The Online Library of Liberty

A project of Liberty Fund, Inc.

• Introduction.
• Biographical and Critical.
• Author’s Preface to the First French Edition.
• Author’s Preface to the English Edition.
• Book I.: Evolution and Retrogression.
• Chapter I.: Social Retrogression.
• Chapter II.: Socialist Programmes.
• Chapter III.: Character of Political and Intellectual Progress.
• Chapter IV.: Character of Social Progress.
• Chapter V.: The Evolution of Property.
• Chapter VI.: Doctrinal Contradictions of the Socialists.
• Chapter VII.: Practical Self-contradiction of the Socialists.
• Book II.: Socialistic Sophisms.
• Chapter I.: Labour and Wealth.
• Chapter II.: On the Limits of Collectivist Society.
• Chapter III.: The Law of Supply and Demand.
• Chapter IV.: The %u201ciron Law%u201d of Wages.
• Chapter V.: Integral Wages.
• Chapter VI.: To Each According to His Needs.
• Chapter VII.: The Abolition of Wages.
• Chapter VIII.: Machinery.
• Chapter IX.: Excessive Production.
• Chapter X.: Economic Crises.
• Chapter XI.: Cheapness.
• Chapter XII.: The Game of the Gullible.
• Chapter XIII.: Socialistic Methods.
• Chapter XIV.: Facts Compared With Socialist Statements.
• Chapter XV.: Redistribution of Wealth.
• Book III.: Socialistic Legislation.
• Chapter I.: Putting Socialistic Sophisms In Force.
• Chapter II.: The Regulation of Child Labour.
• Chapter III.: Female Labour and the Law.
• Chapter IV.: Compulsory Idleness of Lying-in Women.
• Chapter V.: National Labour and Foreign Workmen.
• Chapter VI.: Trade Syndicates.
• Chapter VII.: Registry Offices.
• Chapter VIII.: Nature of %u201clabour Laws.%u201d
• Book IV.: Socialistic Morality and Respect For the Law.
• Chapter I.: Contempt For the Law.
• Chapter II.: Servile Labour and Free Labour.
• Book V.: Strikes and Social War.
• Chapter I.: Cost and Consequences of Strikes.
• Chapter II.: The Causes of Strikes.
• Chapter III.: During the Strike.
• Chapter IV.: Social War.
• Book VI.: Responsibilities.
• Chapter I.: Parliament and Strikes.
• Chapter II.: Subsidies to Strikers.
• Chapter III.: The Executive, the Judicature, and Strikes.
• Chapter IV.: Liberty and Anarchy.
• Chapter V.: The Socialism of Employers.
• Chapter VI.: Militarism, Protection, and Socialism.
• Conclusion.

CHAPTER III.

THE LAW OF SUPPLY AND DEMAND.

Repeal of the Law of Supply and Demand—Newton’s Responsibility—Definition of the Law of Supply and Demand—Its Universality—Its Application to Labour—Labour is Merchandise—Strikes and the Monopoly of Labour—The Law of Supply and Demand in Relation to Labour, according to Cobden.

In the eyes of the Collectivist, these difficulties are evidently matters which may be passed over in silence, so far as regards the goal which they are striving to reach—the suppression of the Law of Supply and Demand.

One day, at an electoral assembly, some one bitterly reproached me with being a supporter of this law. He imagined, honest man, that this law is inscribed in the Statute Book, and that I had voted for it. I thought that he was alone in this idea until lately, when in talking about this law to several Socialists, one of them said to me: Well, then, you decline to repeal this abominable law!

From these two cases I am obliged to conclude that not only ignorance of economic principles, but even of the idea of a scientific law, is much greater than I had imagined it to be; a discovery which should make us full of indulgence towards the mistakes which we hear uttered every day, but which gives us at the same time the right to invite those who speak with such contempt of “vile economists,” and advocate with so much assurance plans for social upheaval, to begin by learning the A B C of the questions with which they deal.

The Law of Supply and Demand was not promulgated in any code. Its power comes from elsewhere. It imposes itself upon mankind in as implacable a way as hunger and thirst. We furnish fresh demonstrations of its truth, whether willingly or not, even while we imagine ourselves to be violating it. If the Socialist excommunicates and abuses the economist, who formulates this law, he should also hold Newton responsible for all the tiles that fall on the heads of passers-by, and should declare that if some poor wretch, in throwing himself from a window, kills himself, it is the fault of those physicists who have discovered and taught the law of gravitation.

As there are still so many who ignore the Law of Supply and Demand, it is useful to recall it. Supply is the desire of an individual to procure for himself a commodity in exchange for one of another kind which he already possesses. Demand is the desire, in conjunction with the means of purchase, to procure for oneself some kind of commodity. The value of a utility is in inverse ratio to the supply, and in direct ratio to the demand. When there is a greater supply of a certain kind of merchandise than demand for that same kind of merchandise, prices fall. They rise in the opposite case.

I ask of the Socialist, who wishes to repeal the Law of Supply and Demand, if he can name a case which contradicts it. When he has seen corn, wine, wood, or machines offered in greater quantities than the consumers require, has he seen prices go up or down?

What do Protectionists do when they demand customs duties to hinder such or such a product crossing the frontier? They perform an act of fidelity towards the Law of Supply and Demand. Their aim is to lessen the supply,1 so they raise the price of those things which they wish to exclude.

It is fine of you Socialists to abuse the Law of Supply and Demand. Not only do you apply it every day of your life, to the purchases which are necessary to your existence, when you bargain for your wine, your bread, your meat, your house, and your clothing; but you also apply it when you are the seller, instead of the buyer.

Socialist.—Come now! I am never the seller, because I have nothing to sell.

Economist.—When you hire out your labour what do you do? Do you not demand wages? Do you not make a contract, either oral or written, which is called the hiring contract? You sell your labour like the grocer sells his salt, his coffee, and his sugar; like the baker sells his bread; like the butcher sells his meat.

Socialist.—It isn’t the same thing; I don’t hand over anything.

Economist.—No, but you render a service. The railway which transports you from one place to another does not hand over anything to you, but it renders you a service. The doctor who attends you, the advocate who pleads for you, receive payment because they render you a service. You let out your strength, either muscular or intellectual, in return for remuneration. It is the hiring of professional strength and skill which we call the contract of labour. It is a merchandise, like any other, and, like all things or services which are the objects of contracts and agreements, is subject to the Law of Supply and Demand.

Socialist.—You may repeat that to me in as many ways as you like, but you will not convert me, because I tell you I do not admit it.

Economist.—And what if I prove to you, that you are the first, not only to recognise that labour is merchandise subject to the Law of Supply and Demand, but also to insist, sometimes even with violence, that all should recognise it to be so?

Socialist.—That would be difficult.

Economist.—You wish to suppress woman’s labour, to suppress apprentices, or, at least, to limit their number, to send back the foreign labourers over the frontier; is it not so?

Socialist.—Yes.

Economist.—Each one of those propositions is a homage paid to the Law of Supply and Demand; because each one of them has for its object to diminish the supply of labour, and thereby to raise the price.

Socialist.—I need other reasons to convince me.

Economist.—Are you a partisan of the law of 1864 which gives workmen permission to strike? Would you like to return to the previous régime?

Socialist.—No, that is not required. The right to strike is now law.

Economist.—Very well! What do you do when you strike? You withdraw your labour from the market. You say to your employer: If you wish to buy my labour, you will have to pay dearer for it. If you are clever you will choose the time when he needs you most, to dictate your conditions to him. Do you know what you are? You are a forestaller.

Socialist.—You don’t say so!

Economist.—What is a forestaller? He is a speculator who withdraws corn, wine, cotton, etc., from the market, to raise the price of his merchandise, and waits for the rise before selling. You, too, you refuse your labour, you withhold it in order to raise its value; and whether you wish to comply with it or not, you apply the Law of Supply and Demand.

Cobden has described, in a picturesque manner, how the Law of Supply and Demand acts in the matter of wages. Wages rise, he said, when two masters run after one workman; they fall when two workmen run after one master. One might try, by more or less violent means, by all sorts of more or less ingenious combinations, by more or less clever laws, inscribed in our codes, to violate this Law of Supply and Demand with respect to labour; but we should never change it, because it is immutable. Each time that there was no demand for some portion of the supply of labour, the workman would be compelled to accept a situation at a reduced price; each time that there was a demand for labour in excess of the supply, wages would necessarily rise.

[1]Demand?—Ed.