supply and demand. Supply and demand are the reciprocal factors of economic value, but they must be adequately connected, as any engineer is aware who has to calculate the hydraulic “value” of a stream of water. Certain measurable potentialities represent his supply: an orderly conductor has to be interposed; and his available fall then represents demand. Value, therefore, cannot be measured by demand alone, as some believers in miracles assume when they propose to base credit[1] (or tentative value) upon consumption. If value could be measured by demand alone, then an engineer would decide upon the capacity of his pump before measuring the capacity of his well: neither can value be measured by supply alone; for, if it could, the engineer would not take the trouble to provide a pump. Furthermore value cannot be measured by a known supply and a known demand: they must obviously be connected by adequate facilities, otherwise the engineer would rest content with his well and his pump and ignore the intermediate pipe. Because of these very elementary considerations, which are as valid in economics as in physics, the net value of effort can only be measured by the reactions due to an available supply and an effective demand, properly coupled by adequate facilities, the scope of which determines the difference between potentialities and value. Our present irrational conception of the basic law of supply and demand in the realm of economics is that value may be determined by what men will give for a privately-owned and occasionally unavailable commodity of unknown total quantity—namely gold. A more valid equation—but still a secondary one—might be based upon what men will give for an available commodity of known total quantity: but the scientific truth underlying such attempts to measure value, though it has been distorted by our arbitrary and materialistic economic dicta, is that value is determined by the effort men will make for freedom, in a region of self-imposed order, or, vice versa, the freedom they will jeopardize for the sake of inducing effort. This is ultimately a question, not of gold or any other commodity, but of effective effort or motion within
- ↑ “Credit Power and Democracy,” C. H. Douglas. Cecil Palmer, London, 1921.
