may be in a particular case is highly uncertain. When we compare a monopolistic business with a competitive business organized on such a scale as to secure the maximum of efficiency, the gains of competition in alertness and inventiveness, stimulated by rivalry, have recently been too little considered.

The principal source of gain in monopoly is found in the ability to get a high price. In confirmation of the position that monopoly price is high price, we may refer to history, the utterances of which seem to be clear and distinct. At any rate, there can be no doubt that, in the opinion of historians who have treated the subject, monopoly means high price. Hume, in his treatment of monopoly in his History of England, speaks of the price of monopolized articles as exorbitant, and cites the price of salt, the price of which had been raised by monopoly tenfold and even more. It is generally conceded that in most cases of a government monopoly of the production or sale of salt the price has been so extremely high as to be a real popular grievance; and it is generally necessary to inflict severe penalties to prevent the people from securing the salt at a lower price from non-authorized sources. But of still greater significance are the results of the investigations of the Industrial Commission of the United States. It was there made evident that when monopoly appears in a form at all clear and well defined, the tendency is plain to increase the margin between the prices of finished products and raw materials.1

The courts of the world have made it clear in their judicial utterances that they regard monopoly price as high price; and, as their opinions are based upon cases actually brought before them, we cannot do otherwise than attach great importance to their view.

Wherever commissions have been formed with power to regulate monopoly price, and these commissions have been comprised of independent and strong men, there has been a marked tendency to reduce monopoly price; because unregulated monop

1 See report by Professor J. W. Jenks on "Industrial Combinations and Prices," Report of the Industrial Commission, Vol. i, pp. 39-57; and also the same author's work, The Trust Problem, Chap. viii.

oly price has very often been found to be excessive and unjust. The opinions of the Railroad Rate Commission of Wisconsin afford many illustrations. This Commission has authorized a higher price in a few cases, but generally has been forced to lower prices, although in a notable case of passenger rates it did not go so far as the legislature subsequently did. The same statement holds true in large measure of the decisions of other state public utility commissions and of the Interstate Commerce Commission.

Monopolies and the Distribution of Wealth. We have not the precise statistical data which will enable us to state the exact influence of monopoly upon the distribution of wealth. We have, however, sufficient data to warrant the opinion that the high monopoly prices and the gains resulting from the exclusive position of the monopolist give us a large privileged class in countries of modern civilization, and especially in the United States. Even when the increment of price is comparatively small, it has large significance in the case of the sale of a vast number of units of services or commodities. The difference between a four-cent street-car fare and a five-cent street-car fare may not appear to be great, but it is a difference of 25 per cent and leads to an enormous difference in earnings.

All the many investigations that have been made recently in various lines of business (especially in railways, the beef industry, the steel industry, coal mining, etc.) point to monopoly as a prime cause of the so-called swollen fortunes of this country. In this and other countries some histories of families distinguished for wealth have been written, and probably few if any cases could be found in which some monopoly element had not entered. Various lists of rich men have been published, among them one published by the New York Sun in 1855, and one published by the New York Tribune in 1892. These lists cannot by any means be presumed to be accurate, and yet they do afford very considerable evidence of the sources of large fortunes, and point to monopoly as a prime source of the enormous fortunes of today. This is a subject which in itself would require a larger book than the present one for adequate treat

ment. The student should attempt by observation and study to carry forward the lines of investigation and thought here suggested.

Public Policy with Respect to Monopolies. - As many monopolies have come as a result of underlying laws of industrial evolution, they cannot all be abolished. Experience, and the analysis of industries like railways, gas works, etc., falling under the head of "public utilities," so called, should be conclusive. We must have monopoly in these cases, and the only question we are concerned with is, "What kind of monopolies shall we We must admit that unregulated monopolies in private hands have always been odious and are opposed to the principles of the laws of civilized nations. They are opposed to that endeavor to secure equality of opportunity which is fundamental in modern democracy and which manifests itself as a red thread running through American history. Even George Washington, generally looked upon as calm and self-contained, denounced monopolizers and wished they might be " hunted down as pests of society" and "hanged on a gallows five times higher than the one prepared for Haman." 1 It is not so much high price that disturbs the modern man as it is inequality of opportunity; and this general sentiment has been very clearly and forcibly expressed in court decisions. In the field in which monopoly is natural and inevitable, therefore, we cannot permit unregulated special privilege, and to this end we must choose between public monopoly-government ownership - and public control of monopolies privately owned and operated. This opens up so vast a subject for discussion that we cannot enter into it here. It should be noted, however, that the considerations which must govern our choice differ for different types of natural monopolies. Municipal waterworks and the federal post office are in most respects efficiently and successfully managed. But in the case of many other natural monopolies the problems of management are more complex and difficult in many ways. Just now the method of public control rather than of public ownership is beginning to be given a thorough test. Our policy in the future 1C. J. Bullock, Essays on the Monetary History of the United States, p. 67.

will undoubtedly be determined in large measure by the results of that test. Public control, to secure equality of opportunity, must so regulate monopolies and limit price that the gains will be no higher than those produced by equally wise investments and equally wise and prudent management in the field of competition. Sometimes it is stated that owners of railways and other monopolistic enterprises should have a competitive return upon all the money that they have invested. This would give them a position of special privilege, inasmuch as in the competitive field a great deal of money is lost. It is only wise investment and careful management in the field of competition that can secure returns equal or superior to the current rates of interest. Imprudently invested capital is lost in the field of competition; and when it is imprudently and unwisely invested in the field of monopoly, it cannot justly claim any return.

When we turn to the field of social monopolies we find that the problems of public control are simpler, but more diverse. These monopolies exist only by the approval or tolerance of society, and each particular one can be judged on its own merits. The problem of social monopolies, therefore, resolves itself into such problems as those of the economic effects of the patent system, the best way of controlling the consumption of liquors and other harmful commodities, and the most expedient means of raising public revenues. With respect to one class of social

'This does not mean that in the case of old enterprises price must always be so reduced that the gains shall yield a competitive return only on the physical value of a plant. The principle of vested rights or interests has to be given a certain rôle. These have often been created by society rather than by private. persons, and faith must be kept. In the case of railways and the telegraph, the American nation and states have deliberately encouraged a wasteful policy of competition which is in large measure responsible for high capitalization. It would not be right to place upon holders of these properties all the burdens of a mistaken public policy in the past. What is needed is to declare a public policy for the future and to base returns for the future upon future actual investments in the case of public utilities. In any case, our federal and state governments are acting wisely in insisting upon physical valuations of railways, gas works, and other similar monopolies as a help in determining fair prices for present and future. Now and here we can do no more than to throw out these suggestions in regard to a pressing present problem of great magnitude. A further discussion of some aspects of the problem will be found in Chap. XXVII (Transportation).

P

monopolies society has reached a very definite conclusion: There must be no needless extension of the field of monopoly through either public or private favoritism. The possibility of obtaining monopoly through special privilege is clearly inconsistent with the maintenance of equal opportunity in the industrial field.

The problem of the public control of monopoly is sometimes confused with the " trust problem" - the problem of the public control of large industrial combinations. But the trust problem is only in part a problem of monopoly. It will be discussed in the following chapter.

QUESTIONS AND EXERCISES

1. Has bigness anything to do with monopoly? Do you know any small business which is a monopoly? Do you know any very large business which is keenly competitive? Contrast a state of competition with a state of monopoly.

2. Define monopoly and discuss each point in the definition.

3. Contrast land ownership with monopoly.

4. Explain the importance of classification of monopolies, and especially of distinguishing between private and public monopolies, and social and natural monopolies.

5. State the main classes of monopolies, and give the divisions and subdivisions in each class.

enues.

6. A public tobacco monopoly exists in France and produces large revThe business is generally said to be well managed. Do you see any benefits that would accrue from the establishment of such a monopoly in the United States? any evil effects?

7. Define monopoly price and show how it is determined.

8. What does class price mean? Explain use price.

9. Why do we think of monopoly price as high price? Do you know any monopoly price which is a low price? What do you mean by high price? by low price?

10. What relation has monopoly to large fortunes? to small fortunes? What, if any, to poverty?

II. What is the best public policy with respect to monopolies?

REFERENCES

BROWN, W. J. The Prevention and Control of Monopolies.

ELY, R. T. Monopolies and Trusts, Chaps. i-iv.

HOBSON, J. A. Evolution of Modern Capitalism, revised ed., Chap. ix.