a problem
which would otherwise be insoluble. For, while it is impossible to
separate out the total utility and cost of wool, it is not impossible
to disentangle its marginal utility and its marginal cost. The
proportion in which wool and mutton are supplied cannot be radically
transformed; but it can be varied within certain limits, by rearing,
for instance, a different breed of sheep. Variations of this kind have
been an important feature of the economic history of Australasia,
where sheep farming is the leading industry. Before the days of cold
storage, Australia and New Zealand could not export their mutton to
European markets, though they could export their wool. Wool was
accordingly much the most valuable product; the mutton was sold in the
home markets, where, the supply being very plentiful, the price was
very low. In the circumstances, the Australasian farmers naturally
concentrated on breeding a variety of sheep whose wool-yielding were
superior to their mutton-yielding qualities. The development of the
arts of refrigeration led in the eighties to an important change. It
became possible to obtain relatively high prices for frozen mutton in
overseas markets. There was, therefore, a marked tendency, especially
in New Zealand, to substitute, for the merino, the crossbred sheep
which yields a larger quantity of mutton and a smaller quantity of
wool of poorer quality. Now if we calculate the cost of maintaining
the number of merino sheep which will yield a given quantity of wool,
and calculate the cost of maintaining the larger number of crossbred
sheep which will be required to yield the _same_ quantity of wool
(allowing for differences of quality) the extra cost which would be
incurred in the latter case must be attributed entirely to the extra
mutton that would be obtained. This extra cost we can regard as
constituting the marginal cost of mutton. So long as this marginal
cost falls short of the price of mutton, it will be profitable to
extend further the substitution of crossbred for merino sheep. The
process of substitution will in fact be continued until we reach the
point at which the marginal cost is about equal to the price.
Similarly by starting with the numbers of merino and crossbred
sheep which would yield the same quantity of mutton, we can calculate
the marginal cost of wool; and again the tendency will be for this
marginal cost to be equal to the price.[1]

[Footnote 1: It may be found difficult t