CHAPTER 15.

On the Influence of Verification on Price

181. The money price of an article at any given period is
usually stated to depend upon the proportion between the supply
and the demand. The average price of the same article during a
long period, is said to depend, ultimately, on the power of
producing and selling it with the ordinary profits of capital.
But these principles, although true in their general sense, are
yet so often modified by the influence of others, that it becomes
necessary to examine a little into the disturbing forces.

182. With respect to the first of these propositions, it may
be observed, that the cost of any article to the purchaser
includes, besides the ratio of the supply to the demand, another
element, which, though often of little importance, is, in many
cases, of great consequence. The cost, to the purchaser, is the
price he pays for any article, added to the cost of verifying the
fact of its having that degree of goodness for which he
contracts. In some cases the goodness of the article is evident
on mere inspection: and in those cases there is not much
difference of price at different shops. The goodness of loaf
sugar, for instance, can be discerned almost at a glance; and the
consequence is, that the price is so uniform, and the profit upon
it so small, that no grocer is at all anxious to sell it; whilst,
on the other hand, tea, of which it is exceedingly difficult to
judge, and which can be adulterated by mixture so as to deceive
the skill even of a practised eye, has a great variety of
different prices, and is that article which every grocer is most
anxious to sell to his customers.

The difficulty and expense of verification are, in some
instances, so great, as to justify the deviation from
well-established principles. Thus it is a general maxim that
Government can purchase any article at a cheaper rate than that
at which they can manufacture it themselves. But it has
nevertheless been considered more economical to build extensive
flour-mills (such are those at Deptford), and to grind their own
corn, than to verify each sack of purchased flour, and to employ
persons in devising methods of detecting the new modes of
adulteration which might be continually resorted to.

183. Some years since, a mode of preparing old clover and
trefoil seeds by a process called doctoring, became so prevalent
as to excite the attention of the House of Commons. It appeared
in evidence before a committee, that the old seed of the white
clover was doctored by first wetting it slightly, and then drying
it with the fumes of burning sulphur, and that the red clover
seed had its colour improved by shaking it in a sack with a small
quantity of indigo; but this being detected after a time, the
doctors then used a preparation of logwood, fined by a little
copperas, and sometimes by verdigris; thus at once improving the
appearance of the old seed, and diminishing, if not destroying,
its vegetative power already enfeebled by age. Supposing no
injury had resulted to good seed so prepared, it was proved that
from the improved appearance, the market price would be enhanced
by this process from five to twenty-five shillings a hundred
weight. But the greatest evil arose from the circumstance of
these processes rendering old and worthless seed equal in
appearance to the best. One witness had tried some doctored seed,
and found that not above one grain in a hundred grew, and that
those which did vegetate died away afterwards; whilst about
eighty or ninety per cent of good seed usually grows. The seed so
treated was sold to retail dealers in the country, who of course
endeavoured to purchase at the cheapest rate, and from them it
got into the hands of the farmers; neither of these classes being
capable of distinguishing the fraudulent from the genuine seed.
Many cultivators, in consequence, diminished their consumption of
the article; and others were obliged to pay a higher price to
those who had skill to distinguish the mixed seed, and who had
integrity and character to prevent them from dealing in it.

184. In the Irish flax trade, a similar example of the high
price paid for verification occurs. It is stated in the report of
the committee, "That the natural excellent quality of Irish flax,
as contrasted with foreign or British, has been admitted." Yet
from the evidence before that committee it appears that Irish
flax sells, in the market, from 1d. to 2d. per pound less than
other flax of equal or inferior quality. Part of this difference
of price arises from negligence in its preparation, but a part
also from the expense of ascertaining that each parcel is free
from useless matter to add to its weight: this appears from the
evidence of Mr J. Corry, who was, during twenty-seven years,
Secretary to the Irish Linen-Board:--

"The owners of the flax, who are almost always people in the lower
classes of life, believe that they can best advance their own
interests by imposing on the buyers. Flax being sold by weight,
various expedients are used to increase it; and every expedient
is injurious, particularly the damping of it; a very common
practice, which makes the flax afterwards heat. The inside of
every bundle (and the bundles all vary in bulk) is often full of
pebbles, or dirt of various kinds, to increase the weight. In
this state it is purchased, and exported to Great Britain. The
natural quality of Irish flax is admitted to be not inferior to
that produced by any foreign country; and yet the flax of every
foreign country, imported into Great Britain, obtains a
preference amongst the purchasers, because the foreign flax is
brought to the British market in a cleaner and more regular
state. The extent and value of the sales of foreign flax in Great
Britain can be seen by reference to the public accounts; and I am
induced to believe, that Ireland, by an adequate extension of her
flax tillage, and having her flax markets brought under good
regulations, could, without encroaching in the least degree upon
the quantity necessary for her home consumption, supply the whole
of the demand of the British market, to the exclusion of the
foreigners."

185. The lace trade affords other examples; and, in enquiring
into the complaints made to the House of Commons by the framework
knitters, the committee observe, that, "It is singular that the
grievance most complained of one hundred and fifty years ago,
should, in the present improved state of the trade, be the same
grievance which is now most complained of: for it appears, by the
evidence given before your committee, that all the witnesses
attribute the decay of the trade more to the making of fraudulent
and bad articles, than to the war, or to any other cause." And it
is shewn by the evidence, that a kind of lace called "single-press"
was manufactured, which, although good to the eye, became nearly
spoiled in washing by the slipping of the threads; that not one
person in a thousand could distinguish the difference between
"single-press" and "double-press" lace; and that, even workmen and
manufacturers were obliged to employ a magnifying glass for that
purpose; and that, in another similar article, called "warp lace,"
such aid was essential. It was also stated by one witness, that

"The trade had not yet ceased, excepting in those places where the
fraud had been discovered; and from those places no orders are
now sent for any sort of Nottingham lace, the credit being
totally ruined."

186. In the stocking trade similar frauds have been practised. It
appeared in evidence, that stockings were made of uniform width
from the knee down to the ankle, and being wetted and stretched
on frames at the calf, they retained their shape when dry, but
that the purchaser could not discover the fraud until, after the
first washing, the stockings hung like bags about his ankles.

187. In the watch trade the practice of deceit, in forging
the marks and names of respectable makers, has been carried to a
great extent both by natives and foreigners; and the effect upon
our export trade has been most injurious, as the following
extract from the evidence before a committee of the House of
Commons will prove:--

"Question. How long have you been in the trade?
Answer. Nearly thirty years.
Question. The trade is at present much depressed?
Answer. Yes, sadly.
Question. What is your opinion of the cause of that distress?
Answer. I think it is owing to a number of watches that have been
made so exceedingly bad that they will hardly look at them in the
foreign markets; all with a handsome outside show, and the works
hardly fit for anything.
Question. Do you mean to say, that all the watches made in this
country are of that description?
Answer. No; only a number which are made up by some of the Jews,
and other low manufacturers. I recollect something of the sort
years ago, of a falloff of the East India work, owing to there
being a number of handsome-looking watches sent out, for
instance, with hands on and figures, as if they shewed seconds,
and had not any work regular to shew the seconds: the hand went
round, but it was not regular.
Question. They had no perfect movements?
Answer. No, they had not; that was a long time since, and we had
not any East India work for a long time afterwards."

In the home market, inferior but showy watches are made at a
cheap rate, which are not warranted by the maker to go above half
an hour; about the time occupied by the Jew pedlar in deluding
his country customer.

188. The practice, in retail linen-drapers' shops, of calling
certain articles yard wide when the real width is perhaps, only
seven-eighths or three-quarters, arose at first from fraud, which
being detected, custom was pleaded in its defence: but the result
is, that the vender is constantly obliged to measure the width of
his goods in the customer's presence. In all these instances the
object of the seller is to get a higher price than his goods
would really produce if their quality were known; and the
purchaser, if not himself a skilful judge (which rarely happens
to be the case), must pay some person, in the shape of an
additional money price, who has skill to distinguish, and
integrity to furnish, articles of the quality agreed on. But as
the confidence of persons in their own judgement is usually
great, large numbers will always flock to the cheap dealer, who
thus, attracting many customers from the honest tradesman,
obliges him to charge a higher price for his judgement and
character than, without such competition, he could afford to do.

189. There are few things which the public are less able to
judge of than the quality of drugs; and when these are compounded
into medicines it is scarcely possible, even for medical men, to
decide whether pure or adulterated ingredients have been
employed. This circumstance, concurring with the present
injudicious mode of paying for medical assistance, has produced a
curious effect on the price of medicines. Apothecaries, instead
of being paid for their services and skill, are remunerated by
being allowed to place a high charge upon their medicines, which
are confessedly of very small pecuniary value. The effect of such
a system is an inducement to prescribe more medicine than is
necessary; and in fact, even with the present charges, the
apothecary, in ninety-nine cases out of a hundred, cannot be
fairly remunerated unless the patient either takes, or pays for,
more physic than he really requires. The apparent extravagance of
the charge of eighteen pence for a two-ounce phial(1*) of
medicine, is obvious to many who do not reflect on the fact that
a great part of the charge is, in reality, payment for the
exercise of professional skill. As the same charge is made by the
apothecary, whether he attends the patient or merely prepares the
prescription of a physician, the chemist and druggist soon
offered to furnish the same commodity at a greatly diminished
price. But the eighteen pence charged by the apothecary might
have been fairly divided into two parts, three pence for medicine
and bottle, and fifteen pence for attendance. The chemist,
therefore, who never attends his customers, if he charges only a
shilling for the same medicine, realizes a profit of 200 or 300
per cent upon its value. This enormous profit has called into
existence a multitude of competitors; and in this instance the
impossibility of verifying has, in a great measure, counteracted
the beneficial effects of competition. The general adulteration
of drugs, even at the extremely high price at which they are
retailed as medicine, enables those who are supposed to sell them
in an unadulterated state to make large profits, whilst the same
evil frequently disappoints the expectation, and defeats the
skill, of the most eminent physician.

It is difficult to point out a remedy for this evil without
suggesting an almost total change in the system of medical
practice. If the apothecary were to charge for his visits, and to
reduce his medicines to one-fourth or one-fifth of their present
price, he would still have an interest in procuring the best
drugs, for the sake of his own reputation or skill. Or if the
medical attendant, who is paid more highly for his time, were to
have several pupils, he might himself supply the medicines
without a specific charge, and his pupils would derive
improvement from compounding them, as well as from examining the
purity of the drugs he would purchase. The public would gain
several advantages by this arrangement. In the first place, it
would be greatly for the interest of the medical practitioner to
have the best drugs; it would be in his interest also not to give
more physic than needful; and it would enable him, through some
of his more advanced pupils, to watch more frequently the changes
of any malady.

190. There are many articles of hardware which it is
impossible for the purchaser to verify at the time of purchase,
or even afterwards, without defacing them. Plated harness and
coach furniture may be adduced as examples: these are usually of
wrought iron covered with silver, owing their strength to the one
and a certain degree of permanent beauty to the other metal. Both
qualities are, occasionally, much impaired by substituting cast-
for wrought-iron, and by plating with soft solder (tin and lead)
instead of with hard solder (silver and brass). The loss of
strength is the greatest evil in this case; for cast iron, though
made for this purpose more tough than usual by careful annealing,
is still much weaker than wrought-iron, and serious accidents
often arise from harness giving way. In plating with soft
solder, a very thin plate of silver is made to cover the iron,
but it is easily detached, particularly by a low degree of heat.
Hard soldering gives a better coat of silver, which is very
firmly attached, and is not easily injured unless by a very high
degree of heat. The inferior can be made to look nearly as well
as the better article, and the purchaser can scarcely discover
the difference without cutting into it.

191. The principle that price, at any moment, is dependent on
the relation of the supply to the demand, is true to the full
extent only when the whole supply is in the hands of a very large
number of small holders, and the demand is caused by the wants of
another set of persons, each of whom requires only a very small
quantity. And the reason appears to be, that it is only in such
circumstances that a uniform average can be struck between the
feelings, the passions, the prejudices, the opinions, and the
knowledge, of both parties. If the supply, or present stock in
hand, be entirely in the possession of one person, he will
naturally endeavour to put such a price upon it as shall produce
by its sale the greatest quantity of money; but he will be guided
in this estimate of the price at which he will sell, both by the
knowledge that increased price will cause a diminished
consumption, and by the desire to realize his profit before a new
supply shall reach the market from some other quarter. If,
however, the same stock is in the hands of several dealers, there
will be an immediate competition between them, arising partly
from their different views of the duration of the present state
of supply, and partly from their own peculiar circumstances with
respect to the employment of their capital.

192. The expense of ascertaining that the price charged is
that which is legally due is sometimes considerable. The
inconvenience which this verification produces in the case of
parcels sent by coaches is very great. The time lost in
recovering an overcharge generally amounts to so many times the
value of the sum recovered, that it is but rarely resorted to. It
seems worthy of consideration whether it would not be a
convenience to the public if government were to undertake the
general conveyance of parcels somewhat on the same system with
that on which the post is now conducted. The certainty of their
delivery, and the absence of all attempt at overcharge, would
render the prohibition of rival carriers unnecessary. Perhaps an
experiment might be made on this subject by enlarging the weight
allowed to be sent by the two-penny post, and by conveying works
in sheets by the general post.

This latter suggestion would be of great importance to
literature, and consequently to the circulation of knowledge. As
the post-office regulations stand at present, it constantly
happens that persons who have an extensive reputation for
science, receive by post, from foreign countries, works, or parts
of works, for which they are obliged to pay a most extravagant
rate of postage, or else refuse to take in some interesting
communication. In France and Germany, printed sheets of paper are
forwarded by post at a very moderate expense, and it is fit that
the science and literature of England should be equally favoured.

193. It is important, if possible, always to connect the name
of the workman with the work he has executed: this secures for
him the credit or the blame he may justly deserve; and
diminishes, in some cases, the necessity of verification. The
extent to which this is carried in literary works, published in
America, is remarkable. In the translation of the Mecanique
Celeste by Mr Bowditch, not merely the name of the printer, but
also those of the compositors, are mentioned in the work.

194. Again, if the commodity itself is of a perishable
nature, such, for example, as a cargo of ice imported into the
port of London from Norway a few summers since, then time will
supply the place of competition; and, whether the article is in
the possession of one or of many persons, it will scarcely reach
a monopoly price. The history of cajeput oil during the last few
months, offers a curious illustration of the effect of opinion
upon price. In July of last year, 1831, cajeput oil was sold,
exclusive of duty, at 7 d. per ounce. The disease which had
ravaged the East was then supposed to be approaching our shores,
and its proximity created alarm. At this period, the oil in
question began to be much talked of, as a powerful remedy in that
dreadful disorder; and in September it rose to the price of 3s.
and 4s. the ounce. In October there were few or no sales: but in
the early part of November, the speculations in this substance
reached their height, and between the 1st and the 15th it
realized the following prices: 3s. 9d., 5s., 6s. 6d., 7s. 6d.,
8s., 9s., 10s., 10s. 6d., 11s. After 15 November, the holders of
cajeput oil were anxious to sell at much lower rates; and in
December a fresh arrival was offered by public sale at 5s., and
withdrawn, being sold afterwards, as it was understood, by
private contract, at 4s. or 4s. 6d. per oz. Since that time, 1s.
6d. and 1s. have been realized; and a fresh arrival, which is
daily expected (March, 1832) will probably reduce it below the
price of July. Now it is important to notice, that in November,
the time of greatest speculation, the quantity in the market was
held by few persons, and that it frequently changed hands, each
holder being desirous to realize his profit. The quantity
imported since that time has also been considerable.(2*)

195. The effect of the equalization of price by an increased
number of dealers, may be observed in the price of the various
securities sold at the Stock Exchange. The number of persons who
deal in the 3 per cent stock being large, any one desirous of
selling can always dispose of his stock at one-eighth per cent
under the market price; but those who wish to dispose of bank
stock, or of any other securities of more limited circulation,
are obliged to make a sacrifice of eight or ten times this amount
upon each hundred pounds value.

196. The frequent speculations in oil, tallow, and other
commodities, which must occur to the memory of most of my
readers, were always founded on the principle of purchasing up
all the stock on hand, and agreeing for the purchase of the
expected arrivals; thus proving the opinion of capitalists to be,
that a larger average price may be procured by the stock being
held by few persons.

NOTES:

1. Apothecaries frequently purchase these phials at the old
bottle warehouses at ten shillings per gross; so that when their
servant has washed them, the cost of the phial is nearly one
penny.

2. I have understood that the price of camphor, at the same time,
suffered similar changes.