The peculiarities of the labour market pointed out by Professor Marshall go far to modify the
general presumption in favour of laisser faire. But less careful writers are less successful in
supporting the burden of proof which lies on those who profess to add to or take away from that
outlined theory of Exchange which seems to express all that is known in general about the working
of a market. A warning example of such modification not warranted by specific experience is the
doctrine of the wagefund, which is now universally discredited, and ought always to have excited
suspicion and challenged proof because, as already intimated in another connection, it is a
supposition repugnant to the general theory of Exchange that “the total amount of means of purchase
must be strictly limited, and the buyers must be determined to spend the whole of this sum in
purchase of the commodities in question.”77 Perhaps, as Sir Leslie Stephen says with reference to
the classical writers, “the assumption slipped into their reasoning unawares.”78 Sometimes it may
have been intended only to convey that early lesson which is contained in our opening
paragraphs,—that no party to production can expect to earn more than the total produce. Sometimes
there was contemplated a more definite statement true of short periods,—a truth which has been well
stated by Professor Taussig in his article on “The Employer's Place in Distribution,” and at greater
length in his book on Wages and Capital—
“The whole of the real income available for the community is not in any substantial sense
at the disposal of the capitalists.... A large part of the commodities now on hand would not serve
their turn. The supply of bread and flour and grain at any moment is adjusted to the expected needs
of the whole mass of consumers.... The effective choice which the capitalists would have . . . would
be thus confined, for the time being at least, within limits not very elastic.”79
Let us suppose that the working classes live on bread only, while the capitalist classes
consume buns also. On a day, after a conference between employers and employed, the partition of
the national dividend is altered in favour of the capitalists. Yet they will be unable to benefit
immediately by the change. On that day more buns will not be forthcoming, all the bakers' ovens
being preoccupied with bread.
For the purpose of illustration there has been chosen a specially simple case in which the
articles consumed by the two classes are formed out of the same material, and by a process which
is identical up to the penultimate stage. The stream of production does not bifurcate till it debauches
into the mouths of the two parties to Distribution.
When we consider longer tracts of that stream, there comes into view a circumstance to be
discussed under the head of Capital, the influence of time on value. To illustrate the distribution of
produce between those who have contributed at different times to its production, let us at first make
abstraction of other differences, and imagine economic men uniting the functions of workman and
capitalist-entrepreneur, differing only in the amount of capitalization, the length of time during
which their labour is invested. One labours at proximate means, another at remote means, tending
77. Quoted from Bohm-Bawerk, who himself compares his theory with that of the wage-fund
(Positive Theory, p. 419). Both theories seem true of short periods. The context accords with the
view here taken of the theory, as true of short periods, inadequate to long periods.
78. The English Utilitarians, Vol. III, p. 216.
79. Quarterly Journal of Economics, Vol. X, p. 74.