in the theory of value and prices.

55

This represents the chronological order but only part of the causa-tion. Cost of production is not the sole determinator of supply.Production is prophetic. When prices are steady the certain futureprice is an unquestionable regulator of supply. Auspitz und Liebenappear to ine to deserve much credit for showing how all these factsharmonize. Price, production, and consumption are determined bythe equality of marginal utility and marginal cost of production*Their clear exposition of this theory not only exhibits the “ funda-mental symmetry of supply and demand,” but reconciles in acaptivating manner the old one-sided and seemingly contradictorytheories of value making them fall in place as opposite facets of thesame gem. It is discouraging to find the old tight still going on.Dietzelf attempts to play the peacemaker by the makeshift ofdividing the field between the contesting theories.

The apparent conflict grows out of an inadequate conception ofmathematical determinateness. As the quantity of any commodityincreases its marginal utility to consumers decreases while its mar-ginal disutility to producers increases. If the latter exceeds theformer the price which consumers will give is less than what pro-ducers will accept. Production is contracted and the utility anddisutility approach each other. If the quantity is too small themachinery acts in the reverse way. The equilibrium though alwaysmiscalculated is constantly sought and its more delicate and rapiddeflections are corrected by a special functionary, the speculator.

§2.

It is assumed that the rate of production during the given periodis exactly equal to the rate of consumption. This is asserting anideal equilibrium.

The expenses of transportation and retailing are included in “ pro-duction.”

The principle of proportion previously explained is now extended.The marginal utilities of consuming and the marginal disutilities ofproducing are in the same continuous ratio for each individual—theratio of prices.

§ 3.

As the simplest case of combining production and consumption,suppose an individual to consume himself just that quantity of agiven commodity which he produces.

* Auspitz uud Lieben, § 5, p. 17.

f Die Klassische Werttheorie und die Theorie vom Grenznutzen. Conrad’s Jahr-buch, 20.