Chap 7: Prices

Chap 7: The Circumstances That regulate the Price of Commodities

  • Every commodity has two different prices which are apparently independent, but connected:
    1. The natural price
    2. The market price
  • These are regulated by certain circumstances.

 

The Natural Price

  • People must make as [174] much by their employment to maintain them while they are employed.
  • An arrow-maker must be sure to exchange as much surplus product to maintain him for the time he took to make the arrows.
  • But there is a big difference in the different trades.
    • Some trades, like those of the tailor and weaver, are not learned by casual observation and a little experience, like that of the day-labourer.
      • It takes a lot time and effort to learn them.
    • When a person begins them, his work is useless to anyone for a long time.
      • Therefore, his master must be compensated:
        • for what maintains him and
        • for what he spoils.
      • When he comes to exercise his trade, he must be repaid what he has spent as expenses and as apprentice fee.
      • His life is not worth more than 10 or 12 years’ purchase at most.
      • His wages must be high because of his risk in not having the whole made up.
    • But there are many [175] arts which need more knowledge than possible during an apprenticeship.
      • A blacksmith and weaver can learn their business without any previous knowledge of math.
      • But a watchmaker must know several sciences such as:
        • arithmetic,
        • geometry, and
        • astronomy with regard to the equation of time.
      • His wages must be high in order to compensate the additional expense.
  • In general, this is the case in all the liberal arts.
    • Because after they have spent a long time in their education, it is 10 to 1 if ever they make anything by it.
    • Therefore, their wages must be higher relative to their expense:
      • the risk of not living long enough, and
      • the risk of not having enough dexterity to manage their business.
    • Not 1 in 20 lawyers attains such knowledge and dexterity in his business to enable him to recoup the expenses of his education.
      • Many of them never make the price of their gown.
      • Lawyers’ fees are generally thought of as low.
    • People are tempted to be lawyers because of the profession’s eminence and not because of the money made by it.
      • Its dignity is part of what is made by it.

[176]

  • In the same way, the prices of gold and silver are not extravagant.
  • In a gold or silver mine, there is a great chance of missing it altogether.
    • If an equal number of men were employed in raising corn and digging silver, the corn men will make more than the silver miners.
    • Of 50 employed in a mine, perhaps only 20 make anything at all.
      • Some of the rest may make fortunes.
    • But every corn man succeeds in his undertakings.
    • So on the whole, there is more made in farming than in mining.
    • The principal temptation in a mine is the ideal acquisition.

 

  • A man then has the natural price of his labour when it is sufficient to:
    • maintain him during the time of labour,
    • defray the expense of education, and
    • compensate the risk of:
      • not living long enough, and
      • not succeeding in the business.
  • When a man has this, there is sufficient encouragement to the labourer.
    • The commodity will be cultivated in proportion to the demand.

 

The Market Price

  • The market price of goods is regulated by quite other circumstances.
    • When a buyer comes to the market, he never the seller what were his expenses in producing them.
  • The regulation of the market price of goods depends on three articles:
    1. The demand for the commodity.
      • There is no demand for a useless thing.
      • It is not a rational object of desire.
    2. The abundance or scarcity of the commodity relative to the need for it.
      • If the commodity is scarce, its price is raised.
      • But if the amount is more than sufficient to supply the demand, its price falls.
      • Thus, diamonds and other precious stones [177] are dear.
      • While iron, which is much more useful, is much cheaper.
        • But this depends principally on the last cause:
    3. The riches or poverty of those who demand.
      • When there is not enough produced to serve everybody, the fortune of the bidders is the only regulation of the price.
      • An evidence of this is the story of the merchant and the carrier in Arabia.
        • The merchant gave 10,000 ducats for a certain amount of water.
        • His fortune here regulated the price.
        • If he did not have his fortune, he could not have given them.
        • If his fortune had been less, the water would have been cheaper.
      • When the commodity is scarce, the seller must be content with the wealth of the buyers.
      • The case is the same in an auction.
        • If two persons have an equal fondness for a book, the richer person will have it.
        • Hence, things that are very rare always go to rich countries.
      • Only the King of France could buy that large expensive diamond.
      • Upon this principle, everything is dearer or cheaper according as it is the purchase of a higher or lower set of people.
        • Gold utensils are attainable only by persons in certain circumstances.
        • Silver utensils fall to another set of people.
          • Their prices are regulated by what the majority can give.
        • Corn and beer prices are regulated by what all the world can give.
        • The day-labourer’s wages have a great influence on corn prices.
        • When corn prices rise, wages also rise, and vice versa.
        • When the amount of corn falls short, as in [178] a sea-voyage, it always creates a famine.
          • The price then becomes enormous.
          • Corn then becomes the purchase of a higher set of people.
          • The lower must live on turnips and potatoes.

 

  • The natural and the market price are necessarily connected, no matter how seemingly independent they appear to be.
    • If the market price of any commodity is very great, and the labour very highly rewarded, the market becomes very crowded with labour.
      • More of the commodity is produced.
      • It then can be sold to the inferior ranks of people.
      • If there were 10,000 for every 10 diamonds, they would become the purchase of everybody
        • because they would become very cheap and would sink to their natural price.
    • When the market is overstocked, and there is not enough reward for its manufacture, nobody will produce it.
      • They cannot have a subsistence by it, because the market price falls then below the natural price.
  • It is alleged that as corn prices sink, the labourer’s wages should also sink since he is then better rewarded.
    • It is true that if food was long cheap, wages would come down because of the many people flocking to this labour.
    • But we find that when corn prices are doubled, the wages stay as before.
      • Because the labourers have no other way to turn themselves.
    • The same is the case with menial servants.

 

Raising The Natural Price Artificially

  • Whatever police tends to raise the market price above the natural, tends to reduce public opulence.
  • Dearness and scarcity are the same thing.
    • When commodities are abundant, they can be sold to the inferior ranks of people.
      • They [179] can afford to give less for them, but not if commodities are scarce.
  • Goods are a convenience to society.
    • Society thus lives less happily when only the few can have goods.
  • Therefore, whatever keeps goods above their natural price permanently, reduces a nation’s opulence, such as:
    1. All taxes on:
      • industry, leather, and shoes.
        • People grudge these the most.
      • salt, beer, or whatever is the strong drink of the country.
        • All countries have some kind of it.
  • Man is an anxious animal.
    • It must have his care swept off by something that can exhilarate the spirits.
    • It is alleged that this tax on beer is an artificial security against drunkenness.
      • But the tax does not prevent drunkeness.
    • In countries where strong liquors are cheap, such as France and Spain, the people are generally sober.
      • But in northern countries, where they are dear, they do get with spirituous liquors, not with beer.

 

  1. Monopolies also destroy public opulence.
    • The price of the monopolized goods is raised above what is sufficient to encourage labour.
    • Less of a commodity is imported when only certain persons can import it.
      • Its price becomes higher.
      • Fewer people are supported by it.
    • The concurrence of different labourers, always brings down the price.
    • Monopolies can make whatever price they want.
      • Examples are the Hudson’s Bay and East India companies.

 

  1. Exclusive privileges of corporations have the same effect.
    • The butchers and bakers can raise the prices of their goods as they please, because only their [180] own corporation is allowed to sell in the market.
      • Their meat must be taken, whether good or not.
    • Because of this, a magistrate is always needed to fix the prices.
    • For any free commodity, such as broad cloth, there is no need for this.
    • But it is necessary with bakers.
      • They may agree among themselves to make whatever quantity and price.
    • Even a magistrate is not a good enough expedient for this.
      • He must always settle the price at the outside, otherwise the remedy would be worse than the disease.
      • Because nobody would apply to these businesses and a famine would ensue.
    • Thus, bakers and brewers always have profitable trades.

 

  • Whatever raises the market price above the natural price reduces public opulence.
  • Whatever lowers the market price below the natural price raises public opulence.

 

  • This can usually be done by any law only on exported manufactures.
    • An example is the bounty on coarse linen.
      • It makes linen exportable when they are under 12 pence a yard.
    • The public pays most of the price.
    • It can be sold cheaper to foreigners than what is sufficient for encouraging the labour.
  • In the same way, by the bounty of 5 shillings on the quarter of corn when sold under 40 shillings, as the public pays 1/8 of the price.
  • It can be sold just so much cheaper at a foreign market.
    • By this bounty, the commodity is rendered more comeatable.
    • More corn is produced.
    • But then it breaks the natural balance of industry.
  • The disposition to apply to [181] produce corn is not proportioned to the natural cause of the demand, but to both that and the annexed bounty.
    • It has not only this effect with regard to the particular commodity.
    • but likewise people are called from other productions which are less encouraged, and
    • thus the balance of industry is broken.

 

  • In the ages of hunting and fishing, provisions were the immediate produce of human labour.
    • When manufactures were introduced, everything produced needed a lot of time.
    • The weaver needed a long time before he could carry the cloth. which he bought in flax, to the market.
  • Every trade therefore, requires a stock of food, clothes, and lodging to carry it on.
  • Suppose that there is a stock of food, clothes, and lodging in store.
    • The number of people that are employed must be proportional to it.
    • If the price of one commodity is sunk below its natural price, while another is above it, there would be fewer of the stored stock left to support the whole.
  • On account of the natural connection of all trades in the stock, by allowing bounties to one you take away the stock from the rest.
  • This has been the real consequence of the corn bounty.

 

  • The price of corn was sunk.
    • The rent of the farms sinks also.
    • The bounty on corn was laid on at the time of the taxes.
      • It was intended to raise the rent.
      • It had the effect for some time, because the tenants were assured of a price for their corn at home and abroad.
      • It encouraged [182agriculture and lowered the price of corn.
      • But it raised the price of grass, since the more the corn, the less the grass.
    • The price of grass went up.
    • Meat prices also went up, because of its dependence on grass.
  • So that if the price of corn is reduced, the price of other commodities is necessarily raised.
    • The price of corn has fallen from 42 to 35.
    • But the price of hay has risen from 25 to near 50 shillings.
    • This price affects horses which are not so easily kept.
    • Therefore, the price of transportation also went up.
    • Whatever increases the price of transportation reduces the plenty in the market.
  • On the whole, therefore, the best police by far is to:
    • leave things to their natural course,
    • allow no bounties,
    • impose no taxes on commodities.

 

Words: 2080

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