6. Different classes of traders.—There are many classes of traders, but for our purpose they can be grouped under the following heads : s ect_p_21219j_t.s _ wholesalers, commission merchants, retailers. All these have a part in the price fixing process, and it is not worth while to try to determine which one is most important.
The retailer is in direct touch with the, consumer and knows, therefore, the existing deniand better than anybody else. By means of his orders he transmits his information to the wholesaler or commission mer chant, who thru his orders transmits it to the producer.
The speculator in various ways gets possession of the information and decides that the prices of certain commodities are destined to undergo considerable change. If he decides •that a rise of price is indi cated, he buys from anybody who will sell, expecting to sell later at a profit. If he foresees a fall in the price of any article, he proceeds to sell it, even tho he has none in his possession, confident that he will be able to buy it at a cheaper price when called upon for delivery.
7. Value determined by competition among trad ers.—Let us for the moment forget these different groups of traders and think of traders in general as embodying all the qbalities and rendering all the services of all the groups, and let us take flour as a typical commodity, supposing its present price to be $10 a barrel. Certain traders will believe that price too low and their belief will be based on a study of the consumers' demand and the outlook for the next crop of wheat. They believe that both wheat and Iflour are destined to rise in price. They do not think in terms of marginal utility or marginal cost. Their theory of v alue is the simple law of demand and sup ply, the truth of which they have learned thru ex perience and observation. They feel confident that an increasing demand for wheat, combined with a b shortage in the supply, will lead to higher prices. In the language of economics, they believe that the marginal utility of wheat and flour is destined to rise and that the marginal consumer will soon be willing to pay a higher price for it. The traders holding to this view buy wheat and flour in order that they may sell it later at a profit. Popularly these traders are
called bulls.
Opposed to the bulls are the bears, who are skeptical about the predicted advance in price. The traders in this class think they have more accurate informa, tion than the bulls, or that the bulls fail to take into account certain important circuinstances, or that the bulls are placing too much reliance upon pessimistic returns from Russia or Argentina, or that they fail to make proper allowance for the fact that a slight advance in the price of wheat flour would cause many people to substitute cornmeal. Whatever the rea son, many of these bears are ready to sell as the bulls offer a higher and higher price.
Before the end of the day half of these traders may have been bulls in the morning and bears in the after noon, and the net result of their day's work may be that their purchases equal their sales. Some traders, because Of sound judgment or good fortune, will find that their average purchase price is less than their average selling price and that they, therefore, have made a profit; others would make a corresponding loss.
All these traders are looking for a profit and a, description of their operations makes them seem to be mere gamblers, betting on the course of prices and performing no service for society. This is a mis tak-e. These traders have been matching, not pen nies or dollars, but intellect against intellect, judg ment against judgment, and the net result of their struggle ha's been the fixing of the market price of wheat or flour.
The bull represents the marginal producer; he be lieves that conditions warrant a higher price and he fights for it. The bear stands for the marginal con sumer; he believes that prices will go lower, Or that any further advance is unwarranted, and is willing to risk money in support of his judgment.
8. Produce and stock competi tive war between opposing groups of traders in all its fierceness and intensity, each man fighting for himself, may be watched in progress almost any day on the floors of stock and produce exchanges in the large cities of Europe and America.