears to the demand, would be more accurate were it expressed with some modifications. It rarely happens that either the actual supply of any species of produce in extensive demand, or the intensity of that demand, can be exactly measured. Every transaction in which produce is bought that it may be afterwards sold, is, in fact, a speculation. The buyer anticipates that the demand for the article he has purchased will be such, at some future period, either more or less distant, that he will be able to dispose of it with a profit; and the success of the speculation depends, it is evident, on the skill with which he has estimated the circumstances that will determine the future price of the commodity. It follows, therefore, that in all highly commercial countries, where merchants are possessed of large capitals, and where they are left to be guided in the use of them by their own discretion and foresight, the prices of commodities will frequently be very much influenced, not merely by the actual occurrence of changes in the accustomed relation of the supply and demand, but by the anticipation of such changes. It is the business of the merchant to acquaint himself with every circumstance affecting the particular description of commodities in which he deals. He endeavours to obtain, by means of an extensive correspondence, the earliest and most authentic information with respect to every thing that may affect their supply or

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demand, or the cost of their production and if he learned that the supply of an article had failed, or that, owing to changes of fashion, or to the opening of new channels of commerce, the demand for it had been increased, he would most likely be disposed to become a buyer, in anticipation of profiting by the rise of price, which, under the circumstances, could hardly fail of taking place; or if he were a holder of the article, he would refuse to part with it unless for a higher price than he would previously have accepted. If the intelligence received by the merchant were of a contrary description - if, for example, he learned that the article was now produced with greater facility, or that there was a falling off in the demand for it, caused by a change of fashion, or by the shutting up of some of the markets to which it had previously been admitted—he would act differently in this case he would anticipate a fall of prices, and would either decline purchasing the article, except at a reduced rate, or endeavour to get rid of it, supposing him to be a holder, by offering it at a lower price. In consequence of these operations, the prices of commodities, in different places and periods, are brought comparatively near to equality. All abrupt transitions, from scarcity to abundance, and from abundance to scarcity, are avoided: an excess in one case is made to balance a deficiency in another, and the supply is distributed with a degree of steadiness and regularity that could hardly have been deemed attainable.

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It is obvious, from these statements, that those who indiscriminately condemn all sorts of speculative engagements, have never reflected on the circumstances incident to the prosecution of every undertaking. In truth and reality, they are all speculations. Their undertakers must look forward to periods more or less distant, and their success depends entirely on the sagacity with which they have estimated the probability of certain events occurring, and the influence which they have ascribed to them. Speculation is, therefore, really only another name for foresight;

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and though fortunes have sometimes been made by a lucky hit, the character of a successful speculator is, in the vast majority of instances, due to him only who has skilfully devised the means of effecting the end he had in view, and who has outstripped his competitors in the judgment with which he has looked into futurity, and appreciated the operation of causes producing distant effects. Even in those businesses, such as agriculture and manufactures, that are apparently the most secure, there is, and must be, a great deal of speculation. Those engaged in the former have to encounter variations of seasons, while those engaged in the latter have to encounter variations of fashion; and each is, besides, liable to be affected by legislative enactments, by discoveries in the arts, and by an endless variety of circumstances which it is always very difficult, and sometimes quite impossible, to foresee. On the whole, indeed, the gains of the undertakers are so adjusted, that they obtain, at an average, the common and ordinary rate of profit. But the inequality in the gains of individuals is most commonly very great; and while the superior tact, industry, or good fortune of some enable them to realise large fortunes, the want of discernment, the less vigilant attention, or the bad fortune of others, frequently reduce them from the situation of capitalists to that of labourers.1

It is by no means an easy task to draw a distinct line of

1 The necessity of speculation in the ordinary affairs of life has been well illustrated by Seneca: "Huic respondebimus, nunquam expectare nos certissimam rerum comprehensionem: quoniam in arduo est veri exploratio; sed eâ ire quà ducit veri similitudo. Omne hâc viâ procedit officium. Sic serimus, sic navigamus, sic militamus, sic uxores ducimus, sic liberos tollimus; quanquam omnium horum incertus sit eventus. Ad ea accedimus, de quibus benè sperandum esse credimus. Quis enim pollicetur serenti proventum, naviganti portum, militanti victoriam, marito pudicam uxorem, patri pios liberos? Sequimur quà ratio, non quà veritas trahit. Expecta, ut nisi benè cessurâ non facias, et nisi compertâ veritate nihil moveris, relicto omni actu, vita consistit. Dum verisimilia me in hoc aut illud impellant, non verebor beneficium, dare ei, quem verisimile erit gratum esse."— De Benefic., lib. iv. cap. 33.

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demarcation between speculation and gambling. The truth is, that they run into one another by almost imperceptible degrees. Practically, however, that may be termed a safe, and, therefore, a legitimate speculation, in which, on a fair and careful estimate of the favourable and unfavourable contingencies, the former preponderate; while that may termed a gambling adventure in which the contingencies are unknown, or in which they are nearly equal. Suppose a race-horse and a dray-horse were matched to run against each other; an individual who betted that the race-horse would win, could not be deemed a gambler; for he, it is plain, would encounter little or no risk. But if two racehorses, each in high estimation, were matched against each other, the risk would become very great; and the success of either would, most likely, depend on so many accidental and almost inappreciable circumstances, that those who betted on the event might fairly be denominated gamblers.

Among the various speculations carried on by merchants, there are few that have exposed them more to the public odium, while, at the same time, there are few more really beneficial, than those of the dealers in corn. Not only do they distribute the produce of the harvest equally throughout the country, according to the wants of different districts, but they manage their operations so as to reserve a portion of the surplus produce of plentiful years as a resource against future emergencies; and when a scarcity occurs, they distribute its pressure equally over the year, and prevent society from ever actually feeling the extremity of want. We shall briefly endeavour to show how speculation produces these effects.

Were the harvests always equally productive, nothing would be gained by storing up supplies of corn; and all that would be necessary would be to distribute the crop equally throughout the country, and throughout the year. But such is not the order of nature. The variations in the aggregate produce of a country in different seasons, though