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145 When we see an increase and a reduction of duties produce effects so different from what we had expected, depreciation often following taxation, and enhancement following free trade, it becomes the imperative duty of political economy to seek an explanation of phenomena so much opposed to received ideas; for it is needless to say that a science, if it is worthy of the name, is nothing else than a faithful statement and a sound explanation of facts.

Now the phenomenon we are here examining is explained very satisfactorily by a circumstance of which we must never lose sight.

Dearness is due to two causes, and not to one only.

The same thing holds of cheapness.

It is one of the least disputed points in political economy that price is determined by the relative state of supply and demand.

There are then two terms which affect price—supply and demand. These terms are essentially variable. They may be combined in the same direction, in contrary directions, and in infinitely varied proportions. Hence the combinations of which price is the result are inexhaustible.

High price may be the result, either of diminished supply, or of increased demand.

Low price may be the result of increased supply, or of diminished demand.

Hence there are two kinds of dearness, and two kinds of cheapness. There is a dearness of an injurious kind, that which proceeds from a diminution of supply, for that implies scarcity, privation (such as has been felt this year from the scarcity of corn); and there is a dearness of a beneficial kind, that which results from an increase of demand, for the latter presupposes the development of general wealth. In the same way, there is a cheapness which is desirable, that which has its source in abundance ; and an injurious cheapness, that has for its cause the failure of demand, and the impoverishment of consumers.

Now, be pleased to remark this ; that restriction tends to induce, at the same time, both the injurious cause of dearness,