There are then two terms which affect price--supply and demand. These terms are essentially variable. They may be combined in the same direction, in contrary directions, and in infinitely varied proportions. Hence the combinations of which price is the result are inexhaustible. High price may be the result, either of diminished supply, or of increased demand. Low price may be the result of increased supply, or of diminished demand. Hence there are two kinds of dearness, and two kinds of cheapness. There is a _dearness_ of an injurious kind, that which proceeds from a diminution of supply, for that implies scarcity, privation (such as has been felt this year* from the scarcity of corn); and there is a dearness of a beneficial kind, that which results from an increase of demand, for the latter presupposes the development of general wealth. * This was written in 1847.--Translator. In the same way, there is a _cheapness_ which is desirable, that which has its source in abundance; and an injurious cheapness, that has for its cause the failure of demand, and the impoverishment of consumers. Now, be pleased to remark this; that restriction tends to induce, at the same time, both the injurious cause of dearness, and the injurious cause of cheapness: injurious dearness, by diminishing the supply, for this is the avowed object of restriction; and injurious cheapness, by diminishing also the demand; seeing that it gives a false direction to labour and capital, and fetters consumers with taxes and trammels. So that, as regards price, these two tendencies neutralize each other; and this is the reason why the restrictive system, restraining, as it does, demand and supply at one and the same time, does not in the long run realize even that dearness which is its object. But, as regards the condition of the population, these causes do not at all neutralize each other; on the contrary, they concur in making it worse. The effect of freedom of trade is exactly the opposite. In its general result, it may be that it does not realize the cheapness it promises; for it has two tendencies, one towards desirable cheapness through the extension of supply, or abundance; the other towards appreciable dearness by the development of demand, or general wealth. These two tendencies neutralize each other in what concerns nominal price, but they concur in what regards the material prosperity of the population. In short, under the restrictive system, in as far as it is operative, men recede towards a state of things, in which both demand and supply are enfeebled. Under a system of freedom, they progress towards a state of things in which both are developed simultaneously, and without necessarily affecting nominal prices. Such prices form no good criterion of wealth. They may remain the same whilst society is falling into a state of the most abject poverty, or whilst it is advancing towards a state of the greatest prosperity.