are as opposite as freedom and bondage, as liberty and servitude. As principles in business they refer to conditions under which the production, exchange and distribution of wealth take place. But they are both alike related to the one economic fact of prices. Competition and monopoly each refer to opposing forces that are active in productive processes in determining prices. Hence, as Prof. Frederick C. Hicks claims, there are but two price-making groups of business enterprise-the competitive and the monopolistic.*

In competitive business prices tend to equal the sum of the expenses of production out of free goods.

To the extent that monopoly costs, that is, monopoly goods, enter into expenses of production, to that extent the resultant price contains a monopoly element. This element may consist in exclusive control of natural agents (land), in personal capabilities (skill), or in market opportunities, as in a municipal franchise.

Monopoly is a question of degree of price control. Exclusive control completes the monopoly. Hence Ely's definition: "Monopoly means that substantial unity of action on the part of one or more persons engaged in some kind of business which gives exclusive control,

* Competitive and Monopoly Price, F. C. Hicks. University of Cincinnati Press.

more particularly, although not solely, with respect to price.

It is plain, therefore, that even in competitive business there is more or less of what is monopolistic in its effect on the price resultant. It is only when this monopoly factor becomes of dominant proportions that society, through its governmental authority, proceeds to ascertain whether or not the productive process needs to be re-organized so as to restore competitive or approve monopolistic prices.

Monopolies exercise their power over the market not simply by raising, lowering, or stabilizing prices. They do by control over and distribution of supply. They may furnish a supply regularly or irregularly. They may charge different prices in the same market for but slightly different goods. Increased expenses of production, higher tariffs or heavier taxes on monopoly products result in shifting forward the price increase as a rule upon the consumer, unless such increase exceeds the limits of monopoly.

Limits to monopoly are set by three very strong influences. First, by the elasticity of demand. As prices rise, or the purchasing power of money diminishes, demand may be curtailed by the consumer, the number of unit-sales be reduced and net profits fall. Secondly, by the

*Monopolies and Trusts, Richard T. Ely. The Maemillan Company, New York, Chap. I.

power to substitute for a monopoly article one similar enough to serve the consumer's purposes. Thirdly, by potential competition. "I sell my company's output at the highest price that will keep competitors from putting capital into the business," is the way a trust president stated it.

Where potential competition hedges about an industrial combination's policy the emphasis in management will normally be placed on increased efficiency of making and selling the output. This is one of the main lessons of trust experience in the United States. President Arthur T. Hadley states the principle admirably as showing this limitation of price-making power in industrial monopolies. "If [he reasons] monopoly is managed by unexperienced hands the effort to put prices up is usually more noticeable than the effort to put expenses down. It seems so easy to make a profit at the expense of society, that managers are apt to neglect the more laborious method of making a profit by service to society. When business men have been all their lives accustomed to face immediate competition they think that the combination of all competitors removes the only effective restriction upon charges. But this is a short-sighted view of the matter, which has wrecked most of the enterprises run on such a basis." *

* Economics, Arthur T. Hadley. G. P. Putnam's Sons, New York.

3. Elements and Sources of Monopoly

In practically all of the more important trusts there was some element of monopoly, privilege, or natural advantage which gave the concern a position not easily duplicated by a rival. The Secretary of the National Asphalt Company, testifying of its chief subsidiary, which had absorbed constituent companies at a security cost of $30,000,000, said: "The Asphalt Company of America's property is of such a character that its value is largely speculative and can not be positively fixed. This is because of the important position which the deposits of asphalt, owned or controlled, hold among the assets of the company." Of the steel trust's advantages in consolidation Charles M. Schwab testified, "The great advantage started with the ore," of which this corporation held eighty per cent of the known ranges in the Northwest by outright ownership, containing 500,000,000 tons in sight. Equally advantageous was its large ownership of Connellsville coking coal.

The presence or absence of monopoly in any industry is often sought in its ability to dictate prices by its large percentage of products made. Yet here much depends on market conditions, on the kind of product, on the character of control and on the policy of management. Ability to fix

*United States Industrial Commission, Vol. XIII, p.

prices was disclaimed (1901) by the steel authorities with an output ranging from sixty-five to seventy-five per cent of the whole industry.

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These prices are naturally fixed [it was claimed by President Schwab], whether there is a combination or not, in times of great demand. In times of depression the chances are that when we take anything like seventy per cent of the business, the company would be unable to fix the prices." The Pittsburgh Plate Glass Company, on the other hand, controlling eighty per cent of the output, exercised so much of a monopoly as to dominate among jobbers the importing of plate glass. This company was charged with maintaining prices in this country at fifty per cent above the prices abroad, and of advancing prices from one hundred twenty-five per cent to one hundred fifty per cent by combination of factories and reduction of supply.

The American tariff of import duties has been regarded as giving to otherwise competitive industries some degree of monopoly advantage among combinations. That was certainly not the case with the oil and tobacco trusts, nor with the meat trusts. Yet Byron W. Holt of the Tariff Reform Club, and H. O. Havemeyer, the sugar magnate, both saw in protective duties a chief cause of trusts. The latter, who wanted free raw sugar, declared: "The mother of all trusts is the custom-tariff bill." The former, who wanted free trade, identified the tariff as the most