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may be quite different from our own. If we could move out capital from where profits are low to where they are high, the result would be good, both for capitalists and for consumers. When a country has a great advantage in one production and a distinct. though less advantage in a second, the best course for all parties, on the principle of the territorial division of labor, is to bring in the capital to work both of them;-Ricardo does not say the labor perhaps because on the Malthusian principle labor could not fail to come where the capital came. But that easy transference of capital does not happen, and accordingly we have the phenomenon of a country importing what it could have produced as well as the foreigner or better, and producing and exporting only what it can produce, not only a little better but very much better, confining itself to the production where it has the greatest advantage, as a single person, of greater abilities for any and every career than his neighbors, lets his neighbors take up the trades in which he would have excelled them less and devotes himself to the trade in which he is most their superior. To a single person it is physically impossible to be a Jack of all trades in these latter days; to the country it is not physically impossible, but there are physical difficulties and social and linguistic difficulties, as yet not quite removed. This phenomenon of which much has been made in the expositions of later writers under the heading of comparative cost, is described most fully by Ricardo in a footnote, as if he himself did not give it front rank. 13 The basis is given briefly in the text (76).

Alongside of this hindrance of effective competition we must place the fact that "gold and silver, the general medium of circulation, are by the competition of commerce distributed in such proportions amongst the different countries of the world as to accommodate themselves to the natural traffic, which would take place if no such metals existed and the trade between countries were purely a trade of barter."14 "The money of each country is apportioned to it in such quantities only as may be necessary to regulate a profitable trade of barter."15 "Accommodate themselves" and "regulate" are perhaps not very happy terms here. The following statement may be hazarded to avoid them. Under

13 McCulloch's edition of Works, Political Economy and Taxation, p. 77; 1st ed., p. 160.

14 Political Economy and Taxation, pp. 77-84.

15 Ibid., 79-80.

barter an equivalent article, an article wherewith to buy what we want to have, is indispensable in all circumstances; under the régime of money, an equivalent article other than money itself, is not absolutely indispensable; the gold may be sent instead, gold being treated as the international money of commerce. Money is the measure of value; goods are measured by their prices in gold. Money is the means of exchange; goods are sent from where they fetch little of it to where they fetch much of it. Money itself, a tool of exchange but a material tool, will be sent from where it fetches less, to where it fetches more. It will, therefore, only be sent when the proportion of currency wanted by domestic needs is exceeded, and the value of money is relatively too low, prices of goods being relatively too high. It is therefore exported. But the tendency of exporting money is to raise prices of goods by increasing the abundance of money, in the country to which it is sent. But to raise prices in the country where you are buying goods is gradually to make it unprofitable for you to go on buying them there. From being cheap they will, like all other goods there, become dear; your money will be more valuable in your own country; you will find goods the more profitable mode of payment since they are now dear there, and the money will come back to the place where it is worth more, where the general level has been altered, if one may say so, to its advantage, and not to its disadvantage.

What causes such alterations? Be it remembered that an increase or a decrease in the facility of production of gold itself would presumably affect all countries equally, and after the first flicker, though the quantities were altered, the proportions would be as before, both between gold and other goods in the same country, and as between one country and another.

But how do we explain the difference in the value of gold between one country and another? Ricardo gives two reasons. There is first the difficulty of procuring the gold from the place of origin; one country may be either farther away than another, or may have fewer goods, to barter for the gold, of the sort that the mining country wants (82). Hence in the second place the development of manufactures, the skilled industry, and advantages of climate may make one country more easily successful in obtaining supplies of gold, and every fresh development of industry will make that metal cheaper. We might call the first negative and physical, the second the positive and human cause.

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It follows that money is normally cheaper, proportionally, where trade is most highly developed.

Ricardo admits fully and sees as clearly as any of us here that there are disturbing causes (the phrase is used on page 81). Bounties and duties, for example, disturb the "natural trade of barter" and lessen the advantage possessed by the countries superior in skill, industry, and climate. If such countries adopt them they are limiting their own powers of purchasing gold cheaply (81-83).

Applying this particular conclusion of Ricardo's to our own day, we should say that the "natural course of things" would make English prices proportionally high; but the fact is otherwise, owing to the absence of disturbing causes (in the shape of vexatious taxes) in England, and the presence of such in rival nations. "They disturb the natural trade of barter and produce a consequent necessity of importing or exporting money in order that prices may be accommodated to the natural course of commerce; and this effect is produced, not only in the country, where the disturbing cause takes place, but in a greater or less degree in every country of the commercial world." (81) "Though taxation occasions a disturbance of the equilibrium of money, it does so by depriving the country in which it is imposed of some of the advantages attending skill, industry, and climate" (83), the chief being presumably the easier purchase of gold.

More space has been given to Ricardo's view of international trade as a sort of monetary equilibrium than can be given to his doctrine in its other aspects, as well as to his doctrines on other subjects. The intention was to raise the question, whether this was not the theory that led to all the other theories. It may have been the conscious skill with which he treated all matters of currency, that tempted him to generalize his solution there into a solution of economic problems in general. Few even of great thinkers are free from the domination of favorite categories, and Ricardo's favorite was proportion. 16

Rent is a "proportion of the produce." (44) Is not value itself a proportion? Ricardo emphatically endorses the statement of Adam Smith that "the proportion between quantities of labor necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them 16 Adam Smith, I, x. (end) has it; and so elsewhere, e. g., IV, vii, 273, but it was not his favorite term.

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for one another." (13) It is on the proportional quantity of labor that natural value depends, not on the wages given for that labor. Why? Because wages, like profits, have a uniform rate in a given country, competition driving them down to necessaries. Whether the necessaries mean a low standard of living or a high one (52), wages are "regulated by the proportion between the supply and demand of necessaries and the supply and demand of labor." (95) In the same way competition drives profits down to the gains of capital employed on the worst land that is worth cultivating at all. There cannot be two rates in a given country, when competition does its perfect work (36). Whatever the variations of money, the value of the produce will "bear the same proportion to the value of the capital" after the variation as before. Although the produce is doubled, "rent, wages, and profits will only vary as the proportions vary, in which this doubled produce may be divided among the three classes that share it." (33) "The profits of stock in different employments bear a certain proportion to each other, and have a tendency to vary all in the same degree, and in the same direction" (60), profits being in any case high or low, according as wages are low or high, and depending "on the quantity of labor requisite to provide necessaries for the laborers on that land, or with that capital which yields no rent." (70 cf. 66)

On the other hand, in proportion to the increase of capital will be the increase in the demand for labor (51). This increase, in the work to be done, raises the market rate of wages above the "natural rate"; but increase of population tends to pull it down again—and produce, we may suppose, the equilibrium of a calm sea.

Ricardo knows perfectly well that seas are not calm; he knows he is dealing only with tendencies. He is deliberately simplifying his subject, and tells us so (e. g., 66). In asking where Ricardo succeeded and where he failed, we are not only asking whether in the limited field he chose for his investigations he lighted upon the right tendencies and the right proportions, but whether his efforts had lasting effects, it may have been on method merely.

He has certainly succeeded in impressing all later economists with the importance of proportion. We need not suppose him to desire the coming of the calm sea, the stationary state; he says in so many words, that he hopes it is far distant (50). But are the tendencies and proportions such that a stationary state is

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itself tending to arrive? No one ever saw a perfectly calm sea. But we all believe that on the whole there is a tendency for the waves to be ruled to a level. We (or our friends) have seen approaches to it. The scientific theory of the claim is said to be more complete than that of the waves. This is our plight at least in economics.

In regard to the monetary equilibrium and theory of the currency in general, if Ricardo's is called a quantitative theory, the title is almost paradoxical, for it is a theory, as he would himself have said, not of quantities but of proportions. Taking it for what it is under any title, we may perhaps say that in our own times it is only less true than in his because the non-competitive groups of foreign trade have become less non-competitive and the frequent occurrence of non-competitive groups in home trade has been recognized. The world is small now, and if protective tariffs did not struggle so hard against foreign competition, capital and labor might flow so freely, as he thought they never would or even should (77). In any case they flow much more freely than in his day. If we had the statistical apparatus desired by Professor Irving Fisher, we might test the monetary theory empirically. The free flow does not of itself invalidate Ricardo's theory, for he applied it to one nation within itself as well as to groups of nations one toward another, and if the nations drew together they would economically be as one.

In regard to the general theory of foreign trade, Marshall's judgment, already quoted, has no doubt against it a considerable force of continental opinion. At a recent Free Trade Congress at Antwerp17 Professor Mahaim of Liege gave a list of the doubters and was himself inclined to leave the theory of foreign trade to the mathematicians. The arithmetic of the older economists is however intelligible to a wider circle than the higher mathematics of the new. A recent pamphlet of the English Cobden Club tried, perhaps indiscreetly, to base the plea for free trade on an absolutely hard and fast distinction between home and foreign trade.18 We may note at least that Ricardo is still so far alive that when those topics come up his name cannot be kept out of them.

In the matter of currency, Ricardo is still, to many of us, one of the few writers who speak clearly and impressively. He has

17 Aug. 9 to 12, 1910.


1 Imports and Employment, by Mr. Russell Rea, 1910.

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