ART. II.--1. The History of Prices. By THOMAS TOOKE, Esq., and W. NEWMARCH, Esq.

1857.

2. La Question De l'Or. Par E. LEVASSEUR. 3. The Probable Fall in the Value of Gold. Translated by R. COBDEN, Esq. 1859.

1858.

By M. CHEVALIER.

4. A Serious Fall in the Value of Gold Ascertained. By W. STANLEY JEVONS, Esq.

1863.

5. The Drain of Silver to the East. By W. NASSAU LEES, Esq.

1864.

6. The Economy of Capital, or, Gold and Trade. By R. H.

PATTERSON, Esq.

1865.

7. Principles of Political Economy. Esq. Sixth Edition.

1865.

By JOHN STUART MILL,

8. Commercial Reports of Her Majesty's Consuls. 9. The Economist.

On the discovery of the new gold mines, under the name of the Gold Question, an economical inquiry, unconnected with party politics, for the first time gained the ear of the public at large. Yet public interest has been languid, in comparison with the real importance of the monetary problems involved. The chief reason for this is perhaps the diffusion of an opinion that the effect of the increase of money upon prices practically concerns persons alone whose pecuniary incomes are fixed; an opinion which would be sufficiently true if prices were everywhere uniformly affected, and with respect to all things alike. But the fact is, that the scale of relative incomes, and of relative prices, in different places, and with respect to different commodities, has been so altered, that the old level of profits in different employments, and the old rates of expenditure in different situations, have been permanently disturbed, and new elements must be imported into all calculations respecting the best markets to buy and sell in, the cost of living in different localities, the outgoings and returns in different trades, and the rates of interest which different investments will yield. Those who omit to take these new elements into account may find that their expenses, both as producers and consumers, are largely increased, while the prices of their own productions are not higher than formerly; or they may find themselves buyers in markets in which prices have unexpectedly and enormously risen, and sellers where they have risen in no such proportion; or again, they may miss investments which would yield extraordinary gain. The British farmer complains that while labour and many of the requisites. of production are dearer, he gets no more money than formerly for his wheat, and the migration of population from the country

to the towns, and the production of animal food instead of corn, are among the results of changes in relative prices at home. Most writers on the effects of the Mines have confined their observations to changes in prices at home. The truth, however, is, that changes in prices abroad are of equal importance even to Englishmen, not for the purpose of theoretical instruction alone, but even with a view to pecuniary saving and gain. Every day people are making speculations and entering into transactions -in emigration, in foreign trade, and in foreign loans and undertakings-the prudence of which depends upon the movements of prices abroad. Great undertakings by Englishmen abroad in fact have been based upon estimates which have proved fallacious, because they made no sufficient allowance for the effects of an extraordinary increase of money in remote places. Chairmen of Indian Railway and Irrigation Companies, for example, have reported in London that the rise of prices in India had falsified all their calculations, and entailed the heaviest losses on contractors. Nor is it in production alone that the unequal alteration of prices has made itself felt, for consumers have been very differently affected, according to the place of their residence and the things they are accustomed to use. The class of British holders of fixed incomes, who have really been the chief sufferers from the increase of money in other hands than their own, are not fundholders and Government servants in Great Britain, who are generally placed first in dissertations on the subject, but military and civil servants of the Crown in India, who are confronted by a rise of prices to which there has been nothing similar in England since the reign of Elizabeth. Even in England itself, consumers are differently affected, according to their class of life and habits, and the localities they live in. To the agricultural labourer the price of grain is the chief matter, and grain is cheap; he suffers comparatively little from the dearness of butter and meat, and nothing from the dearness of service, now pressing so hard on the poorer gentry and tradesmen, especially in the parts of the country where such things used to be cheapest. It depends entirely on the localities men buy and sell in, and the things they buy and sell in them, how they are affected by the greater amount of money in the world; and statistical averages of prices in general are not only fallacious in principle, but misleading in practice. The additional money has been unequally distributed by the balance of trade to different countries, and very unequally shared by different classes in the countries receiving it; again, it has been spent by the classes receiving it, not upon all commodities alike, but unequally, and the supply of some things upon which there has been an additional expenditure has increased very much more

the key to the principal permanent changes in prices which have followed the path of the new gold through the world, is to be found in the fact that remoteness is no longer the obstacle it was to the best territorial division of labour, and that buried natural riches, and neglected local capabilities, are obtaining, in a thousand directions at once, a value proportionate rather to their actual quality than to their nearness to market, and attracting capital and skill by high profits to their development. For the same reason, and by the same aids to industrial enterprise which have brought miners and merchants to cheaper places for gold, cheaper places for the production and purchase of many other things have been contemporaneously found, and the distribution of the new gold and its. effects upon prices have been very different from what they would have been, had the fertility of the new mines been the only altered condition of international trade. The general principle which regulates the distribution of money through the world, is, as we have said, that those who receive it naturally spend it on the things they want most, and in the places where such things can be had cheapest; but they have of late years obtained access to markets not formerly within reach, and much of the new money has been absorbed in new regions, and in the circulation of produce not before in the market. The world may at present be divided into three classes of regions: first, those in which prices were formerly highest; in the second place, those in which the new movements of trade have already raised prices towards the level prevailing in the former regions; and, thirdly, the places not yet within the influence of the new means of commercial intercommunication. The first and second class of regions may be said to be fast merging into one, with pecuniary rates approaching to equality, while the third class is also, in numerous directions, on the point of assimilation. A permanent change is thus taking place in the conditions which govern comparative prices in different markets, and one the more worthy of notice, since, in the earlier years after the discovery of the new mines, there was, both in the gold countries themselves, and in the chief markets of Europe, an abnormal, and, in a great measure, temporary elevation of prices, which, although not in reality principally due to the increase of gold, led to mistaken conclusions respecting its real effects.

The first rise of prices in California and Australia, from which M. Chevalier and other eminent writers were led to apprehend a proportionate fall in the value of money throughout Europe, was, in fact, as Mr. Newmarch has shown,1 both temporary in degree and partial in extent; those things alone rising in price which were in demand with the classes whose pecuniary in1 History of Prices, vol. vi. Appendix.

everything in the places within reach where its cost of production is least, and towards an equality in the prices of portable goods over the area of cheaper and closer commercial intercommunication. Producers in particular occupations and particular places, accordingly, have not only obtained no share in the new treasure, getting no additional custom either from the mining countries or from the countries these deal with, but have even found the demand for their produce decreasing, and transferred to other localities; and capital and industry are in a course of migration, not only because extraordinary profits are offered in new regions and new employments, but also because ordinary profits are no longer to be made in old places and old employments.

The great gold movement itself-that is to say, the production and distribution of the new gold-is only a part of a much larger movement, resulting from the new facilities of producing many things, gold among the number, in cheaper places than formerly, and disposing of them more readily in the places where their value is highest, and the enterprise with which such facilities are being turned to account. The mines of California and Australia, for which older mines were forsaken,1 are only a particular class of new sources of production from which the markets of this world are being supplied, and their rapid development is only a particular instance of the energy with which cheaper and better sources of supply are sought and developed. The bent of the industrial and commercial movement of our times is, above all things, to discover and put to profitable use the special resources, metallic and non-metallic, in which each region excels, to seat every industry in the places best adapted for it, and to apply the skill and capital of old countries more productively in remote places with great natural resources. "The first phenomenon," Mr. Patterson observes, "attendant upon the gold discoveries, has been the great emigration--the transfer of large masses of population from the old seats to new ones, the vast and sudden spread of civilized mankind over the earth. The countries where these gold-beds have been found are in the utmost ends of the earth, regions the most isolated from the seats of civilisation. Of all spots on the globe, California was the farthest removed from the highways of enterprise. Not a road to it was to be found on the map of the traveller; not a route to it was laid down in the charts of the mariner. Australia was, if possible, a still more isolated quarter of the globe." This migration to the remote regions of the new gold is not, however, a singular and isolated movement of industry. We shall find, on the contrary, that

1 "The product of gold in the Atlantic States has fallen off since the discoveries of gold in California."-Preliminary Report on the Eighth Census of the United States, p. 63.

the key to the principal permanent changes in prices which have followed the path of the new gold through the world, is to be found in the fact that remoteness is no longer the obstacle it was to the best territorial division of labour, and that buried natural riches, and neglected local capabilities, are obtaining, in a thousand directions at once, a value proportionate rather to their actual quality than to their nearness to market, and attracting capital and skill by high profits to their development. For the same reason, and by the same aids to industrial enterprise which have brought miners and merchants to cheaper places for gold, cheaper places for the production and purchase of many other things have been contemporaneously found, and the distribution of the new gold and its. effects upon prices have been very different from what they would have been, had the fertility of the new mines been the only altered condition of international trade. The general principle which regulates the distribution of money through the world, is, as we have said, that those who receive it naturally spend it on the things they want most, and in the places where such things can be had cheapest; but they have of late years obtained access to markets not formerly within reach, and much of the new money has been absorbed in new regions, and in the circulation of produce not before in the market. The world may at present be divided into three classes of regions: first, those in which prices were formerly highest; in the second place, those in which the new movements of trade have already raised prices towards the level prevailing in the former regions; and, thirdly, the places not yet within the influence of the new means of commercial intercommunication. The first and second class of regions may be said to be fast merging into one, with pecuniary rates approaching to equality, while the third class is also, in numerous directions, on the point of assimilation. A permanent change is thus taking place in the conditions which govern comparative prices in different markets, and one the more worthy of notice, since, in the earlier years after the discovery of the new mines, there was, both in the gold countries themselves, and in the chief markets of Europe, an abnormal, and, in a great measure, temporary elevation of prices, which, although not in reality principally due to the increase of gold, led to mistaken conclusions respecting its real effects.

The first rise of prices in California and Australia, from which M. Chevalier and other eminent writers were led to apprehend a proportionate fall in the value of money throughout Europe, was, in fact, as Mr. Newmarch has shown,1 both temporary in degree and partial in extent; those things alone rising in price which were in demand with the classes whose pecuniary in1 History of Prices, vol. vi. Appendix.