by exclusive regard to their individual interests to dump their surplus. In drapery, millinery, and other trades where season and fashion are important elements, non-perishable goods are similarly "dumped at longer intervals in "sacrifice" or emergency sales. Bankrupt stock is sold at prices unrelated to "Summer sales" form an ever-growing prac

tice in larger stores; goods are "marked down" to levels sometimes far below cost of production, and many customers spend a considerable part of their dress-money on these goods, who otherwise would have spent a somewhat larger sum upon smaller quantities or inferior qualities of goods in the ordinary course of trade.

Again, some shops have "leading articles, specially low-priced classes of goods, sold cheap as an advertisement and as a means of attracting "" custom."

§ 2. Now all these goods are said to be sold under cost of production. And this is true if we attribute to each unit of supply a separate cost of production. For ordinary manufacturing and commercial purposes it is doubtless convenient to base book-keeping on this estimate of separate costs. But economic analysis must, I think, take a different view. None of these classes of goods is accurately described as being sold under cost price. Even "leading" articles fetch, besides their price, a gain of general custom,

the profit from which would rightly be added to their

price, and, so added, would raise that price above "cost"-supposing the "attraction" to be really operative.

In the other retail cases it is evident that the goods sold at a sacrifice are a surplus due to miscalculation of demand. Such miscalculation will arise partly from the carelessness or incompetence of the trade buyers, partly to changes affecting demand so incapable of prevision that they must be regarded as chance. Tradesmen cannot afford to be found "short," for such failure to have required articles in hand not merely loses them the profit on these sales, but damages their future trade in general. In order to ensure having enough, they must run a continual risk, amounting, in some class of goods, to a certainty, of having too much. The most skilful trader must reckon on being left sometimes with a surplus which, if perishable goods, he must sell soon for what they will fetch; if non-perishable, he must similarly sell before they have become too old-fashioned. Properly regarded, these goods have no separate cost of production; he must buy them at ordinary prices and sell them below those prices, as a necessary condition of conducting his business as a whole profitably; or in other words, the loss on these "dumped" goods ensures the profitable sale of the undumped goods which form the bulk of his stock. It is only a fundamentally false way of looking at these dumped goods, taken as it were on their separate merits, that

makes them appear a dead loss. Regarding them rightly, we must impute to this low-priced surplus a portion of the profit which their existence enables the normal high-priced stock to earn. Even if this surplus be the result of miscalculation, such error is a normal and indeed a necessary incident of every business. When the surplus is abnormally large, or of too-frequent recurrence, the loss incurred is to be regarded as due to general bad judgment exercised in buying, rather than as a separate loss due to the unfortunate conditions under which these particular goods must be sold. This surplus or margin, if it is no larger than is required to ensure the sound conduct of a thriving but necessarily fluctuating business, no more represents waste or loss, because it is eventually sold "below cost price," than the idle reserve which every bank must keep as a condition of being able to use the bulk of its deposits profitably. The bank reserve, it is true, fetches nothing, whereas the reserve goods of a trader are sold at some price or other. But even this apparent difference disappears when we bear in mind that the trader must always have in his stock a certain proportion of these goods, doomed to sell at (say) half their cost price; fifty per cent. of the nominal value of these goods represents at any given time a reserve or insurance fund which plays essentially the same part as a condition of the profitable conduct of his business, as the banker's reserve does in the banking business. The only difference

is that he has frequently to shift the forms in which he keeps his reserve, and to dispose of the outworn forms for what he can get.

Add to this analysis the fact that in the sale of this surplus stock the trader will prefer to make, as far as possible, a separate market of them, choosing a special time for "dumping" them in large numbers, and adapting his modes of sale so as to reach a different class of purchasers from that which he normally serves.

This we see done in the Saturday-night sale, and the high-class draper will not dispose of lines of goods in which he finds himself "long" by "marking down" at ordinary times for his regular customers, but will keep them for summer sales, where a different class of customer attends to buy.

A tradesman must in the ordinary course of trade accumulate a surplus stock which he cannot dispose of in the ordinary way without spoiling the market. He generally finds it better to create a separate market for the disposal of these goods. Of course, if he is an enterprising man, or engaged in an essentially capricious trade, this “ dumping" will form a larger part of his business. The larger the risks, the larger the profits and the larger the insurance.

§ 3. When we turn from retail trade to manufacture the same general analysis applies. Most manufacturers must produce on calculations of a future

market; in order to make and sell at profitable prices the largest quantities of goods, they must run a normal risk of over-production. When this occurs, how shall they unload their surplus? They may try to put it on the ordinary market and let it depress prices, or they may, following the example of the shopkeeper, make some special effort to get rid of it by finding some new market for the occasion. This extraordinary market is likely to be a foreign market. There are two considerations which make it more difficult for competing manufacturers than for shopkeepers to hold in check this tendency to dumping. When a shopkeeper perceives that a line of goods is not taking, he can at once stop or curtail further purchases from the makers, but the latter cannot so easily stop or curtail their production. They have laid down special and expensive plant, have hired labour and entered contracts for the purchase of materials, etc.; they cannot change the channel of this productive energy or greatly reduce the volume of output without a very serious loss. If they are engaged in keen competition, they must be prepared to continue producing at a loss for some time, loading their former market at lower prices, forcing new markets at great sacrifices, or accumulating stock. In whatever way this surplus is disposed of there is a loss on it, if a separate cost of production be imputed to this surplus and a separate market is found for it. If it is simply thrown on to the