776 REPORT— 1895. 



these series is chosen ; the relative money wages are corrected by these index- 

 numbers, and results are deduced from the relative real wages so computed. It 

 is now found that, in the limited area of industry considered, real wages have 

 increased continuously in the United Kingdom, till they stand more than seventy 

 per cent, higher in 1891 than they did in 1860 ; while in the IStates real wages 

 rose with the same rapidity till 1873, were checked, and finally fell in 1880, and 

 then rose rapidly till in 1891 they were nearly sixty per cent, higher than in 1860. 

 These conclusions must not be taken to represent industry in the States or 

 in England as a whole, since it has not been possible to include agricultural 

 wages. 



2. Bimetallism with a Climbing Ratio. By Hexry HiGGS, LL.B. 



FRIDAY, SEPTEMBER 13. 

 The following Papers were read : — 

 1. The Normal Course of Prices. By William Smart, M.A., LL.B. 



"W hat course may prices be expected to take in a period of normal industrial 

 activity ? Practical men, seeing that, in one or two well-known trades, reduced 

 material and freights, improved machinery, centralisation, and gigantic production 

 sum up a lower cost of production, generalise this, and assume that a steadily 

 falling level of price is inevitable as the expression of reduced cost. 



But, on looking through money price to exchange values, it becomes obvious 

 that reduced cost takes effect in increase of supply, and that prices come down 

 only in default of corresponding increase of demand. What is usually forgotten 

 is that every change in supply means a change in demand, the two being different 

 aspects and names for the same goods. 



(1) Every increase of supply (reduction of price) of any article calls out a 

 new demand for it, and prevents the fall in price being proportional to the fall in 

 cost. The present congestion of capital and labour conceals this ; because manu- 

 facturers can just now get both at low rates, we unconsciously assume that there 

 could be indefinite production of any article without increase of cost, (i') Every 

 increase in the total product of industry is a new demand for goods generally, just 

 as truly as would be a chance discovery of sovereigns in an old drawer. 



Suppose A products and B products represented the national output. So long as 

 A and B increased simultaneously and harmoniously, there would be indefinite 

 increase of both supplies without fall of exchange values. If now the same capital 

 and labour doubled A product, while B product remained constant, the exchange 

 value of every A would, in terms of B, fall to one half. If subsequently B pro- 

 ducts experienced the same increase, every A would again rise iu terms of B. 

 Recognising that no two articles have equal elasticity of demand, and that this 

 subsequent rise of price and its extent cannot be foreseen, the essential fact remains 

 that every particular increase of supply is increase of general demand. This being 

 so, reduction of cost, which is the real characteristic of prosperity, will find expres- 

 sion now in falling price, now in rising price ; the falling price being due to in- 

 creased supply of the particular article, the rising price being expression of the 

 increased supply of other articles. 



Conclusion : that, so far as the late fall in prices is general, it cannot be due to 

 causes inside the production process ; and this seems to point to a contraction of 

 the universal commodity in which all goods (and all costs) are named. 



Corollary : that if manufacture — that is, the employment of the masses — is to 

 remain subject to steadily falling prices, the manufacturer will require to find some 

 new means of paying himself for his work. Otherwise he will find it in specula- 

 tion or in combination to sustain price artificially. 



