And even in those competitive manufactures where conditions are most favorable to the law of costs, alterations of the demand and supply are constantly overcoming the influence of cost. Therefore, the cost rule is not only limited in action, but it is directly subordinate to the rule of supply and demand. “The cost of production itself only influences the price of ... commodities as the payment of this cost is the necessary condition of their continued supply.” “It follows that the great principle of demand and supply is called into action to determine what Adam Smith calls natural prices as well as market prices.”[113] Cost of production “can do nothing but in subordination” to the principle of supply and demand.[114] Malthus follows Smith precisely in naming the components of entrepreneur’s costs—wages, profits and rent—but prefers to call the normal value requisite to cover these expenses, instead of natural price, the “_necessary price_,” “because the term necessary better expresses a reference to the conditions of supply.”[115] What he means by the statement that the relation of supply to demand not only determines temporary market prices but also natural prices as defined by Adam Smith, is that wages of labor depend on the supply of labor, and the “profits” of capital and rent of land in the same way on the supplies of these agents.[116] Ricardo took an entirely different view of the relation of the two “empirical” principles. In his work he takes no account of the law of supply and demand until in Chapter XXX, where he admits that this rule holds good of monopolized commodities, and, indeed, of all other commodities for a limited period.[117] But, in a letter to Malthus, he wrote: “You say that demand and supply regulates (sic) value; this I think is saying nothing; it is supply which regulates value, and supply is itself controlled by comparative cost of production.”[118] Of course Ricardo was always conscious of the fact that cost of production can influence exchange value only by way of influencing supply. At the very outset of his chapter on value in his _Principles_ he states: “There are some commodities, the value of which is determined by their scarcity alone. No labour can increase the quantity of such goods, and therefore _their value cannot be lowered by an increased supply_.”[119] Ricardo’s view was virtually this: The rule of supply and demand tells us practically nothing, but in those cases where we cannot get a further principle we will let it count as a law of value. But wherever the law of labor cost applies, the principle of supply and demand ceases to be of importance.