Cost

“ What is the ultimate regulator of its value? The value of freely-produced commodities is—according to the ordinary theory of economists—determined by their “cost of production,” or, where the article is produced at different costs, by the cost of production of the most costly portion. We have now to consider how far this theory applies to the special case of money. Gold and silver, the principal materials of money, are the products of mines, and are produced at different costs; therefore the cost of the part produced at greatest cost ought to determine their value. ”

“ In other lines of business, commonly occupied with the production of staple goods, this constituent of cost may perhaps fall below ten per cent of the total. Where the average, for the price of finished goods delivered to the consumers, may lie would be a hazardous guess. ”

“ But capital always costs something; and, therefore, the cost of the Capital enters in as a second constituent into the cost of production of Land-Commodities. But these two costs are all. We shall search in vain for any other onerous element in the cost of producing commodities. There are two variables only in the Cost of Production, which itself is the sum of the two subordinate costs. ”

“ The amount of saving is partly determined by the cost of the articles consumed.It may also be remarked that the amount of an individual's expenditure is to some extent determined by the cost of the commodities which he consumes. The consumption of some articles diminishes in proportion to the rise which may take place in their price. ”

“ By cost to make is meant full cost, which includes materials used, labor applied, and a fair share of the overhead expenses. Whatever the cost to make, whether lower or higher than the identical equipment could be purchased for on the market, that represents the capital outlay and is the true basis for valuation, taking cognizance of depreciation for the elapsed period. ”

“ Because business must figure in these losses as part of the cost of doing business, the price of their products or services must increase accordingly to all the people who avail themselves of these goods or services. ”

“ If the materials of money were an exception to the general diminution of cost of production, the values of all other things would fall in relation to money, that is, there would he a fall of general prices throughout the world. ”

“ Cost of Production consists of several elements, some of which are constant and universal, others occasional. The universal elements of cost of production are the wages of the labor, and the profits of the capital. The occasional elements are taxes, and any extra cost occasioned by a scarcity value of some of the requisites. Besides the natural and necessary elements in cost of production—labor and profits—there are others which are artificial and casual, as, for instance, a tax. ”

“ Few women when they assume the care of a household know the exact value of the household plant; the amount to be deducted each year for wear and tear; the relative proportions expended annually for rent, fuel, food, clothing, and service; the number of meals served and the approximate cost of each; the amount of profit, waste, or unproductiveness that results from all expenditures made. Every manufacturer, every business man knows the value of his plant, its increasing or diminishing value, the cost of materials used and of service employed. ”

“ I have just said the breadth of sea increases the cost of exchange. Now note that exchange, or commerce, in itself, is always costly; the sum of the value of the goods being diminished by the cost of their conveyance, and by the maintenance of the persons employed in it ”

“ On the other hand, if any production cannot be largely extended so that the supply in market barely meets the requirements of purchasers, the tendency of normal values is toward the cost of the most costly part of the product required to meet wants. ”

“ If the cost of a unit of each of ten articles be represented by the lines falling from the letters A, B, C, etc., to the base of the figure, a considerable fall in the cost of A would put it below the cost of each of the other articles represented. If in the case of a large class of persons who did not formerly buy any of the A it is as desirable as any of these goods, it will take its place as the most desirable subject of purchase instead of the least desirable. ”

“ You say demand and supply regulates value [sic] ; this I think is saying nothing, and for the reason I have given in the beginning of this letter: it is supply which regulates value [228] , and supply is itself controlled by comparative cost of production. Cost of production, in money, means the value of labour as well as profits. Now, if my commodity be of equal value with yours, its cost of production must be the same. But cost of production is, with some deviations, in proportion to labour employed. ”

“ How Cost of Production and Cost of Acquisition are Equalized.—The costs of moving goods from place to place—including in these costs commercial charges and duties imposed by governments—are the cause of most of the manufacturing that is done in the region represented by the left side of the diagram, except the production of such articles for immediate or local consumption as are necessarily made at or near the places where they are used. ”

“ The value of Money, in a state of Freedom, conforms to the value of the Bullion contained in it. But money, no more than commodities in general, has its value definitely determined by demand and supply. The ultimate regulator of its value is Cost of Production. ”

“ In order to show what natural price is, we add up all the wages that have been paid, and declare that to be the cost and then say that the cost governs the price. Then if we are asked why are wages what they are, we turn the argument backward and say that since the selling price is so and so the wages that can be paid out of it only amount to such and such. ”

“ In general, the quantity theorist thinks that he has reconciled his theory with cost theory by pointing out that reduced costs manifest themselves in increasing production, which means increasing trade, which should, on the quantity theory, mean lower prices. ”

“ In the "Essays on Political Economy," since reprinted as "Munera Pulveris." See p. 10, § 12 of that book, where the passage is printed in italics: "The reader must, by anticipation, be warned against confusing value with cost, or with price. Value is the life-giving power of anything; cost, the quantity of labor required to produce it; price, the quantity of labor which its possessor will take in exchange for it." ”

“ Neither utility nor costs nor supply and demand furnishes an adequate basis from which the quantity theory, or any other theory of the value of money can be deduced. The cost theory, and the supply and demand theory, in their present-day formulation, are really not theories of value at all, but are theories of prices, theories which presuppose value, and money, and a fixed value of money. ”

“ The cost which requires 25s. is incurred for the sake of fifty quarters alone: the first hundred might have continued forever to be produced at the original cost, and with the benefit, on that quantity, of the whole rise of price caused by the increased demand: no one, therefore, will incur the additional expense for the sake of the additional fifty, unless they alone will pay for the whole of it. ”

“ The principle, that value is proportional to cost of production, being consequently inapplicable, we must revert to a principle anterior to that of cost of production, and from which this last flows as a consequence,—namely, the principle of demand and supply. ”

“ The cost for each individual, for board and fuel, is settled at twopence halfpenny daily, about one and sixpence of our present money, if we take into account the relative value of money, and the relative prices of provisions. ”

“ VII. Every commodity of which the supply can be indefinitely increased by labour and capital, exchanges for other things proportionally to the cost necessary for producing and bringing to market the most costly portion of the supply required. ”

“ Supply and demand, cost of production, the capitalization theory, the imputation theory—the general laws of the concatenations and interrelations of prices—are quite adequate for the confutation of the quantity theory. They are laws concerned with particular prices, and the price-level is nothing but the average of particular prices. ”

“ Overhead Charges.—In figuring on the cost of a completed device, machine or product so that a selling price may be put on it which will insure a handsome profit the cost of the stock, of the breakage of tools, of the labor, or production, and of the power—gas, electricity, water or coal—are all easy to keep track of. ”

“ They are items which can be separated from all other cost items and applied solely to a particular product. Indirect costs are those which are shared in common by the various products and so must be distributed over them on some equitable basis. ”

“ The value of money must depend, not on prices alone, but, as I have said, also on the standard of living, on wages, on hours of work, on the cost of things, on plenty and scarcity, on taxation, and on many other considerations. ”

“ Its proportion to their number, and the resulting worth of currency, are calculable; but its proportion to their will for labour is not. The worth of the piece of money which claims a given quantity of the store is, in exchange, less or greater according to the facility of obtaining the same quantity of the same thing without having recourse to the store. In other words it depends on the immediate Cost and Price of the thing. We must now, therefore, complete the definition of these terms.
59. All cost and price are counted in Labour. ”

“ Further argument for the inclusion of interest as an item of cost is the fact that in numerous processes time is an important element. Thus, the smelting of ore, the tanning of leather, the curing of tobacco, the seasoning of lumber, etc., are examples of relatively lengthy processes the cost of which should include interest on the capital invested. ”

“ A suddenly enforced increase of even one hundred per cent in the haulage and delivery cost of product would put hundreds of our most serviceable industries on the financial rocks.
2. A business man or a business industry that has been giving us thirty cents in manufacturing cost for our fifteen cents in cash is certainly deserving not only of a hearing but of a vigorous, robust, militant support. ”

“ And finally, let us remember that the current price always stands either above or below the cost of production, according as the sale of a commodity takes place in the favorable or unfavorable period of the industry. ”

“ In this very dynamic aspect of modern life, one observes a tremendous increase in demand for the costly and enervating indulgencies of conspicuous expenditure and a more than proportionate decrease in the productive powers which contribute to the synchronous supply of the staples of life. Here, indeed, resides a fundamental problem in national cost accounting. ”

“ But the cost of the material forming generally a very small portion of the entire cost of the manufacture, the agricultural labor concerned in the production of manufactured goods is but a small fraction of the whole labor worked up in the commodity. ”

“ If wages constituted the only cost which the entrepreneur must defray, the price of A ́ ́ ́ would be reduced to seven eighths of the former price, and this might, in the case of some goods, enlarge the demand to eight sevenths of its former amount and so keep all the labor in the general group. ”

“ If the mean term, which we are searching for, between an infinite value and no value at all is expressed in the case of every product, by the amount of time and expense which the product cost, a poem which has cost its author thirty years of labor and an outlay of ten thousand francs in journeys, books, &c., must be paid for by the ordinary wages received by a laborer during thirty years, plus ten thousand francs indemnity for expense incurred. ”

“ Although price and cost may, in conventional phrasing, be interchangeable without confusion of ideas, the discussion of changing commodity prices and concurrent costs of living necessitates a discriminating use of the terms. As a matter of fact, an increase in the average of prices may be no proof of change in the average cost of living during the same period ”

“ In all cases the source of income is from sales—whether of a commodity or of services makes little difference. The first deduction from gross earnings under the title “Sales” or other similar title is the cost of sales. At this point the first marked divergence among the various groups is met. In an industrial enterprise the cost of sales is the cost of goods manufactured and sold as well as the cost of any goods purchased for immediate resale. This latter cost is met only in enterprises which combine manufacture with selling. ”

“ Hence the business man's view of the costs is that they determine value. It is true in the sense that the supply of a particular product in any market is at last limited by cost of marginal producers or of marginal portions of supply. But it is not true of all the units of product that costs determine, or equal, market price. There is a margin above costs to the successful enterpriser on a large portion of his output. ”

“ An allowance of 8 cents a pound, which is made on bills ordered sent by express or freight, cost of transportation payable on arrival, by the purchaser, is equivalent to a discount of front 15 to 30 per cent. from catalogue prices, varying according to quality, style, copyright, and other considerations, on different books. ”