TRANSACTIONS OF SECTION F. 677 



the two services being in the hands of two companies, each seekiug^ its own 

 gain independently of the other. 



The ratiiiiiale of this somewhat paradoxical proposition is not easily discerned 

 •without the aid of symbols, ('ournot, in a popular ' redaction of the theories which 

 he first conceived in a mathematical form, suggests, as a generally intelligible 

 explanation, that it is better to be at the mei-cy of a single master than of several 

 petty tyrants. But this seems to be a commonplace of the sort whicli, in the 

 absence of rigid reasoning, has so often deceived the amateur economist. Might it 

 not be applied to the case of monopoly in general ? 



It would be hard to say how much this remarliable proposition may add to the 

 arguments iu favour of the Govemraent monopolising railways. Nor would I 

 undertake to estimate the practical significance of C'ournots numerous mathemati- 

 cal theorems on the taxation of monopolists. We might perhaps compare the func- 

 tion of the sovereign science with respect to the theory of monopolies to the duty 

 of Government as to their management — to exei'cise a general supervision without 

 attempting to control details. 



We have in the last few paragraphs been supposing monopoly on one side of 

 the market, on the other side a public competing with each other. Let us now 

 consider the bargain between two monopolists, whether individuals, or rather 

 corporate trading-bodies, combinations in the most general sense of the term. The 

 mathematical analj'sis of this case brings very clearly into view the important 



Eroperty, which is not very prominent in writings of the pre-Jevonian era, that the 

 argain between two self-interested co-contractors is not determinate in the same 

 sense as in a regime of perfect competition. 



No doubt, if we take a very simple case — such as that imagined by De Quincey, 

 of a bargain between the owner of a musical-box and a colonist already on his 

 ■way to a distant region where no luxuries can be purchased — it is easy to see that 

 the bargain may settle down at any point between certain limits. But where both 

 the amount of commodity to be sold and money to be paid are variable, as in the 

 momentous case of the bargain between a combination of employers on the one hand 

 and employees on the other, it is a less familiar truth that the terms of the contract 

 are in general to some extent iudetenninate. For instance, the bargain may be 

 either all in the interest of the one party, say long hours and small pay, or on the 

 other hand high wages with much leisure. 



The signiiicance of this proposition has been missed by many of those who 

 have treated the subject without the aid of the appropriate apparatus. Some fail 

 to see that there is any peculiarity in the bargain between isolated units. Another 

 discerns the indeterminateness of the bargain only in the special case iu which the 

 article exchanged is a large indivisible object, like a house. Another limits the 

 difficulty to the case of a single negotiation as distinguished from a contract which, 

 as in the actual labour market, may be modified from time to time. Another tells 

 us that in such a bargain the most anxious party gains least. 



All these phrases seem to obscure the cardinal distinction that perfect compe- 

 tition tends to a determinate settlement, whereas in a regime of combination a 

 principle of adjustment is still to seek. What is that principle ? 



At a former meeting of the British Association, on the occasion of a discussion 

 on sliding scales, I stated the difficulty which there might be, in the absence 

 of competition, in defining fair wages and reasonable terms, and I asked the 

 eminent Professor who introduced the subject in what direction one should look 

 for a solution of this difficulty. Ilis reply imported, as I understood, that no 

 Other general rule can be given but this : to obtain a lull knowledge of, and bring 

 a candid judgment to bear on, all the circumstances relevant to each case. To 

 •which 1 would add that one circumstance relevant to this whole class of cases is 

 just the fact that there is in the abstract such a marked difference between 

 combination and competition. 



Possibly the dry light of abstract science may enable us to see a little further 

 into this difficulty. Analysis strongly suggests that the right solution is what 



' lirrvc Sammaire. 



