PRINCIPLES OF VALUE AND PRICE 



433 



The economist who has best set forth the general theory of value, 

 Professor Marshall, has ingeniously compared the influence of demand 

 and supply to the working of a pair of scissors. If one blade of a pair 

 of scissors is held still, and the other moves, we may say that the 

 second does the cutting. Yet it could not cut unless the other blade 

 were there. So when supply is fixed, we may say that demand settles 

 value; yet it does so only because supply is there and does not move. 

 When cost is constant, we may say that cost settles value. Yet it 

 does so only because there is a demand for the commodity, and 

 because supply readily adjusts itself to the amount which will be 

 demanded at the cost price. If cost is variable in the manner dis- 

 cussed in the present chapter, both supply and demand both cost 

 and utility exercise a mutual influence on normal price. Both blades 

 of the scissors are in motion. All the various manifestations of value 

 (under the conditions of an advanced division of labor and of exchange 

 flowing from that division) can be analyzed as interactions of supply 

 and demand. Neither can be said to settle value independently of 

 the other. 



The differences in advantage between producers may be due to 

 permanent or to temporary causes. According as they are temporary 

 or permanent, they are of very different significance for the theory of 

 value and for the welfare of society. 



Differences of a temporary sort are the most common. They are 

 so common that they may be said in one sense to be universal. As 

 indicated in the last chapter, it probably never happens hi commu- 

 nities familiar to us that all those engaged in a given industry are 

 carrying on their operations in the same way. Some have better 

 plant, better organization, better location, than others; can bring 

 their products to market at less expense; and, selling at the same 

 price, can reap larger gains. 



But these differences, if their causes are not permanent, tend 

 constantly to disappear. If one man has better plant or machinery 

 than another, and if there be no permanent reason why the second 

 should not also set up the better outfit, he is likely sooner or later to 

 do so. If he does not d^ so, he is likely to be driven out of the market. 

 Others will adopt the more effective method of production, will 

 increase the quantity they put on the market, and will be able to 

 undersell him without foregoing a profit. Where the methods of 

 cheapened production are open to all, they are sure sooner or later 

 to be adopted by all. 



