CERTAIN DOCTRINES OF POLITICAL ECONOMY. [3] 



duced at home, were henceforth to be imported in great quantity from abroad. In what 

 manner will each of the above terms be modified ? 



Perhaps it may be said that in the new resulting condition of equilibrium the imports 

 and exports must still be equal, and that thus, the derangement will remedy itself. But 

 this remark does not suffice. It does not shew how the new position of equilibrium is 

 attained, nor what are its consequences. There is nothing in the direct effect of the newly 

 added import to produce any new export, except the export of money. If the imports be 

 increased, the exports of commodities remaining the same, the balance must be paid, so far 

 as that transaction alone indicates, in gold and silver; and thus, the importing country will 

 have the total import of gold and silver diminished, or turned into an export. It is true, 

 that a country not producing much gold or silver cannot go on exporting gold or silver : 

 but still the question remains, what is it which stops this drain of the precious metals, and 

 gives rise to a new condition of equilibrium ? And to this, the reply, upon the principles 

 here assumed, is, that the efflux or diminished influx of gold and silver reduces the currency ; 

 this reduction of the currency diminishes prices in the country in question ; and prices being 

 diminished, some commodities may be exported now, which could not be exported before ; 

 and thus, the exports are increased, and the increase may balance the increase of imports, so 

 as to give rise to a new condition of equilibrium. And the mathematical problem now to be 

 solved is, to find at what point, the necessary assumptions being made, this new equilibrium 

 will take place. 



73. Besides the effect of diminished prices in producing an increase of exports, there may 

 be an effect of the same kind produced by the diminution of wages in the country in question, 

 arising from the competition of the' labour previously employed in producing the commodity 

 (JT) which is henceforth to be imported. Of course, the price of labour will be diminished 

 along with all other prices : but, by the competition of the labourers thrown out of work by the 

 new importation, the price of labour may be diminished in a still greater ratio. This effect 

 however we shall not at present consider ; but shall investigate the alteration of exports and 

 imports arising from the change of prices only. 



74. We had the equation E = i" + P + Q. Let K be the value of the new imported 

 commodity (K) which deranges the equilibrium, and produces a new state of things : then 

 / becomes I + K ; and we have E = I + K+P+ Q. Let P, the import of gold and silver, 

 annually required for plate, remain unaltered. Let the quantity of gold and silver required 

 to pay for the new import, when the increased export has been deducted, be a fraction of the 

 whole annual import of gold and silver; that is, let it = mQ. Therefore (1 - m) Q is the 

 new import of gold and silver. Let F be the increase of the exports : then the equation of 

 imports and exports under the new conditions is 



E + F = J + K + P + (1 - m) Q; 

 and we had E = I + K + P + Q, 



whence, F = K -mQ. 



Since the quantity of gold and silver imported, in order to keep up the currency, is not 



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