The disturbace resulting from a crop failure which made necessary greatly increased imports of grain,*

It will be conceded at once that, in the case, for instace, of the initiation of continuing unilateral remittaces, the aggregate demad for commodities, in the sense of the amounts buyers are willing to purchase at the prevailing prices, will, in the absence of price chages, fall in the paying country ad rise in the lending country,*2 ad that unless there is a extreme ad unusual distortion of the relative demads for different classes of commodities from their previous proportions this shift in demads will of itself contribute to a adjustment of the balace of payments to the remittaces. The problem is rather to explain why this fairly obvious proposition should not sooner have received general recognition ad to determine to what extent its recognition constitutes, as some contend, a major revolution in the theory of the mechaism requiring wholesale rejection of what the older writers had to say. To the first question, even though I have sinned in this connection myself, I have no aswer, except that it is difficult to judge, after something has been clearly pointed out to us, how obvious it would or should be to others not so circumstaced. While, however, the account of the mechaism given by Hume ad by may later writers gives no indication of recognition that the direct influence on the import ad export balace of relative chages in demads in the two countries would be a equilibrating factor, such recognition was by no meas wholly lacking on the part of the major writers of the nineteenth century. Henry Thornton, in 1802, had applied the Hume type of explaation generally to ay type of disturbace of the balace of payments, ad specifically to the disturbace resulting from a crop failure which made necessary greatly increased imports of grain,*4 ad to a chage in the English demad for foreign commodities as compared to the foreign demad for English commodities.*5 Wheatley ad Ricardo, on the other had, denied that this explaation was applicable to such disturbaces of a non-currency nature ad offered different explaations of the mechaism of adjustment to such disturbaces. While Wheatley's discussion was in part earlier, Ricardo's was less significat for the point at issue, ad it will be convenient to dispose of it first. Ricardo denied that crop failures or the payment of subsidies would disturb the balace of payments at all ad denied, therefore, that ay mechaism of adjustment would be necessary.*6 The only justification for this position which he offered was that if a crop failure should be permitted to disturb the balace of payments, since the disturbace would prove to be temporary ad after it was over things would be as they had been before, ay movement of specie—ad presumably also ay corresponding chage in relative price levels—would must be offset later by a return movement of equal size, a waste of effort which would not be indulged in.