in the theory of value and prices.

103

its cost, but the utility of a second copy is considerably less thanits cost. In the aggregate market, however, there will be a mar-ginal person whose utility is very close to the price. A change inprice will not alter the amount purchased by everyone, but willalter the number of purchasers.*

§ 4 -

Producing, consuming and exchanging are discontinuous in time.The theory of utility when applied to a single act of production orconsumption or of sale or purchase, is independent of time, or ratherthe time element is all accounted for in the form of the utilityfunction.! But an analysis of a number of such acts must takeaccount of their frequency. The manner in which the time elemententers has puzzled not a few economists.

An example from physics may not be amiss. In the kinetictheory of gases the pressure on the walls of the containing vesselis explained by its continual bombardment by molecules. But anapparent difficulty must be observed. A rebound of a moleculeinvolves the idea of momentum, only while that which we wish toexplain is pressure or force which is not by any means momentum,but momentum divided by time. How does this time enter? Byregarding not one but many molecules and taking account of thefrequency of their collision. The average momentum of each blowdivided by the average interval between the blows is the pressuresought.

So a produce exchange is a channel connecting production and con-sumption. Instead of an even flow of one bushel per second, themachinery of the exchange is such that by an instantaneous blow of abat, so to speak, a thousand bushes are knocked along. Time is in-appropriate to explain the single blow but necessary to explain themany.

§ 5 -

The ideal statical condition assumed in our analysis is never satis-fied in fact.

No commodity has a constant yearly rate of production or con-sumption. Industrial methods do not remain stationary. Tastesand fashions change. Panics show a lack of equilibrium. Theirexplanation belongs to the dynamics of economics. But we have

*The analysis of H. Cunynghame in the Ec. Jour., March ’92, applies to this

!Cf. Jevons, 63-68.

case.