in the theory of value and prices. JOS 



its cost, but the utility of a second copy is considerably less than 

 its cost. In the aggregate market, however, there will be a mar- 

 ginal person whose utility is very close to the price. A change in 

 price will not alter the amount purchased by everyone, but will 

 alter the mimber of purchasers.* 



§ 4. 



Producing, consuming and exchanging are discontinuous in time. 

 The theory of utility when applied to a single act of production or 

 consumption or of sale or purchase, is independent of time, or rather 

 the time element is all accounted for in the form of the utility 

 function.! But an analysis of a number of such acts must take 

 account of their frequency. The manner in which the time element 

 enters has j^uzzled not a few economists. 



An example from physics may not be amiss. In the kinetic 

 theory of gases the pressure on the walls of the containing vessel 

 is explained by its continual bombardment by molecules. But an 

 apparent difficulty must be observed. A rebound of a molecule 

 involves the idea of ni.omentinn only while that which we wish to 

 explain is pressure or force which is not by any means momentum, 

 but momentum divided by time. How does this time enter? By 

 regarding not one but many molecules and taking account of the 

 frequency of their collision. The average momentum of each blow 

 divided by the average interval between the blows is the pressure 

 sought. 



So a produce exchange is a channel connecting production and con- 

 sumption. Instead of an even flow of one bushel per second, the 

 machinery of the exchange is such that by an instantaneous blow of a 

 bat, so to speak, a thousand bushes are knocked along. Time is in- 

 appropriate to explain the single blow but necessary to explain the 

 many. 



§5- 



The ideal statical condition assumed in our analysis is never satis- 

 fied in fact. 



No commodity has a constant yearly rate of production or con- 

 sumption. Industrial methods do not remain stationary. Tastes 

 and fashions change. Panics show a lack of equilibrium. Their 

 explanation belongs to the dynamics of economics. But we have 



*The analysis of H. CunjTighame in the Ec. Jour,, March '92, applies to this 

 case. t Cf . Jevons, 63-08. 



