thing certain is that the point at which the fall will cease will be one at which supply will not be in excess of demand, but it may quite possibly proceed to some still lower point, at which demand will be in excess of supply. When a hundredweight of fish, put up for sale at Dutch auction, was knocked down for twenty shillings, it did not follow that a single hundredweight was all the actual purchaser was willing to buy at the price, or that other customers would not have been glad to buy at the same price though it did not suit them to pay a higher. Because a horse offered for sale at sixty pounds finds no purchaser, and cannot be sold until its price be reduced to fifty pounds, it does not follow that only one person would give fifty pounds for the horse, or that he himself would not willingly give fifty pounds a piece for two or three such horses.

It thus appears that of the equation theory no part is strictly true, while one-half is quite contrary to the truth; but what is equally worth remarking is that, if the whole of it were literally true, it would be a truth of small significance. Even if it were true that the price ultimately resulting from competition is always one at which supply and demand are equalised, still only a small proportion of the goods offered for sale would actually be sold at any such price. Suppose the glover to whom we have already once or twice referred, to have five hundred pairs of gloves on hand, to begin by selling them at three shillings a pair, and to be tempted, by the rapid sale of two hundred pairs at that price to raise the price to four shillings; suppose him to be subsequently tempted to raise it to five and six shillings successively, but not to be able to sell at the last-named price, and therefore to reduce it to five shillings, at which price the last hundred pairs are sold. The price ultimately resulting from competition would then be five shillings, and this may, for the sake of argument, be also assumed to be a price at which supply and demand would be equalised. But at this price only one-fifth of the whole quantity would be sold, the other four-fifths having been sold at prices at which supply was in excess of demand. Next, suppose the glover to begin by selling at five shillings, to sell a hundred pairs at that price, and then, finding he can sell no more without lowering his terms, to lower them to four and three shillings successively, and to sell his last two hundred pairs at the last-named price. The price ultimately resulting from competition is now three shillings, and at that price also supply and demand may again, for the sake of argument, be supposed to be equal; but at that price only two-fifths of the stock would be sold, the other three-fifths having been sold at prices at which supply exceeded demand. But when we speak of prices depending on certain causes, we surely refer to the prices at which all goods, or at least the great bulk of them, not that at which merely a small remnant of them, will be sold. How can we say that the equation of supply and demand

determines price, if goods are almost always sold at prices at which supply and demand are unequal?

Similar exception may be taken to every other mode of stating the orthodox theory. Suppose it to be true, which it is, that where there is unrestricted competition prices must fall as long as supply exceeds demand; and suppose it to be also true, which it is not, that in the same situation price must rise as long as demand exceeds supplystill, even then none but the extreme prices finally reached would be determined by the relations between supply and demand. None of the prices intermediate between the original set-up price and the final price would be so determined. But it is not at the finally resulting price that goods would be chiefly sold, but rather at the original setup price, or at prices intermediate between it and the final price. So far would the relations between supply and demand be from determining these intermediate prices, that they would not even permit them to remain as they were, but would compel them to keep changing. Of what consequence would it be, then, that supply and demand determined finally resulting prices, if goods were almost all sold before those prices were reached?

But further, not only is the orthodox theory not true-not only would it be of little significance if true-it is not even by its propounders believed to be true, except on certain conditions; and of these conditions there is one which, as will now be shown, is scarcely ever present. Hitherto it has been throughout assumed that goods are offered for sale unreservedly, and that dealers are always content to let them go for what they will fetch. Such has hitherto been throughout the assumption, but such is scarcely ever-nay, might almost be said to be absolutely never-the fact. With one notable exception, that of labour, commodities are almost never offered unreservedly for sale; scarcely ever does a dealer allow his goods to go for what they will immediately fetch-scarcely ever does he agree to the price which would result from the actual state of supply and demand, or, in other words, to the price at which he could immediately sell the whole of his stock. Imagine the situation of a merchant who could not afford to wait for customers, but was obliged to accept for a cargo of corn, or sugar, or sundries, the best offer he could get from the customers who first presented themselves; or imagine a jeweller, or mercer, or draper, or grocer, obliged to clear out his shop within twenty-four hours. The nearest approach ever made to such a predicament is that of a bankrupt's creditors selling off their debtors' effects at a proverbially "tremendous sacrifice; and even they are, comparatively speaking, able to take their time. But the behaviour of a dealer under ordinary pressure is quite different from that of a bankrupt's assignees. He first asks himself what is the best price which is likely to be presently given, not for

the whole, but for some considerable portion of his stock, and he then begins selling, either at that price or at such other price as proves upon trial to be the best obtainable at the time. His supply of goods is probably immensely greater than the quantity demanded at that price, but does he therefore lower his terms? Not at all: he sells as much as he can at that price, and then, having satisfied the existing demand, he waits awhile for further demand to spring up. In this way he eventually disposes of his stock for many times the amount he must have been fain to accept if he had attempted to sell off all at once. A corn dealer who in the course of a season sells thousands of quarters of wheat at fifty shillings per quarter, or thereabouts, would not get twenty shillings a quarter if, as soon as his corn ships arrived, he was obliged to turn the cargoes into money. A glover who, by waiting for customers, will no doubt get three or four shillings a-pair for all the gloves in his shop, might not get sixpence a-pair if he forced them on his customers. But how is it that he manages to secure the higher price? Simply by not selling unreservedly, simply by declining the price which would have resulted from the relations between actual supply and actual demand, and by setting up his goods at some higher price, below which he refuses to sell.

My case has now, I submit, been completely made out. It has, I submit, been conclusively shown that supply and demand do not determine price, either in the manner commonly supposed, or in any other manner. But if supply and demand do not determine price, what does? Or, since it is past dispute that somehow or other they do influence price, how is it that price is affected by them? These questions are more easily asked than answered. To throw down is much easier than to build up, and to point out inaccuracies in one theory than to devise another more accurate in its stead. Unlearning what is wrong is, however, the best preparation for learning what is right; and though getting rid of prejudice is not the same thing as getting at truth, it at least permits truth to be looked for in the right direction. Divesting ourselves, then, of preconceived notions, and commencing the inquiry anew, we have in the first place to observe that there are two opposite extremes-one above which the price of a commodity cannot rise, the other below which it cannot fall. The upper of these limits is marked by the utility, real or supposed, of the commodity to the customer; the lower by its utility to the dealer. No one will give for a commodity a quantity of money or of money's worth which, in his opinion, would be of more use to him than the commodity itself. No one will take for a commodity a quantity of money or of anything else which he thinks would be of less use to himself than the commodity. The price eventually given and taken may be either at one of the opposite extremes, or may be anywhere intermediate between them, but, with so much latitude for

variation, what is it that decides what price shall exactly be? Our best chance of finding this out is by considering carefully all that happens when a sale takes place. Practically, it is almost always the dealer who begins by naming some set-up price. His object is to get in exchange for his whole stock the largest aggregate price which he can get within the period during which it will suit him to keep part of his stock unsold. To sell the whole stock at a moderate price may be better for him than to sell part only at an exorbitant price, and have the rest left on his hands; and it may also be better for him to realise moderate prices soon, and so be able soon to re-invest his capital, than to obtain double the prices after treble the time, during which his money would lie idle. He begins, therefore, by naming the highest price at which he thinks the whole of his stock is likely to be readily purchased. We have seen that there is an extreme point, dependent on the value of his goods in the eyes of his customers, above which their price cannot possibly rise, but he scarcely ever, or rather almost never, asks that extreme price. Why does he not? Why, seeing that he is eager to get the utmost for his goods, does he not ask the highest price which his customers would consent to pay rather than not have his goods? Evidently the only thing that prevents him is the fear of competition-the fear, that is, of being undersold by some rival dealer. It is competition alone that deters him from asking a higher price than he actually does ask— that may perhaps compel him to lower his price, or may, if he has over-estimated its force, permit him to raise his price. It is competition, wherever competition exists, that determines price. Competition remaining the same, price cannot possibly vary. As long as there are dealers ready to sell goods at a certain price, goods of the same description cannot be selling in the same market at a higher price except, indeed, to persons of the class described by Mr. Mill, who, either from indolence or carelessness, or because they think it fine," are content to "pay and ask no questions." Wherever competition exists, competition is the only thing which directly influences price supply and demand cannot affect it except indirectly, and by their influence upon competition.

In this respect their influence, though very great, is far from supreme, as will be perceived on examination of the manner in which it is exerted. The immediate object of every dealer is to get the largest possible sum for the whole of his goods. If there were but one single dealer, he would probably ask the highest price at which he thought all his goods would readily be purchased; but if he have competitors, he must content himself with the highest price at which he will not be undersold. All dealers, while considering at what price they shall offer their goods, consider each for himself the actual state and future prospects of the market. Each takes stock as well as he can

of the quantities already in hand of the commodity he deals in, and estimates as well as he can the additional quantities likely to be brought in within the period during which he can manage to wait, and also the quantities which, within the same period, customers will be likely to take off at different prices. In this manner each frames his own calculation and judges for himself what would be the best price to ask; but different dealers in the same market may calculate differently, or may draw different inferences from the same calculations. Some may estimate lower than others the probable proportion of demand to supply, or may think that the same estimate requires a lower price; or some may not be able to wait so long as others, and may be compelled to adopt a price which will enable them to dispose of their goods more rapidly than others would care to do. But whatever be, for whatever reason, the lowest price at which any resolve to sell, that price becomes, for the time being, the current price. Competition prevents anyone from selling more dearly, and competition, according to the hypothesis, is not keen enough to induce anyone to sell more cheaply. For all dealers have precisely the same object in view; each wishes to sell his whole stock as dearly as possible. Dealers do not undersell each other merely for fun. Each is quite content that all the rest should sell dearly, provided he himself can sell as dearly all he has to sell. If he undersell, it is because he expects thereby to sell either more, or more rapidly, than he could otherwise do; but he has no motive for selling below the current price, if in his judgment customers will readily purchase at the current price all he has to sell. Thus it is competition and competition alone which regulates current price; but what regulates competition? After what has been said it may not unreasonably be thought to be prospective supply and demand, or, in other words, the estimates formed by dealers of the probabilities of the market. And though the same probabilities may be very differently estimated by different individuals, and though the same estimates may affect different individuals very differently, there is, perhaps, one sense in which prospective supply and demand may not inaccurately be said to determine competition. They may be said to do so by their influence on those particular dealers who are most disposed to sell cheaply. For it is undoubtedly the estimate of supply and demand formed by those particular dealers, which makes them decide what selling price will most suit them, and it is their competition which makes that selling price the current price. Their estimate may indeed be found on trial to be erroneous; if so, the errors when discovered will be corrected, and the proceeding suggested by it will be modified. Supply may turn out to be greater, or demand less than was expected, or vice versa, supply may be less, or demand greater. If so, competition will be stimulated in the one case, or