Essays on some unsettled Questions of Political EconomyMill, John Stuart
PhilosophyPhilosophy
Essays on some unsettled Questions of Political Economy
Mill, John Stuart
Economics
But our supposition might have been different. Suppose that, at the
assumed rate of interchange, England had been disposed to consume no
greater quantity of linen than 800 times 17 yards; it is evident that,
at the rate supposed, this would not have sufficed to pay for the 1000
times 10 yards of cloth, which we have supposed Germany to require at
the assumed value. Germany would be able to procure no more than 800
times 10 yards, at that price. To procure the remaining 200, which she
would have no means of doing but by bidding higher for them, she would
offer more than 17 yards of linen in exchange for 10 yards of cloth; let
us suppose her to offer 18. At that price, perhaps, England would be
inclined to purchase a greater quantity of linen. She could consume,
possibly, at that price, 900 times 18 yards. On the other hand, cloth
having risen in price, the demand of Germany for it would, probably,
have diminished. If, instead of 1000 times 10 yards, she is now
contented with 900 times ten yards, these will exactly pay for the 900
times 18 yards of linen which England is willing to take at the altered
price: the demand on each side will again exactly suffice to take off
the corresponding supply; and 10 yards for 18 will be the rate at which,
in both countries, cloth will exchange for linen.
The converse of all this would have happened if instead of 800 times 17
yards, we had supposed that England, at the rate of 10 for 17, would
have taken 1200 times 17 yards of linen. In this case, it is England
whose demand is not fully supplied; it is England who, by bidding for
more linen, will alter the rate of interchange to her own disadvantage;
and 10 yards of cloth will fall, in both countries, below the value of
17 yards of linen. By this fall of cloth, or what is the same thing,
this rise of linen, the demand of Germany for cloth will increase, and
the demand of England for linen will diminish, till the rate of
interchange has so adjusted itself that the cloth and the linen will
exactly pay for another; and when once this point is attained, values
will remain as they are.
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