tinue to supply the public with a commodity which did not repay them. If, on the other hand, the consumers pay more for an article than its natural value, the producers will be encouraged by their great profits to increase the supply, and the price will consequently fall until it is reduced to the natural value.

CAROLINE.

I do not understand why the producers of a commodity should increase the supply, if the consequence is to lessen their profits?

MRS. B.

We are arguing under the supposition that competition is free and open, and in that case, you know, capital will immediately flow towards any branch of industry that affords extraordinary profits. If, therefore, the original producers of the profitable commodity did not increase the supply, they would soon meet with competitors, which would compel them to lower their price without increasing their sale.

"Price," Mr. Buchanan observes, with great happiness of expression, "is the nicely poised balance "with which nature weighs and distributes to her "children their respective shares of her gifts, to "prevent waste, and make them last out till reproduced."

CAROLINE.

But when I consider labour as a measure of value, I do not clearly understand whether I should estimate the quantity of labour bestowed on the production of a commodity, or the quantity of labour it will exchange for at market?

MRS. B.

The latter, certainly; the former constitutes its natural value, but the latter its exchangeable value or market price, which is undoubtedly the only accurate measure of the value of a commodity when it is sold.

CAROLINE.

Certainly. My earrings cost me five guineas last year, and that I suppose was their natural value; but now, though scarcely the worse for wear, I doubt whether I could sell them for a guinea, because they are out of fashion, and yet the price they would now fetch must be their real exchangeable value.

MRS. B.

That is true of all commodities; but jewels, and other articles whose price is influenced by the caprice of fashion, may be said to bear a fancy price, which does not come strictly under our rules.

We have dwelt a long time upon the subject of value, and we may now conclude that though a fluctuation in the exchangeable value of commodities may be occasioned by various circumstances, it will seldom deviate much from the natural value, or cost of production, which is a variable quality, to which (when the employment of capital is left open) the exchangeable value will always tend to approximate.

CAROLINE.

Value and wealth, I perceive, are far from being synonymous terms; for the increased value of food, in times of scarcity, indicates a diminution of wealth?

MRS. B.

Certainly. Wealth depends upon the abundance of

The

commodities possessed, no matter what their production cost, whether the result of manual labour or machinery, whether obtained by fair or fraudulent means. Romans were wealthy by conquest; the Carthaginians, by industry. But wealth is more equally distributed when it results from machinery, which, on the one hand, augments the wealth of a country by facilitating the production of commodities, whilst, on the other hand, it reduces the price of those commodities by reducing the cost of production.

184

CONVERSATION XII.

ON INCOME.

MODES OF EMPLOYING CAPITAL ΤΟ PRODUCE INCOME.WHICH OF THESE IS MOST ADVANTAGEOUS. VARIES ACCORDING TO THE STATE OF THE COUNTRY.-GARNIER'S OBSERVATIONS ON THE EMPLOYMENT OF CAPITAL.EQUALITY OF PROFITS AFFORDS A CRITERION OF THE DUE DISTRIBUTION OF CAPITAL.-NATURAL ARRANGEMENT OF THE DISTRIBUTION OF CAPITAL. EQUALITY OF PRO

FITS IN AGRICULTURE, MANUFACTURES, AND TRADE. WHY THOSE PROFITS APPEAR UNEQUAL.

MRS. B.

IN our last conversation we have in some measure digressed from our subject; but I trust that you have not forgotten all we have said upon the accumulation of capital. Let us now proceed to examine more specifically the various ways in which it may be employed in order to produce a revenue or income. Capital may be invested :—

In Agriculture,
Mines,

Fisheries,

Manufactures, and

Trade.

CAROLINE.

Of all these ways of employing capital, agriculture, no doubt, must be the most advantageous to the country, as it produces the first necessaries of life.

MRS. B.

In these northern climates it is almost as essential to our existence to be clothed and lodged as to be fed, and manufactures are, you know, requisite for these purposes.

CAROLINE.

True; but then agriculture has also the advantage of furnishing the raw materials for manufactures; it is the earth which supplies the produce with which our clothes are made and our houses built.

MRS. B.

Yet without manufactures these materials would not be produced; it is the demand of the manufacturer for such articles which causes them to be raised by the farmer; agriculture and manufactures thus react on each other to their mutual advantage.

CAROLINE.

No doubt; but still it does not appear to me that they can be equally beneficial to the country. Manufactures do not, like agriculture, actually increase the produce of the earth; they create nothing new, but merely put together under another form the materials with which they are supplied by agriculture.

MRS. B.

True; but by such operations they frequently increase the value of these materials an hundred fold.