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Show I I I 64 ON THE NATURE AND [cH. II. sincrle instances so fully understood, that in the slio~ht use which has hitbe1:to been tnade of them, it bas not been thought necessary to interrupt·the course of the reasoning by explanations a1~d defi-nitions. These terms, however, though In. ~on- · stant use, are by no n1eans applied with pre~Ision. And before we proceed farther, it may be ad v1s~ble to clear this part of the ground as n1u~h as poss1~le, that we may be certain of the foottng on whtch we stand. This will appear to be the more necessary, as it must be allowed, that of all t~e principles in political economy, there is none :vh1ch bears so larcre a share in the phenon1ena \V h1ch con1e under its 0consideratio~ as the principle of supply and demand. It has been already stated, that all value in ex-change depends upon the pov;er and \vill to exchange one commodity for another; and \vhen, by the introduction of a general measure of value and medium of exchange, society has been divided, in common language, into buyers and sellers, demand n1ay be defined to be, the will combined with the power to purchase, and S'Upply, the production of commodities combined \vith the intention to sell them. In this state of things, the relative values of commodities in n1oney, or their prices, are determined by the relative demand for them, compared with the supply of them ; and this law appears to be so general, that probably not a single instance of a change of price can be found which may not be satisfactorily traced to some previous change in the causes which affect the demand or supply. SEC. II.] !W.EASU'll.ES OF VALUE. In exan1ining the tr~th of this position we must constantly bear in n1ind the terms in which it is ex pressed; and recollect that, when prices are said to be determined by demand and supply, it is not 1neant that they are determined either by the den1and alone or the supply alone, but by their relation to each other. But how is this relation to be ascertained? It has been sometimes said that supply is always equal to demand, because no permanent supply of any commodity can take place for which there is not a den1and so effective as to take off all that is offered. In one sense of the tenns in which demand and supply have occasionally been used, this position may be granted. The actual e:t"tent of the den1and, cotnpared with the actual extent of the supply, are always on an average proportioned to each other. If the supply be ever so s1nall, the extent of the effective demand cannot 'be greater; and if the supply be ever so great, the extent of the demand, _or the consumption, will either in· crease in proportion, or a part of it will become useless and cease to be produced. It cannot, therefore, be in this sense that a change in the proportion of den1and to supply affects prices; because in this sense detnand and supply always bear the satne relation to each other. And this uncer .. tainty in the use of these terms renders it a.n ab~o .. lutely necessary prelitninary in the present 1nqu1ry clearly to ascertain \V hat is the nature of that change in the mutual relation of detnand and supply, on which the prices o,f commodities so entirely depend- F |