74 
INTERNATIONAL TRADE 
railways with marked effectiveness of labor; that is, the carrying 
of many ton miles per unit of labor expended. The great plant 
was economically laid out and effectively used. The net result 
was, and probably remains, that in articles which require long 
inland transportation before they can enter the realm of inter- 
national trade, the United States had an advantage thruout the 
period in which the railway has come to be a factor of prime impor- 
tance; and this notwithstanding the fact that thru much the 
larger part of the period, 7.c. until the close of the 19th century, 
a higher interest charge on the heavy capital investment was in the 
nature of a handicap, serving to lessen in some degree the com- 
parative advantage. 
Note oN THE METHOD OF HANDLING CAPITAL AND INTEREST 
Ricardo and his disciples, indeed any economist following the organon of 
Ricardo, would have criticized sharply the way in which the figures in the 
earlier part of this chapter are constructed. The basis of the criticism would be 
that the calculations imply a rise in the price of all goods in consequence of the 
introduction of interest (i.e. “profits”’). The proper treatment is to regard the 
general level of prices as constant, and to analyze on that basis the connec- 
tion between prices (values) and the return to capital (interest or “‘profits”). 
Then one would have to say that the rates of money wages which were originally 
set down under the simplest supposition (no capital involved) must be read- 
justed when capital enters. They must be readjusted downward ; wages must 
be assumed to be lower. If, for example, 30 of copper, made by 10 men, sell for 
$20, the 10 men can not be getting as much as $20 in wages or $2 per man, since 
that would leave nothing at all for profit. Wages must be less than $2 a day. 
If profits are 25 per cent of the wages bill, the rate of wages will be $1.60 and 
profits will be $0.40; the two items making up the full expense (“cost”) of 
production, equal to the supposed money yield of $20. A mere rise or fall in 
profits is to be treated as involving a corresponding fall or rise in wages, but not 
as leading to changes in the prices of goods. It is further to be pointed out, 
following the same analysis, that so far as profits enter to a different extent in 
one commodity than in another — so far as more capital is used per unit of 
current labor, or so far as the use of the same capital is spread over more time, 
— then a rise or fall in profits would affect the relative prices of goods. A rise or 
fall thus brought about in any one article would be offset, however, by a cor- 
responding fall or rise in other directions. Changes in the prices of all goods 
the same way constitute merely a monetary phenomenon, and one not to be 
confounded with changes in the relative prices of different goods. The proper