Mises Daily Articles
The Fundamental Difference between Fairs and Markets
[Excerpted from chapter 4 in part 1 of the The Turgot Collection (2011). Originally written in 1757.]
The word fair, which is derived from forum, a public square, was originally synonymous with that of market, and is still so in certain respects. Both signify a gathering of sellers and buyers at a set time and place, but the word fair seems to present the idea of a more numerous, more solemn, and consequently, less common gathering. The use of these two words in ordinary language appears to be determined by this distinction, which is immediately perceptible, but which itself arises from a less obvious, and, as it were, more radical, difference between these two things. This will be developed further.
It stands to reason that sellers and buyers cannot gather together at certain times and places without an attraction or an interest which compensates for or which even exceeds the expenses of the journey and of the transportation of the produce and merchandise. Without this attraction, each would remain at home. The stronger it is, the longer the transportation which the produce can support, the more numerous and solemn the gathering of merchants and customers will be, and the more the district which has this gathering as its center, can be extended.
The natural course of trade in itself is enough to fashion this gathering and to increase it up to a certain point. The competition of the sellers limits the price of the produce, and the price of the produce in turn limits the number of sellers. Indeed, since all trade must support the person who undertakes it, it is essential that the number of sales compensates the merchant for the low profit which he makes on each sale, and that, consequently, the number of merchants is proportioned to the current number of consumers, so that each merchant is matched by a certain number of the latter.
Recognizing this, I assume that the price of a commodity is such that in order to support the trade in it, it has to be sold in a market of 300 families. It is obvious that three villages, each containing only 100 families, will be able to support only a single merchant of this commodity. This merchant will probably live in that village of the three where the largest number can gather most conveniently and at the least expense, because this curtailment of expenses will give the merchant who is established in this village an advantage over those who would be tempted to set up business in any of the others.
But several types of commodities would probably be in the same category and the merchant of each of these commodities would set up in the same place because of the curtailment of the expenses and because someone who needs two types of commodities prefers making one journey to making two; it is really as if he were paying less for each piece of merchandise. Once a place has become notable because of this self-same gathering together of different trades, it becomes more and more important, because all artisans who are not confined to the countryside by the nature of their work, and all those whose wealth permits them to be idle assemble there to obtain the conveniences of life.
The competition of buyers draws the merchants in the hope of sales, and several of them set up business to deal in the same commodities. The competition of the merchants draws buyers in the hope of a good bargain, and both of them continue to increase in turn up to the point where for the remote buyers the disadvantage of the distance offsets the cheapness of the commodities caused by competition, and even what custom and force of habit add to the attraction of a good bargain. In this manner different centers of commerce, or markets, are naturally formed, to which correspond an equal number of districts or departments of various sizes, according to the nature of the commodities, the relative ease of communications and the condition and relative size of the population. And such is, by the way, the most important and the most common origin of small market towns and cities.
The same reason of convenience which settles the gathering of buyers and sellers at certain places also confines it to certain days, when the commodities are too paltry to support long transportation and when the district is not sufficiently populous to provide an adequate, daily market. These days are settled on through a form of silent agreement, for which the smallest circumstances provide a reason. The number of days' journey between the most important places in the neighborhood, together with certain dates which give rise to the departure of travelers, such as the proximity of certain feast days, certain days hallowed by usage for the payments of rents, all types of recurring solemnities — in short, all the types of occasions which bring together a group of people on specific days — become the principle for the establishment of a market on these same days, because traders have an interest in searching out buyers and vice versa.
But it takes only a fairly short distance for this interest, and the low prices resulting from competition, to be offset by the expenses of travel and of the transportation of the produce. Therefore it is not to the natural course of a commerce animated by freedom that one should attribute these splendid fairs, where the products of part of Europe are assembled at great expense and which appear to be the rendezvous of nations. The gain which must compensate for these exorbitant expenses does not arise from the natural order of things but results from the privileges and franchises granted to trade at certain times and places, while everywhere else it is overburdened with taxes and duties.
It is not surprising that the lack of freedom and the customary obstructions with which commerce has been burdened for so long in all of Europe has forcibly directed it to those places where it was granted a little more freedom. This is how princes, by granting exemptions from duty, have created so many fairs in the various parts of Europe; and it stands to reason that these fairs are all the more important as the trade is more overburdened with duties in normal times.
A fair and a market are therefore both a gathering of merchants and customers at a set time and place. But in the case of markets the merchants and buyers are brought together by the mutual interest they have in seeking each other, while in the case of fairs it is the desire to enjoy certain privileges — from which it follows that this gathering is inevitably much more numerous and solemn at fairs. Although the natural course of commerce is sufficient to establish markets, as a result of the unfortunate principle which in nearly all governments has infected the administration of commerce — I mean, the mania of directing all, regulating all, and of never relying on the self-interest of man — it has happened, in order to establish markets, that the police1 has been made to interfere; that the number of markets has been limited on the pretext of preventing them from becoming harmful to each other; that the sale of certain goods has been prohibited except at certain appointed places, either for the convenience of the clerks charged with receiving the duty with which they are burdened, or because the goods were required to be subjected to the formalities of testing and marking, while offices cannot be established everywhere.
The opportunity cannot be grasped too often to attack this system so fatal to industry; it can be found more than once in the Encyclopédie. The most celebrated fairs in France are those of Lyons, Bordeaux, Beaucaire, etc.; in Germany, those of Leipzig, Frankfurt, etc. My objective here is neither to list them nor to give a detailed exposition of the privileges granted by various sovereigns either to fairs in general or to any one fair in particular. I shall limit myself to some reflection against the common enough illusion which makes some people cite the importance and the extent of the trade at certain fairs as a proof of the greatness of the commerce of a state.
Undoubtedly, a fair must enrich the place where it is held and bring about the importance of a particular town. And when the whole of Europe was groaning under the manifold shackles of feudal government — when each village was, as it were, an independent and sovereign state, when the lords enclosed in their castles envisaged commerce only as an opportunity of increasing their revenue by subjecting all those who were forced of necessity to cross their territory to a tax or to an exorbitant toll — there is no doubt that those who were the first to be sufficiently enlightened to feel that, in slightly relaxing the severity of their duties, they would be more than compensated by the increase of commerce and consumption soon observed the enrichment, the growth, and the improvement of their places of residence.
It is certain that when kings and emperors had sufficiently increased their authority to remove the taxes levied by their vassals from the merchandise destined for the fairs of certain towns which they wished to favor, these towns necessarily became the centers of an exceedingly large commerce and saw the increase of their power as well as of their wealth. But since all these small sovereign states have been united into a single state, under a single prince, is it not strange that, if negligence, force of habit, the difficulty of redressing abuses even if desired, and the difficulty of desiring it, if these things have combined to keep the constraints in existence — namely these local duties and privileges which were established when each province and each village owed allegiance to a different sovereign — is it not strange, I repeat, that this haphazard result has not only been praised but even imitated as if it were the act of rational policy?
Is it not strange that with very good intentions, and with a view to making trade flourishing, new fairs have again been established, the privileges and exemptions of certain towns have yet again been increased, that certain branches of commerce have even been prevented from settling in the midst of the poor provinces for fear of hurting some other towns which for a long time have been enriched by these same branches of commerce? And what does it matter whether Peter or Jack, Maine or Brittany, manufacture this or that commodity, provided that the state is enriched and Frenchmen are earning their living? What does it matter whether a piece of cloth is sold at Beaucaire or in its place of manufacture, provided that the laborer receives the value of his work?
An enormous mass of trade, gathered together in one place and lumped closely together, will attract the attention of shallow politicians in a much more obvious manner. Water artificially brought together in lakes and canals amuses the traveler as a display of frivolous luxury, but the water which the rain uniformly diffuses over the fields, and which is only guided by the incline of the terrain and distributed through all the valleys, forming pools there, carries wealth and fecundity everywhere. What does it signify that a great deal of trading takes place in a certain spot on certain occasions, if this momentary trade is large only through the same causes which obstruct trade and which tend to decrease it at all other times and over the whole extent of the state?
"Is it necessary," said the civic magistrate to whom we owe the translation of Child (M. de Gournay) and to whom France will one day perhaps owe the destruction of the obstacles which have been placed in the way of commerce in the desire to promote it — "is it necessary to fast all year in order to live sumptuously on certain days? In Holland there are no fairs at all, but the whole extent of the state and the whole year are, as it were, a continuous fair, because commerce in that country is always and everywhere equally flourishing."
It is said,
The State cannot do without the revenue; in order to provide for its needs it must burden commodities with various taxes. However, it is no less necessary to facilitate the sale of our products, above all abroad, which cannot be done without lowering their prices as much as possible. Now these two objectives are reconciled by appointing places and times of immunity from duty, where the low price of the commodity attracts the foreigner and causes an extraordinary consumption, while the everyday consumption of necessaries sufficiently supplies the public revenue. The very desire to profit from these occasions of grace gives sellers and buyers an eagerness which the solemnity of these great fairs enhances even more by a type of enticement, from which an increase in the whole of commerce results.
Such are the pretexts which are alleged to uphold the usefulness of the great fairs. But it is not difficult to be convinced that it is possible, by general agreement, and while favoring equally all members of the state, to reconcile much more advantageously the two objectives which the government may have in view. Indeed, since the prince agrees to lose part of his duties and consents to sacrifice them in the interest of commerce, nothing prevents him, in making the duties uniform, from diminishing the total of what he agrees to forego. The objective of exempting the sales abroad from duty while letting them survive only on domestic consumption would be even more easily carried out by exempting from duty all the goods which leave the country, for, after all, it cannot be denied that our fairs supply a large part of our domestic consumption.
Under this arrangement, the extraordinary consumption which occurs at the time of fairs would greatly diminish. But it stands to reason that the reduction of the duties in ordinary times would make the general consumption a great deal more abundant. With this difference — that in the case of a uniform but moderate duty — commerce would gain all that the prince is willing to sacrifice to it; whereas in the case of a general and heavier duty, with local and temporary exemptions, the king may sacrifice much, and commerce gain almost nothing. Or, what is the same thing, the commodities and merchandise can be lowered in price to a much lesser extent than the duties are lowered, and this because it is necessary to subtract from the advantages which this decrease yields, the costs of transportation of the produce and merchandise to the place designated for the fair, the change of abode, the rents of the marketplace increased yet again through the monopoly of the proprietors, and finally the risk of not selling in a rather short time, and of having made a long journey to no avail.
Now, it is always necessary that the merchandise pay for all these expenses and these risks. It is far from true, therefore, that the sacrifice of duties by the prince is as useful to commerce in the form of temporary and local exemptions as it would be in the form of a slight reduction over the whole of the duties. It is far from true, therefore, that the extraordinary consumption increases by special exemptions as much as the daily consumption is diminished through customary overtaxing. Add to this that there are no special exemptions which do not give rise to frauds in order to profit by them, to new constraints, to increases in the number of clerks and inspectors to prevent these frauds, and to the trouble of punishing them. This is another loss of men and money to the state.
Let us conclude that the great fairs are never as useful as the constraints which they imply are harmful; and that, far from being the proof of the flourishing condition of commerce, they can only exist, on the contrary, in states where commerce is restricted, burdened with duties, and, consequently, indifferent.
- 1. "Police" is used here in the sense of a branch of civil government.