The telegraph and the cable have made all coun tries of jhe earth a single, industrial and commer cial unit. The producer of shoes in Lynn, Massachu setts, or of cutlery in Birmingham, England, or of olive oil in Tuscany, Italy, no longer knows his cus tomers; they are scattered all over the earth.
3. Subjective valuations measured by exchange.— Adherents of the Austrian school of political economy use value in its subjective sense, meaning by it the importance which men attach to a good as a means of satisfying their wants. In this sense value and marginal utility are virtually synonyms and the ex change value of a good is its objective measurement in comparison with other goods.
In this Text the word value is used more nearly as it is in the business world, meaning power in ex change. Nevertheless it seems worth while to call the reader's attention not only to the different uses of the word, but to the fact that different men value goods differently and that market values or prices are the outcome of these different subjective valuations, tending, as we have seen, always to coincide with the valuation of the marginal group of consumers.
4. Trader's service.—The trader or merchant is not himself a producer of material goods, nor is he a producer and consumer of the goods which he buys and sells. His buying and selling as a trader are entirely independent of his preferences as a consumer. He trades or deals in the commodities purchased by others, not because he himself wants them, but because others want them and because Ile is able thru his service and forethought to sell them, as o, rule, at a price above that at which he buys them.
In various ways the trader adds to the utility of goods which he handles. The wholesaler collects into one establlshment goods of a certain kind and thereby makes them more accessible to the retailer, thus giv ing them additional place value; the retailer in his turn adds to their place utility or value hy making them more accessible to the consumer. Tbese traders and others of the same sort, such as the commission mer chant, stand between the farmer or manufacturer and the ultimate consumer and are commonly referred to as middlemen. When competition is free no one
of them can make an extraordinary profit unless he has extraordinary talent as a trader.
The trader's most important service is the part he plays in the fixing of market value and price. In do ing this he does not add to the utility or value of the goods he handles, yet he performs a great social serv ice, for Ile furnishes to both producers and consumers price standards with which they can measure the value of 'their possessions and by the use of which they can make exchanges if they wish without the inter vention of the merchant or professional trader. It is the trader who gives us market prices, and it is upon these that people rely in their daily buying and sell ing.
5. Trader account of the great rise of prices during the twenty years following 1897 there was much complaint in newspapers and magazines/ about the high prices exacted and big profits made by the middleman and much agitation in favor of his elimination. It is exceedingly doubt ful if the needs of society can be satisfactorily served without the aid of the middleman. Doubtless some dealers have been guilty of extortion and have taken advantage of the ignorance and necessities of their customers. But such traders were no more numer ous after 1897 than they were before, and we are certainly not justified in holding the trading classes responsible for the increase in the cost of living. This can be fully explained by other causes, especially by the cheapening of gold due to the increase of the gold supply, and by the increase of population, which un der the law of diminishing returns has lifted the cost of nearly all foodstuffs.
Some manufacturers make a specialty of dealing directly with the consumer. They- advertise exten sively and promise low prices because the middlemen have been eliminated. There is without • question much room for further economies in the exchange process, but the world cannot get on without the trader. The manufacturer who sells direct to the consumer does not really fix his price. He is gov erned by the market price even tho he sells a trifle below it.