AdamSmithfanciedthatthereweretwocommoditiespeculiarly
fittedtoserveasameasureofvalue:corn，andlabour。Ofcorn，
hesaidthatalthoughitsvaluefluctuatesmuchfromyearto
year，itdoesnotvarygreatlyfromcenturytocentury。Thiswe
nowknowtobeanerror:corntendstoriseincostofproduction
witheveryincreaseofpopulation，andtofallwithevery
improvementinagriculture，eitherinthecountryitself，orin
anyforeigncountryfromwhichitdrawsaportionofits
supplies。Thesupposedconstancyofthecostoftheproductionof
corndependsonthemaintenanceofacompleteequipoisebetween
theseantagonizingforces，anequipoisewhich，ifeverrealized，
canonlybeaccidental。Withrespecttolabourasameasureof
value，thelanguageofAdamSmithisnotuniform。Hesometimes
speaksofitasagoodmeasureonlyforshortperiods，saying
thatthevalueoflabour（orwages）doesnotvarymuchfromyear
toyear，thoughitdoesfromgenerationtogeneration。Onother
occasionshespeaksasiflabourwereintrinsicallythemost
propermeasureofvalue，onthegroundthatoneday’sordinary
muscularexertionofoneman，maybelookeduponasalways，to
him，thesameamountofeffortorsacrifice。Butthis
proposition，whetherinitselfadmissibleornot，discardsthe
ideaofexchangevaluealtogether，substitutingatotally
differentidea，moreanalogoustovalueinuse。Ifaday’slabour
willpurchaseinAmericatwiceasmuchofordinaryconsumable
articlesasinEngland，itseemsavainsubtletytoinsiston
sayingthatlabourisofthesamevalueinbothcountries，and
thatitisthevalueoftheotherthingswhichisdifferent。
Labour，inthiscase，maybecorrectlysaidtobetwiceas
valuable，bothinthemarketandtothelabourerhimself，in
AmericaasinEngland。
Iftheobjectweretoobtainanapproximatemeasurebywhich
toestimatevalueinuse，perhapsnothingbettercouldbechosen
thanoneday’ssubsistenceofanaverageman，reckonedinthe
ordinaryfoodconsumedbytheclassofunskilledlabourers。Ifin
anycountryapoundofmaizeflourwillsupportalabouringman
foraday，athingmightbedeemedmoreorlessvaluablein
proportiontothenumberofpoundsofmaizeflouritexchanged
for。Ifonething，eitherbyitselforbywhatitwouldpurchase，
couldmaintainalabouringmanforaday，andanothercould
maintainhimforaweek，therewouldbesomereasoninsaying
thattheonewasworth，forordinaryhumanuses，seventimesas
muchastheother。Butthiswouldnotmeasuretheworthofthe
thingtoitspossessorforhisownpurposes，whichmightbe
greatertoanyamount，thoughitcouldnotbeless，thanthe
worthofthefoodwhichthethingwouldpurchase。
TheideaofaMeasureofValuemustnotbeconfoundedwith
theideaoftheregulator，ordeterminingprinciple，ofvalue。
WhenitissaidbyRicardoandothers，thatthevalueofathing
isregulatedbyquantityoflabour，theydonotmeanthequantity
oflabourforwhichthethingwillexchange，butthequantity
requiredforproducingit。This，theymeantoaffirm，determines
itsvalue;causesittobeofthevalueitis，andofnoother。
ButwhenAdamSmithandMalthussaythatlabourisameasureof
value，theydonotmeanthelabourbywhichthethingwasorcan
bemade，butthequantityoflabourwhichitwillexchangefor，
orpurchase;inotherwordsthevalueofthething，estimatedin
labour。Andtheydonotmeanthatthisregulatesthegeneral
exchangevalueofthething，orhasanyeffectindetermining
whatthatvalueshallbe，butonlyascertainswhatitis，and
whetherandhowmuchitvariesfromtimetotimeandfromplace
toplace。Toconfoundthesetwoideas，wouldbemuchthesame
thingastooverlookthedistinctionbetweenthethermometerand
thefire。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3:Distribution
Chapter16
OfSomePeculiarCasesofValue
1。Thegenerallawsofvalue，inallthemoreimportant
casesoftheinterchangeofcommoditiesinthesamecountry，have
nowbeeninvestigated。Weexamined，first，thecaseofmonopoly，
inwhichthevalueisdeterminedbyeitheranaturaloran
artificiallimitationofquantity，thatis，bydemandandsupply;
secondly，thecaseoffreecompetition，whenthearticlecanbe
producedinindefinitequantityatthesamecost;inwhichcase
thepermanentvalueisdeterminedbythecostofproduction，and
onlythefluctuationsbysupplyanddemand;thirdly，amixed
case，thatofthearticleswhichcanbeproducedinindefinite
quantity，butnotatthesamecost;inwhichcasethepermanent
valueisdeterminedbythegreatestcostwhichitisnecessaryto
incurinordertoobtaintherequiredsupply。Andlastly，wehave
foundthatmoneyitselfisacommodityofthethirdclass;that
itsvalue，inastateoffreedom，isgovernedbythesamelawsas
thevaluesofothercommoditiesofitsclass;andthatprices，
therefore，followthesamelawsasvalues。
Fromthisitappearsthatdemandandsupplygovernthe
fluctuationsofvaluesandpricesinallcases，andthepermanent
valuesandpricesofallthingsofwhichthesupplyisdetermined
byanyagencyotherthanthatoffreecompetition:butthat，
undertheregimeofcompetition，thingsare，ontheaverage，
exchangedforeachotheratsuchvalues，andsoldatsuchprices，
asaffordequalexpectationofadvantagetoallclassesof
producers;whichcanonlybewhenthingsexchangeforoneanother
intheratiooftheircostofproduction。
Itisnow，however，necessarytotakenoticeofcertain
cases，towhich，fromtheirpeculiarnature，thislawofexchange
valueisinapplicable。
Itsometimeshappensthattwodifferentcommoditieshavewhat
maybetermedajointcostofproduction。Theyarebothproducts
ofthesameoperation，orsetofoperations，andtheoutlayis
incurredforthesakeofbothtogether，notpartforoneandpart
fortheother。Thesameoutlaywouldhavetobeincurredfor
eitherofthetwo，iftheotherwerenotwantedorusedatall。
Therearenotafewinstancesofcommoditiesthusassociatedin
theirproduction。Forexample，cokeandcoal—gasareboth
producedfromthesamematerial，andbythesameoperation。Ina
morepartialsense，muttonandwoolareanexample:beef，hides，
andtallow:calvesanddairyproduce:chickensandeggs。Costof
productioncanhavenothingtodowithdecidingthevalueofthe
associatedcommoditiesrelativelytoeachother。Itonlydecides
theirjointvalue。Thegasandthecoketogetherhavetorepay
theexpensesoftheirproduction，withtheordinaryprofit。Todo
this，agivenquantityofgas，togetherwiththecokewhichis
theresiduumofitsmanufacture，mustexchangeforotherthings
intheratiooftheirjointcostofproduction。Buthowmuchof
theremunerationoftheproducershallbederivedfromthecoke，
andhowmuchfromthegas，remainstobedecided。Costof
productiondoesnotdeterminetheirprices，hutthesumoftheir
prices。Aprincipleiswantingtoapportiontheexpensesof
productionbetweenthetwo。
Sincecostofproductionherefailsus，wemustreverttoa
lawofvalueanteriortocostofproduction，andmore
fundamental，thelawofdemandandsupply。Thelawis，thatthe
demandforacommodityvarieswithitsvalue，andthatthevalue
adjustsitselfsothatthedemandshallbeequaltothesupply。
Thissuppliestheprincipleofrepartitionwhichweareinquest
of。
Supposethatacertainquantityofgasisproducedandsold
atacertainprice，andthattheresiduumofcokeisofferedata
pricewhich，togetherwiththatofthegas，repaystheexpenses
withtheordinaryrateofprofit。Suppose，too，thatattheprice
putuponthegasandcokerespectively，thewholeofthegas
findsaneasymarket，withouteithersurplusordeficiency，but
thatpurchaserscannotbefoundforallthecokecorrespondingto
it。Thecokewillbeofferedatalowerpriceinordertoforcea
market。Butthislowerprice，togetherwiththepriceofthegas，
willnotberemunerating:themanufacture，asawhole，willnot
payitsexpenseswiththeordinaryprofit，andwillnot，onthese
terms，continuetobecarriedon。Thegas，therefore，mustbe
soldatahigherprice，tomakeupforthedeficiencyonthe
coke。Thedemandconsequentlycontracting，theproductionwillbe
somewhatreduced;andpriceswillbecomestationarywhen，bythe
jointeffectoftheriseofgasandthefallofcoke，somuch
lessofthefirstissold，andsomuchmoreofthesecond，that
thereisnowamarketforallthecokewhichresultsfromthe
existingextentofthegasmanufacture。Orsupposethereverse
case;thatmorecokeiswantedatthepresentprices，thancanbe
suppliedbytheoperationsrequiredbytheexistingdemandfor
gas。Coke，beingnowindeficiency，willriseinprice。Thewhole
operationwillyieldmorethantheusualrateofprofit，and
additionalcapitalwillheattractedtothemanufacture。The
unsatisfieddemandforcokewillhesupplied;butthiscannotbe
donewithoutincreasingthesupplyofgastoo;andasthe
existingdemandwasfullysuppliedalready，anincreasedquantity
canonlyfindamarketbyloweringtheprice。Theresultwillbe
thatthetwotogetherwillyieldthereturnrequiredbytheir
jointcostofproduction，butthatmoreofthisreturnthan
beforewillbefurnishedbythecoke，andlessbythegas。
Equilibriumwillbeattainedwhenthedemandforeacharticle
fitssowellwiththedemandfortheother，thatthequantity
requiredofeachisexactlyasmuchasisgeneratedinproducing
thequantityrequiredoftheother。Ifthereisanysurplusor
deficiencyoneitherside;ifthereisademandforcoke，andnot
ademandforallthegasproducedalongwithit，orviceversa;
thevaluesandpricesofthetwothingswillsoreadjust
themselvesthatbothshallfindamarket。
When，therefore，twoormorecommoditieshaveajointcostof
production，theirnaturalvaluesrelativelytoeachotherare
thosewhichwillcreateademandforeach，intheratioofthe
quantitiesinwhichtheyaresentforthbytheproductive
process。Thistheoremisnotinitselfofanygreatimportance:
buttheillustrationitaffordsofthelawofdemand，andofthe
modeinwhich，whencostofproductionfailstobeapplicable，
theotherprinciplestepsintosupplythevacancy，isworthyof
particularattention，asweshallfindinthenextchapterbut
onethatsomethingverysimilartakesplaceincasesofmuch
greatermoment。
2。Anothercaseofvalueswhichmeritsattention，isthatof
thedifferentkindsofagriculturalproduce。Thisisrathera
morecomplexquestionthatthelast，andrequiresthatattention
shouldbepaidtoagreaternumberofinfluencingcircumstances。
Thecasewouldpresentnothingpeculiar，ifdifferent
agriculturalproductswereeithergrownindiscriminatelyandwith
equaladvantageonthesamesoils，orwhollyondifferentsoils。
Thedifficultyarisesfromtwothings:first，thatmostsoilsare
fitterforonekindofproducethananother，withoutbeing
absolutelyunfitforany;andsecondly，therotationofcrops。
Forsimplicity，wewillconfineoursuppositiontotwokinds
ofagriculturalproduce;forinstance，wheatandoats。Ifall
soilswereequallyadaptedforwheatandforoats，bothwouldbe
grownindiscriminatelyonallsoils，andtheirrelativecostof
production，beingthesameeverywhere，wouldgoverntheir
relativevalue。Ifthesamelabourwhichgrowsthreequartersof
wheatonanygivensoil，wouldalwaysgrowonthatsoilfive
quartersofoats，thethreeandthefivequarterswouldbeofthe
samevalue。Ifagain，wheatandoatscouldnotbegrownonthe
samesoilatall，thevalueofeachwouldbedeterminedbyits
peculiarcostofproductionontheleastfavourableofthesoils
adaptedforitwhichtheexistingdemandrequiredarecourseto。
Thefact，however，isthatbothwheatandoatscanbegrownon
almostanysoilwhichiscapableofproducingeither:butsome
soils，suchasthestiffclays，arebetteradaptedforwheat，
whileothers（thelightsandysoils）aremoresuitableforoats。
Theremightbesomesoilswhichwouldyield，tothesamequantity
oflabour，onlyfourquartersofoatstothreeofwheat;others
perhapslessthanthreeofwheattofivequartersofoats。Among
thesediversities，whatdeterminestherelativevalueofthetwo
things？
Itisevidentthateachgrainwillbecultivatedin
preference，onthesoilswhicharebetteradaptedforitthanfor
theother;andifthedemandissuppliedfromthesealone，the
valuesofthetwograinswillhavenoreferencetooneanother。
Butwhenthedemandforbothissuchastorequirethateach
shouldbegrownnotonlyonthesoilspeculiarlyfittedforit，
butonthemediumsoilswhich，withoutbeingspecificallyadapted
toeither，areaboutequallysuitedforboth，thecostof
productiononthosemediumsoilswilldeterminetherelative
valueofthetwograins;whiletherentofthesoilsspecifically
adaptedtoeach，willberegulatedbytheirproductivepower，
consideredwithreferencetothatonealonetowhichtheyare
peculiarlyapplicable。Thusfarthequestionpresentsno
difficulty，toanyonetowhomthegeneralprinciplesofvalue
arefamiliar。
Itmayhappen，however，thatthedemandforoneofthetwo，
asforexamplewheat，maysooutstripthedemandfortheother，
asnotonlytooccupythesoilsspeciallysuitedforwheat，but
toengrossentirelythoseequallysuitabletoboth，andeven
encroachuponthosewhicharebetteradaptedtooats。Tocreate
aninducementforthisunequalapportionmentofthecultivation，
wheatmustberelativelydearer，andoatscheaper，thanaccording
tothecostoftheirproductiononthemediumland。Their
relativevaluemustbeinproportiontothecostonthatquality
ofland，whateveritmaybe，onwhichthecomparativedemandfor
thetwogrinsrequiresthatbothofthemshouldbegrown。If，
fromthestateofthedemand，thetwocultivationsmeetonland
morefavourabletoonethantotheother，thatonewillbe
cheaperandtheotherdearer，inrelationtoeachotherandto
thingsingeneral，thaniftheproportionaldemandwereasweat
firstsupposed。
Here，then，weobtainafreshillustration，inasomewhat
differentmanner，oftheoperationofdemand，notasan
occasionaldisturberofvalue，butasapermanentregulatorof
it，conjoinedwith，orsupplementaryto，costofproduction。
Thecaseofrotationofcropsdoesnotrequireseparate
analysis，beingacaseofjointcostofproduction，likethatof
gasandcoke。Ifitwerethepracticetogrowwhiteandgreen
cropsonalllandsinalternateyears，theonebeingnecessaryas
muchforthesakeoftheotherasforitsownsake;thefarmer
wouldderivehisremunerationfortwoyears’expensesfromone
whiteandonegreencrop，andthepricesofthetwowouldso
adjustthemselvesastocreateademandwhichwouldcarryoffan
equalbreadthofwhiteandofgreencrops。
Therewouldbelittledifficultyinfindingotheranomalous
casesofvalue，whichitmightbeausefulexercisetoresolve:
hutitisneitherdesirablenorpossible，inaworklikethe
present，toentermoreintodetailsthanisnecessaryforthe
elucidationofprinciples。Inowthereforeproceedtotheonly
partofthegeneraltheoryofexchangewhichhasnotyetbeen
touchedupon，thatofInternationalExchanges，ortospeakmore
generally，exchangesbetweendistantplaces。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book3:Distribution
Chapter17
OfInternationalTrade
1。Thecauseswhichoccasionacommoditytobebroughtfroma
distance，insteadofbeingproduced，asconveniencewouldseemto
dictate，asnearaspossibletothemarketwhereitistobesold
forconsumption，areusuallyconceivedinarathersuperficial
manner。Somethingsitisphysicallyimpossibletoproduce，
exceptinparticularcircumstancesofheat，soil，water，or
atmosphere。Buttherearemanythingswhich，thoughtheycouldbe
producedathomewithoutdifficulty，andinanyquantity，areyet
importedfromadistance。Theexplanationwhichwouldbe
popularlygivenofthiswouldbe，thatitischeapertoimport
thantoproducethem:andthisisthetruereason。Butthis
reasonitselfrequiresthatareasonbegivenforit。Oftwo
thingsproducedinthesameplace，ifoneischeaperthanthe
other，thereasonisthatitcanbeproducedwithlesslabourand
capital，or，inaword，atlesscost。Isthisalsothereasonas
betweenthingsproducedindifferentplaces？Arethingsnever
importedbutfromplaceswheretheycanbeproducedwithless
labour（orlessoftheotherelementofcost，time）thaninthe
placetowhichtheyarebrought？Doesthelaw，thatpermanent
valueisproportionedtocostofproduction，holdgoodbetween
commoditiesproducedindistantplaces，asitdoesbetweenthose
producedinadjacentplaces？
Weshallfindthatitdoesnot。Athingmaysometimesbesold
cheapest，bybeingproducedinsomeotherplacethanthatat
whichitcanbeproducedwiththesmallestamountoflabourand
abstinence。EnglandmightimportcornfromPolandandpayforit
incloth，eventhoughEnglandhadadecidedadvantageoverPoland
intheproductionofboththeoneandtheother。Englandmight
sendcottonstoPortugalinexchangeforwine，althoughPortugal
mightbeabletoproducecottonswithalessamountoflabourand
capitalthanEnglandcould。
Thiscouldnothappenbetweenadjacentplaces。Ifthenorth
bankoftheThamespossessedanadvantageoverthesouthbankin
theproductionofshoes，noshoeswouldbeproducedonthesouth
side;theshoemakerswouldremovethemselvesandtheircapitals
tothenorthbank，orwouldhaveestablishedthemselvesthere
originally。forbeingcompetitorsinthesamemarketwiththose
onthenorthside，theycouldnotcompensatethemselvesfortheir
disadvantageattheexpenseoftheconsumer:themountofit
wouldfallentirelyontheirprofits;andtheywouldnotlong
contentthemselveswithasmallerprofit，when，bysimply
crossingariver，theycouldincreaseit。Butbetweendistant
places，andespeciallybetweendifferentcountries，profitsmay
continuedifferent;becausepersonsdonotusuallyremove
themselvesortheircapitalstoadistantplace，withoutavery
strongmotive。Ifcapitalremovedtoremotepartsoftheworldas
readily，andforassmallaninducement，asitmovestoanother
quarterofthesametown;ifpeoplewouldtransporttheir
manufactoriestoAmericaorChinawhenevertheycouldsavea
smallpercentageintheirexpensesbyit;profitswouldbealike
（orequivalent）allovertheworld，andallthingswouldhe
producedintheplaceswherethesamelabourandcapitalwould
producethemingreatestquantityandofbestquality。Atendency
may，evennow，beobservedtowardssuchastateofthings;
capitalisbecomingmoreandmorecosmopolitan;thereissomuch
greatersimilarityofmannersandinstitutionsthanformerly，and
somuchlessalienationoffeeling，amongthemorecivilized
countries，thatbothpopulationandcapitalnowmovefromoneof
thosecountriestoanotheronmuchlesstemptationthan
heretofore。Buttherearestillextraordinarydifferences，both
ofwagesandofprofits，betweendifferentpartsoftheworld。It
needsbutasmallmotivetotransplantcapital，orevenpersons，
fromWarwickshiretoYorkshire;butamuchgreatertomakethem
removetoIndia，thecolonies，orIreland。ToFrance，Germany，or
Switzerland，capitalmovesperhapsalmostasreadilyastothe
colonies;thedifferenceoflanguageandgovernmentbeing
scarcelysogreatahindranceasclimateanddistance。To
countriesstillbarbarous，or，likeRussiaorTurkey，only
beginningtobecivilized，capitalwillnotmigrate，unlessunder
theinducementofaverygreatextraprofit。
Betweenalldistantplacesthereforeinsomedegree，but
especiallybetweendifferentcountries（whetherunderthesame
supremegovernmentornot，）theremayexistgreatinequalitiesin
thereturntolabourandcapital，withoutcausingthemtomove
fromoneplacetotheotherinsuchquantityastolevelthose
inequalities。Thecapitalbelongingtoacountrywill，toagreat
extent，remaininthecountry，eveniftherebenomodeof
employingitinwhichitwouldnotbemoreproductiveelsewhere。
Yetevenacountrythuscircumstancedmight，andprobablywould，
carryontradewithothercountries。Itwouldexportarticlesof
somesort，eventoplaceswhichcouldmakethemwithlesslabour
thanitself;becausethosecountries，supposingthemtohavean
advantageoveritinallproductions，wouldhaveagreater
advantageinsomethingsthaninothers，andwouldfindittheir
interesttoimportthearticlesinwhichtheiradvantagewas
smallest，thattheymightemploymoreoftheirlabourandcapital
onthoseinwhichitwasgreatest。
2。AsIhavesaidelsewhere（1*）afterRicardo（thethinker
whohasdonemosttowardsclearingupthissubject）（2*）"itis
notadifferenceintheabsolutecostofproduction，which
determinestheinterchange，butadifferenceinthecomparative
cost。ItmaybetoouradvantagetoprocureironfromSwedenin
exchangeforcottons，evenalthoughtheminesofEnglandaswell
ashermanufactoriesshouldbemoreproductivethanthoseof
Sweden;forifwehaveanadvantageofone—halfincottons，and
onlyanadvantageofaquarteriniron，andcouldsellour
cottonstoSwedenatthepricewhichSwedenmustpayforthemif
sheproducedthemherself，weshouldobtainourironwithan
advantageofone—halfaswellasourcottons。Wemayoften，by
tradingwithforeigners，obtaintheircommoditiesatasmaller
expenseoflabourandcapitalthantheycosttotheforeigners
themselves。Thebargainisstilladvantageoustotheforeigner，
becausethecommoditywhichhereceivesinexchange，thoughit
hascostusless，wouldhavecosthimmore。"Toillustratethe
casesinwhichinterchangeofcommoditieswillnot，andthosein
whichitwill，takeplacebetweentwocountries，Mr。Mill，inhis
ElementsofPoliticalEconomy，（3*）makesthesuppositionthat
PolandhasanadvantageoverEnglandintheproductionbothof
clothandofcorn。Hefirstsupposestheadvantagetobeofequal
amountinbothcommodities;theclothandthecorn，eachofwhich
required100days’labourinPoland，requiringeach150days’
labourinEngland。"Itwouldfollow，thattheclothof150days’
labourinEngland，ifsenttoPoland，wouldbeequaltothecloth
of100days’labourinPoland;ifexchangedforcorn，therefore，
itwouldexchangeforthecornofonly100days’labour。Butthe
cornof100days’labourinPoland，wassupposedtobethesame
quantitywiththatof150days’labourinEngland。With150days’
labourincloth，therefore，Englandwouldonlygetasmuchcorn
inPoland，asshecouldraisewith150days’labourathome;and
shewould，inimportingit，havethecostofcarriagebesides。In
thesecircumstancesnoexchangewouldtakeplace。"Inthiscase
thecomparativecostsofthetwoarticlesinEnglandandin
Polandweresupposedtobethesame，thoughtheabsolutecosts
weredifferent;onwhichsuppositionweseethattherewouldbe
nolaboursavedtoeithercountry，byconfiningitsindustryto
oneofthetwoproductions，andimportingtheother。
Itisotherwisewhenthecomparative，andnotmerelythe
absolutecostsofthetwoarticlesaredifferentinthetwo
countries。"If，"continuesthesameauthor，"whilethecloth
producedwith100days’labourinPolandwasproducedwith150
days’labourinEngland，thecornwhichwasproducedinPoland
with100days’labourcouldnotbeproducedinEnglandwithless
than200days’labour;anadequatemotivetoexchangewould
immediatelyarise。WithaquantityofclothwhichEngland
producedwith150days’labour，shewouldbeabletopurchaseas
muchcorninPolandaswasthereproducedwith100days’labour;
butthequantitywhichwasthereproducedwith100days’labour，
wouldbeasgreatasthequantityproducedinEnglandwith200
days’labour。"Byimportingcorn，therefore，fromPoland，and
payingforitwithcloth，Englandwouldobtainfor150days’
labourwhatwouldotherwisecosther200;beingasavingof50
days’labouroneachrepetitionofthetransaction:andnot
merelyasavingto，foritisnotobtainedattheexpenseof
England，butasavingabsolutely。Poland，who，withcornthat
costsher100days’labour，haspurchasedclothwhich，if
producedathome，wouldhavecostherthesame。Poland，
therefore，onthissupposition，losesnothing;butalsoshe
derivesnoadvantagefromthetrade，theimportedclothcosting
herasmuchasifitweremadeathome。ToenablePolandtogain
anythingbytheinterchange，somethingmustbeabatedfromthe
gainofEngland:thecornproducedinPolandby100days’
labour，mustbeabletopurchasefromEnglandmorecloththan
Polandcouldproducebythatamountoflabour;moretherefore
thanEnglandcouldproduceby150days’labour，Englandthus
obtainingthecornwhichwouldhavecosther200days，atacost
exceeding150，thoughshortof200。Englandthereforenolonger
gainsthewholeofthelabourwhichissavedtothetwojointly
bytradingwithoneanother。
3。Fromthisexpositionweperceiveinwhatconsiststhe
benefitofinternationalexchange，orinotherwords，foreign
commerce。SettingasideitsenabLingcountriestoobtain
commoditieswhichtheycouldnotthemselvesproduceatall;its
advantageconsistsinamoreefficientemploymentofthe
productiveforcesoftheworld。Iftwocountrieswhichtrade
togetherattempted，asfaraswasphysicallypossible，toproduce
forthemselveswhattheynowimportfromoneanother，thelabour
andcapitalofthetwocountrieswouldnotbesoproductive，the
twotogetherwouldnotobtainfromtheirindustrysogreata
quantityofcommodities，aswheneachemploysitselfin
producing，bothforitselfandfortheother，thethingsinwhich
itslabourisrelativelymostefficient。Theadditionthusmade
totheproduceofthetwocombined，constitutestheadvantageof
thetrade。Itispossiblethatoneofthetwocountriesmaybe
altogetherinferiortotheotherinproductivecapacities，and
thatitslabourandcapitalcouldbeemployedtogreatest
advantagebybeingremovedbodilytotheother。Thelabourand
capitalwhichhavebeensunkinrenderingHollandhabitable，
wouldhaveproducedamuchgreaterreturniftransportedto
AmericaorIreland。Theproduceofthewholeworldwouldbe
greater，orthelabourless，thanitis，ifeverythingwere
producedwherethereisthegreatestabsolutefacilityforits
production。Butnationsdonot，atleastinmoderntimes，
emigrateenmasse;andwhilethelabourandcapitalofacountry
remaininthecountry，theyaremostbeneficiallyemployedin
producing，forforeignmarketsaswellasforitsown，thethings
inwhichitliesundertheleastdisadvantage，iftherebenone
inwhichitpossessesanadvantage。
4。Beforeproceedingfurther，letuscontrastthisviewof
thebenefitsofinternationalcommercewithothertheorieswhich
haveprevailed，andwhichtoacertainextentstillprevail，on
thesamesubject。Accordingtothedoctrinenowstated，theonly
directadvantageofforeigncommerceconsistsintheimports。A
countryobtainsthingswhichiteithercouldnothaveproducedat
all，orwhichitmusthaveproducedatagreaterexpenseof
capitalandlabourthanthecostofthethingswhichitexports
topayforthem。Itthusobtainsamoreamplesupplyofthe
commoditiesitwants，forthesamelabourandcapital;orthe
samesupply，forlesslabourandcapital，leavingthesurplus
disposabletoproduceotherthings。Thevulgartheorydisregards
thisbenefit，anddeemstheadvantageofcommercetoresidein
theexports:asifnotwhatacountryobtains，butwhatitparts
with，byitsforeigntrade，wassupposedtoconstitutethegain
toit。Anextendedmarketforitsproduce——anabundant
consumptionforitsgoods——aventforitssurplus——arethe
phrasesbywhichithasbeencustomarytodesignatetheusesand
recommendationsofcommercewithforeigncountries。Thisnotion
isintelligible，whenweconsiderthattheauthorsandleadersof
opiniononmercantilequestionshavealwayshithertobeenthe
sellingclass。ItisintruthasurvivingrelicoftheMercantile
Theory，accordingtowhich，moneybeingtheonlywealth，selling，
orinotherwords，exchanginggoodsformoney，was（tocountries
withoutminesoftheirown）theonlywayofgrowingrich——and
importationofgoods，thatistosay，partingwithmoney，wasso
muchsubtractedfromthebenefit。
Thenotionthatmoneyaloneiswealth，hasbeenlongdefunct，
butithasleftmanyofitsprogenybehindit;andevenits
destroyer，AdamSmith，retainedsomeopinionswhichitis
impossibletotracetoanyotherorigin。AdamSmith’stheoryof
thebenefitofforeigntrade，wasthatitaffordedanoutletfor
thesurplusproduceofacountry，andenabledaportionofthe
capitalofthecountrytoreplaceitselfwithaprofit。These
expressionssuggestideasinconsistentwithaclearconceptionof
thephenomena。Theexpression，surplusproduce，seemstoimply
thatacountryisundersomekindofnecessityofproducingthe
cornorclothwhichitexports;sothattheportionwhichitdoes
notitselfconsume，ifnotwantedandconsumedelsewhere，would
eitherbeproducedinsheerwaste，orifitwerenotproduced，
thecorrespondingportionofcapitalwouldremainidle，andthe
massofproductionsinthecountrywouldbediminishedbyso
much。Eitherofthesesuppositionswouldbeentirelyerroneous。
Thecountryproducesanexportablearticleinexcessofitsown
wants，fromnoinherentnecessity，butasthecheapestmodeof
supplyingitselfwithotherthings。Ifpreventedfromexporting
thissurplus，itwouldceasetoproduceit，andwouldnolonger
importanything，beingunabletogiveanequivalent;butthe
labourandcapitalwhichhadbeenemployedinproducingwitha
viewtoexportation，wouldfindemploymentinproducingthose
desirableobjectswhichwerepreviouslybroughtfromabroad:or，
ifsomeofthemcouldnotbeproduced，inproducingsubstitutes
forthem。Thesearticleswouldofcoursebeproducedatagreater
costthanthatofthethingswithwhichtheyhadpreviouslybeen
purchasedfromforeigncountries。Butthevalueandpriceofthe
articleswouldriseinproportion;andthecapitalwouldjustas
muchbereplaced，withtheordinaryprofitfromthereturns，as
itwaswhenemployedinproducingfortheforeignmarket。The
onlylosers（afterthetemporaryinconvenienceofthechange）
wouldbetheconsumersoftheheretoforeimportedarticles;who
wouldbeobligedeithertodowithoutthem，consuminginlieuof
themsomethingwhichtheydidnotlikeaswell，ortopaya
higherpriceforthemthanbefore。
Thereismuchmisconceptioninthecommonnotionofwhat
commercedoesforacountry。Whencommerceisspokenofasa
sourceofnationalwealth，theimaginationfixesitselfuponthe
largefortunesacquiredbymerchants，ratherthanuponthesaving
ofpricetoconsumers。Butthegainsofmerchants，whenthey
enjoynoexclusiveprivilege，arenogreaterthantheprofits
obtainedbytheemploymentofcapitalinthecountryitself。If
itbesaidthatthecapitalnowemployedinforeigntradecould
notfindemploymentinsupplyingthehomemarket，Imightreply，
thatthisisthefallacyofgeneralover—production，discussedin
aformerchapter:butthethingisinthisparticularcasetoo
evident，torequireanappealtoanygeneraltheory。Wenotonly
seethatthecapitalofthemerchantwouldfindemployment，but
weseewhatemployment。Therewouldbeemploymentcreated，equal
tothatwhichwouldbetakenaway。Exportationceasing，
importationtoanequalvaluewouldceasealso，andallthatpart
oftheincomeofthecountrywhichhadbeenexpendedinimported
commodities，wouldbereadytoexpenditselfonthesamethings
producedathome，oronothersinsteadofthem。Commerceis
virtuallyamodeofcheapeningproduction;andinallsuchcases
theconsumeristhepersonultimatelybenefited;thedealer，in
theend，issuretogethisprofit，whetherthebuyerobtains
muchorlittleforhismoney。Thisissaidwithoutprejudiceto
theeffect（alreadytouchedupon，andtobehereafterfully
discussed）whichthecheapeningofcommoditiesmayhavein
raisingprofits;inthecasewhenthecommoditycheapened，being
oneofthoseconsumedbylabourers，entersintothecostof
labour，bywhichtherateofprofitsisdetermined。
5。Such，then，isthedirecteconomicaladvantageofforeign
trade。Butthereare，besides，indirecteffects，whichmustbe
countedasbenefitsofahighorder。Oneis，thetendencyof
everyextensionofthemarkettoimprovetheprocessesof
production。Acountrywhichproducesforalargermarketthanits
own，canintroduceamoreextendeddivisionoflabour，canmake
greateruseofmachinery，andismorelikelytomakeinventions
andimprovementsintheprocessesofproduction。Whatevercauses
agreaterquantityofanythingtobeproducedinthesameplace，
tendstothegeneralincreaseoftheproductivepowersofthe
world。（4*）Thereisanotherconsideration，principallyapplicable
toanearlystageofindustrialadvancement。Apeoplemaybeina
quiescent，indolent，uncultivatedstate，withalltheirtastes
eitherfullysatisfiedorentirelyundeveloped，andtheymayfail
toputforththewholeoftheirproductiveenergiesforwantof
anysufficientobjectofdesire。Theopeningofaforeigntrade，
bymakingthemacquaintedwithnewobjects，ortemptingthemby
theeasieracquisitionofthingswhichtheyhadnotpreviously
thoughtattainable，sometimesworksasortofindustrial
revolutioninacountrywhoseresourceswerepreviously
undevelopedforwantofenergyandambitioninthepeople:
inducingthosewhoweresatisfiedwithscantycomfortsandlittle
work，toworkharderforthegratificationoftheirnewtastes，
andeventosave，andaccumulatecapital，forthestillmore
completesatisfactionofthosetastesatafuturetime。
Buttheeconomicaladvantagesofcommercearesurpassedin
importancebythoseofitseffectswhichareintellectualand
moral。Itishardypossibletooverratethevalue，inthepresent
lowstateofhumanimprovement，ofplacinghumanbeingsin
contactwithpersonsdissimilartothemselves，andwithmodesof
thoughtandactionunlikethosewithwhichtheyarefamiliar。
Commerceisnowwhatwaroncewas，theprincipalsourceofthis
contact。Commercialadventurersfrommoreadvancedcountrieshave
generallybeenthefirstcivilizersofbarbarians。Andcommerce
isthepurposeofthefargreaterpartofthecommunicationwhich
takesplacebetweencivilizednations。Suchcommunicationhas
alwaysbeen，andispeculiarlyinthepresentage，oneofthe
primarysourcesofprogress。Tohumanbeings，who，ashitherto
educated，canscarcelycultivateevenagoodqualitywithout
runningitintoafault，itisindispensabletobeperpetually
comparingtheirownnotionsandcustomswiththeexperienceand
exampleofpersonsindifferentcircumstancesfromthemselves:
andthereisnonationwhichdoesnotneedtoborrowfromothers，
notmerelyparticularartsorpractices，butessentialpointsof
characterinwhichitsowntypeisinferior。Finally，commerce
firsttaughtnationstoseewithgoodwillthewealthand
prosperityofoneanother。Before，thepatriot，unless
sufficientlyadvancedinculturetofeeltheworldhiscountry，
wishedallcountriesweak，poor，andill—governed，buthisown:
henowseesintheirwealthandprogressadirectsourceof
wealthandprogresstohisowncountry。Itiscommercewhichis
rapidlyrenderingwarobsolete，bystrengtheningandmultiplying
thepersonalinterestswhichareinnaturaloppositiontoit。And
itmaybesaidwithoutexaggerationthatthegreatextentand
rapidincreaseofinternationaltrade，inbeingtheprincipal
guaranteeofthepeaceoftheworld，isthegreatpermanent
securityfortheuninterruptedprogressoftheideas，the
institutions，andthecharacterofthehumanrace。
NOTES:
1。EssaysonSomeUnsettledQuestionsofPoliticalEconomy，Essay
I。
2。IatonetimebelievedMrRicardotohavebeenthesoleauthor
ofthedoctrinenowuniversallyreceivedbypoliticaleconomists，
onthenatureandmeasureofthebenefitwhichacountryderives
fromforeigntrade。ButColonelTorrens，bytherepublicationof
oneofhisearlywritings，"TheEconomistsRefuted，"has
establishedatleastajointclaimwithMrRicardotothe
originationofthedoctrine，andanexclusiveonetoitsearliest
publication。
3。Thirded。p。120。
4。Videsupra，booki。chap。ix，sect。1。
ThePrinciplesofPoliticalEconomybyJohnStuartMillBook3:DistributionChapter18
OfInternationalTrade1。Thevaluesofcommoditiesproducedatthesameplace，orinplacessufficientlyadjacentforcapitaltomovefreelybetweenthem——letussay，forsimplicity，ofcommoditiesproducedinthesamecountry——depend（temporaryfluctuationsapart）upontheircostofproduction。Butthevalueofacommoditybroughtfromadistantplace，especiallyfromaforeigncountry，doesnotdependonitscostofproductionintheplacefromwhenceitcomes。Onwhat，then，doesitdepend？Thevalueofathinginanyplace，dependsonthecostofitsacquisitioninthatplace;whichinthecaseofanimportedarticle，meansthecostofproductionofthethingwhichisexportedtopayforit。
Sincealltradeisinrealitybarter，moneybeingamereinstrumentforexchangingthingsagainstoneanother，wewill，forsimplicity，beginbysupposingtheinternationaltradetobeinform，whatitalwaysisinreality，anactualtruckingofonecommodityagainstanother。Asfaraswehavehithertoproceeded，wehavefoundallthelawsofinterchangetobeessentiallythesame，whethermoneyisusedornot;moneynevergoverning，butalwaysobeying，thosegenerallaws。
If，then，EnglandimportswinefromSpain，givingforeverypipeofwineabaleofcloth，theexchangevalueofapipeofwineinEnglandwillnotdependuponwhattheproductionofthewinemayhavecostinSpain，butuponwhattheproductionoftheclothhascostinEngland。ThoughthewinemayhavecostinSpaintheequivalentofonlytendays’labour，yet，iftheclothcostsinEnglandtwentydays’labour，thewine，whenbroughttoEngland，willexchangefortheproduceoftwentydays’Englishlabour，plusthecostofcarriage;includingtheusualprofitontheimporter’scapital，duringthetimeitislockedup，andwithheldfromotheremployment。
Thevalue，then，inanycountry，ofaforeigncommodity，dependsonthequantityofhomeproducewhichmustbegiventotheforeigncountryinexchangeforit。Inotherwords，thevaluesofforeigncommoditiesdependonthetermsofinternationalexchange。What，then，dothesedependupon？Whatisit，which，inthecasesupposed，causesapipeofwinefromSpaintobeexchangedwithEnglandforexactLythatquantityofcloth？
Wehaveseenthatitisnottheircostofproduction。IftheclothandthewinewerebothmadeinSpain，theywouldexchangeattheircostofproductioninSpain;iftheywerebothmadeinEngland，theywouldexchangeattheircostofproductioninEngland:butalltheclothbeingmadeinEngland，andallthewineinSpain，theyareincircumstancestowhichwehavealreadydeterminedthatthelawofcostofproductionisnotapplicable。
Wemustaccordingly，aswehavedonebeforeinasimilarembarrassment，fallbackuponanantecedentlaw，thatofsupplyanddemand:andinthisweshallagainfindthesolutionofourdifficulty。
IhavediscussedthisquestioninaseparateEssay，alreadyoncereferredto;andaquotationofpartoftheexpositionthengiven，willshethebestintroductiontomypresentviewofthesubjects。Imustgivenoticethatwearenowintheregionofthemostcomplicatedquestionswhichpoliticaleconomyaffords;thatthesubjectisonewhichcannotpossibly，andthatamorecontinuouseffortofattentionthanbemadeelementary;hasyetbeenrequired，willbenecessarytofollowtheseriesofdeductions。Thethread，however，whichweareabouttotakeinhand，isinitselfverysimpleandmanageable;theonlydifficultyisinfollowingitthroughthewindingsandentanglementsofcomplexinternationaltransactions。
2。"Whenthetradeisestablishedbetweenthetwocountries，thetwocommoditieswillexchangeforeachotheratthesamerateofinterchangeinbothcountries——batingthecostofcarriage，ofwhich，forthepresent，itwillbemoreconvenienttoomittheconsideration。Supposing，therefore，forthesakeofargument，thatthecarriageofthecommoditiesfromonecountrytotheothercouldbeeffectedwithoutlabourandwithoutcost，nosoonerwouldthetradebeopenedthanthevalueofthetwocommodities，estimatedineachother，wouldcometoalevelinbothcountries。
"Supposethat10yardsofbroadclothcostinEnglandasmuchlabouras15yardsoflinen，andinGermanyasmuchas20。"Incommonwithmostofmypredecessors，Ifinditadvisable，intheseintricateinvestigations，togivedistinctnessandfixitytotheconceptionbynumericalexamples。Theseexamplesmustsometimes，asinthepresentcase，bepurelysupposititious。I
shouldhavepreferredrealones;butallthatisessentialis，thatthenumbersshouldbesuchasadmitofbeingeasilyfollowedthroughthesubsequentcombinationsintowhichtheyenter。
Thissuppositionthenbeingmade，itwouldbetheinterestofEnglandtoimportlinenfromGermany，andofGermanytoimportclothfromEngland。"Wheneachcountryproducedbothcommoditiesforitself，10yardsofclothexchangedfor15yardsoflineninEngland，andfor20inGermany。Theywillnowexchangeforthesamenumberofyardsoflineninboth。Forwhatnumber？Iffor15yards，Englandwillbejustasshewas，andGermanywillgainall。Iffor20yards，Germanywillbeasbefore，andEnglandwillderivethewholeofthebenefit。Ifforanynumberintermediatebetween15and20，theadvantagewillbesharedbetweenthetwocountries。If，forexample，10yardsofclothexchangefor18oflinen，Englandwillgainanadvantageof3yardsonevery15，Germanywillsave2outofevery20。Theproblemis，whatarethecauseswhichdeterminetheproportioninwhichtheclothofEnglandandthelinenofGermanywillexchangeforeachother。
"Asexchangevalue，inthiscaseasineveryother，isproverbiallyfluctuating，itdoesnotmatterwhatwesupposeittobewhenwebegin:weshallsoonseewhethertherebeanyfixedpointaboutwhichitoscillates，whichithasatendencyalwaystoapproachto，andtoremainat。Letussuppose，then，thatbytheeffectofwhatAdamSmithcallsthehigglingofthemarket，10yardsofclothinbothcountries，exchangefor17yardsoflinen。
"Thedemandforacommodity，thatis，thequantityofitwhichcanfindapurchaser，variesaswehavebeforeremarked，accordingtotheprice。InGermanythepriceof10yardsofclothisnow17yardsoflinen，orwhateverquantityofmoneyisequivalentinGermanyto17yardsoflinen。Now，thatbeingtheprice，thereissomeparticularnumberofyardsofcloth，whichwillbeindemand，orwillfindpurchasers，atthatprice。Thereissomegivenquantityofcloth，morethanwhichcouldnotbedisposedofatthatprice;lessthanwhich，atthatprice，wouldnotfullysatisfythedemand。Letussupposethisquantitytobe1000times10yards。
"LetusnowturnourattentiontoEngland。There，thepriceof17yardsoflinenis10yardsofcloth，orwhateverquantityofmoneyisequivalentinEnglandto10yardsofcloth。Thereissomeparticularnumberofyardsoflinenwhich，atthatprice，willexactlysatisfythedemand，andnomore。Letussupposethatthisnumberis1000times17yards。
"As17yardsoflinenareto10yardsofcloth，soare1000
times17yardsto1000times10yards。Attheexistingexchangevalue，thelinenwhichEnglandrequireswillexactlypayforthequantityofclothwhich，onthesametermsofinterchange，Germanyrequires。Thedemandoneachsideispreciselysufficienttocarryoffthesupplyontheother。Theconditionsrequiredbytheprincipleofdemandandsupplyarefulfilled，andthetwocommoditieswillcontinuetobeinterchanged，aswesupposedthemtobe，intheratioof17yardsoflinenfor10yardsofcloth。
"Butoursuppositionsmighthavebeendifferent。Supposethat，attheassumedrateofinterchange，Englandhasbeendisposedtoconsumenogreaterquantityoflinenthan800times17yards:itisevidentthat，attheratesupposed，thiswouldnothavesufficedtopayforthe1000times10yardsofclothwhichwehavesupposedGermanytorequireattheassumedvalue。
Germanywouldbeabletoprocurenomorethan800times10yardsatthatprice。Toprocuretheremaining200，whichshewouldhavenomeansofdoingbutbybiddinghigherforthem，shewouldoffermorethan17yardsoflineninexchangefor10yardsofcloth:
letussupposehertooffer18。Atthisprice，perhaps，Englandwouldbeinclinedtopurchaseagreaterquantityoflinen。Shewouldconsume，possibly，atthatprice，900times18yards。Ontheotherhand，clothhavingriseninprice，thedemandofGermanyforitwouldprobablyhavediminished。If，insteadof1000times10yards，sheisnowcontentedwith900times10
yards，thesewillexactlypayforthe900times18yardsoflinenwhichEnglandiswillingtotakeatthealteredprice:thedemandoneachsidewillagainexactlysufficetotakeoffthecorrespondingsupply;and10yardsfor18willbetherateatwhich，inbothcountries，clothwillexchangeforlinen。