possessor of five hundred dollars than by the possessor of one million dollars. Marginal value of an object diminishes inversely with the supply one has of the object. This supposes that a - man remains unchanged in his disposition with regard to the acquisition of things, and if this supposition is granted, the proposition as stated is called by Marshall the Law of the Diminution of Marginal Utility.

Yet there will be an average degree of utility for the great majority of all the individuals, and this average marginal utility will determine the average marginal value, which will be the actual value of the commodity.

For illustration, take wheat, of which a man has a certain quantity. What would be the value of a bushel of wheat, if he were to exchange?

The wheat may be divided into portions. One portion is needed by the owner for the making of bread for his actual sustenance. This portion will have an infinite value to him and he would not sell it for any price.

A second portion is needed for seed for the coming crop. This portion is of less actual utility than the former and will have less value.

A third portion is needed for the feeding of his stock. This is less needed than the other two, and has still less value.

A fourth portion is needed for the making of pastry. This portion may more easily be dispensed with and is of less value. than the first three.

Now if the man wanted to exchange any portion of his wheat, he would exchange the last portion, which is of least utility to him and would have least value. The actual value of the wheat is estimated not by the sum total of the values of all the portions, but by the least useful portion or the marginal utility of the whole.

Another, who wishes to exchange boards for this man's wheat, will likewise offer that portion of his commodity which is the least useful to him, which has a marginal utility, and will have a marginal value.

If the exchange between the two is not demanded by any great necessity, the exchange value will be fixed at a certain level, which will be midway between the value that would be fixed by higher degrees of want and by no want at all. When many exchangers are in similar conditions, the exchange level of wheat and of boards will become the general relative exchange value of wheat and boards.

The theory of marginal value has been widely propagated in recent times and has gained acceptance among many economists.

It is objected to, because all things are not capable of such minute division as the theory supposes, and, as a matter of fact, people do not actually enter into any such classification of utilities and wants, nor do they analyze the value of a thing, distinguishing between total value and marginal value.

Moreover, men are not stable in their desires, there is no long permanency in their disposition to acquire things, nor does the acquisition of things satiate the appetite. As a result, marginal utility cannot be a general determinant of values. (Cf. Devas, Political Economy, p. 196; Antoine, Cours d'économie sociale, p. 274.)

IV. PRICE

Definition and Explanation of Price.

Price is the value of

an object expressed in money. Value is not the same as price. Value expresses a relation of an object with other objects for which it can be exchanged. It depends, as we have seen, on its two principal elements, utility and limitation of quantity. If the utility of an object is increased, its value increases; if the quantity is increased, the value of a given amount of it decreases.

But price is a relation of the value of an object to money. This relation we might express in any other material, as corn; in rice, as did the Japanese; in cotton stuffs, as did the African negro; in fox or otter skins, as did the Canadian trapper; or again in labor, as the Socialists would have it; but the civilized world has adopted the precious metals coined as money.

Money has become the measure of value. The value of all things is read in terms of money, and in estimating the relative values of different things, the things are not compared one with another, as was done in barter, but with the common standard, money, and thus their relative values become known.

The price of any object should bear some relation to the value of the object. By value here is meant exchange value or economic value, as explained in a preceding page.

The economic value is caused by three factors, the utility of the object to satisfy a want, the scarcity of the object, and the difficulty of attainment or of production. The price of an object, therefore, will bear relation to the same factors.

It will depend, in practically equivalent terms, on demand, supply, and cost of production, the utility of the object being the measure of the demand for it; the scarcity of it indicating the relative supply; and the difficulty of production depending on the cost to the producer in placing the object on the market.

Price will depend, moreover, on the rate of return for invested capital prevalent in the country or locality of which there is question. Producers will expect a return for their capital equal to the current rate of return for capital in general. In some countries and at some periods the average general return for capital invested may be comparatively small; in other countries and at other periods the average general return will be comparatively great. The prevailing rate of profit will exert an influence on the prices of commodities.

Price will depend, again, as we shall see later, in treating of money and prices, on the amount of money in circulation.

Scholastic Doctrine of Price. According to Scholastic writers, there is what is called a just price, a price founded on justice. It demands that the price should maintain a proportion of equality between the object purchased and the sum paid for it, and hence that the price should be a sum of money equal to the value of the object.

This price is Legal, when determined by legal statute. During the Middle Ages, while the guilds were in existence, the prices

of most of the articles of commerce were fixed by law. To-day the law determines the charges for certain services, as cab service in certain cities, and railroad transportation.

The price is a Natural or Common price, when it is fixed by the common estimation of men. This common price will depend on the utility and the general cost of production of the object itself, as well as on various social circumstances, such as the abundance or scarcity of the object and of money, the different customs of life in different places, supply and demand, the expense and risk of transporting and marketing the object.

The common price is not a fixed and definite figure. It allows a certain amount of latitude. Hence, there is the highest, the lowest, and the average just price. The highest and the lowest limits are figures above and below which the article is not sold. The price may vary within these limits according to the greater or less intensity of the determining circumstances already mentioned.

At times, an object may have a specially high price beyond the limit of the highest price fixed by the common estimation of men, owing to the appreciation of the object by the owner, because of its peculiar utility to him and the special degree of privation he will suffer upon parting with the object. The excessive price he asks for the object would not in such a case violate justice.

The owner of an object would violate justice, however, were he to charge an exorbitant price, because of the special utility or necessity an object might have exclusively for the proposed purchaser; in such a case the owner would be endeavoring to make a profit out of a utility not his own but pertaining to another.

From this account of the Scholastic theory of price, it will be seen that most of the fundamental principles set forth to-day by modern economists were known years ago to Catholic writers. The Liberal School claims that there is no such thing as a just price," or rather that any price is just which results from economic principles or forces, such as supply and demand.

Buyer and seller are allowed to determine what sum of money shall exchange for any commodity or service, and the agreement between the buyer and the seller makes the price just, whatever be the circumstances under which the agreement is effected.

Market Price. - Market price is the price any commodity has in its market at a specified time. Thus, we may turn to the market list and find the market price of corn, of wheat, of sugar, of salt.

"A market exists when purchasers and sellers of a single commodity come together in such freedom of intercourse that they establish a single price at which the commodity exchanges." (Bullock, Introduction to the Study of Economics, p. 184.)

Each commodity will have a separate market, and we can speak of the steel market, the iron market, the wheat market.

There are wholesale markets and retail markets. Wholesale markets may be very large, embracing a whole country, and even be international. The prices will tend to be uniform throughout the whole market. Thus, wheat in the United States and Europe. The wholesale dealers compete in distant markets.

Retail markets are restricted to a single locality, to a street even, and prices will be different in each locality, even in each store. The retail dealers do not compete usually in distant markets.

The market price fluctuates up and down according to certain laws which we shall study presently, but there is a certain fixed price about which these fluctuations turn. This fixed price is called the Normal price.

Certain objects have their own special markets, in which dealers appear through their brokers and buy and sell and determine the prices of the objects. Such special markets are known as Exchanges.

Exchanges. Among the principal exchanges may be counted the London Stock Exchange (established in 1773), which deals in all kinds of commodities, stocks, bonds, and bills; the New York Stock Exchange (established in 1817) and the Paris Bourse (established in 1726), which deal chiefly in public and corporate