JUST PRICE; FAIR PRICE; EQUILIBRIUM PRICE 229 



fair to producer and consumer. Since "regulation begets regula- 

 tion," these price-fixing measures entailed the need of government 

 regulation of consumption and production. But as a war measure 

 they were borne cheerfully by all parties. 



Price fixing affects first of all the demand side of the market, 

 not the supply side. Thus, fixing the-price low increases consump- 

 tion (and decreases production, in the end); fixing prices high 

 lessens consumption (and increases production in the end). Thus 

 the Federal Food Administration in the United States, in 1917, 

 fixed the price of wheat at a low -figure, compared with its market 

 value, thus stimulating the consumption of wheat. This led to 

 the regulation of consumption also, and finally to an extensive 

 system of rationing. In other words, the control of demand led 

 to an attempt at control of supply, first of one product, then of 

 other products. Each added. regulation begot another regulation. 

 Regulation had extended only to the necessaries of life when the 

 war closed. Concerning the non-essential industries, Professor 

 Warren made this pertinent comment. 



" The present policy of regulation of prices of necessities is working about 

 as follows: The cost of living is lower than it would be. This leaves more 

 money to spend for luxuries. The luxuries rise in price. The manufacturers 

 Df luxuries pay better wages. Labor is attracted from farms and other regu- 

 lated industries." 5 



This is a good illustration of how the consumer's clamor for 

 cheap food, when headed by a price fixing body, may actually 

 result in food scarcity by diminishing production. 



Just Price; Fair Price; Equilibrium Price. The terms "just 

 price" and "fair price/' have no clear-cut definition in the popular 

 mind. As viewed from the individual producer's viewpoint, a fair 

 price connotes a price rewarding him for all his costs of production. 

 But this cannot be the social viewpoint, since many commodities 

 produced do find a demand at a price much above cost of produc- 

 tion, and others do not find a demand strong enough to cover cost 

 of production. In other words, there is a class of marginal pro- 

 ducers, producing at cost, and there is a class of sub-marginal pro- 

 ducers putting the product on the market at less than cost. As 

 viewed by society, a just price is that price which will maintain the 

 industry or enterprise which society wants maintained. Does a big 

 city want a supply of fresh milk? Then it must pay the price which 

 will maintain the dairy industry the dairy enterprises of the indi- 



5 Reprint from the Proceedings of the American Farm Management 

 Association, December, 1917; The Food Supply, G. F. Warren, p. 18. 



