THEORY OF INTERNATIONAL VALUES
617
imports are obtained worse.1 Cairnes' statements are accurate
only on the supposition that alteration in the supply of woollen
goods makes no difference in international value. It is only on
this interpretation that we can understand his conclusion, ‘ the
wages of English labourers measured in woollen goods would
rise in proportion as the cost of those goods had fallen ’ (p. 407).
This is true of a small country, whose influence on international
values may be neglected ; but is not true in general.
On the important practical question what is the effect of low
wages upon the trade of a country, Cairnes is even more open to
criticism than Mill. Putting the case of wheat imported into
Victoria from South Australia or South America, Cairnes argues
1 inasmuch as a rise or fall in the rate of wages [in Australia] has
no effect on the comparative quantities of labour required for the
production of different commodities, it is evident that if the
received theory be true this circumstance must be incapable of
altering in any way the course of foreign trade ’ (p. 390 top, cf.
p. 393, par. 2).
Now, as Cairnes fully perceives that comparative cost does
not ‘ determine,’ but only ‘ controls ’ value {Leading Principles,
p. 423), does not fix ‘a point about which values move, but a
circle within which they move ’ {ibid. p. 424)—an area corre-
sponding to that intercepted between O T and O S, in our Fig. 6
(p. 623) on the abstract supposition of cost of production not
varying with quantity—it might have occurred to him that, even
though 1 a fall in the rate of wages has no effect on the com-
parative quantities of labour required for the production of
different commodities,’ yet, if the Australian workers became
disposed to give the same quantity of work in return for less
commodities, the point of equilibrium might be displaced to a
position such that the Australian goods would become cheaper on
the international market. This conclusion does not depend upon
the imaginary supposition of fixed costs of production.2
A similar criticism applies to Cairnes' solution of the follow-
ing problem : ‘ Suppose a fall of wages to take place in some
leading branch of English manufacture—say Sheffield cutlery—
. . . accompanied by a corresponding change over the whole
field of English industry . . . what would be the effect of this
on the external trade of England ? ’
ɪ Ante p. 429, where it is shown that the effect of the change might be to push
back the position of equilibrium along the supposed unaltered demand and supply
curve ; that is, to make the gain in respect of utility less for the exporting nation.
2 As in the case described, ante, p. 46.