F.— ECONOMIC SCIENCE AND STATISTICS. 109 



to find its most purposeful form, to bring in the outsiders, to settle the 

 differences ; when he sees what time and trouble are applied, how many 

 conferences held and rules drafted ; and when he considers the earlier 

 conditions where such common negotiation, making the inner details of 

 management a matter of conference and publicity, would have been 

 impossible, then he sees how the whole economic structure has changed, 

 and how much the Cartels have revolutionised the whole basis of manage- 

 ment and enterprise.' ' The sense of interdependence becomes stronger 

 than the thought of economic opposition.' This defines the difference 

 between magnates and leaders, and the rationalisation of authority. 



Third, there will be the fact of mere complexity, whether modified or 

 not by publicity. Industrial government permits of this in a degree not 

 reached in the other great fields of administration, political, religious, and 

 military. Its extent is shown, for instance, in the recent official German 

 analysis of the cross-relations obtaining within and between the Trusts, 

 Concerns, and Cartelled enterprises. This maze of interconnections may 

 become itself a matter of distrust and prejudice from the side of the 

 community, especially but not exclusively in its international aspects. 

 This prejudice showed itself at the outbreak of war in a well-known case, 

 described as an ' octopus ' of private interests ; or in the name, a ' King 

 of rats,' applied to a control which has indefinitely extended underground 

 accesses in all directions. Even if industrial finance is flexible enough 

 not to feel anything unmanageable in this, the community, on occasions 

 when such complexities are made public, is alarmed and disturbed, as if a 

 march were being stolen on its market alternative, or Joint Stock practice 

 going beyond the spirit of the law. Sheer complexity of relationships 

 might be one of the influences causing opinion to move as far beyond the 

 sanction of combination as it has recently moved toward it. Democracy 

 likes at any rate to think that it understands how it is governed. 



vra. 



With the growth of industrial leadership a change takes place in the 

 relation of price determination to the dynamics of production. The change 

 is one of emphasis, that is to say, of the degree to which prices are 

 approximated to a cost of production. Under a strictly competitive 

 economy, there are producers who are just able to come through the 

 fluctuations of prices with an ordinary rate of profit, and these producers 

 are marginal. There is an amount of production, not always in the 

 hands of the same producers, which is extra-marginal, and of course 

 another amount which is infra-marginal. The general conditions of 

 supply and demand determine the price level about which the fluctuations 

 take place, and therefore determine which producers are marginal. The 

 extent to which extra-marginal, or high-cost, producers influence price 

 depends on trade practice ; it is less, the more production is ' to order,' 

 and they can keep their position only by working at lower than ordinary 

 profit. In other words, prices are not usually determined by the costs 

 of the highest-cost product, but the profit on that product is determined 

 by the range through which prices have fluctuated over a period ; and 

 high-cost product has constantly to move to a lower-cost production, or 

 go out of the market. This was shown by the price-fixing proceedings 



