in the theory of value and prices. 105 



§9. 



The " fundamental symmetry of supply and demand worked out 

 by Auspitz und Lieben should not bind us to the fundamental 

 asymmetry. The symmetry enables us to investigate the general 

 dependence of consumption and production but special investigation 

 of production, e. g. of railroad rates should be independently pur- 

 sued. 



(1.) Production of a commodity always precedes its consumption. 



(2.) The maximum advantage in production involves few com- 

 modities for each individual, in consumptio7i many. 



(3.) Increasing social organization intensifies the former fact not 

 the latter. 



(4.) There are more successive steps in production than consump- 

 tion. 



(5) Social organization intensifies this distinction. 



(6) Owing to (4) and (5) service rather than commodity becomes 

 increasingly the unit in production. 



(7.) Freedom to leave off consuming at any point is greater than 

 for producing. 



(8.) Social organization intensifies this. 



(9.) Combination and monopoly are more feasible and frequent in 

 production than in consumption. 



(10.) In production the distinction of fixed charges and running 

 expenses often plays an important role. This deserves a separate 

 treatment. The transportation charges on a steamship are not what 

 it costs to transport an extra ton but it is this quantity plus the pro- 

 portionate share of that ton in the fixed charges (interest, insurance, 

 etc). That is, the marginal cost of service involves the margin of 

 capital invested as well as the marginal cost of running the ship) 

 (which is purely nominal). This is so in theory of railroad rates 

 but the railroad investor cannot foresee the results of his enterprise 

 as well nor can he change his road when built from one route to 

 another as a steamship can do. To apply the theory to railroads 

 assumes that railroad projectors know what the trafiic will be. Con- 

 sequently the proper discussion of railroad rates, assuming that the 

 railroads are already built, takes no account of fixed charges but 

 becomes formulated as " what the trafiic will bear."* 



A complete theory of the relation of cost of production to price 

 in its varying and peculiar ramifications is too vast a subject to be 

 treated here. 



* See Hadley, Railroad Transportation. 



