Itthusappearsthatthealarmofbeingpermanentlyundersold
maybetakenmuchtooeasily;maybetakenwhenthethingreally
tobeanticipatedisnotthelossofthetrade，buttheminor
inconvenienceofcarryingitonatadiminishedadvantage;an
inconveniencechieflyfallingontheconsumersofforeign
commodities，andnotontheproducersorsellersoftheexported
article。Itisnosufficientgroundofapprehensiontothe
Englishproducers，tofindthatsomeothercountrycansellcloth
inforeignmarketsatsomeparticulartime，atriflecheaperthan
theycanthemselvesaffordtodointheexistingstateofprices
inEngland。Supposethemtobetemporarilyundersold，andtheir
exportsdiminished;theimportswillexceedtheexports，there
willbeanewdistributionofthepreciousmetals，priceswill
fall，andasallthemoneyexpensesoftheEnglishproducerswill
bediminished，theywillbeable（ifthecasefallsshortofthat
statedintheprecedingparagraph）againtocompetewiththeir
rivals。ThelosswhichEnglandwillincur，willnotfalluponthe
exporters，butuponthosewhoconsumeimportedcommodities;who，
withmoneyincomesreducedinamount，willhavetopaythesame
orevenanincreasedpriceforallthingsproducedinforeign
countries。
2。Such，Iconceive，isthetruetheory，orrationale，of
underselling。Itwillbeobservedthatittakesnoaccountof
somethingswhichwehearspokenof，oftenerperhapsthanany
others，inthecharacterofcausesexposingacountrytobe
undersold。
Accordingtotheprecedingdoctrine，acountrycannotbe
undersoldinanycommodity，unlesstherivalcountryhasa
strongerinducementthanitselffordevotingitslabourand
capitaltotheproductionofthecommodity;arisingfromthefact
thatbydoingsoitoccasionsagreatersavingoflabourand
capital，tobesharedbetweenitselfanditscustomers——a
greaterincreaseoftheaggregateproduceoftheworld。The
underselling，therefore，thoughalosstotheundersoldcountry，
isanadvantagetotheworldatlarge;thesubstitutedcommerce
beingonewhicheconomiesmoreofthelabourandcapitalof
mankind，andaddsmoretotheircollectivewealth，thanthe
commercesupersededbyit。Theadvantage，ofcourse，consistsin
beingabletoproducethecommodityofbetterquality，orwith
lesslabour（comparedwithotherthings）;orperhapsnotwith
lesslabour，butinlesstime;withalessprolongeddetentionof
thecapitalemployed。Thismayarisefromgreaternatural
advantages（suchassoil，climate，richnessofmines）;superior
capability，eithernaturaloracquired，inthelabourers;better
divisionoflabour，andbettertools，ormachinery。Butthereis
noplaceleftinthistheoryforthecaseoflowerwages。This，
however，inthetheoriescommonlycurrent，isafavouritecause
ofunderselling。Wecontinuallyhearofthedisadvantageunder
whichtheBritishproducerlabours，bothinforeignmarketsand
eveninhisown，throughthelowerwagespaidbyhisforeign
rivals。Theselowerwages，wearetold，enable，orarealwayson
thepointofenablingthemtosellatlowerprices，andto
dislodgetheEnglishmanufacturerfromallmarketsinwhichheis
notartificiallyprotected。
Beforeexaminingthisopinionongroundsofprinciple，itis
worthwhiletobestowamoment’sconsiderationuponitasa
questionoffact。Isittrue，thatthewagesofmanufacturing
labourarelowerinforeigncountriesthaninEngland，inany
senseinwhichlowwagesareanadvantagetothecapitalist？The
artisanofGhentorLyonsmayearnlesswagesinaday，butdoes
henotdolesswork？Degreesofefficiencyconsidered，doeshis
labourcostlesstohisemployer？Thoughwagesmaybeloweron
theContinent，isnottheCostofLabour，whichisthereal
elementinthecompetition，verynearlythesame？Thatitisso
seemstheopinionofcompetentjudges，andisconfirmedbythe
verylittledifferenceintherateofprofitbetweenEnglandand
theContinentalcountries。Butifso，theopinionisabsurdthat
EnglishproducerscanbeundersoldbytheirContinentalrivals
fromthiscause。ItisonlyinAmericathatthesuppositionis
primafacieadmissible。InAmerica，wagesaremuchhigherthanin
England，ifwemeanbywagesthedailyearningsofalabourer:
buttheproductivepowerofAmericanlabourissogreat——its
efficiency，combinedwiththefavourablecircumstancesinwhich
itisexerted，makesitworthsomuchtothepurchaser，thatthe
CostofLabourislowerinAmericathaninEngland;asis
indicatedbythefactthatthegeneralrateofprofitsandof
interestishigher。
3。Butisittruethatlowwages，eveninthesenseoflow
CostofLabour，enableacountrytosellcheaperintheforeign
market？Imean，ofcourse，lowwageswhicharecommontothe
wholeproductiveindustryofthecountry。
Ifwages，inanyofthedepartmentsofindustrywhichsupply
exports，arekept，artificially，orbysomeaccidentalcause，
belowthegeneralrateofwagesinthecountry，thisisareal
advantageintheforeignmarket。Itlessensthecomparativecost
ofproductionofthosearticles，inrelationtoothers;andhas
thesameeffectasiftheirproductionrequiredsomuchless
labour。Take，forinstance，thecaseoftheUnitedStatesin
respecttocertaincommodities，priortothecivilwar。Tobacco
andcotton，twogreatarticlesofexport，wereproducedbyslave
labour，whilefoodandmanufacturesgenerallywereproducedby
freelabourers，neitherworkingontheirownaccountorpaidby
wages。Inspiteoftheinferiorefficiencyofslavelabour，there
canbenoreasonabledoubtthatinacountrywherethewagesof
freelabourweresohigh，theworkexecutedbyslaveswasa
betterbargaintothecapitalist。Towhateverextentitwasso，
thissmallercostoflabour，beingnotgeneral，butlimitedto
thoseemployments，wasjustasmuchacauseofcheapnessinthe
products，bothinthehomeandintheforeignmarket，asifthey
hadbeenmadebyalessquantityoflabour。If，whentheslaves
intheSouthernStateswereemancipated，theirwagesrosetothe
generalleveloftheearningsoffreelabourinAmerica，that
countrymighthavebeenobligedtoerasesomeoftheslave—grown
articlesfromthecatalogueofitsexports，andwouldcertainly
beunabletosellanyofthemintheforeignmarketatthe
accustomedprice。Accordingly，Americancottonisnowhabitually
atamuchhigherpricethanbeforethewar。Itsprevious
cheapnesswaspartlyanartificialcheapness，whichmaybe
comparedtothatproducedbyabountyonproductionoron
exportation:or，consideringthemeansbywhichitwasobtained，
anaptercomparisonwouldbewiththecheapnessofstolengoods。
Anadvantageofasimilareconomical，thoughofavery
differentmoralcharacter，isthatpossessedbydomestic
manufactures;fabricsproducedintheleisurehoursoffamilies
partiallyoccupiedinotherpursuits，who，notdependingfor
subsistenceontheproduceofthemanufacture，canaffordtosell
itatanyprice，howeverlow，forwhichtheythinkitworthwhile
totakethetroubleofproducing。InanaccountoftheCantonof
Zurich，towhichIhavehadoccasiontoreferonanothersubject，
itisobserved，（1*）"TheworkmanofZurichisto—daya
manufacturer，to—morrowagainanagriculturist，andchangeshis
occupationswiththeseasons，inacontinualround。Manufacturing
industryandtillageadvancehandinhand，ininseparable
alliance，andinthisunionofthetwooccupationsthesecretmay
befound，whythesimpleandunlearnedSwissmanufacturercan
alwaysgooncompeting，andincreasinginprosperity，intheface
ofthoseextensiveestablishmentsfittedoutwithgreateconomic，
and（whatisstillmoreimportant）intellectual，resources。Even
inthosepartsoftheCantonwheremanufactureshaveextended
themselvesthemostwidely，onlyone—seventhofallthefamilies
belongtomanufacturesalone;four—seventhscombinethat
employmentwithagriculture。Theadvantageofthisdomesticor
familymanufactureconsistschieflyinthefact，thatitis
compatiblewithallotheravocations，orratherthatitmayin
partberegardedasonlyasupplementaryemployment。Inwinterin
thedwellingsoftheoperatives，thewholefamilyemploy
themselvesinit:butassoonasspringappears，thoseonwhom
theearlyfieldlaboursdevolve，abandonthein—doorwork;manya
shuttlestandsstill;bydegrees，asthefield—workincreases，
onememberofthefamilyfollowsanother，tillatlast，atthe
harvest，andduringtheso—called’greatworks，’allhandsseize
theimplementsofhusbandry;butinunfavourableweather，andin
allotherwisevacanthours，theworkinthecottageisresumed，
andwhentheungenialseasonagainrecurs，thepeoplereturnin
thesamegradualordertotheirhomeoccupation，untiltheyhave
allresumedit。"
Inthecaseofthesedomesticmanufactures，thecomparative
costofproduction，onwhichtheinterchangebetweencountries
depends，ismuchlowerthaninproportiontothequantityof
labouremployed。Theworkpeople，lookingtotheearningsoftheir
loomforapartonly，ifforanypart，oftheiractual
maintenance，canaffordtoworkforalessremunerationthanthe
lowestrateofwageswhichcanpermanentlyexistinthe
employmentsbywhichthelabourerhastosupportthewhole
expenseofafamily。Working，astheydo，notforanemployerbut
forthemselves，theymaybesaidtocarryonthemanufactureat
nocostatall，exceptthesmallexpenseofaloomandofthe
material;andthelimitofpossiblecheapnessisnotthe
necessityoflivingbytheirtradebutthatofearningenoughby
theworktomakethatsocialemploymentoftheirleisurehours
notdisagreeable。
4。Thesetwocases，ofslavelabourandofdomestic
manufactures，exemplifytheconditionsunderwhichlowwages
enableacountrytosellitscommoditiescheaperinforeign
markets，andconsequentlytoundersellitsrivals，ortoavoid
beingundersoldbythem。Butnosuchadvantageisconferredby
lowwageswhencommontoallbranchesofindustry。Generallow
wagesnevercausedanycountrytoundersellitsrivals，nordid
generalhighwageseverhinderitfromdoingso。
Todemonstratethis，wemustreturntoanelementary
principlewhichwasdiscussedinaformerchapter。（2*）General
lowwagesdonotcauselowprices，norhighwageshighprices，
withinthecountryitself。Generalpricesarenotraisedbya
riseofwages，anymorethantheywouldberaisedbyanincrease
ofthequantityoflabourrequiredinallproduction。Expenses
whichaffectallcommoditiesequally，havenoinfluenceon
prices。Ifthemakerofbroadclothorcutlery，andnobodyelse，
hadtopayhigherwages，thepriceofhiscommoditywouldrise，
justasitwouldifhehadtoemploymorelabour;because
otherwisehewouldgainlessprofitthanotherproducers，and
nobodywouldengageintheemployment。Butifeverybodyhasto
payhigherwages，oreverybodytoemploymorelabour，theloss
mustbesubmittedto;asitaffectseverybodyalike，noonecan
hopetogetridofitbyachangeofemployment，eachtherefore
resignshimselftoadiminutionofprofits，andpricesremainas
theywere。Inlikemanner，generallowwages，orageneral
increaseintheproductivenessoflabour，doesnotmakeprices
low，butprofitshigh。Ifwagesfall，（meaningherebywagesthe
costoflabour，）why，onthataccount，shouldtheproducerlower
hisprice？Hewillbeforced，itmaybesaid，bythecompetition
ofothercapitalistswhowillcrowdintohisemployment。But
othercapitalistsarealsopayinglowerwages，andbyentering
intocompetitionwithhimtheywouldgainnothingbutwhatthey
aregainingalready。Theratethenatwhichlabourispaid，as
wellasthequantityofitwhichisemployed，affectsneitherthe
valuenorthepriceofthecommodityproduced，exceptinsofar
asitispeculiartothatcommodity，andnotcommonto
commoditiesgenerally。
Sincelowwagesarenotacauseoflowpricesinthecountry
itself，soneitherdotheycauseittoofferitscommoditiesin
foreignmarketsatalowerprice。Itisquitetruethatifthe
costoflabourislowerinAmericathaninEngland，Americacould
sellhercottonstoCubaatalowerpricethanEngland，andstill
gainashighaprofitastheEnglishmanufacturer。Butitisnot
withtheprofitoftheEnglishmanufacturerthattheAmerican
cottonspinnerwillmakehiscomparison;itiswiththeprofits
ofotherAmericancapitalists。Theseenjoy，incommonwith
himself，thebenefitofalowcostoflabour，andhave
accordinglyahighrateofprofit。Thishighprofitthecotton
spinnermustalsohave:hewillnotcontenthimselfwiththe
Englishprofit。Itistruehemaygoonforatimeatthatlower
rate，ratherthanchangehisemployment;andatrademaybe
carriedon，sometimesforalongperiod，atamuchlowerprofit
thanthatforwhichitwouldhavebeenoriginallyengagedin。
Countrieswhichhavealowcostoflabour，andhighprofits，do
notforthatreasonundersellothers，buttheydoopposeamore
obstinateresistancetobeingundersold，becausetheproducers
canoftensubmittoadiminutionofprofitwithoutbeingunable
tolive，andeventothrive，bytheirbusiness。Butthisisall
whichtheiradvantagedoesforthem:andinthisresistancethey
willnotlongpersevere，whenachangeoftimeswhichmaygive
themequalprofitswiththerestoftheircountrymenhasbecome
manifestlyhopeless。
5。Thereisaclassoftradingandexportingcommunities，on
whichafewwordsofexplanationseemtoberequired。Theseare
hardlytobelookeduponascountries，carryingonanexchangeof
commoditieswithothercountries，butmoreproperlyasoutlying
agriculturalormanufacturingestablishmentsbelongingtoa
largercommunity。OurWestindiacolonies，forexample，cannotbe
regardedascountries，withaproductivecapitaloftheirown。If
Manchester，insteadofbeingwhereitis，wereonarockinthe
NorthSea，（itspresentindustryneverthelesscontinuing，）it
wouldstillbebutatownofEngland，notacountrytradingwith
England;itwouldbemerely，asnow，aplacewhereEnglandfinds
itconvenienttocarryonhercottonmanufacture。TheWest
Indies，inlikemanner，aretheplacewhereEnglandfindsit
convenienttocarryontheproductionofsugar，coffee，andafew
othertropicalcommodities。AllthecapitalemployedisEnglish
capital;almostalltheindustryiscarriedonforEnglishuses;
thereislittleproductionofanythingexceptthestaple
commodities，andthesearesenttoEngland，nottobeexchanged
forthingsexportedtothecolonyandconsumedbyits
inhabitants，buttobesoldinEnglandforthebenefitofthe
proprietorsthere。ThetradewiththeWestIndiesistherefore
hardlytobeconsideredasexternaltrade，butmoreresemblesthe
trafficbetweentownandcountry，andisamenabletothe
principlesofthehometrade。Therateofprofitinthecolonies
willberegulatedbyEnglishprofits;theexpectationofprofit
mustbeaboutthesameasinEngland，withtheadditionof
compensationforthedisadvantagesattendingthemoredistantand
hazardousemployment:andafterallowanceismadeforthose
disadvantages，thevalueandpriceofWestIndiaproduceinthe
Englishmarketmustberegulated，（orrathermusthavebeen
regulatedformerly，）likethatofanyEnglishcommodity，bythe
costofproduction。Forthelasttwelveorfifteenyearsthis
principlehasbeeninabeyance:thepricewasfirstkeptup
beyondtheratioofthecostofproductionbydeficientsupplies，
whichcouldnot，owingtothedeficiencyoflabour，beincreased;
andmorerecentlytheadmissionofforeigncompetitionhas
introducedanotherelement，andsomeoftheWestIndiaIslands
areundersold，notsomuchbecausewagesarehigherthaninCuba
andBrazil，asbecausetheyarehigherthaninEngland:forwere
theynotso，JamaicacouldsellhersugarsatCubanprices，and
stillobtain，thoughnotaCuban，anEnglishrateofprofit。
Itisworthwhilealsotonoticeanotherclassofsmall，but
inthiscasemostlyindependentcommunities，whichhavesupported
andenrichedthemselvesalmostwithoutanyproductionsoftheir
own，（exceptshipsandmarineequipments，）byamerecarrying
trade，andcommerceofentrepot;bybuyingtheproduceofone
country，tosellitataprofitinanother。SuchwereVeniceand
theHanseTowns。Thecaseofthesecommunitiesisverysimple。
Theymadethemselvesandtheircapitaltheinstruments，notof
production，butofaccomplishingexchangesbetweenthe
productionsofothercountries。Theseexchangesareattendedwith
anadvantagetothosecountries——anincreaseoftheaggregate
returnstoindustry——partofwhichwenttoindemnifytheagents
forthenecessaryexpensesoftransport，andanotherpartto
remuneratetheuseoftheircapitalandmercantileskill。The
countriesthemselveshadnotcapitaldisposableforthe
operation。WhentheVenetiansbecametheagentsofthegeneral
commerceofSouthernEurope，theyhadscarcelyanycompetitors:
thethingwouldnothavebeendoneatallwithoutthem，andthere
wasreallynolimittotheirprofitsexceptthelimittowhatthe
ignorantfeudalnobilitycouldandwouldgivefortheunknown
luxuriesthenfirstpresentedtotheirsight。Atalaterperiod
competitionarose，andtheprofitofthisoperation，likethatof
others，becameamenabletonaturallaws。Thecarryingtradewas
takenupbyHolland，acountrywithproductionsofitsownanda
largeaccumulatedcapital。TheothernationsofEuropealsohad
nowcapitaltospare，andwerecapableofconductingtheir
foreigntradeforthemselves:butHolland，having，fromavariety
ofcircumstances，alowerrateofprofitathome，couldaffordto
carryforothercountriesatasmalleradvanceontheoriginal
costofthegoods，thanwouldhavebeenrequiredbytheirown
capitalists;andHolland，therefore，engrossedthegreatestpart
ofthecarryingtradeofallthosecountrieswhichdidnotkeep
ittothemselvesbyNavigationLaws，constructed，likethoseof
England，forthatexpresspurpose。
NOTES:
1。Historisch—geographisch—staatistischesGermaldederSchweiz。
ErstesHeft，1834，p。105。
2。Supra，bookiii。ch。iv。
ThePrinciplesofPoliticalEconomybyJohnStuartMillBook3:DistributionChapter26
OfDistribution，asAffectedbyExchange1。Wehavenowcompleted，asfarasiscompatiblewithourpurposesandlimits，theexpositionofthemachinerythroughwhichtheproduceofacountryisapportionedamongthedifferentclassesofitsinhabitants;whichisnootherthanthemachineryofExchange，andhasfortheexponentsofitsoperation，thelawsofValueandofPrice。Weshallnowavailourselvesofthelightthusacquired，tocastaretrospectiveglanceatthesubjectofDistribution。Thedivisionoftheproduceamongthethreeclasses，Labourers，Capitalists，andLandlords，whenconsideredwithoutanyreferencetoExchange，appearedtodependoncertaingenerallaws。Itisfitthatweshouldnowconsiderwhetherthesesamelawsstilloperate，whenthedistributiontakesplacethroughthecomplexmechanismofexchangeandmoney;orwhetherthepropertiesofthemechanisminterferewithandmodifythepresidingprinciples。
Theprimarydivisionoftheproduceofhumanexertionandfrugalityis，aswehaveseen，intothreeshares，wages，profits，andrent;andthesesharesareportionedouttothepersonsentitledtothem，intheformofmoney，andbyaprocessofexchange;orrather，thecapitalist，withwhomintheusualarrangementsofsocietytheproduceremains，paysinmoney，totheothertwosharers，themarketvalueoftheirlabourandland。
Ifweexamine，onwhatthepecuniaryvalueoflabour，andthepecuniaryvalueoftheuseofland，depend，weshallfindthatitisontheverysamecausesbywhichwefoundthatwagesandrentwouldberegulatediftherewerenomoneyandnoexchangeofcommodities。
Itisevident，inthefirstplace，thatthelawofWagesisnotaffectedbytheexistenceornon—existenceofExchangeorMoney。Wagesdependontheratiobetweenpopulationandcapital;
andwoulddosoifallthecapitalintheworldwerethepropertyofoneassociation，orifthecapitalistsamongwhomitissharedmaintainedeachanestablishmentfortheproductionofeveryarticleconsumedinthecommunity，exchangeofcommoditieshavingnoexistence。Astheratiobetweencapitalandpopulation，inalloldcountries，dependsonthestrengthofthechecksbywhichthetoorapidincreaseofpopulationisrestrained，itmaybesaid，popularlyspeaking，thatwagesdependonthecheckstopopulation;thatwhenthecheckisnotdeath，bystarvationordisease，wagesdependontheprudenceofthelabouringpeople;
andthatwagesinanycountryarehabituallyatthelowestrate，towhichinthatcountrythelabourerwillsufferthemtobedepressedratherthanputarestraintuponmultiplication。
Whatisheremeant，however，bywages，isthelabourer’srealscaleofcomfort;thequantityheobtainsofthethingswhichnatureorhabithasmadenecessaryoragreeabletohim:wagesinthesenseinwhichtheyareofimportancetothereceiver。Inthesenseinwhichtheyareofimportancetothepayer，theydonotdependexclusivelyonsuchsimpleprinciples。Wagesinthefirstsense，thewagesonwhichthelabourer’scomfortdepends，wewillcallrealwages，orwagesinkind。Wagesinthesecondsense，wemaybepermittedtocall，forthepresent，moneywages;assuming，asitisallowabletodo，thatmoneyremainsforthetimeaninvariablestandard，noiterationtakingplaceintheconditionsunderwhichthecirculatingmediumitselfisproducedorobtained。Ifmoneyitselfundergoesnovariationincost，themoneypriceoflabourisanexactmeasureoftheCostofLabour，andmaybemadeuseofasaconvenientsymboltoexpressit。
Themoneywagesoflabourareacompoundresultoftwoelements:first，realwages，orwagesinkind，orinotherwords，thequantitywhichthelabourerobtainsoftheordinaryarticlesofconsumption;andsecondly，themoneypricesofthosearticles。
Inalloldcountries——allcountriesinwhichtheincreaseofpopulationisinanydegreecheckedbythedifficultyofobtainingsubsistence——thehabitualmoneypriceoflabouristhatwhichwilljustenablethelabourers，onewithanother，topurchasethecommoditieswithoutwhichtheyneithercannotorwillnotkeepupthepopulationatitscustomaryrateofincrease。Theirstandardofcomfortbeinggiven，（andbythestandardofcomfortinalabouringclass，ismeantthat，ratherthanforegowhich，theywillabstainfrommultiplication，）moneywagesdependonthemoneyprice，andthereforeonthecostofproduction，ofthevariousarticleswhichthelabourershabituallyconsume:becauseiftheirwagescannotprocurethemagivenquantityofthese，theirincreasewillslacken，andtheirwagesrise。Ofthesearticles，foodandotheragriculturalproducearesomuchtheprincipal，astoleavelittleinfluencetoanythingelse。
ItisatthispointthatweareenabledtoinvoketheaidoftheprincipleswhichhavebeenlaiddowninthisThirdPart。Thecostofproductionoffoodandagriculturalproducehasbeenanalyzedinaprecedingchapter。Itdependsontheproductivenessoftheleastfertileland，oroftheleastproductivelyemployedportionofcapital，whichthenecessitiesofsocietyhaveasyetputinrequisitionforagriculturalpurposes。Thecostofproductionofthefoodgrownintheseleastadvantageouscircumstances，determines，aswehaveseen，theexchangevalueandmoneypriceofthewhole。Inanygivenstate，therefore，ofthelabourers’habits，theirmoneywagesdependontheproductivenessoftheleastfertileland，orleastproductiveagriculturalcapital;onthepointwhichcultivationhasreachedinitsdownwardprogress——initsencroachmentsonthebarrenlands，anditsgraduallyincreasedstrainuponthepowersofthemorefertile。Now，theforcewhichurgescultivationinthisdownwardcourse，istheincreaseofpeople;whilethecounter—forcewhichchecksthedescent，istheimprovementofagriculturalscienceandpractice，enablingthesamesoiltoyieldtothesamelabourmoreamplereturns。Thecostlinessofthemostcostlypartoftheproduceofcultivation，isanexactexpressionofthestate，atanygivenmoment，oftheracewhichpopulationandagriculturalskillarealwaysrunningagainsteachother。
2。ItiswellsaidbyDrChalmers，thatmanyofthemostimportantlessonsinpoliticaleconomyaretobelearntattheextrememarginofcultivation，thelastpointwhichthecultureofthesoilhasreachedinitscontestwiththespontaneousagenciesofnature。Thedegreeofproductivenessofthisextrememargin，isanindextotheexistingstateofthedistributionoftheproduceamongthethreeclasses，oflabourers，capitalists，andlandlords。
Whenthedemandofanincreasingpopulationformorefoodcannotbesatisfiedwithoutextendingcultivationtolessfertilelandorincurringadditionaloutlay，withalessproportionalreturn，onlandalreadyincultivation，itisanecessaryconditionofthisincreaseofagriculturalproduce，thatthevalueandpriceofthatproducemustfirstrise。Butassoonasthepricehasrisensufficientlytogivetotheadditionaloutlayofcapitaltheordinaryprofit，therisewillnotgoonstillfurtherforthepurposeofenablingthenewland，orthenewexpenditureonoldland，toyieldrentaswellasprofit。Thelandorcapitallastputinrequisition，andoccupyingwhatDrChalmerscallsthemarginofcultivation，willyield，andcontinuetoyield，norent。Butifthisyieldsnorent，therentaffordedbyallotherlandoragriculturalcapitalwillbeexactlysomuchasitproducesmorethanthis。Thepriceoffoodwillalwaysontheaveragebesuch，thattheworstland，andtheleastproductiveinstalmentofthecapitalemployedonthebetterlands，shalljustreplacetheexpenseswiththeordinaryprofit。
Iftheleastfavouredlandandcapitaljustdothusmuch，allotherlandandcapitalwillyieldanextraprofit，equaltotheproceedsoftheextraproduceduetotheirsuperiorproductiveness;andthisextraprofitbecomes，bycompetition，theprizeofthelandlords。Exchange，andmoney，therefore，makenodifferenceinthelawofrent:itisthesameasweoriginallyfoundit。Rentistheextrareturnmadetoagriculturalcapitalwhenemployedwithpeculiaradvantages;theexactequivalentofwhatthoseadvantagesenabletheproducerstoeconomizeinthecostofproduction:thevalueandpriceoftheproducebeingregulatedbythecostofproductiontothoseproducerswhohavenoadvantages;bythereturntothatportionofagriculturalcapital，thecircumstancesofwhicharetheleastfavourable。
3。WagesandRentbeingthusregulatedbythesameprincipleswhenpaidinmoney，astheywouldbeifapportionedinkind，itfollowsthatProfitsaresolikewise。Forthesurplus，afterreplacingwagesandpayingrent，constitutesProfits。
WefoundinthelastchapteroftheSecondBook，thattheadvancesofthecapitalist，whenanalyzedtotheirultimateelements，consisteitherinthepurchaseormaintenanceoflabour，orintheprofitsofformercapitalists;andthatthereforeprofits，inthelastresort，dependupontheCostofLabour，fallingasthatrises，andrisingasitfalls。Letusendeavourtotracemoreminutelytheoperationofthislaw。
TherearetwomodesinwhichtheCostofLabour，whichiscorrectlyrepresented（moneybeingsupposedinvariable）bythemoneywagesofthelabourer，maybeincreased。Thelabourermayobtaingreatercomforts;wagesinkind——realwages——mayrise。
Ortheprogressofpopulationmayforcedowncultivationtoinferiorsoils，andmorecostlyprocesses;thusraisingthecostofproduction，thevalue，andtheprice，ofthechiefarticlesofthelabourer’sconsumption。Oneitherofthesesuppositions，therateofprofitwillfall。
Ifthelabourerobtainsmoreabundantcommodities，onlybyreasonoftheirgreatercheapness;ifheobtainsagreaterquantity，butnotonthewholeagreatercost;realwageswillbeincreased，butnotmoneywages，andtherewillbenothingtoaffecttherateofprofit。Butifheobtainsagreaterquantityofcommoditiesofwhichthecostofproductionisnotlowered，heobtainsagreatercost;hismoneywagesarehigher。Theexpenseoftheseincreasedmoneywagesfallswhollyonthecapitalist。
Therearenoconceivablemeansbywhichhecanshakeitoff。Itmaybesaid——itis，notunfrequently，said——thathewillgetridofitbyraisinghisprice。Butthisopinionwehavealready，andmorethanonce，fullyrefuted。（1*）
Thedoctrine，indeed，thatariseofwagescausesanequivalentriseofprices，is，asweformerlyobserved，self—contradictoryforifitdidso，itwouldnotbeariseofwages;thelabourerwouldgetnomoreofanycommoditythanhehadbefore，lethismoneywagesriseeversomuch;ariseofrealwageswouldbeanimpossibility。Thisbeingequallycontrarytoreasonandtofact，itisevidentthatariseofmoneywagesdoesnotraiseprices;thathighwagesarenotacauseofhighprices。
Ariseofgeneralwagesfallsonprofits。Thereisnopossiblealternative。
Havingdisposedofthecaseinwhichtheincreaseofmoneywages，andoftheCostofLabour，arisesfromthelabourer’sobtainingmoreamplewagesinkind，letusnowsupposeittoarisefromtheincreasedcostofproductionofthethingswhichheconsumes;owingtoanincreaseofpopulation，unaccompaniedbyanequivalentincreaseofagriculturalskill。Theaugmentedsupplyrequiredbythepopulationwouldnotbeobtained，unlessthepriceoffoodrosesufficientlytoremuneratethefarmerfortheincreasedcostofproduction。Thefarmer，however，inthiscasesustainsatwofolddisadvantage。Hehastocarryonhiscultivationunderlessfavourableconditionsofproductivenessthanbefore。Forthis，asitisadisadvantagebelongingtohimonlyasafarmer，andnotsharedbyotheremployers，hewill，onthegeneralprinciplesofvalue，becompensatedbyariseofthepriceofhiscommodity:indeed，untilthisrisehastakenplace，hewillnotbringtomarkettherequiredincreaseofproduce。Butthisveryriseofpriceinvolveshiminanothernecessity，forwhichheisnotcompensated。Astherealwagesoflabourarebysuppositionunaltered，hemustpayhighermoneywagestohislabourers。Thisnecessity，beingcommontohimwithallothercapitalists，formsnogroundforariseofprice。Thepricewillrise，untilithasplacedhiminasgoodasituationinrespectofprofits，asotheremployersoflabour:itwillrisesoastoindemnifyhimfortheincreasedlabourwhichhemustnowemployinordertoproduceagivenquantityoffood:buttheincreasedwagesofthatlabourareaburthencommontoall，andforwhichnoonecanbeindemnified。Itwillbepaidwhollyfromprofits。
Thusweseethatincreasedwages，whencommontoalldescriptionsofproductivelabourers，andwhenreallyrepresentingagreaterCostofLabour，arealwaysandnecessaryattheexpenseofprofits。Andbyreversingthecases，weshouldfindinlikemannerthatdiminishedwages，whenrepresentingareallydiminishedCostofLabour，areequivalenttoariseofprofits。Buttheoppositionofpecuniaryinterestthusindicatedbetweentheclassofcapitalistsandthatoflabourers，istoagreatextentonlyapparent。RealwagesareaverydifferentthingfromtheCostofLabour，andaregenerallyhighestatthetimesandplaceswhere，fromtheeasytermsonwhichthelandyieldsalltheproduceasyetrequiredfromit，thevalueandpriceoffoodbeinglow，thecostoflabourtotheemployer，notwithstandingitsampleremuneration，iscomparativelycheap，andtherateofprofitconsequentlyhigh。WethusobtainafullconfirmationofouroriginaltheoremthatProfitsdependontheCostofLabour:or，toexpressthemeaningwithstillgreateraccuracy，therateofprofitandthecostoflabourvaryinverselyasoneanother，andarejointeffectsofthesameagenciesorcauses。
Butdoesnotthispropositionrequiretobeslightlymodified，bymakingallowanceforthatportion（thoughcomparativelysmall）oftheexpensesofthecapitalist，whichdoesnotconsistinwagespaidbyhimselforreimbursedtopreviouscapitalists，butintheprofitsofthosepreviouscapitalists？Suppose，forexample，aninventioninthemanufactureofleather，theadvantageofwhichshouldconsistinrenderingitunnecessarythatthehidesshouldremainforsogreatalengthoftimeinthetan—pit。Shoemakers，saddlers，andotherworkersinleather，wouldsaveapartofthatportionofthecostoftheirmaterialwhichconsistsofthetanner’sprofitsduringthetimehiscapitalislockedup;andthissaving，itmaybesaid，isasourcefromwhichtheymightderiveanincreaseofprofit，thoughwagesandtheCostofLabourremainedexactlythesame。Inthecaseheresupposed，however，theconsumeralonewouldbenefit，sincethepricesofshoes，harness，andallotherarticlesintowhichleatherenters，wouldfall，untiltheprofitsoftheproducerswerereducedtothegenerallevel。Toobviatethisobjection，letussupposethatasimilarsavingofexpensetakesplaceinalldepartmentsofproductionatonce。Inthatcase，sincevaluesandpriceswouldnotbeaffected，profitswouldprobablyberaised;butifwelookmorecloselyintothecaseweshallfind，thatitisbecausethecostoflabourwouldbelowered。Inthisasinanyothercaseofincreaseinthegeneralproductivenessoflabour，ifthelabourerobtainedonlythesamerealwages，profitswouldberaised:butthesamerealwageswouldimplyasmallerCostofLabour;thecostofproductionofallthingshavingbeen，bythesupposition，diminished。If，ontheotherhand，therealwagesoflabourroseproportionally，andtheCostofLabourtotheemployerremainedthesame，theadvancesofthecapitalistwouldbearthesameratiotohisreturnsasbefore，andtherateofprofitwouldbeunaltered。Thereaderwhomaywishforamoreminuteexaminationofthispoint，willfinditinthevolumeofseparateEssaystowhichreferencehasbeforebeenmade。（2*）Thequestionistoointricateincomparisonwithitsimportance，tobefurtherenteredintoinaworklikethepresent;andIwillmerelysay，thatitseemstoresultfromtheconsiderationsadducedintheEssay，thatthereisnothinginthecaseinquestiontoaffecttheintegrityofthetheorywhichaffirmsanexactcorrespondence，inaninversedirection，betweentherateofprofitandtheCostofLabour。
NOTES:
1。Supra，bookiii。ch。iv。section2，andch。xxv。section4。
2。EssayIV，onProfitsandInterest。
PrinciplesofEconomics
byJohnStuartMill
Book4:InfluenceoftheProgressofSocietyonProductionand
Distribution
Chapter1
GeneralCharacteristicsofaProgressiveStateofWealth
1。ThethreeprecedingPartsincludeasdetailedaviewas
ourlimitspermit，ofwhat，byahappygeneralizationofa
mathematicalphrase，hasbeencalledtheStaticsofthesubject。
Wehavesurveyedthefieldofeconomicalfacts，andhaveexamined
howtheystandrelatedtooneanotherascausesandeffects;what
circumstancesdeterminetheamountofproduction，ofemployment
forlabour，ofcapitalandpopulation;whatlawsregulaterent，
profits，andwages;underwhatconditionsandinwhatproportions
commoditiesareinterchangedbetweenindividualsandbetween
countries。Wehavethusobtainedacollectiveviewofthe
economicalphenomenaofsociety，consideredasexisting
simultaneously。Wehaveascertained，toacertainextent，the
principlesoftheirinterdependence;andwhenthestateofsome
oftheelementsisknown，weshouldnowbeabletoinfer，ina
generalway，thecontemporaneousstateofmostoftheothers。All
this，however，hasonlyputusinpossessionoftheeconomical
lawsofastationaryandunchangingsociety。Wehavestillto
considertheeconomicalconditionofmankindasliabletochange，
andindeed（inthemoreadvancedportionsoftherace，andinall
regionstowhichtheirinfluencereaches）asatalltimes
undergoingprogressivechanges。Wehavetoconsiderwhatthese
changesare，whataretheirlaws，andwhattheirultimate
tendencies;therebyaddingatheoryofmotiontoourtheoryof
equilibrium——theDynamicsofpoliticaleconomytotheStatics。
Inthisinquiry，itisnaturaltocommencebytracingthe
operationofknownandacknowledgedagencies。Whatevermaybethe
otherchangeswhichtheeconomyofsocietyisdestinedto
undergo，thereisoneactuallyinprogress，concerningwhich
therecanbenodispute。Intheleadingcountriesoftheworld，
andinallothersastheycomewithintheinfluenceofthose
leadingcountries，thereisatleastoneprogressivemovement
whichcontinueswithlittleinterruptionfromyeartoyearand
fromgenerationtogeneration;aprogressinwealth;an
advancementofwhatiscalledmaterialprosperity。Allthe
nationswhichweareaccustomedtocallcivilized，increase
graduallyinproductionandinpopulation:andthereisnoreason
todoubt，thatnotonlythesenationswillforsometimecontinue
sotoincrease，butthatmostoftheothernationsoftheworld，
includingsomenotyetfounded，willsuccessivelyenteruponthe
samecareer。Itwill，therefore，beourfirstobjecttoexamine
thenatureandconsequencesofthisprogressivechange;the
elementswhichconstituteit，andtheeffectsitproducesonthe
variouseconomicalfactsofwhichwehavebeentracingthelaws，
andespeciallyonwages，profits，rents，values，andprices。
2。Ofthefeatureswhichcharacterizethisprogressive
economicalmovementofcivilizednations，thatwhichfirst
excitesattention，throughitsintimateconnexionwiththe
phenomenaofProduction，istheperpetual，andsofarashuman
foresightcanextend，theunlimited，growthofman’spowerover
nature。Ourknowledgeofthepropertiesandlawsofphysical
objectsshowsnosignofapproachingitsultimateboundaries:it
isadvancingmorerapidly，andinagreaternumberofdirections
atonce，thaninanypreviousageorgeneration，andaffording
suchfrequentglimpsesofunexploredfieldsbeyond，astojustify
thebeliefthatouracquaintancewithnatureisstillalmostin
itsinfancy。Thisincreasingphysicalknowledgeisnow，too，more
rapidlythanatanyformerperiod，converted，bypractical
ingenuity，intophysicalpower。Themostmarvellousofmodern
inventions，onewhichrealizestheimaginaryfeatsofthe
magician，notmetaphoricallybutliterally——the
electro—magnetictelegraph——sprangintoexistencebutafew
yearsaftertheestablishmentofthescientifictheorywhichit
realizesandexemplifies。Lastly，themanualpartofthesegreat
scientificoperationsisnowneverwantingtotheintellectual:
thereisnodifficultyinfindingorforming，inasufficient
numberoftheworkinghandsofthecommunity，theskillrequisite
forexecutingthemostdelicateprocessesoftheapplicationof
sciencetopracticaluses。Fromthisunionofconditions，itis
impossiblenottolookfor。wardtoavastmultiplicationand
longsuccessionofcontrivancesforeconomizinglabourand
increasingitsproduce;andtoaneverwiderdiffusionoftheuse
andbenefitofthosecontrivances。
Anotherchange，whichhasalwayshithertocharacterized，and
willassuredlycontinuetocharacterize，theprogressof
civilizedsociety，isacontinualincreaseofthesecurityof
personandproperty。ThepeopleofeverycountryinEurope，the
mostback。wardaswellasthemostadvanced，are，ineach
generation，betterprotectedagainsttheviolenceandrapacityof
oneanother，bothbyamoreefficientjudicatureandpolicefor
thesuppressionofprivatecrime，andbythedecayand
destructionofthosemischievousprivilegeswhichenabledcertain
classesofthecommunitytopreywithimpunityupontherest。
Theyarealso，ineverygeneration，betterprotected，eitherby
institutionsorbymannersandopinion，againstarbitrary
exerciseofthepowerofgovernment。Eveninsemi—barbarous
Russia，actsofspoliationdirectedagainstindividuals，whohave
notmadethemselvespoliticallyobnoxious，arenotsupposedtobe
nowsofrequentasmuchtoaffectanyperson’sfeelingsof
security。Taxation，inallEuropeancountries，growsless
arbitraryandoppressive，bothinitselfandinthemannerof
levyingit。Wars，andthedestructiontheycause，arenowusually
confined，inalmosteverycountry，tothosedistantandoutlying
possessionsatwhichitcomesintocontactwithsavages。Eventhe
vicissitudesoffortunewhicharisefrominevitablenatural
calamities，aremoreandmoresoftenedtothoseonwhomthey
fall，bythecontinualextensionofthesalutarypracticeof
insurance。
Ofthisincreasedsecurity，oneofthemostunfailingeffects
isagreatincreasebothofproductionandofaccumulation。
Industryandfrugalitycannotexist，wherethereisnota
preponderantprobabilitythatthosewholabourandsparewillbe
permittedtoenjoy。Andthenearerthisprobabilityapproachesto
certainty，themoredoindustryandfrugalitybecomepervading
qualitiesinapeople。Experiencehasshownthatalarge
proportionoftheresultsoflabourandabstinencemaybetaken
awaybyfixedtaxation，withoutimpairing，andsometimeseven
withtheeffectofstimulating，thequalitiesfromwhichagreat
productionandanabundantcapitaltaketheirrise。Butthose
qualitiesarenotproofagainstahighdegreeofuncertainty。The
Governmentmaycarryoffapart;buttheremustbeassurancethat
itwillnotinterfere，norsufferanyonetointerfere，withthe
remainder。
Oneofthechangeswhichmostinfalliblyattendtheprogress
ofmodernsociety，isanimprovementinthebusinesscapacities
ofthegeneralmassofmankind。Idonotmeanthatthepractical
sagacityofanindividualhumanbeingisgreaterthanformerly。I
aminclinedtobelievethateconomicalprogresshashithertohad
evenacontraryeffect。Apersonofgoodnaturalendowments，ina
rudestateofsociety，candoagreatnumberofthingstolerably
well，hasagreaterpowerofadaptingmeanstoends，ismore
capableofextricatinghimselfandothersfromanunforeseen
embarrassment，thanninety。nineinahundredofthosewhohave
knownonlywhatiscalledthecivilizedformoflife。Howfar
thesepointsofinferiorityoffacultiesarecompensated，andby
whatmeanstheymightbecompensatedstillmorecompletely，to
thecivilizedmanasanindividualbeing，isaquestionbelonging
toadifferentinquiryfromthepresent。Buttocivilizedhuman
beingscollectivelyconsidered，thecompensationisample。What
islostintheseparateefficiencyofeach，isfarmorethanmade
upbythegreatercapacityofunitedaction。Inproportionas
theyputoffthequalitiesofthesavage，theybecomeamenableto
discipline;capableofadheringtoplansconcertedbeforehand，
andaboutwhichtheymaynothavebeenconsulted;of
subordinatingtheirindividualcapricetoapreconceived
determination，andperformingseverallythepartsallottedto
theminacombinedundertaking。Worksofallsorts，impracticable
tothesavageorthehalf—civilized，aredailyaccomplishedby
civilizednations，notbyanygreatnessoffacultiesinthe
actualagents，butthroughthefactthateachisabletorely
withcertaintyontheothersfortheportionoftheworkwhich
theyrespectivelyundertake。Thepeculiarcharacteristic，in
short，ofcivilizedbeings，isthecapacityofco—operation;and
this，likeotherfaculties，tendstoimprovebypractice，and
becomescapableofassumingaconstantlywidersphereofaction。
Accordinglythereisnomorecertainincidentofthe
progressivechangetakingplaceinsociety，thanthecontinual
growthoftheprincipleandpracticeofcooperation。Associations
ofindividualsvoluntarilycombiningtheirsmallcontributions，
nowperformworks，bothofanindustrialandofmanyother
characters，whichnoonepersonorsmallnumberofpersonsare
richenoughtoaccomplish，orfortheperformanceofwhichthe
fewpersonscapableofaccomplishingthemwereformerlyenabled
toexactthemostinordinateremuneration。Aswealthincreases
andbusinesscapacityimproves，wemaylookforwardtoagreat
extensionofestablishments，bothforindustrialandother
purposes，formedbythecollectivecontributionsoflarge
numbers;establishmentslikethosecalledbythetechnicalname
ofjointstockcompanies，ortheassociationslessformally
constituted，whicharesonumerousinEngland，toraisefundsfor
publicorphilanthropicobjects，or，lastly，thoseassociations
ofworkpeopleeitherforproduction，ortobuygoodsfortheir
commonconsumption，whicharenowspeciallyknownbythenameof
cooperativesocieties。
Theprogresswhichistobeexpectedinthephysicalsciences
andarts，combinedwiththegreatersecurityofproperty，and
greaterfreedomindisposingofit，whichareobviousfeaturesin
thecivilizationofmodernnations，andwiththemoreextensive
andmoreskilfulemploymentofthejoint。stockprinciple，afford
spaceandscopeforanindefiniteincreaseofcapitaland
production，andfortheincreaseofpopulationwhichisits
ordinaryaccompaniment。Thatthegrowthofpopulationwill
overpasstheincreaseofproduction，thereisnotmuchreasonto
apprehend;andthatitshouldevenkeeppacewithit，is
inconsistentwiththesuppositionofanyrealimprovementinthe
poorestclassesofthepeople。Itis，however，quitepossible
thattheremightbeagreatprogressinindustrialimprovement，
andinthesignsofwhatiscommonlycallednationalprosperity;
agreatincreaseofaggregatewealth，andeven，insomerespects，
abetterdistributionofit;thatnotonlytherichmightgrow
richer，butmanyofthepoormightgrowrich，thatthe
intermediateclassesmightbecomemorenumerousandpowerful，and
themeansofenjoyableexistencebemoreandmorelargely
diffused，whileyetthegreatclassatthebaseofthewhole
mightincreaseinnumbersonly，andnotincomfortnorin
cultivation。Wemust，therefore，inconsideringtheeffectsof
theprogressofindustry，admitasasupposition，howevergreatly
wedeprecateasafact，anincreaseofpopulationas
long—continued，asindefinite，andpossiblyevenasrapid，asthe
increaseofproductionandaccumulation。
Withthesepreliminaryobservationsonthecausesofchange
atworkinasocietywhichisinastateofeconomicalprogress，
Iproceedtoamoredetailedexaminationofthechanges
themselves。
PrinciplesofPoliticalEconomy
byJohnStuartMill
Book4
Chapter2
InfluenceoftheProgressofIndustryandPopulationonValues
andPrices
1。Thechangeswhichtheprogressofindustrycausesor
presupposesinthecircumstancesofproduction，arenecessarily
attendedwithchangesinthevaluesofcommodities。
Thepermanentvaluesofallthingswhichareneitherundera
naturalnorunderanartificialmonopoly，depend，aswehave
seen，ontheircostofproduction。Buttheincreasingpowerwhich
mankindareconstantlyacquiringovernature，increasesmoreand
moretheefficiencyofhumanexertion，orinotherwords，
diminishescostofproduction。Allinventionsbywhichagreater
quantityofanycommoditycanbeproducedwiththesamelabour，
orthesamequantitywithlesslabour，orwhichabridgethe
process，sothatthecapitalemployedneedsnotbeadvancedfor
solongatime，lessenthecostofproductionofthecommodity。
As，however，valueisrelative;ifinventionsandimprovementsin
productionweremadeinallcommodities，andallinthesame
degree，therewouldbenoalterationinvalues。Thingswould
continuetoexchangeforeachotheratthesameratesasbefore;
andmankindwouldobtainagreaterquantityofallthingsin
returnfortheirlabourandabstinence，withouthavingthat
greaterabundancemeasuredanddeclared（asitiswhenitaffects
onlyonething）bythediminishedexchangevalueofthe
commodity。