demand can be increased without raising price, supply remaining the same. That "price may either rise or fall, although supply and demand remain the same, and that whether it rise or fall, the price finally resulting, need not be one at which supply and demand will be equalised."

It is competition alone, and primarily and mainly the competition of dealers, that regulates market value; the activity of competitors depending upon and varying with-not the actual relations of supply and demand-but the varying estimates formed of those relations by competitors of very various degrees of sagacity, and the more or less powerful influence exercised by those estimates on competitors subject to very different degrees of necessity.

The lowest price at which any resolve to sell becomes, for the time being, the current price, and what causes it to be so is competition. What caused certain dealers to adopt that price was the fear that otherwise competition would prevent their selling as fast as they desired. What prevents other dealers from asking higher prices is the knowledge that they will be undersold if they do. Plainly, then, it is competition and competition alone which regulates price, and equally plain is it that competition is not regulated by supply and demand, for in precisely the same relations of supply and demand competition may vary indefinitely. What, then, does regulate competition? My answer is, simply nothing. If it can properly be said to depend upon anything it depends partly upon individual necessity, partly upon individual discretion; and, as for the first of these, there is proverbially, and for the second, manifestly, no law; so likewise there is no law of competition [and, consequently, as he adds], neither can there be any law for price.-(Contemporary Review, October, 1876.)

Walter Bagehot.

The late Mr. Walter Bagehot had all the qualifications necessary to fit him to be a great teacher of Political Economy. Combined with a minute and accurate knowledge of the operations of business of all sorts, he had a highly-trained and acute philosophic mind, and a power of exposition at once felicitous and convincing. In his "Economic Studies" [Longmans, 1880], published after his decease, we have, though in a fragmentary shape, the foundations of a systematic exposition which, had the author lived to complete it, would have effectually relieved the science of many of those excrescent growths of abstruse logomachy by which it is now disfigured, obscured, and obstructed. Those who have not yet read the "Economic Studies" have yet to realise how great a loss befel the State that day when Bagehot died.

Nowhere in the "Economic Studies" does Bagehot speak expressly of a law of natural, necessary, or normal value. The following passages, however, bear on the point: "We have arrived at the principle that within the same nation all commodities will tend to be of the same exchangeable value whose cost of production is identical, and that this cost of production is that which the capitalist expends and the return for which he is willing to take the pains of expending it " (p. 107).

"The pecuniary remuneration to the labourer, and the pecu

niary remuneration of the capitalist seem to me to be essential ingredients in the permanent money price which is to pay them both, for that price must be such as will so pay them, and so pay them adequately" (p. 196). "Cost of production, when analysed properly, is a prompt and efficient regulator of 'value' "(p. 202). Mr. Bagehot's remarkably lucid analysis of market value is summarised in the following passages:—

There are in every exchange no less than six elements which, more or less, affect it in general-first, the quantities of the two commodities, and, next, two feelings in each exchanger-first, his craving for the commodity of the other, and, secondly, his liking or disinclination for his own. In every trans. action, small or great, you will be liable to blunder unless you consider all six (p. 102).

A bargain will be struck when four conditions are satisfied-viz., when the seller thinks he cannot obtain more from the buyer with whom he is dealing, or from any other; when he is sufficiently desirous to sell his article, or enough in want of money to take the price; or when he thinks he can himself obtain the article at a less price, and is willing to take the trouble and incur the risk of attempting to do so; when the buyer thinks that he cannot obtain the article for less, either from that seller or any one else; when he is so eager for the article, or so anxious to invest his money, as to give that price; or when he thinks he can borrow the requisite money, and when he is sufficiently desirous of the article to take the trouble and incur the risk of attempting to do so.

Professor Jevons.

In an ingenious treatise entitled "The Theory of Political Economy" [Macmillan, 1871], Professor Jevons applies the symbols and processes of the calculus to the illustration and demonstration of economical theories. As my mathematical knowledge is, unfortunately, long since dead and buried, I can hazard no opinion as to the success of that portion of his method, and must confine myself to stating, as much in his own words as possible, the conclusions at which he arrives. He maintains that value depends entirely upon utility, and if I understand aright his definition of utility, it means estimated serviceableness. He points out that there is a variation in the degree of utility of different quantities of the same commodity, and that the "final degree of utility is the function upon which the whole theory of economy will be found to turn." "The final degree of utility varies with the quantity of commodity, and ultimately decreases as that quantity increases." For the word "value," in his demonstrations, he substitutes "ratio of exchange,' as being less ambiguous. He makes out that "the keystone of the whole theory of exchange, and of the principal problems in political economy, lies in this proposition-The ratio of exchange of any two commodities will be inversely as the final degrees of uti ity of the quantities of commodity available for consumption after the exchange is effected." Now I frankly confess I do not at present understand this formidable proposition. Some day or another I must crack that nut, or break

my teeth in the attempt; but, meanwhile, it is clear we must not look to Professor Jevons for much simplification of the science,

It is more within our present province to note how he discards the labour theory of value in the following passages :

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The mere fact that there are many things, such as rare ancient books, coins, antiquities, which have high values and which are absolutely incapable of production, now disperses the notion that value depends on labour. Even those things which are producible in any quantities by labour seldom exchange exactly at the corresponding values. If no use could be found for the "Great Eastern" steamship its value would be nil, except for the utility of some of its materials. The fact is, that labour once spent has no influence on the future value of any article-it is gone and lost for ever. In commerce, bygones are for ever bygones, and we are always starting clear at each moment, judging the values of things with a view to future utility. But though labour is never the cause of value, it is in a large proportion of cases the determining circumstance, and in the following way: Value depends solely on the final degree of utility. How can we vary this degree of utility? By having more or less of the commodity to consume. And how shall we get more or less of it? By spending more or less labour in obtaining a supply. According to this view, then, there are two steps between labour and value-labour affects supply, and supply affects the degree of utility which governs value or the ratio of exchange (pp. 158,159,160).

Having thus repudiated the labour theory of value, Professor Jevons, a few pages further on, startles us by speaking of "the wellknown and almost self-evident law that articles which can be produced in greater or less quantity exchange in proportion to their cost of production. The ratio of exchange of commodities will, as a fact, conform in the long run to the ratio of production." * * * And again, "Thus we have proved that commodities will exchange in any market in the ratio of the quantities produced by the same quantity of labour."

I am utterly at a loss to understand how Professor Jevons can reconcile this position with his previous renunciation of the labour theory of value, and with the strictures which in that connection he passes upon Ricardo, who, as he says, "by a violent assumption founded his theory of value on quantities of labour considered as one uniform thing."

The contradiction is a disappointment for which we are only partially consoled by the following remark: "The ratio of exchange (value) governs the production as much as the production governs the ratio of exchange" (p. 183). The observation is as important as it is perfectly just.

There is no doubt that value influences supply as much as supply influences value.

Henry Dunning Macleod.

So far as I am aware, Mr. Henry Dunning Macleod was the first

amongst English economists systematically to confute the labour and the cost of production theories of value. His work, entitled "Principles of Economic Philosophy" [2nd Ed., Vol. 1, Longmans, 1872], contains a most elaborate, and, to my mind, a most convincing demolition of these theories, and by the establishment of one single and invariable law of value, successfully relieves the science of an irksome load of complication. Let us follow him as rapidly as we may along his rigorously logical line of argument. If labour be the cause of all value, it follows:-1. That all variations in value must be due to variations in labour. 2. That all things produced by the same amount of labour must be of equal value. 3. That the value must be proportional to the labour. 4. That a thing once produced by labour must always have value, and the same value. These are all necessary conclusions from the proposition that labour is the origin and cause of value. He shows by examples, of which we shall enumerate a few, that each of these conclusions is palpably inconsistent with fact; therefore the premise from which they are logically deduced must be false.

Many things have value without any labour having been bestowed on them. "The space of ground on which a city stands is in no way the result of labour. Land in the heart of London has been often sold at a rate exceeding £1,000,000 an acre, perfectly exclusive of any buildings upon it. When was any labour bestowed upon it? * ***A frontage in Regent Street, Fleet Street, Cheapside or Cornhill is of far more value than an equal space of ground in a back street. As the tide of fashion, population, and wealth sets towards a locality the ground in it rises rapidly in value, whereas, when a neighbourhood is deserted by fashion and wealth, the ground rapidly diminishes in value. How can these variations in value be due to different quantities of labour? * * The proprietor of

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a coal mine or a stone quarry demands and receives a price for the coal, or the marble, or the building stone as it exists in the mine or the * before a human being has touched it. quarry * * If a person finds a diamond, or a lump of gold by chance, will it sell for nothing before it is picked up? * Many oak trees would sell for £60 or £100 as they stand on the ground. They were perhaps self-sown. How is the value of such an oak tree due to labour? Near these oak trees there may be growing other trees-beeches, elms, ashes of the same size, but they will sell for very different prices to the oaks. Are these variations in value due to different quantities of labour? All things produced by the same amount of labour are not of the same value. If it were so, a diamond and the rubbish it is found in must be of the same value; so a pearl and its shell should be of equal value, and so on.

We need not follow Mr. Macleod furthur through his series of examples. They might be multiplied ad infinitum, as thus:

A struggling artist may expend a year's labour in painting a picture; but if he can find no one to buy it, where is its value?

An author may spend a lifetime in writing a poem ; but if no one will buy a copy, what value results from his labour?

An engineer may construct a machine with the expenditure of much thought and much manual labour of his own and his workpeople; but if it will not serve its purpose, the machine will probably not sell for what was paid for the materials of which it was constructed.

A Wedgwood vase, which was purchased from Etruria last century for 20 or 30 guineas, was sold in 1876 at Christie and Manson's for £735. Was any labour bestowed on that vase since it left the works to account for its value being increased to five-and-twentyfold of the original selling price?

A hunting horse will usually fetch a higher price in November, at the beginning of the hunting season, than in April, at its close. Has the amount of labour bestowed on that horse anything to do with the fluctuations in its value?

Twenty-five years ago a short-horn bull could have been bought for £100; in 1876 a bull of the same strain would have fetched £2,000 or even £3,000. Did the amount of labour requisite to produce and rear and bring to market short-horn cattle increase twenty or thirty-fold in twice ten years?

Consols are now quoted at about 100; some years ago they stood at 85. Will labour in any shape or way whatever account for this increase of value?

If labour is the cause of value, why does the stock of a bankrupt draper sell for less than cost price? Is the quantity of labour expended on it or the quantity of labour which would be necessary to reproduce it diminished?

Mr. Macleod defines cost of production as "the cost of placing the article in the required place," meaning thereby on the market. He points out that "profits are no doubt the inducement to produce but not part of the cost of producing." "It seems better to restrict the expression cost of production' to what mercantile men call prime cost. Profits are the difference between prime cost and market price."

The same process of reasoning which disposed of the labour theory of value is employed by Mr. Macleod to disprove the cost of production theory of value. If, he urges, the cost of production theory of value be true, then (1) all things produced at an equal money cost must be equal in value, independently of any other consideration, which is not the case; (2) all changes in value must be due to changes in cost of production, and to nothing else, which is not the case; and (3) all parts of the same thing, when once produced, must be equal in value, of which there are many instances to the contrary.