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The normal price concept reflects a constructive purpose of economic theory, 632. Margin of profit-making entrepreneurship a test of normality, 633.- Need of a market-distribution normal particularly in the case of extractive products, whose supply is not expansible during certain periods, 636. - This implies merely some change of emphasis and complementing of the equilibrium theory of value, 638. The perfect competitive market price really a normalized price, 639. The distribution normal as a test of the efficiency of our marketing arrangements, 640. Relation of cross-section to longitudinal view of the market, 641. Market normal of fixed-supply goods, 642. - For farm products a season's normal," 643. — This may undergo change as the season progresses, 644. Recapitulation, 648. Three phases of the market normal, 649.- Interplay of the market-distribution and production-adjustment concepts of normality, 650.- Practical usefulness of the above theory, 651.

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THE differentiation of a market price and a normal price concept runs back as far at least as Adam Smith, and is preserved in the writings of the great majority of modern expositors of economic principles. Some such idea is practically indispensable in any formulation of the subject which purposes to make economic theory a constructive force in our social life and to set up standards for the appraisal of current economic processes. All actual prices are, of course, market prices, and the theoretical concept of a normal price merely sets forth some ideal of price adjustment toward whose achievement we may strive in ordering the practices and shaping the institutions of our production and exchange system. Perhaps, on the whole, we should fare better if we were to limit ourselves to expressions such as "the normalizing of market prices" or "normality of prices,"

thus indicating clearly that so-called normal prices are not some separate order of prices made outside the market, but are merely market prices which fulfil (or, if attained, would fulfil) certain theoretical specifications.

The test of that normality has been (in our pricemotivated society) the adequacy of the price paid in the market to cover a wage which would secure the needful labor, interest which would secure the needful capital, and the necessary expenses for the purchase of raw material and the payment of insurance, taxes, and the like. All this, however, runs in terms of the adjustment of production to conditions of natural resources, human agents, technique, organization, or other factors of production, and (in its second and third phases)1 of readjustment to changes in these conditions, and hence costs, of production. In short, writers have habitually given us a production-adjustment concept of price normality and have generally had their minds filled with industrialized processes of production, in which the flow of goods is continuous or, at least, has its stoppings and startings, its expansion and curtailment, largely under control toward the end and purpose of making supply such as to command a remunerative price.

This is all very well so far as it goes. But the concern has been too exclusively with the normality of supply conditions, and little or nothing has been said about the normality of the demand which comes to effective expression in the market, or concerning the adequacy of the market mechanism to bring about normal adjustments of actual supply and actual demand conditions. The stark cost-of-production concept of normal price is insufficient to the economist's need in attacking the

1 I. e., (2) long-run normals, based on a supply which "can be produced by plant which itself can be remuneratively produced and applied within the given time," and (3) secular movements of normal price, caused by the gradual growth of knowledge, of population and of capital, and the changing conditions of demand and supply from one generation to another." Marshall, Principles of Economics, p. 451.

problem of market systems and methods as a factor in price determination. And this inadequacy is particularly evident in the case of those extractive products which are not produced by highly industrialized processes and for which, therefore, the conditions of supply are highly adventitious. Gold during the nineteenth century would furnish an excellent case in point, were it not that its entanglement with monetary systems complicates its value phenomena unduly. The present writer's interest lies in the field of agricultural operations, and here we may find ample illustrations for our purpose.

The production of farm crops is subject to expansion or contraction of acreage, the enthusiastic propagation of plants and animals or the disheartened slaughter of livestock and uprooting of orchards. Likewise, the farmer may neglect his crop in midseason and even "let the weeds take it," or he may give it extra cultivation, fertilizer, or irrigation; animals may be "forced" for maximum growth or turned out to fend for themselves all this in response to the inducements or discouragements which the farmer sees in the trend of market prices. These facts give us what basis there is for the application of current theories of normal price to the farmer's business situation.

But this is not the whole story. The farmer's choice of crops and his determination of the acreage of each having been made irrevocably at planting time, the weather enters as an erratic modifying factor at every subsequent stage of the productive process. Whatever the farmer's intentions, this is the final arbiter, deciding what volume of products shall come finally upon the market. Furthermore, that output, however illmatched to buyers' needs, comes to market, thanks to the seasonal character of the industry, in some relatively

short harvest period - a fixed supply which cannot be increased until the whole long process of the suns has been gone through again, and whose flow upon the market can be checked but little even tho prices be sliding below the marginal or, indeed, the average cost of production. Even if some of the product be held back in local storage, its existence is known and discounted in the market, and prices must fall below the cost of harvest and marketing before it will pay the individual farmer to abandon a crop already grown.

These facts raise an entirely different, but highly important, question of normal adjustment, viz., that of a fixed supply to a given schedule of demand. Every price situation raises an issue of internal or marketdistribution adjustment as well as an external or production adjustment. Even tho a given supply situation be highly abnormal so far as the future trend of profitmaking production is concerned,1 it might conceivably be adjusted perfectly within itself, so that every consumer secured his fragment of supply at a price no greater than that actually necessitated by the ratio of the total stock to total effective demand (transportation cost being assumed), and such that every producer secured a price which represented the full value of his produce in view of its scarcity in that particular year.2 Such a concept of normality, in fact, lies at the very heart of our whole problem of rational market distribution, even as the older idea of a cost of production normal lies at the heart of the problem of rational adjustment of the productive process.

1 E. g., a famine price, which would stimulate production and lower exchange values in the future; or a ruinous overproduction price, which would discourage further effort in the given line and in time raise the demand-supply ratio.

2 With, of course, a similar limitation on the opposite side of each of these propositions. Obviously, this does not touch the issue as to whether the producer is thereby getting less than his cost of production or a fat profit above it.

Changing conditions are revealing the insufficiency of the emphasis which economists generally have placed upon the former of these phases of our price discussion. The distinctive character assumed by the economic exposition of any given period tends naturally to conform to, and hence be limited by, the run of attention of the epoch out of which they grow. The science of economics has been born and reared in a day wherein men have been concerned with the coming of the Industrial Revolution, the development of capitalism, and the exploitation of new natural resources. Consequently we have been concerned very largely with the problem of profit-seeking entrepreneurship and inclined to scrutinize closely the effectiveness of our business organization to equalize profits on all the various margins of economic endeavor. Hence a cost-of-production normal of prices.

Today, however, the burden of exchange distribution, under conditions of world trade and intense geographical specialization in our productive organization, becomes so heavy that our interest is to a considerable extent shifted from production to marketing problems (i. e., from the creation of form utilities to the creation of time and place utilities) and we feel the need of a careful statement of a market distribution normal of prices. In securing such a statement, we need merely to develop certain ideas always implicit in the equilibrium theory of value, but not made sufficiently explicit in the expositions of value and price as found in our college texts or even in more advanced theoretical works.

An entirely orthodox and very common method of procedure has been to state that market prices are prices actually paid in the market,' but to illustrate the

1 Cf. Adam Smith, "The actual price at which any commodity is commonly sold is called its market price. It may be above or below or exactly the same with its natural

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