98 POLITICAL ECONOMY 



keep pace. Demand falls short of production from two reasons : 

 the thing produced is a thing not wanted, or those who want it 

 can produce nothing in return. If labour were wisely applied,' the 

 only limit to the increase of a well-to-do population is the diffi- 

 culty of producing food. To say that the wealth of a country 

 depends on its powers of production, is as true as to say that its 

 powers of profitable production depend on its wealth ; no doubt, 

 the two things are dependent on one another, but there is no fixed 

 ratio between them, such that knowing one you may calculate 

 the other. Capital is produced by labour ; the relative amounts of 

 these two elements which can be em ployed in production at a given 

 moment is approximately fixed, but fixed only by the customs 

 and desires of that particular country at that particular time, 

 when capital expects such and such profit, and labourers expect 

 such and such comforts. Change these feelings, and the fixed 

 ratio between capital and labour vanishes, so that the Malthusian 

 law, true as it is, gives no help in determining the rate of wages, 

 because it gives no help in determining what profit a capitalist 

 will expect or what comfort a labourer will expect ; because, in 

 fact, it gives no help in determining the cost of production either 

 of labour or of anything else. 



The action of the increase of population depends on the 

 second law of demand and supply, showing the probable direction 

 of the change in wages under given circumstances, but not help- 

 ing to determine what wages must be at any time, nor what 

 they will be in future. 



To determine ultimately the rate of wages, we are therefore 

 driven, as in all other cases, to the third law, that price is 

 determined by cost of production. But before applying this 

 law to labour, let as run over the mental machinery by which 

 the price of any article is brought to coincide with the cost of 

 production. 



The value which buyers and sellers set on any article depends 

 on different motives. The demand in the buyers' minds cor- 

 responds to the utility which, in their opinion, attaches to the 

 article ; and the causes which help to form that opinion are too 

 numerous for classification. If their desire be slight, they can 

 force no one to produce ; if it be strong, they will tempt so many 

 to produce that competition will bring down the price to the 



