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Chapter VI.: ON THE DEFINITION AND APPLICATION OF TERMS BY MR. MILL, IN HIS “ELEMENTS OF POLITICAL ECONOMY.” - Thomas Robert Malthus, Definitions in Political Economy 
Definitions in Political Economy (London: John Murray, 1827).
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ON THE DEFINITION AND APPLICATION OF TERMS BY MR. MILL, IN HIS “ELEMENTS OF POLITICAL ECONOMY.”
Mr. Mill, in his Elements of Political Economy, professedly lays no claim to discovery. His main object seems to have been to give the substance of Mr. Ricardo’s work in a more concentrated form, and with a better arrangement; and this object he has accomplished. In the definition and application of his terms he nearly follows Mr. Ricardo; but it may be useful to notice a few cases, where he has either made the errors of Mr. Ricardo’s definitions more prominent, or has altered without improving them.
On his first approach to the question of value, he describes the causes which determine it much more inaccurately than Mr. Ricardo. He says, that “the value of commodities is determined by the quantity of capital and labour necessary to produce them.”* But this is obviously untrue and quite inconsistent with what he says afterwards respecting the regulator of value. It may be correct, and I fully believe it is, to estimate the value of labour by its quantity; but how can we estimate the value of different kinds of machinery, or different kinds of raw materials by their quantity? The quantity of raw material contained in a coarse and thick piece of calico, as compared with a very fine and thin piece of muslin, worked up by the same quantity of labour, may be four or five times greater, while the value of it, and the degree in which it affects the value of the commodity, may be actually less. We cannot, in short, measure the value of any product of labour by its bulk or quantity; and it must therefore be essentially incorrect to say, that the value of commodities is determined by the quantity of capital and labour necessary to produce them.
Proceeding afterwards to investigate more minutely what it is, which in the last resort determines the proportion in which commodities exchange for one another, he observes, that “as all capital consists in commodities, it follows, of course, that the first capital must have been the result of pure labour. The first commodities could not be made by any commodities existing before them. But if the first commodities, and of course the first capital, were the result of pure labour, the value of this capital, the quantity of other commodities for which it would exchange, must have been estimated by labour. This is an immediate consequence of the proposition which we have just established, that where labour was the sole instrument of production, exchangeable value was determined by the quantity of labour which the production of the commodity required. If this be established, it is a necessary consequence that the exchangeable value of all commodities is determined by quantity of labour.”*
Now this necessary consequence, which is here so confidently announced, does not appear to me to follow either from this statement, or from any thing which is said subsequently. Allowing that the first commodities, if completed and brought into use immediately, might be the result of pure labour, and that their value would therefore be determined by the quantity of that labour; yet it is quite impossible that such commodities should be employed as capital to assist in the production of other commodities, without the capitalist being deprived of the use of his advances for a certain period, and requiring a remuneration in the shape of profits.
In the early periods of society, on account of the comparative scarcity of these advances of labour, this remuneration would be high, and would affect the value of such commodities to a considerable degree, owing to the high rate of profits. In the more advanced stages of society, the value of capital and commodities is largely affected by profits, on account of the greatly increased quantity of fixed capital employed, and the greater length of time for which much of the circulating capital is advanced before the capitalist is repaid by the returns. In both cases, the rate at which commodities exchange with each other, is essentially affected by the varying amount of profits. It is impossible, therefore, to agree with Mr. Mill, when he says, “It appears by the clearest evidence, that quantity of labour in the last resort determines the proportion in which commodities exchange for one another.”*
On the same grounds Mr. Mill is quite incorrect, in calling capital hoarded labour. It may, perhaps, be called hoarded labour and profits; but certainly not hoarded labour alone, unless we determine to call profits labour. This Mr. Mill himself could not but see; and consequently, in his second edition, he has deserted Mr. Ricardo, and boldly ventured to say, that “profits are in reality the measure of quantity of labour.”† But as this very peculiar and most unwarranted abuse of terms belongs, I believe, originally to Mr. Maculloch, it may be best to defer the more particular examination of it, till I come to consider the definitions and application of terms adopted by Mr. Maculloch.
In a work like that of Mr. Mill, which has so much the air of logical precision, one should have hoped and expected to find superior accuracy in the definitions, and great uniformity in the application of his terms, in whatever sense he might determine to use them; but in this the reader will be disappointed. It is difficult, for instance, to infer from the language of Mr. Mill, whether a commodity is to be considered as altering in its value in proportion to its costs of production, or in proportion to its power of commanding other commodities, and they are certainly not the same.
At the commmencement of his seventh section, of chap. iii., entitled, “What regulates the Value of Money,” he says,
“By the value of money is here to be understood the proportion in which it exchanges for other commodities, or the quantity of it which exchanges for a certain quantity of other things.”
This is, to be sure, a very lax description of the value of money, very inferior in point of accuracy, even to what would be understood by the general power of purchasing. What are the things a certain quantity of which is here alluded to? and if these things change in the costs of their production, will money be proportionally affected?
But we have a different and better description of value in the next section. It is there said, that “gold and silver are, in reality, commodities. They are commodities for the attainment of which labour and capital must be employed. It is cost of production which determines the value of these as of other ordinary productions.”*
Now, if cost of production determines the value of money, it follows that, while the cost of producing a given quantity of money remains the same, its value remains the same. But it is obvious that the value of money may remain the same in this sense of the term, while, owing to the alterations which may be taking place in the costs of producing the commodities alluded to, the quantity of other things for which it will exchange may be essentially different. Which of the two, then, is the true criterion of the value of money? It is surely most desirable that the student in political economy should not be left in the dark on this subject; yet Mr. Mill gives him no assistance; and he is left to decide between two very different meanings as well as he can.
But, perhaps, the most culpable confusion of terms which Mr. Mill has fallen into, is in relation to demand and supply; and as he has a more original and appropriate claim to this error than any other English writer, and its belief leads to very important consequences, the notice of it is particularly called for.
In the first place, no person can have turned his attention, in the slightest degree, to the language of political economy, either in conversation or books, without being fully aware that the term demand is used in two very distinct senses; one implying the quantity of the commodity consumed, and the other the amount of sacrifice which the purchasers are willing to make in order to obtain a given portion of it. In the former sense, an increase of demand is but very uncertainly connected with an increase of value, or a further encouragement to production, as in general the greatest increase of such kind of demand takes place in consequence of a very abundant supply and a great fall in value. It is the other sense alone to which we refer, when we speak of the demand compared with the supply as determining the values and prices of commodities; and in this latter sense of the term demand, which, perhaps, is in the most frequent use, an increase of supply is so far from increasing demand that it diminishes it, while a diminution of demand increases it.
Secondly, it has been generally agreed, that when the quantity of a commodity brought to market is neither more nor less than sufficient to supply all those who are able and willing to give the natural and necessary price for it, the demand may then, and then only, be said to be equal to the supply; because, if the quantity wanted by those who are able and willing to give the natural price exceed the supply, the demand is said to be greater than the supply, and the price rises above the ordinary costs of production; and if the quantity wanted by those who are able and willing to give the natural price fall short of the supply, the demand is said to be less than the supply, and the price falls below the ordinary costs of production. This is the language of Adam Smith, and of almost all writers on political economy, as well as the language of common conversation when such subjects are discussed. Indeed it is difficult to conceive in what other sense it could, with any propriety, be said, that the supply was equal to the demand, because in any other sense than this, the supply of a commodity might be said to be equal to the demand, whether it were selling at double or the half of its cost.
Thirdly, it must be allowed, that according to the best authorities in books and conversation, what is meant by the glut of a particular commodity is such an abundant supply of it compared with the demand as to make its price fall below the costs of production; and what is meant by a general glut, is such an abundance of a large mass of commodities of different kinds, as to make them all fall below the natural price, or the ordinary costs of production, without any proportionate rise of price in any other equally large mass of commodities.
With these preliminary definitions, we may proceed to examine some of the arguments by which Mr. Mill endeavours to show that demand and supply are always equal in the aggregate; that an over supply of some commodities must always be balanced by a proportionate under supply of others; and that, therefore, a general glut is impossible.
If Mr. Mill had always strictly adhered to that meaning of the term demand for a commodity which signifies the quantity consumed, he might have maintained the position with which he heads the third section of his fourth chapter, namely, that consumption is co-extensive with production. This, however, is, in reality, no more than saying, that if commodities were produced in such abundance as to be sold at half their cost of production, they would still be somehow or other consumed—a truism equally obvious and futile. But Mr. Mill has used the term demand in such a way, that he cannot shelter himself under this truism. He observes, “It is evident that whatever a man has produced, and does not wish to keep for his own consumption, is a stock which he may give in exchange for other commodities. His will, therefore, to purchase, and his means of purchasing, in other words, his demand, is exactly equal to the amount of what he has produced, and does not mean to consume.”*
Here it is evident that Mr. Mill uses the term demand in the sense of the amount of sacrifice which the purchaser is able to make, in order to obtain the commodity to be sold, or, as Mr. Mill correctly expresses it, his means of purchasing. But it is quite obvious that his means of purchasing other commodities are not proportioned to the quantity of his own commodity which he has produced, and wishes to part with; but to its value in exchange; and unless the value of a commodity in exchange be proportioned to its quantity, it cannot be true that the demand and supply of every individual are always equal to one another. According to the acknowledged laws of demand and supply, an increased quantity will often lower the value of the whole, and actually diminish the means of purchasing other commodities.
Mr. Mill asks, “What is it that is necessarily meant, when we say that the supply and the demand are accommodated to one another? It is this (he says) that goods which have been produced by a certain quantity of labour, exchange for goods which have been produced by an equal quantity of labour. Let this proposition be attended to, and all the rest is clear. Thus, if a pair of shoes is produced by an equal quantity of labour as a hat, so long as a hat exchanges for a pair of shoes, so long the supply and demand are accommodated to one another. If it should so happen that shoes fell in value, as compared with hats, which is the same thing as hats rising in value, as compared with shoes, this would imply that more shoes had been brought to market, as compared with hats. Shoes would then be in more than due abundance. Why? Because in them the produce of a certain quantity of labour would not exchange for the produce of an equal quantity. But for the very same reason, hats would be in less than due abundance, because the produce of a certain quantity of labour in them would exchange for the produce of more than an equal quantity in shoes.”*
Now, I have duly attended, according to Mr. Mill’s instructions, to the proposition which is to make all the rest clear; and yet the conclusions at which he wishes to arrive, appear to me as much enveloped in darkness as ever. This, indeed, was to be expected from the proposition itself, which obviously involves a most unwarranted definition of what is meant, when we say that the supply and the demand are accommodated to one another. It has already been stated that what has hitherto been meant, both in conversation and in the writings of the highest authority on political economy, by the supply being accommodated to, or equal to the demand, is, that the supply is just sufficient to accommodate all those who are able and willing to pay the natural and necessary price for it, in which case, of course, it will always sell at what Adam Smith calls its natural price.
Now, unless Mr. Mill is ready to maintain that people would still say that the supply of a commodity was accommodated to the demand for it, whether it were selling at three times the cost of its production, or only one-third of that cost, he cannot maintain his definition. He cannot, for instance, deny that hats and shoes may be both selling below the costs of production, although they may exchange for each other in such proportions, that the hats produced by a certain quantity of labour may exchange for the shoes produced by the same quantity of labour. But can it be said on this account, that the supply of hats is suited to the demand for hats, or the supply of shoes suited to the demand for shoes, when they are both so abundant that neither of them will exchange for what will fulfil the conditions of their continued supply? And supposing that, while both are selling below the costs of production, shoes should fall still lower than hats, what would be the consequence? According to Mr. Mill, “shoes would then be in more than due abundance. Why? Because in them the produce of a certain quantity of labour would not exchange for the produce of an equal quantity. But for the very same reason, hats would be in less than due abundance, because the produce of a certain quantity of labour in them would exchange for the produce of more than an equal quantity in shoes.”*
It will be most readily allowed that, in the case supposed, shoes will be in more than due abundance, though not for the reason given by Mr. Mill. But how can it be stated, with the least semblance of truth, that hats would be in less than due abundance, when, by the very supposition, they are selling at a price which will not re-purchase the quantity of labour employed in producing them.
Nothing can show more distinctly than the very case here produced by Mr. Mill, that his proposition or definition, which is to clear up everything, is wholly inapplicable to the question; and that to represent the abundance or deficiency of the supply of one commodity, as determined by the deficiency or abundance of another, is to give a view of the subject totally different from the reality, and calculated to lead to the most absurd conclusions. There is hardly any stage of society subsequent to the division of labour, where the state of the supply compared with the demand of shoes is essentially affected by the state of the supply compared with the demand for hats; and in the present state of society in this country, where the question of a general glut has arisen, it is still more irrelevant to advert to any other objects as efficient causes of demand for a particular commodity, except those which relate to the costs of producing it.
The hop-planter who takes a hundred bags of hops to Weyhill fair, thinks little more about the supply of hats and shoes than he does about the spots in the sun. What does he think about, then? and what does he want to exchange his hops for? Mr. Mill seems to be of opinion that it would show great ignorance of political economy, to say that what he wants is money; yet, notwithstanding the probable imputation of this great ignorance, I have no hesitation in distinctly asserting, that it really is money which he wants, and that this money he must obtain, in the present state of society, in exchange for the great mass of what he has brought to market, or he will be unable to carry on his business as a hop-planter; and for these specific reasons; first, that he must pay the rent of his hop grounds in money; secondly, that he must pay for his poles, his bags, his implements, &c., &c., in money; thirdly, that he must pay the numerous labourers which he employs on his grounds, during the course of the next year, in money; and fourthly, that it is in money, and in money alone of all the articles brought to the fair, that he can calculate his profits.
It is perfectly true, that both the landlords and the labourers who are paid in money will finally exchange it for something else, as no one enjoys money in kind, except the miser; but the landlord who may spend perhaps a good deal in post-horses, dinners at inns, and menial servants, would be little likely to accept from the hop-planter the articles which he could get at the fair in exchange for his hops; and though the expenditure of the labourer is much more simple, and may be said to consist almost entirely in food and clothing, yet it is quite certain that the power of commanding a given quantity of labour can never be represented, with any approach towards correctness, by a given quantity of corn and clothing. As a matter of fact, the labourer in this country is paid in money; and while it often happens that for many years together the money-price of labour remains the same, the money-price of corn is continually altering, and the labourer may, perhaps, receive the value of twice as much corn in one year as he does in another.
What an entirely false view, then, does it give of the real state of things, what a complete obscuration instead of illustration of the subject is it, to represent the demand for shoes as determined by the supply of hats, or the demand for hops by the supply of cloth, cheese, or even corn. In fact, the doctrine that one half of the commodities of a country necessarily constitute an adequate market or effectual demand for the other half, is utterly without foundation. The great producers who are the great sellers, before they can venture to think about the supplies of hats, shoes, and cloth, on which they may perhaps expend a tenth part of a tenth part of what they have brought to market, must first direct their whole attention to the replacing of their capital, and to the question whether, after replacing it, they will have realized fair profits. Whatever may be the number of intermediate acts of barter which may take place in regard to commodities—whether the producers send them to China,* or sell them in the place where they are produced: the question as to an adequate market for them, depends exclusively upon whether the producers can replace their capitals with ordinary profits, so as to enable them successfully to go on with their business.
But what are their capitals? They are, as Adam Smith states, the tools to work with, the materials to work upon, and the means of commanding the necessary quantity of labour. Colonel Torrens, therefore, is quite right, when he says, “that an increased production of those articles which do not form component parts of capital, cannot create an increased effectual demand, either for such articles themselves, or for those other articles which do form component parts of capital.”* And, perhaps, he may be considered as making some approaches towards the truth, when he says, that “effectual demand consists in the power and inclination, on the part of consumers, to give for commodities, either by immediate or circuitous barter, some greater proportion of all the ingredients of capital than their production costs.”* But in this latter position, he is still very far from representing what actually takes place. When we consider how much labour is directly employed in the production of the great mass of commodities, and recollect further, that raw materials and machinery, the other two branches of capital, are mainly produced by labour, it is obvious that the power of replacing capitals will mainly depend on the power of commanding labour: but a given quantity of what Colonel Torrens calls the ingredients of capital, can never represent a given quantity of labour; and consequently, if a given quantity of labour be necessary in any production, a very different quantity of the ingredients of capital would be required at different times, to occasion the same effectual demand for it. It is far, therefore, from being true, that if the ingredients of capital, represented by a hundred and ten quarters of corn, and a hundred and ten suits of clothing, were increased to “two hundred and twenty quarters of corn, and two hundred and twenty suits of clothing, the effectual demand for the article would be doubled.”*
It is still further from the truth, “that increased supply is the one and only cause of increased effectual demand;”† and most happy is it for mankind that this is not true. If it were, how difficult would it be for a society to recover itself, under a temporary diminution of food and clothing! But by a kind provision of nature, this diminution, within certain limits, instead of diminishing, will increase effectual demand. The theory of demand and supply, shows that the food and clothing thus diminished in quantity, will rise in value; and universal experience tells us, that, as a matter of fact, the money-price of the remaining food and clothing will for a time rise in a greater degree than in proportion to the diminution of its quantity, while the money-price of labour may remain the same. The necessary consequence will be, the power of setting in motion a greater quantity of productive industry than before.*
There is no assumption so entirely fatal to a just explanation of what is really taking place in society, as the assumption, that the natural wages of labour in food and clothing are always nearly the same, and just about sufficient to maintain a stationary population. All the most common causes of an acceleration or retardation in the movements of the great machine of human society, involve variations, and often great variations, in the real wages of labour. Commodities in general, and corn most particularly, are continually rising or falling in money-price, from the state of the supply as compared with the demand, while the money-price of labour remains much more nearly the same. In the case of a rise of corn and commodities, the real wages of common day-labour are necessarily diminished: the labourer obtains a smaller proportion of what he produces; profits necessarily rise; the capitalists have a greater power of commanding labour; more persons are called into full work, and the increased produce which follows, is the natural remedy for that state of the demand and supply, from whatever cause arising, which had occasioned the temporary rise in the money-price of commodities. On the other hand, if corn and other commodities fall in money-price, as compared with the money-price of labour, it is obvious that the day-labourer, who gets employment, will be able to buy more corn with the money which he receives; he obtains a larger proportion of what he produces; profits necessarily fall; the capitalists have a diminished power of commanding labour; fewer persons are fully employed, and the diminished production which follows, is the natural remedy for that state of the demand and supply, from whatever cause arising, which occasioned the temporary fall in the money-price of commodities. The operation of these remedial processes to prevent the continuance of excess or defect, is so much what one should naturally expect, and is so obviously confirmed by general experience, that it is inconceivable that a proposition should have obtained any currency which is founded on a supposed law of demand and supply diametrically opposed to these remedial processes.
It will be recollected, that the question of a glut is exclusively whether it may be general, as well as particular, and not whether it may be permanent as well as temporary. The causes above mentioned act powerfully to prevent the permanence either of glut or scarcity, and to regulate the supply of commodities so as to make them sell at their natural prices. But this tendency, in the natural course of things, to cure a glut or a scarcity, is no more a proof that such evils have never existed, than the tendency of the healing processes of nature to cure some disorders without assistance from man, is a proof that such disorders have not existed.
But to return more particularly to Mr. Mill. After asserting that the supply is the demand, and the demand is the supply, so frequently, that the unwary reader must feel quite at a loss to know which is which, he comes to a distinct conclusion, which is so directly contradicted both by theory and experience, as to shew either that his premises must have been false, or that what he calls his indissoluble train of reasoning consists of mere unconnected links. He says, “It is therefore universally true, that as the aggregate demand and aggregate supply of a nation never can be unequal to one another, so there never can be a superabundant supply in particular instances, and hence a fall in exchangeable value below the cost of production, without a corresponding deficiency of supply, and hence a rise in exchangeable value beyond cost of production in other instances. The doctrine of the glut, therefore, seems to be disproved by a chain of reasoning perfectly indissoluble.”*
While commodities are merely compared with each other, it is unquestionably true that they cannot all fall together, or all rise together. But when they are compared with the costs of production, as they are in the above passage, it is evident that, consistently with the justest theory, they may all fall or rise at the same time. For what are the costs of production? They are either the quantity of money necessary to pay the labour worked up in the commodity, and in the tools and materials consumed in its production, with the ordinary profits upon the advances for the time that they have been advanced; or they are the quantity of labour in kind required to be worked up in the commodity, and in the tools and materials consumed in its production with such an additional quantity as is equivalent to the ordinary profits upon the advances for the time that they have been advanced.
Now it surely cannot be denied theoretically, that all commodities produced in this country may fall in comparison with a commodity produced in Mexico. As little can it be denied theoretically that all commodities produced by British labour may fall as compared with that labour, either from an unusually increased supply of such commodities, or a diminution of demand for them. And when, from these theoretical concessions, required by the universally acknowledged laws of demand and supply, we turn to the facts, we see with our own eyes, and learn from authority which there is no reason whatever for doubting, that a very large mass of commodities does at times fall below the costs of production, whether those costs be estimated in money or labour, without the slightest shadow of pretence for saying that any other equally large mass is raised proportionally above the costs of production.
Even within the very last year, it is a matter of the most public notoriety that the cotton manufactures, the woollen manufactures, the linen manufactures, the silk manufactures, have all fallen below the costs of production, including ordinary profits. To go no further, the amount of these manufactures, taken together, must, on a rough estimate, exceed seventy millions of pounds sterling. And if this mass of commodities, partly from over production and over trading, and partly from their necessary consequences, the shock to confidence and credit and the diminution of bills of exchange and currency, have fallen below the ordinary costs of production, what man is there credulous enough to believe that there must have been, according to the language of Mr. Mill, “a corresponding deficiency of supply, and hence a rise of exchangeable value beyond cost of production in other instances”? I doubt, indeed, much, whether satisfactory evidence could be brought to show that a single million’s worth of goods has risen above the cost of production, while seventy millions’ worth have fallen below it.
Consequently, if the definition of a general glut be a fall in a great mass of commodities below the costs of production, not counter-balanced by a proportionate rise of some other equally large mass of commodities above the costs of production, Mr. Mill’s conclusion against the existence of a general glut, founded on “a chain of reasoning perfectly indissoluble,” seems to be utterly without foundation.
If facts so notorious as these to which I have adverted are either boldly denied, or considered as undeserving attention, in founding the theories of political economy, there is an end at once to the utility of the science.
On the subject of the wages of labour, Mr. Mill has added his authority to the peculiar views and language of Mr. Ricardo. He says, “Whatever the share of the labourer, such is the rate of wages; and, vice versâ, whatever the rate of wages, such is the share of the commodity or commodities’ worth which the labourer receives.”* Perhaps the term rate of wages used by Mr. Mill to express the proportion of the produce which falls to the share of the labourer is in some respects preferable to the term real wages, used by Mr. Ricardo for the same purpose; but still it is highly objectionable, because it is an old and familiar term used in an entirely new sense. When the expressions high or low rates of wages were used, before the time of Mr. Ricardo and Mr. Mill, no one understood them to mean the proportion of the produce awarded to the labourer. In fact, this meaning had not been before conveyed by any appropriate terms in the language of political economy; yet it is a meaning the expression of which was much wanted in explaining the theory of profits. To express it, therefore, a new term should certainly have been chosen, and not an old one, which was familiar in a different sense. There seems to be no objection to the term proportionate wages, which has been used by Mr. Macculloch.
On the whole, it must be allowed, that Mr. Mill in his Elements of Political Economy has but little attended to the most obvious rules which ought to guide political economists in the definition and application of their terms. They are often unsanctioned by the proper authorities, and rarely maintained with consistency.
[* ] Elements of Polit. Econ. c. ii. sec. iii. p. 75, 2nd edit.
[* ] Elements of Polit. Econ. c. iii. sec. ii. p. 92.
[* ] Elements of Polit. Econ. c. iii. sec. ii. p. 94.
[† ] Id. c. iii. sec. ii. p. 95.
[* ] Sec. viii. p. 133.
[* ] Elements of Polit. Econ. c. iv. s. iii. p. 225. If the demand of every indvidual were equal to his supply, in the correct sense of the expression, it would be a proof that he could always sell his commodity for the costs of production, including fair profits; and then even a partial glut would be impossible. The argument proves too much. It is very strange that Mr. Mill should not have seen what appears to be so very obvious,—that supply must always be proportioned to quantity, and demand to value.
[* ] Elem. of Polit. Econ. c. iv. s. iii. p. 233.
[* ] Elem. of Polit. Econ. c. iv. s. iii. p. 234.
[* ] Foreign trade is, no doubt, mainly a trade of barter; but the question whether British woollens find an adequate market in the United States, does not depend upon their purchasing the same quantity of tobacco as usual, but upon whether the tobacco, or whatever the returns may be, will purchase the British money or the British labour necessary to enable the woollen manufacturer to carry on his business successfully. If both woollen manufactures and tobacco are below the costs of production in money or labour, both parties may be carrying on a losing trade, at the time when the rate at which the two articles exchange with each other is the same as usual. This is the answer to the pamphlet, which M. Say addressed to me some years ago.
[* ] On the Production of Wealth, c. vi. s. vi. p. 349.
[* ] On the Production of Wealth, c. vi. s. vi. p. 349.
[* ] On the Production of Wealth, c. vi. s. vi. p. 345.
[† ] Id. p. 348.
[* ] It is quite astonishing that political economists of reputation should be inclined to resort to any kind of illustration, however clumsy and inapplicable, rather than refer to money. I suppose they are afraid of the imputation of thinking that wealth consists in money. But though it is certainly true that wealth does not consist in money, it is equally true that money is a most powerful agent in the distribution of wealth; and those who, in a country where all exchanges are practically effected by money, continue the attempt to explain the principles of demand and supply, and the variations of wages and profits, by referring chiefly to hats, shoes, corn, suits of clothing, &c., must of necessity fail.
[* ] Elem. of Polit. Econ. c. iv. s. iii. p. 234.
[* ] Elements of Polit. Econ. c. ii. sec. ii. p. 41.