there is every reason to believe that there will be a gradual increase in the number of cases like that of one of the largest and most successful brass works in Birmingham, in which the post of general manager is filled by a woman.

§ 8. Local variations of profits may be caused by local variations of interest, or by local variations of the Earnings of Management. We have seen that the growth of the modern system of credit has equalised the rate of interest throughout England; and that a man of business has in some respects greater facilities than any other class of workers have, for moving from a place where there is a poor market for his abilities to one where there is a good market. It is true that by a change of place he may lose some capital which has been sunk either in establishing a good local trade connexion, or in erecting buildings and other plant that cannot be removed; but his habits and resources fit him for learning what is going on in distant places and for taking advantage of his knowledge. And on the whole the Task-earnings of Management, the earnings that are got by ability of a given order, do not seem to vary very much from one place to another. But a tendency towards the equality of Task-earnings of Management in two places is a tendency towards the inequality of the average rate of profits when the average ability in one of them is higher than in the other. A good instance of this is seen in the case of farming.

Where the population is vigorous and enterprising, farmers and labourers have a high standard of efficiency and get high earnings; so that we should expect to find that farmers' Earnings of Management are high where labourers' wages are high, and low where wages are low. And observation shews that this is the general rule. We should also expect to find that where land is rich the population is well fed and vigorous: and that therefore where rents are high farmers' earnings and the wages of labour are generally high. This rule is subject to much greater exceptions than the preceding one; because the vigour of the population and the current rates of wages and farmers' earnings are often more affected by the neighbourhood of manufactures than by the richness of land: they are high in the North of England where the land is poor, and they are low in the South of England where the land is rich and again they are very high in new countries where land can be got for nothing and no rent is paid. But if we compare different parts of Europe which are under equally favourable conditions in other respects, and which are not near manufacturing or mining districts, we find that the rule holds fairly well1.

§ 9. There is however one class of occupations in which 1 Comp. Cliffe Leslie, .c., pp. 365-370.

the local variations of profits are great. The Earnings of Management got by small shopkeepers vary a great deal from one country to another. For instance they are very low in Germany, and they are very high in America. For there are many Germans who have the little capital and education that a small shopkeeper requires, and who like an easy life. But in

new countries those who have a little capital hope to work hard and make their fortunes; so they will not keep a shop unless they can get a good income from it. The difference between retail and wholesale prices is therefore greater in England than in Germany, greater in America than in England; and as another consequence of the same causes, large capitals have displaced small capitals in the retail trade in America more than in England, and in England more than in Germany.

We may next consider the question :-how is it that retail prices often differ much in different parts of the same town, that they are for instance higher in the West-end than in the East-end of London? The answer is not the same for all kinds of trades. In trades that deal in things the selection of which requires taste, the shopkeepers of a fashionable neighbourhood must be men of taste themselves. They must always be well provided with the goods that are coming into fashion; they must promptly rid themselves, even at a loss, of all goods that would lower the general character of their stock; and as they must offer their customers a large choice, their stock of goods must be very great in proportion to their sales. High prices will always be charged in such shops; and high prices will not deter the rich from going to them. But it is different with shops which sell provisions and other goods, in the selection of which little or no taste is required. There is nothing to prevent a shopkeeper who can get a wide reputation for selling ordinary things of a good quality and at a low price, from absorbing a large part of the trade of his district; though of course he cannot attract the custom of those who purchase through their servants and do not pay their bills promptly. Such people will always support a special class of shops where high prices are charged from which to deduct a commission for the servants, interest on all debts, and insurance against bad debts.

Retail prices fluctuate less than wholesale prices. The reason of this is that the retailer can keep his customers if he satisfies them that on the whole his prices are fair. They do not watch the market closely, they do not know whether in each separate charge he has made proper allowance for the fluctuations of the market. But in large wholesale transactions the purchaser examines each bargain on its own merits. In important transactions the higgling and bargaining of the market

are a fit occupation for business men; but in most retail transactions it is a waste of time and energy to bargain.

[It is often said that the high rent which a West-end shopkeeper has to pay compels him to charge high prices. But this is an instance of the error of mistaking cause for effect, which is often made with regard to rent. If a shop is so situated that a shopkeeper who has sufficient capital and understands his business can make large net profits in it, its rent will be high: otherwise not. The shopkeeper may make these large profits in either of two ways. If his shop is in the West-end he can hope for custom even though his prices are high, and perhaps he would not much increase his sales by selling cheaply; so he charges high prices and pays his rent out of them. If his shop is in the East-end, he knows that he must sell cheaply, or not sell at all; and he has to be content with a low rate of profit each time he turns over his capital; but if he is in a first-rate position he can turn over his capital many times a year, so his annual net profits may be very great, and he may be willing to pay a very high rent. Prices are low in many of the most highly rented shops in London; and they are very high in some of the quiet streets in the fashionable parts of London where rent is not very high, and in many villages where rent is very low. Rent does not then enter into retail price any more than it enters into wholesale price1; but some advantages of situation cause high rents and high prices, and others cause high rents and low prices.]

1 See Book II. ch. iv.

§ 1. IN examining market fluctuations and local variations of prices and wages, we have so far supposed each man to fashion his own course without any special agreement with his neighbours in the same trade. But now we are to discuss the influence exerted by trade combinations. These may be organized into formal societies with definite rules, or they may simply adhere together under the influence of custom or of a real or supposed community of trade or class interests.

If the producers of a commodity are many in number and act without any concert, it is to the interest of each of them to increase his supply of it whenever he expects to obtain a price greater than its Expenses of production. So that the price of a commodity cannot long exceed its Expenses of production, if there is free competition among its producers. But where there is not this free competition, where the whole of the production is in the hands of one firm, or where it is in the hands of several firms who combine together to limit the supply, the price may be maintained at a good deal above its Normal level; when the price is thus kept at a higher level than the Expenses of production of the commodity it may be called a Monopoly price.

A man has a complete monopoly of a commodity if no one but himself can produce it. Complete monopolies are for instance conferred by the ownership of a valuable mineral spring, or of a patent which prohibits any one but its owner from making a certain thing. The question which such a monopolist has to settle in order to determine at what price he shall sell, is a very simple one, supposing him to consult only his own interest. He calculates the price at which he can sell each particular amount of the commodity, and also what the Expenses of producing it will be. He thus determines what will be the total net profits that he will make by offering it for

each particular price; and then fixes his price so as to make these total net profits as large as possible1.

A producer who has established a reputation for making something particularly well, often has a partial monopoly. But in deciding at what price to sell, he must consider the risk that a high price will attract the competition of rival producers. It may be his best policy to secure himself in possession of his partial monopoly by charging a price which allows only a low rate of profits on his capital; for if he gets even low profits on a very large capital, his Earnings of Management will be high.

§ 2. When the production of a commodity is in many hands a combination among dealers seldom aims at obtaining a complete monopoly. But combinations for raising prices by limiting supply have been made in every age, in every country, and in almost every trade. In India each trade forms a caste by itself which is generally in a very efficient though not formally organized combination. Within the villages indeed custom rules, but the price which is charged to Europeans is often deliberately fixed at a higher rate than that charged to natives, and it is very seldom that any one can be found to sell to a European at the lower price.

But in a country in which there are no castes, a trade combination in any market has to contend with great difficulties. If those who produce for the market are many in number and scattered over a wide area, it is not easy to form and keep together a trade combination. The difficulty is greatest in those trades in which a great deal of Fixed capital is used. For the combination will aim at keeping the price at all events sufficiently high to cover all the Expenses of production: while it may be the interest of any member of the combination to force a sale of his goods at any price which is more than enough to return to him his actual outlay on them, without allowing anything for interest on his Fixed capital, or for other permanent charges which cannot be avoided however little be produced. But the more likely individual producers are to continue their production and force down prices below their Normal level, the greater is the gain which the trade as a whole may get, at the expense of consumers, by a successful combination to limit production and sustain prices. And the trades in which much Fixed capital is used, are those in which the greatest efforts have been made to form such combinations.

For instance, the Normal fares and freights of a steamship

1 If he calculates that at a price y, an amount x can be sold, and that for this amount the Expenses of production would be z per unit of the commodity, he will try to fix the price so as to make xy-xz a тахітит.