river. The stress laid upon these unqualified and unverified deductions appears to me to be the peculiar vice introduced into economical reasonings by the example and influence of Mr. Ricardo, and it is only to be got rid of by a careful application of the principles of inquiry which Mr. Mill has laid down in his logic of the moral sciences.

A single appeal to experience is, I think, sufficient to overthrow the supposed law as showing the cause of the decline of profit. It is admitted by Mr. Mill, and is indeed notorious, that, owing to agricultural improvements, the law of diminishing fertility of land may be and has been practically suspended for a long series of years. During such suspension, however, all the common phenomena of declining profits have presented themselves, and therefore, of course, must be traced to causes quite unconnected with the state of cultivation.

Profits and Wages may both fall.

Profits, then, are not determined by wages, or by the fertility of the land, but by the competition of capitalists, which reduces them to that minimum which is the least that will induce men to abstain from consumption. They may fall, therefore, while the margin of cultivation remains stationary. Profits and wages are not cause and effect, but co-ordinate effects of that cause, or assemblage of conditions, which determines the equation of demand and supply, between the wages fund on the one hand, and the amount of labour on the other. The moving forces are the desires, calculations, and competition of labourers on the one hand, and those of capitalists on the other.

Further, both profits and wages, as measured in money, may fall at the same time, from the double pressure of unemployed money capital and unemployed labour, to the advantage of all those who hold, in the form of dividends, rents, or salaries, fixed or nearly fixed claims on the receipts from the annual produce.

The line of revolution of capital and income has been com

pared by Sismondi to a spiral; that is to say, to a curve of that kind which goes round in ever-widening folds, the space between the returning line and that beneath it marking the margin of profit. To make the image true, however, we must suppose that space growing narrower with every sweep of the curve, so that the latter tends to settle into a perfect circle. This would represent the action of the law of profits during definite periods in England.

PRICES form a mechanism of extreme delicacy, by which, on the one hand, those real commodities which constitute real income are distributed to the consumers, and, on the other, the money incomes of consumers are drawn back into the form of money capital, so as to complete the operation of the capitalist. All produce of labour, as it leaves the hand of the wages-paid labourer, is capital, in the form called in this work specific. The grain from the farm, the cotton or the sugar from the plantation, the goods from the factory, are all specific capital; but sooner or later these masses break up into minute subdivisions, and become the specific ingredients of income. Their purpose is to be useful to man, and they can only be so by coming to be consumed by him in this form. That movement of money capital and money income which, constantly revolving in a contrary direction, corresponds to and meets this revolution of specific capital and specific income, has been already sufficiently explained. But there is still required an explanation of the laws regulating the variation of prices, and of the connection which income and prices have with the amount of the currency.

Retail Prices govern wholesale.

Prices are of two kinds, retail and wholesale.

Retail prices are those at which commodities are bought by consumers, but, in any scientific reasoning, must be considered as far as possible free from those accidental additions which custom or carelessness may make to them in particular cases. The general retail price of a commodity will then be that average price at which the actual supply of it can be disposed of by the whole body of retailers to those who want it for consumption.

Taken in this sense, it will be evident that retail prices must govern wholesale prices, or those paid by one dealer to another. No matter how many dealers may intervene between the prolucer and the consumer, these two parties at the extremities of the chain determine the permanent points between which prices oscillate. No speculation can cause more than a temporary disturbance.

Retail Prices limited by Incomes.

Every consumer proceeds upon some estimate of the sum which he can spend in a given period. Whether this be fixed or variable, his expectation of what it will be governs him. The amount of money which passes through his hands as capital, supposing him to be a dealer, or the extent of credit which he may have with his banker, or the merchant or manufacturer who supplies him with goods, have properly nothing to do with the matter. If a shopkeeper, in turning a capital of ten thousand pounds, derives from his profits a spending income of only five hundred a year, his power as a consumer is exactly the same with that of the surgeon, who receives fees to the same amount, and sees them vanish to landlord, taxgatherer, and tradesmen, as fast as they come in. Dishonest exceptions do not hinder the generality of the rule. Each can

only pay, for all the goods and services he requires, the sum total of his spending income. If he pays more for bread and meat, he must pay less for wine and coach hire. When necessaries become dearer, he either obtains luxuries cheaper or goes without them. But if the income of each consumer determines the sum total of the prices that he can pay, the aggregate incomes of the body of consumers must determine the sum total of prices that can be paid for all things that go into consumption. Hence, prices and incomes being measured in money, it is totally inconceivable that an enhancement can take place in prices generally without an enlargement of the aggregate of income. It is true that every change in prices affects one or more classes of incomes, and that in a general rise of prices many commodities become dearer, while certain incomes only follow the movement, and others remain stationary; but still it will also remain true that each portion of commodities, as it goes into consumption at the higher price, is bought by the consumer upon a previous view of his income. Hence a rise in general prices requires, as an indispensable antecedent condition, a rise, not in each class of incomes, but in the aggregate of income, that is to say, in the sum total of the fund which the body of consumers calculate upon as available for expenditure.

The prices which retailers, and those who offer personal services, can obtain, are clearly fixed by the means of the consumer. Yet the proposition that retail prices govern wholesale prices may seem to conflict with some common appearances in the wholesale markets. The banker and the speculator are supposed to exercise great power in raising and depressing prices, and there can be no doubt that a great facility in obtaining capital on loan does contribute to raise the prices not only of one, but of several articles. But these fluctuations are only temporary, and whatever power over the markets may be assigned to expansions and contractions of credit, they are still always subordinate to the two great considerations which govern all bonâ fide dealers; namely, first, the probable extent of the