(285.) The effect of over-manufacturing upon great establishments is different. When an over supply has reduced prices, one of two events usually occurs: the first is a diminished payment for labour; the other is a diminution of the number of hours during which the labourers work, together with a diminished rate of wages. In the former case production continues to go on at its ordinary rate: in the latter, the production itself being checked, the supply again adjusts itself to the demand as soon as the stock on hand is worked off, and prices then regain their former level. The latter course appears, in the first instance, to be the best both for masters and men; but there seems to be a difficulty in accomplishing this, except where the trade is in few hands. In fact, it is almost necessary, for its success, that there should be a combination amongst the masters or amongst the men; or, what is always far preferable to either, a mutual agreement for their joint interests. Combination among the men is difficult, and is always attended with the evils which arise from the ill-will excited against any persons who, in the perfectly justifiable exercise of their judgment, are disposed not to act with the majority. The combination of the masters, on the other hand, is unavailing, unless the whole body of them agree: for if any one master can procure more labour for his money than the rest, he will be able to undersell them.
(286.) If we look only at the interests of the consumer, the case is different. When too large a supply has produced a great reduction of price, it opens the consumption of the article to a new class, and increases the consumption of those who
