THE PRICE FALLACY OF HIGH COSTS 497 



cessful " cooperation " into monopoly, and the simultaneous exchange 

 of the ideal of efficiency in production for the slogan of ability in ac- 

 quisition. 



Economically considered, America has, until recently, been thor- 

 oughly democratic; that is to say, despite tendencies to social class and 

 caste, the population has shared without essential discrimination in in- 

 dustry and production. But in late years possessors of the great for- 

 tunes which have been in the building for a half-century have begun 

 seriously to devote themselves to leisure. In so doing, they have not 

 only subtracted their own energies from the productive forces of the 

 country, but they have increased their sumptuary demands and have 

 alienated a host of laborers and a vast capital from the production of 

 the necessities and comforts of plain living in order that a few may in- 

 dulge an epicurean taste for the costly objects of vain and selfish de- 

 sire. This tendency to luxury is leading students of market and in- 

 dustrial conditions to characterize the high bidding of wealthy and 

 profligate spenders and of their improvident imitators as a significant 

 cause of high prices; but a deeper analysis reveals the more vital phe- 

 nomenon of intensified social costs attendant upon a relative reduction 

 of the effective labor power of society and the subversion of a consider- 

 able part of the nation's capital. In this very dynamic aspect of mod- 

 ern life, one observes a tremendous increase in demand for the costly 

 and enervating indulgencies of conspicuous expenditure and a more 

 than proportionate decrease in the productive powers which contribute 

 to the synchronous supply of the staples of life. Here, indeed, resides 

 a fundamental problem in national cost accounting. The passing of 

 the millionaire captains of exploitation and industry is imminent, and 

 there is no more disconcerting contingency in the nation's future than 

 the probable succession of a less hardy and energetic generation to their 

 proprietary trusteeship of the country's wealth. 



Price changes, which may be traced to an increased gold supply and 

 the consequent depreciation of the dollar, react upon the cost of living 

 only as certain reciprocal advantages and disadvantages are shifted 

 among persons whose money incomes rest upon actual or implied con- 

 tractural relations extending over the period of price change. For this 

 reason, advancing prices are peculiarly advantageous to the debtor 

 class, composed mainly of bonded business corporations, virtually dis- 

 counting their obligations at an annual rate commensurate with the 

 increase in prices. It is likewise obvious that expected returns to 

 creditors and investors on securities bearing fixed rates of income are 

 proportionately reduced. Wage earners and salaried .persons are sub- 

 ject to a like disadvantage. Wage and salary scales are not readily 

 readjusted and, especially, in their upward movements, show a consid- 

 erable " lag " behind prices. Because of the prevalence of a customary 



VOL. LXXX.— 33. 



