ce pre-war days, and
this points to a still further increase of money profits, and an
increase in the real income which they represent. See Chapter VIII,
Sec.10]

But this somewhat tame conclusion does not make it any less important
to grasp clearly the significance of the appreciation in the value of
capital goods. A failure to realize it lies at the root of our
bewildered muddling of many crucial problems of the day. In the matter
of housing, for instance, we know we cannot build houses at less than
two or three times their prewar cost, and yet we cannot endure to see
the owners of pre-war houses obtaining a commensurate increase of
rent. And so, in Great Britain, we pass Rent Restriction Acts, and
Housing Acts, and then, in a fit of economy we suspend the latter, and
let the former stand, while the housing shortage becomes steadily more
acute. When we hand the railways back from State control to private
hands, our horror at the idea of the companies receiving larger money
profits than they did before the war leads us to lay down principles
for the fixing of fares and freight charges, which take no account of
post-war construction costs; and then, in alarm lest we may have
thereby made it unprofitable for the companies to spend a single penny
of fresh capital upon further development, we seek to provide for
capital expenditure by cumbrous and dubious expedients. Doubtless we
shall muddle through somehow with such policies: and, public opinion
being what it is, they may perhaps have been about the best policies
that were practicable. But the problems would have been easier to
handle, if the public generally were a little less disposed to think
in terms of averages, and a little more in terms of margins, if we all
of us instinctively realized that the cost that really matters is the
cost at which additional production is profitable under the conditions
ruling at the time, or in the immediate future.

Sec.6. _General Relation between Price, Utility and Cost_. Let us
conclude this chapter by summing up the conclusions which have emerged
as to the relations of utility and cost to price.

The price of a commodity is determined by the conditions of both
supply and demand; and neither can logically be said to be the
superior influence, though it may sometimes be convenient to
concentrate our attention on one or other of them. The chief factor on
which the conditions of demand depend is the utility (as measured in
terms