Monopolies Through Secrets in Trade and Manufactures Icon

January 20, 2020

Keeping Up the Market Price Above the Natural Price through Secrets of Trade and Manufactures

20 The market price always gravitates towards the natural price.

But it may stay above the natural price for long periods due to=

  • natural accidents, and
  • man-made accidents, as in regulations

21 When the effective demand increases, sellers are careful to conceal this increase to prevent new rivals.

Those rivals would reduce the market price to its natural price or even below it. If the market is far from the suppliers, they may be able to=

  • keep the secret for several years and
  • enjoy their extraordinary profits without any new rivals.

However, these secrets of trade can seldom be long kept.

22 Secrets in manufactures can be kept longer than secrets in trade.

A dyer who can reduce his costs to half can enjoy the cost-savings which is normally treated as extraordinary profits.

23 Both kinds of secrets may last for many years.

24 Some natural productions might need a very specific type of soil and location that all the land would not be enough to supply the effective demand.

This causes its price and its rent component to stay high for centuries. Such high rent bears no regular proportion to the rent of other equally fertile land nearby. But the wages of the labour and profits of the stock employed in bringing them to market are usually proportional to wages and profits nearby. An example is the French vineyards.

25 Such enhancements are the effect of natural causes and may continue forever.

Monopolies Increase Prices

26 A monopoly granted to an individual or trading company has the same effect as a secret in trade or manufactures.

The monopolists keep the market constantly under-stocked to unnaturally raise the market prices of their commodities.

27 The price of monopoly is the highest, while the natural price, or the price of free competition, is the lowest which can be taken in the long term.

The monopoly price is the highest which can be squeezed out of the buyers. The natural price is the lowest which the sellers can commonly afford to continue their business.

28 The exclusive privileges of corporations, or enlarged monopolies, and all laws which restrain the competition also increase market prices for ages, but to a lesser degree.

29 Such enhancements of the market price may last as long as the regulations which cause them.

30 The market price may stay higher than the natural price for a long time. But it cannot stay below the natural price as long because the proprietors would feel the loss and would immediately stop production. The price would then soon rise to meet the effective demand if there were perfect liberty.

31 The statutes of apprenticeship and corporation laws allow a worker to raise his wage rate above the natural rate during the prosperity of manufactures.

They lower wage rates below their natural rate during decay. During the prosperity of manufacturing, it excludes others from entering his employment. During the decay, it excludes him from entering other employments. Statues and corporation laws are better at unnaturally lowering wages than raising them. They may lower wages for many centuries. But they can raise wages only for the lifetime of those workers. When they are gone, other people will learn the trade. The number of workers will then suit itself to the effective demand. Laws can also sink wages below the natural rate for several generations. This is seen in ancient India and Egypt where every man was bound by religion to follow only the occupation of his father and never change it.

32 These are all the causes of the differences between the market price and the natural price of commodities.

33 Natural price itself varies with the natural rate of wages, profits, and rent. Their rates vary according to the society’s=

  • circumstances,
  • riches or poverty, and
  • advancing, stationary, or declining condition.

The causes of those variations in natural price will be explained next.

34-35 I shall explain=

  • the circumstances which naturally determine the rate of wages and profits, and
  • how wages and profits are affected by society’s=
    • riches or poverty, and
    • advancing, stationary or declining state.

36 There is a proportion between the monetary wages in all the different employments of labour and the monetary profits in all the different employments of stock.

This proportion depends on= the nature of the different employments, and the laws and policies in place. This proportion remains the same in the advancing, stationary, or declining condition of the society. I shall explain the different circumstances which regulate this proportion.

37 Lastly, I shall explain the circumstances which regulate rent which affects the real price of the produce of land.