98 



DISCUSSION. 



Mr. A. J. Ogilvt said: — Mr. Johnston's opening state- 

 ment (condensed) is that cost of production, not demand 

 and supply, primarily determined prices. Later, lie quali- 

 fied that by excluding things the cost of which was 

 determined by scarcity alone, confining it to things 

 -which could be increased (indefinitely, I suppose), and 

 where competition operated without restraint. In short that, 

 just as south of the tropics the wind would always blow from 

 the west if th re were no land to disturb, and just as every 

 planet's orbit would describe an ellipse if there were no other 

 planets to perturb, so price would always represent cost of 

 production measured in labour if there were no natural 

 scarcity or artificial interference. Mr. Johnston has proved 

 this conclusively, but the case thus qualified seems so plain 

 from the mere statement of it that one was surprised to hear 

 that it required proof, and I suspect that the dispute, where 

 there is any, arises from neither party quite understanding 

 the other's position ; for the law of demand and supply and 

 cost of production are not rivals at all, but each is the com- 

 plement of the other. There is not a farmer or shopkeeper 

 during the bad times whom you will not hear recognising 

 clearly the first half of the law of demand and supply, viz., 

 that p'eople will not go on producing goods for less than their 

 cost of production; and though he may not quite so quickly 

 recognise the second half, viz., that trade competition will 

 not allow anyone to continue getting more than cost of pro- 

 duction (plus margin of profit) ; this is only because business in 

 real life is so full of monopolies, natural and artificial, legiti- 

 mate and illegitimate, that he takes these disturbances as 

 matters of course, and does not trouble himself to recognise 

 that, where there is a continuous and excessive profit, there 

 must be a monopoly of some sort, otherwise other people 

 would have rushed into the business and brought profits 

 down. Still he sees it plainly enough directly it is pointed 

 out. So that he accepts the law of cost of production in 

 full. For all that he sees at the same time that when things, 

 that are wanted are plentiful they are cheap, no matter why 

 they are plentiful ; and that when they get more plentiful 

 still, no matter why, they get cheaper still, and vice versa ; 

 and also that if they are less wanted (supply remaining the 

 same), they again also get cheaper. In short, he also believes 

 in the law of demand and supply, and attends chiefly to 

 that as the broader law that includes and covers the cheaper. 

 For the law of demand and supply is this —that just as the 

 steam, as such, is the sole governing power of the movements 

 of the piston-rod, notwithstanding that behind the steam is 

 the fire that creates the steam, so the ratio between demand 



