320 ECONOMIC PROTECTIONISM

In regard to the effect of export bounties, a lively discussion
was carried on even in the classic Uterature of poUtical
economy. Adam Smith maintained that an export bounty
on grain must result in a sharp increase in price, since it
would stimulate exportation, while an increase in the pro-
duction of grain in the country he regarded as impossible.
Yet the farmer would derive no advantage from this increase
in the price, for wages would rise accordingly. The worth
of a given quantity of wheat Smith regarded as equal to
the quantity of labour which it would support in the person
of the labourer. The prices of grain had, in fact, been very
low in England for a long time, in spite of the bounty ; but
this he attributed to the increase in the value of silver. In
manufactures, on the other hand, an extension of production
is easily possible, and hence a rise in price would not be the
necessary consequence of a bounty ; yet the bounty would be
injurious in this case also, as such exportation woidd be
carried on only at a loss, and besides, capital would be arti-
ficially diverted from its most advantageous employment.
Ricardo disputed the assertion with regard to grain bounties.
