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nomical Currency,' were in every respect worthy of his previous reputation. His plan for making bank notes payable in bullion, a plan which would afford all the security of a gold currency, without any of the expenses of coinage, and without the loss arising from the tear and wear of the coins themselves, is at once happy, original, and ingenious. At present, however, we cannot enter upon any inquiry into its merits, but must confine ourselves to the work before us,-in which Mr Ricardo has examined the fundamental principles on which the science of Political Economy rests, and in which, as it appears to us, he has done more for its improvement than any other writer, with perhaps the single exception of Dr Smith.

A very great, if not the principal source, of the errors into which political economists have been betrayed, appears to have originated in their confounding together the Natural and the Market price of commodities. But the laws by which these prices are regulated, are essentially different. Should the supply of any necessary or desirable commodity be increased beyond the effectual demand, or the demand of those who are able and willing to pay the expense of its production, including in that expense the ordinary rate of profit on the capital employed, its price will decline. Those that are inclined to part with this commodity being more numerous than those that are inclined to purchase it at its full value; the former, to be able to dispose of the whole quantity, and in order to save the expense and loss attending the storing it up, will, by reducing its price, endeavour to engage a greater portion of the community to become purchasers. This is the only way in which, in ordinary cases, an excess of produce can be disposed of: and, besides, there are very many commodities of such a nature as will not admit of their being warehoused for any considerable period, and which must be sold for whatever they will bring. In almost every case, too, it will be found more advantageous for the holders of goods to reduce their price, and thereby obtain a ready market for the whole quantity, than, in the expectation of ultimately selling them at a higher price, to incur the expense of keeping them on hand, and to be prevented from making use of their capital.

In the same way, when the supply of any commodity falls short of the quantity usually demanded, the competition on the part of the buyers becomes greater than that on the part of the sellers, and an increase of its ordinary price is the consequence. When the deficient commodity happens to be a necessary of life, or in very great request, its price, should the deficiency be considerable, will be very much increased. Men cannot give

up necessaries; and are very reluctant to give up those luxuries to which they have been accustomed. But whatever may be their efforts to procure equal quantities in a season of scarcity as in a season of plenty, it is plain that they cannot all be successful; and that the producers of such commodities will always raise their price to a par with the exertions of the consumers to acquire them. Should the corn crop be considerably deficient, we might offer 120s. or 160s. for a quarter of wheat, which might previously have been purchased for 80s.; but unless we could thereby increase the supply, those consumers who could with difficulty afford to pay this high price, or who could not afford it at all, would be compelled to diminish their consumption.

These principles, we believe, are now very generally admitted; and some apology might be necessary for having stated them so much at large, if the error which we wish to expose did not consist in their general misapplication: For though it is perfectly correct to say, in reference to periods of short duration, that the 'exchangeable value of a commodity increases directly as the de'mand, and inversely as the supply, and vice versa;' nothing can be more incorrect than to extend this reasoning, as many political economists have done, to periods of unlimited duration. It is the cost of production, which is the permanent and ultimate regulator of the exchangeable value of every commodity. The occasional variations, arising from an excess or deficiency of supply, or from a variation in the demand, are mere temporary oscillations on one side or the other of this given quantity. It is but seldom, indeed, that the market price and the real price of a commodity entirely correspond; but, except in cases of monopoly, the one can never permanently continue either much above or much below the other. Should the market price of hats, for example, either from the circumstance of an excessive supply, or of a diminished consumption, be reduced considerably below their real price, or that price which is required to pay the expense of their production, capital would be transferred from the manufacture of hats to some other employment; as there can be no reason why the hatter should rest satisfied with less than the ordinary rate of profit. And, on the other hand, if the market price of hats had been elevated above their real price, capital would have flowed into that department of industry; and competition would very soon have reduced their price to its natural level, or to that sum which would cover the expense of produc tion, including in that expense the ordinary rate of profit on the capital employed in the manufacture.

This is a principle of the greatest importance, and which ought never to be lost sight of. When a fall takes place in the market

price of any commodity, we can never know whether that fall is really advantageous, or whether a part of the wealth of the producers has not been gratuitously transferred to the consumers, unless we are at the same time informed, whether the cost of production has been diminished. If this has been the case, the fall of price will be but if this has not been the case, if permanent; the expense production continues the same, prices must very soon rise to their former level. It is the same with a rise of prices. No rise can continue, except where the cost of production has been proportionably increased. If that cost has remained stationary, or has not increased in a corresponding ratio, prices will decline as soon as the causes of temporary enhancement are removed.

The comparative values of gold and silver in the markets of Europe, are at present in the proportion of about 15 to 1. This is not, however, a consequence, as is very generally supposed, of the supply of gold being less, and the demand for it greater than for silver. It arises solely from the comparative difficulty of its production. If the expenses of producing equal quantities of gold and silver were equal, their average market prices would also be equal. Although the demand for one of these metals should permanently be greater than for the other, that circumstance would make no difference whatever on their relative values. It would only, by attracting a greater portion of capital to the producing of the metal which was most in demand, proportion the supply to the consumption; but, as it would neither increase nor diminish the cost of its production, it could not exercise any lasting influence on its price. The influx of the precious metals into Europe, subsequent to the discovery of America, is estimated to have lowered their value to about onefourth part of what they had formerly possessed. But the continued depression of the value of gold and silver since that epoch, has not been a consequence of the increase of their quantity, but of the comparative facility with which the mines of Mexico and Peru are worked. Had the expense of extracting gold and silver from them been as great as the expense of their extraction from the mines of Europe and Asia, the fall in the value of the precious metals, posterior to the discovery of America, would have been but temporary; and, long ere now, unless the expense of mining had been reduced, they would have recovered their former value.

It would be easy to extend these remarks; but we have already said enough to explain our meaning: And shall now direct our attention to the inquiry with which Mr Ricardo commences his work; and endeavour to determine the circumstances which regulate the cost of the production of a commodity,

and the elements which enter into its real price. This is, of all others, the most important, as it is the most radical inquiry in the whole science of political economy; and, without possessing accurate notions on this subject, it is impossible to advance a single step without falling into errors.

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Dr Smith was of opinion, that, in that early and rude state of society, which precedes both the accumulation of stock, and the appropriation of land, the proportion between the quantities of Labour necessary for acquiring different objects, was the only circumstance which could afford any rule for exchanging them for one another. If, among a nation of hunters," he observes, it usually costs twice the labour to kill a beaver which ' 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. In this state of things, the whole produce of labour belongs to the labourer; and the quantity of labour 'commonly employed in acquiring or producing any commodity, is the only circumstance which can regulate the quantity of labour which it ought commonly to purchase, command, or exchange for. ' *

As soon, however, as capital had been accumulated, and as soon as a rent was paid for land, Dr Smith, † and with him,

* Wealth of Nations, vol. 1. p. 70.

+ In this state of things, the whole produce of labour does not always belong to the labourer. He must, in most cases, share it with the owner of the stock which employs him. Neither is the quantity of labour commonly employed in acquiring or producing any commodity, the only circumstance which can regulate the quantity which it ought commonly to purchase, command, or exchange for. An additional quantity, it is evident, must be due for the profits of the stock which advanced the wages, and furnished the materials, for that labour.

As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the license to gather them; and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land; and, in the price of the greater part of commodities, makes a third component part.' Wealth of Nations, vol. 1. p. 74.

every other political economist down to Mr Ricardo, were of opinion, that the circumstances which, in a rude state of society, had determined the exchangeable value of commodities, would be altered. They considered the profits of stock, and the rent of land, as then entering as component parts into price; and they therefore held, that the real price of commodities, or the cost of their production, would be increased by every increase in the ordinary rate of profits, in the rate of wages, and in the rent of land.

Mr Ricardo, however, is of a very different opinion. He considers that the accumulation of capital, and the payment of rent, have no effect whatever in increasing the real price of commodities; and that, in every case, the exchangeable value of such as can be increased in quantity by the exertion of human industry, and, on the production of which, competition operates without restraint, can only be augmented by an augmentation of the quantity of labour necessarily required to bring them to market.

Mr Ricardo has illustrated and supported this new and important doctrine with extraordinary talent and ingenuity, and in a manner which is completely conclusive as to its accuracy. Perhaps, however, he has given too mathematical a cast to his reasoning, to make it perfectly intelligible to the generality of readers; and, therefore, in the following observations, we shall endeavour, though we are fully aware of the difficulty of the task, to demonstrate the truth of this theory in a somewhat more familiar and simple manner; referring such of our readers as wish for a full and satisfactory exposition of the principles on which it rests, and of the various important consequences to which it leads, to Mr Ricardo's own work.

If, then, to revert to the example given by Dr Smith, we suppose the huntsmen of the deer and the beaver to have been employed by two capitalists-and that they were paid a certain rate of wages for their labour-still the one beaver would have exchanged for the two deer, exactly in the same manner as when the hunters, instead of being employed for another, carried on their operations on their own account. It is of no consequence, in reference to this conclusion, that the one species of labour may be supposed to require greater skill and dexterity, or to be more severe, and therefore better paid than the other. These circumstances would be taken into account when the huntsmen were independent, as well as after they had been hired. The labour of one hour at some difficult and nice species of work, may be often of the va lue of a day, or two days' labour, at another and ruder species;

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