accurately to compare free
trade and protection the inquiry should not be which of the two causes
high prices or low prices, but which of the two produces abundance or
scarcity.

For observe this: Products are exchanged, the one for the other, and a
relative scarcity and a relative abundance leave the absolute price
exactly at the same point, but not so the condition of men.

Let us look into the subject a little further.

Since the increase and the reduction of duties have been accompanied by
results so different from what had been expected, a fall of prices
frequently succeeding the increase of the tariff, and a rise sometimes
following a reduction of duties, it has become necessary for political
economy to attempt the explanation of a phenomenon which so overthrows
received ideas; for, whatever may be said, science is simply a faithful
exposition and a true explanation of facts.

This phenomenon may be easily explained by one circumstance which should
never be lost sight of.

It is that there are _two causes_ for high prices, and not one merely.

The same is true of low prices. One of the best established principles
of political economy is that price is determined by the law of supply
and demand.

The price is then affected by two conditions--the demand and the supply.
These conditions are necessarily subject to variation. The relations of
demand to supply may be exactly counterbalanced, or may be greatly
disproportionate, and the variations of price are almost interminable.

Prices rise either on account of augmented demand or diminished supply.

They fall by reason of an augmentation of the supply or a diminution of
the demand.

Consequently there are two kinds of _dearness_ and two kinds of
_cheapness_. There is a bad dearness, which results from a diminution of
the supply; for this implies scarcity and privation. There is a good
dearness--that which results from an increase of demand; for this
indicates the augmentation of the general wealth.

There is also a good cheapness, resulting from abundance. And there is a
baneful cheapness--such as results from the cessation of demand, the
inability of consumers to purchase.

And observe this: Prohibition causes at the same time both the dearness
and the cheapness which are of a bad nature; a bad dearness, resulting
from a diminution of the supply (this indeed is its avowed object), and
a bad cheapness, resulting from a diminution of the demand, because it