F.— ECONOMIC SCIENCE AND STATISTICS. HI 



each of which may use its resources to expand vertically, a development 

 which is not always desired, but which has its point of preference to market 

 dependence. 



The administrative use of prices may also extend beyond the con- 

 sideration of what will maintain and develop productive capacity in a 

 particular industry. It has been claimed that strongly led combines 

 may adjust their prices so as to assist the stability of industrial development 

 as a whole. Thus a combine might, on a rising market, so advance its 

 prices as to render expansion more difficult, and therefore so as to damp 

 down that expansion. There are very few cases in which it can be said 

 that industrial combines have applied this idea. It has been considered 

 that this policy is applicable mainly from the side of the banks which, it is 

 suggested, should move the price of loans quickly and strongly enough to 

 deter speculative inflations of business, and reduce fluctuations. To keep 

 other things more steady than they might otherwise have been, one 

 thing, the price of money, would thus be less steady than otherwise. This 

 policy is not inapplicable to industries which are as fundamental as 

 banking — for instance, to the coal industry, on whose supplies expansion 

 depends as vitally. It is, however, unlikely that any industry will have 

 the same degree of combination for this purpose which the great banks 

 have ; and the relation of such a policy to their own costs is more com- 

 plicated than it is in the case of money. Where price administration has 

 been applied for this purpose, it has been in the form of price-stability, as 

 in the case of the German Coal Cartel. It is natural that this simple 

 method should be applied, and anyone can fix a price, especially near the 

 top of a boom, as was done in that case. It is, however, price adjustment 

 that is required, a more difficult proceeding, and not expectable in respect 

 of industrial administrations beyond the necessities of their own internal 

 stability. 



IX. 



The idea of a rational administration, in its relation to the ' com- 

 petitive war ' and to the monopoly ' problem,' may be otherwise illustrated. 

 Liefmann, a great defender of rationalisation by Cartels, states that ' a 

 Cartel without monopolist purpose is nothing at all.' It is to him a matter 

 of definition that some common administration is to be possible. This is 

 the reaction which he describes from the overdone system of individualism, 

 in which the consumer was tertius gaudens at a concealed social cost. But 

 it will be remembered that Cournot derived the competitive position from 

 that of monopoly, by multiplying the monopolists. Historically, as well 

 as analytically, it is conceivable that we might have worked downward 

 from monopolies, instead of upwards from competition, in order to obtain 

 the position now called rational administration. We might equally 

 explain the facts on the ground that the monopoly motive is fundamental, 

 and that it expresses itself wherever or so far as competition does not 

 impede it ; or on the ground that competition is fundamental, and always 

 tends to break down or circumvent monopolist tendencies. From the 

 former point of view, the more competition is unrestricted the less is the 

 influence of organisation ; working down from monopoly, as a unified 

 organisation, competition appears as the limiting case, when all the parts 

 fly apart and act independently. The latter standpoint gives monopoly 



