The earlier markets
2. Markets are steadily widening through the improvement of means of communication and transportation. The earliest markets were established on the borders between tribes, villages or nations as a common ground where strangers met to trade. At such markets were brought together from sparsely settled districts a comparatively large number of merchants and customers. Buyers had the opportunity of wide selection both in kind and quality, and the sellers found a large body of customers gathered at one point. Throughout the Middle Ages purchases were made by the more prosperous husbandmen in great quantities once a year at the fairs or markets. As both the buyers and sellers came from widely separated places, there was, in most respects, no combination, and the conditions of a competitive market were present.
The growth of markets
The number of buyers and sellers that can constitute a single market is limited both directly and indirectly by the means of transportation. A dense population cannot usually be maintained without easy means of transportation to bring in a large supply of food, and to carry back manufactured goods great distances. The remarkable growth in the means of commerce since the application of steam to water traffic, and the invention of the railroad, have made it possible for goods to be gathered from most distant points. A market implies a common understanding among traders. Modern means of communication such as newspapers, post-offices, telegraph and cable, trade bulletins, commercial travelers, the consular service, and many forms of special agencies, are diffusing information widely. As a result of these changes, there has been a widening of the village-market to the markets of the province, of the nation, and finally of the world. While a part of every one's purchases continues to be made in the neighborhood, a greater and greater portion of the total business is done by traders who are widely separated and who are indeed members of the world market. Various articles produced in the same locality may seek different markets. The market for wheat may be in Liverpool, while that for fruit and eggs is in the village near the farm-house. If a given product of any community is sold in different markets, the net prices secured must be very nearly equal.
The conceptions normal and market price
3. Normal price is spoken of in contrast to market price when the actual market price results from exceptional circumstances and probably will not be maintained. The term "normal price," much used in economic discussion, is the price which, apart from exceptional conditions, is expected to prevail, and to which actual prices seem constantly striving to adjust themselves. As actual prices are nearly always either more or less than so-called normal price, and only momentarily ever correspond with it, the term "normal" would appear to be something of a misnomer. Moreover, as the circumstances of production change, this normal price itself is altered so that what is normal one day may be quite abnormal the next. The thought of "normal price" is an abstract one, but despite the inaptness of the word it is not without some practical validity. In determining whether he shall continue to produce certain goods, the business man is practically guided by his view of normal price. An example of departure from normal price as above defined, is found in the price of food when an expected ship has failed to arrive at a port with its cargo of grain. A scarcity amounting almost to famine might thus exist in a seaboard city, and the market price would rise; but as this would be due to an accident and would afford a larger gain than usual to those who happened to have a supply of grain, men would say that the market price was above the normal price. The arrival of the expected ship would cause the market price to return to the normal.
Review of the argument
In review, we see that the market value of goods grows out of the different personal estimates made by men. Market value itself being a complex and difficult problem, it can be mastered only by dividing it. First, therefore, must be studied the more general and obvious motives of men, the nature of wants and their effects on man's subjective estimates. The same simple motives that influence the subjective valuations made by individual men, may be traced to the conditions of the complicated market. It is their workings that are seen in the obscurest problems of market price.
CHAPTER 6
PSYCHIC INCOME
§ I. INCOME AS A FLOW OF GOODS
The recurrence of wants
1. Satisfaction and gratification being only temporary conditions, economic wants appear in more or less regularly recurring series. Impressions are short lived, sensations are temporary, wants that have been satisfied recur. Wants recur for the same reason that they first arose. No impression on the nerves or on the senses is lasting. Man's senses were developed for the purpose of bringing him into relation with the outer world, of enabling him to survive in his struggle with the forces of nature. So, when a good has been enjoyed, the utility to that person of that thing or service for that particular moment, falls, it may be even to zero. To keep wants satisfied is impossible; we cannot do next year's reading or next week's eating now; we cannot live the life of to-morrow. The best results in reading or eating come from taking the right amount day by day. But it is a need in the life of men that wants should recur after a time, otherwise there would be no motive for action.
Series of wants and series of goods
2. The economic ideal is that this series of recurring wants should be met by a corresponding series of goods. It is evident that if a series or succession of goods varies, at different times, moments, and conditions, in its power to gratify wants, the closer the correspondence between the two series, that of wants and that of goods, the greater will be the total of gratification. We may liken man's life to a journey in which the supplies of food are gotten at the stations. If any one of these supplies fails, the traveler suffers the pangs of hunger, and if two or three supplies are at one point, they do not serve the needs of man so well as if distributed along the way. This constant inflow of goods is one of the fundamental needs of life. The savage dimly understands this need. Even the birds and the beasts adjust their lives to it either by travel or by toil. The spring and autumn migrations to new feeding grounds are the attempts of the bird to gratify this series of wants as they arise. The ant, the bee, and the squirrel anticipate, and work to fill their storehouses against the days of need.
Social and private incomes
3. Objective income consists of the additional sums of goods acquired by individuals or by society during the income period. The term national or social income may be contrasted with individual or private income in the objective sense. The nature of the acquisition of objective incomes may, in some cases, be different if viewed from the social and individual standpoints. Society, as a whole, may be said to acquire income only when goods are produced; individuals may acquire income by gift, bequest, theft, or other modes of transfer from other individuals. In many cases the two kinds of income, however, agree, the objective income of society being the algebraic sum of the goods acquired or parted with by all the individuals.
We should not understand that either social or private objective incomes include only material goods, for many utilities and labor services that never take on a material or money expression are included in either case. Indeed, we are close here to the conception of psychic income which is to be developed more fully.
Money income
Income of money is not often the same as income of things. Usually many of these subtler utilities are overlooked and omitted from the recognized money income. In this day the use of money is so common that we are sometimes led to ignore the value of things to which the money expression is not given. The money income is merely the money expression of the value of currently acquired goods, and it is the only