further, when we come to examine the subject more closely, we find that the cost of production itself only influences the prices of these commodities, as the payment of this cost is the necessary condition of their continued supply in proportion to the extent of the effectual demand for them.
But if this be true, it follows that the great law of demand and supply is called into action to determine what Adam Smith calls natural prices, as well as what he calls market prices.
It has been shown that no change can take place in the market prices of commodities, without some previous change in the relation of the demand to the supply; and the question is, whether the same position is true in reference to natural prices? This question must of course be determined by attending carefully to the nature of the change which an alteration in the cost of production occasions in the state of the demand and supply, and particularly to the specific and immediate cause by which the change of price which takes place is effected.
We all allow that when the cost of production diminishes, a fall of price is almost universally the consequence; but what is it, specifically, which forces down the price of the commodity. It has been shown in the preceding section, that it is an actual or contingent excess of supply.
We all allow that when the cost of production increases, the prices of commodities rise. But what is it specifically which forces up the price? It has been shown that it is an actual or contingent failure of supply. Remove these actual or contingent variations of the supply; that is, let the extent of the supply remain exactly the same, without excess or failure, whether the cost of production rises or falls; and there is not the slightest ground for supposing that any variation of price would take place.
If, for instance, all the commodities which are produced in this country, whether agricultural or manufactured, could be produced during the next ten years
