Fair market value

“ If the purpose sought has been accomplished, and it is understood that free and untrammeled competition is a necessary foundation both of Liberty and plenty; that market price is but the price varying from moment to moment which results from unrestricted freedom, and without which real competition is an impossibility; that those things which men use have real value, and not the mere counters which carry on the exchange of commodity for commodity called "trade" ”

“ The value and profits, combined in the price of a manufacture produced by one man, are easily distinguished, by means of the analysis we have laid down in the fourth chapter. As long as any market is fully supplied with this sort of work, and no more; those who are employed in it live by their trade, and gain no unreasonable profit: because there is then no violent competition upon one side only, neither between the workmen, nor between those who buy from them, and the balance gently vibrates under the influence of a double competition. ”

“ Ultimately, from the demand of the final consumer comes all the demand that is directed toward the agencies of production, even though the laborer sees his immediate market in the person of the employer, and the capitalist or landlord sees his immediate market in the person of the active business man. ”

“ That the "value" of ordinary commodities can only be determined by the results of free competition, in a free government, conducted by free men. "Value," being not at all the result of any one citizen's view, desire or decree, but is that of all men, acting in a free market in free competition, in untrammeled freedom ”

“ If all his competitors had the same advantages, and used them, the benefit would be transferred to their customers, through the diminished value of the article: he only retains it for himself because he is able to bring his commodity to market at a lower cost, while its value is determined by a higher. All advantages, in fact, which one competitor has over another, whether natural or acquired, whether personal or the result of social arrangements, bring the commodity, so far, into the Third Class, and assimilate the possessor of the advantage to a receiver of rent. ”

“ How would you like that, gentlemen—to have protective prices to pay for every thing that you use—for your manures, for your animals, for your implements, for all your farming stock, and at the same time to have to sell what you produce in the free and open market of the world? ”

“ But they can be so easily and cheaply carried from one part of the world to another, that they have substantially the same market value all over the world. They are also, in but a small degree, liable to great or sudden changes in value. For these reasons, they serve well as standards—are perhaps the best standards we can have—by which to measure the value of all other money, as well as other property. ”

“ We are aware of numerous decisions in conflict with this view of the law; but we think the sounder rule, and the one in consonance with the common understanding and usage of commerce, is that the purchaser, at whatever price, takes the benefit of the entire obligation of the maker. Public securities, and those of private corporations, are constantly fluctuating in price in the market, one day being above par and the next below it, and often passing within short periods from one-half of their nominal to their full value. ”

“ There is not a line to be found in these cases under the Act to show the slightest recognition of the definitely established truth, that high prices always have been, and always will be, the forerunner of low prices; that freemen in a free market, with its inducements to gain the higher rewards, strive, invent and compete, so that every temporary rise in price insures not merely a return to the old price, but to a lower one, and finally to the fair and equitable exchange of all commodities, measured by the labor relatively involved. ”

“ The manner in which the wealth created by the toiling millions, passed through the channels of trade, into the possession of a few wealthy speculators, was illustrated by pictures and printed explanations, in almost endless variety, so that even the most obtuse observers, could not fail to get a clear idea of the practical workings of a system of commercial exchange, under the operation of which, interest, profit and rent were always added to the market price of the product, every time it changed hands. ”

“ It is the consensus of opinion of economists and of many of the most important agencies of government that the public interest is served by the gathering and dissemination, in the widest possible manner, of information with respect to the production and distribution, cost and prices in actual sales, of market commodities because the making available of such information tends to stabilize trade and industry, to produce fairer price levels and to avoid the waste which inevitably attends the unintelligent conduct of economic enterprise. ”

“ But fortunately for them, the market value of their ability as men of business is fixed by the same laws that govern the prices of [178] commodities. Just as the sweater is worth his profit, so they are worth their profit; and just as the sweater will be able to exact from them his old remuneration in spite of the advance in wages, so they will be able to exact their old remuneration in spite of the advance in sweaters’ terms. ”

“ In its final value, the consumer compensates the retail dealer for his services in handling it and for advance payments, including every other handler and every other service, down to the boy who drove the cows to pasture. If the system of universal exchanges is free and fair, each has received his fair compensation. In general, then, distribution of wealth is made automatically in the ordinary processes of production, exchange itself being one of the steps by which value to the consumer becomes value also to the producer. ”

“ In short, the open market is open to all; and every man has a right to sell there his labor, his skill, or his goods, of whatever sort he can produce, at such a price as he can obtain. The same is true of the buyer. I have a right to go into the open market and secure such goods as any one wishes to sell me at the lowest price for which he will part with them. ”

“ The price of the article must be such as to afford a profit on more than its natural value, instead of a profit on only its natural value. Neither ought it to be forgotten that whatever renders a larger capital necessary in any trade or business limits the competition in that business, and, by giving something like a monopoly to a few dealers, may enable them either to keep up the price beyond what would afford the ordinary rate of profit, or to obtain the ordinary rate of profit with a less degree of exertion for improving and cheapening their commodity. ”

“ If the market price rises high above the cost of production, producers make a profit greater than the average profit made in the country. This induces them, by the appropriation of new land and the employment of new labor and capital, to increase their business. ”

“ They cannot afford to produce at a loss, and, if they asked for more, fresh competitors would, on the hypothesis of free competition, leave some other industry and enter theirs. But the market-price thus determined will be the price for the whole of the supply of the same quality which is forthcoming. There is no reason, on the hypothesis of free competition, why the producers, who enjoy greater advantages of production, should be content with a lower when they can obtain the higher price, which the buyers must offer, if all the supply they demand is to be forthcoming. ”

“ But in the course of generations, with further development of trade and markets, this conception of price by degrees gave way to or passed over into the modern presumption that any article of value is worth what it will bring; until, when the era of handicraft and petty trade merges in the late-modern régime of investment and machine industry, it has become the central principle of pecuniary relations that price is a matter to be arranged freely between buyer and seller on the basis of bargain and sale. ”

“ That prima facie, the market price, that is to say, the price that is ever resulting from freedom in competition, is the right price; the one that will restrict over production and at the same time stimulate the needed production in times of scarcity. ”

“ The same is true of established market places, boards of trade and produce exchanges. Not only does the multitude of exchanges in one place lessen the cost of such exchanges, but these make it possible for multitudes to reach a fair understanding of what is wanted and what is offered in any line of production. This need accounts for the tendency so frequently noticed to establish great centers of trade in particular commodities. The world wants a fair understanding of what the world contains, and these methods of bringing together buyers and sellers are the natural outgrowth of this need. ”

“ In our opinion there can be no question between the policy of free and open market and the policy of only allowing goods to be sold here 'at the natural price of the world's market.' We hold that the maintenance of an open and unhindered market is essential to our welfare ”

“ On the contrary, many persons are claiming that the market price fixed by competition is usually unjust. A better principle, a more fundamental principle, [Pg 22] one that really strikes its roots down into justice itself, would be to say that a just price is one that will yield a just return to all concerned—the actual laborers who produce the commodities, the clerks in the stores that distribute them, wages of management to the entrepreneurs concerned, and interest on the capital invested. ”

“ It is not Cobdenism or free trade that is involved, but that which underlies them both—the great principle of the free and open market.... We attach such immense importance to the open market because we believe not only that our internal prosperity is essentially bound up with the right, not merely of consumers, but of producers, to buy as cheaply as they can and where and how they will, but that the empire itself rests upon the preservation of a free and open market. ”

“ Commerce over-estimated.—So rapid has been the advancement of systems of exchange within the last half century that men are prone to over-estimate the importance of commerce and its interests. The amount of wealth in motion exaggerates the importance of wealth itself, so that multitudes overlook the foundation in productive industry, and become mere bettors upon the market, attempting to catch a part of the moving wealth as it passes. ”

“ By means of competition between buyers and sellers and the relations between supply and demand—offer and desire. And this competition by which the price of an article is fixed is three-fold.
The same commodity is offered in the market by various sellers. Whoever offers the greatest advantage to purchasers is certain to drive the other sellers off the field, and secure for himself the greatest sale. The sellers, therefore, fight for the sale and the market among themselves. Every one of them wants to sell, and does his best to sell much, and if possible to become the only seller. ”

“ When, either by the monopoly of the home market, or by a bounty upon exportation, you enable our woollen or linen manufacturers to sell their goods for somewhat a better price than they otherwise could get for them, you raise, not only the nominal, but the real price of those goods; you render them equivalent to a greater quantity of labour and subsistence; you increase not only the nominal, but the real profit, the real wealth and revenue of those manufacturers; and you enable them, either to live better themselves, or to employ a greater quantity of labour in those particular manufactures. ”

“ Buyers seek the largest market they can get in order to obtain the lowest prices; sellers, in order to obtain the highest prices; and so it was learned long ago that economy of time and labor, as well as a theoretically perfect market, could be best secured by an organization under one roof of as many dealers in a commodity as could be found.2 Bear in mind that this result, moreover, is best accomplished when the organization is so controlled by rigid rules of business morality as to insure to every one who does business there, great and small, rich and poor, an absolutely square deal. ”

“ So far as I know, there is not in history record of anything so disgraceful to the human intellect as the modern idea that the commercial text, "Buy in the cheapest market and sell in the dearest," represents, or under any circumstances could represent, an available principle of national economy. ”

“ In a competitive situation, each seller will cut his price in order to increase his share of the market, and prices will ultimately stabilize at a competitive level-i.e., price will equal cost, including a reasonable return on capital. Obviously, it would be to a seller's benefit to avoid such price competition and maintain prices at a higher level, with a corresponding increase in profit. In a market with very few sellers, and detailed knowledge of each other's price, such action is possible. ”

“ But, to go no further, if on balance I make a fortune or an income by this method it would seem to be a fortune or an income not earned by productive service. To this it may be replied that the buyers and sellers of stocks are indirectly performing the function of adjusting demand and supply, and so regulating industry. So far as they are expert business men trained in the knowledge of a particular market this may be so. So far as they dabble in the market in the hope of profiting from a favourable turn, they appear rather as gamblers. ”