POTENTIAL COMPETITION AS A SAFEGUARD AGAINST 

 PERMANENT MONOPOLY. 



BUSSELL D. KILBORN. 



Addressing the British Association for the Advancement of Science on the 

 subject "Industrial Combination" in 1890, President Hadley, generally 

 regarded as an ortlioUox economist, took the position tliat we may adopt one 

 of three policies in aealing with the problem of industrial monoply. The three 

 policies are : 



1. Recognition of trusts as monopolies with some form of regulation. 



2. Prohibition of monopoly. 



3. Laissez-faire policy. 



For reasons that need not concern us, he rejected the policies of regula- 

 tion and of prohibition and urged the adoption of the laissez-faire policy. The 

 argument advanced in support of the policy was about as follows : Monopoly 

 is superior to big business for the production and sale of commodities. But 

 the monopolist because of the absence of competition will charge such prices 

 for his commodities that his profit will be above normal. This stimulus will 

 attract new capital into the field and as a result of the ensuing competition 

 prices and profits will drop to their normal level. After two or three exper- 

 iences of this sort, the monopolist and all others like him, will profit by the 

 lesson and be content in the future to charge such prices for his goods that the 

 stimulus for new capital to enter the monopolized field will be lacking. These 

 prices will be normal, or so nearly so, that the problem will either be solved by 

 the spontaneous action of economic forces or will cease to exist. 



In a book published in 1900 Mr. Price Collier, New York State Civil Ser- 

 vice Commissioner, states that competition is the mother of trusts. The inevi- 

 table tendency of competition is combination, so he asserts. As different 

 firms or corporations compete with one another, one is left in power and a 

 monopoly more or less complete is the result. The reason that one firm as 

 distinct from any other is able to survive is because it is the most efllcient of 

 all those engaged in producing the same good. But society has a safeguard 

 from exploitation by this monopoly because new capital will enter the field 

 when the monopoly charges such high prices that the return to the monopolist 

 is above the normal return. Consequently, the policy to be followed in dealing 

 with the problem is to place reliance upon potential competition. 



Professor Jenks completely revised and enlarged his book "The Trust 

 Problem" in 1917. This author, long recognized as an authority on the trust 



21st Mich. Acad. Sci. Kept., 1919. 



