Section XIV. The Value of the Precious Metal, or Medium of Exchange, Which Determines Exportation, Is Not the Same in Al

When we speak of the value of the precious metal, we mean the quantity of other things for which it will exchange.

But it is well known that money is more valuable, that is, goes farther in the purchase of commodities, not only in one country than another, but in one part than another of the same country.

In some of the more distant places of Wales, for example, money is more valuable than in London; in common language, we say, that living is more cheap; in other words, commodities may be purchased with a smaller quantity of money: and this state of things is habitual, money having no tendency to go from London where its value is low, to increase its quantity in Wales where its value is high. This phenomenon requires explanation.

The fact is, that the whole of such difference as is habitual, and has no tendency to produce a transit of the metals, resolves itself into cost of carriage. Corn, butchers'-meat, and other commodities, which are produced in Wales, are cheaper than in London, because the supply of London comes from a distance, and the original price is enhanced by cost of carriage. But as there are certain commodities which thus are cheaper in Wales than in London, so there are others which are cheaper in London than in Wales. Such are all the commodities which are either manufactured in London, or imported into London from abroad. Just as the corn and other commodities, which come from Wales to London, are enhanced by the cost of carriage; so those commodities which are sent from London to Wales, are dearer in Wales than in London, by the whole of the cost which is incurred in transporting them. The fact, therefore, is, that in Wales some commodities are cheaper, and some are dearer, than in London; but those which are cheaper are the articles of principal importance; they are the necessaries of life, the articles the consumption of which constitutes the principal part of almost every man's expenditure. What is more, they are the articles the money-value of which determines the money-value of labour; every thing which a man has done for him, therefore, is done cheaper than it is in London. And, lastly, the gross commodities, which are the produce of Wales, cost much more for carriage, in proportion to their value, than the fine commodities which are received from London: the cost of the gross commodities in London is much more raised above the price of them in Wales, than the price of the fine commodities in Wales is raised above the price of them in London. The cost of living, therefore, is greater in London than in Wales, for this reason, solely, because people in London pay more for carriage. If the value of the metal in Wales rose ever so little above that limit, a profit equal to that rise would immediately operate as a motive for sending it to Wales.

From two places in the same country, let us transfer the consideration to two different countries. The cost of living is higher; in other words, the value of the precious metals is lower in England, than in Poland. The difference here, also, resolves itself wholly into the cost of carriage. Let us suppose that England receives a considerable portion of her supply of corn from Poland, and sends her the whole, or the greater part, of her fine manufactures: corn, it is evident, will be dearer in England; but fine manufactures will be dearer in Poland. For the same reasons that money, as we have shown, goes farther in Wales, than in London, it is easy to see that it will, in this case, go farther in Poland than in England; in other words, the value of gold in Poland will be greater than in England, just so much as to compensate for the greater cost of carriage which England sustains. The moment it rises above that value, a profit may be made by sending it to England.