Particular paths may be indicated by way of illustration, “to fix the ideas,” as mathematicians say.71
In this spirit two kinds of higgling may be distinguished as appropriate respectively to short
and long periods. First, we may suppose the intending buyers and sellers to remain in com-
munication without actually making exchanges, each trying to get at the dispositions of the others,
and estimating his chances of making a better bargain than one that has been provisionally
contemplated. By this preliminary tentative process a system of bargains complying with the
condition of equilibrium is, as it were, rehearsed before it is actually performed. Or, second, one may
suppose a performance to take place before such rehearsal is completed. On the first day in our
example a set of hirings are made which prove not to be in accordance with the dispositions of the
parties. These contracts terminating with the day, the parties encounter each other the following
day,72 with dispositions the same as on the first day,—like combatants armis animisque refecti,73—in
all respects as they were at the beginning of the first encounter, except that they have obtained by
experience the knowledge that the system of bargains entered into on the first occasion does not fit
the real dispositions of the parties. The second plan of higgling was supposed in the example,—the
plan which is more appropriate to “normal” value.
Contemplating the theory of exchange in the abstract, we may exclaim with Burke, “
Nobody, I believe, has observed with any reflection what market is without being astonished at the
truth, the correctness, the celerity, the general equity, with which the balance of wants is settled.”74
But, when we come to the labour market, or any particular market, we must carefully inquire with
what degree of approximateness the above-stated fundamental postulate holds good. When the
bargaining extends over a considerable time, changes are apt to occur in the dispositions of the
parties, whether independently of each other and sporadically, or in a manner even more fatal to the
theory, by way of imitation.75 Also, where there occurs a series of encounters between buyers and
sellers, the results of the earlier encounter may affect the dispositions with which the later ones are
entered on. The terms which the labourer is ready to offer and accept are altered by the alteration in
his habits and efficiency which is the consequence of previous bad bargains.76
streams of trade, but as possessing certain fixed amounts which they exchange until they come to
equilibrium.” The “fixed amount” may be considered as renewed from time to time for each of the
individuals placed along a “stream of trade.”
71. This view of the subject is presented at greater length in an article in the Revue d'Économie
Politique, January, 1891.
72. They recontract, in the phraseology of Mathematical Psychics.
73. Aeneid. xii. 788.
74. Thought and Details on Scarcity. He is speaking with special reference to the labour market.
75. See Pigou on “Utility” in the Economic Journal for March, 1901. Compare, as to the absence
of predeterminateness in the dispositions of parties to the labour market, Walker, Political Economy,
Art. 320.
76. Cp. Marshall, Principles of Economics, Book VI, chap. iv, and Walker Political Economy, Art.
308 et seq.