STUDIES OF COMPETITION AND ITS LIMITS, OF THE THE DETERMINATION OF WAGES, IN THE BY JOHN B. CLARK, AUTHOR OF THE "PHILOSOPHY OF WEALTH," AND FRANKLIN H. GIDDINGS. BOSTON: PUBLISHED BY GINN & COMPANY. PREFACE. A SYSTEMATIC restatement of the facts and laws of the Distribution of Wealth is not attempted in these studies. Nothing is said in them, except incidentally, of interest and rent. They are studies of the process by which the income of modern society is divided among its principal claimants. There is presented to the student of to-day a more highly organized industrial system, and a more complicated process of apportioning the social income, than those that were observed by Adam Smith, David Ricardo, and John Stuart Mill. By the operations of trade the total product of industry is divided and subdivided among certain naturally constituted groups and sub-groups. The income falling to each sub-group is apportioned among its component economic classes, capitalists, laborers, etc., by the bargains that they make with each other. In each of these dividing acts, artificial combinations, - the pools, trusts, labor unions, etc., of recent times, — have come to play a part so prominent that competition would seem, at the first view, to be abolished at important points. The mode of its working has been, in fact, so changed as to demand a new scientific treatment. It is the aim of these studies to analyze the natural group system of modern industry; to determine where within it competition is possible, and where combination is naturally invited; to ascertain the extent to which this movement checks individual rivalry; and to determine the nature and scope of that residual competition which is the controlling principle of the new regime. They thus undertake to separate that which is transient from that which is permanent in the Ricardian Theory of Distribution. They analyze into its elements the sum traditionally termed profits, and show that an essential element, the only part of the gross sum to which the term pure profit can be applied, has not been clearly distinguished by the traditional analysis, and that, as a matter of course, the special laws that determine its amount have not been established. They show that the tendency of modern competition is to sweep this pure profit out of existence, while that of other forces is to cause it continually to reappear. The view of social evolution which these conclusions afford is that of a progress toward equity between men promoted by combinations, but guaranteed by the deeper and more general influence of competition itself. Injustice is diminishing, and that by natural law. These studies, however, take especially into account the ethical consciousness of society, which not only sets up an ideal toward which society should tend, but, by public opinion, by legislation, and in many subtle but effective ways promotes the natural movement in that direction. The complementary character of these essays by two writers is not a premeditated result of joint authorship. The joint authorship was agreed upon, because it was discovered that, working independently, the writers had arrived at complementary conclusions. The essays were originally published in the Political Science Quarterly, and are now republished by the kind permission of the editors of that review. TABLE OF CONTENTS. CHAPTER I. The Limits of Competition. By J. B. CLARK. Current economic theories deducible from the assumption of unlimited competition. Ricardo's system originally based on actual changes in industry; the conditions of his time transitional. The contest between weak competitors and strong ones, in certain industries, now decided; the strong only surviving, and these forming confederacies for the purpose of checking competition. Labor doing the same. Predatory competition vaguely conceived; Professor Cairnes' effort to obtain a systematic theory of it. His conception of cost of production, and his theory of non-competing groups. These groups now practically merged. Machinery the chief leveller. Surviving groups based on intellectual and moral differences among workmen. Entrepreneur's labor more permanently separated from other labor. Levelling tendencies specially active in America; these tendencies resisted by trades unions; the resistance in the end unavailing. Competition more effectively resisted by producers' unions. Pools as based on a normal principle, to be regulated, but not suppressed. A typical producing group, consisting of sub-groups or strata, each containing capitalists and laborers. True competition confined by nature within the horizontal lines that separate strata. Radical difference between this grouping and that of Professor Cairnes. Abnormal competition the cause of combinations. Control of prices their aim; the restricting of production the means employed. Residual competition still an efficient regulator of prices. Combinations limited to natural groups; fewness of competitors a cause of union; comparative equality among them a necessary condition. Pools impossible in agriculture. The effect of cheap transportation. Protective tariffs aids to national combinations, and barriers against international ones. Legal regulation of pools desirable; the complete suppression of them neither desirable nor possible. |