Marginal costs

Abstract

Many pronouncements made about costs of production, profit and loss have an air of unreality due to over-simplification. At the present time almost all economic activity is falling under official control; prices and margins in all directions are being laid down by official bodies and there was never a time when a sound knowledge of price-making forces was more desirable. The underlying philosophy of price-fixing is in a state of flux. Sometimes it tends in the direction of a "just price" conception, such as was characteristic of the middle ages, when, the public had decided views as to what prices ought to be, when there were the Assize of Bread and the Assize of Ale, and when "engrossing" (cornering the market) and "re-grating" (turning over at a profit without increasing the intrinsic value of the goods) were penal offences. At other times the aim is to set such prices as will just suffice to call forth the production or the services required, as when the price of maize and wheat is advanced to encourage greater production, but that of cotton is kept down to discourage increased production at the expense of crops more essential in present circumstances.