Natural and market price
Molinari accepts Smith’s distinction between the natural and market price for the products as well as for the productive services. The market price is determined by supply and demand.
While the quantity supplied is a datum inherited from the past, demand is a decreasing function of the price: (1) fewer agents demand a good when its price rises and (2) the utility of a good and the price an individual is prepared to pay for it diminish as the consumed quantity rises (Molinari 1855a, I: 103). Molinari insists that a change in the supply entails a proportionally greater change in price: if supply rises, proceeds diminish. He justifies his view with empirical and theoretical arguments. When the quantity of a thing increases, it becomes both less rare and less useful.The natural price of a good is equal to the cost of production - the remuneration of capital and labour directly or indirectly necessary to production, rent being excluded from costs - plus a proportional part of the net product. The same applies for the productive services. “Workers must be seen as machines... which require... expenses for their maintenance and renewal, in order to work in a regular and continuous way. These expenses... form the minimum of subsistence of the worker” (Molinari 1855a, I: 194, original emphasis). The minimum price of the productive service of capital entails three elements: its depreciation, a risk premium and a remuneration for the immobilization of capital, that is, the interest on the invested capital. Changes in the quantity of the factors of production depend on their remunerations. In equilibrium each of them must receive a proportional fraction of the net product. Adding it to the cost of production gives their natural price.
Gravitation always brings back the market price to the level of the natural price (Molinari 1851: 117, 1891: 313-15), with a general and permanent tendency towards an equilibrium between production and demand at the necessary price, that is, the price which allows the producer to continuously supply the market.