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commodities exported is less than what it would be if cæteris paribus the trade were closed. For suppose that a nation of Xs being dealers of the sort above defined1, export x to and import y from a nation of Ys; if the price of y in x would be unaffected by the cessation (and reopening) of the foreign trade, there would be no motive for the continuance of the trade. This characteristic property includes as a particular case the classical principle of Comparative Cost. The property is more general as it applies to cases of value depending only on rarity, not (also) on effort and sacrifice. For example, before trade was opened between Japan and the Occident, in the early fifties, the rate of exchange between gold and silver in Japan was about 1:6; while in the outer world it was about 1:15½. There was accordingly fulfilled the condition that gold should be exported from Japan to the Occident, silver exported from the Occident into Japan. The condition would have existed on the supposition that the value of the precious metal had nothing to do with cost of production, but depended entirely on rarity, or the total amount in existence (as possibly in the later Roman empire). The re-statement proposed is not only more general, but less equivocal than the doctrine of Comparative Cost as stated by the earlier writers. For the Comparative Costs must be interpreted in the words of professor Bastable2 as «those which would exist at the margin on the hypothesis that each country is isolated; in the general case (not enplicitly considered by the earlier writers) of cost varying according to quantity produced».
Distribution. — So far we have ignored the heterogeneity of the factors which co-operate in production. Our Xs and Ys might have been small indipendent artizans or peasant proprietors. We have now to take into account the stratification of modern industry — that the class of workmen — is, as it vere, on a different level from the class of landlords,
- Otherwise if there were one or two predominant it might be in their interest and in their power to open the trade for the sake of obtaining the advantage of increasing returns by turning on to one commodity the productive forces which had hitherto been employed on two.
- «Economic Journal», vol. XI, pag. 228, last par., and p. 229, first par; referring to the present writer’s analysis at vol. X, p. 391. Cp. vol. XI, p. 589.