What Regulates the Price of Commodities?

Every commodity has two different prices which are apparently independent, but connected:

• The natural price
• The market price

These are regulated by certain circumstances.

The Natural Price

People must make as 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.

• The trade of the tailor and weaver takes a lot time and effort to learn
• The trade of a day-labourer are learned by casual observation and a little experience

A trainee in weaving produces useless work for a long time.

Therefore, his master must be compensated for his training, maintenance, and expences. When he enters the business, 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 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
• 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.

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 3 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 are dear. While iron, which is much more useful, is much cheaper. But this depends principally on the last cause, as number 3.

3. The riches or poverty* [purchasing power] 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 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 a sea-voyage, it always creates a famine. The price then becomes enormous.

Wheat 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.