thus enter in the long run into the determination of the normal price of all portions of the industry's output. This is not true of joint expenses, for these affect only what we have termed the collective normal price of the joint products. Thus neither steaks nor hides have a separate normal price. But each standard grade or type of product in the output of the furniture industry has a normal price of its own.

The Surplus of Bargaining. - Demand and supply do not) always fix price at a definite point. The price of horses of any given grade, for example, is fixed only approximately by market conditions. In the sale of a horse there is room for considerable latitude of opinion as to the price that should be paid. If the lowest price that the seller will take is considerably below the highest price that the buyer will give, just where between these limits the actual price will be finally fixed will depend upon the relative skill at bargaining of the seller and buyer. In the case of a horse trade, this opportunity for the "higgling of the market " has become proverbial, and in many other kinds of exchanges the efficient bargainer has an opportunity to get for himself a surplus above his minimum selling price, or below his maximum buying price. Real estate transactions furnish a good example. In the case of the great commodities of the world market, like wheat, cotton, and iron, the price is set so accurately by market conditions that the gains of bargaining are relatively small. In general, the wider the market, the more general the use of the commodity, the greater the ease with which the commodity can be sorted into standard grades (as in the case of wheat and cotton), the more accurately will competitive forces fix a definite price. Goods which cannot be standardized, each unit of which possesses some unique qualities, give most scope for the variations in the valuations of individual buyers and sellers. In such cases supply and demand do not fix a price point, but only certain limits within which the price must fall. The widening of the market, however, and the increasing standardization of commodities an effect of machine production are bringing a larger and larger proportion of goods into the field where uniform market valuations dominate.

Non-reproducible Goods. Some economic writers have made a special class of such goods as great works of art. These are absolutely unique, in that no copy can have anything like the value of the original. The price of such non-reproducible goods has an upper limit fixed by the highest subjective valuation set upon it by any possible buyer. The lower limit will be either the seller's own subjective valuation, or the second highest valuation set by any competing buyer, according as one or the other of these two is the higher. Between the upper and lower limit the exact fixing of the price is a matter of pure bargaining. Such cases should not be confused with monopoly price, as has been done by some writers. The products of almost all the industrial handicrafts, as well as the products of the avowedly artistic pursuits, possess a non-reproducible element of individuality, that removes them to a greater or less extent from the operations of the law of normal price. A commodity may possess this quality of uniqueness to such an extent that it is not affected at all by the forces determining the value of the general class of goods to which it belongs, and in this case its owner may be said to have a monopoly of it. But it is better to look upon the valuations of such non-reproducible goods as determined by individual valuations and the process of bargaining. The "normal" price of such goods is simply the highest price that can be got for them a statement which does not hold true of most monopoly goods. For monopoly goods are not necessarily unique or non-reproducible. They differ from ordinary competitive goods, however, in that they cannot be reproduced except by the monopolist.

Retail Prices. The retail prices paid by the individual consumer do not always respond to all the variations in wholesale prices brought about by changes in supply and demand. There are sometimes tacit or explicit local price agreements between local merchants, which apply even to competitively produced goods. Some retailers consistently sell a few kinds of goods at less than cost to attract custom for the goods on which they may make a profit. Merchants who make a specialty of a high class of goods, and thus cater to a wealthy clientele, are

apt to exact higher prices for ordinary goods than do those merchants who have to deal with a poorer class of customers. Custom has more effect on retail than on wholesale prices. The prices of various articles sold as "men's furnishing goods" form a good example of the influence of custom. Retail prices are also governed by the value of the coins that are in general use, and are generally expressed in round numbers. In the long run, demand and supply govern retail prices, but they do not set a definite price point so accurately as they do in the case of wholesale prices.

Public Authority and Value. - In the Middle Ages there was considerable speculation by theologians and legists about the subject of "just price" the value at which things ought to exchange for other things. This idea denotes an important difference between the medieval and modern concept of value. Professor Ashley has put it clearly in these words: "With Aquinas, the greatest of the medieval schoolmen, it [value] was something objective; something outside of the will of the individual purchaser or seller; something attached to the thing itself, existing whether he liked it or not, and that he ought to recognize. And as experience showed that individuals could not be trusted thus to admit the real value of things, it followed that it was the duty of the proper authorities of state, town, or gild to step in and determine it, and what the just and reasonable price really was." This "just and reasonable price" was very often thought to be that price which would afford a reasonable compensation for the labor of the producer. When in more modern times theological speculations began to yield precedence to inquiries into "natural laws," the idea of just price was supplanted by the idea of "natural price." Sometimes this was interpreted as determined by the value of the labor put into a commodity (this was the dominant idea during the eighteenth century), but the growth of capitalistic production necessitated the recognition of the other elements in the expense of producing a commodity as part of its natural price. Modern economic science, as we have seen, applies the term "normal price" to the expense of producing a thing, but interprets it

only as an important factor controlling the long-period fluctuations of market prices. The adjective "natural," with its misleading implications, has been abandoned. Yet the competitive system is today so thoroughly accepted as the "natural" economic order, that there is, as we have previously noted, a deep-seated conviction that normal competitive prices (measured by the expenses of production) are natural and just prices. This conviction is, however, brought face to face with the fact of the growth of a large industrial field in which monopoly, rather than competition, rules. The question of just price is again a live issue as it was before the growth of the competitive system. Public authority is frequently invoked to insure that the prices fixed by holders of municipal franchises and other monopolists are just and reasonable. The chief fundamental test which our courts are able to apply to the reasonableness of any particular price is its conformity to what the price would have been under competitive conditions. Thus it is often asked if a particular monopoly charge gives a more than normal return upon the capital invested. The determination of what the expense of producing a particular commodity or service really is, is often a difficult, or even impossible, task (the distinction between constant and variable expenses being frequently a stumbling-block), but, given the general acceptance of the competitive system, it is hard to see what other standard could be used. Moreover, the general consensus of recent court decisions is that the Fifth and Fourteenth Amendments to the Federal Constitution, prohibiting the taking of property without due process of law, prevent federal and state governments from going farther than this in the regulation of monopoly charges. And even this power is not conceded, except in the case of businesses affected with a distinct public interest, such as those conducted by so-called public-service corporations. In fixing prices for its own services, such as postal charges, the government is controlled by other considerations. These will be discussed in the chapters on public finance. Imputed Value. - The only things to which market valuations actually apply are the specific units of goods that are actually

bought and sold. We are accustomed, however, to impute these market prices to all other existing goods of the same kinds. When wheat is sixty cents a bushel, the only bushels of wheat actually valued by the market at that price are the ones actually sold at that price. Yet we impute or ascribe the same value to all other bushels of the potential supply of wheat in the same market.

Notwithstanding the hypothetical nature of this imputed value, it is often treated as though it were a real thing. Statistical attempts to state the wealth of a nation in terms of dollars and cents are only estimates of the sums of these imputed values. A merchant's inventory of his stock in trade is often accompanied by an estimate of its value. Whether this value will be realized or not depends upon the constancy of business conditions, the ' caprices of fashion, and whether it can be sold in the regular course of trade or whether it has to be disposed of at a forced sale. Many kinds of consumption goods, such as household furniture, are not customarily thought of by the owner in terms of exchange value. It is often necessary for purposes of taxation to ascribe value to them, but this is frequently a difficult and so newhat arbitrary process.

The Prices of Production Goods. Throughout our analysis of exchange value it has been assumed that the commodities valued were wanted by consumers for the satisfaction of their wants; that is, that they were consumption goods. It is not altogether incorrect to say that producers' goods - capital and landhave a marginal utility, which varies with the importance attached to the possession of them. While one could thus, with substantial accuracy, include producers' goods in the scope of the foregoing analysis, there is a more instructive way of approaching the problem of the prices of land and of capital. Consumption goods have value because they satisfy human wants; that is, they yield an income of satisfactions, while production goods are valued because they have the power of gaining a money income for the owner. Just as the values of consumers' goods vary with the intensity of the wants they satisfy, so the values of producers' goods vary with their power