The last objection of Mr. Thornton to the received theory, and the one that he lays most stress upon, is, that it assumes "that goods are offered for sale unreservedly, and that dealers are always content to let them go for what they will fetch." This, however, he observes,-- Is scarcely ever -- nay, might almost be said to be absolutely never -- the fact. With one notable exception, that of labour, commodities are almost never offered unreservedly for sale; scarcely ever does a dealer allow his goods to go for what they will immediately fetch -- scarcely ever does he agree to the price which would result from the actual state of supply and demand, or, in other words, to the price at which he could immediately sell the whole of his stock. Imagine the situation of a merchant who could not afford to wait for customers, but was obliged to accept for a cargo of corn, or sugar, or sundries, the best offer he could get from the customers who first presented themselves; or imagine a jeweller, or weaver, or draper, or grocer, obliged to clear out his shop within twenty-four hours. The nearest approach ever made to such a predicament is that of a bankrupt's creditors selling off their debtor's effects at a proverbially 'tremendous sacrifice;' and even they are, comparatively speaking, able to take their time. But the behaviour of a dealer under ordinary pressure is quite different from that of a bankrupt's assignees. He first asks himself what is the best price which is likely to be presently given, not for the whole, but for some considerable portion of his stock, and he then begins selling, either at that price or at such other price as proves upon trial to be the best obtainable at the time. His supply of goods is probably immensely greater than the quantity demanded at that price, but does he therefore lower his terms? Not at all, and he sells as much as he can at that price, and then, having satisfied the existing demand, he waits awhile for further demand to spring up. In this way he eventually disposes of his stock for many times the amount he must have been fain to accept if he had attempted to sell off all at once. A corn dealer who in the course of a season sells thousands of quarters of wheat at fifty shillings per quarter, or thereabouts, would not get twenty shillings a quarter if, as soon as his corn ships arrived, he was obliged to turn the cargoes into money. A glover who, by waiting for customers, will no doubt get three or four shillings a pair for all the gloves in his shop, might not get sixpence a pair if he forced them on his customers. But how is it that he manages to secure the higher price? Simply by not selling unreservedly, simply by declining the price which would have resulted from the relations between actual supply and actual demand, and by setting up his goods at some higher price, below which he refuses to sell. (pp. 55-6.)
I confess I cannot perceive that these considerations are subversive of the law of demand and supply, nor that there is any ground for supposing political economists to be unaware that when supply exceeds the demand, the two may be equalised by subtracting from the supply as well as by adding to the demand. Reserving a price is, to all intents and purposes, withdrawing supply. When no more than forty shillings a head can be obtained for sheep, all sheep whose owners are determined not to sell them for less than fifty shillings are out of the market, and form no part at all of the supply which is now determining price. They may have been offered for sale, but they have been withdrawn. They are held back, waiting for some future time, which their owner hopes may be more advantageous to him; and they will be an element in determining the price when that time comes, or when, ceasing to expect it, or obliged by his necessities, he consents to sell his sheep for what he can get. In the meanwhile, the price has been determined without any reference to his withheld stock, and determined in such a manner that the demand at that price shall (if possible) be equal to the supply which the dealers are willing to part with at that price. The economists who say that market price is determined by demand and supply do not mean that it is determined by the whole supply which would be forthcoming at an unattainable price, any more than by the whole demand that would be called forth if the article could be had for an old song. They mean that, whatever the price turns out to be, it will be such that the demand at that price, and the supply at that price, will be equal to one another. To this proposition Mr. Thornton shows an undeniable exception in the case of a dealer who holds out for a price which he can obtain for a part of his supply, but cannot obtain for the whole. In that case, undoubtedly, the price obtained is not that at which the demand is equal to the supply; but the reason is the same as in one of the cases formerly considered; because there is no such price. At the actual price the supply exceeds the demand; at a farthing less the whole supply would be withheld. Such a case might easily happen if the dealer had no competition to fear; not easily if he had: but on no supposition does it contradict the law. It falls within the one case in which Mr. Thornton has shown that the law is not fulfilled -- namely, when there is no price that would fulfil it; either the demand or the supply advancing or receding by such violent skips, that there is no halting point at which it just equals the other element.
