Do I then mean to say that Mr. Thornton is entirely wrong in his interpretation of the cases which he suggests, and has pointed out no imperfection in the current theory? Even if it were so, it would not follow that he has rendered no service to science. "There is always a benefit done to any department of knowledge by digging about the roots of its truths. (4)(4. Mill, J. S. "De Quincey's Logic of Political Economy,") Scientific laws always come to be better understood when able thinkers and acute controversialists stir up difficulties respecting them, and confront them with facts which they had not yet been invoked to explain. But Mr. Thornton has done much more than this. The doctrine he controverts, though true, is not the whole truth. It is not the entire law of the phenomenon; for he has shown, and has been the first to show, that there are cases which it does not reach. And he has, if not fully defined, at least indicated, the causes which govern the effect in those exceptional cases. If there is a fault to be found with him, it is one that he has in common with all those improvers of political economy by whom new and just views "have been promulgated as contradictions of the doctrines previously received as fundamental, instead of being, what they almost always are, developments of them;" (5)(5. "De Quincey's Logic of Political Economy,") the almost invariable error of those political economists, for example, who have set themselves in opposition to Ricardo.
Let us, by Mr. Thornton's aid, endeavour to fix our ideas respecting that portion of the law of price which is not provided for by the common theory. When the equation of demand and supply leaves the price in part indeterminate, because there is more than one price which would ful~l the law; neither sellers nor buyers are under the action of any motives, derived from supply and demand, to give way to one another. Much will, in that case, depend on which side has the initiative of price. This is well exemplified in Mr. Thornton's supposed Dutch auction. The commodity might go no higher than eighteen shillings if the offers came from the buyers' side, but because they come from the seller the price reaches twenty shillings. Now, Mr. Thornton has well pointed out that this case, though exceptional among auctions, is normal as regards the general acoursea of trade. As a general rule, the initiative of price does rest with the dealers, and the competition which modifies it is the competition of dealers. (6)(6. "This," says Mr. Thornton," in speaking of tangible commodities, seems to me a more accurate as well as a ******r way of stating the case, than to say that the competition of dealers makes price fall, and that competition of customers makes it rise. What the latter competition seems to me really to do is, to show the dealers that a higher price than they previously supposed is attainable, and to induce them consequently to relax their own competition so as to attain it." (p. 69n.)) When, therefore, several prices are consistent with carrying off the whole supply, the dealers are tolerably certain to hold out for the highest of those prices; for they have no motive to compete with one another in cheapness, there being room for them all at the higher price. On the other hand, the buyers are not compelled by each other's competition to pay that higher price; for (since, by supposition the case is one in which a fall of price does not call forth an additional demand) if the buyers hold out for a lower price and get it, their gain may be permanent. The price, in this case, becomes simply a question whether sellers or buyers hold out longest; and depends on their comparative patience, or on the degree of inconvenience they are respectively put to by delay.
By this time, I think, an acute reader, who sees towards what results a course of inquiry is tending before the conclusion is drawn, will begin to perceive that Mr. Thornton's improvements in the theory of price, minute as they appear when reduced to their real dimensions, and unimportant as they must necessarily be in the common case in which supply and demand are but disturbing causes, and cost of production the real law of the phenomenon, may be of very great practical importance in the case which suggested the whole train of thought, the remuneration of labour. If it should turn out that the price of labour falls within one of the excepted cases -- the case which the law of equality between demand and supply does not provide for, because several prices all agree in satisfying that law; we are already able to see that the question between one of those prices and another will be determined by causes which operate strongly against the labourer, and in favour of the employer. For, as the author observes, there is this difference between the labour market and the market for tangible commodities, that in commodities it is the seller, but in labour it is the buyer, who has the initiative in fixing the price. It is the employer, the purchaser of labour, who makes the offer of wages; the dealer, who is in this case the labourer, accepts or refuses. Whatever advantage can be derived from the initiative is, therefore, on the side of the employer. And in that contest of endurance between buyer and seller, by which alone, in the excepted case, the price so fixed can be modified, it is almost needless to say that nothing but a close combination among the employed can give them even a chance of successfully contending against the employers.
It will of course be said, that these speculations are idle, for labour is not in that barely possible excepted case. Supply and demand do entirely govern the price obtained for labour. The demand for labour consists of the whole circulating capital of the country, including what is paid in wages for unproductive labour. The supply is the whole labouring population.
