laborer is worthy of his hire," and ought not to be kept in poverty and privation, while they who do but little or nothing are abundantly supplied with the means of gratifying their wants, to be at all a favorite with those who seem to think that men were created to produce wealth, and gentlemen to enjoy it.

25. Price determined by value.

It is a fact of daily observation, that where any commodity is abundant and but few comparatively seeking for it, it is cheap. But in the inverse state of things, when an article is scarce, and many persons are in want of it, it is dear. And thus with no change in either the intrinsic or the exchangeable value of an article, its price may vary to almost any fraction or any multiple of its ordinary amount. And thus fluctuations affect what is called the "price" of articles.

But besides these changes there is a something that tends gradually and steadily downwards with every advance in machinery or skill, every increase in the division of labor or saving in the cost of exchanges; and this we call "value." And it is not uncommon thing to hear people say of a thing in times of high prices, "it is worth so much." But worth is value, and not price. But again we say,

"it ought not to cost so much," which means that its price is above its value.

26. Supply and demand, as affecting price.

It is manifest that the same result may be obtained in either of two ways, (1) an increase of the supply, while the demand remains the same, or (2) increase of the demand, while the supply remains the same. Hence this relation is usually called the ratio of supply and demand. And for many purposes it may be regarded as a ratio, in the strict mathematical sense. But for other purposes, though a relation, it is not a ratio. The formula is as follows:

P=V+ (ds)

This will satisfy all cases. If the demand be greater than the supply, the price will be greater than the exchangeable value, and may rise to the intrinsic value, and then its sale will stop; the price can go no higher. If the supply be greater than the demand, the price will fall and there is no limit to its decline.

When the excess of supply over demand becomes so great that price becomes negative, the commodity is regarded as a nuisance, a dead elephant, and we are obliged to pay something for getting rid of it. And so on the other hand, if the demand be anything, and the article a necessity of life, as food,

the air we breathe, or the water we need to slake our thirst, the price which the article will command becomes practically infinite; one will give all he has, and do all he can to get it.

Hence the relation of supply and demand cannot be a ratio, in the mathematical sense-for the value of a ratio can never be negative or a minus quantity so long as both terms are positive. Consequently, if the relation were ratio, the price would always be somewhat above the exchangeable value, however great the supply, and however small the demand.

There are three very important considerations by which the relation of supply and demand are affected.

(1) The length of time that must elapse before another supply of any commodity can be produced. Thus a wheat crop, depending upon the seasons of the year, can be reproduced only at the end of another season. If, therefore, the crop should happen to be short at one harvest, the price will rise much more in consequence, than it would if another could be produced within the next three months. This of course implies that there is labor and capital enough to produce the commodity in the shorter time, which however is usually the case.

(2) The length of time during which any commodity can be kept without decay. The gardener or green-grocer, who has fresh vegetables on hand, must sell them soon or they will become worthless by the process of decay. If, however, they could be kept indefinitely, he could hold them, until either the demand should become greater, or the supply less, and thus protect himself against the loss that would otherwise be inevitable. Hence, as a general rule, the longer an article can be kept, without diminution of intrinsic value, the less liable to fluctuations in price.

(3) The third consideration is this: If the article which is short in supply be one that is regarded as a necessity of life, the rise in price will be greater in consequence of the shortness, than if the article were one that could be more easily dispensed with.

Thus, suppose the crop of wheat is short; people are alarmed, and each one becomes anxious to provide for himself. Speculators are anxious to buy, in view of the rise in prices, and the demand becomes greater than it would have been in view of the mere fact of a deficiency in the crop, to that amount. But if the article be one that people can do without, many will conclude to do so, rather than · pay the higher price, and thus will be in no hurry to buy. And this disinclination to buy-this

knowledge of the fact that they can do without the article, will check the upward tendency of the price of the commodity.

28. Illustration.

To illustrate these relations, suppose that some one should establish a caravansera in the desert, and undertake to supply the travelers with water; the article has great intrinsic value, but ordinarily no exchangeable value. At his caravansera in the desert, however, it would have cost him in the labor of transportation, quite a sum. It would therefore have for him and his customers exchangeable value, and a price.

Suppose now a railroad, or other facility for transportation be built, by which the labor of getting a supply would be lessened; the exchangeable value would be diminished accordingly, and so would the price.

Doubtless he would be obliged to charge something for the use of the railroad; but that fact would not interfere with our calculation; for we shall see bye-and-bye that capital itself can be resolved into labor, and that in paying for the use of it we are but paying for past labor. So that what we pay for, in any case, is only labor-labor performed either in the past or at the present.