3. The number and power of the persons who want it.
4. The estimate they have formed of its desirableness.
(Its value only affects its price so far as it is contemplated in this estimate; perhaps, therefore, not at all.)
Now, in order to show the manner in which price is expressed in terms of a currency, we must assume these four quantities to be known, and the "estimate of desirableness," commonly called the Demand, to be certain. We will take the number of persons at the lowest. Let A and B be two labourers who "demand," that is to say, have resolved to labour for, two articles, a and b. Their demand for these articles (if the reader likes better, he may say their need) is to be absolute, existence depending on the getting these two things. Suppose, for instance, that they are bread and fuel in a cold country, and let a represent the least quantity of bread, and b the least quantity of fuel, which will support a man's life for a day. Let a be producible by an hour's labour but b only by two hours' labour; then the cost of a is one hour, and of b two (cost, by our definition, being expressible in terms of time). If, therefore, each man worked both for his corn and fuel, each would have to work three hours a day. But they divide the labour for its greater ease.[86] Then if A works three hours, he produces 3a, which is one a more than both the men want. And if B works three hours, he produces only 1½b, or half of b less than both want. But if A works three hours and B six, A has 3a, and B has 3b, a maintenance in the right proportion for both for a day and a half; so that each might take a half a day's rest. But as B has worked double time, the whole of this day's rest belongs in equity to him. Therefore, the just exchange should be, A, giving two a for one b, has one a and one b;—maintenance for a day. B, giving one b for two a, has two a and two b;—maintenance for two days.
But B cannot rest on the second day, or A would be left without the article which B produces. Nor is there any means of making the exchange just, unless a third labourer is called in. Then one workman, A, produces a, and two, B and C, produce b;—A, working three hours, has three a;—B, three hours, 1½b;—C, three hours, 1½b. B and C each give half of b for a, and all have their equal daily maintenance for equal daily work.
To carry the example a single step farther, let three articles, a, b, and c, be needed.
Let a need one hour's work, b two, and c four; then the day's work must be seven hours, and one man in a day's work can make 7a, or 3½b, or 1¾c. Therefore one A works for a, producing 7a; two B's work for b, producing 7b; four C's work for c, producing 7c.
A has six a to spare, and gives two a for one b, and four a for one c. Each B has 2½b to spare, and gives ½b for one a, and two b for one c. Each C has ¾ of c to spare, and gives ½c for one b, and ¼ of c for one a. And all have their day's maintenance.
Generally, therefore, it follows that, if the demand is constant,[87] the relative prices of things are as their costs, or as the quantities of labour involved in production.
Then, in order to express their prices in terms of a currency, we have only to put the currency into the form of orders for a certain quantity of any given article (with us it is in the form of orders for gold), and all quantities of other articles are priced by the relation they bear to the article which the currency claims.