Leaving out complementary factors, which do not disturb the action of the law and would complicate our statement, suppose that iron is the sole productive good in the making of those various iron wares we find selling at different prices in the ironmongers’ shops. The general opinion is that it is the price of iron—disregarding other factors—that determines the price of iron wares, from nails to kitchen ranges. And what we have to prove is that the conduction of value really runs in the opposite direction—from nails and ranges to raw iron. Suppose for the moment that the prices obtainable for these products range from 40/ to 48/ for a given unit. That is to say: the ton of iron, when manufactured into, say, nails fetches 40/, when manufactured into other articles, it fetches respectively 42/, 44/, 46/, 48/. These prices are the result of the condition of the market at the moment. The manufacturers of these products—we shall call them respectively A, B, C, D, and E—represent the demand for iron, and the price they will be able to offer for iron depends on the prices obtained by these articles. On the other hand, the supply of raw iron held in store will naturally pass to the most capable buyers—the most capable manufacturers of iron wares—at the valuation of the last buyer. Suppose the stocks of iron are sufficient to meet the demand of E, D, and C, the valuation of C, the last buyer, will determine the price of iron at 44/ per ton. So far all has gone to show that it is the iron wares—through the marginal product—which determine the price of the productive good, iron. But now we come to a feature which gives countenance to the old theory. So long as the prices of iron wares—always assuming that iron is the sole productive group employed in the manufacture—range from 40/ to 48/, while the market price of iron stands at 44/, it is a proof that competition has not done its work. What naturally follows? Producers D and E who are getting respectively 2/ and 4/ advantage over costs will increase the output of their particular iron wares till over-supply brings down the price to 44/. On the other hand, producers A and B, who get respectively 4/ and 2/ less than cost, will curtail their production, till decrease of supply raises their prices to 44/. Thus, from above and from below, competition is always levelling prices to the cost of production. Here it is quite true that cost of production imposes itself on product. What is forgotten is that the cost of production is itself first determined by the marginal product. There is, however, a stronger argument for the old theory. Stocks of iron are not a fixed quantity. If new and productive mines are opened, or new processes discovered, the supply of iron increases, and prices of all iron products will certainly fall. Does this not prove that the value of iron wares is regulated by the cost of producing iron?