17: Price as Measured by Money
The money price at which an article sells in a given market and at a given time tells us very little in respect to its value. Money itself is a commodity that fluctuates over time - too many factors can influence the price which buyers and sellers agree upon. So it is meaningless to suggest that the difference in price is indicative of anything in particular.
He next provides quite a few tables showing the prices of various items, in various markets, at various times. These tables demonstrate a lack of a consistent pattern in the prices of things. There is no consistent pattern to the growth of prices - all fluctuate, and do not move proportional to one another.
He then lists a number of factors that can affect the money price of goods:
- The change in value of currency (debasement)
- The supply and demand of metals of which currency is based
- The supply and demand of the goods themselves
- Fluctuations in the income of consumers
- The cost of capital and labor at a given time
- The change in the price of raw materials
- Changes in the price of labor and fluctuations in quality
- The efficiency or inefficiency of manufacturing techniques
This is likely not an exhaustive list, but demonstrates that money prices are based on a number of factors - such that it is impossible to untangle. Even if every known factor is examined, there may be an unknown factor that influences the money-price of goods, such that price alone cannot be regarded as meaningful.
He speaks briefly of Malthus, who had made the suggestion to express price in terms of time - to consider the day's wages of an unskilled laborer as the unit to which all value can be compared. Because labor is the primary driver of the price of goods, and because wages and prices are expressed in the same currency at about the same time, it should reduce the fluctuations in prices: if an item costs one day's wages in one market, it should cost about the same in others, and likewise across various periods in time.
At first blush this seems quite sound, and eliminates some of the factors that cause variation, but certainly not all. The shortage of labor may increase its value, imports and exports of goods that cause supply and demand to fluctuate, and the efficiency in the use of labor in manufacturing specific items, and other factors other than fluctuations in the value of money will remain in effect.
In particular, the efficiency of the use of labor causes an item to require less time, hence less cost in wages to produce. But the surplus created by increases in efficiency may be shared in arbitrary proportions between increasing the wages of workers, increasing the wages of managers, increasing the profit of the business owner, increasing the profit of his investors, and decreasing the cost to the customers.
He also considers the variations in supply chains. Where a good is sold directly from producer to consumer, only the producer's cost and profit is added to the price. When there is a middleman, his costs and profits must be added. And when there are multiple middlemen, the costs and profits of each must be added. So the efficiencies or inefficiencies of a supply chain also cause prices to fluctuate.
There is finally the negotiating power and skill of the customer to be considered. The price of goods is a negotiated sum, and the haggling that takes place between buyer and seller causes the price of any deal to be largely unique. There are few sellers who demand a fixed price, take it or leave it, and few buyers who will not haggle for a discount.
Ultimately, the money price of goods is subject to so many factors, which are so variable and tangled that it is impossible to draw any connection between the price and value of a good. One must conduct further investigation to determine the exact causes of fluctuations in price, and much of the detail is lost or inaccessible.