M. Simonde, in his excellent work, _De la Richesse Commerciale_, following the same line of argument as M. Say, has calculated that a tax of 4000 francs, paid originally by a manufacturer, whose profits were at the moderate rate of 10 per cent., would, if the commodity manufactured only passed through the hands of five different persons, be raised to the consumer to the sum of 6734 francs. This calculation proceeds on the supposition, that he who first advanced the tax, would receive from the next manufacturer 4400 francs, and he again from the next, 4840 francs; so that at each step 10 per cent. on its value would be added to it. This is to suppose that the value of the tax would be accumulating at compound interest, not at the rate of 10 per cent. per annum, but at an absolute rate of 10 per cent., at every step of its progress. This opinion of M. de Simonde would be correct if five years elapsed between the first advance of the tax, and the sale of the taxed commodity to the consumer; but if one year only elapsed, a remuneration of 400 francs, instead of 2734, would give a profit at the rate of 10 per cent. per annum, to all who had contributed to the advance of the tax, whether the commodity had passed through the hands of five manufacturers or fifty. CHAPTER XXVIII. ON THE INFLUENCE OF DEMAND AND SUPPLY ON PRICES. It is the cost of production which must ultimately regulate the price of commodities, and not, as has been often said, the proportion between the supply and demand: the proportion between supply and demand may, indeed, for a time affect the market value of a commodity, until it is supplied in greater or less abundance, according as the demand may have increased or diminished; but this effect will be only of temporary duration. Diminish the cost of production of hats, and their price will ultimately fall to their new natural price, although the demand should be doubled, trebled, or quadrupled. Diminish the cost of subsistence of men, by diminishing the natural price of the food and clothing, by which life is sustained, and wages will ultimately fall, notwithstanding that the demand for labourers may very greatly increase. The opinion that the price of commodities depends solely on the proportion of supply to demand, or demand to supply, has become almost an axiom in political economy, and has been the source of much error in that science. It is this opinion which has made Mr. Buchanan maintain that wages are not influenced by a rise or fall in the price of provisions, but solely by the demand and supply of labour; and that a tax on the wages of labour would not raise wages, because it would not alter the proportion of the demand of labourers to the supply.