CRITICISM OF OUR PRICE-MAKING 

 SYSTEM 



PRICES of corn, hogs, etc., are determined chiefly by supply 

 and demand, together with the occasional influence of stra- 

 tegic manipulation. The system as operated by the packers and 

 Board of Trade speculators really reflected conditions before the 

 war with remarkable accuracy. During the war, so many extraor- 

 dinary conditions were at work that it was impossible to measure 

 supply-and-demand conditions at all accuratel}^ and it is impos- 

 sible to say how efficiently the speculators did their work. 



But speculators and packers, in so far as they set prices, are 

 concerned solely in making a profit for themselves. If, by manip- 

 ulating the market, they can make a bigger profit than by trying 

 to express supply-and-demand conditions with mathematical ex- 

 actitude, then they may be expected to manipulate. The violence 

 with which hog prices swing above and below cost of production 

 would suggest that the packers are consciously endeavoring to send 

 prices too low for a year or two, in order later to send them too 

 high. They go into the low-price period with a small amount of 

 high-priced products on hand, and come out into the higher level 

 with a large quantity of low-price products. It would seem that 

 by laying in a stock of hog products at the low point, they hope 

 to profit later b}^ an advance in price. 



It is typical of supply and demand, as it makes prices of stan- 

 dard farm products, that a small crop sells for more than a large 

 crop. A twenty per cent decrease in the supply raises the price 

 more than twenty per cent, possibly thirty per cent, or even fifty 

 per cent. Old Gregory King, in the latter part of the Seventeenth 

 century, recognized this principle when he stated: 



"We take it a defect in the harvest may raise the price of corn 

 [wheat] in the following proportions : 



Defect. Above the common rate. 



1 tenth raises the price 3 tenths 



2 tenths raises the price 8 tenths 



3 tenths raises the price 16 tenths 



4 tenths raises the price 28 tenths 



Modern statistical study indicates that this statement of King's 

 is somewhat exaggerated, but undeniably the tendency exists 

 among standard agricultural products for small crops to bring in 



