LA TlIEOBIE DES BICHESSES. 191 



the indirect. The former levied on the net revenue of the producer, 

 whether fixed or sliding, has no effect on the price of the commodity, 

 nor on the quantity produced ; neither does it in any way fall on the 

 consumer. Not the less may it he prejudicial to the general welfare : 

 the following remarks of our author are exhaustive : 



"This tax, though it does not reach the consumer, may be nevertheless very 

 hurtful to the public interest : not mainly because in restricting the wealth of 

 the producer so taxed, it restrains his means of consumption, and so influences the 

 law of the demand of other commodities, but especially because the portion 

 taken away by the tax on the producer's revenue is commonly used in a way less 

 profitable to the increase of the annual production of the national wealth, and of 

 the well-being of the people, than if it had remained at the disposal of the pro- 

 ducer himself. We shall not here examine the effects of this abstraction on the 

 distribution of products, whether natural or manufactured, though doubtless this 

 is the ultimate object of the problems connected with the theory of riches, but we 

 may remark, in harmony with all the authorities, that the tax on the producers 

 revenue, even if it does not hinder the productive funds from producing as much 

 as they did before the tax was imposed, is an obstacle to the creation of new 

 funds for production, and even, where the tax is a slidiug one proportional to 

 the revenue, to the improvement of the existing funds. No oue will employ his 

 capital in the creation of new funds for production, or in the improvement of those 

 existing, if, by reason of the tax with wb/ch he finds the net return of his capital 

 affected, he no longer obtains the ordinary interest aceruiug from eajjitals em- 

 ployed in undertaking-} of the same kind. It is by closing the openings for 

 employment of labour and industry that such a tax, when excessive, acts in the 

 manner the most disastrous." 



Of indirect taxes, we may distinguish the two kinds known as 

 specific and ad valorem. In the former case, the loss sustained by the 

 producer exceeds of itself the gross profit to the treasury, leaving the 

 loss sustained by the consumers wholly uncompensated. Under 

 this head may also be classed the system of bounties or premiums 

 the result being that the gain to the producer which is effected by 

 the bounty, is essentially less than the sacrifice caused by the fall in 

 price produced thereby. With regard to ad valorem duties, Cournot 

 establishes a very beautiful and simple formula,* by which a duty of 

 this kind is shewn to be equivalent to a certain increase in the cost of 

 production or transmission of the commodity. Hence such a duty 

 falls the heavier, according as the cost of production is greater. 

 Just as in the specific duties, the loss sustained by the producer is 

 greater than the income of the treasury, and that by the consumers- 

 is wholly uncompensated. 



*If the tax on each unit of the commodity be to its price in the ratio of wto 1, the effect 

 will be the same as if the cost of production were increased in the ratio of (l-w,) to 1, 

 Thus if the tax were 12 per cent., the increase of cost which would be equivalent to it 

 would be about 13i per cent. 



