832 
7ht RURAL NEW-YORKER 
A Primer of Economics 
By John J. Dillon 
Part XXIX 
COM PETITION 
What do wp moan by competition? 
Competition is the attempt of buyers 
to outbid each other and raise tin* price 
for the commodities offered in the market, 
more especially when the supply is less 
than the demand ; competition is also the 
attempt of producers or dealers to under¬ 
sell each other by lowering the price in 
order to make sales, especially when the 
demand exceeds the supply. Competition 
in an open market is the influence that 
equalizes the supply to the demand and 
fixes the price at that point which will 
find a buyer for all the supply of goods 
in the market at the time. 
When goods are formally offered to the 
public to be sold by a crier at the highest 
bid, we call it an auction sale. The first 
price offered at an auction is usually low¬ 
er than the buyen is willing to pay, and 
the bidding is upwards. In private sales 
thp first price is set by the seller, and 
then the bidding is downward by the buy¬ 
ers. These are the two methods used for 
the sale of farm produce in the large city 
markets. 
When the supply of perishable produce 
is quite regular for a time, and the mar¬ 
ket is established, the auction market is 
very satisfactory. Tf the supply is short 
it is indicated in the high prices for the 
early sales, because the buyers are more 
interested personally in informing them¬ 
selves than the average commission dealer. 
Again, the early buyers have an interest 
in bidding up later sales because they do 
not. want competitors to buy cheap r than 
themselves and undersell them to custom¬ 
ers. The commission merchant salesman 
is always guessing when lie makes prices 
for the first sales. Frequently be sells 
low because he does not know that the 
supply for the day is short, and when lie 
wakes up to the condition of the market 
he is well sold out, and his shippers get 
short returns. But when receipts are ir¬ 
regular. and market not well established, 
the private sale method affords better op¬ 
portunity to protect the goods. In the 
well-organized markets both methods are 
used. The auction system lias the merit 
of being open.. The goods are openly 
displayed and the prices are known to all. 
It is true that the auctioneer as well as 
the private salesman may at times favor a 
pet buyer, but the whole transaction being 
in public view, with alert and interested 
spectators, favoritism could not bo carried 
mi to any great or systematic extent with 
impunity. When bidding is brisk in the 
auction sales we say competition is active, 
and in that case prices are sure to run < u 
the highest level that buyers will pay. In 
a dull market of perishable products the 
seller is always at a disadvantage, and no 
system of selling will be satisfactory, but 
the producer’s interests will be best 
served if the low prices of an overstocked 
market can be passed along to the benefir 
of the consumer. The open character of 
the auction market tends to favor til's 
result. 
SPECIAL PRIVILEGE 
What is a special privilege? 
A special privilege is authority to es¬ 
cape obligations that others, not fa¬ 
vored. must observe; or a favor bestowed 
on one person and refused to another 
person. 
If taken in a broad sense, this definition 
will cover any special privilege. All have 
the privilege of using the public streets 
of a city, but they are all under obliga¬ 
tion not to deface them or obstruct them. 
When one or more persons are authorized 
to dig trenches in them to lay pipes for 
gas, wires for electricity, or rails for cars, 
he or they enjoy a special privilege. All 
who present a ticket may ride in the 
coach of a steam railroad. Anyone who is 
authorized to ride free enjoys a special 
privilege. All who pay the freight may 
ship goods over the railroads. The cor- j 
poratiou that receives a special rate or a I 
rebate enjoys a special privilege. All are 
entitled to delivery of cars for the ship¬ 
ment of carload lots of produce. When 
the hay dealers can get. cars promptly and 
farmers are unable to get them in the rea¬ 
sonable time, llie dealers enjoy a special 
privilege. All have access to the courts, 
but the railroad company that induces a 
judge to accept a pass, bestows a special 
privilege on the court, and beyond any 
doubt expects to get something in return. 
All may buy goods in a foreign country. 
When a tariff must be paid for importing 
them, the manufacturer of similar goods 
in this country enjoys a special privilege. 
The sugar trust admits that its monopoly 
has been favored by the tariff; and it is a 
matter of public record that rebates on 
the railroads were the foundation of 
other noted monopolies. The special priv¬ 
ilege is the most subtle as well as the most 
dangerous form of social and political fa¬ 
voritism. 
TRUSTS AND COMBINES 
What is a trust? 
A trust is a combination organized 
either formally or informally to arbi¬ 
trarily control the supply of a commodity 
and to tix the prices of it. 
Technically a trust is a corporation to 
absorb the whole or a large part of the 
business of individuals, firms and corpora¬ 
tions in some particular industry, the pur¬ 
pose being to control production, to ma¬ 
nipulate supplies, to force competitors out 
of business and ultimately to raise prices 
to the consumer. Some organization ex¬ 
perts vigorously resent any intimation 
that a trust can exist without this legal 
formality, but informal organizations do 
exist that serve the same purpose as a 
trust. The New York milk dealers num¬ 
ber among themselves corporations, part¬ 
nerships and individuals. They have no 
known general corporate organization in- 
cluding them all; but they have an in¬ 
formal organization or understanding by 
which they have for years with temporary 
exceptions arbitrarily controlled the pro¬ 
ducts and fixed prices. These organiza¬ 
tions perform the functions of a trust, and 
it therefore seems proper to broaden the 
technical definition to include the in¬ 
formal organizations. Originally the trust 
consisted of an organization of the sev¬ 
eral concerns which became a party to 
it. Each concern retained its own organi¬ 
zation. and appointed a trustee to repre¬ 
sent it. in the central organization or 
trust. These organizations were declared 
illegal by flic courts, and the corporation 
form was substituted and is familiarly 
known as big business. The corporate 
trust is thp open defiant instrument of 
monopoly. The informal combination is 
an imitation, but. often none the' less effi¬ 
cient. in its monopolistic control of indus¬ 
try. 
A corner is an attempt to buy up 
enough of the available supply of a com¬ 
modity to enable the speculator to ad¬ 
vance the price. When the speculator con¬ 
trols all the supply, the corner is com¬ 
plete ; but when considerable of the pro¬ 
duct is uot under control the high prices 
bring the independent supply into the 
market, and the competition frequently 
defeats the purpose of Ihe corner. Disas¬ 
ter has frequently followed attempts to 
corner wheat in this country. The specu¬ 
lator under-estimates the amount of wheat 
in the farmers’ hands. When the price 
goes up the farmer sells, and the specu¬ 
lator is obliged to buy at the high price 
to protect his corner. When he runs 
June 18, 1921 
short of money to do so the price drops 
and the speculator failsT The successful 
corner, however, results in big gains to 
the speculator and confusion and loss to 
producers as a whole, and to consumers. 
A pool is an agreement by individuals 
or firms to put all of their holdings of a 
particular product together as one supply, 
to lie sold as one account, and to divide 
the net proceeds in proportion to the 
amount of product contributed to the pool 
by each party to the agreement. When a 
pool is used to encourage production and 
to facilitate distribution, its function is 
one of merit. When it is used to limit 
production below normal demand, to cre¬ 
ate a monopoly and to increase prices be¬ 
yond what is necessary to cover cost of 
production and a reasonable profit, its 
functions are detrimental to public inter¬ 
est. 
A gentleman’s agreement is a secret 
verbal understanding or agreement l>e- 
tween individuals or business concerns, or 
both, to act collectively to raise or lower 
prices or limit production. Being gentle¬ 
men, the parties to the secret agreement 
are supposed to live up to it, though it is 
not in writing, and may be contrary to 
statute law, and so obnoxious to public 
interest that it is held as a secret be¬ 
tween the parties to it. 
Cornel's, pools and gentlemen’s agree¬ 
ments are the temporary forerunners of 
the trust. The purpose of all, with the 
exception of the legitimate pool, is mo¬ 
nopoly ; the control of the supply and the 
power to manipulate prices. 
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