Principles of Political Economy and Taxation. 163 



the requisite labour; and the profits upon this capital being al- 

 lowed in the usual manner. 



This measure of exchangeable value is to be understood as 

 applicable only in the long run, and as the regulating and limit- 

 ing principle of what may be called the natural price. Under 

 this restriction its truth depends on the consideration, that if 

 this were not the law of exchange, some labour would be better 

 rewarded than some other, and hence the equilibrium would be 

 restored by a transfer of labourers to the favoured employment. 

 The principle therefore is true so far as the possibility and ope- 

 ration of such a transfer extends; that is, it is true of prices in 

 the same country, and so far as the labour which is embodied 

 in the commodity is, from conditions of time and place, within 

 the reach of this competition. 



That some kinds of labour are more highly paid than others 

 does not vitiate this principle; for they are so in virtue of the 

 education required, the skill of the labourer, or the intensity of 

 the labour (Ric p. 11.). And the tendencies which distribute the 

 numbers and rewards of labourers in different employments, may 

 be supposed to have reached their equilibrium; so that a change 

 in the quantity of labour required can alone affect the price. 



The principle thus enuntiated is sometimes expressed by say- 

 ing, that the price must be such as to pay the cost of produc- 

 tion with profits. 



This natural price may often be different from the market 

 price, which is affected by another principle, that of supply and 

 demand. According to the principle of supply and demand, the 

 price increases by an increase of the demand, or by a diminu- 

 tion of the supply, and vice versa. The exact law which con- 

 nects these changes of price with those of supply and demand, 



x2 



