We have shown that the prices of both consumers' goods and factors of production tend to approach their marginal costs of production. This conclusion is subject to two important caveats:

The cost/price relationship arises, not because costs determine prices, but because marginal costs depend on the quantities of allocated factors, which in turn depend on the prices investors anticipate receiving in the market. As observed previously (pp. 4.4:38-9), goods such as Crusoe's tree house are not valuable because they are costly, but rather are costly because Crusoe expected them to be valuable.
Our analysis so far presumes a simplified market from which uncertainty and risk have been eliminated.

In the relatively static world of 1800, uncertainty was perhaps a lesser factor than it is today. Hence classical economic models, which assumed value to be determined by cost, might have offered a rough approximation to reality (at least, if interest costs were taken into account). Even at that time, however, such models were deficient because they could not account for the ability of innovative minds to discover methods of attaining higher values at lower costs.

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