can not carry the exchange value in either country beyond the line set by the cost of production of the article. For instance, an urgent need in England for corn (if the United States has a light demand for English iron) can not carry the ratio of exchange to a point such that England will offer so much more than 150 days' labor in iron for x bushels of American corn that it will go beyond 200 days' labor in iron. It will be seen at once, then, if that were the case, that England would produce the corn herself; and that she would then have no gain whatever from the trade. The ratio of exchange will thus be limited by the reciprocal demand on one side to the cost of production (200 days' labor) of English corn. On the other hand, if the supposition were reversed, and the United States had a great demand for iron, but England had little need for our corn, then we would not offer more than 125 days' labor of corn for y tons of iron, because for that expenditure of labor we could produce the iron ourselves.
In the above examples we have considered the case of a trade in corn and iron only. If corn were to typify all our goods wanted by England, and iron all English goods wanted by the United States, the conclusions would be exactly the [pg 395] same. The ratios of a myriad of things, each governed by its particular reciprocal demand, exchanging against each other, give a general result by which the goods sent out exchange against the goods brought back at such rates as are fixed by the reciprocal demands acting on all the goods. Goods are payments for goods; the ratio of exchange depends on reciprocal demand and supply. If we now add more countries to the example, we simply increase the number of persons (although in different countries) wanting our goods, as set off against our