Online Library of Liberty: Economics, vol. 2: Modern Economic Problems

capitalists. But this would work slower and less extensive results than does the formation of a combination.

Of course, the fundamental principles of price cannot be changed by a trust; a selling monopoly can affect price only as it affects supply or demand.12 The strongest trust yet seen has not been omnipotent. Many careless expressions on the subject are heard even from ordinarily careful writers and speakers: “The trust can fix its own prices,” “has unlimited control,” “can determine what it will pay and for what it will sell.” This implies that trusts are benevolent, seeing that the prices they charge are usually not far in excess of competitive prices in the past. Such a view overlooks the forces that limit the price a monopoly can charge. If the supply remains the same, no trust can make the price go higher.. The monopoly usually directs its efforts toward affecting the supply, leaving the price to adjust itself. It can affect the supply either by lessening its own output or by intimidating and forcing out its competitors. It is true that this logical order is not always the order of events. The trust may not first limit the supply and then wait for prices to adjust themselves; it may first raise its prices, but, unless it is prepared to limit the supply in accordance with the new resulting conditions of demand, such action would be vain. The control of the sources of supply is the logical explanation of the higher price, even though the limitation of supply is effected later by successive acts found necessary to maintain the higher price.

The report of the Federal Industrial Commission, which from 1898 to 1901 investigated the trusts, showed13 that immediately upon their formation the industrial combinations had raised their prices. Prices might be lowered again, but only when and where competition became troublesome, thus causing either “price-wars” or discrimination.

References.

Bolen, G. L., Plain facts as to the trusts and the tariff. 1902. N. Y. Collier, W. M., The trusts. N. Y. Twentieth Century Press. 1900.

Cotter, A., The authentic history of the United States Steel Corporation. N. Y. Moody magazine book Co. 1916.

Hobson, J. A., The evolution of modern capitalism. N. Y. Scribner. 1912. Ch. V.

Jones, Eliot, The anthracite coal combination in the United States. Harvard Univ. Press. 1914.

King, W. I., The wealth and income of the people of the United States. N. Y. Macmillan. 1915.

Meade, E. S., Trust finance. N. Y. Appleton. 1903.

Montague, G. H., Trusts of to-day. N. Y. Doubleday. 1904. (Favorable.) Ripley, W. Z., (Ed.), Trusts, pools and corporations. Ed., 1916.

Stevens, W. S., (Ed.), Industrial combinations and trusts. N. Y. Macmillan. 1913.

Stevens, W. S., Unfair competition. Univ. of Chicago Press. 1916.

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