PROBLEMS 1N CATALLACTICS.
TO THE EDITOR OF THE SPECTATOR.
BIR—ITI RICARDO'S Chapter upon Foreign Trade, the following passage oc- curs: " The same rule which regulates the relative value of commodities in one country, does not regulate the value of the commodities exchanged between two or more countries. The quantity of wine which Portugal shall give in exchange for the cloth of England, is not determined by the respective quanti- ties of labour devoted to the production of each, as it would be if both commo- dities were manufactured in England, or both in Portugal." Now it is an extraordinary fact, that, after years of discussion, the leading economists of the day continue to he at issue among themselves regarding this elementary principle of international exchange. But a fact still more extraor- dinary remains to be noticed. Economists of high name are disagreed among themselves, not only with regard to this elementary principle of the science, but also with regard to the import of the propositions which they affirm respect- ing it. In an article, attributed to Mr. SENIOR, in a recent number of the Edinburgh Review, we find the following passage : " Why are the wages of an English cotton-spinner four ounces of silver a week, and those of a French cotton- spinner only three ? An English cotton-spinner receives more silver for a day's work than a French cotton-spinner because he produces in a day a larger amount of yarn and of a better quality." According to the obvious meaning of the words employed, this passage ap- pears to reaffirm, under a somewhat varied form, the elementary principle pro- pounded by Ilicenno. Mr. RICARDO says, that equal quantities of labour employed in England and in Portugal produce commodities of unequal value ; and Mr. SENIOR says, that equal quantities of labour employed in England and in France produce commodities differing in quantity and in quality, and consequently of unequal value when measured by silver as a common standard. Is there any detectable difference between the propositions of these eminent economists? May they not in fact be regarded as identical propositions? If it be true, that a commodity produced by a day's labour in England is larger in quantity, better in quality, and in the markets of the world worth more silver, than a commodity produced by a day's labour in France, can it also be true that a commodity produced at the cost of a day's labour in France is equal in value to a commodity produced at the cost of a day's labour in Eng- land? Mr. SENIOR has written a treatise of forty-seven pages in the Edin- burgh Review for the purpose of proving that these two apparently contradic- tory propositions may be consistently maintained. Other economists, not his inferiors in logic, contend that when the products of equal quantities of labour exchange in the markets of the world for unequal quantities of silver, they cannot be equal to each other in exchangeable value. Others again avow, with a celebrated Professor, that as regards the relative value of commodities produced in different countries, they have not yet made up their minds whe- ther things unequal to the same thing are or are not unequal to each other. Seven-and-forty pages of the Edinburgh Review devoted to disprove the proposition, that equal quantities of labour, employed in different countries, prcduce commodities of equal value, by proving that equal quantities of labour employed in different countries produce commodities which are worth, in the markets of the world, unequal quantities of silver ! Abundant evidence this of the lamentably slender progress which has hitherto been made in in- vestigating the laws of international exchange. In Mr. JOHN STUART MILL'S admirable system of Logic, we find the fol- lowing passage : "The opinion of Dugald Stewart is, I conceive, substantially correct, that in any science whatever, by reasoning from a set of hypotheses, we may obtain a body of conclusions as certain as those of geometry ; that is, as strictly in accordance with the hypotheses, and as irresistibly compelling assent on condition that those hypotheses are true. The only sense in which necessity can be ascribed to the conclusions of any scientific investigation, is that of necessarily following from some assumption, which by the conditions of the inquiry is not to be questioned." On reading this passage, it occurred to me, that by assuming as data two or three unquestioned propositions, and proceeding to reason from a sufficiently- numerous set of hypothetical cases, we might obtain, with regard to the imper- fectly-understood laws of international exchange, a body of conclusions as cer- tain, under these hypothetical cases, as the conclusions of geometry, and as irresistibly compelling assent. Could a kind of Euclid of Political Economy thus be framed, it might be regarded as no unimportant improvement in the science. When we have discovered that which is hypothetically true under assumed circumstances, we are enabled to ascertain that which is practically true under actual circumstances. For in this case, all we have to do in order to arrive at practical results is, to compare the assumed circumstances with the actual circumstances, and to make the necessary correction for the difference. Under these impressions, I would venture to submit for your consideration a series of problems in Catallactics, and to express a hope that they may obtain insertion in a journal distinguished for profound and original inquiry on sub- jects connected with social wellbeing and progress.
The first proposition of the series is herewith enclosed. Proposition II. with ita solution shall be forwarded in my next communication.
I have the honour to be, Sir, your obedient servant, A MEMBER OF THE POLITICAL ECONOMY CLUB.
PROPOSITIONS ASSUMED AS AXIOMS.
1st, Coat of production is resolvable into quantity of labour ; or, to use another nomenclature, into the sum of labour and abstinence. 2d, Cost of production is the ultimate regulator of the value, in relation to each other, of commodities produced in the same country. 3d, In different countries the efficacy of labour is different.
PROBLEM I.
England and France are excluded from all external intercourse, except with each other. In the two countries labour is applied with equal efficacy in the production of all commodities, including the precious metals. Show the terms upon which, under these circumstances, interchanges might be
effected between the two countries; and the incidence of the import-duties
which might be imposed by the country receiving the productions of the other.
As in the two countries labour is applied with equal efficacy in the produc- tion of all commodities, including the precious metals, the price of every commodity would be the same in France as in England ; and, therefore, no commercial interchanges with a view to profit would take place. But were English proprietors to travel in France, and French proprietors in England, then it would become necessary that international remittances should be effected. Should the remittances be of equal amount, they might he effected by an interchange of bills, without the transference either of money or of goods from one country to the other. But should the remittances to the absentee proprietors of the two countries be of unequal amount, then a transference either of money or of goods would become necessary ; and this transference would effect an alteration in the relative value and prices of commodities in the two countries.
Should the annual remittances from England to France exceed those from France to England by 100,0001., then money or goods to the amount of 100,000/. would be annually exported from England into France ; and, if the wet of transmitting gold should be one per cent, and that of transmitting the most eligible description of goods be ten per cent, then gold would continue to be sent from England to France until the prices of the goods most eligible for transmission became ten per cent higher in France than in England. But if the prices of the goods most eligible for transmission become ten per lower in England than in France, the prices of all other goods produced in England at equal cost must become ten per cent lower in England than in France. In the markets of France, the value of the gold produced by a given quantity of English labour will be less than the value of the commodities produced by the same quantity of French labour. Under the circumstances assumed, this alteration in the comparative scale of prices must be effected, not by a fall of prices in England, but by a rise of prices xi France. In England no alteration has taken place, either in the cost of producing gold or in that of producing other articles ; and therefore no perma- nent alteration can be effected in the value of gold in relation to the other pro- ducts of English labour. As soon as the increased demand for gold, to be re- mitted to France, raised its value in England above the cost level, additional aspital would be employed in working the English mines ; until, from the in- creased supply, the value of gold in England again coincided with its coot.
As gold flowed from England into France its value in France would fall be- low the cost level. The French mines would he abandoned, and all the gold re- -gained by France would be produced in England.
The value of the produce of English labour in relation to the produce of French labour would be altered. A commodity produced in England by the labour and abstinence of 100, and conveyed to France by the labour and abstinence of 10, would be worth in France, not a commodity produced in France by the labour and abstinence of 110, but a commodity produced by the labour and abstinence of 100; because, by the supposition, a commodity similar to that imported from England can be produced in France by the labour and abstinence of 100. Again, the quantity of gold produced in England by the labour of 109, and conveyed to France by the labour of I, will purchase in France a commodity produced by the labour, not of 110, but only by the labour of 100; because, as has been already shown, the value of gold in relation to commodities has fallen in France in this proportion. The imposition by France of a duty upon British goods would cause a still further decline in the value of the produce of English labour in relation to the produce of French labour. Take the duty imposed on all English productions, except gold, at 15 per cent upon the cost. In this case, a commodity produced in England by the labour of 100, conveyed to France by the labour of 10, and then charged with a duty equivalent to the labour of 15, would not, in the French market, be of greater value than the similar commodity which, by the supposition, is produced in France by the labour of 100. But as gold can be sent to France duty-free, it will be preferred as a remittance, until its increased supply shall have so reduced its value in France, that the quantity produced and conveyed to France by 125 English labour i8 no more than equivalent to com modities produced by 100 French labour; because, until the value of gold in the markets of France shall have fallen to this extent, the balance of remittances due, by the supposition, to English pro- prietors resident in France, cannot be effected so cheaply by the exportation of commodities as by the exportation of gold. The cost of producing all commodities would continue to be equal in the two countries, while the money-value of all commodities would be 25 per cent higher in France than in England. England would be rendered tributary to France, not only by the amount of the balance of remittances made to her ab- sentee proprietors resident in France, but also by the amount of the import- duties levied by France upon the commodities exported by England in dis- charge of that balance.
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