176 WHEAT PRODUCTION IN NEW ZEALAND 
trial world does not cause isolation or even partial 
isolation. The connection between prices in the Dominion 
and prices in the Mother Country has already received 
passing comment, but as the subject is one which contains 
many pit-falls for the unwary, and as in fact popular 
reasoning about it exhibits many fallacies, it will not 
be irrelevant to give a brief discussion of it here. 
From a discussion of the history of prices in New 
Zealand and England, we are now in a position to see 
that the price of New Zealand wheat is not determined 
altogether by local conditions up to the point when we 
have a surplus for export. Should the supply fall 
short of the annual consumption then economy must be 
practised or importation resorted to. The demand for 
wheat is fairly inelastic, for everybody must use flour. 
Especially is this the case in a country like New Zealand, 
where the adoption of a high standard of living among 
the labouring classes has led to the extensive consumption 
of the products of the wheat industry. In the case of 
scarcity in the local supply, what, then, is the limit to 
the price which producers can charge for their wheat? 
Obviously, a price no greater than that at which it would 
pay Australian or other producers, say, to export their 
wheat or flour to New Zealand. This price would 
therefore be an amount equal to cost of production in 
Australia, including rewards for management, together 
with cost of freight, insurance, commission, and the 
amount of the duty charged for wheat and flour entering 
New Zealand. Since Australia exports to Britain as well 
as to New Zealand on occasion, it is at once apparent that 
the New Zealand price cannot remain for long periods 
above the English price, unless, of course, Australian 
supplies are seriously impaired by adverse weather 
conditions there. But even in this event wheat from 
Argentine or Canada would be imported, were New 
