believed to have never before been made in print, possibly because no previous writer thought it worth making. If so, some service will here have been done, in pointing out for the first time its importance. Any definitions less distinctive than those just given would fail to mark the exact outlines of actual or present supply and demand.

The nature and limits of such supply and demand being thus ascertained, the manner in which they affect price is next to be considered. The prevailing doctrine on this subject is variously expressed. Sometimes the statement is simply that supply and demand determine price; sometimes, a little less loosely, that price depends on the proportion or relations between supply and demand. Always it is assumed that price rises when demand exceeds supply, and falls when supply exceeds demand. These are the popular ways of putting the case, and in none of them is there anything inconsistent with the more scientific language used by Mr. Mill, who, however, besides systematising previous notions on the subject, has made some material additions to the stock. With arguments which appeared to me to be irresistible, until I caught myself half unconsciously resisting them, he maintains that price depends on the equation of supply and demand; propounding as the law of value or price, that the price resulting from competition will be the one at which demand and supply the quantity supplied and the quantity demanded—will be equalised. These several propositions are quite consistent with each other; they are one and all versions, more or less complete, of a doctrine preached by the first teachers of political economy, and unanimously accepted as axiomatic by their successors. Nevertheless, in opposition to pre-eminent authority and universal credence, the present writer is heretic enough to assert that not one, or at least not more than one, of these propositions is strictly and invariably true. They are indeed not put forward by their propounders unconditionally; they are not represented to be applicable except to a market in which competition is perfectly free and unrestricted-in which dealers, on the one hand, are anxious to get the utmost for their goods, and customers, on the other, anxious to get the utmost for their money. Neither-although this point is not so generally insisted on-can they be applicable unless goods be offered unreservedly for sale, or unless the customers be at least two in number. Evidently they cannot apply either if dealers are resolved not to sell below a certain price, or unless there be customers as well as dealers to compete with each other. But what I presume to assert is, that even though all these conditions be fulfilled, the propositions I am impugning will still be untenable. How can such presumption be excused? How can such audacity be justified? Clearly only by my making good my case, only by my completely proving my assertions. This, however, I shall do to the satisfaction of every competent judge,

if I cite examples inconsistent with the propositions in questionexamples in which the relations between supply and demand do not determine price-in which, though demand exceed supply, price does not rise—in which, at the price finally resulting from competition, supply and demand, or the quantity offered for sale at a certain price and the quantity demanded at that price will not be equal; and such examples I undertake to bring forward.

When a herring or mackerel boat has discharged on the beach, at Hastings or Dover, last night's take of fish, the boatmen, in order to dispose of their cargo, commonly resort to a process called "Dutch auction." The fish are divided into lots, each of which is set up at a higher price than the salesman expects to get for it, and he then gradually lowers his terms, until he comes to a price which some bystander is willing to pay rather than not have the lot, and to which he accordingly agrees. Suppose on one occasion the lot to have been a hundredweight, and the price agreed to twenty shillings. If, on the same occasion, instead of the Dutch form of auction, the ordinary English mode had been adopted, the result might have been different. The operation would then have commenced by some bystander making a bid, which others might have successively exceeded, until a sum was arrived at beyond which no one but the actual bidder could afford or was disposed to go. That sum would not necessarily be twenty shillings: very possibly it might be only eighteen shillings. The person who was prepared to pay the former price might very possibly be the only person present prepared to pay even so much as the latter price; and if so, he might get by English auction for eighteen shillings the fish for which at Dutch auction he would have paid twenty. In the same market, with the same quantity of fish for sale, and with customers in number and every other respect the same, the same lot of fish might fetch two very different prices.

This, however, although a very noteworthy case, is not a case in point, and the only motive for bringing it forward is to show the utility of our amended definitions of supply and demand. If by supply were meant the quantity absolutely offered for sale, there would here be an instance of price varying while supply and demand -the quantity offered for sale and the quantity demanded—remained the same. But if we adhere to our own definitions, we shall see that supply and demand varied just as much as price. When the price was twenty shillings the supply was not the same as when the price was eighteen. In both cases it was indeed a hundredweight of fish ; but in the one case it was a hundredweight offered for sale at twenty shillings, and in the other a hundredweight virtually offered at eighteen shillings; while the quantity demanded, instead of being a hundredweight for which somebody or other was prepared to pay something or other, was a hundredweight for which some one was

prepared to pay, in the one case twenty shillings, and in the other eighteen shillings. This, then, is no example of price varying while the relations of supply and demand remain unaltered; nor does such a variation seem to be possible in a market under the influence of unrestricted competition. But though no instance of this sort be producible, examples of a converse character are as plentiful as blackberries. Although, where competition has full sway, price can never vary if supply and demand remain the same, price often continues the same while supply and demand vary exceedingly. Suppose two persons at different times, or in different places, to have each a horse to sell valued by the owner at fifty pounds; and that in the one case there are two, and in the other three persons, of whom every one is ready to pay fifty pounds for the horse, though no one of them can afford to pay more. In both cases supply is the same, viz., one horse at fifty pounds; but demand is different, being in one case two, and in the other three, horses at fifty pounds. Yet the price at which the horses will be sold will be the same in both cases, viz., fifty pounds. Or again, reverting to our former hypothesis, suppose that when a hundredweight of fish was sold by auction for eighteen shillings, there was no more fish of the same description in the market; but that no one, except the actual purchaser, was willing to buy any at that price, and that even he did not want to buy more than a hundredweight. The whole demand, then, was one hundredweight of fish at eighteen shillings. But now suppose that, though there was only one hundredweight of that sort of fish to be had, the actual purchaser would willingly have bought three hundredweight at the same price if he could have got them; or suppose that two other customers as well as himself, though neither of them willing to pay more than eighteen shillings a hundredweight, would each of them have been glad to take a hundredweight at that price if he had not forestalled them. The total demand would then have been three hundredweight at eighteen shillings, yet the resulting price would still have been only eighteen shillings, the same as it was when the demand was only one hundredweight, the supply all the time remaining the same. Here are palpable examples of the relations between supply and demand varying without any variation of price, and such examples might evidently be multiplied at pleasure.

Perhaps this sale of fish may be deemed an exceptional transaction. Even if it were so, its importance as an example would be in no degree impaired, for a scientific law admits of no exceptions whatever; one single exception suffices to deprive it of all legal character. If one single instance could be found or conceived in which water failed to seek its own level, that water seeks its own level would cease to be a law. So, however exceptional might be an instance of price

remaining unaffected while supply and demand varied, that one instance would be not the less conclusive against the notion that price depends on supply and demand, or that the relations of these determine price. But, in fact, the instance selected, instead of being exceptional, is almost typical of commercial transactions in general, most of which partake more or less of the character of sales by auction. Every trader who wishes, as all traders do, to get the utmost for his goods, begins by setting a price upon them, probably the highest at which he thinks they can be speedily sold. If the sale simply answers his expectation, he will have no motive for altering his price, but he will be tempted to raise or will be obliged to reduce it, either at once or gradually, if he finds the goods go off much more rapidly in the one case, or much more slowly in the other, than he anticipated. In either case, he will imitate the practice of an auctioneer, adopting the Dutch method when he reduces the set up price, and the English mode when he raises it. The price finally reached may probably be the highest at which the stock then remaining in hand can be disposed of, but although in that case no customer might be willing to pay a higher price for any part of that remainder, the whole body of customers might be very glad to take much more than the whole remainder if more could be got at the same price. They might or they might not be; but whether they were or not, the price in the circumstances supposed would remain unaltered, that is to say, the price would not vary, whether, while supply remained the same, demand were or were not in excess of supply. It would not, in short, follow that, because price had reached the utmost height at which any of the customers would purchase at all, therefore the stock in hand was the utmost which customers would have consented to purchase at that price. Exceptions, it is said, prove the rule, but to the rule that price depends on the relations between supply and demand, the exceptions are evidently so numerous, that beneath their weight of proof the rule itself would be crushed as completely as Tarpeia was beneath the weight of Sabine bucklers.

The illustration already used will serve to refute another of the popular fallacies respecting supply and demand. The demand of horses at fifty pounds each, or of fish at eighteen shillings a hundredweight, may, as we have seen, be three times as great as the supply, without occasioning any increase of the price of horses or fish. When a tradesman has placed upon his goods the highest price which any one will pay for them, the price cannot, of course, rise higher, yet the supply may be below the demand. A glover in a country town, on the eve of an assize ball, having only a dozen pair of white gloves in store, might possibly be able to get ten shillings a pair for them. He would be able to get this if twelve persons were willing

to pay that price rather than not go to the ball, or than go ungloved. But he could not get more than this, even though, while he was still higgling with his first batch of customers, a second batch, equally numerous and neither more nor less eager, should enter his shop, and offer to pay the same but not a higher price. The demand for gloves which at first had been just equal to the supply would now be exactly doubled, yet the price would not rise above ten shillings a pair. Such abundance of proof is surely decisive against the supposition that price must rise when demand exceeds supply. Although, however, price does not always rise when demand exceeds supply, it must needs fall when supply exceeds demand, provided always that competition is allowed free play, and that goods are offered unreservedly for sale. This is the one solitary truth among the fallacies of the popular theory. In the circumstances supposed, a dealer must either lower his terms or part of his stock will be left on his hands. Three horses cannot possibly be sold at fifty pounds a piece, nor three hundredweight of fish at eighteen shillings a hundredweight, nor three pair of gloves at three shillings a pair, if at those prices only one horse, or one hundredweight of fish, or one pair of gloves be demanded. If a dealer wish to sell more than is actually demanded, he must tempt customers to demand more by reducing his price.

Next we come to the supposed dependence of price on the equation of supply and demand; and here I find myself in collision with Mr. Mill, feeling in consequence a little as Saul of Tarsus might have felt, if, while sitting at the feet of Gamaliel, he had suddenly found himself compelled by a sense of duty to contradict his master. But Mr. Mill is not one of those teachers who desire that their scholars should prefer them to truth, as Cicero foolishly boasted of preferring Plato. On the contrary, there is nothing respecting which he is more likely to be curious than the grounds on which others differ from his views. Now his theory is that price is always tending to a point at which supply and demand will be equal; that price will keep falling towards this point as long as supply exceeds demand, and rising towards it as long as demand exceeds supply. I venture to assert that no part of this theory is strictly or literally true. One half of it, I submit, was completely refuted when examples were given of demand greatly exceeding supply without occasioning the smallest increase of price; and with regard to the other half also, I undertake to show that, though perhaps near enough to the truth for most practical purposes, it is not accurate enough to satisfy the rigid requirements of science.

No doubt, when of goods offered unreservedly for sale; the supply exceeds the demand, the whole stock cannot be sold unless the price be lowered to a point at which supply and demand will be equalised; but it does not follow that the fall of price will then cease. The only