In the history of commerce we have experienced periods of scarcity of cotton, when some capitalists united together and sought to buy up not 100 bales, but the whole cotton supply of the world.In the given case, then, one buyer seeks to drive the others from the field by offering a relatively higher price for the bales of cotton.The cotton sellers, who perceive the troops of the enemy in the most violent contention among themselves, and who therefore are fully assured of the sale of their whole 100 bales, will beware of pulling one another's hair in order to force down the price of cotton at the very moment in which their opponents race with one another to screw it up high.So, all of a sudden, peace reigns in the army of sellers.
They stand opposed to the buyers like on e man, fold their arms in philosophic contentment and their claims would find no limit did not the offers of even the most importunate of buyers have a very definite limit.
If, then, the supply of a commodity is less than the demand for it, competition among the sellers is very slight, or there may be none at all among them.In the same proportion in which this competition decreases, the competition among the buyers increases.Result: a more or less considerable rise in the prices of commodities.
It is well known that the opposite case, with the opposite result, happens more frequently.Great excess of supply over demand; desperate competition among the sellers, and a lack of buyers; forced sales of commodities at ridiculously low prices.
But what is a rise, and what a fall of prices? What is a high and what a low price? A grain of sand is high when examined through a microscope, and a tower is low when compared with a mountain.And if the price is determined by the relation of supply and demand, by what is the relation of supply and demand determined?
Let us turn to the first worthy citizen we meet.He will not hesitate one moment, but, like Alexander the Great, will cut this metaphysical know with his multiplication table.He will say to us: "If the production of the commodities which I sell has cost me 100 pounds, and out of the sale of these goods I make 110 pounds -- within the year, you understand --that's an honest, sound, reasonable profit.But if in the exchange I receive 120 or 130 pounds, that's a higher profit; and if I should get as much as 200 pounds, that would be an extraordinary, and enormous profit." What is it, then, that serves this citizen as the standard of his profit? The cost of the production of his commodities.If in exchange for these goods he receives a quantity of other goods whose production has cost less, he has lost.If he receives in exchange for his goods a quantity of other goods whose production has cost more, he has gained.And he reckons the falling or rising of the profit according to the degree at which the exchange value of his goods stands, whether above or below his zero -- the cost of production.
