of it tends to eliminate dishonest profits. A chief
purpose of static studies is to afford a means of testing the
legitimacy of the incomes that come to _entrepreneurs_.

_Market Price._--The old phrase _supply and demand_ describes the
process by which the market price of anything is determined. The total
mercantile stock of goods of a particular kind at any one time on hand
is, of course, an exact quantity, and the law of "market value," when
these words are used in a restricted and technical sense, determines
the price at which this predetermined amount can be sold.

_How a Normal Supply is Determined._--This present stock, however, was
brought into existence by producers who looked forward to the time
when they could probably sell it at a certain price; and the higher
this anticipated return for the article, the more of it they were
induced to make. The price, which to-day depends on the quantity on
hand, acted in advance as a lure to bring that quantity into
existence, and among the different articles which men can produce,
they are forever singling out for increased production those things
which offer the strongest lures--that is, the things that sell for the
largest amounts as compared with the cost of making them. The ultimate
tendency of all this is a certain adjustment of the relative supplies
of different commodities. It is that adjustment which brings all
prices to a level determined by cost.

_Natural Value._--This tendency toward cost prices--those which
afford to the producers wages for all their labor but no true
_entrepreneurs'_ profit--establishes a further law, that of "natural
value," and this it is that fixes the standard to which, in the long
run, market values, as adjusted by supply and demand, tend to conform.
A market value is natural or unnatural according as it does or does
not conform to a certain standard, and this ultimate standard itself
is the cost of producing the several kinds of goods. What the term
_cost_ in this connection really means we must later see; but for the
present we may take the common and practical view that it is the
amount of money that an _entrepreneur_ must pay out in order to bring
the article into existence. If there were very little wheat in the
granaries of the world, demand acting on this limited supply would
determine the selling price of it, and this price would be high as
compared with the cost of raising this grain. It would also be higher
than the sellin