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and eight days to make his hat; and thus it would require twenty-four days' work to supply both parties with hats and shoes without exchange, whereas with exchange it will cost but eight days each, or sixteen in all. And supposing the artizans keep at work all the time, there is a gain to the wealth of the community of the product of eight days' labor, or a hat and a pair of shoes for the laborers in some other form of industry, in consequence of this division of labor and the exchange which is thereby rendered possible.

In the case supposed, the hatter and the shoemaker will exchange even. But suppose one of them, the hatter, invents a means or process, by which he can produce a hat in two days, with no larger outlay for stock or tools, etc. He could now afford to give two hats for a pair of shoes; but it is not likely that he would reduce his price quite so much as that. He will rather increase his profits, by asking a little more than half the former price. Now, suppose the shoemaker, should find means or processes for making shoes, whereby he could make a pair in two days, and the hats and shoes would exchange one for another, as before. And so on, as long as the human labor of production is the same, the exchangeable value will be the same.

154.

The money-price of but little account.

So far as anything we have before us now is concerned, it is manifestly of no consequence what we call the price of a hat or of the shoes, whether a shilling, a dollar, a pound, or a thousand dollars, whether an ounce or a half ton of gold, coined or uncoined. Gold and silver are no standard of value: labor is the only standard, the only thing we pay for, the only thing that we buy or sell in our business transactions.

As this is an important fact, let us, in order to make it plainer, make another supposition. Suppose the shoemaker asks a thousand dollars for his shoes; the hatter, not having the money, goes to the bank and borrows it, pays it to the shoemaker, and the shoemaker on the next day goes to the hatter, and pays the same amount, the same identical bills, perhaps, to the hatter for the hat, and the hatter takes the money back to the bank, and pays the debt he contracted when he borrowed it, and all things return to statu quo.

155. In what respects it is important.

I want the limitation above indicated, however, to be carefully noted; for it does make a difference what is the price of commodities, in two very important particulars.

(1) The money used in making the exchange is never without cost. It costs something for the use of it, and interest is always in proportion to the amount, as six, or some other per cent.

(2) If coin is used, there is always some loss by wear, etc., which is also always in proportion to the amount used. It has been computed that the wear and loss of gold and silver would be about one per cent. per year of the entire amount used, if all our exchanges were made in coin, instead of using paper.

Each of these items will come up for special consideration under a subsequent head. But they are so small, that for present purposes, we may as well leave them out of the account. It will simplify our discussions very much to do so, and will make no difference with the results.

We then assume, for the present, that the price of articles, that is, the money notation of their value, is of no importance to the fundamental laws of exchange.

156. The benefits of exchange.

The benefits of exchange then, are referable to two heads.

(1) When there is a difference in soil, climate, mineral resources, etc., etc., or, (2) a saving of labor

when compared with the production at the place of consumption. Thus, it is cheaper to bring coffee from Brazil, Porto Rico, etc., than to build hothouses and raise it here. We have considered this already.

(2) But in the same locality, where the transportation is nothing, or only a minimum, we gain by it all the difference between the productiveness of skilled and unskilled labor, involving, as this does, the advantages of the division of labor, the utilization of the forces of nature, etc., already considered.

157. The cost of exchange.

But exchange, at any rate and in any form, involves some cost by the very act of making it. This we may resolve into two elements.

(1) The mere labor and expense of the trader, which consists again of two elements; (a) his capital, as store, etc., which will inevitably obey the laws of rent already laid down, and (b) his labor, which under the laws already laid down, will also reduce to the average rate of wages for all kinds of labor.

(2) The cost of transportation which will arise in all cases where there is a distance between the producer and consumer.

This might be reduced to the two elements above

named, namely: cost of means of transportation, as teams, railroads, ships, etc., and the labor needed in using them. But that is not necessary for our presest purpose, I wish rather to find out where this cost of transportation must fall.

158. Who bears the cost?

If we ask the consumers, who live mostly in villages and cities, they will answer, that of course the consumer pays the cost of transportation, and will refer you to the indisputable facts, that meat, and flour, and vegetables, are cheaper in the country than in the town, in the small town than in the large city; that coal, and fuel of all kinds, are cheaper at the mines than when delivered at their doors. Hence they infer that the consumer pays all the cost of transportation.

But many Political Economists hold, nevertheless, that it is the producer who pays the cost of transportation: this is especially true of Carey, and the American writers who follow him. And they refer to the equally indisputable fact, that any commodity, as flour, for example, has a fixed price or value in the city, and that at varying distances from the city the price is less, just in proportion to the cost of transportation. Thus, note the price of flour at New York, at Albany, at Buffalo, at Chicago, etc.,

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