All at once, however, a newer and a grander aspect of the equilibrium comes to view. Is it not quite evident that the total value of the productive services on the one hand and the total value of the products on the other must be mathematically equal? The entrepreneur cannot possibly receive in payment for the goods which he has sold to the consumers more than he gave to the same persons, who were just now producers, in return for their services. For where could they possibly get more money? It is a closed circuit, the quantity that comes out through one outlet re-enters through another.
With the important difference that it keeps much closer to facts, the explanation bears a striking resemblance to Quesnay’s Tableau économique.[1128]
We have two markets in juxtaposition,[1129] the one for services and the other for products, and in each of them prices are determined by the same laws, which are three in number:
(a) On the same market there can be only one price for the same class of goods.
(b) This price must be such that the quantity offered and the quantity demanded shall exactly coincide.
(c) The price must be such as will give maximum satisfaction to the maximum number of buyers and sellers.
All these laws are mathematical in character and involve problems of equilibrium.
In some such way would the new school reduce the science of economics to a sort of mechanism of exchange, basing its justification upon the contention that the Hedonistic principle of obtaining the maximum of satisfaction at the minimum discomfort is a purely mechanical principle, which in other connections is known as the principle of least resistance or the law of conservation of energy. Every individual is regarded simply as the slave of self-interest, just as the billiard-ball is of the cue. It is the delight of every economist as of every good billiard-player to study the complicated figures which result from the collision of the balls with one another or with the cushion.[1130]
Another problem of equilibrium is to discover the exact proportion in which the different elements combine in production. Jevons compares production to the infernal mixture which was boiled in their cauldron by the witches in Macbeth. But the ingredients are not mixed haphazard, and Pareto thinks that they conform to a law analogous to the law known in chemistry as the law of definite proportions, which determines that molecules shall combine in certain proportions only. The combination of the productive factors is perhaps not quite so rigidly fixed as is the proportion of hydrogen and oxygen which goes to form water. Similar results, for example, may be obtained by employing more hand labour and less capital, or more capital and less hand labour. But there must be some certain proportion which will yield a maximum utility, and this maximum is obtainable in precisely the same way as in other cases of equilibrium—that is, by varying the “doses” of capital and labour until the final utility in the case both of capital and labour becomes equal. Generally speaking, this is the law that puts a limit to the indefinite expansion of industry, for whenever one element runs short, be it land or capital, labour or managing ability or markets, all the others are directly affected adversely and the undertaking as a whole becomes more difficult and less effective. Pareto rightly enough attaches the greatest importance to this law, and we have only to remember that it is the direct antithesis of the famous law of accumulation of capital to realise its full significance.