680 TRANSACTIONS OP SECTION F. 



The remaining question is one of high policy. What importance do we as a 

 nation attach to the policy of promoting industrial security by collective action ? 

 And what sacrifices are those interested prepared to make for such an object, and, 

 in particular, to minimise the irregularity of working-class incomes so far as 

 affected by irregular demand for labour ? The final answer will depend not only 

 on the general view taken of the relations of the individual and the State, and 

 of the scope and limits of political action, but also on the relative weight 

 attached to this particular object as compared with other objects which also 

 have claims on public funds and energy. 



The following Papers were then read : — 



1. The Price of Electricity. 

 By Edward W. Cowan, M.Inst.C.E., M.Inst.E.E. 



In this paper the adoption of certain principles by the electrical industry as 

 a basis for the charges made for electricity supply was criticised. 



A fundamental principle which the industry has established is that of charg- 

 ing upon the basis of equal rate of profit from every class of consumer. This 

 system has many advantages from a book-keeping point of view, and is a safe 

 system which is also comparatively simple to administer. 



But the author argued that the ' equal profit ' system fails in the attainment 

 of the best economic results, because the factor of demand is ignored in such a 

 system. The demand for electricity is of a composite character. It is a demand 

 for light, for power, for heat, &c. The intensity of demand as between these 

 various uses of electricity will be different ; that for light generally being greater 

 than that for power, at a given price, and so on. As it will be admitted that the 

 greatest economic advantage will be realised when there is the closest and widest 

 possible correspondence between the incidence of supply and the incidence of 

 demand, it must follow that adjustment of price of supply according to the 

 intensity of demand in the case of each class would secure a more efficient cor- 

 respondence, and consequently a greater aggregate economic advantage. The 

 difficulties in giving effect to a practical system of classified tariffs were dis- 

 cussed, and it was shown by reference to the successful operation of the system 

 in railway working and in other industries that these difficulties are not insur- 

 mountable. It was also shown that electricity production for public supply is of 

 the nature of a ' joint ' production, and it was argued that, in so far as it is of 

 that character, no separate part of the supply can be regarded as having a 

 separate calculable cost. Examples were given in other industries of apparent 

 anomalies in the separate prices of the component parts of a ' joint ' supply. It 

 was shown that these prices, as to their relation to each other, are influenced by 

 the intensity of demand for each part of the joint production, and the impos- 

 sibility of ignoring this influence without great economic loss was pointed out. 



The adherence of electrical engineers to the ' equal profit ' system was dis- 

 cussed, they believing that such a system is ethically right, and that any classi- 

 fication of prices according to the nature of demand would involve the introduc- 

 tion of an unfair element into the business. 



The author contended that, when the conditions are analysed, it is found that 

 there are no grounds for such a view, but that, from an ethical standpoint, classi- 

 fication may be resorted to without any injury or loss to any class. The gain due 

 to such a method was shown not to be a differential gain, but a specific gain 

 which may be shared by all classes of consumers. Further, it was shown that 

 the ' equal profit ' system cannot be entirely justified from the ethical point of 

 view, because certain injurious results may accompany its working; and the fact 

 that the measure of advantage is arbitrarily restricted by the system can scarcely 

 be justified, unless the practical difficulties of classification are such that its 

 adoption is on that account undesirable. 



A diagram was given which depicted ' demand ' characteristics for light, 

 power, and heat, and also a ' cost of production ' (plus a reasonable profit) charac- 

 teristic. The aggregate demand at equal rate of profit from each class of con- 

 sumer was plotted, and, with the arbitrarily selected elasticities of demand taken, 



