Page:The Economic Journal Volume 1.djvu/637

 RWWS 615 found where the relative efficiency of these two agents are propor- tionate to their relative costs;' or the proposition still more liable to misunderstanding, that ' free competition tends in the direction of making each man's wages equal to the net prodct of his own labour.' We should observe, however, that the mathematical version of these theories has been made fuller. The principle on which we proceed in order to ' find the marginal investments of each kind of labour for each kind of use' is stated more explicitly. In Note xiv. (Second Edition), from which we have just quoted, there is added the pregnant clause, 'they may all [all the equations employed to find the marginal invest- ments] be regarded as mathematically contained in the statement that H: V [the net advantages] is to be made a maximum.' In the light of the general theory of economic equilibrium which is thus indicated, how trivial appears the dispute whether it is utility or cost which determines normal value! You might as well ask, given a system of simultaneous equations involving two unknown quantities x and y (or two sets of unknown x, x. z, x., &c., y, y..,, &c.), whether x or y cdn- tributed more to the solution. There is a' fundamental symmetry' between the forces of supply and demand; but there are superficial contrasts. ' The normal value of everything .... rests like the keystone of an arch, balanced in equilibrium between the contending pressures on its two opposing sides. The forces of demand press on the one side, those of supply on the other; and the older economists seem to have been rightly guided by their intuitions when they silently determined that the forces of supply were those the study of which was the nore urgent, and involved the greater difficulty.' The partiality of the older economists has pro- duced a reaction which it is to be feared 'may cause the importance of wants to be over-estimated relatively to activities.' (Preface to the Second Edition.) There is therefore inserted a new chapter,' Wants in Relation to Activities,' directed against Jevons's position that the 'theory of consumption is the scientific basis of economics.' Another peculiarity distinguishing Supply is the special difficulty which the Law of Increasing Returns presents. This difficulty is stated more prominently in a new paragraph at the beginning of the chapter treating of ' Business Management as a part of Industrial Organization' (Book iv., chap. xii., 1), and removed more completely in a re- written chapter treating'of the ' Modes of Action of the Law of Increas- ing Return,' and cognate topics (Book v., chap. xi.). Much additional light is thrown upon these subjects by a new note (page 483) dis- tinguising more explicitly than in the first edition the 'true supply curve,' which relates only to 'long periods' from another construc- tion proper to short periods. The latter ' has attractions, and may perhaps ultimately be of service; but it requires careful handling, for the assumptions on which it rests are very slippery.' The question now recurs in the case of a commodity obeying the Law of Increasing Return, why should not the large manufacturer drive out his rivals ? Why should not the producer by 'doubling his production' increase