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TRANSACTIONS OF SECTION F. 909 
shall be bound to perform services, or deliver goods, at a certain price and subject 
to certain other regulations, some of which may perhaps concern their relations 
to their employés. In order that the plan may have a fair chance of success, it is 
essential that the capital to be supplied by the private corporation should not be 
so large as to prevent there being a real and effective competition for the franchise. 
But this being assumed, the special point of the proposal is that, where possible, 
the competition for the franchise shall turn on the price or the quality, or both, 
of the services or the goods, rather than the annual sum paid for the lease. 
Competition as to quality is, from the consumer's point of view, often just as 
beneficial as competition as to price, and sometimes more so. And in industries 
which obey the Law of Increasing Returns, as very many of these indivisible in- 
dustries do, a reduction of price or an improvement of quality will confer on the 
consumer a benefit out of all proportion to the extra cost involved.! 
§ 12, But I have lingered too long over those industries which I have called in- 
divisible, and I must pass to those in which competition exerts a pretty full sway. 
The first point to be observed is that competition in bargaining and competition in 
production stand in very different relations to the public interest ; and that one of 
the great advances in modern analysis consists in the emphasis which it lays on the 
distinction between the two. Competition in bargaining constitutes a great part 
of competition in marketing, but is not the whole of it. For under mar rketing i is 
included the whole of the effective organisation of the trade side of a business; 
and most of this performs essential services for the public, and is, in fact, of the 
same order as production commonly so called. But a great part of marketing con- 
sists of bargaining, of manceuyring to get others to buy at a high price and sell at 
a low price, to obtain special concessions or to force a trade by offering them. 
This is, from the social point of view, almost pure waste; it is that part of trade 
as to which Aristotle’s dictum is most nearly true, that no one can gain except at 
the loss of another. It hasa great attraction for some minds that are not merely 
mean; but nevertheless it is the only part of honest trade competition that is 
entirely devoid of any ennobling or elevating feature. A claim is made on behalf of 
large firms and large combinations that their growth tends to diminish the waste, 
and on the whole “perhaps it does. The one solid advantage which the public 
gain from ‘a combination powerful enough to possess a local “monopoly i is that it 
escapes much waste on advertising and petty bargaining and manceuvring. But its 
weakness in this regard lies in the fact that to keep its monopoly it must be 
always bargaining and manceuyring on a large scale. And if its monopoly is 
invaded, it must bargain and manceuvre widely in matters of detail as well as in 
larger affairs. 
Still less can we fully concede, without further proof, the claim which has 
been urged on behalf of such combinations, that they will render industry more 
stable and diminish the fluctuations of commercial activity. This claim, though 
put forward confidently and by many writers, does not appear to be supported by 
any arguments that will bear examination. On the one hand some industries 
which are already aggregated into large and powerful units, such as railway com- 
panies, give exceptionally steady employment; and others, such as the heavy iron 
and the chemical industries, exceptionally unsteady. And when combinations suc- 
ceed in steadying their own trades a very little, they often do it by means which 
diminish production and disturb other trades a very great deal. The teaching of 
history seems to throw but little light on the question, because the methods of 
regulation which are now suggested have not much in common with those of 
earlier times, while the causes which govern fluctuations in prices have changed 
their character completely. 
§ 18. Let us thea next turn to the economies of production ona large scale. They 
have long been well known, and our forefathers certainly did not underrate their 
importance. For, though the absence of any proper industrial census in England 
prevents us from getting exact information on the subject, yet there seems no doubt 
1 This belongs to a class of questions relating to monopolies, &c., the more general 
and abstract aspects of which can be best shown by the diagrammatic method. 
