ORIGIN OF MARKETS AND PRICES

[SIR HENRY MAINE in one of his lectures, cited below, shows that the modern ideas of competition-rent for land and of the sale of land by individuals were not known in primitive communities. Rents were determined by custom. Rack-rent, an Irish term sometimes used to indicate an extreme competition-rent, was really the rent exacted from a person of a strange tribe in contrast with "a fair rent, from one of the tribe." "In a primitive society the person who submits to extreme terms from one group is pretty sure to be an outcast thrown on the world by the breaking up and dispersion of some other group, and the effect of giving him land on these terms is not to bring him under the description of a tenant as understood by the economists, but to reduce him to a condition resembling predial servitude."

The author then broadens his inquiry to that of the origin of competition-price, or market-price in general; competition-rent of land being, as he shows, but one case of market-price. We quote below most of pages 189-201, in the chapter on "The early history of price and rent" from Village-Communities in the East and West, six lectures delivered at Oxford. First published 1871; quotations from the third edition, 1876, by courtesy of the publisher, John Murray, Albermarle Street, London.]

It would almost certainly be labor wasted to search among the records of ancient law for any trace of the ideas which we associate with competition-rents. But if land in primitive times was very rarely sold or (in our sense) rented, and if movable property was very rarely hired for money, it is at least probable that from a very early date movables were purchased. It does not appear to me quite a hopeless undertaking to trace the gradual development of the notions connected with price; and here, if at all, we shall be able to follow the early history of bargaining or competition. Nor, if we can discover any primitive ideas on the point, need we hesitate to transfer them from the sale of movables to the

competition of land. The Roman lawyers remark of the two contracts called Sale for Price, and Hiring for Consideration, that they are substantially the same, and that the rules which govern one may be applied to the other. The observation seems to me not only true, but one which it is important to keep in mind. You cannot indeed without forcing language speak of the contract of sale in terms of the contract of letting and hiring; but the converse is easy, and there is no incorrectness in speaking of the letting and hiring of land as a sale for a period of time, with the price spread over that period. I must confess I could wish that in some famous books this simple truth had been kept in view. It has several times occurred to me, in reading treatises on political economy, that if the writer had always recollected that a competitionrent is after all nothing but price payable by instalments, much unnecessarily mysterious language might have been spared and some (to say the least) doubtful theories as to the origin of rent might have been avoided. The value of this impression anybody can verify for himself.

What, in a primitive society, is the measure of price? It can only be called custom. Although in the East influences destructive of the primitive notion are actively at work, yet in the more retired villages the artificer who plies an ancient trade still sells his wares for the customary prices, and would always change their quality rather than their price-a preference, I must remark, which has now and then exposed the natives of India to imputations of fraud not wholly deserved. And in the West, even in our own country, there are traces of the same strong feeling that price should be determined by custom in the long series of royal, parliamentary, and municipal attempts to fix prices by tariff. Such attempts are justly condemned as false political economy, but it is sometimes forgotten that false political economy may be very instructive history..

What, then, is the origin of the rule that a man may ask-or, if you choose so to put it, that he does ask-the

highest available price for the wares which he has to sell? I think that it is in the beginning a rule of the market, and that it has come to prevail in proportion to the spread of ideas originating in the market. This indeed would be a proposition of little value, if I did not go farther. You are well aware that the fundamental proposition of political economy is often put as the rule of buying in the cheapest market and selling in the dearest. But since the primitive period, the character of markets has changed almost as much as that of society itself. In order to understand what a market originally was, you must try to picture to yourselves a territory occupied by village-communities, self-acting and as yet autonomous, each cultivating its arable land in the middle of its waste, and each, I fear I must add, at perpetual war with its neighbor. But at several points, points probably where the domains of two or three villages converged, there appear to have been spaces of what we should now call neutral ground. These were the markets. They were probably the only places at which the members of the different primitive groups met for any purpose except warfare, and the persons who came to them were doubtless at first persons specially empowered to exchange the produce and manufactures of one little village-community for those of another. Sir John Lubbock in his recent volume on the "Origin of Civilization," has some interesting remarks on the traces which remain of the very ancient association between markets and neutrality (page 205); nor-though I have not now an opportunity of following up the train of thought-can I help observing that there is a historical connection of the utmost importance to the moderns between the two, since the Jus Gentium of the Roman Prætor, which was in part originally a market law, is the undoubted parent of our International Law. But, besides the notion of neutrality, another idea was anciently associated with markets. This was the idea of sharp practice and hard bargaining. The three ideas seem all blended in the attributes of the god Hermes

or Mercury-at once the god of boundaries, the prince of messengers or ambassadors, and the patron of trade, of cheating, and of thieves.

The market was then the space of neutral ground in which, under the ancient constitution of society, the members of the different autonomous proprietary groups met in safety and bought and sold unshackled by customary rule. Here, it seems to me, the notion of a man's right to get the best price for his wares took its rise, and hence it spread over the world. Market law, I should here observe, has had a great fortune in legal history. The Jus Gentium of the Romans, though doubtless intended in part to adjust the relations of Roman citizens to a subject population, grew also in part out of commercial exigencies, and the Roman Jus Gentium was gradually sublimated into a moral theory which, among theories not laying claim to a religious sanction, had no rival in the world till the ethical doctrines of Bentham made their appearance. If, however, I could venture to detain you with a discussion on technical law, I could easily prove that market law has long exercised and still exercises a dissolving and transforming influence over the very class of rules which are profoundly modifying the more rigid and archaic branches of jurisprudence. The law of personal or movable property tends to absorb the law of land or of immovable property, but the law of movable tends steadily to assimilate itself to the law of the market. The wish to establish as law that which is commercially expedient is plainly visible in the recent decisions of English courts of justice; a whole group of legal maxims having their origin in the law of the market (of which the rule of caveat emptor is the most significant) are growing at the expense of all others which compete with them.

...

It seems to me that the half-conscious repulsions which men feel to doctrines which they do not deny might often be examined with more profit than is usually supposed. They will sometimes be found to be the reflection of an older law of

ideas. Much of the moral opinion is no doubt in advance of law, for it is the fruit of religious or philosophical theories having a different origin from the law and not yet incorporated with it. But a good deal of it seems to me to preserve rules of conduct which, though expelled from law, linger in sentiment or practice. The repeal of the usury laws has made it lawful to take any rate of interest for money, yet the taking of usurious interest is not thought to be respectable, and our courts of equity have evidently great difficulty in bringing themselves to a complete recognition of the new principle. Bearing this example in mind, you may not think it an idle question if I ask: What is the real origin of the feeling that it is not creditable to drive a hard bargain with a near relative or a friend? It can hardly be said that there is any rule of morality to forbid it. The feeling seems to me to bear the traces of the old notion that men united in natural groups do not deal with one another on principles of trade. The only natural group in which men are now joined is the family; and the only bond of union resembling that of the family is that which men create for themselves by friendship...

All indications seem to me, therefore, to point to the same conclusion. Men united in those groups out of which modern society has grown do not trade together on what I may call, for shortness, commercial principles. The general proposition which is the basis of political economy made its first approach to truth under the only circumstances which admitted of men meeting at arm's length, not as members of the same group, but as strangers. Gradually the assumption of the right to get the best price has penetrated into the interior of these groups, but it is never completely received so long as the bond of connection between man and man is assumed to be that of family or clan-connection. The rule only triumphs when the primitive community is in ruins. What are the causes which have generalized a rule of the market until it has been supposed to express an original and fundamental ten