Supply and Demand · Chapter 1Supply and Demand
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by Hubert D. Henderson M.A.
with an Introduction by J.M. Keynes M.A., C.B.
1922.
The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions. It is not difficult in the sense in which mathematical and scientific techniques are difficult; but the fact that its modes of expression are much less precise than these, renders decidedly difficult the task of conveying it correctly to the minds of learners.
Before Adam Smith this apparatus of thought scarcely existed. Between his time and this it has been steadily enlarged and improved. Nor is there any branch of knowledge in the formation of which Englishmen can claim a more predominant part. It is not complete yet, but important improvements in its elements are becoming rare. The main task of the professional economist now consists, either in obtaining a wide knowledge of relevant facts and exercising skill in the application of economic principles to them, or in expounding the elements of his method in a lucid, accurate and illuminating way, so that, through his instruction, the number of those who can think for themselves may be increased.
This Series is directed towards the latter aim. It is intended to convey to the ordinary reader and to the uninitiated student some conception of the general principles of thought which economists now apply to economic problems. The writers are not concerned to make original contributions to knowledge, or even to attempt a complete summary of all the principles of the subject. They have been more anxious to avoid obscure forms of expression than difficult ideas; and their object has been to expound to intelligent readers, previously unfamiliar with the subject, the most significant elements of economic method. Most of the omissions of matter often treated in textbooks are intentional; for as a subject develops, it is important, especially in books meant to be introductory, to discard the marks of the chrysalid stage before thought had wings.
Even on matters of principle there is not yet a complete unanimity of opinion amongst professors. Generally speaking, the writers of these volumes believe themselves to be orthodox members of the Cambridge School of Economics. At any rate, most of their ideas about the subject, and even their prejudices, are traceable to the contact they have enjoyed with the writings and lectures of the two economists who have chiefly influenced Cambridge thought for the past fifty years, Dr. Marshall and Professor Pigou.
J.M. Keynes.
§1. Theory And Fact 1
§2. The Division Of Labor 3
§3. The Existence Of Order 5
§4. Some Reflections Upon Joint Products 7
§5. Some Reflections Upon Capital 11
§6. The Fundamental Character Of Many Economic Laws 17
§1. Preliminary Statement Of Three Laws 18
§2. Diagrams And Their Uses 21
§3. Ambiguities Of The Expressions, "Increase In Demand," Etc. 24
§4. Reactions Of Changes In Demand And Supply On Price 27
§5. Some Paradoxical Reactions Of Price Changes On Supply 30
§6. The Disturbances Of Monetary Changes 33
§7. The Trade Cycle 34
§1. The Forces Behind Supply And Demand 37
§2. The Law Of Diminishing Utility 40
§3. The Relation Between Price And Marginal Utility 43
§4. The Marginal Purchaser 44
§5. The Business Man As Purchaser 47
§6. The Diminishing Utility Of Money 49
§1. An Illustration From Coal 52
§2. The Various Aspects Of Marginal Cost 55
§3. The Dangers Of Ignoring The Margin 57
§4. A Misinterpretation 59
§5. Some Consequences Of A Higher Price Level 60
§6. General Relation Between Price, Utility And Cost 65
§1. Marginal Cost Under Joint Supply 66
§2. Marginal Utility Under Joint Demand 69
§3. A Contrast Between Cotton And Cotton-Seed, And Wool And Mutton 71
§4. The Importance Of Being Unimportant 74
§5. Capital And Labor 76
§6. Conclusions As To Joint Supply And Joint Demand 79
§7. Composite Supply And Composite Demand 79
§8. Ultimate Real Costs 82
§1. The Special Characteristics Of Land 83
§2. The Scarcity Aspect 84
§3. The Differential Aspect 87
§4. The Margin Of Transference 94
§5. The Necessity Of Rent 98
§6. The Question Of Real Costs 100
§7. Rent And Selling Price 102
§1. Profits And Earnings Of Management 104
§2. The Payment For Risk-Bearing 104
§3. Monte Carlo And Insurance 105
§4. Risk Under Large Scale Organization 111
§5. The Entrepreneur 113
§6. Risk-Taking And Control 116
§7. General Analysis Of Profits 117
§1. A Reference To Marx 119
§2. Waiting For Production 120
§3. Waiting For Consumption 121
§4. Capital Not A Stock Of Consumable Goods 123
§5. The Essence Of Waiting 126
§6. Individual And Social Saving 127
§7. The Necessity Of Interest 129
§8. The Supply Of Capital 130
§9. Involuntary Saving 134
§10. Interest And Distribution 137
§1. A Retrospect On Laissez-Faire 139
§2. Ideas And Institutions 141
§3. The General Wage-Level 143
§4. The Supply Of Labor In General 145
§5. The Apportionment Of Labor Among Places 147
§6. The Apportionment Of Labor Among Social Grades 149
§7. The Apportionment Of Labor Among Occupations 153
§8. Women's Wages 157
§1. Comparative Costs 162
§2. The Allocation Of Resources 166
§3. Utility And Wealth 170
§4. Criteria Of Policy 172
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