Economic Sophisms/156

<pagequality level="3" user="Zoeannl" />style="background: #ececec; text-align: left; padding-left: 0.5em; font-weight: bold;" class="table-rh"boast so much." To which the reply was, "It is liberty which has induced the dearness which you find so useful"[1]

At this rate, would it not be amusing to see cheapness become the watch-word of the Rue Hauteville, and dearness the watchword of the Rue Choiseul?

Evidently there is in all this a misconception, an illusion, which it is necessary to clear up; and this is what I shall now endeavour to do.

Put the case of two isolated nations, each composed of a million of inhabitants. Grant that, cœteris paribus, the one possesses double the quantity of everything,—corn, meat, iron, furniture, fuel, books, clothing, etc.,—which the other possesses. It will be granted that the one is twice as rich as the other.

And yet there is no reason to affirm that a difference in actual money prices[2] exists in the two countries. Nominal prices may perhaps be higher in the richer country. It may be that in the United States everything is nominally dearer than in Poland, and that the population of the former country should, nevertheless, be better provided with all that they need; whence we infer that it is not the nominal price of products, but their comparative abundance, which constitutes wealth. When, then, we desire to pronounce an opinion on the comparative merits of restriction and free-trade, we should not inquire which of the two systems engenders dearness or cheapness, but which of the two brings abundance or scarcity.

For, observe this, that products being exchanged for each other, a relative scarcity of all, and a relative abundance of all, leave the nominal prices of commodities in general at the same point; but this cannot be affirmed of the relative condition of the inhabitants of the two countries.

Let us dip a little deeper still into this subject.

  1. Recently, M. Duchâtel, who had formerly advocated free trade, with a view to low prices, said to the Chamber: It would not be difficult for me to prove that protection leads to cheapness.
  2. The expression, prix absolus (absolute prices), which the author employs here and in chap. xi. of the First Series (ante), is not, I think, used by English economists, nd from the context in both instances I take it to mean actual money prices; or what Adam Smith terms nominal prices.,—TRANSLATOR.