Prices are Demand Driven

Part 14

Aristotle has clearly proved that the general demand for anything constitutes the true measure of its value.

But this is not the only standard. The humours and caprice of mankind dictates and controls all regulations. It gives a nominal value to many superfluities.

Pliny says that it was luxury that first discovered151 the value of pearls.

Cicero observed that the worth of such things can only be estimated by the desires of men.

But on the other hand, the plentiful supply of necessaries lowers their price.

Seneca proves this by many instances in Chapter 15, Book 6 on benefits.

He concludes that “the price of every thing must be regulated by the market. Despite all your praises, it is worth nothing more than it can be sold for.”

Paulus the Lawyer adds: “The prices of things do not depend upon the humours and interest of individuals. It depends on common estimation as to the worth which they are of to all.”

Hence, things are valued in proportion to what is usually offered or given for them. This rule admits a great variation and latitude, except in certain cases, where the law has fixed a standard price.

In the common price of articles, the labour and expence of the merchant in procuring them is taken into the account.

The sudden changes in prices are so frequent in all markets. These depend on:

• the number of buyers [demand]
• the amount money and marketable commodities [supply]

A thing might be lawfully bought or sold above or below the market price.

• A thing might be damaged and lose its original or common value
• An unsold item might be sold from some particular liking

All these circumstances should be made known to the contracting parties. Regard too should be had to the loss or gain arising from delay or promptness of payment.

Part 15

In buying and selling we must observe, that:

• the bargain is completed from the very moment of the contract, even without delivery.
• this is the most simple way of dealing.

Thus Seneca says, that a sale is a transfer of one’s right and property in a thing to another, which is done in all exchanges.

But if it be settled that the property shall not be transferred immediately, still the seller will be bound to convey it at the stated period, taking in the mean time all the profits and losses.

152 Whereas the completion of bargain and sale, by giving the purchaser a right of possession and ejectment, and conveying to him the hazard with all the profits of the property, even before it is transferred, are regulations of the civil law not universally observed.

Some legislators have made the seller answerable for all accidents and damages, till the actual delivery of possession is made, as Theophrastus has observed in a passage in Stobaeus, under the title of laws, where the reader will find many customs, relating to the formalities of sale, to earnest, to repentance of a bargain, very different from the rules of the Roman law.

Among the Rhodians, Dion Prusaeensis informs us that all sales and contracts were confirmed by being entered in a public register.

If a thing has been twice sold, of the two sales the one is valid, where an immediate transfer of the property has been made, either by delivery of possession, or in any other mode. For by this means the seller gives up an absolute right, which could not pass by a promise alone.

Part 16

It is not every kind of monopoly that amounts to a direct violation of the laws of nature. The Sovereign power may have very just reasons for granting monopolies, and that too at a settled price: a noble instance of which we find in the history of Joseph, who governed Egypt under the auspices of Pharaoh.30 So also under the Roman government the people of Alexandria, as we are informed by Strabo, enjoyed the monopoly of all Indian and Ethiopian goods.

A monopoly also may, in some cases, be established by individuals, provided they sell at a reasonable rate. But all combinations to raise the necessary articles of life to an exorbitant rate, or all violent and fraudulent attempts to prevent the market from being supplied, or to buy up certain commodities, in order to enhance the price, are public injuries and punishable as such.31 Or indeed153 ANY WAY of preventing the importation of goods, or buying them up in order to sell them at a greater rate than usual, though the price, UNDER SOME PARTICULAR CIRCUMSTANCES, may not seem unreasonable, is fully shewn by Ambrose in his third book of Offices to be a breach of charity; though it come not directly under the prohibition of laws.

Part 17

The uses of money do not result from any value intrinsically belonging to the precious metals, or to the specific denomination and shape of coin. It comes from the general application which can be made of it, as a standard of payment for all commodities.

For whatever is taken as a common measure of all other things, ought to be liable, in itself, to but little variation.

The precious metals are of this description, possessing nearly the same intrinsic value at all times and in all places.

Though the nominal value of the same quantity of gold and silver, whether paid by weight or coin will be greater or less, in proportion to the abundance or scarcity of the things for which there is a general demand.