entirely beyond our reach, we may say that anything which possesses both utility and scarcity will have power in exchange, and nothing else whatsoever will have that power.

The utility of an article is the basis of the demand for it; the scarcity of the article is the measurable limit of its supply. Every boy knows that the first apple which he eats at any one time tastes better than the second, provided they are alike, and the second better than the third, and so on. He knows also that, however capacious his appetite, if the supply of apples holds out he will ultimately reach a point where he doesn't care for any more; in other words, he will reach the point of complete satiation so far as apples are concerned. When this point is reached, apples have lost their utility for him and he becomes indifferent to them. He may still be willing to give something in exchange for them in anticipation of tomorrow's hunger, but if he has a supply sufficient to satisfy not only present but future desires, he becomes absolutely indifferent and gives nothing in exchange for them.

Social value. We now approach a secondary phase of the law of value. Even though a boy's own desire for apples may be completely satiated, not only in the present but in the anticipated future, his commercial instinct may prompt him to prize them, not because he himself desires to consume them but because he can trade them to someone else for objects which he himself desires. At this stage he has arrived at the point where he begins to take account of social utility as well as of individual utility. If he perceives that there is in society around him an unsatisfied desire for apples, he may make use of that unsatisfied desire to acquire desirable things in exchange for his own surplus apples. This power (that is, power in exchange) which commodities possess on the market he is able to make use of to his own advantage. Thus we see a great many men producing articles far in excess of their own needs because they know that these articles are exchangeable for other things which they need. We see a considerable body of men doing nothing except to trade in objects of general social desire. But the laws which

govern social valuation are fundamentally the same as those which govern individual valuation. There must be somebody in the community who has less of the object than he wants; otherwise neither the producer nor the trader would be able to exchange the object for other desirable things.

Diminishing utility. Desire and utility are reverse aspects of the same thing. The desire exists in the human being and is that which the object of the desire is capable of satisfying. Utility exists in the object outside the human being and is that which is capable of satisfying his desire. In proportion as the human being's de

creases. This diminishing utility of a desirable object is sometimes illustrated by means of a diagram, of which the above will serve as a sample.

Let us measure the quantity of a certain commodity along the line OX, and the intensity of the desire for it along the line OY. When the quantity is represented, for example, by the line OG, each unit is desired with an intensity represented by the line OE; and when the quantity is represented by the line OH, the desire is so well satisfied that the intensity of the desire is now represented by the line OF. If the quantity were to increase until it was represented by the line OD, all desires would be satiated; that is, the desire for any particular unit of the supply would have no intensity, there would be no desire left. And, finally, if the quantity were to increase still further, the commodity might be considered as a nuisance, and men might begin to desire to have less of it rather than more. The curve ABCD becomes the utility curve according to the assumptions. Just what shape this curve would take in any individual case

would be hard to determine. One thing, however, is certain (and this is the really essential thing), that, whatever its shape, it is a descending curve. Its distance from the line OX diminishes as we approach the point D. That is as certain as that a desire is satiable. Therefore we are safe in using a descending curve to illustrate the decline in the intensity of the desire for a commodity as the quantity of the commodity increases in proportion to the number of people who desire it. The total utility of the commodity is represented by the surface bounded by the lines OX, OY, and the curve ABCD. Its marginal utility (that is, the effective utility of any single unit of the supply) is represented by the line OE or BG when the quantity is OG, and by the line OF or CH when the supply is OH.

If now we consider two commodities whose quantities and utilities are represented by the two diagrams above, we shall see how the relative intensity of the desires for the two commodities will affect their relative values.

Let us assume that the curves ABC in the two diagrams represent the diminishing intensity of the desire for potatoes and oranges respectively, and the line OD in each diagram the available quantity of each commodity. The quantity of potatoes being so much larger than that of oranges, the desire for them is much more nearly satiated than is the desire for oranges, though the total utility of potatoes is much greater; that is to say, a pound of potatoes out of the total supply is very slightly esteemed or desired, whereas an equal quantity of oranges out of the much smaller supply is more highly esteemed

or desired. Under these circumstances a pound of oranges would have as much power in exchange as several pounds of potatoes; that is, oranges are more valuable than potatoes.

By increasing the number of diagrams the relative power in exchange of a number of commodities could be illustrated in the same way. That, however, would introduce no new principle, but would only complicate matters.

CHAPTER XXVI

SCARCITY

Causes of scarcity. It was shown in the last chapter that commodities must be both desirable and scarce in order to possess value. We have now to inquire why such things are scarce. There are four reasons which come within the limits of our comprehension. These we may call (1) "the niggardliness of nature," (2) the expansion of desires, (3) the cost of production, and (4) monopoly.

"Niggardliness of nature." When the term "niggardliness of nature" is used, it is not intended to cast reflections upon nature nor to imply that she is not bounteous in many respects. It is merely to call attention to a fact which cannot well be disputed; namely, that in many places men have congregated in numbers greater than nature has there provided for. Desirable things are scarce in those places at least, and it is at least necessary to bring supplies from other places where there is a surplus. Moreover, there are many things which we desire which nature does not supply at all in the form in which we desire them, though she supplies the raw materials out of which we may make them. Again, some things which we desire can be produced only at certain times and seasons. They must therefore be preserved and kept for other times when they will be needed.

Expansion of desires. The fact that nature does not supply us with everything we desire in the exact forms and at the exact times and places when and where we happen to desire them may be in part due to the fact that we desire more refined products than grow in a natural state, or to the fact that great numbers of us choose to live in places where such products do not grow in sufficient abundance. It is only a symptom of the