VI

When Adam Smith said, "It is to the interest of all those who employ their land, labor, or stock, in bringing any commodity to market, but (that) the quantity never should exceed the effectual demand; and it is to the interest of all other people that it never should fall short of that demand," he was very close to the human, the vital side of the problem he was discussing, but he did not follow the matter further, and from his day to THIS scarcely an economist has devoted time and thought to the really great problem of intelligent control of so-called "economic laws."

If it is to the interest of the community that supply and demand should be maintained as nearly as possible in a state of equilibrium, then it should be the business of the community to devise ways and means for controlling the violent fluctuations due to free competition.

In every country town the prices of small products of the farm are the result of "free competition.' When the weather is fair farmers "come to town" in such large numbers and bring so much to market, prices drop to absurdly low figures; when the weather is bad little is brought in and prices go up to absurdly high figures. One year there is a shortage of crops and prices soar, the next, under the incentive of the high prices of the year before, a larger acreage is planted, the season is good, crops are abundant, and prices drop to a level that yields many farmers less than cost.

What are farmers doing to help these conditions? Are they meekly submitting to the "law" of supply and demand? Are they content with the doctrine of "free competition"? Not at all: they read and are guided by government crop reports; they are forming coöperative societies to control competition, to introduce rational and scientific supervision over

both production and marketing to the end that prices may be more stable and returns more constant.

VII

"Market price" is a statistical proposition, it has no real, no tangible existence aside from tables of averages.

What an article sells for is its price, whether it is the market price for similar articles depends upon an average struck from a number of sales.

Tables of averages and variations are of value; they furnish data not only for conducting business, but for controlling competition. They should be compiled for every industry and every locality, and carefully studied. To a certain extent the government does this, but on so large a scale the figures, when published, are of little real assistance to the individual farmer and manufacturer, they do not help him to make up his mind what he should do next week, next month.

VIII

The prevailing price for certain plows may be $20.00. Three makers supply the market, and the plows they make are so alike it is immaterial to users which they buy. Each plow costs A, a new-comer, with his smaller plant, $20.00 to make; B, with a larger output, $19.00; C, with a very large output, $18.00-what is the fair price for those plows?

At $20.00 it is but a question of time when A will go out of business; B is making only fair returns on his investment; C with his larger output is making large profits.

If A goes out of business the price of plows will advance materially; if he is to remain in business they must advance. Under free competition A hovers on the edge of bank

ruptcy; if he closes down temporarily, plows advance to $21.00 and he immediately starts up, when the price drops again to $20.00. He is on the ragged edge of industrial starvation.

This is no fanciful illustration. It is the normal condition of the industrial and commercial world; it is the condition described by Smith; it is the "margin of cultivation" of Ricardo and writers upon agriculture and rents; it is recognized in the phrases "marginal increment,” “"marginal utility," etc.

Under free competition fluctuations in supply and demand are sudden and wide, as the most cursory study of price charts demonstrates.

The inevitable result is that the margin of instability in every occupation and industry is very wide, wide in direct proportion to the freedom of the competition, narrow where competition is controlled.

The practical question for the community to consider is, whether it is better to broaden this margin of instabilityof loss and disaster-by encouraging still greater freedom and recklessness of competition, or narrow the margin of instability by controlling competition.

Is it to the interest of the community that plows should be sold at $20.00 until A is ruined and then go to $22.00 or $24.00, where possibly they were before A started in; or is it not to the interest of the community to pay $21.00 and keep all three makers in business ?1

IX

Statistics show that a given steel industry has a “boom" period on an average but once in five years, the four years

'Taking, perhaps, some of the increased profits of B and C by an income tax. This means of equalizing conditions is always open, and, in time, will be worked out on a scientific basis.

range from dull to the point of disaster, the business is a "feast or a famine," yet such is human nature that the one good year invariably leads to a large increase of capacity in additions and new plants; new men and capital rush into the business, all of which means large losses in the “lean” years certain to follow.

It is not surprising the individual who is ever sanguine should make foolish investments, but it is surprising that experience has taught the community so little it encourages the individual to do things that mean loss of time, labor and money, and the demoralization of an entire industry.

The community does not seem to appreciate that:

All losses in unproductive and unremunerative enterprises are borne by the community.

The argument that the public may profit by the demoralized prices that prevail for a time is more specious than sound, it amounts to the proposition that the community profits in the end from commercial savagery, from the ruin of its members, which, if true, would lead to the pessimistic conclusion that the community and its commercial code are both depraved-a conclusion reached by many a teacher of men from Christ down.

X

There is still another aspect to this price question.

In the operation of a gas plant for lighting there is always a period in every twenty-four hours, usually the early evening hours, when the consumption of gas is at its maximum-this point of highest consumption is the "peak load."

The peak load in a lighting plant is not the same for each

'This is true in nearly all branches of the iron and steel trade, as well as in many other industries, far truer than it is in farming, for the farmer can count on more good crops, or high prices, for smaller crops, than any steel manufacturer can upon good years and good prices.

twenty-four hours of the year; it varies, increasing with the short, dark days of winter, decreasing with the days of spring and summer; the peak for the year may be the three hours from 5 p. m. to 8 p. m. the day before Christmas, but whenever it comes, the plant must be equipped to meet it and the cost of carrying this excess of capacity is borne by the community in the price of gas; the community recognizes its obligation to those who own the plant, for whether the plant is owned by the municipality or a private corporation, the cost of maintaining it to meet the maximum demand is the same.

It is comparatively easy and inexpensive to equip a gas plant to meet variations in consumption, for gas can be stored; the huge gas tanks that loom up in every town are the reservoirs built to hold the gas that is manufactured steadily during the twenty-four hours.

An electric light plant is subjected to the same sudden and wide variations in demand, it must be built to carry the same peak load.

The plant is costly to install and maintain, the storage of electricity is not so easy as the storage of gas, hence all well-managed electric companies try in every possible way to increase the consumption of electric energy during the day, to encourage the use of electricity as a power. Gas companies are doing the same thing for gas, and between the two builders of small steam engines are having a hard time.

But whether a plant is operated at its maximum three hours or fifteen, the cost of operation and maintenance of the extra capacity required to meet the peak load is borne by the community in the prices charged.

In these instances the community admits without question its obligation to insure a profit upon the equipment necessary to meet wide fluctuations in demand.