Astheseprojects，howeveroftenslain，alwaysresuscitate，
itisnotsuperfluoustoexamineoneortwoofthefallaciesby
whichtheschemersimposeuponthemselves。Oneofthecommonest
is，thatapapercurrencycannotbeissuedinexcesssolongaS
everynoteissuedrepresentsproperty，orhasafoundationof
actualpropertytoreston。Thesephrases，ofrepresentingand
resting，seldomconveyanydistinctorwell—definedidea:when
theydo，theirmeaningisnomorethanthis——thattheissuers
ofthepapermusthaveproperty，eitheroftheirown，or
entrustedtothem，tothevalueofallthenotestheyissue:
thoughforwhatpurposedoesnotveryclearlyappear;forifthe
propertycannotbeclaimedinexchangeforthenotes，itis
difficulttodivineinwhatmanneritsmereexistencecanserve
toupholdtheirvalue。Ipresume，however，itisintendedasa
guaranteethattheholderswouldbefinallyreimbursed，incase
anyuntowardeventshouldcausethewholeconcerntobewoundup。
Onthistheorytherehavebeenmanyschemesfor\"coiningthe
wholelandofthecountryintomoney\"andthelike。
Insofarasthisnotionhasanyconnexionatallwith
reason，itseemstooriginateinconfoundingtwoentirely
distinctevils，towhichapapercurrencyisliable。Oneis，the
insolvencyoftheissuers;which，ifthepaperisgroundedon
theircredit——ifitmakesanypromiseofpaymentincash，
eitherondemandoratanyfuturetime——ofcoursedeprivesthe
paperofanyvaLuewhichitderivesfromthepromise。Tothis
evilpapercreditisequallyliable，howevermoderatelyused;and
againstit，aprovisothatallissuesshouldbe\"foundedon
property，\"asforinstancethatnotesshouldonlybeissuedon
thesecurityofsomevaluablethingexpresslypledgedfortheir
redemption，wouldreallybeefficaciousasaprecaution。Butthe
theorytakesnoaccountofanotherevil，whichisincidenttothe
notesofthemostsolventfirm，company，orgovernment;thatof
beingdepreciatedinvaluefrombeingissuedinexcessive
quantity。Theassignats，duringtheFrenchRevolutionwerean
exampleofacurrencygroundedontheseprinciples。Theassignats
\"represented\"animmenseamountofhighlyvaluableproperty，
namelythelandsofthecrown，thechurch，themonasteries，and
theemigrants;amountingpossiblytohalftheterritoryof
France。Theywere，infact，ordersorassignmentsonthismassof
land。Therevolutionarygovernmenthadtheideaof\"coining\"
theselandsintomoney;but，todothemjustice，theydidnot
originallycontemplatetheimmensemultiplicationofissuesto
whichtheywereeventuallydrivenbythefailureofallother
financialresources。Theyimaginedthattheassignatswouldcome
rapidlybacktotheissuersinexchangeforland，andthatthey
shouldbeabletoreissuethemcontinuallyuntilthelandswere
alldisposedof，withouthavingatanytimemorethanavery
moderatequantityincirculation。Theirhopewasfrustrated:the
landdidnotsellsoquicklyastheyexpected;buyerswerenot
inclinedtoinvesttheirmoneyinpossessionswhichwerelikely
toberesumedwithoutcompensationiftheRevolutionsuccumbed:
thebitsofpaperwhichrepresentedland，becomingprodigiously
multiplied，couldnomorekeepuptheirvaluethantheland
itselfwouldhavedoneifithadallbeenbroughttomarketat
once;andtheresultwasthatitatlastrequiredanassignatof
sixhundredfrancstopayforapoundofbutter。
Theexampleoftheassignatshasbeensaidnottobe
conclusive，becauseanassignatonlyrepresentedlandingeneral，
butnotadefinitequantityofland。Tohavepreventedtheir
depreciation，thepropercourse，itisaffirmed，wouldhavebeen
tohavemadeavaluationofalltheconfiscatedpropertyatits
metallicvalue，andtohaveissuedassignatsupto，butnot
beyond，thatlimit;givingtotheholdersarighttodemandany
pieceofland，atitsregisteredvaluation，inexchangefor
assignatstothesameamount。Therecanbenoquestionaboutthe
superiorityofthisplanovertheoneactuallyadopted。Hadthis
coursebeenfollowed，theassignatscouldneverhavebeen
depreciatedtotheinordinatedegreetheywere;for——asthey
wouldhaveretainedalltheirpurchasingpowerinrelationto
land，howevermuchtheymighthavefalleninrespecttoother
things——beforetheyhadlostverymuchoftheirmarketvalue，
theywouldprobablyhavebeenbroughtintobeexchangedfor
land。Itmustberemembered，however，thattheirnotbeing
depreciatedwouldpresupposethatnogreaternumberofthem
continuedincirculationthanwouldhavecirculatediftheyhad
beenconvertibleintocash。Howeverconvenient，therefore，ina
timeofrevolution，thiscurrencyconvertibleintolandondemand
mighthavebeen，asacontrivanceforsellingrapidlyagreat
quantityoflandwiththeleastpossiblesacrifice;itis
difficulttoseewhatadvantageitwouldhave，asthepermanent
systemofacountry，overacurrencyconvertibleintocoin:while
itisnotatalldifficulttoseewhatwouldbeits
disadvantages;sincelandisfarmorevariableinvaluethangold
andsilver;andbesides，land，tomostpersons，beingratheran
encumbrancethanadesirablepossession，excepttobeconverted
intomoney，peoplewouldsubmittoamuchgreaterdepreciation
beforedemandingland，thantheywillbeforedemandinggoldor
silver。（1*）
4Anotherofthefallaciesfromwhichtheadvocatesofan
inconvertiblecurrencyderivesupport，isthenotionthatan
increaseofthecurrencyquickensindustry。Thisideawasset
afloatbyHume，inhisEssayonMoney，andhashadmanydevoted
adherentssince;witnesstheBirminghamcurrencyschool，ofwhom
Mr。Attwoodwasatonetimethemostconspicuousrepresentative。
Mr。Attwoodmaintainedthatariseofpricesproducedbyan
increaseofpapercurrency，stimulateseveryproducertohis
utmostexertions，andbringsallthecapitalandlabourofthe
countryintocompleteemployment;andthatthishasinvariably
happenedinallperiodsofrisingprices，whentherisewasona
sufficientlygreatscale。Ipresume，however，thattheinducement
which，accordingtoMrAttwood，excitedthisunusualardourin
allpersonsengagedinproduction，musthavebeentheexpectation
ofgettingmorecommoditiesgenerally，morerealwealth，in
exchangefortheproduceoftheirlabour，andnotmerelymore
piecesofpaper。Thisexpectation，however，musthavebeen，by
theverytermsofthesupposition，disappointed，since，all
pricesbeingsupposedtoriseequally，noonewasreallybetter
paidforhisgoodsthanbefore。ThosewhoagreewithMr。Attwood
couldonlysucceedinwinningpeopleontotheseunwonted
exertions，byaprolongationofwhatwouldinfactbeadelusion;
contrivingmattersso，thatbyaprogressiveriseofmoney
prices，everyproducershallalwaysseemtobeintheveryactof
obtaininganincreasedremunerationwhichhenever，inreality，
doesobtain。Itisunnecessarytoadverttoanyotherofthe
objectionstothisplan，thanthatofitstotalimpracticability。
Itcalculatesonfindingthewholeworldpersistingforeverin
thebeliefthatmorepiecesofpaperaremoreriches，andnever
discoveringthat，withalltheirpaper，theycannotbuymoreof
anythingthattheycouldbefore。Nosuchmistakewasmadeduring
anyoftheperiodsofhighprices，ontheexperienceofwhich
thisschoollayssomuchstress。AttheperiodswhichMr。Attwood
mistookfortimesofprosperity，andwhichweresimply（asall
periodsofhighprices，underaconvertiblecurrency，mustbe）
timesofspeculation，thespeculatorsdidnotthinktheywere
growingrichbecausethehighpriceswouldlast，butbecausethey
wouldnotlast，andbecausewhoevercontrivedtorealizewhile
theydidlast，wouldfindhimself，aftertherecoil，in
possessionofagreaternumberofpoundssterling，withouttheir
havingbecomeoflessvalue。If，atthecloseofthespeculation，
anissueofpaperhadbeenmade，sufficienttokeeppricesupto
thepointwhichtheyattainedwhenatthehighest，noonewould
havebeenmoredisappointedthanthespeculators;sincethegain
whichtheythoughttohavereapedbyrealizingintime（atthe
expenseoftheircompetitors，whoboughtwhentheysold，andhad
tosellaftertherevulsion）wouldhavefadedawayintheir
hands，andinsteadofittheywouldhavegotnothingexceptafew
morepaperticketstocountby。
Hume’sversionofthedoctrinedifferedinaslightdegree
fromMr。Attwood’s。Hethoughtthatallcommoditieswouldnot
riseinpricesimultaneously，andthatsomepersonstherefore
wouldobtainarealgain，bygettingmoremoneyforwhattheyhad
tosell，whilethethingswhichtheywishedtobuymightnotyet
haverisen。Andthosewhowouldreapthisgainwouldalwaysbe
（heseemstothink）thefirstcomers。Itseemsobvious，however，
thatforeverypersonwhothusgainsmorethanusual，thereis
necessarilysomeotherpersonwhogainsless。Theloser，if
thingstookplaceasHumesupposes，wouldbethesellerofthe
commoditieswhichareslowesttorise;who，bythesupposition，
partswithhisgoodsattheoldprices，topurchaserswhohave
alreadybenefitedbythenew。Thissellerhasobtainedforhis
commodityonlytheaccustomedquantityofmoney，whilethereare
alreadysomethingsofwhichthatmoneywillnolongerpurchase
asmuchasbefore。If，therefore，heknowswhatisgoingon，he
willraisehisprice，andthenthebuyerwillnothavethegain，
whichissupposedtostimulatehisindustry。Butif，onthe
contrary，thesellerdoesnotknowthestateofthecase，and
onlydiscoversitwhenhefinds，inlayinghismoneyout，thatit
doesnotgosofar，hethenobtainslessthantheordinary
remunerationforhislabourandcapital;andiftheother
dealer’sindustryisencouraged，itshouldseemthathismust，
fromtheoppositecause，beimpaired。
5。Thereisnowayinwhichageneralandpermanentriseof
prices，orinotherwords，depreciationofmoney，canbenefit
anybody，exceptattheexpenseofsomebodyelse。Thesubstitution
ofpaperformetalliccurrencyisanationalgain:anyfurther
increaseofpaperbeyondthisisbutaformofrobbery。
Anissueofnotesisamanifestgaintotheissuers，who，
untilthenotesarereturnedforpayment，obtaintheuseofthem
asiftheywerearealcapital:andsolongasthenotesareno
permanentadditiontothecurrency，butmerelysupersedegoldor
silvertothesameamount，thegainoftheissuerisalosstono
one;itisobtainedbysavingtothecommunitytheexpenseofthe
morecostlymaterial。Butifthereisnogoldorsilvertobe
superseded——ifthenotesareaddedtothecurrency，insteadof
beingsubstitutedforthemetallicpartofit——allholdersof
currencylose，bythedepreciationofitsvalue，theexact
equivalentofwhattheissuergains。Ataxisvirtuallyleviedon
themforhisbenefit。Itwillbeobjectedbysome，thatgainsare
alsomadebytheproducersanddealerswho，bymeansofthe
increasedissue，areaccommodatedwithloans。Theirs，however，is
notanadditionalgain，butaportionofthatwhichisreapedby
theissuerattheexpenseofallpossessorsofmoney。Theprofits
arisingfromthecontributionlevieduponthepublic，hedoesnot
keeptohimself，butdivideswithhiscustomers。Butbesidesthe
benefitreapedbytheissuers，orbyothersthroughthem，atthe
expenseofthepublicgenerally，thereisanotherunjustgain
obtainedbyalargerclass，namelybythosewhoareunderfixed
pecuniaryobligations。Allsuchpersonsarefreed，bya
depreciationofthecurrency，fromaportionoftheburthenof
theirdebtsorotherengagements:inotherwords，partofthe
propertyoftheircreditorsisgratuitouslytransferredtothem。
Onasuperficialviewitmaybeimaginedthatthisisan
advantagetoindustry’。sincetheproductiveclassesaregreat
borrowers，andgenerallyowelargerdebtstotheunproductive（if
weincludeamongthelatterallpersonsnotactuallyinbusiness）
thantheunproductiveclassesowetothem;especiallyifthe
nationaldebtbeincluded。Itisonlythusthatageneralriseof
pricescanbeasourceofbenefittoproducersanddealers;by
diminishingthepressureoftheirfixedburthens。Andthismight
beaccountedanadvantage，ifintegrityandgoodfaithwereofno
importancetotheworld，andtoindustryandcommercein
particular。Notmany，however，havebeenfoundtosaythatthe
currencyoughttobedepreciatedonthesimplegroundofits
beingdesirabletorobthenationalcreditorandprivate
creditorsofapartofwhatisintheirbond。Theschemeswhich
havetendedthatwayhavealmostalwayshadsomeappearanceof
specialandcircumstantialjustification，suchasthenecessity
ofcompensatingforapriorinjusticecommittedinthecontrary
direction。
6。ThusinEngland，formanyyearssubsequentto1819，itwas
pertinaciouslycontended，thatalargeportionofthenational
debt，andamultitudeofprivatedebtsstillinexistence，were
contractedbetween1797and1819，whentheBankofEnglandwas
exemptedfromgivingcashforitsnotes;andthatitisgrossly
unjusttoborrowers，（thatis，inthecaseofthenationaldebt，
toalltax—payers）thattheyshouldbepayinginterestonthe
samenominalsumsinacurrencyoffullvalue，whichwere
borrowedinadepreciatedone。Thedepreciation，accordingtothe
viewsandobjectsoftheparticularwriter，wasrepresentedto
haveaveragedthirty，fifty，orevenmorethanfiftypercent:
andtheconclusionwas，thateitherweoughttoreturntothis
depreciatedcurrency，ortostrikeofffromthenationaldebt，
andfrommortgagesorotherprivatedebtsofoldstanding，a
percentagecorrespondingtotheestimatedamountofthe
depreciation。
Tothisdoctrine，thefollowingwastheanswerusuallymade。
Grantingthat，byreturningtocashpaymentswithoutloweringthe
standard，aninjusticewasdonetodebtors，inholdingthem
liableforthesameamountofacurrencyenhancedinvalue，which
theyhadborrowedwhileitwasdepreciated;itisnowtoolateto
makereparationforthisinjury。Thedebtorsandcreditorsof
to—dayarenotthedebtorsandcreditorsof1819:thelapseof
yearshasentirelyalteredthepecuniaryrelationsofthe
community。，anditbeingimpossiblenowtoascertainthe
particularpersonswhowereeitherbenefitedorinjured，to
attempttoretraceourstepswouldnotberedressingawrong，but
superaddingasecondactofwide—spreadinjusticetotheone
alreadycommitted。Thisargumentiscertainlyconclusiveonthe
practicalquestion;butitplacesthehonestconclusionontoo
narrowandtoolowaground。Itconcedesthatthemeasureof
1819，calledPeel’sBill，bywhichcashpaymentswereresumedat
theoriginalstandardof3l。17s。101/2d。，wasreallythe
injusticeitwassaidtobe。Thisisanadmissionwhollyopposed
tothetruth。Parliamenthadnoalternative;itwasabsolutely
boundtoadheretotheacknowledgedstandard;asmaybeshownon
threedistinctgrounds，twooffact，andoneofprinciple。
Thereasonsoffactarethese。Inthefirstplaceitisnot
truethatthedebts，privateorpublic，incurredduringtheBank
restriction，werecontractedinacurrencyoflowervaluethan
thatinwhichtheinterestisnowpaid。Itisindeedtruethat
thesuspensionoftheobligationtopayinspecie，didputitin
thepoweroftheBanktodepreciatethecurrency。Itistruealso
thattheBankreallyexercisedthatpower，thoughtoafarless
extentthanisoftenpretended;sincethedifferencebetweenthe
marketpriceofgoldandtheMintvaluation，duringthegreater
partoftheinterval，wasverytrifling，andwhenitwas
greatest，duringthelastfiveyearsofthewar，didnotmuch
exceedthirtypercent。Totheextentofthatdifference，the
currencywasdepreciated，thatis，itsvaluewasbelowthatof
thestandardtowhichitprofessedtoadhere。Butthestateof
Europeatthattimewassuch——therewassounusualan
absorptionofthepreciousmetals，byhoarding，andinthe
militarychestsofthevastarmieswhichthendesolatedthe
Continent，thatthevalueofthestandarditselfwasvery
considerablyraised:andthebestauthorities，amongwhomitis
sufficienttonameMrTooke，have，afteranelaborate
investigation，satisfiedthemselvesthatthedifferencebetween
paperandbullionwasnotgreaterthantheenhancementinvalue
ofgolditself，andthatthepaper，thoughdepreciatedrelatively
tothethenvalueofgold，didnotsinkbelowtheordinaryvalue，
atothertimes，eitherofgoldorofaconvertiblepaper。Ifthis
betrue（andtheevidencesofthefactareconclusivelystatedin
Mr。Tooke’sHistoryofPrices）thefoundationofthewholecase
againstthefundholderandothercreditorsonthegroundof
depreciationissubverted。
But，secondly，evenifthecurrencyhadreallybeenlowered
invalueateachperiodoftheBankrestriction，inthesame
degreeinwhichitwasdepreciatedinrelationtoitsstandard，
wemustrememberthatapartonlyofthenationaldebt，orof
otherpermanentengagements，wasincurredduringtheBank
restriction。Alargeparthadbeencontractedbefore1797;a
stilllargerduringtheearlyyearsoftherestriction，whenthe
differencebetweenpaperandgoldwasyetsmall。Totheholders
oftheformerpart，aninjurywasdone，bypayingtheinterest
fortwenty—twoyearsinadepreciatedcurrency:thoseofthe
second，sufferedaninjuryduringtheyearsinwhichtheinterest
waspaidinacurrencymoredepreciatedthanthatinwhichthe
loanswerecontracted。Tohaveresumedcashpaymentsatalower
standardwouldhavebeentoperpetuatetheinjurytothesetwo
classesofcreditors，inordertoavoidgivinganunduebenefit
toathirdclass，whohadlenttheirmoneyduringthefewyears
ofgreatestdepreciation。Asitis，therewasanunderpaymentto
onesetofpersons，andanoverpaymenttoanother。ThelateMr。
Mushettookthetroubletomakeanarithmeticalcomparison
betweenthetwoamounts。Heascertainedbycalculation，thatif
anaccounthadbeenmadeoutin1819，ofwhatthefundholdershad
gainedandlostbythevariationofthepapercurrencyfromits
standard，theywouldhavebeenfoundasabodytohavebeen
losers;sothatifanycompensationwasdueonthegroundof
depreciation，itwouldnotbefromthefundholderscollectively，
buttothem。
Thusitiswiththefactsofthecase。Butthesereasonsof
factarenotthestrongest。Thereisareasonofprinciple，still
morepowerful。Supposethat，notapartofthedebtmerely，but
thewhole，hadbeencontractedinadepreciatedcurrency，
depreciatednotonlyincomparisonwithitsstandard，butwith
itsownvaluebeforeandafter;andthatwewerenowpayingthe
interestofthisdebtinacurrencyfiftyorevenahundredper
centmorevaluablethanthatinwhichitwascontracted。What
differencewouldthismakeintheobligationofpayingit，ifthe
conditionthatitshouldbesopaidwaspartoftheoriginal
compact？Nowthisisnotonlytruth，butlessthanthetruth。The
compactstipulatedbettertermsforthefundholderthanhehas
received。DuringthewholecontinuanceoftheBankrestriction，
therewasaparliamentarypledge，bywhichthelegislaturewasas
muchboundasanylegislatureiscapableofbindingitself，that
cashpaymentsshouldberesumedontheoriginalfooting，at
farthestinsixmonthsaftertheconclusionofageneralpeace。
Thiswasthereforeanactualconditionofeveryloan;andthe
termsoftheloanweremorefavourableinconsiderationofit。
Withoutsomesuchstipulation，theGovernmentcouldnothave
expectedtoborrow，unlessonthetermsonwhichloansaremade
tothenativeprincesofIndia。Ifithadbeenunderstoodand
avowedthat，afterborrowingthemoney，thestandardatwhichit
wascommutedmightbepermanentlylowered，toanyextentwhichto
the\"collectivewisdom\"ofalegislatureofborrowersmightseem
fit——whocansaywhatrateofinterestwouldhavebeena
sufficientinducementtopersonsofcommonsensetorisktheir
savingsinsuchanadventure？Howevermuchthefundholdershad
gainedbytheresumptionofcashpayments，thetermsofthe
contractinsuredtheirgivingamplevalueforit。Theygavevalue
formorethantheyreceived;sincecashpaymentswerenotresumed
insixmonths，butinasmanyyears，afterthepeace。Sothat
wavingallourargumentsexceptthelast，andconcedingallthe
factsassertedontheothersideofthequestion，the
fundholders，insteadofbeingundulybenefited，aretheinjured
party;andwouldhaveaclaimtocompensation，ifsuchclaims
werenotveryproperlybarredbytheimpossibilityof
adjudication，andbythesalutarygeneralmaximoflawand
policy，\"quodinterestreipublicaeutsitfinislitium。\"
NOTES:
1。Amongtheschemesofcurrencytowhich，strangetosay，
intelligentwritershavebeenfoundtogivetheirsanction，one
isasfollows:thatthestateshouldreceiveinpledgeor
mortgage，anykindoramountofproperty，suchasland，stock，
&c。，andshouldadvancetotheownersinconvertiblepapermoney
totheestimatedvalue。Suchacurrencywouldnotevenhavethe
recommendationsoftheimaginaryassignatssupposedinthetext:
sincethoseintowhosehandsthenoteswerepaidbythepersons
whoreceivedthem，couldnotreturnthemtotheGovernment，and
demandinexchangelandorstockwhichwasonlypledged，not
alienated。Therewouldbenorefluxofsuchassignatsasthese，
andtheirdepreciationwouldbeindefinite。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3:Distribution
Chapter14
OfExcessofSupply
1。Aftertheelementaryexpositionofthetheoryofmoney
containedinthelastfewchapters，weshallreturntoaquestion
inthegeneraltheoryofValue，whichcouldnotbesatisfactorily
discusseduntilthenatureandoperationsofMoneywereinsome
measureunderstood，becausetheerrorsagainstwhichwehaveto
contendmainlyoriginateinamisunderstandingofthose
operations。
Wehaveseenthatthevalueofeverythinggravitatestowards
acertainmediumpoint（whichhasbeencalledtheNaturalValue），
namely，thatatwhichitexchangesforeveryotherthinginthe
ratiooftheircostofproduction。Wehaveseen，too，thatthe
actualormarketvaluecoincides，ornearlyso，withthenatural
value，onlyonanaverageofyears;andiscontinuallyeither
risingabove，orfallingbelowit，fromalterationsinthe
demand，orcasualfluctuationsinthesupply:butthatthese
variationscorrectthemselves，throughthetendencyofthesupply
toaccommodateitselftothedemandwhichexistsforthe
commodityatitsnaturalvalue。Ageneralconvergencethus
resultsfromthebalanceofoppositedivergences。Dearth，or
scarcity，ontheonehand，andover—supply，orinmercantile
language，glut，ontheother，areincidenttoallcommodities。In
thefirstcase，thecommodityaffordstotheproducersor
sellers，whilethedeficiencylasts，anunusuallyhighrateof
profit:inthesecond，thesupplybeinginexcessofthatfor
whichademandexistsatsuchavalueaswillaffordtheordinary
profit，thesellersmustbecontentwithless，andmust，in
extremecases，submittoaloss。
Becausethisphenomenonofover—supply，andconsequent
inconvenienceorlosstotheproducerordealer，mayexistinthe
caseofanyonecommoditywhatever，manypersons，includingsome
distinguishedpoliticaleconomists，havethoughtthatitmay
existwithregardtoallcommodities;thattheremaybeageneral
over—productionofwealth;asupplyofcommoditiesinthe
aggregate，surpassingthedemand;andaconsequentdepressed
conditionofallclassesofproducers。Againstthisdoctrine，of
whichMr。MalthusandDr。Chalmersinthiscountry，andM。de
SismondiontheContinent，werethechiefapostles，Ihave
alreadycontendedintheFirstBook;（1*）butitwasnotpossible，
inthatstageofourinquiry，toenterintoacomplete
examinationofanerror（asIconceive）essentiallygroundedona
misunderstandingofthephenomenaofValueandPrice。The
doctrineappearstometoinvolvesomuchinconsistencyinits
veryconception，thatIfeelconsiderabledifficultyingiving
anystatementofitwhichshallbeatonceclear，and
satisfactorytoitssupporters。Theyagreeinmaintainingthat
theremaybe，andsometimesis，anexcessofproductionsin
generalbeyondthedemandforthem;thatwhenthishappens，
purchaserscannotbefoundatpriceswhichwillrepaythecostof
productionwithaprofit;thatthereensuesageneraldepression
ofpricesorvalues（theyareseldomaccurateindiscriminating
betweenthetwo），sothatproducers，themoretheyproduce，find
themselvesthepoorer，insteadofricher;andDrChalmers
accordinglyinculcatesoncapitaliststhepracticeofamoral
restraintinreferencetothepursuitofgain;whileSismondi
deprecatesmachinery，andthevariousinventionswhichincrease
productivepower。Theybothmaintainthataccumulationofcapital
mayproceedtoofast，notmerelyforthemoral，butforthe
materialinterestsofthosewhoproduceandaccumulate;andthey
enjointherichtoguardagainstthisevilbyanample
unproductiveconsumption。
2。Whenthesewritersspeakofthesupplyofcommoditiesas
outrunningthedemand，itisnotclearwhichofthetwoelements
ofdemandtheyhaveinview—thedesiretopossess，orthemeans
ofpurchase;whethertheirmeaningisthatthereare，insuch
cases，moreconsumableproductsinexistencethanthepublic
desirestoconsume，ormerelymorethanitisabletopayfor。In
thisuncertainty，itisnecessarytoexaminebothsuppositions。
First，letussupposethatthequantityofcommodities
producedisnotgreaterthanthecommunitywouldbegladto
consume:isit，inthatcase，possiblethatthereshouldbea
deficiencyofdemandforallcommodities，forwantofthemeans
ofpayment？Thosewhothinksocannothaveconsideredwhatitis
whichconstitutesthemeansofpaymentforcommodities。Itis
simplycommodities。Eachperson’smeansofpayingforthe
productionsofotherpeopleconsistsofthosewhichhehimself
possesses。Allsellersareinevitablyandexviterminibuyers。
Couldwesuddenlydoubletheproductivepowersofthecountry，we
shoulddoublethesupplyofcommoditiesineverymarket;butwe
should，bythesamestroke，doublethepurchasingpower。
Everybodywouldbringadoubledemandaswellassupply:
everybodywouldbeabletobuytwiceasmuch，becauseeveryone
wouldhavetwiceasmuchtoofferinexchange。Itisprobable，
indeed，thattherewouldnowbeasuperfluityofcertainthings。
althoughthecommunitywouldwillinglydoubleitsaggregate
consumption，itmayalreadyhaveasmuchasitdesiresofsome
commodities，anditmayprefertodomorethandoubleits
consumptionofothers，ortoexerciseitsincreasedpurchasing
poweronsomenewthing。Ifso，thesupplywilladaptitself
accordingly，andthevaluesofthingswillcontinuetoconformto
theircostofproduction。Atanyrate，itisasheerabsurdity
thatallthingsshouldfallinvalue，andthatallproducers
should，inconsequence，beinsufficientlyremunerated。Ifvalues
remainthesame，whatbecomesofpricesisimmaterial，sincethe
remunerationofproducersdoesnotdependonhowmuchmoney，but
onhowmuchofconsumablearticles，theyobtainfortheirgoods。
Besides，moneyisacommodity;andifallcommoditiesare
supposedtobedoubledinquantity，wemustsupposemoneytobe
doubledtoo，andthenpriceswouldnomorefallthanvalues
would。
3。Ageneralover—supply，orexcessofallcommoditiesabove
thedemand，sofarasdemandconsistsinmeansofpayment，is
thusshowntobeanimpossibility。Butitmayperhapshesupposed
thatitisnottheabilitytopurchase，butthedesireto
possess，thatfallsshort，andthatthegeneralproduceof
industrymaybegreaterthanthecommunitydesirestoconsume——
thepart，atleast，ofthecommunitywhichhasanequivalentto
give。Itisevidentenough，thatproducemakesamarketfor
produce，andthatthereiswealthinthecountrywithwhichto
purchaseallthewealthinthecountry;butthosewhohavethe
means，maynothavethewants，andthosewhohavethewantsmay
bewithoutthemeans。Aportion，therefore，ofthecommodities
producedmaybeunabletofindamarket，fromtheabsenceof
meansinthosewhohavethedesiretoconsume，andthewantof
desireinthosewhohavethemeans。
Thisismuchthemostplausibleformofthedoctrine，and
doesnot，likethatwhichwefirstexamined，involvea
contradiction。Theremayeasilybeagreaterquantityofany
particularcommoditythanisdesiredbythosewhohavethe
abilitytopurchase，anditisabstractedlyconceivablethatthis
mightbethecasewithallcommodities。Theerrorisinnot
perceivingthatthoughallwhohaveanequivalenttogive，might
befullyprovidedwitheveryconsumablearticlewhichthey
desire，thefactthattheygoonaddingtotheproductionproves
thatthisisnotactuallythecase。Assumethemostfavourable
hypothesisforthepurpose，thatofalimitedcommunity，every
memberofwhichpossessesasmuchofnecessariesandofallknown
luxuriesashedesires:andsinceitisnotconceivablethat
personswhosewantswerecompletelysatisfiedwouldlabourand
economizetoobtainwhattheydidnotdesire，supposethata
foreignerarrivesandproducesanadditionalquantityof
somethingofwhichtherewasalreadyenough。Here，itwillbe
said，isover—production:true，Ireply;over—productionofthat
particulararticle:thecommunitywantednomoreofthat，butit
wantedsomething。Theoldinhabitants，indeed，wantednothing;
butdidnottheforeignerhimselfwantsomething？Whenhe
producedthesuperfluousarticle，washelabouringwithouta
motive？Hehasproduced，butthewrongthinginsteadofthe
right。Hewanted，perhaps，food，andhasproducedwatches，with
whicheverybodywassufficientlysupplied。Thenewcomerbrought
withhimintothecountryademandforcommodities，equaltoall
thathecouldproducebyhisindustry，anditwashisbusinessto
seethatthesupplyhebroughtshouldbesuitabletothatdemand。
Ifhecouldnotproducesomethingcapableofexcitinganewwant
ordesireinthecommunity，forthesatisfactionofwhichsome
onewouldgrowmorefoodandgiveittohiminexchange，hehad
thealternativeofgrowingfoodforhimself;eitheronfresh
land，iftherewasanyunoccupied，orasatenant，orpartner，or
servant，ofsomeformeroccupier，willingtobepartially
relievedfromlabour。Hehasproducedathingnotwanted，instead
ofwhatwaswanted;andhehimself，perhaps，isnotthekindof
producerwhoiswanted;butthereisnoover—production;
productionisnotexcessive，butmerelyillassorted。Wesaw
before，thatwhoeverbringsadditionalcommoditiestothemarket，
bringsanadditionalpowerofpurchase;wenowseethathebrings
alsoanadditionaldesiretoconsume;sinceifhehadnotthat
desire，hewouldnothavetroubledhimselftoproduce。Neitherof
theelementsofdemand，therefore，canbewanting，whenthereis
anadditionalsupply;thoughitisperfectlypossiblethatthe
demandmaybeforonething，andthesupplymayunfortunately
consistofanother。
Driventohislastretreat，anopponentmayperhapsallege，
thattherearepersonswhoproduceandaccumulatefrommere
habit;notbecausetheyhaveanyobjectingrowingricher，or
desiretoaddinanyrespecttotheirconsumption，butfromvis
inertiae。Theycontinueproducingbecausethemachineisready
mounted，andsaveandre—investtheirsavingsbecausetheyhave
nothingonwhichtheycaretoexpendthem。Igrantthatthisis
possible，andinsomefewinstancesprobablyhappens;butthese
donotinthesmallestdegreeaffectourconclusion。For，whatdo
thesepersonsdowiththeirsavings？Theyinvestthem
productively。thatis，expendtheminemployinglabour。Inother
words，havingapurchasingpowerbelongingtothem，morethan
theyknowwhattodowith，theymakeoverthesurplusofitfor
thegeneralbenefitofthelabouringclass。Now，willthatclass
alsonotknowwhattodowithit？Arewetosupposethattheytoo
havetheirwantsperfectlysatisfied，andgoonlabouringfrom
merehabit？Untilthisisthecase;untiltheworkingclasses
havealsoreachedthepointofsatiety—therewillbenowantof
demandfortheproduceofcapital，howeverrapidlyitmay
accumulate:since，ifthereisnothingelseforittodo，itcan
alwaysfindemploymentinproducingthenecessariesorluxuries
ofthelabouringclass。Andwhentheytoohadnofurtherdesire
fornecessariesorluxuries，theywouldtakethebenefitofany
furtherincreaseofwagesbydiminishingtheirwork;sothatthe
over—productionwhichthenforthefirsttimewouldbepossible
inidea，couldnoteventhentakeplaceinfact，forwantof
labourers。Thus，inwhatevermannerthequestionislookedat，
eventhoughwegototheextremevergeofpossibilitytoinventa
suppositionfavourabletoit，thetheoryofgeneral
over—productionimpliesanabsurdity。
4。Whatthenisitbywhichmenwhohavereflectedmuchon
economicalphenomena，andhaveevencontributedtothrownew
lightuponthembyoriginalspeculations，havebeenledto
embracesoirrationaladoctrine？Iconceivethemtohavebeen
deceivedbyamistakeninterpretationofcertainmercantile
facts。Theyimaginedthatthepossibilityofageneraloversupply
ofcommoditieswasprovedbyexperience。Theybelievedthatthey
sawthisphenomenonincertainconditionsofthemarkets，the
trueexplanationofwhichistotallydifferent。
Ihavealreadydescribedthestateofthemarketsfor
commoditieswhichaccompanieswhatistermedacommercialcrisis。
Atsuchtimesthereisreallyanexcessofallcommoditiesabove
themoneydemand:inotherwords，thereisanunder—supplyof
money。Fromthesuddenannihilationofagreatmassofcredit，
everyonedislikestopartwithreadymoney，andmanyareanxious
toprocureitatanysacrifice。Almosteverybodythereforeisa
seller，andtherearescarcelyanybuyers;sothattheremay
reallybe，thoughonlywhilethecrisislasts，anextreme
depressionofgeneralprices，fromwhatmaybeindiscriminately
calledaglutofcommoditiesoradearthofmoney。Butitisa
greaterrortosuppose，withSismondi，thatacommercialcrisis
istheeffectofageneralexcessofproduction。Itissimplythe
consequenceofanexcessofspeculativepurchases。Itisnota
gradualadventoflowprices，hutasuddenrecoilfromprices
extravagantlyhigh:itsimmediatecauseisacontractionof
credit，andtheremedyis，notadilutionofsupply，butthe
restorationofconfidence。Itisalsoevidentthatthistemporary
derangementofmarketsisanevilonlybecauseitistemporary。
Thefallbeingsolelyofmoneyprices，ifpricesdidnotrise
againnodealerwouldlose，sincethesmallerpricewouldbe
worthasmuchtohimasthelargerpricewasbefore。Innomanner
doesthisphenomenonanswertothedescriptionwhichthese
celebratedeconomistshavegivenoftheevilofover—production。
Thepermanentdeclineinthecircumstancesofproducers，forwant
ofmarkets，whichthosewriterscontemplate，isaconceptionto
whichthenatureofacommercialcrisisgivesnosupport。
Theotherphenomenonfromwhichthenotionofageneral
excessofwealthandsuperfluityofaccumulationseemstoderive
countenance，isoneofamorepermanentnature，namely，thefall
ofprofitsandinterestwhichnaturallytakesplacewiththe
progressofpopulationandproduction。Thecauseofthisdecline
ofprofitistheincreasedcostofmaintaininglabour，which
resultsfromanincreaseofpopulationandofthedemandfor
food，outstrippingtheadvanceofagriculturalimprovement。This
importantfeatureintheeconomicalprogressofnationswill
receivefullconsiderationanddiscussioninthesucceeding
Book。（2*）Itisobviouslyatotallydifferentthingfromawant
ofmarketforcommodities，thoughoftenconfoundedwithitinthe
complaintsoftheproducingandtradingclasses。Thetrue
interpretationofthemodernorpresentstateofindustrial
economy，is，thatthereishardlyanyamountofbusinesswhich
maynotbedone，ifpeoplewillbecontenttodoitonsmall
profits;andthis，allactiveandintelligentpersonsinbusiness
perfectlywellknow。buteventhosewhocomplywiththe
necessitiesoftheirtime，grumbleatwhattheycomplywith，and
wishthattherewerelesscapital，orastheyexpressit，less
competition，inorderthattheremightbegreaterprofits。Low
profits，however，areadifferentthingfromdeficiencyof
demand;andtheproductionandaccumulationwhichmerelyreduce
profits，cannotbecalledexcessofsupplyorofproduction。What
thephenomenonreallyis，anditseffectsandnecessarylimits，
willbeseenwhenwetreatofthatexpresssubject。
Iknownotofanyeconomicalfacts，exceptthetwoIhave
specified，whichcanhavegivenoccasiontotheopinionthata
generalover—productionofcommoditieseverpresenteditselfin
actualexperience。Iamconvincedthatthereisnofactin
commercialaffairs，which，inordertoitsexplanation，standsin
needofthatchimericalsupposition。
Thepointisfundamental;anydifferenceofopiniononit
involvesradicallydifferentconceptionsofPoliticalEconomy，
especiallyinitspracticalaspect。Ontheoneview，wehaveonly
toconsiderhowasufficientproductionmaybecombinedwiththe
bestpossibledistribution;butontheotherthereisathird
thingtobeconsidered—howamarketcanbecreatedforproduce，
orhowproductioncanbelimitedtothecapabilitiesofthe
market。Besides;atheorysoessentiallyself—contradictory
cannotintrudeitselfwithoutcarryingconfusionintothevery
heartofthesubject，andmakingitimpossibleeventoconceive
withanydistinctnessmanyofthemorecomplicatedeconomical
workingsofsociety。Thiserrorhasbeen，Iconceive，fatalto
thesystems，assystems，ofthethreedistinguishedeconomiststo
whomIbeforereferred，Malthus，Chalmers，andSismondi;allof
whomhaveadmirablyconceivedandexplainedseveralofthe
elementarytheoremsofpoliticaleconomy，butthisfatal
misconceptionhasspreaditselflikeaveilbetweenthemandthe
moredifficultportionsofthesubject，notsufferingonerayof
lighttopenetrate。Stillmoreisthissameconfusedidea
constantlycrossingandbewilderingthespeculationsofminds
inferiortotheirs。Itisbutjusticetotwoeminentnames，to
callattentiontothefact，thatthemeritofhavingplacedthis
mostimportantpointinitstruelight，belongsprincipally，on
theContinent，tothejudiciousJ。B。Say，andinthiscountryto
MrMill;who（besidestheconclusiveexpositionwhichhegaveof
thesubjectinhisElementsofPoliticalEconomy）hadsetforth
thecorrectdoctrinewithgreatforceandclearnessinanearly
pamphlet，calledforthbyatemporarycontroversy，andentitled，
\"CommerceDefended;\"thefirstofhiswritingswhichattainedany
celebrity，andwhichhepriedmoreashavingbeenhisfirst
introductiontothefriendshipofDavidRicardo，themostvalued
andmostintimatefriendshipofhislife。
NOTES:
1。Supra，vol。i。pp。66—8。
2。Infra，bookiv。chap。4。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3:Distribution
Chapter15
OfaMeasureofValue
1。Therehasbeenmuchdiscussionamongpoliticaleconomists
respectingaMeasureofValue。Animportancehasbeenattachedto
thesubject，greaterthanitdeserved，andwhathasbeenwritten
respectingithascontributednotalittletothereproachof
logomachy，whichisbrought，withmuchexaggeration，butnot
altogetherwithoutground，againstthespeculationsofpolitical
economists。Itisnecessaryhowevertotouchuponthesubject，if
onlytoshowhowlittlethereistobesaidonit。
AMeasureofValue，intheordinarysenseoftheword
measure，wouldmean，something，bycomparisonwithwhichwemay
ascertainwhatisthevalueofanyotherthing。Whenweconsider
farther，thatvalueitselfisrelative，andthattwothingsare
necessarytoconstituteit，independentlyofthethirdthing
whichistomeasureit;wemaydefineaMeasureofValuetobe
something，bycomparingwithwhichanytwootherthings，wemay
infertheirvalueinrelationtooneanother。
Inthissense，anycommoditywillserveasameasureofvalue
atagiventimeandplace;sincewecanalwaysinferthe
proportioninwhichthingsexchangeforoneanother，whenweknow
theproportioninwhicheachexchangesforanythirdthing。To
serveasaconvenientmeasureofvalueisoneofthefunctionsof
thecommodityselectedasamediumofexchange。Itisinthat
commoditythatthevaluesofallotherthingsarehabitually
estimated。Wesaythatonethingisworth2l。，another3l。;and
itisthenknownwithoutexpressstatement，thatoneisworth
two—thirdsoftheother，orthatthethingsexchangeforone
anotherintheproportionof2to3。Moneyisacompletemeasure
oftheirvalue。
Butthedesideratumsoughtbypoliticaleconomistsisnota
measureofthevalueofthingsatthesametimeandplace，buta
measureofthevalueofthesamethingatdifferenttimesand
places:somethingbycomparisonwithwhichitmaybeknown
whetheranygiventhingisofgreaterorlessvaluenowthana
centuryago，orinthiscountrythaninAmericaorChina。Andfor
thisalso，money，oranyothercommodity，willservequiteas
wellasatthesametimeandplace，providedwecanobtainthe
samedata;providedweareabletocomparewiththemeasurenot
onecommodityonly，butthetwoormorewhicharenecessaryto
theideaofvalue。Ifwheatisnow40s。thequarter，andafat
sheepthesame，andifinthetimeofHenrytheSecondwheatwas
20s。，andasheep10s。，weknowthataquarterofwheatwasthen
worthtwosheep，andisnowonlyworthone，andthatthevalue
thereforeofasheep，estimatedinwheat，istwiceasgreatasit
wasthen;quiteindependentlyofthevalueofmoneyatthetwo
periods，eitherinrelationtothosetwoarticles（inrespectto
bothofwhichwesupposeittohavefallen），ortoother
commodities，inrespecttowhichweneednotmakeany
supposition。
Whatseemstobedesired，however，bywritersonthesubject，
issomemeansofascertainingthevalueofacommoditybymerely
comparingitwiththemeasure，withoutreferringitspeciallyto
anyothergivencommodity。Theywouldwishtobeable，fromthe
merefactthatwheatisnow40s。thequarter，andwasformerly
20s。，todecidewhetherwheathasvariedinitsvalue，andin
whatdegree，withoutselectingasecondcommodity，suchasa
sheep，tocompareitwith;becausetheyaredesirousofknowing，
nothowmuchwheathasvariedinvaluerelativelytosheep，but
howmuchithasvariedrelativelytothingsingeneral。
Thefirstobstaclearisesfromthenecessaryindefiniteness
oftheideaofgeneralexchangevalue——valueinrelationnotto
someonecommodity，buttocommoditiesatlarge。Evenifweknew
exactlyhowmuchaquarterofwheatwouldhavepurchasedatthe
earlierperiod，ofeverymarketablearticleconsidered
separately，andthatitwillnowpurchasemoreofsomethingsand
lessofothers，weshouldoftenfinditimpossibletosaywhether
ithadrisenorfalleninrelationtothingsingeneral。Howmuch
moreimpossible，whenweonlyknowhowithasvariedinrelation
tothemeasure。Toenablethemoneypriceofathingattwo
differentperiodstomeasurethequantityofthingsingeneral
whichitwillexchangefor，thesamesumofmoneymustcorrespond
atbothperiodstothesamequantityofthingsingeneral，that
is，moneymustalwayshavethesameexchangevalue，thesame
generalpurchasingpower。Now，notonlyisthisnottrueof
money，orofanyothercommodity，butwecannotevensupposeany
stateofcircumstancesinwhichitwouldbetrue。
2。Ameasureofexchangevalue，therefore，beingimpossible，
writershaveformedanotionofsomething，underthenameofa
measureofvalue，whichwouldbemoreproperlytermedameasure
ofcostofproduction。Theyhaveimaginedacommodityinvariably
producedbythesamequantityoflabour;towhichsuppositionit
isnecessarytoadd，thatthefixedcapitalemployedinthe
productionmustbearalwaysthesameproportiontothewagesof
theimmediatelabour，andmustbealwaysofthesamedurability:
inshort，thesamecapitalmustbeadvancedforthesamelength
oftime，sothattheelementofvaluewhichconsistsofprofits，
aswellasthatwhichconsistsofwages，maybeunchangeable。We
shouldthenhaveacommodityalwaysproducedunderoneandthe
samecombinationofallthecircumstanceswhichaffectpermanent
value。Suchacommoditywouldbebynomeansconstantinits
exchangevalue;for（evenwithoutreckoningthetemporary
fluctuationsarisingfromsupplyanddemand）itsexchangevalue
wouldbealteredbyeverychangeinthecircumstancesof
productionofthethingsagainstwhichitwasexchanged。Butif
thereexistedsuchacommodity，weshouldderivethisadvantage
fromit，thatwheneveranyotherthingvariedpermanentlyin
relationtoit，weshouldknowthatthecauseofvariationwas
notinit，butintheotherthing。Itwouldthusbesuitedto
serveasameasure，notindeedofthevalueofotherthings，but
oftheircostofproduction。Ifacommodityacquiredagreater
permanentpurchasingpowerinrelationtotheinvariable
commodity，itscostofproductionmusthavebecomegreater;and
inthecontrarycase，less。Thismeasureofcost，iswhat
politicaleconomistshavegenerallymeantbyameasureofvalue。
Butameasureofcost，thoughperfectlyconceivable，canno
moreexistinfact，thanameasureofexchangevalue。Thereisno
commoditywhichisinvariableinitscostofproduction。Goldand
silveraretheleastvariable，buteventheseareliableto
changesintheircostofproduction，fromtheexhaustionofold
sourcesofsupply，thediscoveryofnew，andimprovementsinthe
modeofworking。Ifweattempttoascertainthechangesinthe
costofproductionofanycommodityfromthechangesinitsmoney
price，theconclusionwillrequiretobecorrectedbythebest
allowancewecanmakefortheintermediatechangesinthecostof
theproductionofmoneyitself。