The damage, however, is not considerable.  For in each case the uncertainty arises only when we are dealing with one of the factors of production, land, labor or capital, regarded as a whole.  If we are dealing with the capital available for a particular industry, a rise in the rate of profit in that industry will certainly increase the supply of capital available there; for it will tend to attract savings that might otherwise have been employed elsewhere.  We can even be fairly sure that an increase in the general rate of interest prevailing in any particular country will increase the total supply of capital available for the businesses of that country, since capital has in modern times acquired a considerable migratory power.  In the case of labor, we cannot go so far as this; but here, too, there is no doubt that an increase in the remuneration offered in any particular occupation will attract an increased labor supply (always supposing, of course, that “other things are equal").  No similar difficulty arises for land, labor or capital, as regards the effect of price-changes on demand; while for ordinary commodities there is no such difficulty on the side either of demand or of supply.  Hence the only qualification which the strictest accuracy would require us in this connection to attach to our statement of Law II is the postscript:—­

   “Except that, in the case of land, the aggregate supply is
   unalterable; while in the case of capital or labor we cannot be
   sure how price-changes will affect the aggregate supply.”

Much significance attaches to these exceptions, as later will appear.

Sec.6. The Disturbances of Monetary Changes.  But let us still keep a critical eye on Law II, and submit it to another flashlight from our practical experience.  The recent world war made us all acutely aware of a remarkable rise in the price of almost everything, which yet did not seem to diminish appreciably the demand.  The explanation of this paradox is not difficult to find.  There was an immense increase in the volume of nominal purchasing power, due to a complex set of causes, of which “currency inflation” may be taken as the symbol.  Now perhaps we are entitled to assume the absence of such currency changes as part of the “other things being equal” which is always understood as implied.  But it is rash to take this particular assumption for granted, more especially in these days.  Already people are too apt to speak as though the trade depression (which as these pages are written holds us in its grip) cannot pass away until pre-war prices are restored, ignoring altogether the great and probably permanent increase in nominal purchasing power which the war has left behind it.  It would be safer, therefore, to add explicitly to Law II the reservation, “Assuming that there is no change in the general volume of purchasing power.”