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fields to which access is not absolutely forbidden he can only enter upon terms of purchase which prune his profit to a low level for the exclusive benefit of the group of capitalists who have fenced round for themselves this particular preserve. Labour notoriously is more restricted: the ordinary labourer even in England to-day has choice of employment only within a narrow limit, not so much of place (for cheapness of transport has extended the spatial area of his market) as of grade; the labour market is broken up into many markets, alike of “ skilled” and “unskilled” trades, and a labourer is practically precluded by poverty, lack of education, family associations, etc., from exercising a wide choice; while, once fixed in a trade, he finds it difficult to change into another. Though an English worker today has more mobility and wider real choice than his ancestors, much stratification still survives.
$5. When in such a society different sorts of goods and services come to be exchanged in elaborate processes of barter, the results of this stratification are very evident. The guarantee, provided by complete mobility of capital and labour, that goods would exchange on a basis of equality of "costs,” or human “trouble” of production, no longer exists. If everyone were equally free to be a miller or a shoemaker, we saw that flour and shoes must exchange on terms which gave each man the same reward for his “trouble”; but if milling becomes a
close corporation which no man can enter without an expensive education and large capital, there is no security that flour will exchange with shoes upon terms which distribute the gain of barter equally. Or again, if every boy were really free to get education and equip himself for medical work, medical service would exchange for domestic service, or for porterage, upon the basis of a comparison of "final" costs, and the ordinary surgeon might get no more pay per diem than the ordinary porter. But so long as the opportunity of equipment for the medical profession is less free than that for ordinary manual work, there is nothing to prevent the average or the marginal doctor getting twice, ten times, or a hundred times more service from the porter who employs him than the service he renders in return, as measured by "cost" or trouble. The fee paid by the porter for medical service may represent fifty units of “cost as compared with one unit received in return. It is clear that in barter of goods and services between members of different groups in such a society, the goods and services do not exchange in accordance with their final cost, in the sense hitherto accorded to that term.
What does determine the rate of exchange, or value, of different sorts of goods in a society composed of non-competing groups? At first sight two circumstances would seem to have equal weight, the degree of intensity of demand, the degree of scarcity
of supply. Two persons confronting one another, each with a monopoly of an absolute necessity of life, could have no basis for bargain, unless it be urged that a perception by each of the equal necessity of obtaining a unit of the supply belonging to the other would determine the rate of exchange on a firm basis of utility, a day's necessary supply of the one commodity exchanging for a day's supply of the other. If for two persons in this situation we substitute two groups, competing only among themselves, and with the same aggregate surplus of the two necessaries available for exchange, it is clear that, since ex hypothesi each act of exchange has the same importance for one party as for the other, the exchange will again be on a basis of equal utility, with no reference to respective costs. If, however, the intensity of demand is greater for one of the commodities than for the other, the one being a physical necessity, the other only a prime convenience of life, or if, on the other hand, both being necessary, the available surplus of the one was greater than that of the other, it is clear that the commodity to whose demand the greater necessity, or to whose supply the greater scarcity attached, would have a higher rate of exchange than where the conditions were equal. But though it here seems as if intensity of demand played an equal part with scarcity of supply in determining rate of exchange, it can easily be shown that this is not the case. For if the surplus constantly available
for barter in each group exceeded the amount necessary to supply the members of the other group, the fact that these groups were non-competing would not prevent the rate of exchange from conforming to the ordinary rule of free commercial societies: the goods would exchange according to final costs. The fact that one class of goods was a necessity, the other only a convenience, would not give an advantage to the former. If I am about to purchase a loaf of bread and a hat under terms of free competition, though the intensity of my demand for bread per se is greater than that for a hat per se, where competing bakers possess an ample supply of bread the importance of my obtaining any particular loaf is no greater than the importance of my obtaining any particular hat; or in other words, the existence of a competing surplus supply cancels the influence of intensity of demand in determining price or rate of exchange.
Though a baker's monopoly is in a stronger bargaining position than a hatter's monopoly, under free competition a baker has no advantage over a hatter on account of the greater necessity of bread.
It is relative scarcity that determines the strength of bargain in a society of non-competing groups.
If the hatting trade can keep hats more scarce than the baking trade can keep loaves, hats will exchange against loaves at a premium per unit of final cost of production, i.e. the least efficient hatter will make more than the least efficient baker.
If we are to master the theory of exchange between non-competing groups, we must pay chief regard to the factor of scarcity of supply, and regard intensity or elasticity of demand in its bearing on scarcity. Only in proportion as the non-competing character of groups is reflected in scarcity of supply can it cancel or modify the law of exchange according to final costs. For while immobility of capital and labour between the groups, by limiting competition, impairs the full economy of division of labour and lessens the aggregate productivity of wealth in a community, it does not necessarily affect the rate of exchange between goods and services of different sorts. If an equally rigorous industrial caste system were applicable to all trades, there is no reason why final costs of production should not form an accurate standard of rates of exchange.
It is because this immobility is not equally applicable to all trades that rates of exchange diverge from this standard. When access is more difficult to one trade than to another, that greater difficulty will be attended by a corresponding limitation of the freedom of supply of commodities, and this relative scarcity will be a source of gain when this class of goods is bartered against other classes where supply is not thus restricted.
This is of course universally recognised in the case of “monopolies,” natural or acquired; final expense of production there forms only the lower limit of a price