§1. People make various trades for benefit without worrying about equilibrium, or balancing aggregates of supply and demand, which occurs when many actors repeatedly trade (semi-)commodified goods.
§2. Marshall gives the example of a corn market — a “grain” market in the US — in which buyers (with willingness to pay) and sellers (with willingness to accept) converge on an equilibrium price of 36 pence/quarter at which quantity demanded equals quantity supplied. Fluctuations around 36d occur, but they do not persist, since buyers wait out “outrageous” offers and sellers ignore “lowball” bids.
§3. Prices in commodity markets do not deviate too far from equilibrium because traders can borrow (or lend) money to smooth bumps. Prices (wages) in labor markets can vary a lot because workers go hungry if they cannot eat whereas capitalists can eat while they wait for willing workers. The implication, which Marshall elaborates in Annex F (“Barter”), is that money allows commodity markets to clear “on the margin” while labor markets (which have a barter component when one considers that workers are offering heterogeneous units of labor) have a lot of inframarginal noise due to workers getting bad deals. Gender-wage gaps, for example, can be explained by men driving harder bargains than women when negotiating their starting salaries.
This post is part of a series in the Marshall 2020 Project, i.e., an excuse for me to read Alfred Marshall’s Principles of Economics (1890 first edition/1920 eighth edition), which dominated economic thinking until Van Neumann and Morgenstern’s Theory of Games and Economic Behaviour (1944) and Samuelson’s Foundations of Economic Analysis (1946) pivoted economics away from institutional induction and towards mathematical deduction.