A manufacturer making the usual profit upon his
capital, invested in looms or other machines in perfect
condition, the market price of making each of which is a hundred
pounds, invents some improvement. But this is of such a nature,
that it cannot be adapted to his present engines. He finds upon
calculation, that at the rate at which he can dispose of his
manufactured produce, each new engine would repay the cost of its
making, together with the ordinary profit of capital, in three
years: he also concludes from his experience of the trade, that
the improvement he is about to make, will not be generally
adopted by other manufacturers before that time. On these
considerations, it is clearly his interest to sell his present
engines, even at half-price, and construct new ones on the
improved principle. But the purchaser who gives only fifty pounds
for the old engines, has not so large a fixed capital invested in
his factory, as the person from whom he purchased them; and as he
produces the same quantity of the manufactured article, his
profits will be larger. Hence, the price of the commodity will
fall, not only in consequence of the cheaper production by the
new machines, but also by the more profitable working of the old,
thus purchased at a reduced price.
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