_The nature of value._—Perhaps no question in the discussion of wealth is
of greater importance than the nature of value. Certainly the measurement
of value in all our property is the basis of all exchanges, of all book
accounts, and of all inventories. The worth of any piece of property in
such estimates always involves some comparison, either of things possessed
or of exertion required or of satisfaction yielded. In comparing an apple
and a peach, both equally attainable, we may value the peach most highly
because it gratifies desires in higher degree. Thinking of future uses, we
may value the apple more highly because it will keep longer, and so be
available for future wants. In considering all the kinds of satisfaction
to be provided for, we may think of the peach as desired by more people
who are likely to render us service, and therefore more readily
exchangeable, and so of higher value. Again, the peach may be at the top
of the tree and the apple within reach, in which case we may think whether
the peach will give enough greater satisfaction to make it worth the
greater exertion to get it. In this way a single individual, who has wants
to be gratified only by exertion, forms an idea of value as founded upon
some relation between his wants and his powers, between the desires to be
gratified and the qualities of the object expected to give satisfaction.
Since wealth always implies an accumulated store of good things, every one
comes to think of the worth of his accumulation as estimated by what it
will do at any time, in any place, in satisfying any need. So, most
naturally, we associate our ideas of value with trade. An exchange of
horses brings in not only the present qualities of each horse for present
service, but all the qualities and circumstances affecting the
possibilities of disposing of the horse whenever something else is needed
more. An expert judge of horses not only knows when the horse is sound in
wind and limb, and what are the signs of docility, speed, etc., but also
what the rest of the world considers the qualities of a satisfactory
horse. In all experience peculiar circumstances, varying the relation
between wants and satisfaction, affect immensely our estimate of value.
When an ancient king shouted, “My kingdom for a horse!” he was doubtless
moved by the uselessness of a kingdom to one about to lose his life in
battle for want of a horse and also by the difficulty at that particular
moment of gaining a horse.
In ordinary experience everybody estimates value by some comparison with
what he can obtain in exchange. A picture of a friend may be priceless in
two senses: first, of so great importance to its owner that nothing can
buy it; second, of so little importance to anybody else that nobody will
give anything for it. In any inventory of wealth the picture could not be
counted; it is valueless. But in any judgment of personal welfare it may
be beyond price. So, in the universal experience, the term value has come
to be used as essentially connected with exchanges and with property as
stored to meet all kinds of wants.
_Value in services._—In a similar way experience has developed the idea of
value with reference to services. A service may be invaluable, as when a
physician saves the life of his patient, but the value of that service is
estimated by the return expected in the community where the physician and
his patient live. Many services of highest usefulness and most important
in welfare cannot be valued in terms of wealth, because no wealth can
secure them. Love and patriotism and philanthropy cannot be had for
wealth. But in comparison of two services rendered for hire, both are
measured by their general utility, either directly or indirectly, and even
this estimate is modified by the readiness with which either service can
be secured. One who seeks the service of an artist who stands alone among
ten thousand people, may be willing to give the services of a thousand
other men, which can be had for a trifle, because they are everywhere
abounding.
_Essentials of value._—Experience seems, therefore, to settle upon three
conditions for value in any article of wealth or any service rendered.
First, the article or service must have utility—that is, it must be useful
in satisfying somebody’s wants, either present or future. Second, those
wants must be of such a nature that effort on the part of some human being
will be necessary to gratify them. Nothing which can be had at all times
by mere desire of it can have value. Third, the object must be of such a
nature as to command other services or exchange of other wealth. For this
reason it must be transferable from one owner to another.
_Utility as related to value._—While utility is a basis of all values, it
is not the chief element in measuring the value of wealth. The things of
highest utility, like air and water, have no value as long as trifling
exertion will bring them. Even land is without appreciable value so long
as any person can obtain it by settling upon it.
In general, we measure utility by the relation between the nature of any
object and human nature as expressed in wants. A bushel of wheat has
utility equal to the number of loaves of bread it will furnish to hungry
humanity. In this respect every bushel may have the same utility as every
other. This would be true if every bushel of wheat was wanted by hungry
people able to exert themselves in securing it; but if five bushels of
wheat are sufficient for each human being in a year’s supply of bread, a
distribution to all the world of more than five bushels to each would make
some of the wheat useless. So if the world’s product of wheat more than
supplies the world’s want, the extra amount will be without utility unless
some means of storing against future want is devised. In that case the
utility of the stored portion will be lessened by the extra exertion
required to store it until the need comes. One may be glad to pay
twenty-five cents for a good dinner, but an equally good dinner offered
immediately afterwards will have no utility, unless he can save it for
supper. If the dinners offered are so many as to imply that several will
be useless, the value of each is likely to be affected by this estimate of
lost utility in some. Dinners in that case are liable to be furnished for
what they are worth for cold suppers.
If any article of commerce, like wheat, has its highest utility in one way
of meeting wants, as in bread, that utility will have a strong influence
upon value as long as the supply of wheat is not too great for this want.
If the supply of wheat should be so great that only a small portion could
be used for bread, other utilities would be sought. It would be used for
feeding hens, and perhaps for cattle feed. If still the amount is too
great to be consumed, it might be used for starch. In this case the least
useful portion is likely to furnish the estimate of value for the whole.
Both the raiser of wheat and the user will consider the lowest use as the
probable basis for sale.
Before the opening of the Erie canal a farmer in northern Ohio drew a load
of wheat twelve miles in hope of a market. The dealer said: “It isn’t
worth anything, since nobody has any use for it. If you had a load of
sand, I could pay you for that, to fill the mud-hole in front of my
store.” Since the utility of some wheat was nothing, the value of all
wheat tended to nothing. On the other hand, if wheat is scarce in the
community, it will be used only to meet the wants of the delicate or the
fastidious, whose comfort and life may depend upon it. In that case its
general value will be estimated by its higher utility, whatever other use
it is put to. That is called a final utility, which, in any particular
case, is the lowest use implied in consuming the supply. And this final
utility is the only one influencing the estimate of value.
It is possible, therefore, that the total utility of anything, like a
paper of tacks, for instance, may be greatly increased, since it has
indefinitely more uses than when tacks were first made. Yet the supply of
tacks is so enormous that to consume them we must use them for trifling
purposes; and therefore their value is a trifle. When we have water to
throw away, its value is nothing. When water is limited to culinary uses,
its value is considerable. When water is sufficient only to slake extreme
thirst, its value is beyond price. Even the prospect of a future supply
diminishes the utility of any commodity, since time is an important
element in satisfaction. Thus a store of potatoes in early spring, however
well preserved, has its final utility lowered, and therefore its value
lessened, by the prospect of new potatoes.
On the other hand, the present value of a field of grain or the young
orchard is dependent upon its utility in meeting a future want. Everything
which enhances prospective utility of any article enhances its value; and
everything which diminishes the chance of such utility, like bad weather,
insects or plant diseases, diminishes the present value. In this way risk
diminishes the value of wealth subject to it and increases the value of
wealth which has passed by it.
In general, the usefulness of anything is no criterion for measuring
value, because other elements of value are more important. Henry C. Carey
says, “Utility is the measure of man’s power over nature; value is the
measure of nature’s power over man.” This may be a striking way of saying
that great utility implies a discovery of uses, while great value often
indicates only difficulty in securing what has great usefulness.
_Exertion as related to value._—Since utility, however essential to value,
is not its measure, we are led to consider whether the exertion required
to obtain any article desired may not measure its worth. This is certainly
a matter of prime consideration, and many have been led to suppose the
cost of production, by which is meant all the exertion necessary to bring
any commodity to its final consumer, to be the sole and absolute measure
of value.
This supposition, if ever correct, is subject to great modifications. None
know better than farmers that a bushel of wheat from one field may have
cost twice as much as a bushel from another field, without any possible
distinction in value. Every mechanic knows that what he has accomplished
with great exertion may have been duplicated by some labor-saving device
with half the exertion, the two values being essentially equal. Nothing is
more common than to find articles in the market sold without regard to
cost because they are superseded by more desirable articles. Indeed, the
most ardent defender of cost as the sole basis of value is obliged to
notice multitudes of exceptions to the rule. Yet it must be granted that
only those articles involving effort in securing them have value at all,
and in general the amount of effort actually put forth has some relation
to our estimate of value.
In general, men do not exert themselves more than necessary to meet wants,
and in any exchange with others estimate the value of what they have
produced by the exertion expended. Yet, as products of the same kind
exchange in the same market without regard to their individual cost, it is
evident that some other principle must be discovered. Nevertheless, no
farmer will continue indefinitely the raising of a crop which brings in
the market less than a fair average return for his labor in raising it. In
a series of years he expects his wheat to return a fair compensation for
labor expended. In the same way every manufacturer expects a full return
for all cost of all his efforts, and would not continue his work from year
to year without such expectation. Moreover, when for any reason the market
value of anything is much above its cost, somebody is ready to increase
the supply of that particular article, and more will add their efforts in
the same direction until its value approaches nearly the general cost of
production as compared with the cost of other products selling in the same
market.
_Normal value._—In this way the cost of production is said to fix the
normal value of any article of commerce capable of production in
indefinite quantity and within limited time. For this reason farmers are
interested in finding the average cost of production of wheat, corn, etc.,
within a region supplying their market. They are even interested in
knowing the conditions for wheat raising in India, South Africa and
Australia, since the cost of production there may influence the value of
wheat throughout the world. The normal value of products capable of
indefinite multiplication tends always toward the value of the least
costly. This is shown in the effect of labor-saving machinery upon the
value of cloths and other goods. It is equally true in agriculture that
wheat raising upon cheap land with extensive use of machinery and
economical methods of culture and harvesting brings down the normal value.
So long as more land can be applied to wheat raising with these
advantages, the less productive methods may be too costly for the market.
On the other hand, if any production cannot be largely extended so that
the supply in market barely meets the requirements of purchasers, the
tendency of normal values is toward the cost of the most costly part of
the product required to meet wants. This is because the supply is kept up
only by the exertion of the greater amount of labor as well as the less.
If farmers in western prairie country can raise corn at an expense of 15
cents per bushel, as they can upon an average, so long as that region can
raise all the corn required no less productive region can force the normal
price above what will keep western farmers raising corn. When the western
crop fails, the price is far above normal value, and may even go above the
cost of the most costly corn in market, under a principle called the law
of supply and demand.
Since improvements in method so constantly lessen the normal value of
products, Mr. Carey made the effort to measure value by “cost of
reproduction,” meaning, I suppose, that any article produced at any time
and place is likely to bring in any market a price equal to the cost of
similar articles produced under the most improved methods anywhere used in
the present. This, of course, does not apply to articles not desired in
the present, because deteriorated or out of fashion or less useful than
some new device for a similar use, but only to those articles of full
utility in having all the qualities needed to meet the desire of
purchasers. Even a diamond like the famous “Kohinoor” would have its
almost priceless value reduced to the cost of securing similar jewels
equally desirable if a process of crystallizing carbon were suddenly
discovered. It is easy to see, then, that cost measures value only so far
as it is directly connected with the available supply in any market. Under
ordinary circumstances the supply cannot be increased unless the cost is
met, but the rule is modified by any peculiarity of season, or conditions
of trade, or production by cheaper methods or cheaper labor, or by the
changing wants of a community. The application of all these influences may
be studied under the so-called law of supply and demand.
_Supply and demand; markets._—The law of supply and demand is only a
statement of the general fact that market value tends to increase with
increase of demand and to decrease as the supply to meet the demand
increases. It must be understood that a market means a particular spot
where buyers and sellers of any article of commerce meet at a particular
time. The supply is the amount offered for sale at a given price. The
demand is the amount buyers will purchase at the same price.
Thus, if on a certain day sellers offer in Chicago 10,000 hogs, with a
willingness to take $5 per cwt., they represent the supply. If on the same
day in the same place buyers are willing to take 10,000 hogs at $5 per
cwt., $5 will be the market price, and the supply and demand will be
equal. If, however, only 5,000 hogs would be bought at $5 per cwt., 5,000
hogs will be without buyers, and their owners will seek, by lowering the
price, to find buyers at $4.50 per cwt., if necessary. Since all the
sellers will feel the same pressure, the tendency of market value will
immediately be downward. Buyers willing to pay $5 per cwt., finding many
sellers, will expect a reduction in price, and the price will certainly go
down until the hogs purchased equal the entire supply. And that will not
be until the buyers are stimulated by reduction of price, so that as many
hogs are wanted as there are for sale. If that point is reached at a price
of $4.50 per cwt., the market value is found there. The limit of time
within which this reduction takes place will depend upon the ability and
willingness of sellers to wait. If the product offered is perishable, or
costly in keeping on the market, the reduction will be speedy. Otherwise
it may be held indefinitely with the hope of compelling buyers to come to
the higher prices, in which case it is practically taken out of the
market. Only those commodities are practically in the market which are
held for sale at the market price. Only those buyers practically enter the
market who are able and willing to give the market price.
_The higgling of the market._—The process of reaching an agreement between
buyers and sellers is called the higgling of the market, and represents
the conflict between the wishes of sellers to get the most possible for
their products, and the wishes of buyers to get the most possible for
their money. In fact, both buyers and sellers have the same motive: to
make their own exertions go as far as possible in supplying their own
wants. The fact that money enters into the transaction makes no difference
with the bargain. Two farmers trading horses have exactly the same desire:
to get the full worth of the horse to be given. A genuine bargain usually
benefits both parties. Even in a horse trade each owner expects to be
benefited by the exchange; and only a jockey seeks that benefit in taking
advantage of his neighbor’s ignorance or inexperience.
So, in the general market, every seller gains what he desires more than
what he possesses, and every buyer has exactly the same experience. Two
friends may exchange books if either would be benefited by the exchange.
In that case the one gaining the less valuable book gains the satisfaction
of giving to his friend. Both are still profited, one by the larger value
received, and the other by the pleasure of giving. In such an exchange no
basis of value is reached, but in any ordinary bargain the final
adjustment will be as nearly as possibly upon the test of value in the
market. Between one buyer and one seller, the bargain is likely to turn to
the advantage of the one who is quickest to discover the weakness of the
other. If two persons are discussing the price of a house for which the
seller wishes $1,000, but will sell for even $600, and for which the buyer
hopes to give only $600, but will pay even $1,000, the seller will
gradually lower his price, and the buyer gradually raise his offer until
one or the other discovers the working of his neighbor’s mind. These are
the natural conditions for sharp bargaining.
In the larger market the interests of a multitude of buyers and a
multitude of sellers have weight, and no shrewdness can prevent a
settlement upon such a price as comes nearest to satisfying all parties.
The so-called law of supply and demand is a brief statement of the fact
that sales cannot be made in open market above the mark where buyers and
sellers agree, and that mark is essentially the price at which all who are
willing to buy at the price current are met by those who are willing to
sell at the same current price. With reference, then, to all articles sold
in open market, it is safe to say that the only test of value is the price
which the public is willing to pay. So universal is the acceptance of this
principle in practical affairs that everybody estimates the value of his
property by the price at which it will sell. Any appraiser or assessor who
should adopt a different principle would be considered wholly
untrustworthy.
_Freedom in markets._—In this higgling of the market it is absolutely
necessary that buyers and sellers have essential freedom of choice and
fairly equal information. There may be conditions of law preventing free
competition, as under the regulation of prices attempted in various
countries prior to the present century. In England, during nearly four
centuries, limits of prices for nearly every article of food and clothing
were named by law. Yet in every instance the conditions of the market were
stronger than the laws, and the restriction upon free competition and free
discussion of prices actually destroyed the open market. The conditions of
a bankrupt sale at auction reduce the competition to a struggle between
buyers. In this case a very slight collusion between the buyers may
destroy the market. This is frequently illustrated in the sale of real
estate after foreclosure of mortgages. The unnatural conditions of auction
at any price are so evident as to make common the secret employment of
sham bidders, shrewd enough to push actual buyers as far as they will go
without preventing the sale. Somewhat similar conditions may exist in a
great cattle market, in which immense quantities of cattle are delivered
by owners, while the number of buyers is few. The great packing houses
have the advantage of being almost the sole bidders for what must be sold
at their price. These conditions, however, are not made by the packing
houses, but by the large supply subject to immediate sale. Such conditions
are much more noticeable in the market for ripe berries, when a slight
excess of supply makes these perishable products of trifling value.
Conditions on the other extreme, from scarcity of supply and anxiety of
buyers, may also interfere with a free market. Any scarcity in food
products leads to an anxiety on the part of consumers to buy and an equal
disposition on the part of owners to hold for higher prices. In this case,
while the law of supply and demand is still active, the effects are quite
out of the ordinary course. Thus, for a long time it has been estimated
that a scarcity of one-tenth in the natural supply of wheat raises the
price three-tenths, scarcity of two-tenths raises the price eight-tenths,
scarcity of three-tenths raises the price one and six-tenths, scarcity of
four-tenths raises the price two and eight-tenths, and scarcity of
one-half makes the price of the half-crop four and a half times greater. A
decrease in the supply of less essential foods evidently cannot have equal
effect. Thus, a scarcity of sugar, causing increased price, will directly
reduce consumption of sugar, so that the limit may be easily reached. The
same conditions may exist with reference to meats, since a high price
diminishes the demand from the disposition of people to eat less meat.
Indeed it has passed into almost a proverb that dear bread makes cheap
meat, for the reason that few will diminish the supply of daily bread, but
the mass are willing to lessen the meat diet to save expense.
Similar conditions, affecting every market for any commodity, may easily
be discovered. Yet in spite of all these extreme fluctuations, no better
test of value has been suggested than the market price in open,
unrestrained competition of buyers and sellers.
_The market price._—In the discussion of value so far, the term market
price has been used because perfectly familiar to everyone. It is
necessary, however, to call attention to the fact that price always
indicates an estimate of value in units of current money. If that money
itself has a fluctuating value, the same article may have at different
times different prices with the same value, or the same price with
different values. Thus market prices in our country during and after the
civil war, in which a paper currency gave the unit of prices, cannot
safely be compared with each other, and can far less be compared with
prices upon a specie basis.
Even the reduction to a so-called gold basis may give misleading ideas in
regard to the market, since a new element of speculation in gold enters
into the calculation. In all the accompanying illustrations of fluctuating
prices, this particular abnormal condition has been carefully excluded.
Any fluctuations in the value of money metals, necessarily affecting the
relation of market price to market value, will be treated under standards
of price in Chapter X.
_Prices of farm products; the crop year._—The actual fluctuations of
market prices under the law of supply and demand can be most clearly seen
by a careful study in the same definite market during a period of years.
For illustration here the staple products of the farm have been chosen,
and the markets of Chicago and New York, as most truly representative,
have furnished the facts for study. These facts are presented to the eye
directly by a series of charts, each of which has been most carefully
prepared from official records, and gives within narrow limits a large
range of investigation. In every case involving annual crops, it seemed
necessary to rearrange statistics so as to cover the actual year affected
by the crop in question. September 1 was chosen as the beginning of each
year, because that date is nearest the time when the new crop of the
season appears in market and directly affects the price of such products
in store. All calculations upon live stock have been brought to the same
basis, for the reason that the supply of marketable stock is largely
dependent upon the supply of feed for stock. It seems very desirable that
all statistics in regard to markets and productive industry should be
brought to a uniform year. The year given in these charts seemed best to
suit the subjects treated. It is possible, however, that for all data
convenience would settle upon July 1, the beginning of the fiscal year in
the United States, as the best for beginning the universal statistical
year. Each chart in the series, of course, requires its particular
explanation.
The fluctuations of supply and prices for series of years are exhibited in
the Charts 4, 5, 6, 8, 9 and 12, and these are explained in detail at the
close of the chapter.
_Fluctuations with season._—Every product of the farm is known to have
conditions favorable or unfavorable from the mere changes of season
affecting the prospective supply. Conditions equally dependent upon the
seasons have something to do with demand. The result of both combined is
worthy of study by farmers and dealers in farm produce, that all may get
the full benefit of such knowledge as the study affords. For this purpose,
charts showing the annual fluctuations of staple products in the leading
markets have been carefully prepared. These may have a greater usefulness
than simply to illustrate the law of supply and demand, since it is within
the possibility of actual practice to in some degree modify by provident
foresight the extremes of fluctuation. It is hoped that the suggestiveness
of these charts may help the most enterprising farmers to adjust their
practice to conditions of market.
Charts Nos. 7, 10, 11 and 13 illustrate the fluctuations as related to
seasons.
_Law of diminishing returns._—In considering the value of farm products,
it is necessary to notice a natural tendency in all products of the earth
toward greater cost of effort in production. This is called the law of
diminishing returns, and is illustrated in every industry where the
accumulations of nature are depended upon for making labor effective.
Hunting, fishing and mining afford familiar illustrations of more work of
the same kind for equal product.
Agriculture, however, gives the most extensive available illustration of
the facts grouped under this law. In the first place, the farmer is
subject to it by mere location. The product of a field near his house and
barn costs less exertion than the product of a more distant field. In the
second place, he is likely to have chosen for his first efforts in crop
raising the land most readily yielding its fertility in crops. If he
extends his operations to less productive soil, he must work more for the
same product. In the third place, if a certain amount of work upon a
certain field will give him twenty bushels of wheat, he must give a good
deal more than twice as much work in the way of tillage and manufactured
fertilizer to make a crop of forty bushels. The proof of this is clear in
the disposition of farmers to buy more land instead of to increase labor
upon a limited space possessed.
A specific statement of the law of diminishing returns is that _in the
cultivation of land an increased amount of effort under usual conditions
fails to give a correspondingly increased amount of produce_.
_Exceptions to law of diminishing returns._—Exceptions to this law are
easy to find, as where the first selection of land in a new country has
had reference rather to safety from wild beasts and savages or malarial
diseases than actual store of fertility. Another exception is found in any
new country, where imperfect adjustment of labor to conditions of soil and
climate are liable at the outset to prevent the full use of natural powers
of the soil. So evident are these two exceptions in imperfectly developed
agriculture that some have disputed the general fact, yet all must admit
the certainty of diminished returns from multiplication of the same kind
of efforts upon the same space, and general proof is abundant in all long
settled communities.
_Effect of improved farming._—Counteracting this tendency to diminishing
returns, and in many instances more than overcoming the difficulty, is a
tendency toward improved methods in farming by more perfect application of
labor to the soil, better developed crops, better adaptation of live stock
to culture, improved machinery of every sort, and more extended range of
operations in farming, reducing the restraints of space by improved
transportation and more economical use of natural fertilizers; in short,
by any improvement through which labor is made more directly effective in
either quantity or quality of agricultural products. The whole story of
the development of agriculture in all these ways furnishes abundant
illustration of this counteracting tendency. In some regions it has more
than counter-balanced the tendency to diminishing returns. Various staple
products, like wheat, show in their diminishing value the advance in
methods of culture and adjustment of labor to production.
_Diminishing values._—The above is only a particular illustration of the
general tendency of all values to diminish with every improvement in
tools, machinery, economy of materials and saving of time, as the world
gains wisdom in applying labor to the meeting of material wants. With
every discovery of more perfect power or better use of natural forces,
like electricity, or easier ways of handling raw materials, as in
developing aluminum from crude clay, the value of the product quickly
diminishes.
A familiar illustration is found in the manufacture of steel. The
so-called Bessemer process, introduced some thirty years ago, reduced the
actual labor of making steel from iron by more than one-half. Improved
furnaces and greatly enlarged operations have reduced still further the
labor involved, until now steel often takes the place of iron, and the
value of all such products is greatly diminished. This is easily
illustrated by comparison of prices during a series of years, as shown in
chart No. 14. That this reduction in price is not the result of poorly
paid labor, but of better returns for labor expended, is evident to any
one investigating the tendency of wages or of living among wage-earners,
or of the general improvement in welfare of communities where these
labor-saving methods are applied. Any hardship connected with these
diminished values falls chiefly upon the laborers who fail to adjust their
work to the improved method. But even they gain for the diminished value
of their product a larger return on the whole through exchanges than the
higher values had brought them before.
[Chart.]
Chart IV. Comparison of the numbers of live stock with increases in
population and mileage of railroad, 1860-1898.
CHART NO. 4
_Numbers of live stock compared with increase of population and mileage of
railroad, 1860 to 1898, in the United States_
_Explanation._—This chart exhibits to the eyes a comparative increase of
(1) population, (2) sheep, (3) hogs, (4) railroad mileage, (5) beef
cattle, (6) cows, (7) horses, (8) mules. The figures followed in making
this chart are taken from the best estimates available, chiefly from the
reports of the United States Department of Agriculture. It shows that
railroad mileage has increased faster than the population, with some
slight exceptions, and its fluctuations mark quite distinctly the periods
of financial speculation and distress. The great fluctuations in the line
of sheep raising may be seen to have some correspondence with special
tariff legislation. The striking opposition of hog raising to sheep
raising is in accord with the universal experience that farmers easily
turn from one to the other. The rapid development immediately following
the civil war represents the restocking of farms and the great expansion
in farm industry so noticeable during that period. The falling off in
numbers of live stock during the last five years is evidently a reaction
from a very apparent over-production in many directions during the
previous ten years. The miles of railroad are shown in thousands, the
population and live stock in millions.
[Chart.]
Chart V. Showing the acreage and yield of Indian corn, wheat, and oats in
the United States, 1862-1897. Pages 84-87.
CHART NO 5.
_Acreage and yield of corn, wheat and oats, 1862 to 1897, in the United
States_
_Description._—This chart is intended to show the fluctuations from year
to year in acres devoted to the three staple crops, together with
fluctuations in the corresponding years in yield of each. Figures on the
right show the number of millions of acres. Figures on the left give
millions of bushels. Continuous lines show the acreage. Dotted lines show
the yield. For convenience of comparison, the line of increasing
population is added. The broken lines indicate what might have been the
consumption of each of these staples within our own country, if the people
had used throughout all the years as much of each as during the five years
of plenty from 1888 to 1892. Lines marked 1 tell the story for corn; those
marked 2 for wheat; and those marked 3 for oats. In comparing the number
of acres as given on the right with the number of bushels as given on the
left, it will be seen that an average yield of corn is assumed to be 25
bushels per acre; an average yield of wheat, 12 bushels; and an average
yield of oats, 28 bushels. The variations of the dotted lines above or
below the continuous line show whether the yield was greater or less than
these averages. The average assumed is evidently too high for the oats.
_Explanation._—Several important facts are shown. First, there has
evidently been a very great increase in the amount of these staple crops
in proportion to the population, with a recent tendency toward reduction.
Second, all three have exceeded the needs for domestic consumption, and at
the same time; while it is evident that the rate of consumption in the
early years could not have been equal to that of recent years. This
appears very striking with reference to corn. An explanation of the
increased consumption of corn may be found in its larger use for fattening
pork and beef for export as well as for domestic consumption. It has also
entered quite largely, through improved manufacture of meals, starches and
syrups, into table use. The consumption of oats is known to have greatly
increased in its use for breakfast food. The per capita consumption of
wheat, while slightly increased in some quarters through the cheapening of
flour, has been diminished by the larger use of corn and oats, and a far
greater variety of table food. Quite probably, however, the data as to
corn raising in the first few years of this period are not complete. The
years of the war made such statistics difficult to obtain. The difficulty
with reference to wheat raising was by no means as great, since the wheat
raising regions were more directly accessible. Third, the seasons of
abundance and those of poor crops can easily be seen. It is evident that
while the three crops are not always poor together, they are too
frequently so to balance each other in meeting the risks of farmers.
Fourth, it appears that the fluctuations in yield are much greater in late
years. This is accounted for by the greatly increased proportion of lands
cultivated upon the plains of the western states and subject to greater
fluctuations of climate. It will be noticed that the acreage frequently
falls off in the years showing inferior yield. This shows that sowing and
planting have frequently been affected by unpropitious weather. In fact,
wheat fields have frequently been plowed up in the spring and not counted
in return of acreage. Reductions in the acreage of wheat, however, appear
frequently succeeding an immense crop. This indicates the effect of low
prices. Fifth, the bearing of the total product upon the prices of these
staples, while suggested by the greatly increased amount, will be more
clearly seen by reference to Chart No. 6.
[Chart.]
Chart VI. Fluctuations in prices of wheat, Indian corn and oats in New
York, 1878-1898. Pages 87-91.
CHART NO. 6
_Fluctuation of prices of wheat, corn and oats in New York, 1878 to 1896._
_Explanation._—This chart exhibits the average price of each of these
three staples in September, December and May of each year. These months
are chosen as giving without too great complication the widest range with
reference to a particular season. September gives usually the price of the
first of the new crop; December shows usually the fullest marketing of
crops; May marks the month of largest speculation with reference to the
incoming crop. Corn is less distinctly affected by these peculiarities,
being subject to different conditions of the weather as well as of
marketing. But the correspondence in price to a certain extent is easily
perceived at a glance. The reason for this correspondence is partly in the
uniform effect of seasons, as shown in Chart No. 5, and partly in the fact
that either of the crops may supplement, in certain respects, a deficiency
in either of the others.
_Wheat prices._—With reference to wheat, No. 1 in the chart, further
particulars as to prices are shown. The horizontal line in each year gives
the average price of the year; the diagonal line gives the extremes of
prices, highest and lowest, within the twelve months from September to
September again. The dot within the circle gives the estimated average of
farm prices on the first of December, as given by the Department of
Agriculture. The relation of this, somewhat constant, to the New York
price for December, as given in the line directly above it, may be of
interest as showing the average actual expense of bringing wheat from all
over the United States to the New York market. Where the difference of the
two prices is more than an average, a speculative turn in the market
during December is indicated, the farm price being fixed on the first day
of December. The same fact of speculation is also shown in years where the
diagonal line is longer than usual.
_Special variations._—At the top of the chart is shown the world’s visible
supply of wheat for each year, each horizontal line indicating 500,000,000
bushels. The shaded portion gives the amount exported by the United States
and the part above the shaded portion indicates the amount consumed or
stored within the country. Thus, in the year 1894-5 the total wheat crop
of the world was 2,672,000,000 bushels, of which the United States
furnished 460,000,000, 144,000,000 of this amount being exported. This
year marked the lowest price of wheat in the record, together with the
largest crop in the world, though not in the United States. A
proportionally small amount exported explains the falling out of the
bottom of the wheat market. By reference to Chart No. 5, it will be seen
that while the wheat crop of that year was considerably above the average,
the corn crop and oat crop were far below the average. This explains the
fact appearing in Chart No. 6, that the price of wheat was lower than the
price of corn at the beginning of that year. It is probable that the use
of wheat as a substitute for corn in feeding stock actually saved the
wheat from a still lower price. The crop of 1891, the largest on record in
the United States, was accompanied by a moderate crop in the rest of the
world following two other moderate crops, indeed two short crops, for the
entire world. The large amount of wheat exported explains the reason why
the fall of prices was not greater in this country. That the price did not
fall faster was due to the fact, remembered by many, that farmers, as well
as speculators, held to the crop with the expectation of larger demand
from abroad. When the crop of 1892 was felt to be still larger throughout
the world, the price fell rapidly, in spite of a smaller crop in the
United States. But when the prospect of an inferior crop in this country
for 1893 was felt in the spring, the price rose a trifle. Yet as soon as
the harvests of the world showed an enormous crop outside the United
States, the price dropped again. The crop of 1889 was a short one in the
world, and apparently should have affected the price of wheat in this
country more than appears; but when the total amount exported is seen to
leave more than an average crop in store, it is easy to see why the price
in this country did not rise. The explanation of this small exportation is
in the fact that the greater part of the shortage in yield was in
countries like Russia, from which no demand was felt, because the people
simply went without. The starvation of people in such countries affected
the demand for wheat in this country only so far as our benevolence
enlarged the market. The peculiar shape of the line of wheat prices in
1889 without any correspondence in prices of corn and oats is due to a
speculative movement for December wheat in Chicago. The attempted corner
in wheat failed suddenly, or it might have produced a line similar to that
of 1897-8, due to the famous long-continued Leiter corner.
_Sources of information._—The object of this chart, taken altogether, is
to show the general law of market prices as governed by supply and demand
from the actual facts in the market for wheat. The facts are taken from
the best records available. The prices are from the daily record of the
Produce Exchange of New York. The average price for the year and the
fluctuations within the year are given for the period from September 1,
when the new crop appears, to the August following, this being the period
actually corresponding in market with a year represented by the crop
figures. The estimate of the world’s crop since 1885 is taken from
carefully prepared statistics in the United States Department of
Agriculture. The estimates prior to that date do not include the entire
world, because no statistics can be reached, but they do include the most
careful estimates of all countries whose product entered into the world’s
market. No effort has been made, for fear of complicating the chart, to
show a similar correspondence between supply and price in reference to
corn and oats. The tables following, however, give data for such
comparison with reference to this country alone. The export of corn and
oats has been too limited to play any great part in modifying prices.
[Table.]
Table of production—wheat, corn, oats, 1878 to 1897. (Figures give
millions of bushels)
CHART NO. 7
[Chart.]
Chart VII. Annual fluctuations in the price of wheat in New York,
1878-1897. Page 91.
_Annual fluctuations in the price of wheat. Highest year, lowest year, and
average of twenty years in New York, 1878 to 1897_
_Explanation._—This chart is intended to show the tendencies of the market
for wheat from month to month throughout the market year. In the center is
given the averages of highest prices and of lowest prices for each month
in the New York Produce Exchange during the period from September, 1878,
to August, 1897, inclusive. The horizontal lines between the averages of
extremes give the average price for the twenty years in the several
months. The diagonal lines give for each month the extreme fluctuation
during the twenty years. Above the lines of averages are given the
fluctuations by months in the year 1881-2, the year of highest prices. The
upper of the two continuous lines gives the top prices of the month and
the lower the bottom prices. The short horizontal lines give the average
price for each month; and the double horizontal line across the chart
represents the average price for the year. Below, the fluctuations in
wheat prices for 1894-5, the year of lowest prices, are shown in the same
way. At the top of the chart are given, in millions of bushels, the
receipts of wheat in New York. The shaded double column in the center
under each month gives the average receipts for twenty years. To the left,
a single column shows the receipts for 1894-5. To the right, a single
column gives the receipts for 1881-2. Since the receipts at New York are
chiefly for export, the general correspondence between receipts and prices
is rather a result of a larger application of supply and demand than an
exposition of it. The chief use of the chart is to show the fluctuation of
prices under varying local conditions. The figures on the left give the
price per bushel, and the figures on both left and right at the top
indicate millions of bushels.
CHART NO. 8
[Chart.]
Chart VIII. Prices of wheat in England, 1300-1890. Page 93.
_Prices of wheat in England for 600 years, 1300 to 1900_
_Description._—This chart is to show at a glance the history of the wheat
market in England for the past six hundred years. The record of the first
four hundred years is taken from Rogers’ “Agriculture and Prices.” That
for the eighteenth century, less complete, is taken from Schoenhof’s
“History of Money and Prices.” The nineteenth century record is from the
report of the statistician of the United States Department of Agriculture.
All are reduced with care to the basis of bushels and dollars and cents.
The figures on the right and left show the price per bushel in United
States money.
_Explanation._—The heavy horizontal lines show the average price during a
period of ten years, though in a few instances the period is longer. The
diagonal lines show the extremes of fluctuation during the period which
they cover. During the first two hundred and fifty years the coinage of
England made the shilling in which prices were reckoned a much larger
unit, practically three times as great as at present. The dots within
circles indicate where the horizontal lines might have been had the unit
been always the same. The same dots crossed cover a period of forty years
in which prices are somewhat uncertain, from transition between the old
standard and the new. The beginning of the nineteenth century shows a
remarkable condition of the wheat market, due chiefly to the wars in which
England was engaged, together with issues of paper money affecting the
standard of value. The record is especially interesting from showing,
first, the great fluctuations natural from unequal seasons; second, the
gradual increase in cost of production under the law of diminishing
returns; third, the effects of changes in money legislation; fourth, the
effect of extra consumption in times of war; and fifth, the effects of the
present world-wide commerce in overcoming the law of diminishing returns.
A more complete record for the eighteenth century would add to the
interest, if not to the effectiveness of the chart.
_Relation to wages._—For convenience of comparison, the average price of
wheat in France during periods of twenty-five years, as given by
Schoenhof, is added by dotted horizontal lines. The double line across the
chart indicates the range of average day’s wages of house mechanics in
England, without indicating the extreme of fluctuations. It seems evident
that wages and subsistence have something in common.
CHART NO. 9
[Chart.]
Chart IX. Prices of hogs and hams in Chicago, 1884-1907. Page 95.
_Prices of live hogs and green hams in Chicago, 1884 to 1897_
_General description._—This chart exhibits the fluctuations in prices of
live hogs and green hams as shown by reports of the Chicago Board of Trade
from September, 1884, to August, 1897, together with the visible supply of
live hogs in the market from month to month and for the entire year. The
figures to right and left give dollars per cwt. of live hogs, and per
barrel of green hams. The figures upon the upper third of the chart, right
and left, indicate the number of thousands of live hogs received in
Chicago during the successive months, as indicated by the dark lines. The
figures at the top of the chart under the date line give the number of
thousands of hogs received during the entire year. The year is taken from
September to August following, because the hog crop is in large measure
dependent upon the corn crop coming into use in September.
_Prices of live hogs._—No. 3, irregular line, gives the fluctuation of top
prices in every month from September, 1884, to August, 1897, for fat hogs.
The total range is between $3.30 per cwt. in September, 1896, and $8.80 in
February, 1893. A somewhat striking general correspondence is readily seen
between this line of prices and a line connecting the ends of the lines
indicating the monthly supply of live hogs at the top of the chart. The
average price of the year is easily seen to be low when the supply for the
year is high, and high when the supply is low, though in some instances
the effect of an increased supply is evidently anticipated in the prices.
Thus, an increase of 2,000,000 of hogs in 1889-90 over the supply in
1888-9 is anticipated by falling prices during the early part of 1889. In
a similar way, the effect of a diminished supply in the summer of 1895 is
not so marked upon the prices as might have been the case had not the
prospect been strong for a large supply in the fall of 1895. Whatever
influence the local manipulation of the market may have had, it is
perfectly evident that conditions of supply and demand have overwhelming
influence.
_Prices of green hams and mess pork._—No. 2, giving the range of prices
per barrel of green hams, shows fluctuations in some respects
corresponding to the prices of live hogs, but with variations due in a
measure, undoubtedly, to speculative interests in these products. The
range is from $6.60 in December, 1897, to $13.80 in May, 1893,
corresponding with the range in the prices of live hogs. Were there room
upon the chart, it would be easy to show an almost exactly corresponding
fluctuation in the prices of mess pork, which article is one affected
largely by speculation, though even that speculation is dependent upon
prospective supply and demand. The prices of mess pork at the New York
Produce Exchange during the same period ranged from $9 a barrel in 1885-6
to $15.80 and $15.60 in 1887-8, $14.20 in 1889-90, $11.75 in 1891, $14.20
in 1892, $22.60 in 1893, and gradually down to $7.25 in 1896-7.
CHART NO. 10
[Chart.]
Chart X. Prices of hogs and pork at Chicago, 1892-3 and 1896-7, highest
and lowest year. Page 98.
_Prices of hogs and pork products at Chicago Board of Trade for 1892-3 and
1896-7, the highest year and the lowest year_
_Annual fluctuation, 1892-3._—This chart presents a comparison between the
prices of live hogs, fresh hams and mess pork in the year of highest
range, with the prices of the same in the year of lowest range. The
figures on the left indicate the prices per cwt. of live hogs and per bbl.
of green hams and mess pork. No. 1 gives, in the dotted line above the
date figures, the highest price of mess pork in each month of the year,
while the dotted line below the date figures gives the lowest price for
the corresponding months. The range in any month is found in the distance
between the heavy dots on the line following the name of the month. Thus
the highest price in April, 1893, is $19.35, and the lowest price in the
same month, $15.50. The range throughout the year is from $21.80 in May to
$12 in August. No. 2 gives the same facts with reference to the prices per
barrel of green hams; and No. 3 gives the corresponding facts as to prices
of live hogs.
_Annual fluctuation, 1896-7._—Nos. 4, 5 and 6, marked by more distinct
lines, show the range of prices for these three related articles of
commerce for the year 1896-7. No. 4 gives the prices of green hams, which
in this year averaged higher than the prices of mess pork, although the
fluctuations of mess pork are the greater. At the top of the chart are
given in thousands the number of live hogs received in Chicago during the
two years.
On the right of each month are the numbers for 1892-3; on the left the
numbers for 1896-7. The lines connecting the shaded portion show the
fluctuations from month to month in the supply. A general, though not a
perfect, correspondence is perceptible.
CHART NO. 11
[Chart.]
Chart XI. Annual fluctuations of prices of pork in Chicago, 15 years. Page
100.
_Annual fluctuations in pork prices in Chicago—average of fifteen years_
_Average annual fluctuations._—This chart is intended to show the annual
range of prices as shown by reports of the Board of Trade of Chicago, from
September, 1883, to August, 1897. The figures, right and left, give prices
per cwt. of live hogs, and per barrel of green hams and mess pork. The
figures opposite the shaded lines at the top indicate receipts of live
hogs in thousands, by the average in each month, for the fifteen years.
The year is taken from September to August following, for correspondence
with the crop year, as in previous charts.
_Explanation._—No. 1 gives in the upper continuous line the average of top
prices for mess pork in successive months; and in the lower line the
average of bottom prices for the same months. The long, diagonal lines
show the extreme of fluctuations in each month during the entire fifteen
years. Thus the lowest price reached during the month of April in any year
was $8.05, while the highest was $25.50. The lowest price in November of
any year was $6.40, while the highest price in the same month was $15.50.
No. 2 gives in the same way the average of top prices and bottom prices
during the fifteen years for green hams; and by its diagonal lines, the
extremes of fluctuation. No. 3 presents a corresponding showing of average
top and bottom prices of live hogs, with extreme fluctuations. No. 4, at
the top of the chart, gives the average receipts of live hogs in Chicago
during the several months of the year, counted in thousands.
The supply of hogs.—The correspondence between the receipts of live hogs
and the average market price in each month is worthy of study. Every
farmer can see in what months of the year the market is fullest. It is
also evident that the fluctuations in mess pork are much more extensive
than in live hogs or fresh products. This is doubtless due to the
possibility of speculation in a product which can be held for future
market. Nevertheless, it is quite evident that the prices of mess pork
have some direct connection with the supply available.
CHART NO. 12
[Chart.]
Chart XII. Prices of cattle and beef in Chicago, 1884-1897. Page 103.
_Prices of cattle and mess beef in Chicago, 1884 to 1897_
_Description._—This chart is planned to show the prices of cattle and the
prices of mess beef from month to month from September, 1884, to August,
1897, together with the supply of cattle received in Chicago in each month
and for each year. The figures right and left on the lower part, give in
dollars the prices per hundred pounds live weight, and per barrel of extra
mess beef. Above, to right and left, the figures indicate thousands of
live cattle received in Chicago.
_Explanation._—No. 1 gives the lowest price in successive months of lowest
quality of beef steers. No. 2 gives the highest price in successive months
for stock cattle. No. 3 gives the highest price in successive months for
best quality of beef steers. No. 4 shows the fluctuations in the highest
price per barrel of extra mess beef from month to month. No. 5 shows, by
length of lines in each month, the receipts of cattle in Chicago by
thousands. No. 6 gives the number of thousands of cattle received in each
year. As in previous charts, the year runs from September 1 to August of
the year following, though the relation of the beef market to the crops of
the year is not so marked as that of the pork market. Although the
correspondence in prices between these various parts of the cattle trade
is not absolute, it is too striking to be consistent with independence of
causes. The price of stock cattle has some elements not found in the price
of beef cattle; and the price of lowest quality of beeves for canning
purposes is naturally more uniform than any other prices.
CHART NO. 13
[Chart.]
Chart XIII. Annual fluctuations in prices of cattle and beef in Chicago,
1883-1897. Page 104.
_Annual fluctuation in prices of cattle and beef, Chicago, 1883 to 1897_
_Explanation._—This chart is intended to illustrate the changes of prices
in successive months upon the average of fifteen years, as to stock
cattle, beef steers, mess beef and beef hams. The data are taken from the
daily records of the Chicago Board of Trade, from September, 1883, to
August, 1897. The figures to right and left indicate prices in dollars per
hundred pounds live weight, and per barrel of beef products. No. 1
indicates the range of prices for beef hams. The upper line gives the
average of highest prices in each month for fifteen years. The lower line
gives the average of lowest prices for the same period. The diagonal lines
give the extremes of prices within the fifteen years.
_Mess beef and beef steers._—No. 3 gives the average of highest and lowest
prices for mess beef. Nos. 4 and 6 give respectively the average of
highest and lowest prices for beef steers. The diagonals give the extremes
for beef steers during the entire period. No. 5 gives the average of
highest prices for stock cattle.
_Supply of cattle._—In the center, No. 2, is given the average receipts of
cattle in the Chicago market for each month. The unshaded portion at the
end of the lines, represents the average reshipment of cattle. Thus
September, on the average, brings 265,000 cattle to Chicago and reships
90,000; while October brings nearly 283,000 and reships 82,000.
_Peculiarities of mess beef market._—It will be noticed that the prices of
beef hams give an annual curve, entirely distinct from either of the
others. This indicates the fluctuation in demand entirely out of keeping
with the supply. It is quite possible that the opening and closing of
navigation upon the Great Lakes may be an important influence. Certainly
the change of the season between cold and heat is an important element,
since the lowest month, and that of least fluctuation, is December. The
month of highest prices is August, and those of greatest fluctuation are
May, June and September. The curve of prices for mess beef has a fair
correspondence with the numbers of cattle slaughtered in Chicago. The line
indicating top prices of beef cattle has peculiarities of its own, because
it stands for quality as well as quantity, representing the fancy lots,
which are necessarily somewhat more irregular than the average. The line
of prices for stock cattle is evidently affected by the variations in
demand by feeders. The line of lowest prices for beef cattle, No. 6, is
quite probably affected by quality as well as supply.
CHART NO. 14
[Chart.]
Chart XIV. Wholesale prices of iron, kerosene, etc., New York, 1867-1896.
Page 106.
_Prices of iron, kerosene, etc., 1867 to 1896_
_Description and Explanation._—This chart gives the prices from year to
year for steel rails, bar iron, pig iron and nails in the New York market,
each dot indicating the average for the year. The average prices for the
corresponding years for refined kerosene are also shown. No. 1 gives
prices per ton of steel rails, into which enters all the influence of the
improved methods of manufacture. No. 2 represents the prices of bar iron
per ton, less affected by improvements but influenced by the substitution
of steel. No. 3 gives the prices of nails per thousand pounds. For
comparison with the other prices of iron, the prices of nails must be
doubled. All will realize the immense improvements made in the manufacture
of nails. No. 4 gives the prices per ton of pig iron. It is evident that
all these forms of iron and steel have stood in the market under the same
general influences, with slight modifications from special characteristics
of production or use. No. 5 gives the average price in each year for one
hundred gallons of refined kerosene oil. The price per gallon can be found
by reading the figures as cents instead of dollars. In the same way the
price of ten pounds of nails can be found. It should be said, however,
that all these prices are the wholesale prices, retail prices being
subject to local influences, sometimes even to custom, which prevents
their adhering closely to the prices in larger markets.
_Even monopoly affected._—These articles have been chosen as illustrating
the essential law of prices even under the advance of combination of
capital upon an enormous scale. The iron industries and the Standard Oil
Company come nearest, perhaps, to fulfilling the conditions of monopoly
found anywhere. Yet the actual effect of improved methods in great
combinations is seen to have reached the mass of the people in spite of
any tendency to sustain prices by combination. A line, No. 6, indicating
the general trend of wages for farm hands in the North, is added to more
clearly indicate the distribution of welfare through such improvements in
method. For still other purposes, the fluctuating price of silver bullion
is shown in line No. 7.