By the effect on prices of the gold that is sent across to pay for the goods that are being bought and sold, says Mr. Pigou. For, look you! he says, if one nation starts by being able to undersell the other nation in every commodity, the first effect will be that the people of the industrially weaker nation will buy everything from the stronger nation instead of from their own, while the stronger nation will buy nothing from the weaker. The consequence of this will be that the weaker nation will have to empty its public and private treasuries of all the gold it can lay its hands on to pay for the goods, and that when this cargo of gold is emptied on the shores of the stronger nation, it will roll over it like a stream from some great and newly discovered Australian or Californian mine. The prices of all things, in consequence, from a box of matches, a glass of whisky, a cigar, a meal, a suit of clothing, the rent of a house, up and up through every kind and variety of material used or consumed by men, will rise to keep pace with this influx of money, - where sovereigns are as plentiful as shillings were before, and shillings as pence.

In the meantime in the weaker nation which has been denuded of its money, - and where shillings are now as scarce as sovereigns were before, - prices will have fallen so low that you can pick up for a penny what you had to pay a shilling or two for before. So far so good. And now what will happen next? asks Mr. Pigou in a triumphant tone. Why this, that the stronger nation which has now got possession of all the gold, and where prices in consequence are so high, will at the next turn buy all it wants, not at home where things are at famine prices, but from the other nation where they can be had almost for the picking up. And then what will occur? Simply this, that the excess of gold will all roll back again to the nation whence it came, prices will fall in the one, just as they rose before, and rise again in the other as they fell before. And so the to-and-fro movement of gold backwards and forwards will go on uninterruptedly until the two nations in spite of the advantages of the one in the real cheapness with which it can produce every article used by both (for that is the supposition with which he started out) will exchange on even terms.

And this consummation once reached, there will be no reason why trade should not then go on between them - for ever! And all this through the magical property possessed by gold of distributing its weight precisely at those points necessary to keep the two sides of the trade-balance even, moving up and down alternately when the heavier side threatens to pull the other permanently down; like a boy standing at the centre of a see-saw, who by throwing his weight on one side or the other can keep the two boys on the ends going up and down as long as his strength holds out; or should one boy be bigger and heavier than the other, can prevent him from weighing the other down and stopping the movement altogether; the only difference being, that while the ability of the boy to continue is limited by his strength, the movement of gold, being mechanical and automatic, will go on indefinitely or for ever. Were we wrong then in saying that here we have a perpetual-motion scheme as perfect and self-acting in its way as any that ever issued from the brains of the mechanical perpetual-motion schemers of long ago? And while we may be quite willing to allow that it is superficially as plausible as any of these old schemes, have we not reason to suspect that it is likely to be as false as they were, not merely in this or that particular, but in all? This we have now to consider, and at the same time to shew once again how crude and primitive is the orthodox Political Economy which could have lent itself to so puerile an explanation; - and all due to its having made of itself a narrow academic specialism founded, and still continuing to build (in its leading organic outlines and types of structure at least), on great blocks of undigested and un-analysed generalities thrown off in the infancy of the science by Adam Smith, in his reaction against the old Mercantile System, and continued through John Stuart Mill to our own time; precisely as the numerous existing theological sects started by the Reformation on the break up of the old Catholic Theology of the Middle Ages, still go back to Calvin, or Luther, or Hooker, or some other old fifteenth or sixteenth century divine for their foundations and fundamentals, and instead of throwing them one and all overboard together and beginning afresh on the higher knowledge of to-day, break off only a chip here and there, and one at a time - verbal inspiration, Mosaic Cosmogony, eternal damnation, literal hell-fire, and what not - but still continue refining on the remains of the old blocks, with endless ingenuities of new patterns and scrollwork each in its own kind, - new shades and distinctions in predestination and the 'effectual calling,' new hopes for the damned, adult or infant, new denominations of sinners, and the like, - till we despair of ever getting any rationalised science of theology at all.

In other words, the difference between the Orthodox Political Economy and the new science with which we are seeking to replace it, lies not in the fact that the latter proceeds on evolutionary lines, and the former does not; on the contrary, just as in the animal kingdom there is no type of creature however low or primitive, which when once launched on the world will not go through a parallel course of evolution to every other, tricking its different species out with infinite ingenuity in every variety of form and colour, to fit them for their special environment, whether it belong to the type of the molluscs, the reptiles, the birds, or the mammals; so too is it with systems of thought, where there is no difference in so far as their following the ordinary course of evolution is concerned, but where the one evolves throughout on the basis of a lower and more primitive type than the other. And nowhere is the crudeness of the organic type on which the orthodox Political Economy is constructed more apparent than in this doctrine of the function of Gold and the part it plays in raising or depressing prices in different countries, and in neutralizing by its mere movement from one to the other, the effects which naturally follow in any industry where one individual firm or nation of firms can from natural advantages permanently undersell another.