DOI Page / Citation link:
https://doi.org/10.11588/diglit.42346#0258
246 THE NEW COMPETITION
the truth without going beyond their own personal obser-
vations.
The farmer knows that if on the same acreage and with
the same labor he produces but two bushels of wheat where
the year before he produced three, his cost per bushel is
higher, and if farmers throughout the co'Untry have had no
better success, the price of wheat will be higher, how much
higher will depend a good deal upon crops in other coun-
tries.
Per contra if the same acreage and labor yield five bush-
els as against three the year before, the cost per bushel is
lower, and, other things being equal, the price will be lower.
The manufacturer faces the exact reverse of these con-
ditions; his prices move inversely to his costs.
It being conceded that a fair price should cover legiti-
mate cost plus at least some profit, it follows that prices
should, vary with cost and thus ordinarily he higher when
the output is low, and vice versa.
But—as noted by Adam Smith—the exact reverse ob-
tains. As demand falls and output is curtailed prices in-
variably fall.
The condition is a curious illustration of the tendency
of men to accept as right and natural any evil, however
great, if it is of long duration.
That prices should drop as cost advances and rise as
cost drops is a fundamentally unsound condition, yet be-
cause such has been the result of the old unrestricted com-
petition from time immemorial, the very people who suffer
most, employers and employees, tamely acquiesce.
If the community were organized on a socialistic basis,
prices ■would rise and fall with cost; the state would not
commit the folly of selling goods cheaper and cheaper as
they cost more and more; nor would the people permit the
state to charge high'er and higher prices as cost dropped
lower and lower.
the truth without going beyond their own personal obser-
vations.
The farmer knows that if on the same acreage and with
the same labor he produces but two bushels of wheat where
the year before he produced three, his cost per bushel is
higher, and if farmers throughout the co'Untry have had no
better success, the price of wheat will be higher, how much
higher will depend a good deal upon crops in other coun-
tries.
Per contra if the same acreage and labor yield five bush-
els as against three the year before, the cost per bushel is
lower, and, other things being equal, the price will be lower.
The manufacturer faces the exact reverse of these con-
ditions; his prices move inversely to his costs.
It being conceded that a fair price should cover legiti-
mate cost plus at least some profit, it follows that prices
should, vary with cost and thus ordinarily he higher when
the output is low, and vice versa.
But—as noted by Adam Smith—the exact reverse ob-
tains. As demand falls and output is curtailed prices in-
variably fall.
The condition is a curious illustration of the tendency
of men to accept as right and natural any evil, however
great, if it is of long duration.
That prices should drop as cost advances and rise as
cost drops is a fundamentally unsound condition, yet be-
cause such has been the result of the old unrestricted com-
petition from time immemorial, the very people who suffer
most, employers and employees, tamely acquiesce.
If the community were organized on a socialistic basis,
prices ■would rise and fall with cost; the state would not
commit the folly of selling goods cheaper and cheaper as
they cost more and more; nor would the people permit the
state to charge high'er and higher prices as cost dropped
lower and lower.