EFFECT OF QUANTITY ON PERMANENT VALUE.

On few subjects is the practical knowledge of men more . correct, and the speculative knowledge more indefinite, than on the relation which quantity bears to value. The quantity of gold which may exist in California will not inevitably influence its permanent value, though it may affect its price temporarily. The quantity of gold we may assume to be illimitable, but all that will be procured thereof will be the quantity whose procurement shall remunerate the procurers. The cost of procurement must, therefore, constitute the ultimate regulator of the value of gold. A remarkable connection exists, however, between the quantity in which we possess any article and the cost of its procurement: and hence, probably, has arisen the notion that value depends on quantity. We possess every article in a quantity inverse the cost of its procurement; for instance, if you inform a man that iron is procurable from the earth at a less cost than brass, he may know with certainty that we possess more iron than brass, though possibly the earth may contain within its recesses more brass than iron. We know that men have always dug brass from the earth, and probably always will; therefore the quantity thereof which we possess to-day is not limited by the quantity in the earth, except on the principle above asserted that the quantity which we procure of any article is governed by the cost of its procure

ment.

Men use most the articles which they procure most easily. But why do men procure every natural production in a quantity inverse to the cost of its procurement? Because

*The market price of any article (its price to-day compared with its price last year) is indeed governed by its scarcity or plenty, with reference to the quantity of it we are accustomed to possess; but the intrinsic value of the article (its permanent relation in price to any other article) is not governed by the quantity in which mankind possess the two articles, but by the relative cost of their production.

we use every article in a degree proportioned to the facility of its procurement. This is an instinct of our nature—an organic predisposition, strikingly exemplified in the numerous uses to which we apply silver, beyond the uses to which we apply gold, and in the still more numerous uses to which we apply brass than silver, iron than brass, stone than iron, and water than stone. In every country the articles most easily procured come to be deemed the necessaries of life, because we conform in our habits to the use of articles in a degree proportioned to the facility of their procurement. The principle is well exemplified in our plank roads-a use of plank which clearly derives its origin from the comparatively small cost with which plank is procurable, as compared with its cost in England, where no such use of plank is adopted. In some parts of our country, wood supplies the place of stone and brick in building, and of coal for fuel. The wicks of candles are composed of wood, and the hinges and latches of doors: it constitutes in such localities the great necessary of life.

EFFECT OF QUANTITY ON TEMPORARY VALUE.

But though the permanent value of gold, and every article, is thus governed, not by its quantity in nature, but by the cost of its procurement, the temporary value (present price) is continually governed by the proportion which the quantity we possess of any article bears to the quantity that we are accustomed to use. When the crop of coffee happens to be much less than the accustomed crop, a sufficiency no longer exists to supply the accustomed uses; but as every man is naturally solicitous to obtain his accustomed quantity, the demand for coffee will become active, and the holders of it will be stimulated to enhance the price. The advance in price will induce most persons to

be unusually frugal in the use of coffee, and some persons will abstain wholly from its use; and thus the small crop is eked out.

Now, if we can suppose that the annual production of coffee shall, from any reason, continue for a few years to be equally small, the enhanced price will not continue. Every man will be accustomed to the quantity to which the scarcity induced him to limit himself, and therefore coffee will no longer be deemed scarce-the demand will subside, and beonly equivalent to the supply; and the unusual price will subside with the unusual demand. When the Dutch possessed all the countries which produced nutmegs, they were accused of annually destroying a portion of the crop, to create annually an artificial scarcity. But the stratagem could realize its object occasionally only; men would soon become habituated to the restricted sup ply, and would cease from competing for more: the article would then be no longer scarce, nor command a price dictated by an insufficient supply. This foolish story has been repeated by the gravest writers, who seem not to have been aware of the fallacy on which its alleged practice is founded. Potatoes are probably experiencing in Ireland a permanent change of quantity. When the crop first became less than ordinary, the price rose by competition among purchasers, who severally desired their accustomed supply, deeming it essential, almost, to their existence. The high price thus induced influenced many persons to substitute Indian meal, and other articles, in place of potatoes; and now the people of Ireland are becoming so accustomed to the diminution in the potato crop, that the quantity produced is no longer enhanced in price by the principle of scarcity.

Consequences opposite to the foregoing will accompany

any surplus production of gold, or of any other article. When more gold shall be produced than will supply the accustomed uses, the holders of gold will be more solicitous to part from it than others to purchase; and the principle of over-abundance or plenty will cause the price to fall in a degree proportioned to the over-abundance.

But as every article is used by man in a degree governed by the cost of its procurement, the uses to which we apply gold will increase as its costliness shall diminish; a process which continually tends to mitigate the fall in value of any article whose production happens to become augmented. The abundance of sheep in some parts of our country introduced the practice of melting them for their tallow, and a superabundance of hogs caused the invention of lard oil. We use peaches to feed hogs and make brandy, as the grape is used in other countries to make wine; but in both cases the use is dictated by the quantity in which the article is possessed. We use iron to make roads, and cotton to make cordage-uses which were not thought of when the articles were comparatively difficult of production, and consequently small in quantity.

THE EXTENT TO WHICH DEPRECIATION CAN PERMANENTLY

ARRIVE.

We may imagine, however, that the quantity of new gold will increase as California shall increase annually in population. Should this occur, and the supply keep continually in advance of old and new uses, the depreciation must continue to go on, till the price of gold shall eventually become so reduced as no longer to pay the cost of further production. This is the minimum price which gold can permanently attain, and at this point further depreciation will be arrested by a cessation of gold increase; and

after various vibrations, gold will become again measurably fixed in a price graduated by the cost of producing it.

THE PROGRESS OF ANY SUPPOSABLE DEPRECIATION.

We find, therefore, that the extent of permanent depreciation which gold can suffer, from the discoveries of California and other places, will depend on the cost at which gold can be procured. The progress of depreciation in any article, may be likened to the circles produced in a pond by the descent of a stone. The descent is immediately followed by a disturbance of the water within a definite small circle. The first circle is succeeded by a second, which is larger than the first; the second is succeeded by a third, which is larger than the second; and so progressively, till the disturbing force becomes exhausted, or so diminished as to produce no longer any sensible effect. Now, to profit by the metaphor, we must remember that the pond which California gold disturbs is the civilized world, and, in that particular, gold differs from articles of a restricted local use. The disturbing cause has been in active operation some sixteen months, during which period some sixty million dollars' worth of gold has been exported from San Francisco, and the world is just beginning to debate whether the effect is at all apparent beyond the immediate circle of the gold diggings. The effect there is apparent in all operations and things in which California labor is an element-the price of labor being necessarily graduated by the amount that it can earn in gold digging, an employment free to all persons. If, then, we knew precisely the money price of day labor in and around the diggings, we might estimate pretty accurately the average quantity of gold that a man can reasonably expect to find daily at the placers-the two being naturally equivalent, or,