Entrepreneurs establish markets in centrally located villages which provide the necessary conditions under which prices are established between supply and demand. The size of the market town depends on the size of the economy it serves.
THERE ARE VILLAGES WHERE markets have been established by the interest of some property owner or royal resident. These markets, held once or twice a week, encourage several little entrepreneurs3 and merchants to establish themselves there. In the market, they buy the products brought from the surrounding villages in order to transport them to the large towns for sale. In the large towns, they exchange them for iron, salt, sugar and other merchandise, which they sell on market days to the villagers. Many small artisans, like locksmiths, cabinetmakers and others, also settle down in these places to serve the villagers, and, as a result, these villages become market towns. A market town being located in the center of the villages whose people come to the market, it is natural and easier for the villagers to bring their products for sale on market days and to buy the articles they need, than it would be for the merchants and entrepreneurs to transport the merchandise to the villages and exchange them for the villagers’ products.
1. For the merchants to go around the villages would unnecessarily increase the cost of transportation.
2. The merchants would perhaps be obliged to go to several villages before finding the quality and quantity of products that they wish to buy.
3. The villagers would generally be in their fields when the merchants arrived and, not knowing what products the merchants desired, they would have nothing prepared and ready for sale.
4. It would be almost impossible to fix the price of the products and the merchandise in the villages, between the merchants and the villagers. In one village, the merchant would refuse the price asked for the products, hoping to find it cheaper in another village, and the villager would refuse the price offered for his merchandise in the hope that another merchant would come along and take it on better terms.
All these difficulties are avoided when the villagers come to town on market days to sell their products and buy the things they need. Prices are fixed by the proportion between the products displayed for sale and the money offered for it; this takes place in the same spot, under the eyes of all the villagers of different villages and of the merchants or entrepreneurs of the town. When the price has been settled between a few, the others follow without difficulty and so the market price of the day is determined. The peasant then goes back to his village and resumes his work.
The size of the market town is naturally proportioned4 to the number of farmers and laborers needed to cultivate the lands dependent on it, and to the number of artisans and small merchants that the villages bordering on the market town employ with their assistants and horses. Finally, it also depends on the number of persons supported by the property owners who live in the town.
When the villages associated with a market town (i.e., those who ordinarily sell their products in a particular market town) are sizeable and have a large output, the market town will become considerable and large in proportion. However, when the neighboring villages have little production, the market town also is poor and insignificant.