Thursday, August 15, 2019

Essay on the Nature of Trade in General’

In the excerpt from R. Cantillion ‘Essay on the Nature of Trade in General’ relationship between price and costs of production are being described and explained. Author emphasizes that price of a commodity is a ‘measure of the Land and Labour which enter into its Production’. In other words, price consists of labour and manufacturing costs and should reflect the quality of these two factors. In the excerpt, author makes some accurate assumptions.Firstly, he notices the difference in value of land and labour: ‘One Acre of Land produces more Corn or feeds more Sheep than another. The work of one Man is dearer than that of another’. I am interpreting land as the quality of materials to produce a commodity and consider only labour included in manufacturing. So the fertility of land (which is equal to the quality of the good, as the more fertile land is, the tastier, nicer and bigger fruits it will produce) and quality of labour should be included in the price.Author uses example with wool suite to illustrate his observations : ‘If the Wool of the one Acre is made into a suit of coarse Cloth and the Wool of the other into a suit of fine Cloth, as the latter will require more work and dearer workmanship it will be sometimes ten times dearer’. So the suit of fine cloth will be more expensive than the one from coarse cloth even thought the price of materials used for these suits are the same. It means that price difference of the costumes is determined by the price of labour. Fine cloth suit requires more skilled work and at the same time more expensive work.Skilled workers, with more knowledge are more efficient so their labour costs more. Same relationship between price and quality of materials exist: ‘the price of the Hay in a Field, on the spot, or a Wood which it is proposed to cut down, is fixed by the matter or produce of the Land, according to its goodness’. Author uses phrases such as ‘land fertility’ and ‘quality of the produce of the land’, but for simplicity, let’s assumes that it is the quality of materials used for production or the quality of the good itself it is a raw material.The price of billets is determined by the quality of timber, the price of hay is determined by the quality of the grass cut. In this case the difference between two identical piles of wood or two rolls of hay is determined by the quality of the materials. This given example proves that relationship between the price and quality of the materials do exists. Another accurate observation was made about the surplus and the shortage influence to the price. Author used an example with corns: ‘If the Farmers in a State sow more corn than usual

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.