When，however，Mr。Careyassertsthatthewholelandofany
countryisnotnowworththecapitalwhichhasbeenexpendedon
it，hedoesnotmeanthateachparticularestateisworthless
thanwhathasbeenlaidoutinimprovingit，andthat，tothe
proprietors，theimprovementofthelandhasbeen，inthefinal
result，amiscalculation。Hemeans，notthatthelandofGreat
Britainwouldnotnowsellforwhathasbeenlaidoutuponit，
butthatitwouldnotsellforthatamountplustheexpenseof
makingalltheroads，canals，andrailways。Thisisprobably
true，butisnomoretothepurpose，andnomoreimportantin
politicaleconomy，thanifthestatementhadbeen，thatitwould
notsellforthesumslaidoutonitplusthenationaldebt，or
plusthecostoftheFrenchRevolutionarywar，oranyother
expenseincurredforarealorimaginarypublicadvantage。The
roads，railways，andcanalswerenotconstructedtogivevalueto
land:onthecontrary，theirnaturaleffectwastolowerits
value，byrenderingotherandrivallandsaccessible:andthe
landholdersofthesoutherncountiesactuallypetitioned
Parliamentagainsttheturnpikeroadsonthisveryaccount。
Thetendencyofimprovedcommunicationsistolowerexisting
rents，bytrenchingonthemonopolyofthelandnearesttothe
placeswherelargenumbersofconsumersareassembled。Roadsand
canalsarenotintendedtoraisethevalueofthelandwhich
alreadysuppliesthemarkets，but（amongotherpurposes）to
cheapenthesupply，bylettingintheproduceofotherandmore
distantlands;andthemoreeffectuallythispurposeisattained，
thelowerrentwillbe。Ifwecouldimaginethattherailwaysand
canalsoftheUnitedStates，insteadofonlycheapening
communication，didtheirbusinesssoeffectuallyastoannihilate
costofcarriagealtogether，andenabletheproduceofMichigan
toreachthemarketofNewYorkasquicklyandascheaplyasthe
produceofLongIsland—thewholevalueofallthelandofthe
UnitedStates（exceptsuchasliesconvenientforbuilding）would
beannihilated;orrather，thebestwouldonlysellforthe
expenseofclearing，andthegovernmenttaxofadollaranda
quarterperacre;sincelandinMichigan，equaltothebestin
theUnitedStates，maybehadinunlimitedabundancebythat
amountofoutlay。ButitisstrangethatMr。Careyshouldthink
thisfactinconsistentwiththeRicardotheoryofrent。Admitting
allthatheasserts，itisstilltruethataslongasthereis
landwhichyieldsnorent，thelandwhichdoesyieldrent，does
soinconsequenceofsomeadvantagewhichitenjoys，infertility
orvicinitytomarkets，overtheother;andthemeasureofits
advantageisalsothemeasureofitsrent。Andthecauseofits
yieldingrent，isthatitpossessesanaturalmonopoly;the
quantityofland，asfavourablycircumstancedasitself，not
beingsufficienttosupplythemarket。Thesepropositions
constitutethetheoryofrent，laiddownbyRicardo;andifthey
aretrue，Icannotseethatitsignifiesmuchwhethertherent
whichthelandyieldsatthepresenttime，isgreaterorless
thantheinterestofthecapitalwhichhasbeenlaidouttoraise
itsvalue，togetherwiththeinterestofthecapitalwhichhas
beenlaidouttoloweritsvalue。
Mr。Carey’sobjection，however，hassomewhatmoreof
ingenuitythantheargumentscommonlymetwithagainstthetheory
ofrent;atheoremwhichmayhecalledtheponsasinorumof
politicaleconomy，forthereare，Iaminclinedtothink，few
personswhohaverefusedtheirassenttoitexceptfromnot
havingthoroughlyunderstoodit。Thelooseandinaccuratewayin
whichitisoftenapprehendedbythosewhoaffecttorefuteit，
isveryremarkable。Many，forinstance，haveimputedabsurdityto
Mr。Ricardo’stheory，becauseitisabsurdtosaythatthe
cultivationofinferiorlandisthecauseofrentonthe
superior。Mr。Ricardodoesnotsaythatitisthecultivationof
inferiorland，butthenecessityofcultivatingit，fromthe
insufficiencyofthesuperiorlandtofeedagrowingpopulation:
betweenwhichandthepropositionimputedtohimthereisnoless
adifferencethanthatbetweendemandandsupply。Othersagain
allegeasanobjectionagainstRicardo，thatifalllandwereof
equalfertility，itmightstillyieldarent。ButRicardosays
preciselythesame。Hesaysthatifalllandswereequally
fertile，thosewhicharenearertotheirmarketthanothers，and
arethereforelessburthenedwithcostofcarriage，wouldyielda
rentequivalenttotheadvantage;andthatthelandyieldingno
rentwouldthenbe，nottheleastfertile，buttheleast
advantageouslysituated，whichthewantsofthecommunity
requiredtobebroughtintocultivation。Itisalsodistinctlya
portionofRicardo’sdoctrine，thatevenapartfromdifferences
ofsituation，thelandofacountrysupposedtobeofuniform
fertilitywould，allofit，onacertainsupposition，payrent:
namely，ifthedemandofthecommunityrequiredthatitshould
allbecultivated，andcultivatedbeyondthepointatwhicha
furtherapplicationofcapitalbeginstobeattendedwitha
smallerproportionalreturn。Itwouldbeimpossibletoshowthat，
exceptbyforcibleexaction，thewholelandofacountrycan
yieldarentonanyothersupposition。
6。Afterthisviewofthenatureandcausesofrent，letus
turnbacktothesubjectofprofits，andbringupfor
reconsiderationoneofthepropositionslaiddowninthelast
chapter。Wetherestated，thattheadvancesofthecapitalist，or
inotherwords，theexpensesofproduction，consistsolelyin
wagesoflabour;thatwhateverportionoftheoutlayisnot
wages，ispreviousprofit，andwhateverisnotpreviousprofit，
iswages。Rent，however，beinganelementwhichitisimpossible
toresolveintoeitherprofitsorwages，wewereobliged，forthe
moment，toassumethatthecapitalistisnotrequiredtopay
rent—togiveanequivalentfortheuseofanappropriatednatural
agent:andIundertooktoshowintheproperplace，thatthisis
anallowablesupposition，andthatrentdoesnotreallyformany
partoftheexpensesofproduction，oroftheadvancesofthe
capitalist。Thegroundsonwhichthisassertionwasmadearenow
apparent。Itistruethatalltenantfarmers，andmanyother
classesofproducers，payrent。Butwehavenowseen，that
whoevercultivatesland，payingarentforit，getsinreturnfor
hisrentaninstrumentofsuperiorpowertootherinstrumentsof
thesamekindforwhichnorentispaid。Thesuperiorityofthe
instrumentisinexactproportiontotherentpaidforit。Ifa
fewpersonshadsteam—enginesofsuperiorpowertoallothersin
existence，butlimitedbyphysicallawstoanumbershortofthe
demand，therentwhichamanufacturerwouldbewillingtopayfor
oneofthesesteam—enginescouldnothelookeduponasan
additiontohisoutlay，becausebytheuseofithewouldsavein
hisotherexpensestheequivalentofwhatitcosthim:withoutit
hecouldnotdothesamequantityofwork，unlessatan
additionalexpenseequaltotherent。Thesamethingistrueof
land。Therealexpensesofproductionarethoseincurredonthe
worstland，orbythecapitalemployedintheleastfavourable
circumstances。Thislandorcapitalpays，aswehaveseen，no
rent;buttheexpensestowhichitissubject，causeallother
landoragriculturalcapitaltobesubjectedtoanequivalent
expenseintheformofrent。Whoeverdoespayrentgetsbackits
fullvalueinextraadvantages，andtherentwhichhepaysdoes
notplacehiminaworsepositionthan，butonlyinthesame
positionas，hisfellow—producerwhopaysnorent，butwhose
instrumentisoneofinferiorefficiency。
Wehavenowcompletedtheexpositionofthelawswhich
regulatethedistributionoftheproduceofland，labour，and
capital，asfarasitispossibletodiscussthoselaws
independentlyoftheinstrumentalitybywhichinacivilized
societythedistributioniseffected;themachineryofExchange
andPrice。Themorecompleteelucidationandfinalconfirmation
ofthelawswhichwehavelaiddown，andthedeductionoftheirmostimportantconsequences，mustbeprecededbyanexplanationofthenatureandworkingofthatmachinery—asubjectsoextensiveandcomplicatedastorequireaseparateBook。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3，Exchange
Chapter1
OfValue
1。Thesubjectonwhichwearenowabouttoenterfillsso
importantandconspicuousapositioninpoliticaleconomy，that
intheapprehensionofsomethinkersitsboundariesconfound
themselveswiththoseofthescienceitself。Oneeminentwriter
hasproposedasanameforPoliticalEconomy，\"Catallactics，\"or
thescienceofexchanges:byothersithasbeencalledthe
ScienceofValues。Ifthesedenominationshadappearedtome
logicallycorrect，Imusthaveplacedthediscussionofthe
elementarylawsofvalueatthecommencementofourinquiry，
insteadofpostponingittotheThirdPart;andthepossibility
ofsolongdeferringitisaloneasufficientproofthatthis
viewofthenatureofPoliticalEconomyistooconfined。Itis
truethatintheprecedingBookswehavenotescapedthe
necessityofanticipatingsomesmallportionofthetheoryof
Value，especiallyastothevalueoflabourandofland。Itis
neverthelessevident，thatofthetwogreatdepartmentsof
PoliticalEconomy，theproductionofwealthanditsdistribution，
theconsiderationofValuehastodowiththelatteralone;and
withthat，onlysofarascompetition，andnotusageorcustom，
isthedistributingagency。TheconditionsandlawsofProduction
wouldbethesameastheyare，ifthearrangementsofsocietydid
notdependonExchange，ordidnotadmitofit。Eveninthe
presentsystemofindustriallife，inwhichemploymentsare
minutelysubdivided，andallconcernedinproductiondependfor
theirremunerationonthepriceofaparticularcommodity，
exchangeisnotthefundamentallawofthedistributionofthe
produce，nomorethanroadsandcarriagesaretheessentiallaws
ofmotion，butmerelyapartofthemachineryforeffectingit。
Toconfoundtheseideas，seemstome，notonlyalogical，buta
practicalblunder。Itisacaseoftheerrortoocommonin
politicaleconomy，ofnotdistinguishingbetweennecessities
arisingfromthenatureofthings，andthosecreatedbysocial
arrangements:anerror，whichappearstometobeatalltimes
producingtwooppositemischiefs;ontheonehand，causing
politicaleconomiststoclassthemerelytemporarytruthsof
theirsubjectamongitspermanentanduniversallaws;andonthe
other，leadingmanypersonstomistakethepermanentlawsof
Production（suchasthoseonwhichthenecessityisgroundedof
restrainingpopulation）fortemporaryaccidentsarisingfromthe
existingconstitutionofsociety—whichthosewhowouldframea
newsystemofsocialarrangements，areatlibertytodisregard。
Inastateofsociety，however，inwhichtheindustrial
systemisentirelyfoundedonpurchaseandsale，eachindividual，
forthemostpart，livingnotonthingsintheproductionof
whichhehimselfhearsapart，butonthingsobtainedbyadouble
exchange，asalefollowedbyapurchase—thequestionofValueis
fundamental。Almosteveryspeculationrespectingtheeconomical
interestsofasocietythusconstituted，impliessometheoryof
Value:thesmallesterroronthatsubjectinfectswith
correspondingerrorallourotherconclusions;andanythingvague
ormistyinourconceptionofit，createsconfusionand
uncertaintyineverythingelse。Happily，thereisnothinginthe
lawsofValuewhichremainsforthepresentoranyfuturewriter
toclearup;thetheoryofthesubjectiscomplete:theonly
difficultytobeovercomeisthatofsostatingitastosolveby
anticipationthechiefperplexitieswhichoccurinapplyingit:
andtodothis，someminutenessofexposition，andconsiderable
demandsonthepatienceofthereader，areunavoidable。Hewill
beamplyrepaid，however（ifastrangertotheseinquiries），by
theeaseandrapiditywithwhichathoroughunderstandingofthis
subjectwillenablehimtofathommostoftheremainingquestions
ofpoliticaleconomy。
2。Wemustbeginbysettlingourphraseology。AdamSmith，in
apassageoftenquoted，hastoucheduponthemostobvious
ambiguityofthewordvalue;which，inoneofitssenses，
signifiesusefulness，inanother，powerofpurchasing;inhisown
language，valueinuseandvalueinexchange。But（asMr。De
Quinceyhasremarked）inillustratingthisdoublemeaning，Adam
Smithhashimselffallenintoanotherambiguity。Things（hesays）
whichhavethegreatestvalueinusehaveoftenlittleorno
valueinexchange;whichistrue，sincethatwhichcanbe
obtainedwithoutlabourorsacrificewillcommandnoprice，
howeverusefulorneedfulitmaybe。Butheproceedstoadd，that
thingswhichhavethegreatestvalueinexchange，asadiamond
forexample，mayhavelittleornovalueinuse。Thisis
employingtheworduse，notinthesenseinwhichpolitical
economyisconcernedwithit，butinthatothersenseinwhich
useisopposedtopleasure。Politicaleconomyhasnothingtodo
withthecomparativeestimationofdifferentusesinthejudgment
ofaphilosopheroramoralist。Theuseofathing，inpolitical
economy，meansitscapacitytosatisfyadesire，orservea
purpose。Diamondshavethiscapacityinahighdegree，andunless
theyhadit，wouldnotbearanyprice。Valueinuse，orasMr。De
Quinceycallsit，teleologicvalue，istheextremelimitofvalue
inexchange。Theexchangevalueofathingmayfallshort，toany
amount，ofitsvalueinuse;butthatitcaneverexceedthe
valueinuse，impliesacontradiction;itsupposesthatpersons
willgive，topossessathing，morethantheutmostvaluewhich
theythemselvesputuponitasameansofgratifyingtheir
inclinations。
ThewordValue，whenusedwithoutadjunct，alwaysmeans，in
politicaleconomy，valueinexchange;orasithasbeencalledby
AdamSmithandhissuccessors，exchangeablevalue，aphrasewhich
noamountofauthoritythatcanbequotedforitcanmakeother
thanbadEnglish。Mr。DeQuinceysubstitutesthetermExchange
Value，whichisunexceptionable。
ExchangevaluerequirestobedistinguishedfromPrice。The
wordsValueandPricewereusedassynonymousbytheearly
politicaleconomists，andarenotalwaysdiscriminatedevenby
Ricardo。Butthemostaccuratemodernwriters，toavoidthe
wastefulexpenditureoftwogoodscientifictermsonasingle
idea，haveemployedPricetoexpressthevalueofathingin
relationtomoney;thequantityofmoneyforwhichitwill
exchange。Bythepriceofathing，therefore，weshallhenceforth
understanditsvalueinmoney;bythevalue，orexchangevalueof
athing，itsgeneralpowerofpurchasing;thecommandwhichits
possessiongivesoverpurchaseablecommoditiesingeneral。
3。Buthereafreshdemandforexplanationpresentsitself。
Whatismeantbycommandovercommoditiesingeneral？Thesame
thingexchangesforagreatquantityofsomecommodities，andfor
averysmallquantityofothers。Asuitofclothesexchangesfor
agreatquantityofbread，andforaverysmallquantityof
preciousstones。Thevalueofathinginexchangeforsome
commoditiesmayberising，forothersfalling。Acoatmay
exchangeforlessbreadthisyearthanlast，iftheharvesthas
beenbad，butformoreglassoriron，ifataxhasbeentakenoff
thosecommodities，oranimprovementmadeintheirmanufacture。
Hasthevalueofthecoat，underthesecircumstances，fallenor
risen？Itisimpossibletosay。allthatcanbesaidis，thatit
hasfalleninrelationtoonething，andriseninrespectto
another。Butthereisanothercase，inwhichnoonewouldhave
anyhesitationinsayingwhatsortofchangehadtakenplacein
thevalueofthecoat:namely，ifthecauseinwhichthe
disturbanceofexchangevaluesoriginated，wassomethingdirectly
affectingthecoatitself，andnotthebreadortheglass。
Suppose，forexample，thataninventionhadbeenmadein
machinery，bywhichbroadclothcouldbewovenathalftheformer
cost。Theeffectofthiswouldbetolowerthevalueofacoat，
andifloweredbythiscause，itwouldhelowerednotinrelation
tobreadonlyortoglassonly，buttoallpurchaseablethings，
exceptsuchashappenedtobeaffectedattheverytimebya
similardepressingcause。Weshouldthereforesay，thattherehad
beenafallintheexchangevalueorgeneralpurchasingpowerof
acoat。Theideaofgeneralexchangevalueoriginatesinthe
fact，thattherereallyarecauseswhichtendtoalterthevalue
ofathinginexchangeforthingsgenerally，thatis，forall
thingswhicharenotthemselvesacteduponbycausesofsimilar
tendency。
Inconsideringexchangevaluescientifically，itisexpedient
toabstractfromitallcausesexceptthosewhichoriginatein
theverycommodityunderconsideration。Thosewhichoriginatein
thecommoditieswithwhichwecompareit，affectitsvaluein
relationtothosecommodities;butthosewhichoriginatein
itself，affectitsvalueinrelationtoallcommodities。Inorder
themorecompletelytoconfineourattentiontotheselast，itis
convenienttoassumethatallcommoditiesbuttheoneinquestion
remaininvariableintheirrelativevalues。Whenweare
consideringthecauseswhichraiseorlowerthevalueofcorn，we
supposethatwoollens，silks，cutlery，sugar，timber，&c。，while
varyingintheirpowerofpurchasingcorn，remainconstantinthe
proportionsinwhichtheyexchangeforoneanother。Onthis
assumption，anyoneofthemmaybetakenasarepresentativeof
alltherest;sinceinwhatevermannercornvariesinvaluewith
respecttoanyonecommodity，itvariesinthesamemannerand
degreewithrespecttoeveryother;andtheupwardordownward
movementofitsvalueestimatedinsomeonething，isallthat
needbeconsidered。Itsmoneyvalue，therefore，orprice，will
representaswellasanythingelseitsgeneralexchangevalue，or
purchasingpower;andfromanobviousconvenience，willoftenbe
employedbyusinthatrepresentativecharacter;withtheproviso
thatmoneyitselfdonotvaryinitsgeneralpurchasingpower，
butthatthepricesofallthings，otherthanthatwhichwe
happentobeconsidering，remainunaltered。
4。ThedistinctionbetweenValueandPrice，aswehavenow
refinedthem，issoobvious，asscarcelytoseeminneedofany
illustration。Butinpoliticaleconomythegreatesterrorsarise
fromoverlookingthemostobvioustruths。Simpleasthis
distinctionis，ithasconsequenceswithwhichareader
unacquaintedwiththesubjectwoulddowelltobeginearlyby
makinghimselfthoroughlyfamiliar。Thefollowingisoneofthe
principal。Thereissuchathingasageneralriseofprices。All
commoditiesmayriseintheirmoneyprice。Buttherecannotbea
generalriseofvalues。Itisacontradictioninterms。Acan
onlyriseinvaluebyexchangingforagreaterquantityofBand
C;inwhichcasethesemustexchangeforasmallerquantityofA。
Allthingscannotriserelativelytooneanother。Ifone—halfof
thecommoditiesinthemarketriseinexchangevalue，thevery
termsimplyafalloftheotherhalf;andreciprocally，thefall
impliesarise。Thingswhichareexchangedforoneanothercanno
moreallfall，orallrise，thanadozenrunnerscaneachoutrun
alltherest，orahundredtreesallovertoponeanother。Simple
asthistruthis，weshallpresentlyseethatitislostsightof
insomeofthemostaccrediteddoctrinesbothoftheoristsandof
whatarecalledpracticalmen。Andasafirstspecimen，wemay
instancethegreatimportanceattachedintheimaginationofmost
peopletoariseorfallofgeneralprices。Becausewhenthe
priceofanyonecommodityrises，thecircumstanceusually
indicatesariseofitsvalue，peoplehaveanindistinctfeeling
whenallpricesrise，asifallthingssimultaneouslyhadrisen
invalue，andallthepossessorshadbecomeenriched。Thatthe
moneypricesofallthingsshouldriseorfall，providedtheyall
riseorfallequally，isinitself，andapartfromexisting
contracts，ofnoconsequence。Itaffectsnobody’swages，profits，
orrent。Everyonegetsmoremoneyintheonecaseandlessin
theother;butofallthatistobeboughtwithmoneytheyget
neithermorenorlessthanbefore。Itmakesnootherdifference
thanthatofusingmoreorfewercounterstoreckonby。Theonly
thingwhichinthiscaseisreallyalteredinvalueismoney;and
theonlypersonswhoeithergainorlosearetheholdersof
money，orthosewhohavetoreceiveortopayfixedsumsofit。
Thereisadifferencetoannuitantsandtocreditorstheoneway，
andtothosewhoareburthenedwithannuities，orwithdebts，the
contraryway。Thereisadisturbance，inshort，offixedmoney
contracts;andthisisanevil，whetherittakesplaceinthe
debtor’sfavourorinthecreditor’s。Butastofuture
transactionsthereisnodifferencetoanyone。Letittherefore
beremembered（andoccasionswilloftenariseforcallingitto
mind）thatageneralriseorageneralfallofvaluesisa
contradiction;andthatageneralriseorageneralfallof
pricesismerelytantamounttoanalterationinthevalueof
money，andisamatterofcompleteindifference，saveinsofar
asitaffectsexistingcontractsforreceivingandpayingfixed
pecuniaryamounts，and（itmustbeadded）asitaffectsthe
interestsoftheproducersofmoney。
5。Beforecommencingtheinquiryintothelawsofvalueand
price，Ihaveonefurtherobservationtomake。Imustgive
warning，onceforall，thatthecasesIcontemplatearethosein
whichvaluesandpricesaredeterminedbycompetitionalone。In
sofaronlyastheyarethusdetermined，cantheybereducedto
anyassignablelaw。Thebuyersmustbesupposedasstudiousto
buycheap，asthesellerstoselldear。Thevaluesandprices，
therefore，towhichourconclusionsapply，aremercantilevalues
andprices;suchpricesasarequotedinprice—currents;prices
inthewholesalemarkets，inwhichbuyingaswellassellingisa
matterofbusiness;inwhichthebuyerstakepainstoknow，and
generallydoknow，thelowestpriceatwhichanarticleofa
givenqualitycanheobtained;andinwhich，therefore，theaxiom
istrue，thattherecannotbeforthesamearticle，ofthesame
quality，twopricesinthesamemarket。Ourpropositionswillbe
trueinamuchmorequalifiedsense，ofretailprices;theprices
paidinshopsforarticlesofpersonalconsumption。Forsuch
thingsthereoftenarenotmerelytwo，butmanyprices，in
differentshops，oreveninthesameshop;habitandaccident
havingasmuchtodointhematerasgeneralcauses。Purchases
forprivateuse，evenbypeopleinbusiness，arenotalwaysmade
onbusinessprinciples:thefeelingswhichcomeintoplayinthe
operationofgetting，andinthatofspendingtheirincome，are
oftenextremelydifferent。Eitherfromindolence，or
carelessness，orbecausepeoplethinkitfinetopayandaskno
questions，three—fourthsofthosewhocanafforditgivemuch
higherpricesthannecessaryforthethingstheyconsume;while
thepooroftendothesamefromignoranceanddefectofjudgment，
wantoftimeforsearchingandmakinginquiry，andnot
unfrequentlyfromcoercion，openordisguised。Forthesereasons，
retailpricesdonotfollowwithalltheregularitywhichmight
beexpected，theactionofthecauseswhichdeterminewholesale
prices。Theinfluenceofthosecausesisultimatelyfeltinthe
retailmarkets，andistherealsourceofsuchvariationsin
retailpricesasareofageneralandpermanentcharacter。But
thereisnoregularorexactcorrespondence。Shoesofequally
goodqualityaresoldindifferentshopsatpriceswhichdiffer
considerably;andthepriceofleathermayfallwithoutcausing
thericherclassofbuyerstopaylessforshoes。Nevertheless，
shoesdosometimesfallinprice;andwhentheydo，thecauseis
alwayssomesuchgeneralcircumstanceasthecheapeningof
leather:andwhenleatherischeapened，evenifnodifference
showsitselfinshopsfrequentedbyrichpeople，theartizanand
thelabourergenerallygettheirshoescheaper，andthereisa
visiblediminutioninthecontractpricesatwhichshoesare
deliveredforthesupplyofaworkhouseorofaregiment。Inall
reasoningaboutprices，theprovisomustbeunderstood，
\"supposingallpartiestotakecareoftheirowninterest。\"In
attentiontothesedistinctionshasledtoimproperapplications
oftheabstractprinciplesofpoliticaleconomy，andstill
oftenertoanunduediscreditingofthoseprinciples，through
theirbeingcomparedwithadifferentsortoffactsfromthose
whichtheycontemplate，orwhichcanfairlybeexpectedtoaccord
withthem。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3，Distribution
Chapter2
OfDemandandSupplyinTheirRelationtoValue
1。Thatathingmayhaveanyvalueinexchange，two
conditionsarenecessary。Itmustbeofsomeuse;thatis（as
alreadyexplained）itmustconducetosomepurpose，satisfysome
desire。Noonewillpayaprice，orpartwithanythingwhich
servessomeofhispurposes，toobtainathingwhichservesnone
ofthem。But，secondly，thethingmustnotonlyhavesome
utility，theremustalsobesomedifficultyinitsattainment。
\"Anyarticlewhatever，\"saysMrDeQuincey，（1*）\"toobtainthat
artificialsortofvaluewhichismeantbyexchangevalue，must
beginbyofferingitselfasameanstosomedesirablepurpose;
andsecondly，eventhoughpossessingincontestablythis
preliminaryadvantage，itwillneverascendtoanexchangevalue
incaseswhereitcanbeobtainedgratuitouslyandwithout
effort;ofwhichlasttermsbotharenecessaryaslimitations。
Foroftenitwillhappenthatsomedesirableobjectmaybe
obtainedgratuitously;stoop，andyougatheritatyourfeet;but
still，becausethecontinuediterationofthisstoopingexactsa
laboriouseffort，verysoonitisfound，thattogatherfor
yourselfvirtuallyisnotgratuitous。Inthevastforestsofthe
Canadas，atintervals，wildstrawberriesmaybegratuitously
gatheredbyshiploads:yetsuchistheexhaustionofastooping
posture，andofalaboursomonotonous，thateverybodyissoon
gladtoresigntheserviceintomercenaryhands。\"
Aswaspointedoutinthelastchapter，theutilityofa
thingintheestimationofthepurchaser，istheextremelimitof
itsexchangevalue:higherthevaluecannotascend;peculiar
circumstancesarerequiredtoraiseitsohigh。Thistopicis
happilyillustratedbyMr。DeQuincey。\"Walkintoalmostany
possibleshop，buythefirstarticleyousee;whatwilldetermine
itsprice？Intheninety—ninecasesoutofahundred，simplythe
elementD——difficultyofattainment。TheotherelementU，or
intrinsicutility，willbeperfectlyinoperative。Letthething
（measuredbyitsuses）be，foryourPurposes，worthtenguineas，
sothatyouwouldrathergivetenguineasthanloseit;yet，if
thedifficultyofproducingitbeonlyworthoneguinea，one
guineaisthepricewhichitwillbear。Butstillnottheless，
thoughUisinoperative，canUbesupposedabsent？Byno
possibility;for，ifithadbeenabsent，assuredlyyouwouldnot
haveboughtthearticleevenatthelowestprice。Uactsupon
you，thoughitdoesnotactupontheprice。Ontheotherhand，in
thehundredthcase，wewillsupposethecircumstancesreversed:
youareonLakeSuperiorinasteam—boat，makingyourwaytoan
unsettledregion800milesa—headofcivilization，and
consciouslywithnochanceatallofpurchasinganyluxury
whatsoever，littleluxuryorbigluxury，forthespaceoften
yearstocome。Onefellow—passenger，whomyouwillpartwith
beforesunset，hasapowerfulmusicalsnuff—box;knowingby
experiencethepowerofsuchatoyoveryourownfeelings，the
magicwithwhichattimesitlullsyouragitationsofmind，you
arevehementlydesiroustopurchaseit。Inthehourofleaving
Londonyouhadforgottodoso;hereisafinalchance。Butthe
owner，awareofyoursituationnotlessthanyourself，is
determinedtooperatebyastrainpushedtotheveryuttermost
uponU，upontheintrinsicworthofthearticleinyour
individualestimateforyourindividualpurposes。Hewillnot
hearofDasanycontrollingpowerormitigatingagencyinthe
case;andfinally，althoughatsixguineasa—pieceinLondonor
Parisyoumighthaveloadedawaggonwithsuchboxes，youpay
sixtyratherthanloseitwhenthelastknelloftheclockhas
sounded，whichsummonsyoutobuynowortoforfeitforever。
Here，asbefore，onlyoneelementisoperative;beforeitwasD，
nowitisU。Butafterall，Dwasnotabsent，thoughinoperative。
TheinertnessofDallowedUtoputforthitstotaleffect。The
practicalcompressionofDbeingwithdrawn，Uspringsuplike
waterinapumpwhenreleasedfromthepressureofair。Yetstill
thatDwaspresenttoyourthoughts，thoughthepricewas
otherwiseregulated，isevident;bothbecauseUandDmust
coexistinordertofoundanycaseofexchangevaluewhatever，
andbecauseundeniablyyoutakeintoveryparticular
considerationthisD，theextremedifficultyofattainment（which
hereisthegreatestpossible，viz。animpossibility）beforeyou
consenttohavethepricerackeduptoU。ThespecialDhas
vanished;butitisreplacedinyourthoughtsbyanunlimitedD。
UndoubtedlyyouhavesubmittedtoUinextremityasthe
regulatingforceoftheprice;butitwasunderasenseofD’s
latentpresence。YetDissofarfromexertinganypositive
force，thattheretirementofDfromallagencywhateveronthe
price—thisitiswhichcreatesasitwereaperfectvacuum，and
throughthatvacuumUrushesuptoitshighestandultimate
gradation。\"
Thiscase，inwhichthevalueiswhollyrelatedbythe
necessitiesordesiresofthepurchaser，isthecaseofstrict
andabsolutemonopoly;inwhich，thearticledesiredbeingonly
obtainablefromoneperson，hecanexactanyequivalent，shortof
thepointatwhichnopurchasercouldbefound。Butitisnota
necessaryconsequence，evenofcompletemonopoly，thatthevalue
shouldbeforceduptothisultimatelimit;aswillbeseenwhen
wehaveconsideredthelawofvalueinsofarasdependingonthe
otherelement，difficultyofattainment。
2。Thedifficultyofattainmentwhichdeterminesvalue，is
notalwaysthesamekindofdifficulty。Itsometimesconsistsin
anabsolutelimitationofthesupply。Therearethingsofwhich
itisphysicallyimpossibletoincreasethequantitybeyond
certainnarrowlimits。Sucharethosewineswhichcanbegrown
onlyinpeculiarcircumstancesofsoil，climate，andexposure。
Suchalsoareancientsculptures;picturesbyoldmasters;rare
booksorcoins，orotherarticlesofantiquariancuriosity。Among
suchmayalsobereckonedhousesandbuilding—ground，inatown
ofdefiniteextent（suchasVenice，oranyfortifiedtownwhere
fortificationsarenecessarytosecurity）;themostdesirable
sitesinanytownwhatever;housesandparkspeculiarlyfavoured
bynaturalbeauty，inplaceswherethatadvantageisuncommon。
Potentially，alllandwhateverisacommodityofthisclass;and
mightbepracticallyso，incountriesfullyoccupiedand
cultivated。
Butthereisanothercategory（embracingthemajorityofall
thingsthatareboughtandsold），inwhichtheobstacleto
attainmentconsistsonlyinthelabourandexpenserequisiteto
producethecommodity。Withoutacertainlabourandexpenseit
cannotbehad:butwhenanyoneiswillingtoincurthese，there
needsbenolimittothemultiplicationoftheproduct。Ifthere
werelabourersenoughandmachineryenough，cottons，woollens，or
linensmightbeproducedbythousandsofyardsforeverysingle
yardnowmanufactured。Therewouldbeapoint，nodoubt，where
furtherincreasewouldbestoppedbytheincapacityoftheearth
toaffordmoreofthematerial。Butthereisnoneed，forany
purposeofpoliticaleconomy，tocontemplateatimewhenthis
ideallimitcouldbecomeapracticalone。
Thereisathirdcase，intermediatebetweenthetwo
preceding，andrathermorecomplex，whichIshallatpresent
merelyindicate，buttheimportanceofwhichinpoliticaleconomy
isextremelygreat。Therearecommoditieswhichcanbemultiplied
toanindefiniteextentbylabourandexpenditure，butnotbya
fixedamountoflabourandexpenditure。Onlyalimitedquantity
canbeproducedatagivencost:ifmoreiswanted，itmustbe
producedatagreatercost。Tothisclass，ashasbeenoften
repeated，agriculturalproducebelongs;andgenerallyallthe
rudeproduceoftheearth;andthispeculiarityisasourceof
veryimportantconsequences;oneofwhichisthenecessityofa
limittopopulation;andanother，thepaymentofrent。
3。Thesebeingthethreeclasses，inoneorotherofwhich
allthingsthatareboughtandsoldmusttaketheirplace，we
shallconsiderthemintheirorder。Andfirst，ofthings
absolutelylimitedinquantity，suchasancientsculpturesor
pictures。
Ofsuchthingsitiscommonlysaid，thattheirvaluedepends
upontheirscarcity:buttheexpressionisnotsufficiently
definitetoserveourpurpose。Otherssay，withsomewhatgreater
precision，thatthevaluedependsonthedemandandthesupply。
Buteventhisstatementrequiresmuchexplanation，tomakeita
clearexponentoftherelationbetweenthevalueofathing，and
thecausesofwhichthatvalueisaneffect。
Thesupplyofacommodityisanintelligibleexpression:it
meansthequantityofferedforsale;thequantitythatistobe
had，atagiventimeandplace，bythosewhowishtopurchaseit。
Butwhatismeantbythedemand？Notthemeredesireforthe
commodity。Abeggarmaydesireadiamond;buthisdesire，however
great，willhavenoinfluenceontheprice。Writershave
thereforegivenamorelimitedsensetodemand，andhavedefined
it，thewishtopossess，combinedwiththepowerofpurchasing。
Todistinguishdemandinthistechnicalsense，fromthedemand
whichissynonymouswithdesire，theycalltheformereffectual
demand。（2*）Afterthisexplanation，itisusuallysupposedthat
thereremainsnofurtherdifficulty，andthatthevaluedepends
upontheratiobetweentheeffectualdemand，asthusdefined，and
thesupply。
Thesephrases，however，failtosatisfyanyonewhorequires
clearideas，andaperfectlypreciseexpressionofthem。Some
confusionmustalwaysattachtoaphrasesoinappropriateasthat
ofaratiobetweentwothingsnotofthesamedenomination。What
ratiocantherebebetweenaquantityandadesire，orevena
desirecombinedwithapower？Aratiobetweendemandandsupply
isonlyintelligibleifbydemandwemeanthequantitydemanded，
andiftheratiointendedisthatbetweenthequantitydemanded
andthequantitysupplied。Butagain，thequantitydemandedis
notafixedquantity，evenatthesametimeandplace;itvaries
accordingtothevalue;ifthethingischeap，thereisusuallya
demandformoreofitthanwhenitisdear。Thedemand，
therefore，partlydependsonthevalue。Butitwasbeforelaid
downthatthevaluedependsonthedemand。Fromthis
contradictionhowshallweextricateourseLves？Howsolvethe
paradox，oftwothings，eachdependingupontheother？
Thoughthesolutionofthesedifficultiesisobviousenough，
thedifficultiesthemselvesarenotfanciful;andIbringthem
forwardthusprominently，becauseIamcertainthatthey
obscurelyhaunteveryinquirerintothesubjectwhohasnot
openlyfacedanddistinctlyrealizedthem。Undoubtedlythetrue
solutionmusthavebeenfrequentlygiven，thoughIcannotcallto
mindanyonewhohadgivenitbeforemyself，excepttheeminently
clearthinkerandskilfulexpositor，J。B。Say。Ishouldhave
imagined，however，thatitmustbefamiliartoallpolitical
economists，ifthewritingsofseveraldidnotgiveevidenceof
somewantofclearnessonthepoint，andiftheinstanceofMr。
DeQuinceydidnotprovethatthecompletenon—recognitionand
implieddenialofitarecompatiblewithgreatintellectual
ingenuity，andcloseintimacywiththesubjectmatter。
4。Meaning，bytheworddemand，thequantitydemanded，and
rememberingthatthisisnotafixedquantity，butingeneral
variesaccordingtothevalue，letussupposethatthedemandat
someparticulartimeexceedsthesupply，thatis，thereare
personsreadytobuy，atthemarketvalue，agreaterquantity
thanisofferedforsale。Competitiontakesplaceonthesideof
thebuyers，andthevaluerises:buthowmuch？intheratio（some
maysuppose）ofthedeficiency:ifthedemandexceedsthesupply
byone—third，thevaluerisesone—third。Bynomeans:forwhen
thevaluehasrisenone—third，thedemandmaystillexceedthe
supply;theremay，evenatthathighervalue，beagreater
quantitywantedthanistobehad;andthecompetitionofbuyers
maystillcontinue。Ifthearticleisanecessaryoflife，which，
ratherthanresign，peoplearewillingtopayforatanyprice，a
deficiencyofone—thirdmayraisethepricetodouble，triple，or
quadruple。（3*）Or，onthecontrary，thecompetitionmaycease
beforethevaluehasrisenineventheproportionofthe
deficiency。Arise，shortofone—third，mayplacethearticle
beyondthemeans，orbeyondtheinclinations，ofpurchasersto
thefullamount。Atwhatpoint，then，willtherisebearrested？
Atthepoint，whateveritbe，whichequalizesthedemandandthe
supply:atthepricewhichcutsofftheextrathirdfromthe
demand，orbringsforwardadditionalsellerssufficienttosupply
it。When，ineitheroftheseways，orbyacombinationofboth，
thedemandbecomesequalandnomorethanequaltothesupply，
theriseofvaluewillstop。
Theconversecaseisequallysimple。insteadofademand
beyondthesupply，letussupposeasupplyexceedingthedemand。
Thecompetitionwillnowbeonthesideofthesellers:theextra
quantitycanonlyfindamarketbycallingforthanadditional
demandequaltoitself。Thisisaccomplishedbymeansof
cheapness;thevaluefalls，andbringsthearticlewithinthe
reachofmorenumerouscustomers，orinducesthosewhowere
alreadyconsumerstomakeincreasedpurchases。Thefallofvalue
requiredtore—establishequality，isdifferentindifferent
cases。Thekindsofthingsinwhichitiscommonlygreatestare
atthetwoextremitiesofthescale;absolutenecessaries，or
thosepeculiarluxuries，thetasteforwhichisconfinedtoa
smallclass。Inthecaseoffood，asthosewhohavealready
enoughdonotrequiremoreonaccountofitscheapness，but
ratherexpendinotherthingswhattheysaveinfood，the
increasedconsumptionoccasionedbycheapness，carriesoff，as
experienceshows，onlyasmallpartoftheextrasupplycausedby
anabundantharvest;（4*）andthefallispracticallyarrested
onlywhenthefarmerswithdrawtheircorn，andholditbackin
hopesofahigherprice;orbytheoperationsofspeculatorswho
buycornwhenitischeap，andstoreituptobebroughtoutwhen
moreurgentlywanted。Whetherthedemandandsupplyareequalized
byanincreaseddemand，theresultofcheapness，orby
withdrawingapartofthesupply，equalizedtheyareineither
case。
Thusweseethattheideaofaratio，asbetweendemandand
supply，isoutofplace，andhasnoconcerninthematter:the
propermathematicalanalogyisthatofanequation。Demandand
supply，thequantitydemandedandthequantitysupplied，willbe
madeequal。ifunequalatanymoment，competitionequalizesthem，
andthemannerinwhichthisisdoneisbyanadjustmentofthe
value。Ifthedemandincreases，thevaluerises;ifthedemand
diminishes，thevaluefalls:again，ifthesupplyfallsoff，the
valuerises;andfallsifthesupplyisincreased。Theriseor
thefallcontinuesuntilthedemandandsupplyareagainequalto
oneanother……andthevaluewhichacommoditywillbringinany
market，isnootherthanthevaluewhich，inthatmarket，givesa
demandjustsufficienttocarryofftheexistingorexpected
supply。
This，then，istheLawofValue，withrespecttoall
commoditiesnotsusceptibleofbeingmultipliedatpleasure。Such
commodities，nodoubt，areexceptions。Thereisanotherlawfor
thatmuchlargerclassofthings，whichadmitofindefinite
multiplication。Butitisnotthelessnecessarytoconceive
distinctlyandgraspfirmlythetheoryofthisexceptionalcase。
Inthefirstplace，itwillbefoundtobeofgreatassistancein
renderingthemorecommoncaseintelligible。Andinthenext
place，theprincipleoftheexceptionstretcheswider，and
embracesmorecases，thanmightatfirstbesupposed。
5。Therearebutfewcommoditieswhicharenaturallyand
necessarilylimitedinsupply。Butanycommoditywhatevermaybe
artificiallyso。Anycommoditymaybethesubjectofamonopoly:
liketea，inthiscountry，upto1834;tobaccoinFrance，opium
inBritishIndia，atpresent。Thepriceofamonopolized
commodityiscommonlysupposedtobearbitrary;dependingonthe
willofthemonopolist，andlimitedonly（asinMr。DeQuincey’s
caseofthemusicalboxinthewildsofAmerica）bythebuyer’s
extremeestimateofitsworthtohimself。Thisisinonesense
true，butformsnoexception，nevertheless，tothedependenceof
thevalueonsupplyanddemand。Themonopolistcanfixthevalue
ashighashepleases，shortofwhattheconsumereithercould
notorwouldnotpay’。buthecanonlydosobylimitingthe
supply。TheDutchEastIndiaCompanyobtainedamonopolyprice
fortheproduceoftheSpiceIslands，buttodosotheywere
obliged，ingoodseasons，todestroyaportionofthecrop。Had
theypersistedinsellingallthattheyproduced，theymusthave
forcedamarketbyreducingtheprice，solow，perhaps，thatthey
wouldhavereceivedforthelargerquantityalesstotalreturn
thanforthesmaller:atleasttheyshowedthatsuchwastheir
opinionbydestroyingthesurplus。EvenonLakeSuperior，Mr。De
Quincey’shuckstercouldnothavesoldhisboxforsixtyguineas，
ifhehadpossessedtwomusicalboxesanddesiredtosellthem
both。Supposingthecostpriceofeachtobesixguineas，he
wouldhavetakenseventyforthetwoinpreferencetosixtyfor
one;thatis，althoughhismonopolywastheclosestpossible，he
wouldhavesoldtheboxesatthirty—fiveguineaseach，
notwithstandingthatsixtywasnotbeyondthebuyer’sestimateof
thearticleforhispurposes。Monopolyvalue，therefore，doesnot
dependonanypeculiarprinciple，butisamerevarietyofthe
ordinarycaseofdemandandsupply。
Again，thoughtherearefewcommoditieswhichareatall
timesandforeverunsusceptibleofincreaseofsupply，any
commoditywhatevermaybetemporarilyso;andwithsome
commoditiesthisishabituallythecase。Agriculturalproduce，
forexample，cannotbeincreasedinquantitybeforethenext
harvest;thequantityofcornalreadyexistingintheworld，is
allthatcanbehadforsometimesayeartocome。Duringthat
interval，cornispracticallyassimilatedtothingsOfwhichthe
quantitycannotbeincreased。Inthecaseofmostcommodities，it
requiresacertaintimetoincreasetheirquantity;andifthe
demandincreases，thenuntilacorrespondingsupplycanhe
broughtforward，thatis，untilthesupplycanaccommodateitself
tothedemand，thevaluewillsoriseastoaccommodatethe
demandtothesupply。
Thereisanothercase，theexactconverseofthis。Thereare
somearticlesofwhichthesupplymaybeindefinitelyincreased，
butcannotberapidlydiminished。Therearethingssodurable
thatthequantityinexistenceisatalltimesverygreatin
comparisonwiththeannualproduce。Gold，andthemoredurable
metals，arethingsofthissort;andalsohouses。Thesupplyof
suchthingsmightbeatoncediminishedbydestroyingthem;but
todothiscouldonlybetheinterestofthepossessorifhehad
amonopolyofthearticle，andcouldrepayhimselfforthe
destructionofapartbytheincreasedvalueoftheremainder。
Thevalue，therefore，ofsuchthingsmaycontinueforalongtime
solow，eitherfromexcessofsupplyorfallingoffinthe
demand，astoputacompletestoptofurtherproduction;the
diminutionofsupplybywearingoutbeingsoslowaprocess，that
alongtimeisrequisite，evenunderatotalsuspensionof
production，torestoretheoriginalvalue。Duringthatinterval
thevaluewillberegulatedsolelybysupplyanddemand，andwill
riseverygraduallyastheexistingstockwearsout，untilthere
isagainaremuneratingvalue，andproductionresumesitscourse。
Finally，therearecommoditiesofwhich，thoughcapableof
beingincreasedordiminishedtoagreat，andevenanunlimited
extent，thevalueneverdependsuponanythingbutdemandand
supply。Thisisthecase，inparticular，withthecommodity
Labour;ofthevalueofwhichwehavetreatedcopiouslyinthe
precedingBook:andtherearemanycasesbesides，inwhichwe
shallfinditnecessarytocallinthisprincipletosolve
difficultquestionsofexchangevalue。Thiswillbeparticularly
exemplifiedwhenwetreatofInternationalValues;thatis，of
thetermsofinterchangebetweenthingsproducedindifferent
countries，or，tospeakmoregenerally，indistantplaces。But
intothesequestionswecannotenter，untilweshallhave
examinedthecaseofcommoditieswhichcanbeincreasedin
quantityindefinitelyandatpleasure;andshallhavedetermined
bywhatlaw，otherthanthatofDemandandSupply，thepermanent
oraveragevaluesofsuchcommoditiesareregulated。Thiswe
shalldointhenextchapter。