BOOK II.

LABOUR AND CAPITAL IN DEBATE.

CHAPTER I.

OF SUPPLY AND DEMAND, AND OF THEIR INFLUENCE ON PRICE AND WAGES.

BEFORE entering on our main subject it is indispensable to disentangle ourselves from certain misconceptions which beset us at the threshold, and which unless got rid of now, will continue to cling to and hamper us throughout our subsequent progress.

The actual condition of labour being what it notoriously is, enhancement of the price of labour must be an indispensable element in any very material improvement of that condition. But hitherto everybody has taken for granted that the price of all things, labour included, depends upon the proportion between supply and demand; and if it does really so depend, we are clearly engaging in an almost hopeless enquiry. If the price of labour does so depend, there is plainly but one means by which it can be enhanced the proportion of demand to supply must be increased. But in order to produce such relative increase no absolute augmentation of demand will of itself suffice. In the case of labour the normal tendency of supply is to keep at least pace with demand. If demand is to continue in advance, the progress of supply must be retarded. In plain language, labourers must place their power of selfmultiplication under more rigorous restraint. Unfortunately, restraint of the sort referred to is commonly most wanting

where most wanted. Prudence in matters matrimonial is too often in inverse ratio to poverty. As Johnson said to Boswell, neatly compressing into two lines the quintessence of practical Malthusianism, 'A man is poor: he thinks he cannot be worse: so I'll e'en take Peggy.' Labourers can be rendered connubially discreet only by having their standard of living raised. But their standard of living cannot be raised without a permanent rise in the price of their labour, and the price of labour cannot be permanently raised, unless the multiplication of labourers be checked, and that multiplication cannot be checked except at the bidding of connubial discretion. So that, the problem before us being how permanently to raise the price of labour, the dilemma in which the supply and demand theory places us is this: the price cannot be permanently raised unless the supply be first checked, and the supply cannot be checked unless the price be first permanently raised.

For those who do not choose to be confined within this millhorse circle there is no alternative but to cut the supply and demand theory adrift, as I hope to persuade the reader to join with me in doing. Of such of my critics as have been conscientious enough to examine my former pleadings on this matter before pronouncing upon them, one and all admit that I have pointed out real defects in the popular theory. The only difference between these critics and myself is as to the gravity of the admitted defects. With the additional light with which they have themselves favoured me, I hope now to be able to convince them that the defects pointed out are fatal ones-that the theory is not simply imperfect, but radically and intrinsically unsound. I assert positively that the price, whether of labour or of anything else, in no case whatsoever depends on the proportion between supply and demand, and that no definitions ever have or can be given of supply and demand consistently with which price can so depend. To make good these assertions will be the first object of the present.

chapter; a second will be to ascertain what does determine price if supply and demand do not; and a third to discover whether there is any, and if so, what, difference between the mode in which the really determining cause regulates the price of labour or rate of wages and that in which it operates on prices generally.

From some of the comments which have been made upon my previous statements, I find it to my extreme surprise necessary to explain, that, when speaking as above, I mean by 'price' only selling price-the sum, that is, at which a commodity is either actually being or will eventually be sold. This must not be confounded with market price, or the sum for which a commodity is merely offered for sale, but which may perhaps never be obtained for it,— the difference between the two being all the difference between asking and getting. Still less must it be confounded with that pure abstraction of the mind, to which its authors have given the name of normal or natural price, denoting thereby not any sum for which commodities are either sold or even offered for sale, but only one at which they would be sold if certain disturbing influences did not cause them to be sold for a different sum. It is to this abstraction, or at any rate not to selling price, to which those refer who, like Ricardo, although admitting that the price of commodities is temporarily regulated by supply and demand, say nevertheless that it is cost of production which ultimately regulates price. For here as elsewhere the word 'ultimately' means, it may be presumed,' at last,' but with respect to an individual sale, there can be no separable first and last. A sale as soon as it has taken place, has become an accomplished fact, and at whatever price the sale was effected that price cannot subsequently change. Upon whatsoever conditions it depended at first, it cannot subsequently depend upon any others. It cannot depend upon supply and demand at one time, and upon cost of production subsequently. When price, then, is said to depend ultimately upon cost of production, it cannot be

With regard to that, the been at one with their

selling price that is referred to. greatest masters have always humblest disciples. By both equally selling price has always been understood to be dependent solely and absolutely on supply and demand.*

* It may, I think, be perceived by anyone who reads Ricardo's 30th Chapter with due care, that in speaking of cost of production as ultimately determining price, he meant little more than this, viz., that the price of unmonopolised commodities cannot for a length of time remain either above or below the cost of production, because in the one case production would increase, and in the other diminish, proportionately. He only amplifies this idea when he says that 'supply and demand may indeed for a time affect the market value of a commodity until it is supplied in greater or less abundance, according as the demand may have increased or diminished; but this effect will be only of temporary duration.' He represents, in short, cost of production as the natural price with which market price would always exactly correspond if the continual variations of supply and demand did not cause market price also to vary. This was apparently Ricardo's opinion, and it is identical with that of every intelligent upholder of the popular supply and demand doctrine, and notably with that of Mr. Mill, until lately its most strenuous upholder.

It must be owned, however, that there are considerable inconsistencies in Ricardo's language on the subject. Some of his propositions, indeed, considering whom they come from, are nothing short of astounding. Take, for instance, this : 'Diminish the cost of subsistence of men by diminishing the natural price of the food and clothing by which life is sustained, and wages will ultimately fall, notwithstanding that the demand for labourers may very greatly increase;' which is almost equivalent to saying that wages must have fallen in England since the repeal of the Corn Laws, instead of rising as they notoriously have done, and which is quite equivalent to saying that in the long run money wages must always and everywhere represent the same quantity of the necessaries of life. Or take this: "The demand for a commodity cannot be said to increase if no additional quantity of it be purchased or consumed; and yet under such circumstances its money value may rise.' According to which, the quantity on hand of some particular commodity being supposed to be limited, only sufficient, say, for the want of twenty customers, the demand for it will be the same whether the number of persons desirous of purchasing be twenty or forty.

With respect to the limit set by cost of production to possible fall of price, Ricardo copies from J. B. Say, who, while stating that 'cost of production determines the lowest price to which things can fall,' is