chapter  44
2 Pages


When the gain in value-in-use is finally obtained, for the sake of which exchange has been resorted to, it no longer comes as an unexpected increment. A man sees in it the realization of the antecedent value-in-exchange. He would be disappointed and would consider himself a loser if the exchange-value did not result in an accretion in value-in-use. The formula for the law of natural exchange with whose deduction we opened our investigation of the institution of economic exchange therefore requires further explanation along this line. So also does our exposition of the fundamental law of the formation of prices. In order to arrive a t a radical theoretical explanation we deduced this law by assuming an economic condition without prices. As a matter of fact, however, prices are always made by starting with those already established. The formation of prices thus is always aided by appraisals of exchange-values which are founded upon previous market experience. In a quiet market, producers refuse every sale whose proceeds fail to bring the accustomed personal exchangevalue of the wares, and consumers make no acquisitions whose use-value is not equivalent to the customary exchange-value of the amount involved in the price. In such a market, the exchange-value invariably determines the price, or, conversely, price is a realization of exchange-value. Price-formation by custom, therefore, is in t ru th the formation of prices by exchange-value. In a disturbed market where prices have to be formed anew the appraisal of exchangevalue as indicated by the old prices also serves; it confines the functions of the market to the determination of the changes which are necessary in existing appraisals.