might be pursued of selling coal at a price which left the industry no more than self-supporting as a whole.  Some coal might thus be sold at less than its cost price, and the selling price would conform roughly to the average cost.  But such a policy, though in special circumstances it might be justified, would represent a very dangerous principle, which could not be applied widely without the most serious results.  Nothing could be more fatal to any enterprise, whether it be in the hands of an individual, a joint-stock company, a State department, or a Guild, than that the management should content themselves with results which in the lump seem satisfactory, and regard losses here or there with an indifferent eye.  That way lies stagnation, waste, progressive inefficiency and ultimate disaster.  To inquire searchingly into every nook and cranny of the business, to construct, as it were, for each part a separate balance-sheet of profit and loss, to expand in those directions where further development promises good results, and to curtail activity where loss is already evident, is the very essence of good management.  Here, it will be observed, we are using language very similar to that in which we described the principles which govern a business man’s expenditure.  The resemblance is inevitable and significant, for we are dealing here with what is essentially another aspect of the same thing.  The object is to secure that nowhere does expenditure fail to yield a commensurate return.  This we express, when we consider a business in its aspect as a consumer, by saying that its consumption of anything will not be carried beyond the point at which the marginal utility exceeds the price it will have to pay.  When we consider it as a producer, we say that its production of anything will not be carried beyond the point at which the marginal cost exceeds the price it will obtain.

Sec.3. The Dangers of Ignoring the Margin.  This at least is the general rule.  A business may decide deliberately to sell part of its output below cost, because, for instance, this will serve as an advertisement, bring it connections, and enable it to obtain a larger profit at a later date, or immediately on other portions of its sales.  In so acting, it recognizes that the price obtained for a thing may be an inadequate measure of the real return it yields.  In the same way, though for different reasons, a nationalized coal industry might conceivably be justified in selling some coal below cost price, because, let us say, it held that the price which the immediate purchasers were willing to pay was an inadequate measure of the utility of coal to the community as a whole.  But in all such cases it is essential to be very clear as to what exactly you are doing; so that you may be at least moderately clear as to whether the policy is well advised.  It may be sound enough to lose on the swings and make good this loss on the roundabouts, but only if your loss on the