Chapter , Chap. V, § 5.

Book II, Chap. V, § 5.

171 Mr. Carey takes this ground.

172 See the explanation of an economic law, Book II, Chap. II, § 1.

173 “Constitutional History of England,” vol. ii, p. 563. See also Nicholls’s “History of the Poor Laws,” vol. ii, p. 303.

174 For further discussion of the advantages of small holdings, see Book IV, Chap. V, § 2.

175 “Leading Principles,” pp. 64-69.

176 See Young, “Labor in Europe.”

177 Walter Bagehot, “Lombard Street,” p. 13.

178 “Work and Wages.”

179 The reader is advised to consider, in connection with this, the former discussion on the relation between wages and the price of food (pp. 185, 186).

180 “Logical Method,” p. 206.

181 “American Political Economy,” p. 164.

182 Rickards, “Population and Capital,” p. 135.

183 Rickards, ibid., p. 75.

184 “Political Economy,” p. 288.

185 “Progress and Poverty,” pp. 220, 221.

186 “American Political Economy,” p. 164.

187 For other writers opposed to the doctrine of Rent as maintained by Ricardo and Mill, see Bonamy Price, “Practical Political Economy,” chap. x; McLeod, “Principles of Economic Philosophy,” chap. x; and J. E. T. Rogers, “Manual of Political Economy,” chap. xii.

188 Cairnes, “Logical Method,” p. 199.

189 “Theory and Practice of Banking,” vol. i, p. 13. Cf. Cairnes, “Logical Method,” p. 106.

190 “Leading Principles,” p. 11.

191 “Political Economy,” p. 5.

192 “Social Science,” vol. i, p. 158.

193 “Harmonies,” p. 171.

194 “Political Economy,” p. 126.

195 “Political Economy,” Introduction, Chap. I, § 5.

196 “Précis d’Économie politique,” p. 175.

197 “Précis de la Science économique,” vol. i, p. 202.

198 “Political Economy Primer,” p. 98.

199 “Leading Principles,” p. 15.

200 “Theory of Political Economy,” pp. 82-91. See Cairnes, ibid., pp. 17-19.

201 “Political Economy,” p. 92.

202 “Social Science,” vol. ii, p. 335.

203 “Political Economy,” Introduction, Chap. I, § 5.

204 “Précis,” p. 206.

205 “Political Economy,” p. 165.

206 “Logic of Political Economy.”

207 Although here using demand in its proper sense, a little later Mr. Mill defines it as the “quantity demanded.” As he again uses it in the proper sense in discussing excess of money (Book III, Chap. V), supply (Book III, Chap. XI), and foreign trade (Book III, Chap. XIV), I have omitted from his present exposition his evidently inconsistent use of the word.

208 “Leading Principles,” p. 25.

209 “Leading Principles,” p. 108.

210 See his chapter on “Natural and Market Price,” book i, chap. vii.

211 “Report of the Director of the Mint,” 1883, p. 69.

_ 212 Supra_, p. 222.

213 “Leading Principles,” p. 41.

214 Book I, Chap. I, § 2.

215 See supra, p. 210.

216 “Leading Principles,” part i, chap. iii, p. 87.

217 “Work and Wages.”

218 “Leading Principles,” p. 136.

219 F. A. Walker (“Political Economy,” pp. 248-259) expands this idea, and makes it the pivotal part of his whole theory of distribution among laborers, capitalists, and landlords.

220 “Money and the Mechanism of Exchange,” chap. iii.

221 “Political Economy,” p. 127.

222 “Money and the Mechanism of Exchange,” p. 1.

223 “Political Economy,” p. 144.

224 The substance of Mr. Mill’s former chapter, XV (Book III), is here inserted in its direct connection with the functions of money.

225 F. A. Walker, “Political Economy,” p. 363. A German, Count Soden (1805), Joseph Lowe (1822), and G. Poulett Scrope (1833), proposed this scheme. See Jevons, “Money and the Mechanism of Exchange,” chap. xxv.

226 “Money and the Mechanism of Exchange,” p. 31.

227 “A Serious Fall in the Value of Gold” (1863).

228 F. A. Walker defines the demand for money as “the occasion for the use of money in effecting exchanges; in other words, it is the amount of money-work to be done” (“Political Economy,” p. 133); and the supply of money as “the money-force available to do the money-work which the demand for money indicates as required to be done, in the given community, at the given time. The supply of money is measured by ... the amount of money and the rapidity of circulation” (ibid., p. 136).

229 Jevons, “Money and the Mechanism of Exchange,” pp. 336, 339.

230 “Edelmetall-Production,” in Petermann’s “Mittheilungen,” Ergänzungsheft, No. 57.

231 See Jevons’s “A Serious Fall in the Value of Gold.”

232 In his book “De la Baisse probable de l’Or” (1859). See also Cairnes’s “Essays.” For authorities on the new gold, see Robinson’s “California” (Larkin’s and Mason’s Reports, pp. 17, 33); Executive Documents of United States, 1848, I, 1; Westgarth’s “Colony of Victoria,” pp. 122, 315; Wood, “Sixteen Months in the Gold Diggings,” p. 125; Lalor’s “Cyclopædia,” II, p. 851; Walker, “Money,” part i, chaps. vii, viii. For the probable effects, see “North American Review,” October, 1852; Tooke’s “History of Prices,” vi, p. 224; “Statistical Journal,” 1878, p. 230; Levasseur, “Question de l’Or.” As to how far the value of gold was lowered, Jevons, “Serious Fall,” etc.; “Statistical Journal,” 1865; ibid., 1869, p. 445; and Giffen’s “Essays in Finance,” p. 82.

233 “Report of the House of Commons on Depreciation of Silver,” 1876, p. v.

234 See Macaulay, “History of England,” chap. xxi.

235 “Money and the Mechanism of Exchange,” p. 84.

236 Jevons, ibid., p. 138.

237 See S. Dana Horton, “Gold and Silver,” 1877, p. 84, et seq.

238 See Linderman, “Money and Legal Tender,” p. 161.

239 Director of the Mint, Report, 1883, p. 49, and Linderman, ibid., p. 173.

240 See “Atlantic Monthly,” “The Silver Danger,” May, 1884.

241 See “International Review,” September, 1876; and for some further explanation of banks, see “Atlantic Monthly,” 1882, pp. 196, 695, 696.

242 “Report of the Comptroller of the Currency,” 1883, p. 34.

243 See “Nature,” xix, 33, 588.

244 See Walker’s “Money,” p. 473.

245 Vol. i, p. 302. See Sumner’s “History of American Currency” and Walker’s “Money” for much valuable material.

246 See Cherbuliez, vol. i, p. 299.

247 “Money and the Mechanism of Exchange,” p. 232.

248 For John Law’s famous scheme (1718-1720) in France, called the “Mississippi Bubble,” the best authority is Levasseur’s “Système de Law” (1854). Also consult M. Thiers’s “The Mississippi Bubble” (translated by F. F. Fiske, 1859); Steuart’s “Political Economy” (1767); and McLeod’s “Dictionary of Political Economy,” article on “Banking in France.”

249 For the best brief account of the issues of assignats, see President A. D. White’s “Paper Money Inflation in France.” See also F. A. Walker, “Money,” pp. 336-347; Bazot’s “Assignats”; and Alison’s “History of the French Revolution,” vol. ii, p. 606.

250 See “Some Account of the Bills of Credit or Paper Money of Rhode Island, 1710-1786,” in “Rhode Island Historical Tracts,” No. 8 (1880), by E. S. Potter and S. S. Rider.

251 See Felt’s “History of Massachusetts Currency.” Consult also Minot, Hutchinson, and Gouge. Walker, “Money,” and Sumner, “History of American Currency,” have given considerable accounts of paper experiments in the United States, and should be well studied.

252 See Walker, “Money,” p. 329.

253 See J. J. Knox’s “United States Notes” (1884); the Finance Reports during and since the war to 1879; Spaulding’s “Financial History of the War” (1869); Bowen’s “American Political Economy,” chap. xv; “Chapters of Erie,” by H. Adams and F. A. Walker; and the voluminous pages of the “Congressional Globe.” For the decisions in the legal-tender cases, see “Banker’s Magazine,” 1869-1870, p. 712, and 1871-1872, pp. 752, 780. A collection of statutes affecting United States finance, especially since 1860, has been made in a small pamphlet, by Professor C. F. Dunbar (published by Sever, Cambridge, Massachusetts).

254 Report of 1861.

255 Mr. Malthus, Dr. Chalmers, M. de Sismondi, and various minor writers. It is especially likely that, in times of commercial depression, the journals of the day will contain arguments to show a general over-production.

256 Book IV, Chap. II.

257 This is practically the argument of a little book, “Excessive Saving a Cause of Commercial Distress” (1884), by Uriel H. Crocker.

258 Book III, Chap. II, § 4.

259 “Leading Principles,” pp. 302-307.

260 “Essays on some Unsettled Questions of Political Economy,” Essay I.

261 I at one time believed Mr. Ricardo to have been the sole author of the doctrine now universally received by political economists, on the nature and measure of the benefit which a country derives from foreign trade. But Colonel Torrens, by the republication of one of his early writings, “The Economists refuted,” has established at least a joint claim with Mr. Ricardo to the origination of the doctrine, and an exclusive one to its earliest publication.—MILL.

262 I have in this illustration retained almost the exact words quoted by Mr. Mill from his father’s book, James Mill’s “Elements of Political Economy,” but altered it by changing the trade from Poland to the United States, and by speaking of iron instead of cloth.

263 “American Political Economy,” p. 481.

264 For a fuller discussion of this question see Cairnes, “Leading Principles,” p. 319, ff.

265 “Leading Principles,” p. 323.

266 Cairnes, “Leading Principles,” p. 301.

267 Book I, chap. VI, § 4.

268 I have changed the illustration from England to the United States in this example.

269 Book III, Chap. II, § 4.

270 Book III, Chap. I, § 3.

271 See “Statistical Abstract,” 1883, pp. 32, 33.

272 This substitution has been made for Brazil.

273 See close of last chapter.

274 I have also changed the illustrations in this chapter so as to apply to the United States.

275 The examples in this and the next section have been altered so as to apply to the United States.

276 I have changed the names of the countries in the illustrations contained in this chapter, but have not further altered the language beyond the occasional change of a pronoun.

277 The subjoined extract from the separate essay [“Some Unsettled Questions of Political Economy”] previously referred to will give some assistance in following the course of the phenomena. It is adapted to the imaginary case used for illustration throughout that essay, the case of a trade between England and Germany in cloth and linen.

  “We may, at first, make whatever supposition we will with respect to
  the value of money. Let us suppose, therefore, that, before the
  opening of the trade, the price of cloth is the same in both
  countries, namely, six shillings per yard. As ten yards of cloth
  were supposed to exchange in England for fifteen yards of linen, in
  Germany for twenty, we must suppose that linen is sold in England at
  four shillings per yard, in Germany at three. Cost of carriage and
  importer’s profit are left, as before, out of consideration.

  “In this state of prices, cloth, it is evident, can not yet be
  exported from England into Germany; but linen can be imported from
  Germany into England. It will be so; and, in the first instance, the
  linen will be paid for in money.

  “The efflux of money from England and its influx into Germany will
  raise money prices in the latter country, and lower them in the
  former. Linen will rise in Germany above three shillings per yard,
  and cloth above six shillings. Linen in England, being imported from
  Germany, will (since cost of carriage is not reckoned) sink to the
  same price as in that country, while cloth will fall below six
  shillings. As soon as the price of cloth is lower in England than in
  Germany, it will begin to be exported, and the price of cloth in
  Germany will fall to what it is in England. As long as the cloth
  exported does not suffice to pay for the linen imported, money will
  continue to flow from England into Germany, and prices generally
  will continue to fall in England and rise in Germany.

  “By the fall, however, of cloth in England, cloth will fall in
  Germany also, and the demand for it will increase. By the rise of
  linen in Germany, linen must rise in England also, and the demand
  for it will diminish. As cloth fell in price and linen rose, there
  would be some particular price of both articles at which the cloth
  exported and the linen imported would exactly pay for each other. At
  this point prices would remain, because money would then cease to
  move out of England into Germany. What this point might be would
  entirely depend upon the circumstances and inclinations of the
  purchasers on both sides. If the fall of cloth did not much increase
  the demand for it in Germany, and the rise of linen did not diminish
  very rapidly the demand for it in England, much money must pass
  before the equilibrium is restored; cloth would fall very much, and
  linen would rise, until England, perhaps, had to pay nearly as much
  for it as when she produced it for herself. But, if, on the
  contrary, the fall of cloth caused a very rapid increase of the
  demand for it in Germany, and the rise of linen in Germany reduced
  very rapidly the demand in England from what it was under the
  influence of the first cheapness produced by the opening of the
  trade, the cloth would very soon suffice to pay for the linen,
  little money would pass between the two countries, and England would
  derive a large portion of the benefit of the trade. We have thus
  arrived at precisely the same conclusion, in supposing the
  employment of money, which we found to hold under the supposition of
  barter.

  “In what shape the benefit accrues to the two nations from the trade
  is clear enough. Germany, before the commencement of the trade, paid
  six shillings per yard for broadcloth; she now obtains it at a lower
  price. This, however, is not the whole of her advantage. As the
  money-prices of all her other commodities have risen, the
  money-incomes of all her producers have increased. This is no
  advantage to them in buying from each other, because the price of
  what they buy has risen in the same ratio with their means of paying
  for it: but it is an advantage to them in buying anything which has
  not risen, and, still more, anything which has fallen. They,
  therefore, benefit as consumers of cloth, not merely to the extent
  to which cloth has fallen, but also to the extent to which other
  prices have risen. Suppose that this is one tenth. The same
  proportion of their money-incomes as before will suffice to supply
  their other wants; and the remainder, being increased one tenth in
  amount, will enable them to purchase one tenth more cloth than
  before, even though cloth had not fallen: but it has fallen; so that
  they are doubly gainers. They purchase the same quantity with less
  money, and have more to expend upon their other wants.

  “In England, on the contrary, general money-prices have fallen.
  Linen, however, has fallen more than the rest, having been lowered
  in price by importation from a country where it was cheaper; whereas
  the others have fallen only from the consequent efflux of money.
  Notwithstanding, therefore, the general fall of money-prices, the
  English producers will be exactly as they were in all other
  respects, while they will gain as purchasers of linen.

  “The greater the efflux of money required to restore the
  equilibrium, the greater will be the gain of Germany, both by the
  fall of cloth and by the rise of her general prices. The less the
  efflux of money requisite, the greater will be the gain of England;
  because the price of linen will continue lower, and her general
  prices will not be reduced so much. It must not, however, be
  imagined that high money-prices are a good, and low money-prices an
  evil, in themselves. But, the higher the general money-prices in any
  country, the greater will be that country’s means of purchasing
  those commodities, which, being imported from abroad, are
  independent of the causes which keep prices high at home.”

  “In practice, the cloth and the linen would not, as here supposed,
  be at the same price in England and in Germany: each would be dearer
  in money-price in the country which imported than in that which
  produced it, by the amount of the cost of carriage, together with
  the ordinary profit on the importer’s capital for the average length
  of time which elapsed before the commodity could be disposed of. But
  it does not follow that each country pays the cost of carriage of
  the commodity it imports; for the addition of this item to the price
  may operate as a greater check to demand on one side than on the
  other; and the equation of international demand, and consequent
  equilibrium of payments, may not be maintained. Money would then
  flow out of one country into the other, until, in the manner already
  illustrated, the equilibrium was restored: and, when this was
  effected, one country would be paying more than its own cost of
  carriage, and the other less.”—MILL.

278 See Book III, Chap. XVIII, § 5, of Mill’s original work.

279 “Principles of Political Economy and Taxation,” third edition, p. 143.

280 For an exceedingly good study on the conditions of our foreign trade down to 1873, and a prophecy of the panic of 1873, see Cairnes, “Leading Principles,” pp. 364-374.

281 “Leading Principles,” p. 357.

282 The illustrations in this chapter have also been changed, but only so far as to make them apply to the United States.

283 I am here supposing a state of things in which gold and silver mining are a permanent branch of industry, carried on under known conditions; and not the present state of uncertainty, in which gold-gathering is a game of chance, prosecuted (for the present) in the spirit of an adventure, not in that of a regular industrial pursuit.—MILL. It is, however, worth recalling that gold and silver mining have not been—for large effects on the value of the metals—anything like a permanent branch of industry, but that, in the main, great additions have been obtained suddenly and by chance discoveries.—J. L. L.

284 See Walker, “Money,” Chap. XIX.

285 Book II, Chap. V, § 1.

286 I do not include in the general loan fund of the country the capitals, large as they sometimes are, which are habitually employed in speculatively buying and selling the public funds and other securities.—MILL.

287 The rate of interest at such crises in New York has several times risen to 400 or 500 per cent per annum.

288 In this illustration I have retained as nearly as possible the form of that given by Mr. Mill for the trade between England and Germany in cloth and linen.

289 Book II, Chap. V, § 5.

290 Book II, Chap. II, § 3.

291 Cf. Cairnes, “Leading Principles,” p. 209.

292 For a brief bibliography on our own Navigation Laws and the Shipping Question, see Appendix I.

293 Book III, Chap. III, § 1.

_ 294 Supra_, Book III, Chap. II, § 2, and Chap. XX, § 4.

295 Henry George, however, asserts that, “irrespective of the increase of population, the effect of improvements in methods of production and exchange is to increase rent” (“Progress and Poverty,” p. 220).

296 “Leading Principles,” Part I, chap. v.

297 For the distinction between normal and market values, see supra,