5 Economists long took that proposition as sound, and tried to build upon it a scientific explanation of prices and values as they are. It always has been recognized that there are difficulties in such an explana tion. We shall not enter into the controversy, but briefly indicate the point of view we now take.
not sell without loss. Within or above those limits the price is determined by the bidding of the market, buyers and sellers. If any one is so situated that he can regularly get more than cost on any unit, he attributes the gain to what ever agent gives the advantage,—to his patents, his land, his own ability,—and thereafter he adds more to costs on that account. In this case we see plainly that the value (or price) of the factors (that is, the cost) is being marked up (or down) according to the price of the products, and not vice versa.
The rule must be reversed also in the case of many large classes of goods. Some things that can not be multiplied or reproduced, such as autographs, old violins, old paintings, diamonds, bring prices that are not dependent on the cost of production. The same is true of great numbers of natural resources, including all lands taken in a state of nature, whether agricultural, mineral, residential, or commercial. That leaves still to be explained the relation of costs to the prices of the great class of goods which are grown by the art of man, e.g., grain, cotton, cattle, etc., and manufactured, e.g., tools, machines, cloth, etc. Now it is noticeable that every one of these objects has a cost just because it happens to be looked at just when it is in the enterpriser's hands at an inter mediate stage of its production. The cost rule applies only to factors that have been bought at a price, and the total cost is simply the sum of the prices of the factors. But how did the factors, the various qualities of labor, the materials, use of agents, etc., get their price? That question has been an ,--"swered in earlier chapters: from the value of the expected product, or uses. The business enterpriser is a middle man, buying to sell again, and his costs determine whether or not he can make a profit, but they do not determine the prices of the products. Rather they are seen to be determined by
the prices, when a broad enough view of the situation is taken.
§ 9. A single factor of a single product. The tracing of the value of goods through intermediate products to direct enjoyable goods, and finally to the source of value in psychic income, gives the genealogy of value. After the goods enter into the channels of commerce and are once bought and sold, they bear a cost to the owner. In the one direction we seek the "ultimate agent," or factor, the natural agents and la borers; in the other direction we seek "the ultimate products" or ultimate uses. A single product having a single factor shows most clearly the reflection of value directly from the product. (See Figure 43.) The discovery of a mineral spring or of a good quality of building-stone on worthless land, will cause a value to at tach at once to the agent. When a great singer like Ade lina Patti commands several thousand dollars for each ap pearance in concert, the value of the music in the minds of de lighted hearers is transmitted to the salary of the singer. Her salary is not determined by cost, but it becomes a cost to the enterpriser who employs her and undertakes a concert tour.
§ 10. The genealogy of value. When the one factor yields several different kinds of products no one product alone ac counts for the value of the factor. As any one wishing the factor for any use must bid against the other uses, the factor appears, on a superficial view, to have a price already deter mined by its other uses. But we know from our previous studies (see Chapters 4-6) that the value in any situation results from all the uses taken together, including the par • A factor F (it may be a concert singer, an acre of land, or a mineral spring) derives its entire value (usance and capital value) from the price of the product, is valuable or worthless according as the product is so. If two or more products (p', p", p"') are attributable to it, its value is the sum of their prices (less costs, that is, the prices paid for other factors). But inasmuch as the use of F for one product takes it away from the use of another, the value of its use must be accounted as a cost whenever it is a question of increasing the output of any one of the products. Therefore, at that moment the cost seems primary and price derived.