cost if they conferred together and compared data; their bids would not vary greatly in true competition and such differences as there were would be normal, easily explained and justified. But where two bidders vary so widely in their figures that each looks upon the other as "wild" in his estimates, something is wrong, either the one is too high or the other too low, the intelligent bidder in between is the sufferer.

In false competition the honest and intelligent bidder is always at a disadvantage when there is little demand for work. When there is more than enough work for all it does not matter so much what the ignorant bidder may do; he may bid high and make more than he should, or he may bid low and lose money, the intelligent bidder pursues the even tenor of his way, knowing his costs he makes sure of a fair profit on each contract taken.

It is in the dull times that the intelligent bidder feels the competition of ignorance and unscrupulousness. He is caught between two fires, that of the man who does not know his costs, and bids recklessly in the dark, and the man who knows his business, but bids low, with the intention of working out a profit in some tricky way—of the two the ignorant bidder is the more troublesome factor, his competition is disastrous because blind and reckless.

IX

In transactions such as those outlined, the factors of true competition are present—(a) work to do; and (b) a number of parties able and anxious to do it; but some element is lacking, some element the presence of which would transform the false and vicious competition into true and healthful. That element is knowledge, such knowledge of conditions and considerations affecting the price of the

work as would place all bidders on a footing of something like equality in the preparation of their estimates.

In proportion to the fullness and accuracy of such knowledge is the competition keen, intelligent, and beneficial to bidders, purchasers and the community. To precisely the extent that ignorance, jealousy, deceit prevail is the competition apparent rather than real, disastrous rather than beneficial.

X

As a further step toward ascertaining what true competition is, as distinguished from false, carry the illustration to the other extreme.

Suppose the bidders get together and agree upon the price all shall bid, or agree that one shall have the work, the others to either refrain from bidding or put in "protecting" bids. Competition is suppressed; the agreements are illegal.

Between the two extremes of bidding in the dark as individuals, without coöperation-false competition, and bidding in combination an agreed price, suppressed competion must be found the conditions favoring true competition.

Under false competition the purchaser has every advantage over bidders in the dark; under suppressed competition the bidders in combination have every advantage over the purchaser who is in the dark; under true competition both deal frankly in the open on a footing of equality.

To return to the illustration first used: it is the best informed blacksmith, carpenter or painter who gets the trade in good times because he keeps in touch with what is going on, with what his competitors are doing and charging, so that by reason of his knowledge he is in a position

to really compete with them, to take the work he wants at the price he wants. It is the man who stays within the four walls of his shop, who fails to keep his ears and eyes open, who asks no questions and gives no information, who bids in the dark, that goes to the wall, or, at best, makes a precarious living; every country town can show plenty of such men, silent and envious, melancholy relics of the old order of things.

CHAPTER VII

THE OLD COMPETITION

I

Under existing conditions practically all bids upon contract work fall into two classes:

A. Collusive-suppressed competition.

B. Secret-false competition.

In neither case is there any true competition.

Where bidders conspire together and agree upon their bids either for the purpose of exacting an arbitrarily high price, or with a view to throwing the work to some one bidder, at such price as he wishes to charge, the result is the same-suppression of competition.

If bidders do not conspire together, but each prepares his bid independently and submits it sealed, there is still no real competition; each bidder bids against his own fears and necessities.

The purchaser who opens the bids has little difficulty in determining whether he is confronted by suppressed competition or false. If suppressed, the bids will be suspiciously alike; while if the competition is of the pseudo variety the bids will be characterized by spreads that are ridiculous.

As a matter of fact, there is comparatively little collusive bidding. Collusion calls for a large degree of confidence in one another on the part of the bidders, and it is a familiar fact that no sooner do men come together in

agreements to suppress competition than the very act of conspiring tends to destroy the little confidence that may have existed. Collusion begets distrust. As a body of keen competitors once said: "We no sooner combine and agree upon prices than it is a race to the telephone to see who can book orders first at prices a little under those fixed."

Attempts are made to give force to these combinations by depositing large amounts to be forfeited in case of cutting, but these penalties are altogether ineffectual.

Now and then one hears of a "pool," or combination, an association in some particular trade or industry that is effective and that has existed for many years, but these instances are few indeed in comparison with the number of lines wholly uncontrolled, and where combinations are successful in maintaining uniform prices, the interest of the customer is considered and no advantage taken.

II.

The writer has in mind a class of machinery, the prices of which for many years have been established by joint action at the beginning of each year.

When the legality of the agreement was questioned the purchasers of the machinery protested against the suggestion to restore old competitive conditions; they said in so many words: "Do not disturb this association; it is an advantage to us to have prices fixed for the year, and it is even more important that we know that all who buy pay the same price."

Again, in the case of a certain railroad specialty, the roads much prefer the sellers should coöperate and maintain a fair price, and each be content with the customers he has rather than slaughter prices in efforts to extend the