Front Page Titles (by Subject) 12.: TOOKE'S THOUGHTS ON HIGH AND LOW PRICES  MORNING CHRONICLE, 9 AUG., 1823, P. 3 - The Collected Works of John Stuart Mill, Volume XXII - Newspaper Writings December 1822 - July 1831 Part I
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12.: TOOKE’S THOUGHTS ON HIGH AND LOW PRICES  MORNING CHRONICLE, 9 AUG., 1823, P. 3 - John Stuart Mill, The Collected Works of John Stuart Mill, Volume XXII - Newspaper Writings December 1822 - July 1831 Part I 
The Collected Works of John Stuart Mill, Volume XXII - Newspaper Writings December 1822 - July 1831 Part I, ed. Ann P. Robson and John M. Robson, Introduction by Ann P. Robson and John M. Robson (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1986).
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TOOKE’S THOUGHTS ON HIGH AND LOW PRICES 
For the context, heading, and entry in Mill’s bibliography for this second half of a two-part review, see No. 8.
it will be remembered that we have already noticed the First Part of this well-timed and highly useful production.1 The remaining Three Parts are now before the public.
Three opinions prevail concerning the circumstances which occasioned the prosperity of the Agricultural Classes during the interval from 1792 to 1812, and their distress during the greater part of the ten years which followed that period.
By Mr. Western, Mr. Attwood, and their followers, the prosperity of the agriculturists is attributed to the depreciation of the currency, and their distress to the resumption of cash payments.2 By another class of reasoners, the high prices are attributed to the operation of the war—the low prices to the transition from war to peace. There is still another opinion, that the variations of prices were owing to circumstances of temporary operation, principally to the vicissitudes of the seasons.
In Part I of his work, published a few months since, Mr. Tooke gave a detailed examination of the opinion which attributes the high and low prices to the variations in the amount of the currency. He undertook to prove that these variations could not affect prices to any greater extent than was indicated by the difference in value between paper and gold. In support of this assertion, he first adduced general reasoning, which alone sufficed to prove the absurdity of attributing to depreciation any greater effect: but as there are many, who, not being capable of comprehending general reasoning, are inclined to regard it with distrust, Mr. Tooke fortified his position by a statement of facts, proving conclusively that during the last 30 years enhancement of prices was seldom, if ever, coincident with increase in the issues of Bank paper, but was sometimes coincident with a diminution. To attribute, therefore, any considerable part of the enhancement to depreciation, is inconsistent not only with principle, but with facts—not only with general, but with specific experience.
In Part II just published, Mr. T. proceeds to the examination of the doctrine which attributes the high prices to the effect of war, and the subsequent fall to the transition from war to peace.
Two questions here arise. First—Whether the taxation attending a state of war is calculated to raise prices? Next—How far prices can be affected by war, through the medium of supply and demand?
First, as to taxation. [Pt. II, pp. 1-6.] Direct taxes, such as an income tax, if equally levied upon all classes, are never supposed to affect prices. Taxes levied upon particular commodities will usually raise the prices of those commodities, but there is never any reason why they should raise general prices, while, under some circumstances, they may lower them. If the commodities taxed be the instruments of production, the effect upon prices will vary according to circumstances. If, for instance, the taxes apply equally, or nearly equally, to all branches of industry, they cannot raise prices; but, if they are laid on the instruments of production of some particular article, and not of others, that article must advance in price.
From this analysis of the influence of taxation upon prices, it appears that the high range of general prices during the war cannot be attributed to taxation. To this argument Mr. T. adds a further confirmation, by the fact, that with the exception of the Income Tax, the amount of taxation (including Land Tax, Tithe and Poor-rate,) down to last summer was as great as during the war. [P. 4.] If therefore taxation had raised prices, taxation must have prevented them from falling.
Independently of taxation war could have raised prices only by creating demand, or by obstructing supply.
Those who affirm that war increased demand, think that the whole of the extra government expenditure creates a new source of demand; that not only the prices of naval and military stores are raised, but that the additional consumption of fleets and armies must raise the price of food; that the demand for soldiers and sailors must raise wages; also the increased demand for manufactures to supply fleets and armies must farther raise wages, and thus increase the consumption by the labouring classes, &c.
This would be true if the extra government expenditure consisted of new funds; but these reasoners forget that what is consumed by government comes out of the pockets of the people, and would by them have been expended in the purchase of labour and commodities. In this way, therefore, war cannot raise prices. It can only raise those commodities which are the objects of sudden demand, such as naval and military stores, and these only until the supply has accommodated itself to the demand.
Accordingly, it appears that for 100 years previous to 1793, exclusively of taxed or imported commodities, and naval or military stores, there was as low a range of prices during war as during peace. This Mr. T. proves by a table of prices. [Pp. 14-20.]—Wheat, indeed, was at a lower price during the expensive war preceding the peace of Aix-la-Chapelle3 than during any other part of the whole period from 1688 to 1792.
Besides, it is notorious that the consumption of food has been considerably increased during the low prices since the peace. It is not, therefore, extra consumption which raised prices during the war, since in that case it would have prevented them from falling during the peace.
It has also been contended, that prices were greatly affected by the monopoly which, from our ascendancy at sea, the war conferred on our trade. But the very articles which were the subject of that monopoly were more depressed in 1810 and 1812, than they have been either before or since. An ordinary monopoly raises prices by limiting the supply; but the supply of Colonial produce, and the other commodities which were the objects of our exclusive trade, was greatly increased during the war, while it was only the export of them which was restricted. The price therefore fell.
Mr. Tooke next considers to what extent war may have operated in raising prices by limiting the supply. [Pp. 47-61.]
This it may have done, either by a diminution of reproduction or by impeding commerce. Now although the tendency of war is to diminish production, no one asserts that the country has retrograded during the war: production cannot, therefore, have been actually diminished. The only mode in which the war can have affected supply must have been by impeding commerce. And it is certain that by enhancing greatly the cost of importation, it did operate to raise the prices of imported commodities. In ordinary years, however, we never imported agricultural produce. War, therefore, could raise agricultural prices only by preventing relief from abroad, to that scarcity which was produced by other causes at home.
Mr. T. therefore concludes that war could affect prices only in as far as it obstructed importation, and created a demand for naval and military stores. [Pp. 58-60.] It is therefore wholly inadequate to account for the high range of prices during the 20 years following 1793.
Part III is devoted to the examination of that opinion which attributes principally to the vicissitudes of the season the great variations in prices during the last ten years. [Pt. III, pp. 9-48.] This opinion Mr. T. has, we think, proved to be perfectly correct, and adequate to the explanation of all the phenomena of prices.
He furnishes a concise character of every season from 1688 to 1792 inclusive, from which it appears, that during that time good and bad seasons occurred as it were in clusters, thus producing ranges of high and low prices, which lasted not a few years merely, but for considerable periods.
From 1686 to 1691, prices gradually declined, producing considerable agricultural distress. But in 1692 began a series of seven very bad seasons, which raised prices to an unusually high level. On the whole, from 1692 to 1713 there were no fewer than twelve years of bad or indifferent produce, and consequent high prices. From 1730 to 1739, on the contrary, there was not one decidedly bad season. Accordingly wheat was low. The winter of 1739-1740 was very severe; and the following harvest was bad, which produced a considerable rise, but from 1741 to 1751, were ten abundant seasons. Again, from 1765 to 1776, bad seasons frequently recurred, both in this country and on the continent. From 1776 to 1782, the seasons appear to have been favourable, because with an increased and increasing population, the produce was sufficient for the consumption.—From 1782 to 1792 inclusive, there was a large proportion of severe winters and backward springs, and with the exception of 1791, not one very abundant season. Now, it appears, that during these 105 years, in all the periods when bad seasons were comparatively frequent, Corn was permanently at a high price, and during the periods when they were rare, it was uniformly low.
The analogy of this long period affords reason to conjecture that the high and low prices from 1792 to 1822, may be attributed to similar causes. This is what Mr. Tooke proceeds to establish by a minute character of the seasons during the last thirty years. [Pp. 49-86.]4
The harvest of 1793 was barely an average, and that of 1794 was deficient, which combined with unfavourable prospects for the following year, raised prices very high; but the Government sent agents to buy corn in the Baltic, and the harvest of 1795 turning out better than had been expected, prices declined. They followed the variations of the seasons until 1799, when two very bad harvests raised them to an enormous height. On the whole, from 1793 to 1800 inclusive, there were four very bad, and only two good crops, with four very severe winters, producing increased consumption. This surely accounts for a permanence of high prices during all this period.
Three tolerable harvests, with a small importation, lowered prices, and produced agricultural distress. But the six seasons from 1807 to 1812 were all deficient, at a time when the difficulties of importation were very great. On a general review of the whole period of twenty years from 1793 to 1812, there were eleven more or less deficient, six of average produce, and three only of abundant crops. Surely it does not require the supposition of an extra war demand, or a depreciation of the currency beyond the difference between paper and gold, to account for high prices during these 20 years.
If prices had risen only in proportion to the deficiency of produce, then the farmer and the landlord, while they would have suffered as consumers, would not have gained as agriculturists by the rise. But when the necessaries of life are concerned, prices always rise more than in proportion to the deficiency. The Agricultural classes, therefore, gained by the high prices, and concluding their gains to be permanent, they applied much new capital to the land, thereby increasing the quantity of produce, and aggravating their distress when low prices returned.
Of the nine seasons, from 1813 to 1821 inclusive, one only, that of 1816, was bad, while three were very abundant, and five of fair average produce. Comparing these with the nine years preceding, the difference of produce is abundantly sufficient to account for a great difference of price. As, when the produce was scanty, the price rose; so, when it was abundant, the price fell in a greater proportion than was indicated by the variation in the amount of produce. The Agriculturists, who before gained, now lost by the state of prices. There can, therefore, be no difficulty in accounting for the prosperity of Agriculture during the first twenty years, and for its depression during the last ten of the period from 1792 to 1822, from the vicissitudes of the seasons.
It may be objected that the lowest prices sometimes coincide with the smallest stock for sale, and the highest prices with the largest stocks. This may occasionally happen, but Mr. T. has shewn that it is perfectly reconcilable with the principles which he has laid down. [Pt. III, pp. 87-112; Pt. IV, pp. 4-10.] Demand and supply, as affecting prices, are either actual or prospective. If the supply on hand has been under-rated, more especially if one or more seasons of increased supply should follow, they who have bought before the fall of price, find that they would have done better to postpone their demand, and fearing a still greater fall, they think it their interest not to buy more than they can help in advance.
Thus [says Mr. T.] although the supply may, in consequence of long protracted discouragement, be falling off, that part of the demand which consists in the anticipation of future want, falls off in a still greater degree, till both reach their minimum; the consumption all the time going on at its wonted rate, or more probably increasing in consequence of cheapness; and in such cases it may be only when the stock is at length discovered to be below the immediate want for actual consumption, while fresh supplies are remote or uncertain, that any decided improvement takes place.
(Part IV, pp. 8-9.)
In general, Mr. Tooke remarks, that after a glut has been once fully established, it cannot be carried off without a “period of falling prices and diminishing supplies, till it may so happen, though perhaps rarely, that the lowest prices and the smallest stocks may coincide.” (P. 9.)
Mr. Tooke subjoins a table of the prices of various commodities, from 1782 to 1822, with explanations, from which it appears that the difference in the relative proportions of supply and demand is quite sufficient to account for the fluctuations in price. [Appendix No. 1 to Pt. IV, pp. 1-69.] Mr. T. has thus the merit of having solved a number of the phenomena of prices, which Gentlemen both in and out of Parliament have frequently quoted, to prove the fallaciousness of the doctrines of political economy. Mr. T. has shewn, that far from being inconsistent with those doctrines, they afford still farther illustrations and confirmations of them, and could not be explained upon any principles except those which they are brought to impugn. It becomes no one, but least of all the Agriculturists, who have suffered so recently from their ignorance of Political Economy, to affect contempt for that important science. Had these gentlemen, in the days of their prosperity, been aware that a succession of deficient harvests was the only cause of the high prices, they would have foreseen that a revulsion would finally take place; and they would neither have expended upon the land a quantity of capital which is now irrecoverably gone, nor entered into contracts, and made provisions for their younger children, on the supposition that their rents would always continue at the existing elevation.
[1 ]Mill’s form of words is odd, since this review is in the Morning Chronicle, while the earlier one (No. 8) was in the Globe and Traveller, and neither was reprinted in the other paper.
[2 ]See, e.g., Observations on the Speech of the Right Hon. W. Huskisson (London: Ridgway, et al., 1823), by Charles Callis Western (1767-1844), M.P. for Essex, writing in reply to Huskisson, Speech on Resumption of Cash Payments (11 June, 1822), PD, n.s., Vol. 7, cols. 897-925; and A Letter to the Right Honourable Nicholas Vansittart, on the Creation of Money, and on Its Action upon National Prosperity (Birmingham: Wrightson, 1817), and Prosperity Restored; or, Reflections on the Cause of the Public Distresses, and on the Only Means of Relieving Them (London: Baldwin, et al., 1817), by Thomas Attwood (1783-1856), banker, economic and political reformer.
[3 ]The peace, established 18 Oct., 1748, ended the War of the Austrian Succession.
[4 ]Tooke actually covers 1783-1821.