Proceeding to reason on this subject, some principles must be premised as forming its basis.  The adequate price of a thing depends on the capital and labor necessary to produce it. (In the term capital, I mean to include science, because capital as well as labor has been employed to acquire it.) Two things requiring the same capital and labor should be of the same price.  If a gallon of wine requires for its production the same capital and labor with a bushel of wheat, they should be expressed by the same price, derived from the application of a common measure to them.  The comparative prices of things being thus to be estimated, and expressed by a common measure, we may proceed to observe, that were a country so insulated as to have no commercial intercourse with any other, to confine the interchange of all its wants and supplies within itself, the amount of circulating medium, as a common measure for adjusting these exchanges, would be quite immaterial.  If their circulation, for instance, were of a million of dollars, and the annual produce of their industry equivalent to ten millions of bushels of wheat, the price of a bushel of wheat might be one dollar.  If, then, by a progressive coinage, their medium should be doubled, the price of a bushel of wheat might become progressively two dollars, and without, inconvenience.  Whatever be the proportion of the circulating medium to the value of the annual produce of industry, it may be considered as the representative of that industry.  In the first case, a bushel of wheat will be represented by one dollar; in the second, by two dollars.  This is well explained by Hume, and seems admitted by Adam Smith, (B. 2. c. 2. 436, 441, 490.) But where a nation is in a full course of interchange of wants and supplies with all others, the proportion of its medium to its produce is no longer indifferent, (lb. 441.) To trade on equal terms, the common measure of values should be as nearly as possible on a par with that of its corresponding nations, whose medium is in a sound state; that is to say, not in an accidental state of excess or deficiency.  Now, one of the great advantages of specie as a medium is, that being of universal value, it will keep itself at a general level, flowing out from where it is too high into parts where it is lower.  Whereas, if the medium be of local value only, as paper-money, if too little, indeed, gold and silver will flow in to supply the deficiency; but if too much, it accumulates, banishes the gold and silver not locked up in vaults and hoards, and depreciates itself; that is to say, its proportion to the annual produce of industry being raised, more of it is required to represent any particular article of produce than in the other countries.  This is agreed by Smith (B. 2. c. 2. 437.), the principal advocate for a paper circulation; but advocating it on the sole condition that it be strictly regulated.  He admits, nevertheless, that ’the commerce and industry of a country cannot be so secure when