ECONOMIC GOODS AND THEIR VALUATION 39 



stood is full of significance. It is a misinterpretation, however, 

 to assume this phrase to mean that every producer of a given 

 product has a right to expect and to demand a price which will 

 cover his costs and give him what he considers a reasonable 

 profit. There are many causes of variation in costs : (i) varia- 

 tion in natural conditions, such as soil and climate of the dif- 

 ferent areas producing a given crop, (2) variations in the abun- 

 dance of labor in the different localities, (3) variation in the 

 kinds of equipments which can be made use of, (4) variations 

 in the distance from the market, and (5) variations in the effi- 

 ciency of the farmers who give direction to the work on the 

 different farms. As a result of the wide variations in the 

 efficiency of the instruments of production, it usually happens 

 that there is an inefficient producer here and there who is pro- 

 ducing at a cost greater than the price at which other farmers 

 find it profitable to produce enough to supply the market. 

 If the price were artificially pushed up to a point where the in- 

 efficient farmer can make a profit, this would make the enter- 

 prise exceedingly profitable to the efficient farmers, and would 

 tend to increase their production, the greater supply would 

 force prices down, and the second state of the inefficient farmer 

 would be worse than the first. Some of those who are produc- 

 ing at a loss might well change to some other line of production 

 in which their qualifications count for more. It often happens, 

 for example, that a low grade dairyman is a high grade tobacco 

 producer, that a low grade grain farmer can make money in the 

 grazing of cattle. Every farmer should strive to get into the 

 field of work in which he is best able to compete. 



Low efficiency of the farmer in a given line of production 

 is only one of the causes which may result in costs which exceed 

 prices. For example, the wheat regions of the world are 

 numerous and widely scattered. The cost, per bushel, of pro- 

 ducing wheat and putting it upon the world's central wheat 

 market, Liverpool, vary greatly. During periods when the 

 supply of wheat is increasing slowly and the demand for wheat 

 is increasing at a slightly more rapid rate, the price of wheat 

 will tend to remain high enough to retain the wheat industry 



