Second, There are things which at a moderate out. lay of labor and capital can be multiplied indefinitely. With laborers and machinery enough, such things as cotton and woolen goods, shoes, hats, &c., might be multiplied a thousand-fold, or at least till the limit of the earth's capacity to yield materials is reached.

Third, There are things which can be produced in limited quantity at a given cost, but to increase the quantity involves a much greater proportional cost. Such are the agricultural products of a defined area of land. A field that yields twenty-five bushels of wheat to the acre may be made to yield forty bushels, but the cost will be more than doubled.

With these distinctions in mind, the following fundamental principles of exchange, as presented for the most part by Mr. Mill, are plain and almost self-evident.

1. Value is a relative term.

All goods sold are
Whoever sells

paid for in goods of another kind. a thing becomes in the act a purchaser of some other thing, and the value of each is simply what it brings in the trade. The values of all things can never, therefore, rise or fall at once. A rise of value on one side implies a fall on the other side.

Here the distinction between value and price must be observed. Price is value expressed in terms of the single article money. If the amount of money in a country be suddenly increased, as was the case in the United States in the years from 1861 to 1865, the prices of all things will rise together, because money is cheapened. The prices of wheat and

broadcloth may thus be doubled at the same time without changing the value of either: it will take the same amount of wheat to buy a yard of broadcloth as before. If it takes twice as much wheat to buy a hat this year as it did last, the fact implies a change of value on one side or the other. If the hat holds the same relation to all other articles as before, it is evident that wheat has for some reason declined in value. If all other articles must be doubled to buy the hat, it is evident that the hat has risen in value.

2. The temporary or market value of a thing depends on the demand and supply; rising as the demand rises, and falling as the supply rises. As a thing grows cheaper, however, under an increased supply, the demand increases in greater proportion; because every step downward in the value widens the circle of those who are able to buy the article.

3. Things have also a permanent, or, as it may be called, a natural value, to which the market value, after every variation, tends to return; and the oscillations compensate for one another, so that on the average, commodities are exchanged at about their natural value.

4. The natural value of some things is a scarcity value; but most things naturally exchange for one another in the ratio of their cost of production, or at what may be termed their cost values.

5. The things which are naturally and permanently at a scarcity value are those of which the supply cannot be increased at all, or not sufficiently to satisfy the whole demand which would exist for them at their cost value.

6. A monopoly value means a scarcity value. Monopoly cannot give a value to any thing, except through a limitation of the supply.

7. Every commodity of which the supply can be indefinitely increased by labor and capital exchanges for other things proportionally to the cost necessary for producing and bringing to market the most costly portion of the supply required. The natural value is synonymous with the cost value; and the cost value of a thing means the cost value of the most costly portion of it which the market demands.

8. If competition be free, the perturbations of value caused by variations of demand and supply continue only during a period which cannot exceed the length of time necessary for increasing or diminishing the supply. Under the pressure of competition, demand and supply rush towards an equilibrium; but the condition of stable equilibrium is when things exchange for each other according to their cost, or at what is fitly called their natural value.

The Necessity of Exchange springs from the diversity of nature's resources, the diversity of human capacities and tastes, and the wide reach of human desires, all of which prescribe for human industry the principle of division of labor. As men advance in intelligence, their desires are multiplied; at the same time, by discovery and invention the resources of nature are unfolded in full proportion. Desire stimulates invention, and successful invention wakes new desires. There is no assignable limit to the

development of either men's desires or nature's

resources.

Out of man's social nature spring sympathies, attractions, interests, which widen his associations, and multiply his opportunities, as both a giver and receiver of good things. Hence comes a law of interdependence, which forbids that any man should live either for or by himself alone. Thus human industry is varied; and each does that for which he is best fitted, or which he likes best, while mutua exchanges enable each to get what he wants by giving what he can spare.

Where the diverse labor of many is combined to produce a single object, exchange is the indispensable means of breaking up and distributing the value, SO that each may receive his share, and use it to meet his wants. The little screws which a man in a watch-factory makes by the thousand will not themselves feed or clothe him. The part which each one of a hundred men contributes to the building of a steam-engine is of no use apart from the whole, and yet no one can rightly appropriate the whole. But the complete watch or engine may be exchanged for food and clothing and other things which are desirable and exactly suited to the needs of all concerned.

The same principles apply with equal force to exchanges between different nations. In many cases the aptitudes of different nations for the creation of peculiar products is fixed by unchangeable geographical and physiological law. Moreover, a nation at one period of its history is best adapted to produce certain articles. It is obviously best that each

nation should devote its energies to the production of those things for which it has the greatest facilities, and by exchange with other nations make the surplus of its own products provide the products of other countries which its people need. Through

the mutual intercourse of nations for trade, civilization is developed, and the happiness of the human race is increased. Thus the conditions of our being demand the processes of exchange as imperatively as the processes of production.

Exchange is a

The Agents of Exchange. distinct department of useful industry, by which commodities are transferred from the producers to the consumers, in such places, at such times, and in such quantities, as are most convenient. It involves labor, and so adds to the cost of objects; it adds also to their desirableness, by bringing them within the reach of those whose wants are to be gratified. Thus in both ways it enhances their value to the benefit of both parties. By it the producer is helped to dispose of his products, and the consumer gets things just where and when and as they will best meet his wants. Obviously this labor will be most economically performed by persons who devote themselves exclusively to it, receiving a fair compensation for their service. This compensation is made up by a percentage charged on the values transferred, of which each party pays a portion; that is, the producer sells his products to the exchanger for something less than he would ask of the consumer directly, and the consumer pays the ex