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CHAPTER 10
General Equilibrium and
Welfare
A. Summary
This chapter provides a very elementary introduction to general equilibrium
theory. It begins by showing why taking a general equilibrium approach may
be necessary to address some important economic questions and then pro-
ceeds to build a simply model of two markets. That model (drawn primarily
from the graphical approach to international trade theory) generalizes “sup-
ply” by using the production possibility frontier and “demand” by using a
typical person’s indifference curve. An advantage of this approach is to
stress that the economic “problem” is how to make the best (utility-
maximizing) use of scarce resources.
The middle portion of the chapter is devoted to showing the “first theo-
rem of welfare economics” (that perfectly competitive prices, under certain
circumstances, yield economic efficiency). Again this is done using the pro-
duction possibility frontier and indifference curves to show how the opera-
tions of markets cause the economy to hone in on the efficient point.
Reasons why the first theorem may fail are discussed in the third section
of the chapter. Subjects given very brief treatment include: (1) Imperfect
competition; (2) Externalities; (3) Public goods; and (4) Imperfect infor-
mation. Each of these topics is covered in considerable detail in later chap-
ters. The discussion here also includes a brief discussion of equity and of
how goals of equity and efficiency may sometime (but by no means always)
be in conflict. The Edgeworth Box Diagram is the primary tool used for this
purpose.
The chapter concludes with a brief discussion of how money enters into
general equilibrium models. The main goals here are: (1) to introduce the
“classical dichotomy” between monetary and real sectors; and (2) to illustrate
the notion of fiat money and why this innovation has important economic
implications.

B. Lecture and Discussion Suggestions


Repeating the development of the general equilibrium model in this chapter
in lecture would probably be quite dull. Hence, it may better to assume that
students have understood the development in the text and just use the model
to illustrate some results. One approach that seems to work well is to use
separate supply and demand curves for goods X and Y together with the gen-
eral equilibrium model to show how both approaches to equilibrium are get-
ting at the same sort of thing. Reasons for the superiority of general
equilibrium should become readily apparent in this comparison. Having an
operational, simple GE model can also provide students with a lot of insights
about how these models work in practice.

1
2 Chapter 10: General Equilibrium and Welfare

Discussions of general equilibrium might focus on “what more did you


learn by using these models?” For example, students may find that tax inci-
dence questions are much more complicated than they at first thought. Espe-
cially interesting are discussions of the role of capital taxation and how
theoretical insights might shed light on real world issues about, say, the inci-
dence of the corporate tax. Use of general equilibrium models to look at
trade issues also provides a number of good discussion questions. For exam-
ple, students may have rather simple views about how the NAFTA may have
affected the welfare of low income workers and it may be useful to show
them how complex answering this question actually is.

C. Glossary Entries in the Chapter


• Contract Curve
• Economically Efficient Allocation of Resources
• Equity
• Externality
• First Theorem of Welfare Economics
• General Equilibrium Model
• Imperfect Competition
• Initial Endowments
• Pareto Efficient Allocation
• Partial Equilibrium Model
• Public Goods

SOLUTIONS TO CHAPTER 10 PROBLEMS


10.1 a. The production possibility frontier for M and C is shown as:

b. If people want M = ½ C and technology requires C + 2M = 600, then C +


2(1/2C) = 600.
2C = 600 or C = 300. M = 150.
c. For efficiency RPT=MRS=1/2, so
PC 1
RPT = MRS = =
PM 2
Chapter 10: General Equilibrium and Welfare 3

10.2 a. See Graph

b. See Graph
c. The production possibility frontier is the set of food and cloth outputs that sat-
isfy both constraints (see graph).
d. The frontier is concave because the two goods use differing factor proportions.
The slope changes as a different input becomes the binding constraint.
e. The constraints intersect at F = 50. For F < 50 the slope of the frontier is -1.
P
Hence, in this range, F = 1 . For 50 < F < 75 the slope of the frontier is -2
PC
P
(because land is the binding constraint). In this range therefore F = 2 .
PC

PF 5
f. With these preferences, = .
PC 4
g. Any price ratio between 1.0 and 2.0 will cause production to occur at the kink
in the frontier.
h. This capital constraint lies always outside the previous production possibility
frontier. It will not therefore affect any of the calculations earlier in this prob-
lem.

10.3 a. The frontier is a quarter ellipse:


4 Chapter 10: General Equilibrium and Welfare

2 2
b. If Y = 2X, X + 2(2X) = 900.
2
9X = 900; X = 10, Y = 20. This point is shown on the frontier in part a.
c. If X = 9 on the production possibility frontier,
Y = 819 / 2 = 20.24

If X = 11, Y = 779 / 2 = 19.75


Hence, RPT = 0.49/2 = 0.245 . This is the ratio of prices that will cause produc-
tion to occur at X = 10, Y = 20.
d. See graph in part a.
2 2
10.4 Since LF + LC = 8 . the production possibility frontier is F + C = 8

Given H = 16, U = 4F¼ C¼ and we know that optimality will require C = F since the
goods enter both the utility function and the production possibility frontier symmetri-
2
cally. Since C = F, have 2C = 8 or C = F = 2. Utility = 4 2.

10.5 a. Given the production conditions, the production possibility frontier will be a
straight line with slope - 3/2. Hence the price ratio in this economy must be
PX 3 X Y
= . The equation for the frontier is + = 20 .
PY 2 2 3

3 5 8
b. Using the hint, X S = XJ = XT =
PX PX PX

12
Similarly YT = . Substituting these into the equation for the frontier and us-
PY
2P 4 4 10 1 1
ing the fact that PY = X yields + = = 20 PX = ; PY = . Notice
3 Px PY PX 2 3
how setting the wage here also sets the absolute price level.
Chapter 10: General Equilibrium and Welfare 5

c. With these prices, total demand for X is 16, total demand for Y is 36. Hence 12
hours of labor must be devoted to Y production, 8 hours to X.

10.6 a. For region A the production possibility frontier is X A2 + YA2 = 100 . For region
B it is X B2 + YB2 = 25 . Hence the frontiers are concentric circles with radius 10
for A and 5 for B.
b. Production in both regions must have the same slope of the production possi-
bility frontier. In this case that means that the ratio X/Y must be the same in
both regions – production must take place along a ray through the origin.
c. The geometry of this situation suggests that for efficiency
X A = 2 X B YA = 2YB . Hence X T = 3 X B YT = 3YB and the frontier is given
by X T2 + YT2 = 9( X B2 + YB2 ) = 225 . If X T = 12 YT = 9 .

10.7 a. U1 = 10 U 2 = 5 .
F2
b. F1 = which implies F1 = 40 F2 = 160 .
4
c. The allocation in part a achieves this result --
F1 = F2 = 100  U1 = 10 U 2 = 5 .
d. A natural suggestion would be to maximize the sum of utilities. This would
1 1
require that marginal utilities be equal. Because MU1 = MU 2 =
2 F1 4 F2
equality of marginal utilities requires F1 = 4F2 F1 = 160; F2 = 40 -- a rather
unequal distribution. Still the sum of utilities is 15.8 – the largest possible.
With an equal allocation the sum of utilities, for example, is 15.0.

10.8 a. The total value of transactions is 20w. So, money supply = 60 = money de-
1 12 1 12
mand = 5w. So w = 12. PX =  = 0.6 PY =  = 0.4 .
2 10 3 10
b. If the money supply increases to 90, all wages and prices increase by 50 per-
cent: w = 18, PX = 0.9, PY = 0.6 . Relative prices and the overall allocation of
resources remain the same. Yes, this economy exhibits the classical dichoto-
my.
6 Chapter 10: General Equilibrium and Welfare

10.9 a-c. See Graph

d. As before, efficient points are the tangencies of the isoquants.


e. The production possibility frontier shows the maximum amount of Y that can
be produced for any fixed amount of X. Any point off the contract curve has
the property that Y can be increased even if X is held constant.
f.
(i) The production possibility frontier is a single point where X gets all labor
input, Y gets all capital input.
(ii) The frontier would be a straight line
(iii) Again, the frontier would be a straight line. Only with differing factor
intensities would the frontier have a concave shape.
(iv) The frontier would be convex.
Chapter 10: General Equilibrium and Welfare 7

10.10 a. The preferences of Smith and Jones are shown in the figure. The only ex-
change ratio that can prevail is set by Jones’ preferences – 1C must trade for
0.75H. On the other hand, all efficient allocations must lie along the main di-
agonal of the box where, because of Smith’s preferences, C = 2H.

b. This is an equilibrium – the allocation lies on the contract curve and any trade
would make at least one person worse off.
c. Now the initial position is off the contract curve. Smith has 20“extra” H. If
Jones gets all the gains from trade because Smith gives these to him/her, utility
will increase from U J = 4(40) + 3(120) = 520 to U J = 4(60) + 3(120) = 600 . If
Smith gets all the gains from trade, the new equilibrium requires
4 H + 3C = 520 and C = 2 H . Hence, the equilibrium requires Jones to get H =
52, C = 104. Smith gets H = 48, C = 96 and is much better off than at the ini-
tial allocation. Smith may be able to enforce this equilibrium or, if he/she is
especially strong may in fact take everything.
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What was Kenneth Fortescue doing that day? Was he
still living in that poor dismal neighbourhood? Was he still
denying himself in countless different ways for their sakes?
Or had he discovered the missing word in the letter? Had he
found the father who had cast him off as a child? Had he
been owned and reinstated in his rightful position? Perhaps
he had; perhaps now he was taking his place amongst the
great ones of the earth, and they would hear of him no
more.

But no; in that case he would write to her mother, she


was sure of that. If he was rich and was able to do so, that
money would be repaid. She knew that he would never
forget his promise, and that the revelation made to him in
that letter would in no way alter his former determination.
What if her mother had already heard from him? What if
she were keeping the secret as a pleasant surprise for her
on her return? So her busy thoughts wandered on, as the
busy engine, puffing hard at times as they got into the hilly
country of the North, bore her onwards towards
Cumberland.

Then, as she drew nearer home, her thoughts were all


centred on Keswick station. Who would be there to meet
her? Which of the home faces would she see first? How
eagerly she gazed out of the window long before the station
came in sight! How anxiously she scanned the platform as
the train began to stop!

Yes, there they were, her mother and Phyllis and Louis
Verner. It seemed too good to be true! What a drive home
that was, and how much they had to say to each other!
How beautiful it all looked! She had never thought that the
mountains were so high, or the Lake so lovely, or
Borrowdale so fine, or Castle Crag so magnificent. She had
loved them all from her childhood; but she thought she had
never fully appreciated them until that day.

And then they reached home, her dear cosy home, so


free from smoke and dirt and everything ugly or depressing.
Little Carl was at the gate. How he had grown since she saw
him last! And Leila was at the door, looking much better and
stronger, and old Dorcas came running out of the kitchen to
welcome her. And now she was in the cheerful dining-room,
how lovely it all was! The table seemed laden with good
things. It was all so tasteful and pretty, and it was home,
and that was best of all.

The days flew very quickly after that. There were so


many friends to be seen, there was so much to be said and
to be done, that the first ten days seemed to fly on the
wings of the wind. Old Mary and her other old women were
overjoyed to see her, and sometimes she felt as if she had
never really been away. Daisy Bank appeared to her like a
dream from which she had awakened.

She went alone one day up the steep pass towards


Honister Crag, and thought of the photo which she had seen
over the mantlepiece at Birmingham. She wondered where
he had bought it, and why he had chosen it. Was it in
remembrance of the walk they had had there together? Oh
no, of course it could not have been that. It was a beautiful
place, and any one who had seen it would be glad to have a
picture of it.

Marjorie was charmed to find how well Phyllis had taken


her place in her absence. She had shaken off to a great
extent the natural indolence of her nature, and had risen to
the occasion in a way which Marjorie would hardly have
thought possible. Her mother had been cared for and Leila
had been waited on, almost as well as Marjorie had done it
before she left home, and she felt that she would go back to
Daisy Bank with a happy heart, knowing that all was going
on well in the home she had left.

Louis Verner was, of course, a constant visitor at


Fernbank, and was just the same easy, good-natured fellow
as he had ever been. He was now in his third year at
Oxford, and was still trying to discover his vocation. His
father, however, declared that if Louis came to no decision
during that vacation, he should settle the matter for him. It
was finally decided that Louis should try to get into the
Consular Service, and should sit for an examination to be
held the following year. Whether he would be able to
succeed in this was, Marjorie thought, extremely doubtful,
for Louis had no love for work, and went through life doing
as little of it as he possibly could. His motto seemed to be
that Irish one which advises you to 'Take it easy, and if you
can't take it easy, take it as easy as you can;' and it needs
one of life's hardest and sternest lessons, to make men like
Louis Verner realize its importance, and shake themselves
free from their natural inclination to slackness and inertion.

Nevertheless, Louis was a most amusing companion and


a good-hearted affectionate fellow, too affectionate
sometimes, Marjorie thought; but she made fun of all his
pretty speeches, and treated him, as she always had done,
with sisterly candour. He did not mind what she said to him,
although she spoke very plainly to him at times, and they
were ever the best of friends.

But when Marjorie had been at home about a fortnight,


something happened which brought a great cloud over her
happiness.

"A letter for you, Marjorie," said Phyllis, who had gone
to meet the postman at the gate, "and it has such a black
border."

Marjorie took it hastily from her; she knew the writing


well; it was Patty Holtby's. Such terrible news the letter
contained, poor Patty had been almost broken-hearted as
she wrote it. Her father had gone to the works the day
before, apparently quite well, but a short time after he
arrived there, he had been seen to stagger and fall, and
when they went to him, they found that he was dead. It had
been an awful shock to them all, and Patty said that she
could hardly yet believe that it was true.

Marjorie felt as if all the brightness of her holiday had


passed away. She realized now how fond she had become of
the people with whom she had lived for the last year, and
she longed to be with them in their time of trouble. She
wrote at once, offering to return immediately if it would be
the least comfort to them; she would only be too glad to
come to them.

Marjorie waited anxiously for the answer. It came in


poor Mrs. Holtby's writing. It would be an unspeakable help
to have her there, she said, but their plans were so
undecided now that she thought it would be better for her
to wait for a few days. Her brother had come for the
funeral, and he was helping her to arrange matters, and she
would write again shortly.

When Mrs. Holtby's next letter came, it was a very sad


one. She was grieved to have to say that it would be
impossible for Marjorie to return to them. They were leaving
Daisy Bank, and her brother, who was now a widower, had
invited them to come and live with him. Of course now she
would have to be very careful of expense, and could no
longer afford to have a mother's help. She added that she
could never thank Miss Douglas enough for all she had done
for them; she would miss her more than words could say;
but she felt sure that she would rejoice to know that Patty
had profited so much by the good training she had received
from her, that she was becoming the greatest comfort and
help to them all. She ended by saying that she could hardly
bear to think that Marjorie was not coming back to them; it
was one of the most painful consequences of her heavy
bereavement.

So that chapter of Marjorie's life was ended. Daisy Bank


was, as far as she was concerned, nothing but a memory of
the past. Never more would she climb the pit mounds, or
watch old Enoch tending his roses, or walk amongst the
furnace débris. A year ago she would not have believed that
she would have felt the parting so much as she did, nor that
she would have so many pleasant remembrances of their
Black Country.

Now she must begin life again somewhere, and where


would it be? She dreaded the thought of going once more
amongst strangers, and even Colwyn House had become a
kind of second home to her. Well, she must not be faint-
hearted; she had been guided so far, and she knew that her
Guide would not forsake her.

But January passed away, and February came, and no


opening had been found for her. Marjorie was beginning to
feel anxious on the subject of the family finance, when one
day, returning from a walk, she found Colonel Verner's
carriage at the door.

Louis had long since returned to Oxford, and Mrs.


Verner was an invalid and not able to call, so she was
somewhat surprised to see the carriage, and wondered
whom she should see when she went into the house.
She heard voices in their little drawing-room, and her
mother came to the door and culled her in. Marjorie found
Colonel Verner, and with him a lady whom she had never
seen before. The Colonel introduced Marjorie, and she found
that the lady's name was Mrs. St. Hellier, the Honourable
Mrs. St. Hellier, she discovered afterwards. She was Colonel
Verner's cousin, and she was spending a few weeks with
him at Grange.

Mrs. St. Hellier seemed an exceedingly pleasant woman,


and Marjorie felt much drawn to her. After a little
conversation on general subjects, she told them that a
friend of hers was most anxious to find some one who
would be willing to act as companion to her daughter. This
young lady had met with an accident in the hunting-field,
and was confined to her room, or rather to her rooms, for
she was wheeled on an invalid couch into an adjoining
apartment where she lay during the day, unable to move or
to raise herself from her recumbent position.

The poor girl of course felt the confinement; the


monotony of such an existence was a sad change for her,
after the active life which she had been accustomed to lead,
and her mother was therefore anxious to find some one
who would be willing to come to them as her daughter's
companion. She would have no work of any kind to do; the
lady's maid would undertake, as usual, all that was
necessary in dressing and otherwise waiting upon her
daughter. She simply wanted one who would be a cheerful
companion, and who would be ready to read to her, to
amuse her, and to turn her thoughts as much as possible
from her helpless condition.

Then Mrs. St. Hellier went on to say that she had heard
from Colonel Verner that Miss Douglas was looking for
something of the kind, and she wanted to know whether
she would like her to name her to Lady Earlswood. She
thought she was at liberty to tell her that the remuneration
would be a handsome one; fifty pounds a year was the
amount mentioned by Lady Earlswood when she spoke to
her on the subject.

Marjorie felt that this was indeed an answer to the


prayers she had offered, and she gratefully accepted Mrs.
St. Hellier's proposal that she should write to her friend
without further delay.

In the course of the following week, Marjorie received a


kind letter from Lady Earlswood, and in a very short time,
all the preliminary arrangements were made, and she once
more took leave of her home, and set off for Grantley
Castle.

What a wonderful contrast she found on her arrival to


her reception at Daisy Bank! A footman with a cockade on
his hat came up to her on the platform, and told her that he
would see after her luggage, and that the carriage was
outside waiting for her. During the five miles' drive to the
Castle, Marjorie leant back amongst the cushions of the
luxuriously comfortable brougham, and wondered very
much what was in store for her in the new home to which
she was going.

When the carriage stopped, she was taken through the


marble hall, and at the top of the long flight of steps, she
found the housekeeper awaiting her.

"Lady Earlswood is out this afternoon, Miss Douglas,"


she said, "so she asked me to receive you. May I take you
to your room? You will find a good fire, I think, and I will
send you some tea in a few minutes. Lady Violet has had
tea, so perhaps you would like to have it in your own
room."

Marjorie thanked her, and followed her up the wide


staircase into the bedroom which she was henceforth to call
her own. It was not a large room, but it was most
beautifully furnished. A pretty French bedstead, with dainty
rosebud-covered hangings, a comfortable sofa covered with
the same delicate chintz, an easy-chair by the bright fire, a
writing-table, with inkstand, blotter and pens, at which she
would be able to write her home letters—all these made
Marjorie feel that she had come to a home where comfort
and ease abounded.

Then she went to the window. It was not yet dark, and
she could see hills and woods in every direction, whilst close
to the house were three long terraces, one above another,
from the various heights of which glorious views of the
surrounding country could be obtained. What a strange
contrast to the views from her bedroom window in Colwyn
House!

Then there came a knock at the door, and a maid


brought in a tray, on which was a small silver tea-pot and
cream-jug, a china cup and saucer, and a plate of delicately
cut bread and butter. It seemed strange to Marjorie to be
thus waited upon, for she had been waiting upon others all
her life, and as she sat in the armchair by the fire, pouring
out the tea which had been placed on a small table beside
her, she felt that, so far as she could see at present, the
lines had indeed fallen for her in pleasant places.
CHAPTER XX
THE PHOTO OF A FRIEND

WHEN Marjorie first saw Lady Violet, she thought that


hers was the most beautiful face that she had ever seen;
yet she was very pale, and had a weary look in her eyes
which told of pain and weakness. She held out her hand as
Marjorie entered.

"Miss Douglas, I am glad to see you."

Marjorie took the low chair by Lady Violet's side, and


told her that she hoped she would tell her exactly what she
would like her to do, and that she would let her help her in
any way that she could.

"Oh! I don't want you to do anything," she said, "only to


amuse me. I'm so sick of seeing nobody but Collins; my
mother and sister come up as often as they can, but we
have so many visitors, and they have so many calls to
make, and there is so much going on of one kind and
another, that they are obliged to leave me hours alone
sometimes. This is my worst time; I get so tired in the
evening, and awfully cramped with lying so long in one
position. You mustn't mind if I am cross sometimes; I often
am."

Marjorie laughed, and told her she did not think that
was possible.

"Oh, but it is. I worry poor Collins to death. Now I am


tired and can't talk; will you talk to me?"
Marjorie found it very difficult to know what to say. It is
one thing to join in a conversation, and quite another thing
to talk to a silent person without having anything particular
to say. She could not imagine how to begin, and then a
bright thought struck her.

"Shall I tell you about my home, Lady Violet?"

"Yes, do; it will be just like a story."

So Marjorie began by describing Borrowdale and their


pretty house on the hill; she told her about her mother,
Leila, Phyllis, and little Carl; she spoke of the garden with
its spring flowers, of the walk through the woods to
Watendlath, at the top of the hill, of the quiet village
church, of her old women and the quaint cottages in which
they lived, of her life at home and of how she spent her
days;—all this she told her, in her own bright, pleasant way,
until the poor girl beside her was soothed and interested,
and forgot her pain and weariness whilst she listened.

"Thank you," she said, when Marjorie stopped. "I can


see it all as if I had been there. May I have another chapter
to-morrow evening, and will you call Collins now to help me
into bed? And do you mind telling me your Christian
name?? I should like to call you by it if I may; Miss Douglas
sounds so formal."

"Please do; my name is Marjorie. I shall feel I am at


home, Lady Violet, if I hear you say it."

As the weeks went on, Marjorie soon became


accustomed to her new life in the Castle. Beyond going for a
walk daily in the lovely park and gardens, she spent all her
time with Lady Violet. They had meals together in the pretty
sitting-room, and Marjorie saw very little of the other
members of the family. When they came to see Lady Violet,
she generally went into her bedroom to write her letters, or
strolled along one of the grassy terraces, or gathered
primroses and moss in the copse wood to adorn Lady
Violet's room.

By degrees, very slow degrees at first, Lady Violet let


her companion know a little of what her thoughts and
feelings were. She had been most reserved at first, and at
one time Marjorie had felt as if she would never really know
her. But one evening, when Marjorie had been at Grantley
Castle about a month, the ice was broken for the first time.
Lady Violet had been very restless and impatient all day;
nothing was right that was done for her; she found fault
with every one, and Marjorie herself experienced some
difficulty in keeping bright and cheerful when all her efforts
to cheer the patient seemed such an utter failure.

But after dinner, when Marjorie was sitting beside her


with her work in her hand, Lady Violet suddenly said—

"Marjorie, I've been horrid all day; why don't you tell
me so?"

Marjorie laughed. "Do you want a scolding?" she said.

"I don't mind one from you; but I do think it's a shame,
a horrible shame."

"What is a shame?" asked Marjorie.

"My being laid on my back like this. Do you know,


Marjorie, I was to have been married in May?"

"Oh, I'm so sorry," said Marjorie. "I had not heard about
it."
"Oh, didn't you know? We were going to London to get
my trousseau the very week that this accident happened.
We were making all the plans about the wedding, and
actually had patterns in the house for choosing the
bridesmaids' dresses; and now here I am, lying helpless on
my back, and my wedding put off indefinitely. It is an awful
shame!"

"Don't say that, Lady Violet," said Marjorie, "because


God has sent the trouble; hasn't He?"

"Then I think God is very cruel! What pleasure can it be


to Him to punish me like this?"

"He doesn't like to see you suffer, Lady Violet. Oh, don't
ever think that! It is because He loves you He has let this
trouble come."

"I don't see much love in it! I suppose you mean that
God thinks I need punishing; but I've never done anything
to deserve it, and I do think it's a horrid shame!"

"Oh, don't say that!" said Marjorie. "Dear Lady Violet,


don't say that!"

"But I must say it," she answered impatiently, "because


I feel it, and it does me good to come out with it."

Marjorie did not speak for a few minutes, and Lady


Violet said—

"Talk to me, Marjorie, scold me, if you like, only don't


sit quiet like that. Tell me what you were thinking about."

"I was thinking about the eagle's nest, and that you
were like one of the eaglets."
"What do you mean by that?"

"You know how the eagle makes her nest on the ledge
of some high rock, building it of sticks and briars, and then
lining it with moss, and hay, and wool, and soft feathers out
of her own breast."

"Well," said Lady Violet, as Marjorie stopped, "go on."

"And then she lays her eggs, and the eaglets are
hatched, and they lie down in the soft nest, and are so cosy
that they never want to leave it. But, as they grow older,
the mother-bird wants them to learn to fly, that they may
be able to soar up with her towards the sun. So she hovers
over them and tries to persuade them to stretch their
wings; but the nest is far too cosy and snug for them to
want to leave it, and they nestle down again in the moss
and hay. But the mother knows all they will lose if they do
not learn to fly, so she rakes out the wool and feathers with
her strong beak, and makes the thorns and briars come to
the top. Then, when all the soft lining is gone, the young
birds shuffle about uncomfortably. The nest is not such a
nice place after all, and by degrees they creep to the edge
of it and sit there very miserably. And now the mother-bird
again tries to get them to fly, and they spread their small
wings, and she puts her great strong wing underneath
them, so that they may not fall, and soon they are soaring
with her into the glory above."

"Yes, go on," said Lady Violet.

"Do you remember that God says He is like that eagle?


And so He rakes up the comfortable home nest, and lets us
feel the prickles of pain and sorrow, not because He is cruel,
not because He wants to punish us, but because He wants
us to rise to something brighter and better, to the City of
Sunshine. Now, Lady Violet, I'm afraid I've been preaching
quite a sermon, and it is very good of you to listen; but
don't you think this illness is one of the sharp thorns in the
nest, to bring you to the edge, and make you care for
something better?"

"Perhaps. I don't know, I'm sure."

They were silent for some time after this, and then Lady
Violet said suddenly—

"It seems a pity now that I was ever engaged."

"Why?"

"Oh, it's such a nuisance for him, you see."

"Do you mean for the gentleman you are going to


marry?"

"Yes. You see, he wanted me to marry him a long time


ago, but I refused him; at least, I didn't actually refuse him,
but there were reasons why I couldn't marry him then, one
reason especially. But all that is over now, and I had just
accepted him, and all was nicely settled, when this
happened."

"But the doctor hopes you will be all right soon; doesn't
he?"

"Oh yes, in time. But it's an awful nuisance for him


having to wait; he wants to get settled. You see, he has
only just come into his property; it's a nice little place, and
he has a fair amount of money. It belonged to his mother's
father; but some day he will come into a much grander
estate, and be awfully rich. His brother owns it now, but he
is getting an old man, and has no children. It's really a very
good match for me, but it's a long time to wait, and I think
he's getting rather impatient, and I did so want to have
next season in town."

"Has he been to see you?"

"Oh yes, once or twice. Just before you came, he was


here; but he lives a long way off, and I don't really want
him to come too often—it's so tiring seeing people when
you're ill."

Marjorie rather wondered at this remark. Surely if Lady


Violet were very fond of her fiancé, she would not find his
company tiring, although she was ill. However, she made no
remark, but went on quietly with her work.

"Marjorie," said Lady Violet, presently, "you've never


seen my photographs. I have two large albums full. Would
you like to look at them?"

"Very much indeed. May I get them?"

"Yes, do. They're on the bottom shelf of that bookcase


in the corner. Switch on more light, and sit in that armchair;
you will see them better there."

Marjorie brought the albums, and sat down to look


through the hundreds of photos with which they were filled
—views of the park and the woods, of the church and the
village, groups of various friends who had stayed at the
Castle, photos of Lady Violet's horse and of the two St.
Bernard dogs, river scenes and lake scenes, photos taken at
all seasons of the year, some with the trees in full leaf,
others with bare and naked branches, some showing the
broad shadows of a hot summer's day, others taken in
snow, with every tree and shrub looking as if it were
growing in fairyland.
"They are lovely, Lady Violet," she said, as she laid
down the first volume, and took up the one lying on the
table.

SHE GAZED A LONG TIME AT THIS PICTURE.

"Oh! Those are foreign views. I don't know whether you


will care for them so much. They are in the Riviera chiefly.
We were there for a month about two years ago, and had
an awfully jolly time."

Marjorie was turning over the leaves of the album, and


had just been admiring a beautiful view of Monaco, when
she suddenly came to one which brought all the blood
rushing into her face. It was a photo of Lady Violet sitting
on a rock near the sea, and close by her side and looking
over the same book with her was Captain Fortescue.

Marjorie would have known him anywhere; but she had


never seen him look quite as he looked then. There was not
a vestige of care on his face; he was evidently enjoying life
to the full. She gazed a long time at this picture, and Lady
Violet, glancing round, noticed how she coloured when she
looked at it, and then how all the colour faded out of her
face.

"Oh! That is a very great friend of mine," she said. "He


helped me to take nearly all those Riviera photos. Evelyn
took several of us together, and they came out very well.
What is the matter, Marjorie?"

"Oh! Nothing; only it reminded me of some one I


know."

"Did it? Isn't it awfully funny how one sees likenesses


sometimes! Turn over; there are some more of him in that
book. Isn't he good-looking?"

Marjorie did not answer; her heart was beating too


quickly.

So he knew Lady Violet—yes, and admired her too; she


could see that by his face in several of the photos where
they were taken together. And what a handsome pair they
made! They were just suited to each other. And now he was
a lord; she had no doubt of it from that letter she had read.
Had he discovered his parentage? Had he, in those long
months since she had heard of him, found his father, and
claimed his fortune? Could it be that he was the one whom
Lady Violet was about to marry, the one who had admired
her long ago, but whom she had refused because of some
reason which stood in the way? Could that reason have
been the loss of his money, and his being compelled to
leave the army?

If so, Marjorie could quite understand that now this


difficulty was probably removed. If he had found his father,
if he had inherited a title, if he was heir to a large property,
then surely no objection to their engagement could be
urged.

Now, of course, she could see the reason of his long


silence. It was now the end of March, and she had never
seen him or heard of him since that October night when he
had brought her home from Birmingham. Why had she
expected to see him or to hear from him? How blind and
foolish she had been!

Lady Violet seemed impatient that she should close the


book, and Marjorie put it back in its place on the shelf. She
wanted to ask her if Captain Fortescue was the one to
whom she was engaged, but she felt that she could not
bring herself to do so. She was so strongly convinced in her
own mind that she was right in her conclusion, that she felt
as if she could not steady her voice sufficiently to frame the
question. Not for worlds would she have Lady Violet know
what she had felt when she saw that photograph. How silly
she had been! How foolish it was to have dwelt on what was
merely a passing feeling of gratitude for a little service
which she had rendered him! No one should know; no one
should ever guess what she had sometimes thought and
hoped. Least of all should Lady Violet know or guess.

So Marjorie talked to her on all manner of subjects, and


was apparently never in better spirits, until at last the long
evening wore away, and alone in her own room she could sit
by her fire, and gazing into its red blaze she could pull down
stone after stone of her fragile castle in the air, and then,
when it was all laid in ruins, could pray for contentment and
for peace. Surely she ought to be glad to hope that his
troubles were over. Surely she should rejoice, if the desire
of his heart had been granted unto him.

CHAPTER XXI
LORD KENMORE

THE spring ran its course, and the beautiful days of


early summer began, and Marjorie sometimes felt as if she
had lived at Grantley Castle all her life. It was a most restful
time for her after the hard work of the year before, and she
felt that she had much for which to be thankful. Lady Violet
was still obliged to lie still, although her health and spirits
were daily returning, and she was far less easily tired than
she had been when Marjorie first came.

The house was now full of company, and Lady


Earlswood, whose time was much occupied, was the more
gratified that Lady Violet was so charmed with her
companion, and that the arrangement she had made had
thus turned out so satisfactorily. She was always very
gracious to Marjorie, and Lady Maude thanked her several
times for cheering up "poor dear Vi," as she called her. Lady
Maude was full of life and spirits, and was certainly not cut
out for a sick room. Her energy knew no bounds; she
delighted in golf, motoring, and bicycling, and though she
was fond of her sister and very sorry for her, she was of too
restless a nature to stay long in the sick room, and was
therefore very glad to feel that Marjorie's presence there
enabled her to go to her various amusements with a clear
conscience.

"Vi likes Miss Douglas," Lady Maude would say to her


friends, "they get on wonderfully well together, and she
keeps her in a far better temper than I can do."

So Marjorie had very few difficulties to contend with in


her new position; even Collins the maid was glad that she
had come and was able to relieve her from constant
attendance on her young mistress, and from the fretful
fault-finding to which she had been obliged to submit before
Miss Douglas arrived.

Marjorie was very thankful for all this, and for the
letters from home, which were very cheering. Leila was
becoming quite strong again, and the money Marjorie was
earning, and which she had been able to send home at the
end of her first three months at Grantley Castle, had
enabled her mother to buy many much-needed things for
the household, and had considerably relieved the strain
consequent upon the loss of the insurance money.

Marjorie searched the home letters carefully for any


mention of Captain Fortescue, as she still called him to
herself, but there was no allusion whatever to him. They
had evidently heard nothing of him or from him.
Lady Violet did not speak to her again about her fiancé.
She knew that she often had letters from him, and she
wrote to him in pencil from her couch, but this was in the
afternoon after luncheon, when Marjorie had gone out for
her daily walk and when Collins was in attendance, and the
letter had been carried down to the post-bag before her
return.

But one wet day in the beginning of June, when Collins


was lying down in her room, with a swollen face, Lady Violet
said—

"Marjorie, will you get me my writing-case? I want to


write to Lord Kenmore."

That was his name, then—Lord Kenmore. She would


have thought that the missing word in the letter was a
longer word than that; but she remembered that old Mr.
Fortescue's writing was most uncertain and irregular, and he
would probably spread out this name more than the rest of
his writing, in order to make it clearer and more distinct.

Lord Kenmore. Could she ever think of him by that


name? It all seemed so strange, so difficult to understand!
But why was she letting these thoughts come into her
mind? She had resolved never to think of him in that way
again, never to recall that walk from Deepfields to Daisy
Bank, or the grasp of his hand when he had said good-bye
to her. She had been a foolish girl in the past; she would be
a wise one in the future.

Lady Violet Kenmore. What a pretty name it would be!


"Thank you for all you have done for me to-day." Of course
he was thinking of Lady Violet when he said those words.
He knew that she had not been able to accept him because
of the loss of his money; but all that time, he had loved her,
even though it had appeared hopeless. But now that the
letter was found, which might enable him to prove his noble
birth, and to find the clue which might lead him to recover
his rightful possessions, he would feel that Lady Violet
might still be his.

No wonder, then, that he had said so earnestly, "Thank


you for all you have done for me to-day." No wonder that he
had pressed her hand in gratitude, when she had been the
means of bringing him hope. She saw it all now, and she
marvelled at her former folly.

But all that was over now, and she took the letter from
Lady Violet, when it was finished—the letter to him,—and
carried it down to the bag.

"LORD KENMORE,
"Rockcliffe Castle."

That, then, was his address. She saw that, but she saw
no more. What right had she to look at the letter to see his
address? She would put it in the letter-box at once. It was
nothing to her where he lived.

It was about a week after this, that one morning, as


Marjorie was going out, Lady Earlswood asked her to go into
the village to take five shillings, which she had promised to
an old man, living in a cottage near the church, and who
had once been a gardener at the Castle. She called at the
cottage, had a chat with old Hill, and then went through the
lodge gates, and began to climb the long ascent to the
Castle.

The beech trees looked very lovely that morning in their


pale spring dress, the moss by the side of the road being
covered by the pale brown covering of the buds, which had
fallen off as the leaves opened. The colouring was perfect,
and Marjorie was thoroughly enjoying her walk.

But suddenly, as she turned a corner of the long


avenue, far ahead of her, about a hundred yards or more,
she saw something which took all the brightness out of her
face. She saw Captain Fortescue walking rapidly towards
the Castle. Yes, she was sure it was he. She could not see
his face of course, but he was the same height, he had the
same figure and hair, and he walked in the same erect way.
All the feelings which she had been repressing and keeping
down for so long rushed back into her heart.

It was hard work to walk steadily on towards the house.


She felt dizzy and faint for a few minutes, and turned off
the road and sat down upon the gnarled roots of a giant
beech tree. But she prayed for strength and courage, and
soon walked on again to the Castle. The road was empty
now; she could see the great pillars of the portico and the
closed door between them; he had evidently gone inside.

Once a wild hope darted across her mind that after all
she had jumped to a wrong conclusion. Perhaps Captain
Fortescue and Lord Kenmore were after all not the same;
and if so, could it be that he had found out where she was,
and had come to see whether she was happy at Grantley
Castle, just as once before he had come to Daisy Bank?

But this faint hope was dispelled as she went upstairs,


for Collins met her as she was going to her room, and said

"Miss Douglas, perhaps you had better not go to my


lady just now. Lord Kenmore has come to see her
unexpectedly. His motor broke down just outside the
village, and he had to walk the last part of the way."

Marjorie went on into her room, determined to be very


busy and to give herself no time to think. She hoped,
fervently hoped, that she would not see him. Perhaps he
would not be able to stay long, and he would probably go
downstairs for luncheon, and then afterwards she would go
out in the garden or take a long walk on the hills.
Meanwhile she would tidy her drawers, change her dress,
and write home.

Marjorie found, however, that the writing was an


impossibility; her thoughts would wander to the next room.
How well she could picture him sitting in her usual place by
Lady Violet's couch! How good he would be to her; how
much he would feel for her in her suffering! What a comfort
his sympathy and tender care would be to her!

And so more than an hour went by, and then came the
sound of a bell, the bell of Lady Violet's sitting-room. This
bell rang upstairs in Collins' room, so that her mistress
could summon her whenever she required her. She heard
Collins come down and go into the next room, and soon
afterwards there came a knock at her bedroom door.

"Come in, Collins."

"If you please, Miss Douglas, my lady would like you to


go to her."

Marjorie's heart died within her. He was still there, and


now she would have to meet him. She wondered whether
he knew that she was at Grantley Castle, or would he be
surprised to see her there? Probably Lady Violet had told
him, and, hearing that he knew her, had sent for her to
come and see him.
With a prayer in her heart for help, Marjorie crossed the
landing and went into the next room.

"Marjorie," said Lady Violet, "come here; I want to


introduce Lord Kenmore to you."

Fearfully, almost tremblingly, Marjorie went forward,


but, to her utter astonishment, a perfect stranger stood
before her. His face was as unlike that of Captain Fortescue
as it was possible for two faces to be. The figure, the build,
and the colour of the hair were exactly similar, so that
Marjorie was not surprised that, as he walked before her in
the drive, she had imagined that he was Captain Fortescue;
but the features, the eyes, and, above all, the expression of
his face, were totally different.

Lord Kenmore was an exceedingly plain man, with the


palest of blue eyes, which seemed wholly devoid of
expression, with thin lips, a pallid, unhealthy-looking face,
and a most cynical and unpleasant expression. How could
she think for a moment that this was Captain Fortescue? He
bowed stiffly when Lady Violet introduced him to her
companion, and sat down again in the low chair beside the
couch.

"Marjorie, I have been telling Lord Kenmore about the


kind of paper I print my photos on; he is a photographer
too. Would you mind getting those books you looked
through the other day?"

Marjorie brought the albums from their place on the


shelf, and handed them to Lord Kenmore. She was going to
leave the room when Lady Violet called her back.

"Don't run away, Marjorie. Lord Kenmore is going down


to lunch in a few minutes, and I shall want you then."
So she took her work-bag from the table, and sat down
in the window, busy with a table-centre which she was
working for her mother. She felt as if a great weight had
been lifted off her heart; she had never realized how
crushing the weight had been, until she felt the relief she
experienced now that it had gone. Captain Fortescue was
not Lord Kenmore! It seemed too good to be true, and he
had not been thinking of Lady Violet when he said good-bye
to her at Daisy Bank.

Meanwhile Lord Kenmore was turning over the photos,


commenting on them as he did so. He was opening the
Riviera book now.

"These are pretty!" she heard him say.

"Yes; we had a lovely time there two years ago."

"Hullo! Who's this?"

He had come to the very photo which had made


Marjorie's face flush as she looked at it.

"Oh, that's a friend of Evelyn; they were at Sandhurst


together, and we met him out there."

"I can't think who he reminds me of," said Lord


Kenmore; "he's like some one. Dear me, who is it?"

"That is just what Marjorie said when she looked at that


photo," said Lady Violet, laughing; "he is just like some
friend of hers; he seems to be like a good many people."

"What's his name?"

"Captain Fortescue; perhaps you knew him at


Sandhurst."
"No, I was at Woolwich; I can't think whom he reminds
me of."

"There's another of him on the next page."

"Yes," he said, turning over the leaves, "he seems to


have been fond of being taken with you, Vi."

"Yes, you see we saw a good deal of him there. He is


very good-looking, isn't he?"

"Well, yes, I suppose he is. I don't care for that kind of


face, though; he looks like a fellow in a cheap music-hall."

Marjorie was not half satisfied with Lady Violet's answer.

"Oh no, he isn't like that at all."

"Why, there he is again! A conceited sort of fellow, I


should think."

Was he jealous? Marjorie wondered.

"No, he wasn't at all conceited," Lady Violet replied.


"You would have liked him, I'm sure."

"Have you seen him lately?"

"No, not for ages; he has lost all his money, poor fellow,
and is as poor as a church mouse. I don't know what has
become of him."

Lord Kenmore seemed relieved to hear this, and there


followed a long discussion on the relative merits of Ziga and
Paget printing-papers, which lasted until the gong
summoned Lord Kenmore to the dining-room.
"Will you put these books by, Marjorie?" said Lady
Violet. "It was too bad of him to run down poor Captain
Fortescue."

Marjorie saw no more of Lord Kenmore, for he had gone


when she returned from her afternoon walk. Lady Violet
seemed tired and out of spirits, she thought; perhaps she
had felt the parting with him, it was only natural that she
should; and Marjorie devoted herself to her more than ever
that evening, and was determined to do all that she could to
cheer her. She had such a light heart herself that it was not
a difficult task to be bright and cheerful.

CHAPTER XXII
MR. NORTHCOURT'S OPINION

WHEN Kenneth Fortescue had left Marjorie at the door


of Colwyn House, he blamed himself very much that, for
even a single moment, he had allowed his feelings to be
seen by her. Perhaps she had not noticed; he hoped not. For
what right had he, a practically homeless and penniless
man, to allow any girl to see that he loved her, or to
attempt, in however small a degree, to win her love in
return? It was cruel, utterly heartless and unworthy of a
man, he said to himself.

For what hope of future happiness could such love ever


bring? As long as he was so heavily in debt to her mother
(for he refused to allow that the letter she had found had in
any way cancelled that obligation) every penny of his salary,
beyond what he actually required for food and clothing and
the other small necessaries of life, must be sent to
Rosthwaite. He intended to send it in future at the end of
each year, and as his salary was a fairly good one, he hoped
to be able to remit a substantial sum the following
Christmas. But four thousand pounds was a considerable
amount to reach, and he realized that it would take years
before he could return it all, if indeed his life were spared
long enough for him to do so. Meanwhile the thought of a
home of his own was one of the many things denied to him,
one of the indulgences which he had told Mrs. Douglas that
he should renounce.

Moreover, as he travelled back to Birmingham, whilst he


could not help a feeling of satisfaction that his origin was
not so humble as he had imagined, yet at the same time,
he reflected that his own father, whether he were a lord or
not, was by no means a father of whom he could be proud.
His foster-father, poor common miner though he was, had
shown far more feeling than his real father, and had
behaved in a manner which was vastly superior to that of
the heartless man who had deserted his own helpless child,
and had left him to the care of complete strangers. Still, if
only that word had not been blotted out of the letter, he
might have been able to prove his claim on that father's
consideration, and might have compelled him to reinstate
him in the position which was his by birth.

As it was, he knew not what steps to take. He decided


at length to go to Sheffield, that he might see Mr.
Northcourt, his father's lawyer, and take his advice in the
matter.

Accordingly, the following week, Captain Fortescue


travelled northward, and reaching Sheffield went at once to
Mr. Northcourt's office.

The lawyer was much interested in the information laid


before him. He read and re-read the letter several times; he
took a magnifying glass and tried to discover the word
covered by the ink; but at last he was obliged to confess
that it was hopeless to attempt to decipher it. He was,
however, strongly of opinion that the missing word or words
had undoubtedly been the correct name. Watson and
Makepeace would not have made that name illegible, had
they not known beyond all doubt that it was the name of his
lost father. What use they had made of that knowledge Mr.
Northcourt said it was impossible to tell.

Probably the story that Miss Douglas had heard from


the old woman in the cottage at Daisy Bank, and which
Captain Fortescue had just told him, was perfectly true.
They had found this name mentioned in the letter as the
possible name of Captain Fortescue's father; they had then
sought out and discovered the man named, and, by
threatening to disclose what they knew of his past history,
they had extracted large sums of money from him, money
which they were now spending abroad, or which, quite
possibly, lay buried with them at the bottom of the Atlantic.

Mr. Northcourt asked Captain Fortescue to leave the


letter in his charge, as it would prove most valuable
evidence, should the case ever come to trial, and he
promised meanwhile to make all inquiries that were
possible. At the same time he was obliged to tell Captain
Fortescue that he much feared that no solution of the
mystery would be forthcoming; the two guilty persons had
evidently made good their escape, and he was therefore
sorry to say that, in his opinion, they had not yet found the
clue which would lead them to the discovery of Captain
Fortescue's family.

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