i 4 POLITICAL ECONOMY 



swelled by the increased savings of the community made in the 

 face of a diminished average rate of interest ; it may rise by an 

 increase in the gross receipts received by the maker from the con- 

 sumer, and the want of specie opposes no obstacle to an increase 

 of wages so long as produce will sell for more than its cost. We 

 see that in some uncertain way the wages fund is affected by 

 the security of property, the effective desire of accumulation, 

 profits made on capital, the number of labourers, peace or war, 

 but we have found no better way than mere observation of 

 determining whether a given change of circumstances will or 

 will not augment the fund. One class of economists believe 

 they can give a definite rule by which the price of labour may 

 be determined, or at least by which any permanent change in 

 that price is regulated. This rule would, therefore, if true, 

 allow us to calculate either the wages fund or the change in 

 the wages fund due to altered circumstances. This rule they 

 name the Law of Demand and Supply. We will again take 

 our definition of the law from Mr. Mill, who says 



The idea of a ratio as between demand and supply is out of place, 

 and has no concern in the matter ; the proper mathematical analogy 

 is that of an equation. 



Demand and supply, the quantity demanded and the quantity 

 supplied, will be made equal. If unequal at any moment, competi- 

 tion equalises them, and the manner in which this is done is by an 

 adjustment of the value. If the demand increases, the value rises ; 

 if the demand diminishes, the value falls ; again, if the supply falls 

 off, the value rises ; and falls if the supply is increased. The rise or 

 the fall continues until the demand and supply are again equal to 

 one another ; and the value which a commodity will bring in any 

 market is no other than the value which in that market gives a 

 demand just sufficient to carry off the existing or expected supply. 

 . . . This then is the law of value with respect to all commodities 

 not susceptible of being multiplied at pleasure. 



There are commodities of which, though capable of being in- 

 creased or diminished, to a great or even unlimited extent, the value 

 never depends on anything but demand and supply. This is the 

 case in particular with the commodity labour. 



Well, as Mill says, labour and commodities not capable of 

 being multiplied at pleasure have their value fixed by demand 



