COST OF PRODUCTION 27 



embark in general business or in farming, no matter how intelli- 

 gent, are likely to go into and come out of any particular enter- 

 prise at just the wrong time. The average man who is moderately 

 well fixed and stays by a particular enterprise year in and year 

 out, manages to secure for himself just a little better than ordinary 

 wages. The man who is wealthy and expands his operations just 

 as prices are starting up, and reduces operations just as prices are 

 starting down, secures large profits. 



The fluctuating price system, which means great profits to a 

 wealthy few, serious losses and wrecked lives for a few, and a bare 

 livelihood for many, is the natural result of the laissez faire policy 

 of the old classical economists. Their idea was to let things alone, 

 on the theory that, let alone, prices would sooner or later adjust 

 themselves to the proper point. In practice, prices almost never 

 reach a proper point, but are constantly moving either above or 

 below cost of production. One hundred years of laissez faire pol- 

 icy have demonstrated beyond a doubt that under such a system 

 the wealthy few inevitably become richer, whereas the bulk of the 

 people get just enough to keep them going. 



The laissez faire, supply and demand, speculative, or market 

 price system, is condemned by nearly every one except the busi- 

 ness men who run it and believe they understand its beneficent 

 workings, and the economists of the classical type who, in their 

 careful reasoning, are unable to think of any other way of deter- 

 mining satisfactory prices over any period of time. The common 

 people and the lofty idealists were greatly elated during 1917 and 

 1918 at the apparently successful working of fixed prices estab- 

 lished more or less in defiance of the speculative or laissez faire 

 price system. 



Those who have given the most thought to price fixing advo- 

 cate as a guide "cost of production plus a reasonable profit." 

 But what is cost of production? Even in industries so well con- 

 trolled by man as coal mining, where the weather does not enter in, 

 there are some mines that can produce a ton of coal for two or three 

 dollars, while other mines can not produce a ton of coal for less 

 than six or seven dollars. The North Dakota wheat farmer, in a 

 year of rust, may produce wheat at a cost of four or five dollars 

 a bushel, whereas the Kansas farmer the same year may produce 

 wheat at a cost of only a dollar or a dollar and a half per bushel. 

 Shall both the Dakota farmer and the Kansas farmer be paid cost 

 of production plus a reasonable profit for their wheat? From 

 this standpoint we see that there is no such thing as a standard 

 cost of production. A single producer may be able to determine 



