VALUES IN INTERNATIONAL TRADE 203

domestic supply at this price not fully adequate to market
requirements at the price? Treating the general case,
rather than expressing an opinion on the question of cotton
fabrics, it would seem as if the domestic supply could not
be enlarged without sacrifice of profit. We ignore the
influence of habit affecting the use of one country’s product
rather than another. If the fabrics are identical in physical
characteristics it will not be of importance, and if not, this
difference throws us back on another question, for we should
be dealing with different commodities in the imported and
home-produced. If we rightly suppose the condition
described to imply that the domestic supply could not be
enlarged without sacrifice of profit, it would seem that the
conditions are those of diminishing returns, In that case,
the absence of the imported product would leave an
unsupplied demand. To adjust supply to demand requires
an enlargement of supply or a restriction of demand or
both. The demand can be restricted by raising the price,
and if the supply be enlarged without diminishing the
profits, the addition to the supply will cost more per unit
than the preceding supply. The inducement to its production
 must be a price capable of covering this addition to
cost of production. In either, or in both, of the cases, the
withdrawal of the imported supply implies a rise in price,
that is, the cost of producing more of the product at home
would bear a higher proportion to the value of other
domestic commodities, including the export with which the
foreign goods are purchased, than does the cost of procuring
the imported goods. This last cost is, as before seen, the
cost of producing those exports with which the imports are
purchased.
If the cost of increasing the domestic supply would be
greater than the cost of producing the exported goods with
which the foreign supplies are paid for, the substitution of
domestic for foreign goods would mean a transference of
productive power to a point where it is less efficient than
elsewhere. It must be pointed out that we here make an
assumption which may be stated as follows :—The struggle
to secure private gain leads to the adoption of that arrange-