enter into cost of production, for it includes every sacrifice to be compensated, every satisfaction to be given to makers and to sellers.

Wages and profits manifestly constitute the largest part of the cost of most things made, but it would be a false inference to draw that high wages and high profits generate always a high cost of production. This is a complete mistake. High profits and high wages constantly co-exist with cheap goods. In a colony abounding in fertile land, the rates of both profits and wages stand often on a very high level, yet the corn and cattle produced are sold freely at low prices. A pair of scissors made in an undeveloped country, destitute of machinery, would require an enormous time to make, would be badly made, and would sell at an immense price; and yet probably the wages and profits of the makers would be small. A hundred needles are bought for a shilling in England, a trifle, considering the elaborate character of the little tool; yet probably the manufacturer and his workmen have earned high rates of reward. The labour was very efficient: that is, the work produced very large for the number of workmen and the time bestowed upon the needles. The money realised by the employer and his men was, in the aggregate, small in proportion to the quantity of needles or scissors made; and thus each packet of needles, or of cotton thread, becomes excessively cheap. A very high daily wage, a handsome profit, articles of great finish, and a trifle for price -such are the fruits gathered up from labour rendered efficient by machinery. Small indeed is the cost of production of each needle under such circumstances.

The phrase, efficiency of labour, it must be added,

is equally applicable to work which is very small in quantity, but exceedingly high in quality. Machinery multiplies products, executing them well at the same time; but the skill and the fineness of handling which create a delicate scientific instrument, or a piece of exquisite lace, though it produces but a single thing, yet is most efficient of excellence. Quality is a great product, a rare and difficult achievement.

So much then for the fundamental principle, that if commodities are to be permanently provided for human wants, all the services required for making them, and placing them in the hands of the consumers, that is, their cost of production, must be satisfied. In respect of goods made to order, no more need be said. With regard to the bulk of articles which come under trade, and are made on the expectation of being sold, we will now suppose that they have been brought to market, whatever be the form of that market; they then fall under the principle of supply and demand. They are supplied for sale under the expectation of being demanded by buyers. The relative strength of what may be called these two forces exerts an enormous influence on the prices at which they are sold.

When business, owing to the circumstances of the country, or the nature of the goods, proceeds in an ordinary humdrum way, the quantity of the articles made may closely correspond with the quantity required; and variations of price may be few and insignificant. In such cases, demand easily equals supply, the equation is ordinarily complete.

But such is not the especially English trade.

character of modern trade, The economical principle of

division of employments has become international, and has introduced radically different conditions of market. England makes clothing for almost all the world, and receives most of her raw materials, as well as the goods she receives in exchange for what she sells, from foreign countries. Her markets, both for buying and selling, have thereby become subject to all the changes of fortune and circumstance which may befall these foreign lands. A bad harvest of silk in China, or of corn in America, a famine in India, a civil war in the United States arresting the production of cotton, a war between France and Germany, insolvency of foreign loans, commercial depression over the States and Canada, and Germany, and other territories-these, and endless other vicissitudes of commercial position, most powerfully affect the demand and supply of the whole of English trade, and create violent commotions in prices, both for buyers and sellers. It was natural that economists should fasten their attention on these variable winds of the commercial weather, and be eager to discover the existence of laws in supply and demand to guide and protect traders in every market. Much ability and acuteness have been devoted to this study. Whether an economical Newton has ever sprung up and proclaimed a law of supply and demand which may rival in authority that of gravity is a matter which must now be considered.

The interest here, be it observed, is a purely practical one. Is Political Economy able only to record certain facts without giving any rules for determining what these facts shall be? or can it furnish laws, which, if followed, will lead to certain and necessary results?

To learn whether demand and supply contain a

scientific law, we must first know what they are. Adam Smith defines demand as a desire to buy on the part of those who are able to pay the price required; and supply as the quantity of goods brought to market. To this definition Mr Mill makes the objection, that there can be no proportion between two things not of the same denomination, such as a desire and a quantity of goods; they cannot be compared together as to their action on price. Accordingly he gets over the difficulty by defining demand as the quantity of goods demanded, and supply as the quantity of goods offered for sale; and when the goods are bought and paid for, he pronounces that the result is an equation between supply and demand. Professor Perry substantially takes the same view. He calls the money ready to be offered in buying demand, and the quantity of goods present to be sold supply. The sale marks that an equation has been established between the two. But these definitions only state two facts; they are merely statistics, they tell us nothing about their action on prices, and the forces which make that price what it is.

Further, Mr Thornton attacks this doctrine of equation, and denies that the market price of a commodity is always such that the demand and supply become equal. He most unanswerably urges that demand often would buy more if the price would remain stationary at a fixed point beyond which it refuses to advance. When an article is absolutely indispensable, such as food to ward off starvation, then a defective supply will be all bought. In the siege of Paris, men preferred to give their all for food rather than die; but if the article be a luxury, the desire to buy and the means of paying may

remain unexhausted, yet the price is unable to rise. There are many who would consent to buy oysters at four shillings a dozen, who would refuse to give six; they prefer some other luxury to oysters at such a price. The price in that case will not rise beyond four shillings, yet there are many who would give that sum but cannot get the oysters. At four shillings the demand is stationary, yet the supply is insufficient. To say that at that price, demand equals supply because the surplus demand has been extinguished, would not be accurate, for at that market value there are buyers who go empty away; and if it were accurate, it only expresses that all the oysters were bought.

Adam Smith's definition, slightly modified, will give us the true relation of supply to demand, and put us in presence of the real forces which act on value in a given state of supply and demand in a given market. Let the first part of his definition stand. He describes demand correctly as a desire to acquire with ability to pay. On a level with this, let supply be described as a desire to sell with the means of at once furnishing the goods. The parallel will then be complete; and we shall have two opposite desires, standing, each of them, on a physical fact, the goods actually in existence, and the money wherewith to buy them. Under ordinary circumstances, supply will adapt itself to demand, and natural prices will prevail. The usual compensation for services rendered in production will be given by purchasers in the shape of profits, wages, and other payments; when, on the contrary, in a given market, the relation between supply and demand is disturbed, then the feelings of the demanders and their suppliers will come into play. If the article be rare or