immediate consumption. They constitute almost the whole of trade. They are the products of the enormous manufacturing and agricultural industries of modern times, and are under a constant process of continuous production. For these cost of production is the dominating element for their value in exchange.

Both classes fall under the forces involved in supply and demand. The abundance or scarcity in which they appear at market, compared with the demand which is present to purchase them, exercises great influence in: determining their values.

Cost of production implies services rendered and goods manufactured by one class of people, makers, for the benefit of another class, consumers. It is obvious that this cost, however defined, must be compensated to the makers, or else the articles will not be produced. Each of the parties must have his satisfaction; the maker has his reward for having worked for you, you the acquisition of a thing to use and enjoy.

But what is cost of production in its economical sense? Professor Cairnes has proposed to define the phrase as meaning the pains of labour, the efforts and sacrifices which must be given in making commodities for others. The words of the expression, it must be admitted, suit this explanation, but they give an unusual sense to an expression which has already got a well known and satisfactory meaning. Why load Political Economy with another violation of common usage, and add to its discredit for inventing phrases unfamiliar to common life? Mr Mill also gives a peculiar definition to the expression. from the point of view of the capitalist.

He regards it

He describes

it as all that the capitalist, or employer, has to pay, exclusively of his own profit. But the object of all production is to do a service to a consumer. On him must fall the cost, the remuneration to be given to others. If he orders a thing to be made, he will probably ask, What will it cost? and such a question manifestly means, How much am I to pay for having it made? Why then draw an arbitrary line amidst all these expenses? Why leave out one? Why substitute the manufacturer for the buyer? That expense, the profit, must be paid, like all the others, indeed many profits, for many will be the capitalists engaged before the consumer gets his razor or his hat. Again there are many producers who find the capital, and do the whole work themselves. The price they charge covers both the remuneration for the use of their capital and that for the labour bestowed. Upon Mr Mill's definition it is hard to say what cost of production means for such persons. That definition introduces confusion wantonly. Prices revolving round a cost of production which omitted the profit of the manufacturer would be an expression destitute of definite meaning, for one most essential element in the fluctuation of market-values would be omitted.

This aggregate price, including every charge for construction and transport, is the indispensable condition on which commodities will be permanently produced. It is obtained at once for goods made upon order. For those produced in advance on the expectation of sale, it must be obtained either regularly upon each sale, or when variations of selling value occur, upon an average for a definite period. This price has been

called the natural value or price, by Adam Smith; by Professor Cairnes and others, the normal price. But it would be a mistake to regard this as anything more than a rough and general statement in relation to temporary fluctuations. It indicates merely average or medium price-that price which a farmer exposed to the influence of the seasons must in the long run obtain, if he is not to be ruined by his business. And one further feature of this normal or natural price must be carefully noticed. Along with the storms which trouble the surface of the market price, there may be going on at the same time a steady set of the tide, upwards or downwards, altering its permanent level. Thus, compared with forty years ago, the natural or average price of wheat has steadily sunk, whilst the winds of good and bad harvests were blowing as usual over the land. What the repeal of the Corn Laws, with the vast area of supply which it won, did for wheat, other influences have done for iron, cotton, and many other commodities. Their natural price is changed; as a rule it stands at a lower figure.

It is very important to trace out more closely the main elements of cost of production. Adam Smith resolves this cost into labour alone ultimately. He describes labour as the real price of everything, what everything costs to the man who wants to acquire it. Ricardo follows in the same path; he lays down labour to be the real foundation of value in exchange. Both these statements are incorrect; they fail in completeness of analysis. Even were the assertion accurate, the word labour is not a well-chosen expression. There are many things which enter into cost of produc

tion which it would be startling to call labour. Labour is a term closely associated with certain classes of society. Workmen of all kinds are called labourers, yet sailors, physicians, barristers, teachers, work very hard, and are never called labourers. The idea, however, contained in the word is accurate; effort is the thing intended to be described by the word labour, but as it is contributed in producing by persons who are not associated by popular language with the class of labourers, a better expression for it may be found as an element of cost of production. That expression is service; it furnishes all the meaning that is desired.

The question has been often asked, Is the skill of the labourer, or rather the expense of his training and education, an item reckoned in exchanging, a part of the cost of production? Mr Danson, following many leading writers, considers "that it has been wisely agreed that we shall refrain from putting any pecuniary valuation upon men. We ignore the money cost of rearing a day labourer to maturity. Yet it is considerable, and consistency seems to require that we should do the same as to the higher but strictly analogous cost of rearing a lawyer or a physician.' It is always with regret that I differ from so distinguished a master of practical Political Economy as Mr Danson; but on this subject I feel unable to go along with this statement. It is perfectly true, as Professor Jevons has remarked, that on the day of exchange, when an article is bought, the purchaser puts no question as to the history of its manufacture. He looks only at it as it stands in the market; he

* "Lectures on the Political Economy of Daily Life," by J. T. Danson, Liverpool.

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thinks only of its market value on that day. But both the Professor and Mr Danson, by taking their stand on this fact, forget that if the skill and training required for the manufacture of the commodity be not compensated-speaking of its continued production—it will cease to be made. If the cost of the education of the great lawyer and physician is not replaced by their fees, then their learning and their skill will disappear from the world. The highly paid training of the chronometermaker and the painter must be paid for by the buyers, or farewell to accurate chronometers and exquisite pictures. These are practical and very real facts, and they govern the situation. The objection to putting a pecuniary value on a man is a mere sentiment; it has no foundation in the actual constitution of society.

But is service, in the sense of exertion made for another, the whole of what an article costs to a man who wishes to acquire it, all that he has to pay for? There are other matters undeniably to be paid for, before he can get it made for him. In many countries, a tax will have been levied on the materials of which it is composed. Then there may be a natural monopoly— such as a quicksilver mine, or a distinguished vineyard —which imposes its charge on a consumer. Unquestionably the wages given for labour figure most largely in the cost of most articles produced; but the engineer, manager, clerk, and other officers obtain much larger salaries-not for mere labour, but for skill and intelligence. Still more yet, the reward claimed by the capitalist for the use of the funds which his abstinence has provided, has no connection with labour, and must be given by the buyer under the name of interest. All these things