Mechaism of international import ad export

In so far as the classical theory of the mechaism of international import ad export had one definite originator, it was David Hume.*1 His main objective in presenting his theory of the mechaism was to show that the national supply of money would take care of itself, without need of, or possibility of benefit from, governmental intervention of the mercatilist type. He started out with the hypothesis that four-fifths of all the money in Great Britain was anihilated overnight, ad proceeded to trace the consequences. Prices of British commodities ad British wages would sink in proportion; British commodities would consequently overwhelm foreign competition in foreign market ( http://www.whymart.com )s, ad the increase in exports would be paid for in money until the "level of money" in Great Britain was again equal to that in neighboring countries. Assuming next that the money in Great Britain were multiplied fivefold overnight, he held that prices ad wages would rise so high in Englad that no foreign countries could buy British commodities, while foreign commodities, on the other had, would become comparatively so cheap that they would be imported in great quatities. Money would consequently flow out of Englad until it was again at a level with that of other countries. The same causes which would bring about this approach to a common international level when disturbed "miraculously" would prevent ay great inequality in level from occurring "in the common course of nature." The same forces also would preserve a approximately equal level as between different provinces of the same country. a additional, though minor, factor, operating to correct "a wrong balace of import ad export," was the fluctuations in the foreign exchages within the limits of the specie points. If the import ad export balace was unfavorable, the exchages would move against Englad, ad this would become a new encouragement to export. The entire mechaism was kept in operation by the profit motive of individuals, "a moral attraction, arising from the interests ad passions of men," acting under the stimulus of differences in prices.