article which they desire, the fact that they go on adding to the production proves that this is not actually the case. Assume the most favorable hypothesis for the purpose, that of a limited community, every member of which possesses as much of necessaries and of all known luxuries as he desires, and, since it is not conceivable that persons whose wants were completely satisfied would labor and economize to obtain what they did not desire, suppose that a foreigner arrives and produces an additional quantity of something of which there was already enough. Here, it will be said, is over-production. True, I reply; over-production of that particular article. The community wanted no more of that, but it wanted something. The old inhabitants, indeed, wanted nothing; but did not the foreigner himself want something? When he produced the superfluous article, was he laboring without a motive? He has produced—but the wrong thing instead of the right. He wanted, perhaps, food, and has produced watches, with which everybody was sufficiently supplied. The new-comer brought with him into the country a demand for commodities equal to all that he could produce by his industry, and it was his business to see that the supply he brought should be suitable to that demand. If he could not produce something capable of exciting a new want or desire in the community, for the satisfaction of which some one would grow more food and give it to him in exchange, he had the alternative of growing food for himself, either on fresh land, if there was any unoccupied, or as a tenant, or partner, or servant of some former occupier, willing to be partially relieved from labor. He has produced a thing not wanted, instead of what was wanted, and he himself, perhaps, is not the kind of producer who is wanted-but there is no over-production; production is not excessive, but merely ill-assorted. We saw before that whoever brings additional commodities to the market brings an additional power of purchase; we now see that he brings also an additional desire to consume, since if he had not that desire he would not have troubled himself to pro

duce. Neither of the elements of demand, therefore, can be wanting when there is an additional supply, though it is perfectly possible that the demand may be for one thing, and the supply may, unfortunately, consist of another.

It is not sufficiently borne in mind, also, that the whole progress of civilization results in a differentiation of new wants and desires. To take but a single instance, with the growth of the artistic sense the articles of common use change their entire form; and the advances in the arts disclose new commodities which satisfy the world's desires, and for these new satisfactions people are willing to work and produce in order to attain them. With education also comes a wider horizon and a more refined perception of taste, which creates wants for new things for which the mind before had no desires. A little reflection, therefore, must inevitably lead us to see that no person, no community, ever had, or probably ever will have, all its wants satisfied. So far as we know man, it does not seem possible that there will ever be a falling off in demand, because of a satiety of all material satisfactions.

§ 4. I have already described the state of the markets for commodities which accompanies what is termed a commercial crisis. At such times there is really an excess of all commodities above the money demand: in other words, there is an under-supply of money. From the sudden annihilation of a great mass of credit, every one dislikes to part with ready money, and many are anxious to procure it at any sacrifice. Almost everybody, therefore, is a seller, and there are scarcely any buyers: so that there may really be, though only while the crisis lasts, an extreme depression of general prices, from what may be indiscriminately called a glut of commodities or a dearth of money. But it is a great error to suppose, with Sismondi, that a commercial crisis is the effect of a general excess of production. It is simply the consequence of an excess of speculative purchases. It is not a gradual advent of low prices, but a sudden recoil from prices extravagantly high: its immediate cause is a contraction of credit, and the remedy is, not a diminution of supply, but the restoration of confidence. It is also evident that this temporary derangement of markets is an evil only

because it is temporary. The fall being solely of money prices, if prices did not rise again no dealer would lose, since the smaller price would be worth as much to him as the larger price was before. In no matter does this phenomenon answer to the description which these celebrated economists have given of the evil of over-production. That permanent decline in the circumstances of producers, for want of markets, which those writers contemplate, is a conception to which the nature of a commercial crisis gives no support.

The other phenomenon from which the notion of a general excess of wealth and superfluity of accumulation seems to derive countenance is one of a more permanent nature, namely, the fall of profits and interest which naturally takes place with the progress of population and production. The cause of this decline of profit is the increased cost of maintaining labor, which results from an increase of population and of the demand for food, outstripping the advance of agricultural improvement. This important feature in the economical progress of nations will receive full consideration and discussion in the succeeding book.' It is obviously a totally different thing from a want of market for commodities, though often confounded with it in the complaints of the producing and trading classes. The true interpretation of the modern or present state of industrial economy is, that there is hardly any amount of business which may not be done, if people will be content to do it on small profits; and this all active and intelligent persons in business perfectly well know: but even those who comply with the necessities of their time grumble at what they comply with, and wish that there were less capital,' or, as they express it, less competition, in order that there might be greater profits. Low profits, however, are a different thing from deficiency

1 Book IV, Chap. II.

This is practically the argument of a little book, "Excessive Saving a Cause of Commercial Distress" (1884), by Uriel H. Crocker.

of demand, and the production and accumulation which merely reduce profits can not be called excess of supply or of production. What the phenomenon really is, and its effects and necessary limits, will be seen when we treat of that express subject.

CHAPTER XII.

OF SOME PECULIAR CASES OF VALUE.

§ 1. THE general laws of value, in all the more important cases of the interchange of commodities in the same country, have now been investigated. We examined, first, the case of monopoly, in which the value is determined by either a natural or an artificial limitation of quantity, that is, by demand and supply: secondly, the case of free competition, when the article can be produced in indefinite quantity at the same cost; in which case the permanent value is determined by the cost of production, and only the fluctuations by supply and demand: thirdly, a mixed case, that of the articles which can be produced in indefinite quantity, but not at the same cost; in which case the permanent value is determined by the greatest cost which it is necessary to incur in order to obtain the required supply: and, lastly, we have found that money itself is a commodity of the third class; that its value, in a state of freedom, is governed by the same laws as the values of other commodities of its class; and that prices, therefore, follow the same laws as values.

From this it appears that demand and supply govern the fluctuations of values and prices in all cases, and the permanent values and prices of all things of which the supply is determined by any agency other than that of free competition but that, under the régime of competition, things are, on the average, exchanged for each other at such values, and sold at such prices, as afford equal expectation of advantage to all classes of producers; which can only be when things