Principles Of Political Economy

§ 4. Miscellaneous Cases falling under this Law.

There are but few commodities which are naturally and necessarily limited in supply. But any commodity whatever may be artificially so. The monopolist can fix the value as high as he pleases, short of what the consumer either could not or would not pay; but he can only do so by limiting the supply. Monopoly value, therefore, does not depend on any peculiar principle, but is a mere variety of the ordinary case of demand and supply.

Again, though there are few commodities which are at all times and forever unsusceptible of increase of supply, any commodity whatever may be temporarily so; and with some commodities this is habitually the case. Agricultural produce, for example, can not be increased in quantity before the next harvest; the quantity of corn already existing in the world is all that can be had for sometimes a year to come. During that interval, corn is practically assimilated to things of which the quantity can not be increased. In the case of most commodities, it requires a certain time to increase their quantity; and if the demand increases, then, until a corresponding supply can be brought forward, that is, until the supply can accommodate itself to the demand, the value will so rise as to accommodate the demand to the supply.

There is another case the exact converse of this. There are some articles of which the supply may be indefinitely increased, but can not be rapidly diminished. There are things so durable that the quantity in existence is at all times very great in comparison with the annual produce. Gold and the more durable metals are things of this sort, and also houses. The supply of such things might be at once diminished by destroying them; but to do this could only be the interest of the possessor if he had a monopoly of the article, and could repay himself for the destruction of a part by the increased value of the remainder. The value, therefore, of such things may continue for a long time so low, either from excess of supply or falling off in the demand, as to put a complete stop to further production; the diminution of supply by wearing out being so slow a process that a long time is requisite, even under a total suspension of production, to restore the original value. During that interval the value will be regulated solely by supply and demand, and will rise very gradually as the existing stock wears out, until there is again a remunerating value, and production resumes its course.

The total value of gold and silver in the world is variously estimated at from $10,000,000,000 to $14,000,000,000; while the annual production of both gold and silver in the world during 1882[211] was only $212,000,000. The loss of gold by abrasion is about 1/1000 annually, and of silver about 1/700, but much depends on the size of the coin. A change in the annual production of the precious metals can have a perceptible effect on their value only after such a time as will permit the change to affect the existing quantity in a way somewhat comparable with its previous amount. The quantity, however, of wheat produced is nearly all consumed between harvests; and the annual supply bears a very large ratio to the existing quantity. Consequently the price of wheat will be very seriously affected by the quantity coming from the annual product.

Finally, there are commodities of which, though capable of being increased or diminished to a great and even an unlimited extent, the value never depends upon anything but demand and supply. This is the case, in particular, with the commodity Labor, of the value of which we have treated copiously in the preceding book; and there are many cases besides in which we shall find it necessary to call in this principle to solve difficult questions of exchange value. This will be particularly exemplified when we treat of International Values; that is, of the terms of interchange between things produced in different countries, or, to speak more generally, in distant places.