procuring food, unless it will return a larger amount of sustenance than is required in order to maintain the cultivators; and the excess produced above their necessary maintenance is the absolute limit to any rent or profit which it is capable of yielding. But in no other department of human industry is this principle at all applicable. There is, in the majority of cases, no more connexion between the quantity of the things produced and the quantity of the things consumed in the process of production, than there is between yards of cloth and gallons of wine. The only possible means of comparing the one with the other is by their value, and not by their quantity. We cannot, therefore, agree with Mr. Macculloch in his doctrine, that profit is occasioned by an excess of the quantity produced over and above the quantity consumed. It is not always true of the produce of the land; for the varying value of the crop must often make the quantity necessary to put into motion the labour that has produced it, greater or less than the quantity actually consumed in the production. In the one case the profit will be greater than the excess of quantity produced, and in the other case it will fall below it. Thus, if to produce 120 quarters of corn it has cost 100 quarters, the excess will be twenty quarters; but if, owing to a rise of price, when those 120 quarters are brought to market, ninety-five quarters should be sufficient to put into motion the same quantity of labour as that employed in the production of the whole 120 quarters, instead of twenty quarters, the profit will be increased to twenty-five quarters; or if, on the other hand, owing to a fall of price, 105 quarters should be required to command that same quantity of labour, the profit will be reduced to fifteen quarters. In other sorts of industry, the quantities produced and those consumed relate, for the most part, to perfectly different subjects, which are obviously incommensurable by each other; so that profits must depend upon the excess of value, and not upon the excess of quantity produced.

It seems to be a favourite tenet of Mr. Macculloch, and one which he has taken much pains to inculcate, that the power to accumulate in a country depends altogether upon the rate of profit.

"Seeing, therefore, that capital is produced out of the excess of the produce realized by those who engage in industrious undertakings, over and above the produce necessarily expended in carrying them on, it plainly follows that the means of amassing capital will be greatest where this excess is greatest, or, in other words, that they will be greatest where the rate of profit is greatest."-p. 105.

If, on the rise or fall of profit, other things remained the same, this doctrine would of course be true; but, in the progress of

society, it is very rarely the case that other things do remain the same. The very circumstances which diminish the rate of profit (unless temporarily) increase rent, stated wages, and derivative incomes, which are all sources of accumulation, and in our own country especially very largely so. It happens, therefore, that practically the augmentations that are made to capital are often the greatest where the rate of profit is the lowest.

Even if profits were the sole, or even chief fund out of which a nation could add to its capital, its power of accumulation from this source must depend upon the mass of its profits, and not upon their rate. If in one country profits are ten per cent., and in another fifteen per cent., yet if the capital in the former be double what it is in the latter, its power of augmenting its capital will, cæteris paribus, be as twenty to fifteen.

Mr. Macculloch has a long chapter on the subject of gluts. We are certainly as little apprehensive as himself that a glut is ever likely to be brought about by the substitution of machinery for human labour. It is the fall of commodities below their cost of production that is ruinous to the producer, and not their fall in consequence of a diminution of the cost. A fall from the latter cause is an universal benefit, since it puts the article to which it applies within the reach of those who could not before obtain it, and that without any abatement of profit to the producer. Such a fall, too, is usually attended by an increase of the quantity demanded and consumed, so that the total value sold is greater than it was before. A fall, however, arising from the over-supply of a commodity of which the cost has not been reduced, is a totally different thing, and the question is, whether or not such a fall can possibly be general.

In arguing against this possibility, Mr. Macculloch has propounded some things which we could hardly have expected to have proceeded from the pen of a man of sense. He says,

"In exerting his productive powers, every man intends either to consume the entire produce of his labours himself, or to exchange it, or a portion of it, for such commodities or services as he wishes to obtain from others. Suppose now that he directly consumes every thing he produces; it is obvious that in such a case there can be no glut or excess; for to suppose that commodities intended for direct consumption by the producers may be in excess, is equivalent to supposing that production may be carried on without a motive, that there may be an effect without a cause. When individuals, instead of directly consuming the produce of their industry, offer it in exchange for others, their miscalculations may occasion a glut. Should A for example produce commodities and offer them in exchange to B or C, who is unable to furnish him with those he wished to obtain, he will have miscalculated; and there will be a glut. He should, it is obvious, have offered his com

modities to others, or have applied himself to the production of those which he wanted. This, however, is an error that will speedily be rectified; for, if he find that he cannot attain his object by prosecuting his present employment, he will forthwith set about changing it, producing in time to come such commodities only as he may find a merchant for, or as he means to consume himself.”—p. 192.

Now, in a state of society in which the division of labour is carried to its utmost extent,-where each one confines himself, or pretty nearly so, to a single branch of business, and exchanges the produce of his one species of industry, either for labour or for the various produce of many other kinds of industry,—how is it possible for a man directly to consume himself every thing he produces? and, if he could so consume it, what would become of his capital which is vested in it? Or, again, how is he to follow Mr. Macculloch's recommendation, and apply himself to the production of the other things he may want? Is he to quit a business to which he has been perhaps all his life accustomed, in order to take up others of which he knows little or nothing; or, in other words, to make himself a Jack of all trades; in doing which it is pretty certain that he would become master of none? But supposing these difficulties to be got over, and that he had both the will and capability of undertaking some new employment, from whence is he to derive the means of doing it, seeing that his capital is locked up in an article which is either wholly unsaleable, or which he cannot dispose of but at such a sacrifice as must render his continuance in his own trade by far the least evil of the two? Reasonings like these, on the part of theoretical writers, which bid defiance to common sense and experience, are calculated to bring the science into contempt, and make practical men turn away from it in disgust.

The following passage is less objectionable. We quote it, because it shows more clearly wherein the fallacy upon this question lies:

"It is clear, therefore, that a universally increased facility of production can never be the cause of a permanent overloading of the market. Suppose that the amount of capital and labour engaged in different employments is adjusted according to the effectual demand, and that they are all yielding the same net profit. If the productive powers of labour were universally increased, the commodities produced would all preserve the same relation to each other. Double or treble the quantity of one commodity would be given for double or treble the quantity of every other commodity. There would be a general augmentation of the wealth of the society, but there would be no excess of commodities in the market; the increased equivalents on the one

side being balanced by a corresponding increase on the other."p. 193.

Mr. Macculloch evidently imagines that, so long as commodities all preserve the same relation to each other, they must all continue to yield the same net profit. He does not perceive that this profit may vary, that it may be increased or decreased on the whole mass of commodities generally, without affecting their relative value. This is precisely the error into which Mr. Mill has fallen on this subject, and which is founded upon a total misconception as to the nature of demand and supply.

"What is it," says Mr. Mill, "that is necessarily meant when we say that the supply and the demand are accommodated to one another? It is this: that goods which have been produced by a certain quantity of labour, exchange for goods which have been produced by an equal quantity of labour. Let this proposition be duly attended to, and all the rest will be clear *.

Now as the rise and fall of profit do not (according to Mr. Mill's own doctrine, adopted by him from Mr. Ricardo,) affect the relative value of commodities, so neither (upon the principle set forth in the above extract) can it affect the proportion between the demand and supply in Mr. Mill's sense of those terms; and yet, according to their ordinary meaning, no rise or fall could possibly take place in profits either generally or in reference to particular commodities only, without some change having taken place in the relation between the demand and the supply to account for it. Upon this mistaken interpretation of those terms, however, it is, that Mr. Mill has founded his denial of the possibility of a general glut. An excessive supply of some commodities implies, in his view, an excessive demand for others. He has failed to perceive that they may all preserve a due proportion to each other, and yet all be in excess. Their relative value may be the same, when they are all selling at money prices which are insufficient to defray the cost of their production.

Mr. Mill, and those who have adopted his theory on this subject, have not sufficiently considered that men do not practically barter their goods with each other; but they first exchange them for money, and afterwards exchange that money for other goods. Now it occasionally happens, that owing to a scarcity of money, originating, perhaps, in causes peculiar to the currency, or in over-speculation, or in an union of both causes, a general apprehension exists on the part of dealers of a probable fall of prices. Under this impression all rush to the market together, and are eager to convert their goods into money, but are not equally

Elem of Pol. Econ, chap. iv, sec. 3.

anxious to convert their money again into goods. The natural and inevitable consequence is the very fall which they apprehended, attended with an increased difficulty of selling, and terminating in a complete stagnation of business, or what is called a general glut. This, at the time being, is a state of overproduction, that is, of production beyond a remunerative demand, or such a demand as will satisfy the conditions of the cost 3.

We pass on to the consideration of the question of value.

Mr. Macculloch's doctrine on this subject seems to be a modification of that of Mr. Ricardo, to whose work we must refer, in order thoroughly to understand it.

Mr. Ricardo's opening chapter commences with the following proposition: "The value of commodities, or the proportion in which they will exchange for each other, depends upon the relative quantities of labour employed in their production."

Now here the term value is used as synonymous with the proportion in which commodities exchange for each other. But a little further on (in the same chapter) we are told that commodities rise in value with every increase of labour required to produce them, and fall with every diminution of such labour.

"If," says Mr. Ricardo, "the quantity of labour realized in commodities regulate their exchangeable value, every increase of the quantity of labour must augment the value of that commodity on which it is exercised, as every diminution must lower it."

In conformity with this statement, if all commodities could be produced with one-half the labour that is now bestowed on them, they would fall in value one-half (a doctrine which Mr. Ricardo has still more clearly stated in other parts of his work, as for instance in his remarks on Mons. Say); but, as this circumstance would not alter the proportion in which they would exchange with each other, it is clear that Mr. Ricardo has here used the term value in a sense different from that in which he explained it at the outset of his work. In the latter instance he considers it with reference to cost, and the moment we refer value to cost there is an end of saying that it is a mere relation of one commodity to another. In chap. xx., edit. 3, his remarks on Mons. Say are as follows:

“According to Mons. Say, if the difficulty of producing cloth

* See this subject very ably explained in some Essays on Polit. Econ. by Mr. John Stuart Mill, recently published (p. 69.) On one point we venture to differ from the view taken by this very talented writer. He thinks that when a fall takes place, if the prices remained permanently low, no producer would be the worse for it, as all would be put on the same footing in respect to their sales and purchases; but it seems to have escaped him, that many rates and taxes and the price of labour do not fall, or at any rate not in proportion, so that a reaction of the prices, or a rise, is always felt by them to be a relief.