what nobody wants. In such a case, if you will allow me to use the terms adopted in developing the productive system, the circulator has produced what does not become actual circuland. The circulation stops with the fabrication. Nay further, circulation is injured by it, for the power of the circulator to reproduce, is diminished by the loss incurred in this abortive production.

If, again, the amount of the supply of any article is equal, or nearly equal, to the amount of the demand for it, the article produced will bring the average value of such article in any given market. The cause of this well-known result is obvious. The buyer wants all that is produced; he both knows that he must give a fair price for what he wants, and is willing to give it. The seller, again, unless when constrained by a slackness in the market, or by competition, will not sell lower than at a price which includes a fair profit; and in this case there is no slackness, nor are there competitors possessing a surplus to force a sale by a lower than a fair price.

Further, the proposition is no less founded on facts, that the value of any article produced depends on the relative states of the demand and the supply.

I may here take occasion to notice, that in all countries where population has made a progress beyond the rate of the mere savage state, an artificial mode of settling the value of things in exchanging them has been adopted for the sake of convenience. This is by referring the article to be exchanged to a measure, which we call money. The necessity for using this artificial mode of exchanging is strong, but it is not absolute; for in the highest state of population, and in the most perfect commercial intercourse, articles are sometimes exchanged without having recourse to this artificial medium.

The value of things, when expressed in this artificial medium, is called by us price. Now it is evident that this price, in the case of all actual exchanges, or acts of buying and selling, being fixed by both buyer and seller, will contain the result of the states of the demand and the supply, as far as these operated on the buyer and seller.

To ascertain the amount of the value of any article, or class of articles, the quantum is to be multiplied by the actual price. If, then, it were the common result in nature, that the quantum had no effect on the price, your conclusion would be correct. The greater the produce, the greater the value. But the contrary is the common result. The quantum has uniformly an effect on the price, and that effect is often directly opposite to what your conclusion requires.

The result of an increase in the quantum, when that is beyond the amount required by the demand, is uniformly a reduction in

the rate of price; and this in a ratio which seems constantly to increase in proportion to the excess of the quantum.

Did this price-lowering influence of an increase in the quantum bear a somewhat corresponding proportion to the amount of the increase, the result to the supplier would be much the same, whatever were the amount of the produce. What he lost by the price, in the case of an excess, he would gain by the quantum; and, in the case of a deficiency, he would gain in the former what he lost by the latter. But do facts show that such is the common result? The following is laid down in "The Happiness of States,"* as the general effect of excess and deficiency in the quantity. "A deficiency and superabundance are alike apt to affect the price of an article much more than the real amount below or above the average supply would warrant: the former, in raising -the latter, in lowering it." These results, I believe, no statistician will deny. And I appeal to all the cultivators, manufacturers, and merchants in Europe, whether they are not found uniformly to follow, in a greater or less degree, from under and over-supplies. In the course of this discussion I shall have occasion to notice facts, which would remove all doubt, did any exist on the subject.

An increase in the quantum, thus, far from supposing an increase in the value, is frequently found to produce a diminution in it; and, if the excess be considerable, this is uniformly the result.

The principle, therefore, which you have assumed, and which would be a most important one, were it a real principle of nature, instead of being warranted by her arrangements, supposes what is often directly contrary to what is found to be the result of these. It is at all times fallacious; and, in certain combinations of the demand and supply, it is uniformly false.

It is undoubtedly what all classes of dealers would reckon a most desirable principle. What circulator is there who would not wish to have it in his power to raise the demand to the supply, or to command a brisk and profitable market for all he can produce in his own line? But the principle is unsound; and it is most unsafe. Dealers unfortunately act too often from a kind of practical belief in it. And what is the result? Loss, distress, and frequently bankruptcy.

And yet, sir, production, both in nature, and according to the productive system, is the immediate grand source of wealth. For without supplying or producing something to sell to others, how can profit or income be obtained? But then it must be under the direction of what I have numbered the Fourth Principle of Circulation, or the regulating power of the demand.

*Book ix. Chap. 2. p. 607.

Your error has arisen from leaving out a moiety of the transaction, or from considering only one branch of the wealth-producing process. When under the regulation of the demand, production is uniformly the source of income and wealth. It is alternately cause and effect to the demand. It is created by the demand, and then by yielding profit to the supplies, it creates a fresh demand, and so on in a perpetual circle. Indeed, it not merely renews the former quantum of demand, but, when cooperating with an increase of population, it actually augments the demand; and in all cases in which it is under the regulation of the demand, it will continue to do so for ever, or, at least, until population shall have reached its complement universally.

Production in the sense in which I have used it with reference to wealth, when I state the "power of reproduction to depend on it, and to be always equal to it," is not simply produce, but the combined result of produce and price: of course, a result regulated by the relative states of the demand and the supply. In short, it is equivalent to the actual price of any given quantity of any species of commodity, or circuland. Whether the commodity be tangible, visible, or audible, or not-or whatever be its form, it matters not, so as it possess the quality of chargeability. This is alone necessary to produce price, or what we are all seeking. And it is not only the source, but the measure of productiveness as to wealth; and, of course, of reproductiveness. The distinction of Dr. Adam Smith, of commodities or employments into kinds productive and kinds unproductive of wealth, is, as has been shown in "The Happiness of States" and "All Classes Productive," utterly unknown to nature; and not merely imaginary, but directly contrary to every real principle of nature operating in the production of wealth, and every actual result. Indeed, this doctrine of that celebrated economist, upon which his peculiar system has been raised, is founded on a downright absurdity.

What I have called the first principle of circulation, as what sets the whole in motion, is, that "what is income to one," though it be drawn from others, "is the source of employment and income to others."

Our power to reproduce employment to others is thus evidently equal to the value of what we can draw from others. It matters not for what, or in what manner, it is drawn ; but it is as evidently limited to that amount. If we draw 100/. in a given time, we can reproduce to the amount of 100%., either by expending, or by investing as capital; but we cannot to the amount of 120/.

Let us now, sir, examine these principles and observations by

* Happiness of States, B. ix. ch. 2. p. 600.

the test of facts. It is needless to say, that it is this test alone by which theoretical opinions can be proved correct or erroneous. Let us apply them in particular to the circumstances in which all Europe and North America have been for some time, and which most practical men seem to reckon so extraordinary and unaccountable.

A supplier, a cotton manufacturer, for example, might tell me in the name of his brethren: "Without meddling with theoretical niceties, we admit, as you do, in spite of whatever Dr. Adam Smith and others may affirm, that whoever can obtain a price for what he has got to dispose of, it matters not whether he be a ploughman, a manufacturer, a mechanic, a merchant, a soldier, a sailor, lawyer, clergyman, or doctor, will be enabled to purchase from others to the amount of what he obtains, and no more; or, if you choose, will be an agent in the production of wealth, or the reproduction of employment, to that amount. This our experience fully confirms. We will also grant you, that M. Say's doctrine, though it seems reasonable on first thoughts, is opposed by our experience; for we find, often to our cost, that a general increase in the quantum of produce is by no means equivalent to an increase of value, but frequently the reverse. Still, however, even according to your own ideas, an increase of produce, when regulated by the demand, is an increase of value; and when co-operating with an increase of population, will go in creating an additional quantum of demand.

"Now here arises the difficulty. Whence come these fallings off in the demand, while the supply of almost all classes is rather increasing than diminishing?"

"Why, for example, sir, have we been suffering from a deficiency in the demand during the whole of 1819, and up to the present time, which has reduced prices in such a degree, as to deprive a very considerable mass of their former comforts, while, in 1817 and 1818, we had an universal demand, which gave full employment and fair prices to all who were disposed to exert themselves?

"Has not the natural produce of the earth during 1819 and 1820 been as abundant as in the two prior years? Have we not the same means of producing in every line, the same (but probably more) capital, and the same desire to produce? Has not our population been still increasing, as in those prior years, and, of course, must there not be an increase in the demand arising from these young additional circulators, who are, as you yourself state, demanders and not suppliers? Have we not the same facility of intercourse with our foreign customers? And yet are not we, throughout almost all our classes (excepting fixed annuitants) as well as these foreign customers, amid all

this sameness of circumstances, instead of being in a state of comfort, in a state approaching to distress? "This is the question that puzzles us. And what we want statisticians to account for, is, why similar circumstances should produce such opposite results? And why, with so much capital, such effective means of supplying, and such a willingness to supply, we should be incapable of procuring the usual quantity of income? In a word, Why Europe and North America, amid general peace and plenty, should have been for nearly two years in a state of comparative general distress ?"

This question has actually been propounded to our legislators and statisticians:* and if the latter cannot answer it satisfactorily, these practical men have a right to say, that their science is, with respect to a most important division of facts, of no real value. Their peculiar principles must be imaginary or erroneous; they cannot be those of nature.

In my next Letter, sir, I shall venture on an attempt to give an answer for myself on this very important practical question, according to the principles of the Productive System,

S. GRAY.

MODERN IMPROVEMENTS.

MR. EDITOR-I trust that, even in this age of improvement, you will suffer one of the old school to occupy a small space in your pages. A few words respecting myself will, however, be necessary to apologize for my opinions. Once I was among the gayest and sprightliest of youthful aspirants for fame and fortune. Being a second son, I was bred to the bar, and pursued my studies with great vigour and eager hope, in the Middle Temple. I loved, too, one of the fairest of her sex, and was beloved in return. My toils were sweetened by the delightful hope that they would procure me an income sufficient for the creditable support of the mistress of my soul. Alas! at the very moment when the unlooked-for devise of a large estate from a distant relative gave me affluence, she for whom alone I desired wealth, sunk under the attack of a fever into the grave. Religion enabled me to bear her loss with firmness, but I determined, for her sake, ever to remain a bachelor. Although composed and tranquil, I felt myself unable to endure

I know not whether you have had an opportunity of seeing the Report of a Committee of the Merchants, Manufacturers and Traders of Birmingham, on the subject of the prevailing Stagnation, published in the Farmer's Journal of the 25th of September last. It seems to be entirely free from the spirit of party, (which never fails to lessen the value of statements with all impartial inquirers, and to render the whole suspected;) and it is drawn up in a masterly manner. It claims the most serious consideration of our legislators, as well as of our professed statisticians.