mankind, and because great skill in them is comparativaly rare. The fees of a Follett, or a Dunning, or a Scott, were not so high because there were so many Mr. Brieflesses, but simply because the talents of a Follett, or a Dunning, or a Scott, were so rare and so important. If their talents had become more general, the rewards of their labour would have diminished. It is exactly the same law in the other professions alluded to. It is the high rewards that may be won in them, that attracts high talent into them, and it is for the sake of these high rewards that men undergo a long, tedious, and expensive education, and course of labour. Exactly as the Roman tribune said "Eo impendi laborem ac periculum magna præmia proponantur.”1

38. It is, then, the universal law of Economics-That people bestow much labour or expense in producing commodities because they expect that others will give a high price for them. It may be a reason for asking a high price, that they have bestowed much labour, but that is no reason why others will give it. In many cases it is perfectly well known that the public will give a certain price and no more for an article, and the problem is to produce the article for the price.

39. We must also be on our guard against admitting a specious form of expression which J. B. Say uses,—“ Thus, without examining yet, why olive oil is worth 30 sous a pound at Marseilles, and 40 sous at Paris, I say that he who sends it from Marseilles to Paris, adds 10 sous to the value of each pound of oil."2 "Products successively increase their value in passing through the hands of their different producers."3 It is never the producers that confer value, but the consumers; it is each successive consumer that confers the value. If it were the cost of transport that added to its value, it would necessarily follow that to send it back again from Paris to Marseilles would still further add to its value, and to send it backwards and forwards twenty times ought to add twenty times the cost to its value. The truth manifestly is that people incur the cost of transport because they expect that the difference of the value between the two places will repay the cost; but no cost of transport can really add to its 1 Livy, IV., 35.

2 Traité d'Economie Politique, p. 101. Edit. Guillaumin. 3 Ibid., p. 531.

value. Thus, a Library or Museum may be brought up to London from the country for sale, but the expenses of the transport do not add to the value of the books, but they are brought up to London because it is expected that their higher value in London will repay the cost of bringing them there.

40. To exemplify, and still further enforce the truth of our formula, we may take the case of diamonds and other precious stones. Their value depends entirely upon their rarity, and the extreme desire of rich persons to possess them, and has no appreciable relation to the labour of finding them. They have acquired a certain estimation in the eyes of men for certain reasons, and they are scarce, and it flatters the pride of men to be the possessors of rare articles. The finding of diamonds is a great hazard, and they are only found in a few places, and of certain sizes. If a few persons were to be so fortunate as to discover a few hundreds of diamonds of large size, their value would be immensely diminished all over the world; nor would it be possible to assign what proportion the labour of producing them would bear to their price. On the other hand, were a million of men to devote themselves to search for them, and if they searched in vain, and found none, that circumstance would not have the smallest effect in raising the value of a single diamond. So that the real truth is, that men are willing to devote themselves to search for diamonds because they are of great value when found. A diamond is not valuable because a great deal of labour has been bestowed on finding it, but a man searches for diamonds because, though he may only find one at rare intervals, the value of it when found is so great that it will repay him for a long course of unsuccessful labour. Thus, also, pearls are not dear because so many fishermen seek for them, but so many fishermen labour to find them because they are highly esteemed, and rich people are willing to pay high prices for the pleasure of possessing them. Hence, we may say that it is true of diamonds and pearls, and all that class of products, that a great deal of labour is bestowed on producing them because a high price is given for them, and that it is a mistake to say that a high price is given for them because a great deal of labour is bestowed on producing them. Sidney Smith was in a fever of anxiety to sell some jewels he had, to set up house, lest mankind

should awake from their folly, and refuse to buy these glittering baubles. No examples can be taken better than these to shew the total want of any necessary relation between labour and value.

41. An attentive consideration of this last example is of the utmost importance, and is of universal application in Economics. We observe that the quality of the diamond is not in any way affected by the quantity of labour bestowed on finding it. A diamond of the first water may be found after a search of five minutes; a search of as many days, months, or years, may only be rewarded by finding a very inferior one. But yet the result of the lesser amount of labour may be far more valuable than the result of the greater amount. This is a universal truth in Economics. In all cases it is the result, and that only, which is looked to, wholly independent of the labour by which it has been arrived at.

42. Ricardo has brought forward in support of his fundamental principle, that cost of production regulates value, an article that deserves to be examined. He says" Gold and Silver, like all other commodities, are valuable only in proportion to the quantity of labour necessary to produce them and bring them to market. Gold is about fifteen times dearer than silver, not because there is a greater demand for it, nor because the supply of silver is fifteen times greater than that of gold, but solely because fifteen times the quantity of labour is necessary to produce a given quantity of it." Such an assertion as that it is fifteen times more expensive to obtain gold than silver carries its own refutation on the very face of it, and is just one of those tests which, being inconsistent with a known truth, proves the fallacy of the whole of Ricardo's argument. A gold mine is not more costly or laborious to work than a lead, or tin, or copper mine. But it is a much scarcer metal than any of the others, and it is extremely useful for certain purposes. It is not the greater amount of labour bestowed upon producing gold that gives it its greater comparative value to silver, but its greater comparative scarcity to that metal. So far from its being true, as Ricardo says, that the supply of silver is not fif een times as large as that of gold, the fact is that until the discovery of California and Australia, the 1 Principles of Political Economy and Taxation, p. 421.

on.

supply of silver was forty times as great as that of gold.1 The reason why, when it was forty times more abundant, it was only fifteen times less valuable than gold, will be shewn a little further Now, this is exactly what Bacon calls a crucial instance; and is absolutely decisive of the merits of Ricardo's system. According to his doctrine, the only reason why gold could be fifteen times more valuable than silver would be that it was fifteen times more expensive to produce it. But this is known to be a fallacy, and is decisive of the fallacy of the system built upon such doctrines. If gold were as abundant as silver, it would be much more convenient to have silver coins than gold ones, as an equal quantity of silver would be much lighter and more convenient to carry than the same quantity of gold. It is, in fact, the peculiar qualities which render gold so useful as a currency that give it the greater portion of its value.

43. The different value of houses according to the locality in which they are built well exemplifies how greatly more surrounding circumstances influence the value of an article than the cost of its production. It would not cost more to build a house or a range of offices in the heart of the City of London, opposite the Bank of England or the Exchange, than in the most unfrequented suburb, but of what different values they would be! Now, it is clear that the greatly augmented value of the building in the City would be almost entirely due to the great demand for offices in that locality, and would have no reference to the cost of its production. Nay, so much is value affected by external circumstances, that a house or a shop will be far more valuable on one side of a street than on the other, as it may be more fashionable or sunny, or the reverse. So apparently minute are the circumstances that cause great differences in value. Again, an unexpected change in the fashion, which is merely another name for the demand suddenly ceasing, causes the most violent depression in the value of the most expensive articles. A few years ago a species of carriage called chariots were the most fashionable of any-now there are very few remaining, and a good chariot which in former times would have cost several hundred pounds, would not now fetch more than a few pounds, the mere value of the wood and iron, because they have been superseded by more 1 Mc Culloch's Commercial Dictionary. Art.: Precious Metals.

convenient forms of carriages. These examples are sufficient to shew how erroneous it is to think that the value or price of an article can be controlled by its cost of production.

44. The value of pictures, sculpture, and all objects of art is so entirely allowed by the advocates of the law of cost of production regulating value, to be an exception or contradiction to that law, that we need not further allude to them than to remark that they are examples of the law of supply and demand, and are universally allowed to be so.

45. Many railway companies, in regulating their fares, have acted upon an error analogous to the doctrine that the cost of production regulates price. It used to be not an uncommon argument for keeping up fares very high, that the cost of making the railway was very high, and therefore the fares must be high. The two things have no relation whatever. The object should be so to regulate the fares as to produce the greatest amount of revenue possible. The companies should have calculated before making the railway the amount of revenue they could probably obtain, which would determine the value of the railway when made, and then the cost of making the railway, and if the revenue would pay the interest of the money expended in making the railway, then they should make it, otherwise not.

46. It is quite easy to shew that the value of an article may diminish, as the cost of its production increases. Let us take the example of a ship, as that will illustrate this principle as well as any other. The value of a ship at any given time (omitting the question of how long she may last) is measured by the amount of freight she can earn. If the demand for ships be great and the number of them few, the value of shipping will, of course, be high; but if the number of ships be increased, while the demand for them remains the same, the value of each will be diminished. Now, if the value of ships be high, it will naturally cause a greater number to be built, which will stimulate industry in that trade, and certainly cause an advance in shipwrights' wages, Thus, the cost of production of each ship will be increased, while each new ship that is built will diminish the value of the whole; and the more that are built will still further diminish their