Front Page Titles (by Subject) Opinions as to the Variation of Price. - The Theory of Political Economy
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Opinions as to the Variation of Price. - William Stanley Jevons, The Theory of Political Economy 
The Theory of Political Economy (London: Macmillan, 1888) 3rd ed.
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Opinions as to the Variation of Price.
There is no difficulty in finding in works of Economists remarks upon the relation between a change in the supply of a commodity and the consequent rise of price. The general principles of the variation of utility have been familiar to many writers.
As a general rule the variation of price is much more marked in the case of necessaries of life than in the case of luxuries. This result would follow from the fact observed by Adam Smith, that "The desire for food is limited in every man by the narrow capacity of the human stomach; but the desire of the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary." As I assert that value depends upon desire for more, it follows that any excessive supply of food will lower its price very much more than in the case of articles of luxury. Reciprocally, a deficiency of food will raise its price much more than would happen in the case of less necessary articles. This conclusion is in harmony with facts; for Chalmers says:1 "The necessaries of life are far more powerfully affected in the price of them by a variation in their quantity than are the luxuries of life. Let the crop of grain be deficient by one-third in its usual amount, or rather, let the supply of grain in the market, whether from the home produce or by importation, be curtailed to the same extent, and this will create a much greater addition than of one-third to the price of it. It is not an unlikely prediction that its cost would be more than doubled by the shortcoming of one-third or one-fourth in the supply."
He goes on to explain, at considerable length, that the same would not happen with such an article as rum. A deficiency in the supply of rum from the West Indies would occasion a rise of price, but not to any great extent, because there would be a substitution of other kinds of spirits, or else a reduction in the amount consumed. Men can live without luxuries, but not without necessaries. "A failure in the general supply of esculents to the extent of one-half would more than quadruple the price of the first necessaries of life, and would fall with very aggravated pressure on the lower orders. A failure to the same extent in all the vineyards of the world would most assuredly not raise the price of wine to anything near this proportion. Rather than pay four times the wonted price for Burgundy, there would be a general descent to claret, or from that to port, or from that to the home-made wines of our own country, or from that to its spirituous, or from that to its fermented liquors."1 He points to sugar especially as an article which would be extensively thrown out of consumption by any great rise in price,1 because it is a luxury, and at the same time forms a considerable element in expenditure. But he thinks that, if an article occasions a total expenditure of very small amount, variations of price will not much affect its consumption.
Speaking of nutmeg, he says: "There is not sixpence a year consumed of it for each family in Great Britain; and perhaps not one family that spends more than a guinea on this article alone. Let the price then be doubled or trebled; this will have no perceptible effect on the demand; and the price will far rather be paid than that the wonted indulgence should in any degree be foregone.... The same holds true of cloves, and cinnamon, and Cayenne pepper, and all the precious spiceries of the East; and it is thus that while, in the general, the price of necessaries differs so widely from that of luxuries, in regard to the extent of oscillation, there is a remarkable approximation in this matter between the very commonest of these necessaries and the very rarest of these luxuries."1
In these interesting observations Chalmers correctly distinguishes between the effect of desire for the commodity in question and that for other çommodities. The cost of nutmeg does not appreciably affect the general expenditure on other things, and the equation on p. 113 therefore applies. But if sugar becomes scarce, to consume as before would necessitate a reduction of consumption in other directions; and as the degree of utility of more necessary articles rises much more rapidly than that of sugar, it is the latter article which is thrown out of use by preference. This is a far more complex case, which includes also the case of corn and all large articles of consumption.
Chalmers' remarks on the price of sugar are strongly supported by facts concerning the course of the sugar markets in 1855-6. In the year 1855, as is stated in Tooke's History of Prices,1 attention was suddenly drawn to a considerable reduction which had taken place in the stocks of sugar. The price rapidly advanced, but before it had reached the highest point the demand became almost wholly suspended. Not only did retail dealers avoid replenishing their stocks, but there was an immediate and sometimes entire cessation of consumption among extensive classes. There were instances among the retail grocers of their not selling a single pound of sugar until prices receded to what the public was satisfied was a reasonable rate.
[]Chalmers' Christian and Economic Polity of a Nation, vol. ii. p. 240.
[]Chalmers' Christian and Economic Polity of a Nation, vol. ii. p. 242.
[]Ibid., p. 251.
[]Chalmers' Christian and Economic Polity of a Nation, vol. ii. p. 252.
[]Vol. v. p. 324, etc.