which are of little use for any other purpose, a business may continue for many years, with a rate of profit far below what it had anticipated.  But plant and buildings gradually wear out, and need to be replaced; the course of technical improvement calls continually for fresh capital outlay, which a business in a bad way is reluctant to undertake.  The tendency, therefore, when profits rule low over a considerable period, is for the plant to fall gradually into disrepair and obsolescence, and finally for the business to disappear.  We can thus include an ordinary rate of profit under the head of cost of production, and say with substantial accuracy that for no business can this cost for long exceed the price if the business is to continue to exist.  If then the relatively poor and badly situated mines are to be worked, the price of coal, taking good years together with bad, must cover the costs at which these mines can produce.  If the price rules lower than this, sooner or later they will close down, and we will be left with a smaller number of mines, among which great variations of conditions will still prevail.  Once more, the price must cover the cost incurred by the least profitable of these remaining mines, unless their number is still further to be diminished.  Thus we can conceive of a “margin of production” which will shift backwards to more profitable or forwards to include less profitable mines, according as the demand for coal contracts or expands.  But, wherever this margin may be, there is no escaping the conclusion that it is the cost of production of the “marginal mines,” of those that is to say which it is only just worth while to work, to which the price of coal will approximate.

It follows that there is no real connection between price and cost of production throughout the industry as a whole.  It follows incidentally that those concerns which can market their coal at an appreciably lower cost than the marginal concerns, are likely to reap more than an ordinary rate of profit, though royalties may absorb part of the excess.

Sec.2. The Various Aspects of Marginal Cost.  This relation cuts much deeper than the particular system under which the mines are at present owned and worked.  If, for instance, we supposed that the various mines were amalgamated together in a few giant concerns, each of which comprised some of the richer and some of the poorer mines, the preceding argument would need to be recast in form, but its substance would be unaffected.  For though a great coal trust could in a sense afford to sell at a price lower than the marginal cost, setting its losses on the poorer against its gains on the better pits, is it likely it would do so?  Why should it dissipate its profits in this way?  It is clearly more reasonable to suppose that it would close down the poorer pits (unless it could advance the price of coal), and thereby maintain its profits at a higher figure.  If, indeed, the mines were nationalized the deliberate policy