The R U 8 A NEV/-YORKER 
A Primer of Economics 
By John J. Dillon 
Part XXXI 
The manufacture of securities is one 
of the objects of capitalistic monopolies 
and one of the big sources of profit. The 
actual assets of the combined companies 
are represented in bonds and preferred 
stock. The common stock issued in lib¬ 
eral proportions is all water, or largely 
so. As soon as this is put on a dividend 
basis, the stock is put on the stock ex¬ 
change and sold on an investment basis. 
The new purchasers become genuine in¬ 
vestors, but there is frequently an inter¬ 
mediate period of speculative gambling. 
The principal asset behind the common 
stock is the ability of the company to 
control prices because of its monopoly. 
If it fails in this the company makes less 
profit; the stock pays less dividend or 
none at all, and the new investors lose 
their money. 
The boast of monopoly is efficiency. 
Its advocates claim that they can produce 
cheaper and sell at lower prices than the 
smaller concerns, but the claims are not 
proven. They are disputed by competent 
authorities. The burden of testimony is 
to the effect that there is greater ef¬ 
ficiency in moderate-sized companies 
where individual members of the firm 
supervise it, than in the larger trusts 
where the supervision is necessarily left 
to employees, and overhead expenses are 
necessarily large and usually increased 
through the employment of favorites, and 
the slothful methods that sooner or later 
creep into a business freed from the stim¬ 
ulus of competition. Besides, the mo¬ 
nopolies are always on the defensive, and 
incur exp ‘uses that smaller competitive 
companies do not incur. Campaign con¬ 
tributions, legislative lobbies, high-priced 
attorneys, and often their own legislative 
representatives are among the items of 
expense of the modern trust. They get 
efficient political service only because they 
pay well for it, and the ultimate cost of 
it must in one way or another come out 
of the public. 
Without going into details, it ‘seems to 
be a fair conclusion from available infor¬ 
mation gathered from the courts and va¬ 
rious investigations by legislative and 
other committees that: 
1. Monopolies increase the price of 
commodities to the consumer. 
2. Cheapen the quality of the goods by 
adulteration or otherwise. 
3. Depress the price of the raw ma¬ 
terial to the producer of it. 
A monopoly created in the distribution 
of farm food products always widens the 
margin between producer and consumer, 
and discourages the production of the 
product. The organization of the pack¬ 
ers’ trust resulted in driving the business 
of producing meat animals off the farms 
of the Eastern States almost entirely, and 
has finally resulted in a serious reduction 
of the meat supply per capita for the 
whole country. The milk monopolies, big 
and small, general and local, have dis¬ 
couraged the dairy business in all sections 
of the United States. 
Few monopolies could develop or exist 
of their own inherent strength. For the 
most part they are encouraged or sup¬ 
ported openly or covertly, directly or in¬ 
directly by government or those in a 
position to convert public functions to 
private advantage. Favored as it is in 
matter of location, the hard coal industry 
could not be monopolized without the in¬ 
fluence of the railroads. The same is 
true of the oil monopoly and the packers’ 
monopoly. So, too, with the flour and 
feed trusts. In New York City the 
wholesale produce business is in a large 
measure monopolized through the rail¬ 
road, docks and terminal facilities. The 
cold storage business is also a virtual mo¬ 
nopoly in New York and other large cities 
in the hands of speculators and commis¬ 
sion houses, through the favor of banks 
and the corporations which control them. 
Monopolies are frequently promoted under 
the cover of laws enacted ostensibly for 
public protection, and executed for the 
benefit of the monopoly. It is doubtful 
if the big milk dealers in New York 
could ever have stamped out competition 
of small dealers and monopolized the busi¬ 
ness without the help of the regulatory 
laws of State and city enacted in th; 
name of public health and hygiene, and 
the enforcement of these laws through 
susceptible agencies acting tinder orders 
from high political sources. 
Monopoly is also favored by propa¬ 
ganda of inspired publicity to give the 
public such information as the promoters 
want them to have. Honest, truthful 
publicity would alone correct many of 
the abuses of monopoly, but the facts are 
not available to the independent press, or 
to any other press for that matter. Mo¬ 
nopoly secrets are well guarded. Even 
the government usually fails to get them 
in sufficient detail and completeness to 
serve any purpose more than an occa¬ 
sional sensation. The suspicion is pretty 
general that the agents of the government 
confine their inquiries to prudential 
limits. 
A distinction should be made between 
public monopolies and private monopolies. 
A private monopoly is one the profits of 
which go to private individuals. The 
public monopoly, when conducted prop¬ 
erly, turns all the benefits and profits 
back to the public. When, if ever, the 
people become educated to demand ef¬ 
ficient and economic service in affairs of 
government, public utilities will be gener¬ 
ally operated by public monopolies. 
THE COST OF PRODUCTION' 
How is cost of production determined? 
The cost of production is determined 
by finding the sum of the cost of the dif¬ 
ferent elements of production. These are 
cost of natural products (or rent), raw 
naterials, interest on capital, wages of 
labor, taxes, insurance, depreciation of 
property aud profits. 
Whether the farmer labors himself or 
manages the business, or does both, his 
wages and salary must be included in cost 
of production. 
Some economists do not include rent in 
the coi^t of production because rent, as 
has been already explained, is merely the 
excess products of superior land over the 
poorest land in cultivation, and this dif¬ 
ference is paid by the consumer, and goes 
to the landlord and not to the tenant. 
This method of computation is an inherit¬ 
ance from the English, where the tenant 
system is general; but even in England, 
as John Stuart Mill admits, factory 
sites pay rent, and this element should be 
and no doubt is included there in the cost 
of production. In this country nearly two- 
thirds of the farms are operated by their 
owners, and the tenants in normal cases 
pay rent on the land as we’l as interest on 
the improvements under the popular term 
“rent,” and the logical method of ac¬ 
counting is to charge rent, and credit 
the full returns for the product. Tech¬ 
nically such elements as seed, feed and 
commercial fertilizers would be included 
in natural products. For example, in 
potash we could, estimate -the cost of the 
raw material as it comes from the natural 
deposits in the ground; add to this the 
cost of labor in taking it from the beds 
and putting it within our reach, and to 
879 
this add the profits that would be imposed 
by those who did the work as a business. 
Scientifically that method of estimation 
would be correct; but it does not change 
the result if we classify such necessities 
as.supplies, or raw material, and add the 
price of them as an element of our cost 
of production. Generally speaking, farm¬ 
ing has never been on a strictly commer¬ 
cial basis. Up to the present time we 
were frankly told that farming could 
never be managed as a business in which 
prices would be figured as in a factory 
on the cost of production. “Farming,” 
we are told, “was never intended to pay 
on that basis.” Now we have business 
men who publicly admit that to insure a 
full supply of food and raw materials 
for the future the farmer must be paid the 
cost of producing it, aud that cost in¬ 
cluded a . reasonable profit. When this 
principle is universally recognized agricul¬ 
ture will have won the greatest victory 
in its history. 
Producing food on the farm is a busi¬ 
ness undertaking. It requires land, cap 
ital and labor. It should produce rent, 
interest, wages and profits. Like the pro¬ 
duction of other forms of wealth, the prin 
cipal item in the cost of production ir 
labor; that is to say, present labor and 
labor of the past which has been saved 
and handed down to the present in th 
form of capital. It is principally thes 
two elements of labor that either in the 
factory or in the field give wealth 
its exchange value. We estimate the 
value of commodities largely by the 
amount of present and past labor neces¬ 
sary to produce them. That is the 
amount of labor and interest. If we 
underestimate the value of farm products 
by selling them for less than they cost 
to produce, we cheapen the labor that 
produces them. The first essential to the 
making of an economic price is a careful 
estimate the cost of production. 
Why Strangle Your Furnace? 
If yom were to take as big a crimp in the outer casing of a Moncrief 
Pipeless Furnace as the fellow above has taken, it would still have as much 
capacity for air circulation as has the ordinary pipeless furnace. 
Full and free air circulation is the very breath of life of pipeless furnace 
heating. It is the extra air circulation of the Moncrief that enables it to pro¬ 
duce such wonderful heating results at so low a cost. 
moncrief™ furnace 
The casings, or air chambers, of 
the Moncrief afford passage for 50% 
more air circulation than the aver¬ 
age pipeless furnace. Large casings 
mean more heat and small fuel bills. 
Large casings effect a greater and 
wider distribution of heat through 
your house with a more slowly 
moving current of air. That means 
absence of floor drafts and cold 
corners. 
In every way the Moncrief is the 
big value, high quality pipeless 
furnace. Every part is generously, 
honestly made. Castings are of the 
finest grey iron, close in grain and 
well finished. They radiate heat in 
a degree that a coarse grained, un¬ 
finished casting never can. Every 
joint is ground smooth and straight 
so that the sections go together 
smoke- and gas-tight. All the dust 
and smoke goes up the chimney, not 
into your house. 
It is worth your while to investi¬ 
gate this improved pipeless furnace. 
It will do the biggest job of heating 
at the smallest cost of anything you 
will find. 
Any Moncrief dealer will tell you 
more about it. Write us for the 
name of the Moncrief dealer in your 
community. 
Manufactured by 
THE HENRY FURNACE & FOUNDRY CO., Cleveland, Ohio 
Eastern Distributors 
F. H. HANLON, Batavia. N. Y. E. L. GARNER. 619 E. 14th St., Brooklyn. N. Y. 
DEALERS: Many desirable territories are still open. Write for the details of the Moncrief Proposition. 
