March 5, 1886.] 



SCIENCE. 



223 



question in which the whole community^has an 

 interest. If a man is morally responsible for the 

 injury to another, and we allow him to be relieved 

 of legal responsibility, we strain the basis of public 

 opinion on which the enforcement of law rests. 

 This fact is being gradually recognized. The Eng- 

 lish employers' liability act of 1880 corrects some 

 of the worst abuses of the principle of ' negli- 

 gence of fellow-servant ; ' and a recent decision of 

 the supreme court does much the same thing for 

 the United States. 



It is not merely against their employees that 

 large concerns can relieve themselves of responsi- 

 bility. The case of carriers' contracts has been 

 already alluded to. Were it not for the opposition 

 of the courts, such a concern could throw responsi- 

 bility for damage upon the shipper as easily as upon 

 the employee. In spite of all the courts can do, 

 the carrier's position is so much stronger than that 

 of the individual shippers, that he can often dic- 

 tate his own terms in this respect. 



This brings us face to face with the other 

 element in our position, — the fact, that, in the 

 every-day dealings between a large concern and its 

 individual customers, free competition does not 

 and can not readily exist. 



1. As a matter of fact, it does not. The local 

 shipper, bargaining for rates with a railroad, has 

 no help from competition to protect him against 

 mistakes of the manager. In an indirect way he 

 receives some help, because it is against the inter- 

 est of the railroad manager to discourage business 

 along his route by higher rates than his competi- 

 tors offer. But practically this principle is violated 

 in thousands of instances, and competition affords 

 no relief. Unless the manager makes his rates so 

 high everywhere as to tempt a parallel road into 

 the field, no amount of individual injustice will 

 work its own cure. The local shipper does not 

 enjoy free competition. Even if the supply of 

 transportation facilities is more than adequate to 

 meet the demand s the supply is monopolized, while 

 the demand is not. The competition is all one- 

 sided. 



It is much the same way with a large factory 

 dealing with unorganized employees, especially if 

 the employee is so situated that he cannot readily 

 change his residence. And it is so, to a far greater 

 extent than we are wont to suspect, in the produc- 

 tion and sale of manufactured goods. A few r 

 instances, like the Standard oil company, have 

 become notorious, and have withdrawn attention 

 from the rest ; but the number of industries where 

 a pool or division of the field has been carried out 

 is really very large. It is rare that for a weak 

 individual, dealing with a strong organization, 

 competition exists in any thing but name. 



2. As a matter of theory, competition cannot 

 produce the effects which have been expected of 

 it. It tends to keep down profits, and limit a verage 

 rates ; but it does not prevent disastrous fluctua- 

 tions, or protect the weaker individuals. Rather, it 

 harms them by causing discrimination in favor of 

 the stronger and more unscrupulous. This is one 

 respect in which the industries of to-day differ 

 from those of a century ago. The larger the per- 

 manent investment, the less good and more harm 

 competition can do. What was nearly right for a 

 bank or store, is partly wrong for a factory, and 

 almost wholly wrong for a railroad. 



The expenses of a railroad (and the same sort of 

 reasoning might be applied to a factory) are of 

 two kinds, — fixed charges and operating expenses. 

 Under the former head we include interest on the 

 investment, deterioration, and the various ad- 

 ministrative expenses which are involved in the 

 conduct of the business as a whole. Under the 

 latter head we include train and station service, 

 fuel, and the various items of expense involved in 

 doing each individual piece of business. Fixed 

 charges, as the name implies, vary but little as 

 the volume of business increases or diminishes : 

 operating expenses are nearly proportional to the 

 volume of business. 



In order to attract new capital into the business, 

 rates must be high enough to pay not merely 

 operating expenses, but fixed charges on both old 

 and new capital. But, when capital is once invest- 

 ed, it can afford to make rates hardly above the 

 level of operating expenses gather than lose a given 

 piece of business. This ' fighting rate ' may be only 

 one-half or one-third of a rate which would pay 

 fixed charges. Pig iron in England in 1873 was 

 three times as high as in 1878. Railroad rates, 

 on the other hand, have varied as much as this 

 within a single year. 



The old theory of competition said, "Such fluc- 

 tuations cannot take place, because new capital 

 will come in when rates are above cost, and old 

 capital will withdraw when rates are below cost." 

 The trouble with this theory, as applied to modern 

 industry, is twofold : 1. Where there is a great 

 deal of fixed capital, it can only come in slowly, 

 and only withdraw slowly; 2. More important still, 

 the rate at which it pays to come in is very much 

 higher than the rate at which it pays to go out. 

 Cost of service is calculated on two distinct bases, 

 one of which includes fixed charges, while the 

 other does not. The former may be two or three 

 times as high as the latter. The difference is suffi- 

 cient to give the chance for a commercial crisis 

 or for outrageous discrimination. 



Competition, if it exists at all, must exist either 

 everywhere or somewhere. In the former case 



