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.





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