Saturday, September 15, 2012

The Available Quantities

Principles of Economics

If it is generally correct that clarity about the objective of their endeavors is an essential factor in the success of every activity of men, it is also certain that knowledge of requirements for goods in future time periods is the first prerequisite for the planning of all human activity directed to the satisfaction of needs. Whatever may be the external conditions, therefore, under which this activity of men develops, its success will be dependent principally upon correct foresight of the quantities of goods they will find necessary in future time periods—that is, upon correct advance formulation of their requirements. It is clear also that a complete lack of foresight would make any planning of activity directed to the satisfaction of human needs completely impossible.
The second factor that determines the success of human activity is the knowledge gained by men of the means available to them for the attainment of the desired ends. Wherever, therefore, men may be observed in activities directed to the satisfaction of their needs, they are seen to be seriously concerned to obtain as exact a knowledge as possible of the quantities of goods available to them for this purpose. How they proceed to do so is the subject that will occupy us in this section.
The quantities of goods available, at any time, to the various members of a society are set by existing circumstances, and in determining these quantities the only problems they have are to measure and take inventory of the goods at their disposal. The ideal result of these two varieties of provident human activity is the complete enumeration of the goods available to them at a given point in time, their classification into perfectly homogeneous categories, and the exact determination of the number of items in each category. In practical life, however, far from pursuing this ideal, men customarily do not even attempt to obtain results as fully exact as is possible in the existing state of the arts of measuring and taking inventory, but are satisfied with just the degree of exactness that is necessary for practical purposes. Yet it is significant evidence of the great practical importance that exact knowledge of the existing quantities of goods available to them has for many people that we find a quite exceptional degree of exactness of this knowledge among merchants, industrialists, and such persons generally as have developed a high degree of provident activity. But even at the lowest levels of civilization we encounter a certain amount of knowledge of the available quantities of goods, since it is evident that a complete lack of this knowledge would make impossible any provident activity of men directed to the satisfaction of their needs.
To the degree to which men engage in planning activity directed to the satisfaction of their needs, they endeavor to attain clarity as to the quantities of goods available to them at any time. Wherever a considerable trade in goods already exists, therefore, we will find men attempting to form a judgment about the quantities of goods currently available to the other members of the society with whom they maintain trading connections.
As long as men have no considerable trade with one another, each man obviously has but a small interest in knowing what quantities of goods are in the hands of other persons. As soon, however, as an extensive trade develops, chiefly as a result of division of labor, and men find themselves dependent in large part upon exchange in meeting their requirements, they naturally acquire a very obvious interest in being informed not only about all the goods in their own possession but also about the goods of all the other persons with whom they maintain trading relations, since part of the possessions of these other persons is then accessible to them, if not directly, yet indirectly (by way of trade).
As soon as a society reaches a certain level of civilization, the growing division of labor causes the development of a special professional class which operates as an intermediary in exchanges and performs for the other members of society not only the mechanical part of trading operations (shipping, distribution, the storing of goods, etc.), but also the task of keeping records of the available quantities. Thus we observe that a specific class of people has a special professional interest in compiling data about the quantities of goods, so-called stocks in the widest sense of the word, currently at the disposal of the various peoples and nations whose trade they mediate. The data they compile cover trading regions that are smaller or larger (single counties, provinces, or even entire countries or continents) according to the position the intermediaries in question occupy in commercial life. They have, moreover, an interest in many other general kinds of information, but we will have occasion to discuss this at a later point.
The keeping of such statistical records, insofar as they relate to the quantities of goods currently at the disposal of sizeable groups of individuals, or even at the disposal of whole nations or groups of nations, meets, however, with not inconsiderable difficulties, since the exact determination of these stocks can be made only by means of a census. The procedure of a census presupposes a complicated apparatus of public officials, covering an entire trading area and equipped with the necessary powers. Such an apparatus can be supplied only by national governments, and by these only within their own territories. Moreover, a census fails to be efficient even within these limits, as is known to every expert, when it deals with goods whose available quantities are not easily accessible to official enumeration.
Censuses, too, can be undertaken conveniently only from time to time. Indeed, it is ordinarily possible to undertake them only at considerable intervals of time. Hence the data obtained at a certain point in time for all goods whose available quantities are subject to severe fluctuations will not infrequently already have lost practical value, even though the figures may lay claim to reliability.
Government activity directed to the determination of the quantities of goods available at any time to a given people or nation is, therefore, naturally confined: (1) to goods whose quantities are subject only to slight changes, as is the case with land, buildings, domestic animals, transportation facilities, etc., since a census of such items, taken at a particular point in time, maintains its validity for later points in time as well, and (2) to goods whose available quantities are subject to such a degree of public control that the correctness of the figures obtained is thereby guaranteed, at least in some degree.
With the signal interest that the business world, under the circumstances just described, has in as exact a knowledge as possible of the quantities of goods available in certain trading areas, it is understandable that it is not satisfied with the incomplete results of this activity of governments, performed, as it is for the most part, with little commercial understanding and always covering only particular countries or parts of countries rather than entire trading areas. On the contrary, the business world itself attempts to provide independently, and not infrequently at considerable financial sacrifice, as inclusive and as exact information as is possible of the quantities in question. This need has produced many organs serving the special interests of the business world, whose task consists, in considerable part, of informing the members of each branch of production about the current state of stocks in the various trading areas.7
Among these organs are the correspondents who are maintained by large business houses at the major markets for each of their commodities. One of the chief duties of these correspondents is to keep their employers continuously informed about the condition of commodity stocks. For every important commodity there is also a considerable number of periodically published business reports that serve the same purpose. Anyone who carefully follows the grain reports of Bell in London or Meyer in Berlin, the sugar reports of Licht in Magdeburg, the cotton reports of Ellison and Haywood in Liverpool, etc., will find reliable information in them about the current state of commodity stocks (and many other data of importance to the business world, which I will discuss later) based on investigations of various kinds and on ingenious calculation where investigation is not feasible. These estimates of commodity stocks have a very definite influence, as we shall see, on economic phenomena, notably price formation. The cotton reports of Ellison and Haywood, for example, contain periodical information about current stocks of the different grades of cotton in Liverpool, in England in general, on the continent, and in America, India, Egypt and the other producing regions; they inform us regularly about the quantities of cotton in process of shipment on the high seas (floating cargo), about the ports to which they are consigned, and whether the quantities in England are still in the hands of the wholesalers, already in the warehouses of spinners or other buyers, or assigned for export, etc.
These reports are based on public censuses of all kinds, which the business world immediately strives to make serviceable if they prove at all trustworthy, on information gathered by expert correspondents in various places, and in part also on the estimates of experienced businessmen of proven reliability. They cover not only the stocks available at any given time but also the quantities of goods expected to be at the disposal of men in future time periods.8 In the above-mentioned reports of Licht, for example, one finds not only news of the fluctuations of sugar stocks in all the trading areas in contact with Germany, but also a comprehensive collection of facts concerning raw material and manufacturing production. In particular, one finds current reports on the area of land planted in sugar cane and sugar beets, on the present condition of the cane and beet crops, on the expected influence of the weather on the time and quantitative and qualitative results of the harvest, on the harvest itself, on the capacities of sugar factories and refineries, on the number of these plants that are active and the number that are idle, on the amount of foreign and domestic output that is expected to reach the German market and the times of expected arrival, on technical progress in methods of sugar production, on disturbances in the distributive apparatus, etc. Similar data on other commodities are contained in the other business reports mentioned in the previous paragraph.
Such reports are usually sufficient to inform the business world about the available quantities of certain commodities in the more or less extensive trading areas relevant to each commodity, and to provide it with a basis for judging prospective changes in stocks. Where actual uncertainties exist, the reports serve to draw attention to this circumstance, so that, in all cases where the outcome of a particular transaction depends upon the larger or smaller available quantity of a good, its risky character is brought to the attention of the business world.

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