EDWARD S, MASON 169 



consumed produce relatively large fluctuations of both prices and 

 incomes. 



The term "raw materials," however, covers a wide variety of con- 

 ditions. About the only relevant characteristic common to all raw 

 materials is that, since they lie far back in the production process, 

 demand is subject to inventory fluctuations, with attendant specula- 

 tion, at all successive stages. But it is possible to distinguish broad 

 groups of raw materials that tend to exhibit special supply and de- 

 mand characteristics. Most minerals flow into durable goods indus- 

 tries and consequently reflect, frequently in exaggerated form, the 

 wide cyclical variations in consumption of those industries. On the 

 supply side, reduction of output is usually accompanied by higher 

 maintenance costs than characterize manufacturing operations and 

 cessation of output may be equivalent to loss of the property. Fur- 

 thermore, expansion of output may, beyond a certain point, be im- 

 possible without further discovery. 



Many foodstuffs confront demands that tend to be inelastic both to 

 price and income changes. Supply inelasticities are also common in 

 food production either for technical reasons, such as the long growing 

 period of tree crops, or because producers, lacking alternative oppor- 

 tunities, are slow to move in or out of production. The demands for 

 agricultural raw materials are usually more elastic, both price- and 

 income-wise, than for foodstuffs, but supply conditions frequently 

 show the same inelasticities. Beyond these broad generalizations, anal- 

 ysis of price and quantity behavior would find it necessary to proceed 

 to the supply and demand characteristics of particular materials. Still, 

 there are sufficient differences between the production and consump- 

 tion of raw materials as against manufactures to justify, in large part, 

 the special study of agricultural economics and the less well developed 

 special field of mineral economics. 



It does not, of course, follow from these special characteristics and 

 the consequent wide fluctuations of raw material prices that a case has 

 been made for public intervention. But it is equally clear, from obser- 

 vation, that intervention has a peculiar predilection for the field of 

 raw materials and usually on the ground that unimpeded price changes 

 fail to bring about a proper adjustment of supply to demand. To un- 

 derstand and to evaluate this phenomenon takes us out of the field of 



