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sense, to be so completely severed by abstraction from all the disturbing forces which concur in the production of actual results as to be of no practical use whatever.

That law, as I conceive it, is contained in the following propositions :

1. So long as the standard of comfort amongst the labouring class remains unaltered, there is some definite quantity of food and other necessaries, without which a labourer cannot bring up a family, and that quantity is the moral minimum of wages.

2. The tendency of population to excess prevents actual wages from permanently exceeding that moral minimum. 3. Whenever new capital is applied to land, the return is some definite amount of produce determined by the operations of nature. That return replaces the wages of the labourers, and yields, besides, a surplus which is profit, its proportion to the outlay determining the rate of agricultural profit.

4. The rate of agricultural profit so determined, or that obtained at what Dr. Chalmers calls the margin of cultivation, determines the rate of all profit.

5. Hence the observed tendency of general profits to fall is to be referred to the constant diminution in the proportionate returns which land makes to new capital.

The law involves all these particulars, and I am obliged to state them in my own language because I cannot find them presented in one view in the writings of any of the economists. The long chain of deductions which it exhibits, however, involves processes of such length and complexity that the connection between the first premises and the last conclusion appears to me to be almost as slight and distant, as if one should say that the currents of the Atlantic affected the height of water at London Bridge. There is no doubt some connection between the two, but none which the utmost progress of science will ever make appreciable in the navigation of the

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.

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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. exceptions do not hinder the generality of the rule.

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