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| on the use of the differential calculus etc. | 87 |
To return to our explanation of a market; it may be held that this shows badly compared with the explanation of the Law of Error and other more familiar derivations of observed uniformities. For there is no other probable explanation available in many of those cases; whereas here there is a very simple alternative explanation, namely that exchange with different parties at the same rate is dictated by the simplicity of the arrangement — by an unconscious pressure of general convenience of the kind usually supposed to have brought about the adoption of money. No doubt this cause will explain something, but not, I think, everything. It will explain why a monopolist, apart from law and ethics, would probably not want to make separate terms with every individual, as strict theory might suggest. But it will not explain why in a monopolistic régime there may be several prices for (practically) the same article, but only one in a perfect market. To have analysed the conditions of a perfect market will be of assistance when we come to deal with monopolies and imperfect markets.
Composite Exchange. — A separate heading is scarcely required for the generalization of the preceding theory. By supposing that the Xs offering x deal not only with Ys offering y, but also with Zs offering z, Ws offering w, and that dealers in each of these groups deal with two or more of the remaining groups. As Mill says, after analysing a certain case of simple exchange: «trade among any number of countries and in any number of comodities must take place on the same essential principles as trade between two countries and in two commodities»1.
Economic Mobility. — The groups of Xs, Ys, etc., which supply different articles, may be imagined occupying different islands, between which there is a great gulf fixed, so that they which would go from one to the other island cannot. It is not possible for an X to assume the part of a Y, or
- ↑ «Political Economy», Book III, chapter XVIII, t. 2; referring to international Trade.
from ten to hundred. Then steadiness may be restored by the principle of averages. But alone it is not sufficient to secure steadiness, since it does not secure determinateness; for instance in the case of two combinations — their average motives might be constant, but their bargains might vary from time to time.
