the commodity is worth ten dollars, or ten pounds, etc. That is its price. defined. The price of a thing is, therefore, the expression of the relation Price between the value of the thing and the value of a certain weight of gold or silver; or, to put it more briefly, it is its value expressed in money. ... 47. A provision market in a great city 1 Under modern industrial conditions it often happens that the complex division of labor requires the bringing together of large numbers of laborers and other industrial agents. It is primarily because of this necessity that there have grown up in the United States great industrial cities, in which large numbers of workers coöperate with one another under the control and superintendence of business men. The products of these specialists are carried to market by various agencies of transportation, and transportation in turn brings to the city most of the food which is in demand by the various classes of the urban population. The following description of a provision market in Chicago will give some idea of the dependence of urban dwellers upon the mechanism of exchange: Industry tends to concentrate in cities. The prod There is a street in the city of Chicago which is only five blocks long. It is said to be one of the busiest streets in the world. The uce market in Chicago. perishable produce which Chicago needs for its food is handled there every day. . . . One should picture this short, narrow street, packed with thousands of wagons and automobiles which are coming in or slowly making their way out with the loads of farm products to be distributed to the stores throughout the city. The warehouses and sidewalks are filled with the produce for the day's sales. This produce has been coming in by the carload during the night, and the street begins to be busy at an early hour in the morning in summer at daylight, in winter before. Each warehouse specializes in some particular class of produce. Here are One is devoted entirely to trading in cheese. One four-story building gathered is filled with Spanish and Bermuda onions. Another has hundreds 1 From the Department of the Interior, Bureau of Education, Lessons in Community and National Life. Washington, 1918. Series B, pp. 34-39. products from all parts of the country. The Some ways in which provisions reach the city market. of bags of potatoes piled from floor to ceiling. These come from states as distant as New Jersey and Montana. A number of cellars of these warehouses are filled with ripening bananas from Cuba and pineapples from Porto Rico. Fruit from California and Florida is the chief stock of other warehouses. Many of the warehouses handle only fresh vegetables. These come from the truck farms around Chicago and throughout the Mississippi valley. For example, tomatoes are brought early in the spring from Mississippi, and as the season advances the supply comes from states further north. In like fashion in the autumn it moves southward from Maine. The wide territory from which Chicago draws these perishable products makes it possible for the people of the city to have fresh summer vegetables at all seasons of the year... ... The markets which we have been describing . . . would not be possible without the labor of a great number of people, some of whom are concerned with the distribution of produce to the consumer, some with bringing the produce into the city, others with securing it at the points where it is produced. . . . The man who comes into the most direct contact with the producer is the "buyer." . . . He goes through a producing territory, making contracts with the producers for the whole or a stated portion of their output, or buying from day to day wherever he can secure goods at satisfactory prices. He keeps in close touch with his employer, advising him by letter, telegraph, or telephone of the condition of the field and the outlook as to quantity, quality, prices demanded, and amount and character of competition from other buyers. In turn he is advised about the demand at the market and instructed as to how much to buy and what to pay. The buyer turns his purchases over to the transportation companies, who in turn deliver them to the market. Goods may arrive at the city market under other conditions. Sometimes the producer ships his products to a commission merchant, who sells them for him. Sometimes selling associations of the producers send their products to their own representatives on the market. Producers in remote regions sometimes combine their shipments and send them in carload and trainload lots to the large cities, where they are sold at public auction. The auction sale generally takes place at railroad freight yards or at steamship piers. The commodities sold by auction are usually limited to the citrus fruits from California, Florida, and foreign countries, and the deciduous fruits, such as cherries, grapes, plums, peaches, apples, and other fruits from the West and Northwest. ... When the goods reach the market they are handled by a number The of different kinds of traders. The most familiar type is the retailer, retailer. whom everybody knows, because it is he who supplies the family with the small quantities needed from time to time. tages of ex change are no longer denied. There was formerly some discussion as to whether or not exchange The advanwere productive. It was said, for example, that exchange could benefit no one, for if an exchange is a fair one and the values of the goods exchanged are equal, there can be neither gain nor loss on either side. Sometimes, too, it was said that one party to an exchange of commodities was certain to lose, for how could anyone reap an advantage from exchange without the other party sustaining a loss? These arguments no longer carry weight, and to-day it is universally agreed that the voluntary exchange of products is generally advantageous to both parties to the exchange. The advantages of exchange are outlined by Professor Gide in the following summary: ... We shall state briefly the advantages of exchange from the practical point of view. enables us to utilize wealth which would (1) Exchange enables us to utilize, in the best way possible, a Exchange large quantity of wealth which without exchange would remain unused. Without exchange, what would England do with her coal, California with her gold, Peru with her guano, Brazil with her chinchona bark? When analyzing the notion of wealth, we found that an indispensable otherwise condition of any object ranking as wealth was its capability of being utilized. And in order that this may be effected, the article must be conveyed, by means of exchange, to the person who is to use it the quinine to the fever patient, the guano to the farmer, the 1 From Charles Gide, Principles of Political Economy. D. C. Heath & Co., 1903; pp. 198-200. remain unused. It likewise enables us to utilize productive capacities which would otherwise remain inactive. The division pends upon exchange. coal to the manufacturer. Suppose that exchange were suppressed everywhere, and that all persons and all nations were obliged to keep all the wealth they possess. What an enormous mass of wealth would thus be condemned to remain useless, and doomed to destruction! . . . If In other words, we must regard exchange as the last of the series of productive acts that begins with invention (which is also an immaterial act) and continues throughout the whole list of agricultural, manufacturing, and transporting industries, bringing products step by step nearer to their final destination, which is to come into the possession of the persons who will use them. These steps are changes of form, changes of place, and changes of ownership — all three of which are equally indispensable to the attainment of the final result. (2) Exchange enables us to utilize in the best way a host of productive capacities which without exchange would remain inactive. there were no such thing as exchange, each man would be compelled to produce all that is necessary to supply his wants. If his wants were ten in number, he would have to ply ten different trades. Whether he did this well or not would not alter the case; he would be obliged to regulate his production not according to his aptitudes, but according to his wants. With the introduction of exchange, however, the state of affairs is completely changed. Everyone is then sure of obtaining by exchange just what he needs; every one, moreover, devotes himself to the production of those things which he can produce best. He regulates his production, not according to his wants, but according to his aptitudes or his means. Before the era of exchange, everyone was obliged to produce what he needed most; now everyone devotes himself solely to the production of whatever he can most easily produce. This is a most important and wonderful progress. If there were no exchange, association and division of labor would of labor de- require a previous agreement among those who are to work in harmony. What would be the use of the most perfect division of labor in an immense factory producing (let us say) hats, unless other persons were simultaneously producing food, shoes, houses, etc., to exchange for these hats? Exchange dispenses with the necessity for a preliminary agreement, and thus enables the division of labor to extend beyond the narrow circle of the home and the workshop, and spread over the whole industrial community, reaching even to the extremes of the earth. Under a system of exchange, each man no matter where he The results may be produces according to his natural or acquired aptitudes of exchange. and according to the facilities offered by the region which he inhabits; he devotes himself entirely to one kind of labor, and always puts the same product on the market, with a certainty that the ingenious arrangements of exchange] will permit him to receive in exchange any other objects that he wants. It has often been remarked that the things which any one of us consumes in a day, are the combined result of the toil of hundreds or perhaps thousands of workers who are united one to another by invisible but none the less real bonds of association. Questions on the foregoing Readings 1. Under what circumstances would it be uneconomical to increase the product of, say, a manufacturing plant? 2. What does Adam Smith say concerning the relation of the division of labor to the extent of the market? 3. Name some sorts of industry which can be carried on only in a large town or city. 4. Explain the relation of water-carriage to the market. 5. Why was the American market a relatively narrow one at the time that Adam Smith was studying the relation of the market to the division of labor? 6. What was the first important railway in the United States? 7. When was this railway opened to traffic? 8. Describe the first steam locomotive used by this railway. 9. What was the effect of the opening of this railway upon the exchange of products? 10. What is necessary to the effective exchange of products besides the division of labor and the development of transportation? 11. Describe the manner in which barter clogs or embarrasses the exchange of products. 12. Name some commodities which at different times, and in different countries, have been used as money. 13. Why are metals more suited to be used as money than are other commodities? 14. Give an example of how money facilitates exchange. |