Principles of Political Economy and Taxation. 187 



POSTULATES CONCERNING TRADE. 



I. The merchant will buy a commodity at one place, and 

 sell it at another, if by so doing he can recover the money cost 

 with the profit usual in his own country. The consumer will 

 buy a commodity of foreign rather than the same commodity of 

 domestic production, if by so doing he can obtain it cheaper. 



This is the fundamental principle of all foreign trade, all 

 restrictions being, as has been said, supposed to be removed. 



II. When a country has as much gold (or any other money- 

 metal) as is wanted to circulate her commodities; if an additional 

 quantity of gold be imported and retained in the country, the 

 circulation of commodities remaining the same, money prices will 

 rise. 



Gold being more abundant, will of course become less valu- 

 able; that is, commodities will be more valuable, if compared 

 with gold, or gold-prices will rise. 



I shall suppose, in what follows, that prices rise in proportion 

 to the increased quantity of gold : that is, if g be the original 

 quantity, and h the quantity imported, prices will rise in the ratio 



g : g+h. Up be the price at first, p(l+-) is the price at last. 



If however gold is imported in consequence of a balance of 

 exports over imports, it is probable that the internal trade would 

 increase, and the circulation of commodities in the country would 

 be greater than when there were no exports or imports. Hence 

 a greater quantity of gold than g, the original quantity, would 

 now be wanted, and the price would not rise so much as has 

 just been mentioned. Instead of p (l + j\ it might become 



A A2 



