86

POLITICAL  ECONOMY

theory,  in  an  exaggerated  long  run  it  is  the
marginal  cost  of  every  producer,  as  it  is  the
marginal  demand  of  every  consumer,  which
settles  price.
But  there  is  a  difficulty  in  our  new  view.
Does  abstract  theory  hold  with  such  precision
of  the  facts  on  the  side  of  supply  as  of  the  |
facts  on  the  side  of  demand?  The  latter
may  be  co-ordinated  in  systems  as  nonviscous
  as  water  but  the  former  in  systems  as
viscous  as  tepid  tar.  Before  he  has  made
any  tests  an  employer  cannot  accurately
guess  at  what  is  the  most  economical  size
of  business  for  him  to  aim  at,  and  once
businesses  are  established  their  elasticity  may
be  checked  by  cramped  space  in  their  premises
and  in  the  vicinity  and  the  limited  horsepower ­
  of  the  engines  originally  installed.
Again,  though  it  may  be  worth  while  to
attempt  a  large  expansion,  the  trouble  of
making  a  little  expansion  may  quite  outweigh
the  gains.  Moreover  it  is  indubitable  that  a
certain  size  of  business  is  likely  to  become
typical  of  certain  industries  despite  the
differences  between  employers  in  respect  of
capacity.  Consequently  we  cannot  allege
that  the  tendency  for  the  marginal  cost  of  a
firm  to  equal  price  will  be  as  a  rule  triumphant.
In  numerous  instances  it  may  be  indefinitely