and the War Department, t'~ey had to agree .to.p.ay producers a certain 

 schedule of prices according to grades. This price schedule was de- 

 veloped by government officials In consultation with representatives of 

 the industry. Following the war the procedure was abandoned. 



In the case of milk marketing, prices for fluid milk are determined in 

 many of the larger city milk markets through marketing agreements and 

 orders administered by government authority. When a price-determining 

 arrangment of this sort is established, no particular change takes place 

 in the structure of the market, but the machinery for price determination 

 is changed. Prices are set, not by the unregulated forces of supply and 

 demand operating through the interplay of many buyers and sellers all 

 over the market, nor by the bargaining of a cooperative with a few proc- 

 essors, but 'administratively by a government agency. 



So-called administrative pricing of farm products is not a new develop- 

 ment. Its history extends over many years and many countries. In the 

 depression years of the 1930' s it was used to alleviate the plight of 

 the producers * In this case the government acted to increase farm 

 prices and incomes. At other 'times, as during World War II, the situa- 

 tion was reversed, and the government acted to hold down prices in an 

 effort to pravent the cost of living from rising. Because government 

 represents the entire population, it should consider the interests of all 

 groups and endeavor always to reach a balance that is fair. The collective 

 bargaining association, If there were such in that particular market area, 

 would likely act as the representative of a large number of producers 

 in hearings held to develop the basis for administrative pricing and would 

 have an important voice in final price determination. Its bargaining 

 would thus be more with the government agency than with the processors . 



The real problem in administrative pricing pertains to the level at which 

 the prices are fixed. Minor deviations from the levels that would pre- 

 vail under competitive market conditions might not have a significant 

 effect. Dislocations would beome serious, however, when prices are set 

 out of line with competitive prices for any considerable length of time. 

 Under conditions of relative stability in the general price level a 

 fairly close approximation may be achieved. But under conditions of 

 widely fluctuating prices, this task is very difficult. 



The history of government price fixing efforts provides a wealth of 

 examples of the dislocations which are encountered in administrative 

 pricing when too little consideration to fundamental economic principles 

 is given. 2/ Further emphasis on this point is made In the conclusions 

 of the New "fork Kilkshed Price Committee which states: 



"In any program of administrative pricing by government, 

 it is Important to keep clearly in mind (i) that the long- 

 run interests of producers and consumers should be considersd 

 as more important than their short-run interests and (2) that 

 many objectives which are desirable from the standpoint of 





9/ For oxamplas see Blackman, Jules, Government P^ico Fixin g, Pitman, 

 N.Y. 1933 - or review some of the cases of Price fixing by Office of 

 Price Administration. 



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