exchange value, that is, for how much of other commodities a given commodity will exchange. The reasons for the trade are supposed to exist; but we now want to know what the law is which determines the proportions of the exchange. Why does one article exchange for more or less of another? Not, as we have seen, because one costs more or less to produce than the other.
In the trade between the United States and England in iron and corn, formerly referred to (p. 383), it was seen that a 100 days' labor of corn buys from England iron which would have cost the United States 125 days' labor. England sends 150 days' labor of iron and buys from the United States corn which would have cost her 200 days' labor. But what rule fixes the proportions between 100 and 125 for the United States, and between 150 and 200 for England, at which the exchanges will take place? The trade increases the productiveness of both countries, but in what ratio will the two countries share this gain? The answer is, briefly, in the ratio set by reciprocal demand and supply, that is, the relative strength, as compared with each other, of the demands of the two countries respectively for iron and corn. This, however, may be capable of explanation in a simple form.
A has spades, and B has oats, to dispose of; and each wishes to get the article belonging to the other. Will A give one spade for one bushel of oats, or for two? Will B give two bushels of oats for one spade? That depends upon how strong a desire A has for oats; the intensity of his demand may induce him to give two spades for one bushel. But the exchange also depends upon B. If he has no great need for spades, and A has a strong desire for oats, B will get more spades for oats than otherwise, possibly two spades for