nowise influences the price;-a position in direct contradiction to daily and indisputable experience, which leads us inevitably to the conclusion, that value is increased by increase of demand. Supposing that, by the discovery of new mines, silver were to be come as common as copper, it would be subject to all the disqualifications of copper for the purposes of money, and gold would be more generally employed. The consequent increase of the demand for gold would increase the intensity of its value, and mines would be worked that now are abandoned, because they do not defray the expense. It is true that the ore would then be obtained at a heavier rate; but would any one deny that the increased value of the metal would be owing to the increased demand for it? It is the increased intensity of that demand that determines the miner to incur the increased charge of production."

We shall soon have occasion to examine whether the doctrine, that value depends on the proportion between supply and demand, which Say puts in opposition to the doctrine of Ricardothat value depends on labour-will bring us out of the difficulty and intricacy in which this part of Political Economy is involved; or whether Say's doctrine also does not cheat the understanding with a mere show of soundness and truth, when, in fact, it bears additional testimony in support of our position, that the science of Political Economy does not rest on a sure basis. We must previously, however, advert to a modification of Ricardo's doctrine, or, perhaps, more strictly speaking, to an illustration of the ultimate fact on which it may be grounded. Mr Mill, one of its ablest supporters, has supplied this illustration. Ricardo, as we have seen, maintains that two articles, which have required the same amount of labour for their production, are equal in value, and that the only reason why they are interchangeable is, that they have been produced by the same quantity of labour. To the inquiry, Why should a quarter of corn and a stone of beef, for example, which have required the same quantity of labour to produce them, be therefore interchangeable? Mr Mill replies, because the person who wants the corn for his beef must either give his beef, or employ as great a quantity of labour to produce corn

for himself, as he employed to produce the beef required in exchange for it. Let us suppose that the quarter of corn and the stone of beef each required the labour of a week; then the possessor of the beef, by giving a stone of it for a quarter of wheat, gives, in fact, for it, only that labour which it would cost him to raise it himself.

This certainly does away the objection to Mr. Ricardo's doctrine, that quantities of even the rudest labour cannot be accurately measured and compared, but it leaves it open to the other objections we have stated above; and, in fact, the doctrine of Mr Mill applies only to those cases in which each party can, by his labour, produce what the other has to interchange;-cases which are very limited in number, and of extreme rare occurrence in any state of society, except the very rudest and simplest. Besides, the remark of Mr Say applies to this doctrine, as well as to Mr Ricardo's— that, according to it, the want or demand nowise influences the price.

To this notion of price we shall next advert.-The doctrine is, that price depends entirely on the proportion between the supply and demand; and, that the value of every commodity may be altered-1st, By a diminution of its quantity: 2d, By an increase in its quantity: 3d, By an increase of demand; and, lastly, By a diminution of demand.

The phrase," proportion between the supply and the demand," seems, at first sight, most clear and precise; and to approach, as the words employed indicate, even to a mathematical certainty of meaning: and there cannot be the slightest difficulty in understanding the two first circumstances, which are alleged to alter the value of every commodity,—a diminution in its quantity, and an increase in its quantity. But, if we attempt to affix as clear and precise ideas to the other two circumstances that are alleged to alter the value of every commodity-an increase of demand, and a diminution of demand,-we shall find ourselves disappointed: and it is obvious, that unless we have ideas attached to the term demand, as clear and precise as we attach to the term supply, we cannot understand what is meant by the phrase "proportion between supply and demand," on which value is said to depend. Those who hold this doctrine

prolific and deceitful sources of the errors into which they are so liable to fall.

We have dwelt at considerable length on the two leading doctrines regarding Price; because it is a subject which certainly holds a high and most important rank and influence in the science, and, as such, has engaged the attention and profound study of the most distinguished Political Economists; and yet we perceive that the two leading doctrines regarding it will not bear a close and strict examination, nor satisfy the understanding of any one who looks through the mere words in which they are clothed, to the precise meaning, or, having ascertained the meaning, brings it to the test of experience and fact.

The terms which first and most frequently meet the eye of a student of Political Economy, in perusing works on this subject, are wealth, riches, value, price, wages, capital, credit, &c. Even if these terms were clearly and accurately defined, when they first occurred, if the definition, then given, were uniform and strictly adhered to, throughout the treatises, he might yet be exposed to difficulties, and not unfrequently perplexed, from the circumstance of their being popular terms with which he had associated loose and popular ideas, that it was necessary to forget, and replace by others.

But his difficulties and perplexities are much increased and strengthened, and his progress, consequently, much impeded, when, after having, by a strong and continued effort, freed himself from his early associations, he perceives that, instead of them, he is presented with no clear and precise meaning; or that the meaning, if clear and precise, when first laid down, is not adhered to; or that each new writer whom he consults, affixes to the same terms a very different meaning from that offered to him by the writer he previously studied.

But his difficulties and perplexities are not confined even within this wide circle, nor do they arise only from these sources, fertile as they are. The positions and principles themselves, even supposing the meaning of the terms to be clear, precise, and uniformly adhered to, are loosely stated, unsupported by facts, or inapplicable to them, or at variance with one another.

The truth and justice of these re

marks, we trust we have substantiated in the preceding part of this Essay, on what relates to wealth, value, and price, as explained by the most celebrated writers on Political Economy. It may be proper, however, to vary and amplify our proofs, and to proceed to examine what they teach respecting wages, capital, &c.

Adam Smith

The first question is, what regulates Wages? According to the Economists, and they are followed by many modern writers, the wages of labour are regulated by, and proportioned to, the price of provisions. Hume maintains, that men being averse to labour, necessity alone can induce them to labour; and that they cease to labour whenever the gain of a few days enables them to supply themselves with necessaries. is of opinion, that the cheapness or dearness of provisions has but little influence on the rate of the wages of labour, but that this rate is chiefly fixed, like the price of commodities, by the proportion between the supply and demand. According to Say, necessary subsistence may be taken to be the standard of the wages of common rough labour, and the wages of the labourer are a matter of adjustment, or compact, between the conflicting interests of master and workman; the latter endeavouring to get as much, the former to give as little, as he possibly can.

With respect to the doctrine of the Economists, it is contradicted by facts; if it were true, wages would always rise in proportion to the rise in the price of provisions, and fall whenever, and as they fall. This is not the case: so far from it, that, generally speaking, the reverse is not only the case, but might be anticipated to be the case. Smith's doctrine is liable to all the objections we have already stated to the general doctrine of price being regulated by the proportion between supply and demand. Say himself admits the vagueness of his standard of necessary subsistence; for he expressly says, "This standard is itself extremely fluctuating." But how can that be a standard or measure of either price or value, which fluctuates? What is meant by necessary subsistence? Fix the meaning accurately, and the proposition is identical; leave it vague, the proposition, of course, amounts to nothing.

How will Ricardo's doctrine, that

price depends on the quantity of labour, and that two commodities requiring for their production the same quantity of labour, are equal in value and interchangeable-apply to the wages of labour? evidently not at all.

On wages and profit, however, this writer has a singular doctrine: according to him, "such a relation subsists between the funds which supply the wages of labour, and those which contribute to the profits of stock-that any increase in the one necessarily occasions, and is accompanied by, a diminution of the other; or, in other words, that whenever wages rise, the rate of profit must fall; and, consequently, that when wages fall, profits rise." The unsoundness of this doctrine is well pointed out in this Magazine for the month of May, 1819, p. 171. But we cannot agree with the writer of that article in his opinion, that this doctrine of Mr Ricardo has probably arisen from too hastily generalizing the result of a particular inquiry, and extending a proposition partially true, beyond the proper limits of its application.

We would trace this erroneous and unfounded doctrine to a different source, and cannot help regarding it as a pregnant and striking instance of the origin of Mr Ricardo's peculiar errors in his works on Political Economy. Did he, in support of this doctrine, or of others, in which he runs counter to the generally received opinions, appeal to facts, we might be disposed to agree with this writer, that he had too hastily generalized the result of a particular inquiry; but when, through all his works, even the most elementary and practical,-there is an abstraction-a metaphysical refinement and subtlety-almost as careful, and apparently as premeditated an avoidance of resting on facts, as the most rigid and pure mathematician could wish to see exhibited, in a treatise on the most abstract part of his favourite study-it is impossible not to trace, and ascribe his errors, as well as his excessive refinement and obscurity, to a morbid desire to be profound and original, unaccompanied by a thorough and clear apprehension of the doctrine he endeavours and wishes to inculcate, rather than to an over-hasty and unwarranted generalization.

Is the lowness of the rate of wages
VOL. XV.

advantageous, or the contrary, to a nation? Hume maintains that it is; Adam Smith, on the other hand, maintains that the high price of the rates of labour is equally profitable to the state and to general wealth. Sismondi is of opinion, that the low rate of wages exclusively benefits the master who employs, and pays the labourers. Say denies this position, and maintains, that their reduction is sure to bring about a fall in the price of products, so that it is the class of consumers, or, in other words, the whole community, that derives the profit.

What is capital?-whence does it spring ?-how is it increased?-and what effects does it produce? Will a person, who applies himself to the study of Political Economy, and who, in the ordinary language and concerns of life, has heard this word used, with only a loose and general idea of its import, be enabled, after he has perused the best works on this science, to affix a clear and precise meaning to it, or to understand its nature, source, operations, and effects?

According to Ganihl, the theory of capital is new, and owes its origin to Adam Smith. Before his time, the notions on this subject were confused, partial, and limited-and yet capital existed-and in Holland and the commercial states of Italy, it had produced wonderful effects. But so little did the earliest writers on Political Economy attend to facts-so prone were they, either to generalize too rapidly and rashly, or to spin out theories from their own brains, apart from the observation and consideration of all that was passing around them, that, to use the words of Ganihl, the nature, formation, employment, and general and particular influence of capital, were so many unsolved problems, or gave rise to numberless errors and misconceptions. The earliest writers on Political Economy considered money as alone forming capital, and that the sole origin of it was foreign commerce; this is the old mercantile system, the leaven of which still mixes up with, and actuates, some of our notions and practices. This system was first attacked by the Economists; but they in this, as in everything else, went into an extreme, and seemed to have thought, that they must have found truth, because they removed as far as possible from error. They formed the 4 P

agricultural system, and maintained, that there were no capitals, but those derived from the cultivation of the ground.

According to Smith, capital consists in the advances, and prime materials of all labour, in the improvements of the soil-in the implements and machines of agriculture, manufactures, and trade, which comprise both metallic and paper currencies, and in cominodities reserved for general consumption.

It is not our object in this place, as we have more than once observed, to enter into a regular and full examination of any of the opinions we exhibit, but principally by exposing their contrariety, obscurity, and contradiction, in some cases, to others maintained by the same author, to prove the infancy of Political Economy. On this doctrine of capitals, as laid down by Adam Smith, it is well observed by Ganihl, "It is certainly matter of surprise, that commodities reserved for consumption, and incapable of being accumulated, should be ranked among capitals, which, according to Smith himself, are the produce of accumulation."

Lord Lauderdale limits capital to the instruments and machines proper to shorten and facilitate labour, and is of opinion that it derives its profits either from supplanting a portion of labour, which would otherwise be performed by the hand of man, or from its performing a portion of labour, which it is beyond the reach of the personal exertion of man to accomplish. Machinery and money, therefore, are, according to this noble author, both capital.

Say and Canard assign the rank of capital to lands, mines, and fisheries, which they regard as instruments of production, and little different from any other machine or implement destined to produce commodities. But Say is not very consistent, for, in the very same chapter in which he gives this definition of capital, he maintains, that, without capital, industry could produce nothing. Capital, he adds, must work, as it were, in concert with industry. On this doctrine his translator well observes, that industry may produce considerably without the preexistence of any but natural products.

Similar varieties and contradictions of opinion exist with respect to the

formation of capital, the employment of capital, and the influence of capital on the progress of public wealth. With respect to the first topic, some are of opinion that capitals are formed solely by economy in the cost of agricultural labour, and by the increased price of commodities through foreign tradesome by the proportion between what is called productive and unproductive labour-and others by economy in consumption. Lord Lauderdale directly and strongly opposes this last notion. He goes into the opposite opinion, and maintains, that capital can be increased exclusively by the means, and from the sources, that originally gave birth to it, and that economy or parsimony in a nation cannot possibly tend to increase its capital. It is unnecessary to exhibit the various and conflicting opinions entertained on the other topics connected with capital.

Let us examine what is meant and taught respecting credit-a term which, like most others employed in writings on Political Economy, occurs so frequently in common discourse, that it particularly behoved writers on this subject to define it accurately, and to adhere to their definition, and not mix up the popular and loose meaning with their own. The following remark by Say will prevent the necessity of our dwelling long on this point :"It has sometimes been supposed, that capital is multiplied by the operation of credit. This error, though frequently recurring in works professing to treat of Political Economy, can* only rise from a total ignorance of the nature and functions of capital. Capital consists of positive value vested in material substance, and not of immaterial products, which are utterly incapable of being accumulated.-And a material product evidently cannot be in more places than one, or be employed by more persons than one, at the same identical moment."

Here we observe a specimen of the loose statements and reasoning, so common in writers on Political Economy. The position which Say means to controvert, and which he says is an error frequently recurring in works treating of Political Economy, is, that capital is multiplied by the operation of credit; and yet his whole argument merely goes to prove, that capital cannot be in action in more places than one! But if capital is put in action by