in the theory of value and prices. 55 



This represents the chronological order but only part of the causa- 

 tion. Cost of production is not the sole determinator of supply. 

 Production is prophetic. When prices are steady the certain future 

 price is an unquestionable regulator of supply. Auspitz und Lieben 

 appear to me to deserve much credit for showing how all these facts 

 harmonize. Price, production, and consumption are determined by 

 the equality of "marginal utility and marginal cost of production.^ 

 Their clear exposition of this theory not only exhibits the " funda- 

 mental symmetry of supply and demand," but reconciles in a 

 captivating manner the old one-sided and seemingly contradictory 

 theories of value making them fall in place as opposite facets of the 

 same gem. It is discouraging to find the old fight still going on. 

 Dietzelf attempts to play the peacemaker by the makeshift of 

 dividing the field between the contesting theories. 



The apparent conflict grows out of an inadequate conception of 

 mathematical determinateness. As the quantity of any commodity 

 increases its marginal utility to consumers decreases while its mar- 

 ginal disutility to producers increases. If the latter exceeds the 

 former the price which consumers will give is less than what pro- 

 ducers will accept. Production is contracted and the utility and 

 disutility approach each other. If the quantity is too small the 

 machinery acts in the reverse way. The equilibrium though always 

 miscalculated is constantly sought and its more delicate and rapid 

 deflections are corrected by a special functionary, the speculator. 



§2. 



It is assumed that the rate of production during the given period 

 is exactly equal to the rate of consumption. This is asserting an 

 ideal equilibrium. 



The expenses of transportation and retailing are included in "pro- 

 duction." 



The principle of proportion previously explained is now extended. 



The marginal utilities of consuming and the marginal disutilities of 



producing are in the same continuous ratio for each individual — the 



ratio of prices. 



§3. 



As the simplest case of combining production and consumption, 

 suppose an individual to consume himself just that quantity of a 

 given commodity which he produces. 



* Auspitz und Lieben, ^ 5, p. 17. 



f Die Klassische Werttheorie und die Theorie vom Grenznutzen. Conrad's Jahr- 

 buch, 20. 



