The real connection between the proper conception of cost of production and cost of labor is, however, worth attention. It touches cost of labor through that one of its elements called “efficiency of labor.” The more productive an industry is, the higher its wages and profits may be, and it is exactly at this point that more attention should be given to the relations of labor and capital. If productiveness can be increased, higher wages as well as higher profits are possible. The proper understanding of the idea that where cost of production is low wages and profits are high, throws a flood of light on many industrial questions in the United States. In the connection in which it stands, as I have shown, to cost of labor, it means that if commodities can be produced at a less sacrifice to labor and capital by the use of machinery and new processes, higher wages are consistent with a lower price of the given product. It explains the fact that, owing to skill or natural resources, labor, although paid much higher rates, can produce articles cheaper than laborers who are less highly paid. Mr. Brassey(217) has pointed out that English wages are higher than on the Continent; and yet England, through low cost of production, owing to skill, natural resources, etc., can produce so much more of commodities for a given outlay that (while keeping her usual rate of profit) she can generally undersell her competitors who employ cheaper labor. The same observations apply to the United States; but the question of foreign competition will be further discussed (Book III, Chap. XX) after we have studied international trade and values.