THE
LAW OF PRICES:
A DEMONSTRATION OF
THE AWA CESS/TV ACA’ AAV /AVD/º/AV/7/2
AVCA’A.A.S.A. O.A." MOAVAZY.
by
LY SANDER SPOONER.
REPRINTED FRoºt “THE RADICAL REview.”
BOST ON .
A. WILLIAMS AND COMPANY.,
283 Washington Sºrrºr.
1877.







ºad,
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THE LAW OF PRICES:
A DEMONSTRATION OF THE NECESSITY FOR AN INDEF-
INITE INCREASE OF MONEY.
I.
HE writers on money seem never to have obtained the first
glimpse of the fundamental law which governs prices,
and which necessitates a constant and indefinite increase in the
volume of money. That law may be illustrated in this manner:
Suppose an island cut off from all communication with the
rest of the world, and inhabited by one hundred men. Suppose
that these hundred men know no industry except the production
of wheat; that they produce annually one thousand bushels, each
man producing ten bushels, which is enough for his own con-
sumption. Suppose further that these hundred men have money
to the amount of five dollars each in gold, silver, and copper coins,
and that these coins are valued by them as highly as similar
coins are now by us. What will be the price of wheat among
these men, compared with the coins? Plainly, it will bear no
price at all. Each man producing for himself all he can eat, no
one has any occasion to buy. Therefore none can be sold at any
price.
But suppose that one after another of these hundred men leave
wheat-growing and engage in the production of other commodi-
ties, each producing a different commodity from all the others,
—until there shall be a hundred different commodities produced;
only one man being left to produce wheat. And suppose that
this one man has increased his product from ten bushels to one
thousand. There is now just as much wheat as there was when
all were employed in producing it. The only differences are,
first, that the whole amount is produced now by one man, where

4. The Law of Prices.
before it was produced by a hundred men; and, secondly, that
the ninety-nine men have each engaged in the production of
some commodity different from that produced by any other, but
of which, we will suppose, all the others wish to purchase each
his proportionate share for consumption.
There is now a hundred times as much wealth produced as
when all produced wheat and nothing else. But each kind has
only a single producer, while it finds a hundred consumers. And
each man's product, we will suppose, has the same value with
every other man's product.
What, now, will be the price of wheat among these hundred
men, relatively to the coins 2 Doubtless a dollar a bushel.
When the first man abandoned wheat-growing, and betook him-
self to some other occupation, he created a demand for ten bush-
els of wheat, which he still wanted for consumption as before.
This demand for ten bushels would doubtless be sufficient to
give wheat the price of one cent per bushel where it had no
price before. When a second man of the hundred abandoned
wheat-growing, he created a demand for ten bushels more; mak-
ing twenty bushels in all. This increased demand would doubt-
less be sufficient to raise the market price of wheat to two cents
a bushel. When a third man of the hundred left wheat-growing
for some other pursuit, his demand for ten bushels would raise
the market price another cent; and so on, until by the time the
ninety-nine had left wheat-growing, the continually increas-
ing demand would have raised the price to ninety-nine cents a
bushel; for convenience of round numbers, say a dollar a bushel.
Here, then, wheat has been raised from no price at all to a
dollar a bushel, not because there is any less wheat produced, or
any more consumed, than before, but solely because the whole
thousand bushels are now produced by one man, instead of being
produced, ten bushels each, by the hundred different men who
were to consume it; and because, further, each of the ninety-
nine men who have left wheat-growing is able to purchase wheat,
inasmuch as he has been producing some other commodity which
brings him as good a price as the wheat brings to the man who
still produces wheat.
Under this new state of things, then, the man who continues
to produce wheat produces a thousand bushels, worth a dollar a

The Radical Review. 5
bushel; that is, a thousand dollars' worth in all. Each of the
other ninety-nine produces an equal amount of market value in
some other commodity. The whole hundred men, then, pro-
duce wealth that has now a market value of one hundred thou-
sand dollars, where originally they had produced nothing that
had any market value at all.
This change in the price of wheat has been produced, then,
solely by reason of the diversity of industry and production that
has taken place among these hundred men. And the market
prices of all the other ninety-nine commodities have been af-
fected by the same law, and to the same extent, as has been the
price of wheat.
Here, then, is a hundred thousand dollars' worth of commodi-
ties produced, each man producing a thousand dollars' worth.
As each man retains a hundredth part of his product—that is,
ten dollars' worth—for his own consumption, he has nine hun-
dred and ninety dollars' worth for sale. The whole hundred men,
therefore, have one hundred times nine hundred and ninety
dollars' worth for sale, which is equal to ninety-nine thousand
dollars in all; for convenience of round numbers, say one hun-
dred thousand dollars.
The hundred men, having each five dollars in coins, have in
the aggregate five hundred dollars. To make the purchases
and sales of these hundred thousand dollars' worth of commodi-
ties will require each of these five hundred dollars to be ex-
changed for commodities, on an average, two hundred times.
That is, in carrying on the commerce of these hundred men for
a year, their whole stock of money must be exchanged, on an av-
erage, once in a little less than two days. Or if we reckon but
three hundred business days in a year, we shall find that the
whole stock of money must be exchanged, on an average, once in
every day and a half.
Such rapidity of exchange would be practicable enough if the
holders of the coins should all part with them readily at their
true and natural value, instead of holding them back in the hope
of getting for them more than they were really worth. But
where there was so active a demand for the coins as to require
that the whole stock be sold, on an average, once in every day
and a half, it is natural to suppose that the holders of the coins

6 The Law of Prices.
would hold them back, in order to get more for them than their
true and natural value. And in sofar as they should do so, they
would obstruct trade, and by obstructing trade obstruct and
discourage production, and thus obstruct the natural increase of
wealth.
II.
But suppose, now, that the number of men on this island bein-
creased from one hundred to one thousand, and that they are all
engaged in producing wheat only; each man producing ten
bushels, which is all he wants for his own consumption. And
suppose that each man has five dollars in gold, silver, and copper
coins. What will be the price of wheat among these men, rela-
tively to the coins? Clearly, it will have no market price at all,
any more than it had when there were but a hundred men.
But suppose that nine hundred and ninety-nine of these thou-
sand men leave wheat-growing, and engage each in the produc-
tion of a commodity different from that produced by any one
of the others. And suppose that the one who still continues to
produce wheat is able, from his increased science, skill, and ma-
chinery, to produce ten thousand bushels—ten bushels for each
of the thousand men—where before he produced only ten bush-
els for himself.
There is now just as much wheat produced as there was be-
fore. But it is now all produced by one man—nine hundred and
ninety-nine thousandths of it being produced for sale—instead
of being produced by a thousand men, each producing ten bush-
els for his own consumption.
What, now, will be the price of wheat among these thousand
men? Why, being governed by the same law that has already
been illustrated in the case of the hundred men, it will go on
rising one cent at a time as each man leaves wheat-growing for
some other pursuit, until, when nine hundred and ninety-nine
shall have left wheat-growing, and shall have become purchasers
of wheat, instead of producers, the price will be nine hundred and
ninety-nine cents a bushel—for convenience of round numbers,
say ten dollars a bushel—where before it bore no price at all.
In this state of things, then, the man who still continues to

The Radical Review. 7
produce wheat will produce ten thousand bushels; worth, in the
market, ten dollars a bushel, or a hundred thousand dollars in all.
Here, then, we have the price of a hundred thousand dollars
for ten thousand bushels of wheat, which, when produced by a
thousand different men, each producing ten bushels for his own
consumption, had no market value at all. And the other nine
hundred and ninety-nine men, we will suppose, produce each a
different commodity from all the others; the whole annual prod-
uce of each having the same market value as the wheat-grower's
crop of wheat. The market value, then, of all the products of
the whole thousand men will be one thousand times one hun-
dred thousand dollars—that is, one hundred million dollars—
where before, when they were all producing wheat and nothing
else, their whole products had no market price at all.
When we consider that each producer retains for his own
consumption but a thousandth part of his products (a hundred
dollars' worth), and that, consequently, nine hundred and ninety-
nine parts of all these products are not only to be sold, but to
be sold twice, as they would now have to be, that is, once by the
producer to the merchant, and once by the merchant to the con-
sumer-we see that there will be sales to the amount of one hun-
dred and ninety-nine million eight hundred thousand dollars—
for convenience of round numbers, say two hundred million dol-
lars—where before, when all were producing wheat, there was
no such thing as a sale of a cent's worth of anything.
These thousand men, we have supposed, had each five dollars
in coins—making five thousand dollars in all—with which to
make these purchases and sales of two hundred millions. How
many times over will all these coins, on an average, have to be
bought and sold, in order to effect these exchanges? Dividing
two hundred millions by five thousand, we have the answer;
namely, forty thousand times / Dividing this number by three
hundred,—which we will suppose to be the number of business
days in a year-we find that, in order to make their exchanges,
their whole stock of money must be bought and sold, on an ave-
rage, one hundred and thirty-three times every day /
Thus we see that one thousand men, with such a diversity and
amount of production as we have supposed, would have two thou-
sand times as many purchases and sales to make as the one hun-

8 The Law of Prices.
dred men. And in making these purchases and sales, we see
that their whole stock of money would have to be bought and
sold two hundred times oftener than would the whole stock of
money of the one hundred men in making their purchases and
sales of one hundred thousand dollars. We see, too, that, if we
call eight hours a day,+that being the usual number of business
hours, their whole stock of money would have to be bought
and sold, on an average, sixteen times over every hour, or once in
every four minutes; whereas the whole stock of money of the
one hundred men would have to be bought and sold only once in
a day and a half, or—calling eight hours a day—once in twelve
Jours.
Such, let it be specially noticed, is the difference in the rapid-
ity required in the purchase and sale of money in making the ex-
changes among a thousand men, on the one hand, and a hundred
men, on the other, although the thousand men have the same
amount of money, man for man, as the hundred men, the thou-
sand men having five thousand dollars, and the hundred having
but five hundred dollars.
This illustration gives some idea of the effect produced upon
prices by the expansion of industry and the diversity of produc-
tion. And yet the writers on money tell us that a large number
of men need no more money, man for man, than a small number;
that, if a hundred men need but five hundred dollars of money,
a thousand men will, by the same rule, need but five thousand
dollars.
In the case already supposed,—of the one thousand men,
how far would their five thousand dollars avail as money towards
making their exchanges of two hundred million dollars? Plainly,
they would avail nothing. The holders of them, seeing the ne-
cessities of the people for money, would hold back their coins,
and demand so much more than their true and natural value as
to put a stop substantially to all production, except of such few
things as could be exchanged by barter, or as each one could pro-
duce for his own consumption.
The obvious truth is that, in order to carry on their commerce
with money at its true and natural value, and consequently with-
out obstruction or extortion from the money holders, it is neces-
sary that these thousand men, with their increased diversity and

The Radical Review. 9
amount of production, should have two hundred times as much
money, man for man,—and two thousand times as much in the
aggregate-as was necessary for the one hundred men, as be-
fore supposed.
In other words, the thousand men have two hundred million
dollars of sales to make, where the hundred men had but one
hundred thousand. Dividing two hundred million by one hun-
dred thousand, we find that the thousand men, with such diver-
sity and amount of production as we have supposed, have two
thousand times as many sales to make as the one hundred had,
and consequently that they require two thousand times as much
money as did the one hundred.
III.
But to show still further the ratio in which diversity of indus-
try tends to increase the prices of commodities, relatively to any
fired standard, let us suppose that the number of men on this
island be still further increased from one thousand to ten thou-
sand. And suppose that all these ten thousand are engaged in
producing wheat alone; each producing ten bushels for his own
consumption, that being all he wants. And suppose they have
each five dollars in gold, silver, and copper coins. What will be
the price of wheat, relatively to the coins? Clearly, it will have
no price at all, not even so much as one cent a bushel.
But suppose that all but one of these ten thousand men should
leave wheat-growing, and engage in other industries; each one
producing a different commodity from all the others. And sup-
pose that the one who still continues wheat-growing has acquired
such science, skill, and machinery, that he is now able to produce
a hundred thousand bushels—that is, ten bushels each for ten
thousand men—where before he only produced ten bushels for
himself.
What will now be the price of wheat among these ten thousand
men Why, by the same law that has been already illustrated
it will be ninety-nine dollars and ninety-nine cents a bushel–
for convenience of round numbers, say one hundred dollars a
bushel–where before it had no market value at all.
And yet there is just as much wheat produced as there was

IO The Law of Prices.
before, and every man gets just as much wheat to eat as he had
before, when all were producing wheat.
In this state of things, the one hundred thousand bushels of
wheat produced by one man at a hundred dollars a bushel—which
will then be its market value—are worth one hundred thousand
times one hundred dollars; that is, ten million dollars. And sup-
pose that all the other nine thousand nine hundred and ninety-
nine men are each engaged in an industry as profitable as that
of the remaining wheat-grower. The aggregate production of
the whole ten thousand men will now have a market value equal
to ten thousand times ten million dollars; that is, one hundred
thousand million dollars.
And if we suppose that all these commodities are to be sold 1
three times over-that is, once by the producer to the wholesale
dealer, once by the wholesale dealer to the retailer, and once by
the retailer to the consumer, we shall see that there are to be
sales equal to three hundred thousand million dollars, where be-
fore, when all were producing wheat and nothing else, there was
no sale of a cent's worth of anything, and no market value at all
for anything. -
Now suppose that the coins which these men had have re-
mained fixed at the same value they had when the men were all
producing wheat. How many times over, then, must they neces-
sarily be bought and sold in the course of a year, in order to ef-
fect the purchase and sale of these three hundred thousand mil-
lions—or one hundred thousand millions three times over—of
property that are to be exchanged?
There are ten thousand men, each having five dollars in coins;
that is, fifty thousand dollars in all. Dividing three hundred
thousand millions by fifty thousand, we find that the whole of
these fifty thousand dollars in coins must be bought and sold sir
million times / Six million times annually, to effect the ex-
changes of the products often thousand men!
Dividing six million by three hundred (which we will suppose
to be the number of business days in a year), we find that, on
an average, their whole stock of money must be bought and sold
* All but ten millions—a ten thousandth part of the whole—would have to be sold,
since each man would retain for his own consumption only a ten thousandth part of
what he produced; namely, one thousand dollars' worth.

The Radical Review. II.
twenty thousand times over every day. Or supposing the busi-
ness day to be eight hours, the coins would all have to be bought
and sold twenty-five hundred times over every hour; equal to
forty-one and two-thirds times every minute.
And this happens, too, when the ten thousand men have the
same amount of coin, man for man, as the one hundred and the
one thousand men had in the cases before supposed.
Thus we see that, with such a diversity and amount of pro-
duction as we have supposed, the exchanges of the ten thousand
men would require that their whole stock of money should be
bought and sold one hundred and fifty times oftener than the
whole stock of the one thousand men, and thirty thousand times
oftener than the whole stock of the one hundred men.
We also see that, in the cases supposed, the ten thousand men,
having three hundred thousand millions of exchanges to make,
have fifteen hundred times as many as the one thousand men,
who had but two hundred millions; and that they have three
million times as many exchanges to make as the one hundred
men. Consequently the ten thousand men require fifteen hun-
dred times as much money as the one thousand men, and three
million times as much money as the one hundred men.
IV.
According to the foregoing calculations, the ratio of increase
required in the volume of money is this: Supposing the diver-
sity and amount of production to keep pace with the increase in
the number of men, and supposing their commodities to be sold
but once,—that is, directly from producer to consumer–a hun-
dred men would require a thousand times as much money as ten
men; a thousand men would require a thousand times as much
money as a hundred men; ten thousand men would require a
thousand times as much money as a thousand men; and so on.
But inasmuch as, in the case of a thousand men, their com-
modities would have to be sold twice,—that is, once by the
producer to the merchant, and once by the merchant to the con-
sumer-the thousand men would require two thousand times as
much money as the hundred men. And inasmuch as, in the case
of the ten thousand men, their commodities would have to be

12 The Law of Prices,
sold three times over-that is, once by the producer to the whole-
sale dealer, once by the wholesale dealer to the retailer, and once
by the retailer to the consumer-the amount of money required,
instead of being either one thousand or two thousand times as
much as in the case of the one thousand men (whose commodi-
ties were sold but twice), would be one and a half thousand
times (as three sales are one and a half times as much as two)
—that is, fifteen hundred times—as much as in the case of the
one thousand men.
Stating the results of the preceding calculations in the sim-
plest form, we find that different numbers of men, having a diver-
sity and amount of production corresponding to their numbers,
in making their exchanges with each other, require money in
the following ratios, relatively to each other; namely,–
Io men require $1oo
1oo men require IOO,OOO
1,ooo men require 200,000,000
roooo men require 300,000,000,000
But as the same money could be used many times over in the
course of a year, they would not need an amount of money equal
to the amount of their annual exchanges. If, then, we suppose
the aggregate of their annual exchanges to be as above, and
their whole stocks of money to be used three hundred times
over in a year-that is, once a day, calling three hundred the
number of business days in a year-we find that the stocks of
money required would be as follows:–
to men would require $.33%
too men would require 333.33%
1,000 men would require 666,666.33%
Loooo men would require 1,000,000,000.00
Or, to state the case in still another form, supposing their ag-
gregate annual exchanges to be as above, and supposing their
whole stocks of money to be bought and sold three hundred
times over in the year, the money required, per man, would be
as follows:–

The Radical Reviezw. I3
To men would require $ .ogº each.
too men would require 3.33% each.
1,000 men would require 666.66 each.
roooo men would require 1oo,ooooo each.
If any body thinks he can dispute these figures, let him at-
tempt it. If they cannot be disputed, they settle the law of
prices.
V.
The foregoing suppositions are, first, that the ten thousand
men came finally to have ten thousand different kinds of com-
modities where they originally had but one,—namely, wheat; sec-
ondly, that they finally came to have ten thousand times as much
wealth, in quantity, as they had originally, when all were produc-
ing wheat; thirdly, that wheat, which at its first sales brought
only one cent a bushel, came afterwards to sell for ten thousand
cents a bushel,-although the amount of wheat produced, and
the supply of wheat for each individual, were the same in the one
case as in the other; fourthly, that the same effect is produced
upon the prices of all the rest of the ten thousand different kinds
of commodities as upon the price of wheat; and, fifthly, that the
annual sales made by the ten thousand men amounted finally
to three hundred thousand million dollars, where their first sales
had amounted to but ten cents, the amount which the first man
who left wheat-growing paid for his yearly supply often bushels.
It is not necessary to suppose that such a diversity and amount
of production will ever be realized in actual life, although that is
not impossible. It is sufficient that these figures give the law
that governs prices, and consequently demonstrate that a con-
stant and enormous increase of money must be necessary to
keep pace with the increase of population, wealth, and trade, if
we wish to give free scope to diversity and amount of production.
Unless money should be increased so as to keep pace with
this increased demand, the result would be, first, obstruction to
trade; secondly, obstruction to, and discouragement of, indus-
try; and thirdly, a corresponding obstruction to the increase of
wealth.
In fact, unless the amount of money were increased, these

I4 The Law of Prices.
hundred men, thousand men, and ten thousand men, instead of
having a hundred, a thousand, or ten thousand different kinds
of commodities, would advance very little beyond the state they
were in when all were producing wheat and nothing else. Some
feeble attempts at other industries might possibly be made, but,
their money, like the shells and wanpum of savages, would aid
these attempts but slightly; and the men, unless they invented
some other money, would either remain absolute savages, or at-
tain only to a very low state of barbarism.
The practical question, then, is whether it is better that these
ten thousand men should remain mere savages, scratching the
earth with rude sticks and stones to produce each ten bushels of
wheat, or whether it is better that they should all have the
money—which stands in political economy for all the ingenuity,
skill, science, machinery, and other capital which money can buy
—that may be necessary to enable them to produce, in the
greatest possible abundance, and of the greatest possible excel-
lence, all the ten thousand commodities which will contribute to
their happiness.
A full discussion of this subject would require much more
space than can here be given to it. It may perhaps be continued
at a future time, if that should be necessary. But enough has
doubtless now been said to show the general law that governs
prices, and consequently to show the necessity for an immense
increase of money; an increase dependent upon the diversity
and amount of production and the natural laws of trade applic-
able thereto; such an increase as no legislation can ascertain
beforehand, or consequently prescribe.
Lysander Spooner.

P R O S P E CT U.S.
Tº RADICAL REVIEW, as its name implies, is a publication
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agement, or rather because under radical management, it shows no par
tiality to any particular school or special system of belief. Sincerity
and earnestness of purpose, depth and subtlety of thought, ability and
propriety of presentation,-these, regardless of conclusions reached,
are the principal qualifications essential in commanding admission to
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catholic spirit, yet conceiving some subjects to be of more immediate
importance than others, and believing that the so-called “LABor Ques-
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finance, and the organization of industry, and seriously affecting, in its
settlement, directly the material, and indirectly the mental and spiritual
condition of the people, demands consideration by the best minds,-
will give the preference largely, in the selection of its contents, to arti-
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John WEIss. John FiskE. EDMunn C. STEDMAN.
Sidney H. Morse. Octavius B. Frothingham. Lysander Spoon ER.
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J. N. LARNED. B. F. UNDERwood. CHAs. D. B. MILLs.
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Prof. E. S. Morse. ohn W. Chadwick. opl A. Allen.
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WM. J. Porter. John ORVIs. Chas. W. Buck.
Francis E. Abbot. W. M. HANSoN. Howard N. Brown.
Samuel Longfellow. Abram W. Stevens. Cyrus A. Bartol.
oseph H. ALLEN. º H. Clifford. J. K. INGALLs.
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