operation. The price of grinding was, at first, only that of immediate labor; it is now the price of immediate labor, together with the interest on the amount of the pre-exerted labor. It is, however, to be observed, that notwithstanding I am receiving emolument from two sources, and am growing rich faster than before, it is on terms vastly more favorable to the community, inasmuch as I can, for the same remuneration, give ten times as much in return as I could before.

The case is the same, if two separate individuals are employed in the operation, the one owning the capital or stock, and the other performing the labor. In this case, the cost consists of the wages of labor, and of the interest on, and the wear and tear of, the capital. Here, however, as before, the community is the gainer; because, for the wages of labor and interest on capital, it receives a much larger product than it received before, for the wages of labor alone. Thus, if a machine cost one thousand dollars, and there were paid for the use of it, one hundred dollars a year, this, added to the wages of labor, at a dollar a day, would be four hundred dollars, allowing three hundred working days a year. This would be but one hundred dollars more than would be paid for the labor of the man alone. But a man, with such an instrument, would, probably, in a year, accomplish ten times as much work as he could accomplish without it. All the gain of the change is, therefore, for the benefit of the public. see, therefore, that labor and the interest of capital, must, necessarily and justly, enter into the price of every product which is offered in exchange. The producer can never, for a long period, chargé more than a fair remuneration for his labor and capital; because, then, it would be cheaper for the other party to produce it for himself. He cannot, for a long period, charge less; because, in this case, he will be ruined, and must leave the employment; and thus the number of producers will be diminish

We

ed, and the value of the product will rise to the average rate of profit."

Nevertheless, for short periods, the exchangeable value of any product may be raised above the reasonable rate of profit. If the demand exceed the supply, there will be a competition among the buyers; the more wealthy will overbid the less wealthy, and the price will rise. This rise of price will induce others to devote themselves to supplying the demand, and thus the price will fall. If the supply be greater than the demand, there will arise a competition among the sellers, and the price will fall, and will remain depressed, until either the demand increase, or else until so many leave the employment, as shall reduce the supply to the average demand.

It is evident that it makes no difference, as to the result, whether the ratio between supply and demand be disturbed by a change in supply or in demand. If the demand continue the same, a diminished supply produces the same effect as would be produced by an increased demand, while the supply remained the same. And, on the other hand, demand being the same, an increased supply produces the same result as when, supply being the same, the demand is increased; that is, in the one case, the exchangeable value of the product will rise; in the other case, it will fall.

It deserves, however, to be remarked, that this effect produced by the disturbance of the ratio between supply and demand will be greater or less, according to several circumstances.

These are:

1. The durability of the commodity. If it be one which, unless it be consumed immediately, will become worthless, the fall of price, from increased supply is great. Such is the case with oranges, lemons, figs, fresh fish, &c. If, on the contrary, it be a commodity which will endure for years, without loss of intrinsic value, the effect will be less. Thus, an increased supply of iron, produces in the market a comparatively small variation in the price.

2. Variation of price, from this cause, depends, also, upon the ease or difficulty with which the supply may be increased. Thus, manufactured articles can generally be produced in a short time, and, if necessary, in a much more than usual quantity. Agricultural products, on the contrary, require a year, in order to be brought to perfection. Hence, if a crop fail this year, we know that there must be a diminished supply in the whole country, for the remainder of the year; and hence, as there must be a scarcity, every one is prepared to give as much as he is able. But, if cotton cloth be high, unless the rise of price be owing to a diminished production of the material, this high price will cause more cloth to be made, and hence, before long, the price will fall. We therefore purchase only as much as we absolutely need, and wait for the favorable change.

3. It will be affected by the nature of the demand for the article. If it be an article of universal necessity, it will rise more rapidly by scarcity, and sink less rapidly by increased supply; while, if it be an article of mere luxury, it will rise less rapidly by scarcity, and sink more rapidly by increased supply. When every one must have a commodity, the demand is constant, and every one is alarmed at the prospect of suffering; hence, he purchases it at any price. And, on the other hand, if the supply be abundant, the holder knows that the ordinary consumption will soon reduce the quantity in market, and rather than sell at a reduced profit, he will wait for the change of price. On the contrary, if an article of luxury be scarce, men begin to abandon it, and thus the demand is quickly reduced. If it be abundant, the number of purchasers does not increase with the supply, because men have not yet learned to use it; hence, its fall in price is rapid, being not sustained by a correspondent increase of demand.

These, I think, are the principal circumstances which enter into the exchangeable value of products. They are variously combined and modified, so that

they may sometimes counteract, and sometimes exaggerate each other. But, I think, that, by applying them to the actual occurrences of life, we may generally be able to explain the fluctuations of price, which are daily taking place in the market.

II. When an article of produce is offered for exchange, the producer has conferred upon it his last value, and it is now ready for the consumer.

By the consumer, here, I do not mean him only who gratifies his desire by the ultimate destruction of the product, but also him who receives it for the purpose of giving to it some other modification. The exchanger confers upon it no new value. It is the same when it passes out of his hands to the consumer, as when it came into his hands from the producer: that is, in general, exchange confers no value at all upon products; since they receive no modification by passing from the hands of one person to those of another.

1. Hence it will be seen, that the more rapidly exchanges are made, the better. The more rapidly they are made, the less is the loss of interest, and the smaller the advance which the exchanger must charge for his labor. If a merchant purchase to-day a thousand dollars' worth of iron, which he sells to-morrow, he charges us for his labor and skill, and adds only the interest for one day upon his capital. If he must keep the iron a whole year before he sell it, he must charge the interest of a whole year, or else he will be the loser by his operation.

Nor is this all. If he sell his iron to-morrow, he may invest the same sum, in iron, and sell it again fifty times in the course of the year; and thus receive a profit fifty times a year upon the use of his skill and labor, while, in the other case, he receives this profit but once. Hence, when exchanges are rapid, he can afford to exchange at a less rate for his labor and skill, than when they are slow. And hence, brisk exchanges are for the benefit of both buyer and seller; and a benefit to one, is a benefit to

all. It is for this reason, among others, that we can frequently purchase at a cheaper rate in a large city, than in a country town.

2. And hence we see a reason, why the profit upon one operation in some kinds of exchange, is greater than that in others. The profits of the wholesale merchant on a pound of tea, are, for instance, greater than those of the retail merchant. He who sends his capital to the East Indies, and receives in return a cargo of teas, must charge interest and risk, for the whole time consumed, from the day that he parts with his property, until the day that he receives it again. This may be nearly two years. The retail merchant, who purchases one of those chests of tea, may sell it all in a week, and thus invest it fifty times in the course of a year. Now, if the profit on an exchange were as great in the one case as in the other, the annual gains of the retail merchant would be exorbitant. These are reduced, by competition, to the average level; and hence, his gains on any single operation are much less than those of the wholesale merchant. The same principle applies to production. The greater the time consumed in an operation, the larger is the profit on each article which justly belongs to the producer.

3. But, though the act of exchange add nothing to the absolute value of the commodity, it adds greatly to its relative value, that is, to the convenience both of the buyer and the seller; inasmuch as it enables both to gratify a desire, which, otherwise, would have been unsatisfied. If I want a pen-knife more than I want a dollar, and a hardware merchant wants a dollar more than he wants a pen-knife, we make the exchange with each other. The dollar is the same as before: it will buy no more in his hands, than it will in mine. The pen-knife is the same as before; it has neither gained nor lost; and I might, if I chose, exchange it with the next man I met, for a dollar. But, both the merchant and myself are benefitted by the exchange. I can use the knife for