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those who have made the contracts are unable to buy at the price stipulated, when the grain is deliverable. The cornered merchants must pay, to the clique, the difference between the price named in the contract and the price current at the time set for delivery. The corner could be prevented by confining the purchase and sale of grain to that in sight, or, in other words, by prohibiting a dealer from selling, or agreeing to sell, what he has not yet purchased.

It can not always be known, until the contest is over, whether one party is trying to corner the market, or the other to break it. A purchaser may begin buying, to protect a price at which he has already bought and desires to sell. He may believe, as Mr. Keene did in 1879, that a wet season in England would send wheat up from $1.05 to $1.35. In August he buys 500,000 bushels, deliverable in October at $1.10. Having once agreed to take this quantity at this rate, he does not want the price depressed below that rate, and believes that whoever tries it will lose their money, if met with both money and courage. He therefore buys all the wheat offered for October at $1.10. He can not always distinguish between the effect of his own purchases to run up the market and the effect of English dampness. When he has bought 15,000,000 bushels he would have all the wheat the elevators in Chicago would hold, if he were buying for present delivery. But as he is buying for October delivery, the sales can be manufactured on him as often as there is a party with courage and the margin. Buying at prices ranging from $1.10 to $1.35, he has one chance of gain and two chances of loss. His two chances of loss are (1) that so much wheat deliverable in October may be poured in on him, and the certainty of English dampness not affecting the price in the degree he had expected may become so apparent, that either from loss of courage or lack of money he may be compelled before October to allow the market to break, in which case it falls to perhaps 90 cents, and he has lost the difference between the prices he paid and 90 cents. He may have this luck when he is right in his judgment, and when October comes the price may be $1.35, unless he also has the courage and the money to hold the market against the bears. (2) His second chance of loss is that, in buying to sustain his price, he may have much "cash wheat on hand which he must sell out at a decline. His one chance of profit is that, if his judgment was correct, he will have only sent up the market in advance, to the point where the ratio of supply to demand would have compelled it sooner or

later to go, with the advantage that he will reap as profit the rise on all he has bought.

In the case of the Keene wheat deal of 1879, the result showed that he operated against the true and proper course of the market, by underestimating the capacity of the American supply and overestimating the potency of the English deficiency. By expanding the American export of wheat from 152,075,000 bushels in 1878-9 to 176,426,000 bushels in 1879-80, and our export of corn from 79,431,000 bushels to 103,450,000 bushels, with a like increase from India and elsewhere, the deficiency was filled without any serious rise in price.

In 1881 the New York legislature ordered an investigation of the causes of the extraordinary rise in prices in Chicago and cessation of shipments of wheat eastward and to Europe.

Railway managers of high repute testified that the difficulty was due to gambling in futures on the Chicago Board. The facts, when fully sifted, showed that the Board of Trade was right and wise in preventing the export of wheat necessary for our own consumption, and which, if we had sent abroad, we must have brought back at a still greater advance. The total corn crop of the United States had fallen from 1,754,861,535 bushels in 1880 to 1,194,916,000 bushels in 1881, a decline of 559,945,535 bushels, or more than five times the amount of our export in 1880. Our wheat crop in the same year had fallen from 459,479,505 bushels in 1880, according to the census, to 380,280,000 bushels in 1881, according to Bradstreet's. Here was a decline in production of 79,199,505 bushels in wheat, while our export of wheat in 1880 had been 159,264,214 bushels. The market was maintained in its equilibrium by sending abroad only 118,000,000 bushels in 1881, for which the American farmers received at the place of production $1.19 per bushel, whereas for the larger crop of 1880 the farmers got* only 95 cents, and for that of 1882 only $1.03. The amount saved, to the farmers, by the superior sagacity of the Board of Trade over that of their critics, was in this instance $28,320,000, or twice the sum involved in the so-called Alabama claims, the peaceful adjustment of which through the Geneva arbitration and award is justly regarded as one of the triumphs of national economy as well as of international diplomacy.

A temptation is afforded, by the system of dealing in futures in the grain market, to those who have no means of

* According to Mr. Nimmo, statistician of the Department of Agriculture, Washingington, D. C.

basing their ventures on any calculations or reasons connected with supply and demand, and whose purchases and sales are made upon no principle, and with no insight into the condition of the market or the facts which should influence prices. To such persons the buying and selling of futures becomes a mode of gambling as blind and reckless as betting on cards would be. The mistake has been made, however, of making the gravamen of the evil to consist in dealing in futures, whereas the real fact which marks their dealing as gambling is not that they do not get a physical delivery of the grain they buy, but that they do not get an intellectual conception of any reasons or motives which should justify buying. To bet in the dark on the prospective changes of prices, in an article of whose supply and demand they know nothing, is mere gambling, while to buy in anticipation and intelligent forethought of causes which make the thing purchased worth more than the money paid for it is mere prudence.

43. How Prices Are Made. -Economists have used the term natural value to express the value which they think a commodity possesses by reason of the labor spent in producing it; intrinsic value, to express the permanent value a commodity has when measured in the average of other commodities, or in comparison with a sufficiently large number of commodities to comprise a standard more trustworthy than gold or silver coin or other money; and money value, or price, to express the value a commodity has in money. So far as money rises and falls, in its purchasing power, by reason of causes relating to its own volume, the price, or money value, ceases to accurately measure intrinsic value. But the disturbances in the value of money being slow, and often concealed far below the surface of things, do not appear in the ordinary markets of merchandise. In them price passes for value, as if the two were identical. What all men assume

without thinking has, in certain ways, the potency of truth, even if they all think wrong. Hence prices, rather than values, become the immediate force that impels trade. Buyers seek the largest markets they can reach to get the lowest prices, and sellers seek the largest markets they can to get the highest prices. Markets thus become the manufactory of a price, on each commodity in which they deal, which rules all transactions in that commodity. The price is the index of demand, and the magnet of supply. The price, by pointing out each new direction of the demand, rules production. If the price of peas is higher, relatively to oats, farm

ers drop oats and raise peas. If women wear Jerseys and Jerseys are made of worsted, wool-dealers express the change by a rise in worsted wools, and farmers meet the change by changing their short, fine-wooled merinoes for sheep that produce a longer wool. Thus price regulates production, and points out the changes which different articles undergo, in their relative utility, accordingly as they begin, or cease, to please the human taste. The phrase, "There can be but one price in one market," depends for its truth, on our defining the term market to mean that area over which but one price rules, at one time, or over which all minds are in direct communication. Hence wide markets imply wide equality of terms, i. e., that great numbers of persons shall be enabled to buy and sell at one price. This equality is sought by all dealers and insures promptness in trading, thus saving time and chaffering. For, as soon as one who desires to buy knows he is getting his article at the lowest price obtainable, he buys. Till then he waits. The lack of a known price is a paralysis upon commerce, and through that upon production. Hence the prompt fixation of prices, the wide acceptance of their authority by producers and consumers, and prompt trading by many millions of people, is as important a time-saving, and laborsaving service, as is that performed by steam engines and railway trains. In the more remote African fairs, according to Stanley, the buyers meet to inspect and chaffer, and perhaps continue this for days before beginning to buy and sell. The most advanced and useful markets are those whose prices are most widely authoritative. In grain these are the Chicago, Liverpool and New York Boards of Trade or Produce Exchanges. In stocks and shares it is the London and New York Stock Exchanges and the Paris Bourse. The instant a price is made at either of these, buyers and sellers, all over the world, deal in accordance with it. If each dealer had to wait until he himself could learn the causes which influence demand and supply commerce would be paralyzed. Every manufactory must use power. A manufactory of prices involves a use of two powers: intelligence combined with courage, and money or credit. There are in every such price-mill two parties, one of which, the "bears," have made such contracts that they will gain if prices fall and lose if they rise. Another, the "bulls," is interested in having the market price go up. All the capital in the business divides itself between these two parties. The battle between the two contending forces is like a fight between two armies. Some are wounded in it; some are slain. But it

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decides the price not merely for that spot but for millions dealing elsewhere.

In the sale of carriages, pianos, jewelry, clothing, and other things which do not admit of such an authoritative contest over the price, there is great inequality in the prices at which two persons, in the same city, on the same day, may buy two things of the same kind, and of equal value. Hence there is great cheating in such trading. One may pay $200 for a watch which another buys for $100. There is no standard. In all these grades of goods long credits must be given, as the dealers must hold the goods until they reach consumers. But in articles dealt in by produce exchanges the price is advanced to the producer, and his crop can always be sold if he desires, even before it is harvested. Hence the authoritative manufacture of prices confers somewhat the same benefit on a community as is conferred by an authoritative system of law, religion, manners, and ethics. It enables every man to know, each moment, how he stands relatively to the results of his past exertions, what they have cost, and how much he can get for them.

It is easy to exaggerate the notion that exchanges of commodities indicate equivalent values in the things exchanged. When Esau sold his birthright to Jacob for a mess of pottage, when Judas sold his Saviour to his enemies for 30 pieces of silver, and when Benedict Arnold sold his honor and his patriotism as an American for a commission in the British army, when Bacon sold his integrity as a judge-in all these cases there was an exchange, but not an equivalence of value. Men may sell what it is unprofitable for them to sell at any price, buy what would be dear if they got it gratis, and so make unprofitable exchanges as easily as unprofitable investments, employments, or experiments. The naked fact, that an exchange occurs, determines no more whether it is profitable, than the naked fact, that production occurs, determines whether the product is worth more than the cost. Yet a presumption arises in favor of a continuing stream of exchanges, or productions, that both are profitable, as a presumption arises that the point to which water flows is lower than its fountain. In this sense, price becomes a presumption of equity and economic fair dealing, as between all who sell and all who buy.

In our chapters on labor we shall endeavor to show that this principle of equitable exchange underlies the ordinary sales of labor to an employer for wages, of the use of money to a borrower for interest, of the use of land to a tenant for rent, and of