176 Transactions. — Miscellaneous. 



on the contrary, in proportion as they have opened their ports 

 to all nations, instead of being ruined by this free trade . . . 

 have been enriched by it." In other words, Adam Smith claimed 

 that attempts to bring about by policy what was considered a 

 favourable balance had been actually unfavourable to national 

 prosperity. 



It is not easy to avoid altogether the use of words which. 

 in spite of their bearing on their surface the erratic ideas that 

 were current during the infancy of the science of economics, 

 have become part of the current phraseology of the mercantile 

 world ; but it is most necessary to dissociate them altogether 

 in this connection from their ordinary connotation, and to regard 

 them merely as indicating whether the exports or imports are 

 in excess, without suggesting anything beyond. Indeed, it will 

 be better for us to use the word " positive " as indicating an 

 excess of imports, and " negative " as indicating an excess of 

 exports. These words at least correspond to something tangible. 

 Thus, when the balance of trade is positive, a country is obtaining 

 for consumption an amount of products in excess of what she 

 produces ; and when it is negative the country has left to consume 

 less than she actually produces. The words seem suitable ; 

 at all events they do not tend to convey entirely false notions 

 to those who have not special knowledge or have not had special 

 wan ling ; and they will not have that fatal power which words 

 sometimes have of cheating the mind, even occasionally of 

 careful and well-instructed thinkers. In accordance with this 

 terminology it will be convenient to speak sometimes of the 

 balance of trade as rising when an excess of imports increases 

 or an excess of exports diminishes, and as falling when the con- 

 trary movement takes place ; and this will correspond exactly 

 with the way in which we should speak in the ordinary course 

 of the corresponding graphs in the accompanying figures. 



We shall now proceed to consider the elements on which the 

 balance of trade depend-.. 



Intkrnational Payments. 



The transactions between nations are of much the same 

 character as between individuals, and, except in the case of 

 bankruptcy, the payments in goods and coin and sen ices rendered 

 on the one side must pay for those on the other, in a similar 

 way. A nation may have to pay — 



(1.) For goods received by it, including gold ; 



(2.) Interest on loans received by it ; 



("..) 'I'he principal of loans advanced by it, or the return of 

 the principal of loans borrowed by it ; 



(1.) Tributes or indemnities ; 



