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Price-Control in United States
1911 Encyclopedia Britannica
or "PRICE-CONTROL IN UNITED STATES. - During the World War price-fixing agencies in the United States were numerous, and the arrangements made were often informal. Many prices were controlled indirectly; but when this control was to any degree international the result was a " fixed price." Prices were more or less formally fixed by various departments or branches of the U.S. Government for at least fro important products, each of which required a separate price-fixing operation. This was exclusive of repetitions or renewals at later periods, which often involved as much work and study as the original decisions. The following is a partial list of products for which prices were fixed by some government agency or sanction. They ar., arranged in general in the order in which the prices were fixed, although no pretence to accuracy in this regard is claimed. Food products are not covered in detail, and no attempt has been made to mention them in order: - Copper, ingot, electrolytic Copper wire Iron ore Nitric acid Cotton linters Cotton goods Cotton yarns Denims (Mass.) Drillings (Mass.) Ginghams, (Amoskeag) Print cloths Sheetings, bleached Sheetings, brown Hemp Hides Coal, bituminous Coal, semibituminous Pig iron Steel plates Steel, structural Wheat Ship timbers Pine, yellow Steel billets Sugar Sardines Bar iron Pipe, cast-iron Castor oil Aluminium Coal, anthracite Coke Copper Molasses (imported) Manila fibre Retail lumber (eastern cities) Platinum Hemlock Pine, white Spruce, eastern Paper, newsprint Manganese ore Nickel Tin plate Wire, barbed, galvanized Wire, plain, annealed Ammonia Douglas fir Arsenic Ammonium sulphate Alcohol, wood Acetic acid Nitrate of soda Silver Zinc, grade "A" Zinc, sheets and plates Binder twine Castor beans Sashes and doors Linters (munition) q uebracho extract Cement, Portland Sulphur Rubber Wool Acetate of lime Quicksilver Iridium Hogs Leather, harness Prunes, California Raisins, California Carbon tetrachloride Formaldehyde Chlorine gas, liquid Toluol Phenol Picric acid Sulphuric acid Tickings (Amoskeag) Flour, wheat Rice Building tile Crushed stone Sand and gravel Lead Charcoal Leather, sole Glycerine (dynamite) Cottonseed meal Cottonseed oil Wool grease Burlap Tin, pig Tree nails, locust Cotton compress rates Birch logs Brick, common Wallboard Fobd products Without attempting a complete list, it may be stated that food products whose prices were regulated included flour, bread, sugar, live stock, meat, poultry, dairy products (including retail milk prices), oleomargarine, cottonseed and its products, canned foods, dried foods, rice and rice flour, feeds and coffee. The prices that were first formally fixed by the Government fall chiefly in the basic raw-materials group. A more shortsighted policy might have begun by regulating prices of articles which figure most conspicuously in public consumption.
In some cases prices were fixed for Government purchases alone, for example, nickel, quicksilver, sulphuric acid, cement, New England spruce and other lumber. In others the prices were fixed for the Government and made available to the public in a contingent way; for example, in the case of hemlock lumber it was provided that any quantity of the commodity which, in the judgment of the lumber director of the War Industries Board, could be released for the commercial market might be sold to the public, subject to the maximum price fixed for the Government. In still other cases - for example, copper and raw sugar - purchases by the Allied Governments were included in the scope of price-fixing for the U.S. Government; and in a few instances, as purchases for the use of the railways of the United States, the prices were specifically fixed, although they did not apply to the public. Prices were sometimes fixed for single branches of the Government, as in the case of oil products for the navy and cow-hide splits for the quartermaster's corps of the army. Prices were even fixed by the U.S. Government to apply to purchases by the Allied Governments only, as was the case with fuel oil, gasoline and kerosene.
The President, however, early took a firm stand for the principle that prices charged by producers should be the same to the public and to the Government, and, with the exception of prices on certain purchases made by Government departments, rapid progress was made during 1918 in carrying out this policy. Thus the prices fixed for pine, fir lumber and cement, which at first applied only to direct Government purchases, were extended to the public. It proved to be highly important as a practical matter that prices under similar conditions of purchase should be the same to all. The existence in the commercial market of prices that were higher than those paid for Government purchases made it difficult for the Government to secure prompt deliveries. Moreover, such a situation often defeated the purpose of pricefixing, because large purchases might be made by private concerns producing more or less directly for the Government.
The period of price-fixing began about the middle of 1917, and came to a nearly complete standstill with the signing of the Armistice. Among the earliest commodities to be affected by the price-fixing activities of the Government were lumber, coal, wheat, sugar and canned foods. Lumber prices for the Government alone were fixed by arrangement with the Council of National Defense on June 18 1917, and approved by the Secretary of War; coal prices for the navy were fixed on June
19 1917. The Food and Fuel Control Act on Aug. 10 1917 set a minimum price on the wheat crop of 1918. Bituminous coal prices at the mine were fixed by executive order on Aug. 2 1 1917. Nine days later came the President's announcement of a $2.20 basic price on wheat " to be paid in Government purchases." The price of copper was fixed in September. Relatively few prices were fixed after Nov. 1918, although those fixed prior to that time extended well over into 1919. Prices, as fixed, were allowed to expire in spite of the fact that in several important cases the representatives of the industry concerned asked that the existing price be continued. On Dec. 11 1918 the War Industries Board issued a statement to the effect that, since it would cease to function after Jan. 1 1919, no new price agreements would be entered into by the Price-Fixing Committee and that all prices theretofore fixed would be allowed to expire by limitation. Several commodities, the cost of which had not been immediately ascertainable, had been taken in large quantities by the Government at prices subject to later determination. For example, during the latter part of Jan. and the early part of Feb. 1919, the Price-Fixing Committee of the War Industries Board fixed prices on common brick and on wall board. Inasmuch as the Food and Fuel Administrations depended for their powers upon the Act of Aug. 10 1917, which applied " during the war," they functioned longer, but became practically inoperative early in 1919.
Of the various agencies through which prices were fixed the following are without doubt the most important: Congress, which by direct legislation fixed a minimum price for wheat and for silver; the President, acting under authority granted by Congress, who fixed prices for coal and wheat; the War Industries Board, created by the President July 28 1917, under authority from Congress, which Board through its Price-Fixing Committee fixed numerous prices from Sept. 1917 to Nov. 1918 (as late as Jan. and Feb. 1919 several cases of price-fixing for commodities bought at tentative prices were awaiting cost determination); the U.S. Food Administration, established in Aug. 1917, which fixed prices of hogs, meat, flour, sugar, binder twine, etc.; local food administrators and sub-agencies, such as the Sugar Equalization Board and the U.S. Food Administration Grain Corporation, which fixed many prices; the U.S. Fuel Administration, established in Sept. 1917, which fixed prices of coal, coke, etc.; the War Trade Board, which fixed prices of rubber, quebracho extract and manila fibre; the Federal Trade Commission, which fixed the prices of newsprint paper; the Emergency Fleet Corpora tion of the U.S. Shipping Board, which fixed the price of ship timbers and locust tree nails; the U.S. Shipping Board which fixed ocean freight rates; the International Nitrate Executive Committee, which fixed the price of nitrate of soda; the Food Purchase Board, which fixed prices of canned foods, etc., for the army and navy; various army and navy departments, which fixed prices of gasoline and fuel oil, zinc oxide, automatic sprinklers, sashes and doors, castor oil, etc.; the Appraisal Boards of the army and navy, which fixed prices in cases of dissent from prices named in commandeering orders; and the U.S. Railroad Administration, which took steps to fix reasonable prices of locomotives and cars. As time went on a tendency toward greater uniformity and centralization of procedure developed within the pricefixing mechanism. This tendency was seen in an increasing amount of work thrown upon the War Industries Board and the Federal Trade Commission, the former naming a price based largely upon the cost findings of the latter.
In initiating price-fixing no systematic plan was followed and prices were at first fixed sporadically. Various Governmental powers were resorted to and were applied by numerous agencies, using diverse means for carrying out the decisions or agreements which they reached. In some cases prices were fixed under special authority, conferred directly by Act of Congress, and limited by the provision of such Act to specified commodities. Thus by section 14 of the Act of Congress of Aug. Jo 1917, already referred to, the President was empowered to fix " a reasonable guaranteed price for wheat.", Accordingly on Aug. 30 the President, acting upon the recommendation of a committee appointed by himself, promulgated a price of $2.20 per bus. for No. i northern spring wheat at Chicago. The same law, commonly known as the Lever Act, authorized and empowered the President to license importers, producers or distributors of " any necessaries, in order to carry into effect any of the purposes of this Act "; and, if he found unreasonable any storage charges, commissions or profits, to revoke licences and make findings as to reasonable profits, etc. Section to of the Act authorized him to requisition necessary foods, feeds, fuels and other supplies. Section 11 gave him preference list " issued by the Priorities Committee and by the recommendations of the division chiefs of the War Industries Board, and on the whole came to work in close relation to the committee's general policy. The Priorities Committee, then, exercised a general function of adjusting production to the needs of the nation at war by allocating the limited supplies of fuel and basic raw materials, and its powers were sometimes used as a club to reinforce the authority of the Price-Fixing Committee in particular cases. The Army and Navy Appraisal Boards were called to pass on prices in the case of commandeer orders issued for the requirements of those departments. When a commandeer order was to be issued the practice developed of having the chief in charge of that division of the War Industries Board which dealt with that commodity approve the order in which the price was named. If, as was frequently the case, the producers of the commodity were not satisfied with the price, the matter was brought before the Appraisal Board. It is important to observe that those members of the Price-Fixing Committee who represented the army and navy were also members of the appraisal boards of these two departments.
Various methods of applying price control were tried. Prices may be fixed both directly and indirectly. As a rule, each commodity the price of which it was desired to fix was taken up directly and a specific price made for its purchase; but in some cases reliance was placed upon indirect control of the price of one commodity through direct control of the price of another. A most interesting and important phase of indirect price-fixing activities lay in the attempts to restrain prices by controlling consumption, as in the cases of tin, platinum, coal, sugar, wheat and meat. These efforts culminated in rationing in the case of sugar and the requirement of purchase of substitutes in the case of wheat or flour. Steps were taken, also, to prevent waste and to improve methods of production, for example, cleaner threshing of wheat. Most of such " conservation " measures are to be approved without reserve. Closely connected with the conservation phase as seen in control of demand, rationing, etc., were stabilization and pooling. But pooling, while partly used to facilitate rationing (as in the case of sugar), may also be used to keep prices up, either locally or throughout the entire market. In at least three cases, wheat, sugar and tin, the Government entered upon a pool ing programme for the purpose of stabilizing prices. Stabilization is a term which implies mixed motives, a considerable part of its purpose commonly being to maintain or keep up prices, at least in a part of the field. This was the case with the Sugar Equalization Board and the tin pool, and the Government's Grain Corporation.
The degree of precision with which prices were fixed varied widely from commodity to commodity, ranging from a loosely determined maximum price to a careful determination of the definite price to be charged for a particular commodity in the case of a particular purchase. As a rule, onl y maximum prices were fixed, although in a majority of cases the price named as a maximum was the one which actuall y prevailed. This was not infrequently taken for granted by the price-fixing agency. In some important cases, however, the actual market price fell below the maximum named by the Government. This was true of zinc plates and sheets and certain kinds of lumber. Also, in the case of rubber, a price was named by the War Trade Board as a maximum, which was considerably higher than the market price. As has been already noted, a minimum price was fixed for wheat, the reason being that it was desired to guarantee the market in this case and thus encourage production. The price of hogs was fixed on the basis of a positive minimum after the failure of the attempt to maintain the price on the basis of a fixed ratio to corn. Wheat also furnishes a case in which both a maximum and a minimum price were specifically fixed. Obviously a result similar to that obtained by naming a price may be gained by limiting profits or gross margins. Thus, an effort was made to restrict the profits of the meatpackers to 21% on sales, and in the case of the five largest packers a maximum margin on meat of 9% on investment was named. The flour millers were limited to a profit of 25 cents per barrel. Dealers in cotton-seed and peanuts, both ginners and others, were limited, beginning July I 1918, to a margin of $3.00 per ton over cost (not replacement value). This method was also largely used by the Fuel Administration in an attem p t to regulate the price of coal to consumers, and in Sept. 1917 this agency announced its plan for fixing the maximum gross margins of retail dealers in coal and coke. Each dealer was authorized to add to the average margin for 1915 between his delivered cost price of coal or coke and the price charged consumers, 30% to cover increased expenses provided the gross margin thus arrived at did not exceed his average for July 1917. Fixed rates of commission or margins of profit were imposed also on dealers in newsprint paper, retail lumber and other commodities.
In addition to the above methods, there was the attempt to fix retail prices directly by publishing fair prices, as was done for groceries by the local " price interpreting boards " set up by the Food Administration. Price-fixing by restricting margins passed into the realm of hopes and aspirations in such cases as the earlier regulation of the lake-forwarders b y the Fuel Administration, and the cotton-ginners by the Food Administration, for in these cases the producers were merely urged to charge "reasonable" prices. Much the same may be said of the somewhat tentative moves made by the Oil Division of the Fuel Administration toward fixing the price of petroleum and its products. In July 1918 the Oil Director made some proposals with regard to fixing the differential between the prices of crude and those of refined products; and in Aug. he announced a plan to stabilize the price of crude oil, stating his belief that this would prevent radical changes in the price of refined products. It does not appear, however, that the plan had any appreciable effect.
From the foregoing it would appear that there were three chief types of price-fixing: - (I) maximum prices, in the case of basic staples which had wide public interest, often recognized as " pegged " prices when any scarcity or rapidly advancing cost existed; (2) definite prices, (a ) to encourage production by guaranteeing returns, (b) Government purchases (direct or indirect) in the nature of single transactions; (3) margins, (a) absolute amount per unit, ( b ) percentage on sales, cost, or investment; this method being used when it was desired to cover the distribution of products, the marketing of which was not integrated with manufacture. The minimum price, strictly speaking, was the exception, but is logically associated with the definite price, which is both maximum and minimum.
Another distinction of some importance in fixing prices depended upon the place at which the price named was to apply. Some prices were made on an f.o.b. factory basis, while others were on a delivered basis. The practice prevailing in the industry was partly followed. The tendency, however, was to fix prices on an f.o.b. factory or mill basis, a natural tendency when the price is based on cost. In a majority of cases, prices came to be made f.o.b. the producer's plant. In many cases, however, prices were quoted f.o.b. some market basing point. This was notably true of copper, which was always quoted f.o.b. New York, although the metal was secured from mines in Michigan, Montana and Arizona. and refined at various seaboard points. In the case of commodities produced in several competing areas there was often a tendency to quote prices on a delivered basis. Prices delivered were fixed for New England spruce, power to purchase and sell at reasonable cash prices wheat, flour, meal, beans and potatoes. The power under this Act ran to the President, and the Fuel Administrator and Food Administrator acted under " executive orders." On the other hand, the War Industries Board acted under less specific authority proceeding from the general war powers of the President. Thus the prices fixed for steel, copper, lumber and other commodities by the Price-Fixing Committee of the War Industries Board were in theory approved by the President before being publicly announced. In some cases, however, such as retail lumber prices in certain eastern cities, the prices were announced without formal approval by the President.
The means of enforcing prices when " fixed," whether determined by the price-fixing agencies or reached by agreement with the producers, were various, ranging from appeals to the patriotism of the trade to commandeering orders. In most cases there was in the background the possibility of the Government's taking over the industry; and in not a few the army or navy did commandeer plants or stocks of merchandise. In such cases a price was named which was subject to adjudication, first by the Board of Appraisers and then, upon appeal, by the courts. On Dec. 24 1917 all wood chemicals (acetic acid, alcohol, etc.) were commandeered for a period of six months and later the commandeering order was extended to cover the second half of 1918. Apart from purchases on army or navy account, however, price-fixing was effected chiefly by " licences " and control of " priorities." The Food Administration and the Fuel Administration, under the Act of Aug. 10 1917, put in force extensive systems of licensing, under which unlicensed producers and distributors were not allowed to engage in business, and licences were revoked, if the regulations were disobeyed. The War Trade Board also licensed importers of certain articles on condition that the prices which it fixed should be observed. The administration of priorities proved to be a major element in the price-fixing programme, and involved many important questions. Toward the end of 1917 a priorities division was established within the War Industries Board and a priorities commissioner placed at its head. Representatives of the Fuel Administration, the Railroad Administration. and the U.S. Shipping Board were placed upon a Priorities Committee. The War Trade Board, the Food Administration, and the army and navy were also represented. The Price-Fixing Committee of the War Industries Board and the Priorities Committee worked in harmony. This was of the utmost importance, as it made possible a substantial degree of unity of policy among the different Government purchasing departments; and, through the power of the Priorities Committee over fuel and transportation, pressure could be brought to bear upon a recalcitrant business concern for the purpose of compelling it to adhere to fixed prices. The Priorities Committee undertook whenever necessary to administer priorities in the production of all raw materials and finished products, save food, feeds and fuels. The distribution of fuel was, of course, under the supervision of the Fuel Administrator, and transportation service under the U.S. Railroad Administration, but the Fuel and Railroad Administrators were guided largely by the Pennsylvania hemlock, cement, hollow building tile, iron and steel scrap, and oil products for the navy. The situation in the case of hollow building tile furnishes some explanation of this tendency. The chief producing area for this commodity was centred in Ohio, while there were other producing territories in the south, in New Jersey and elsewhere. In order to stabilize market conditions and to divide the market, the representatives of the industry desired to fix prices on a delivered basis. In this way, by fixing a delivered price sufficiently low, the low-cost producers in Ohio were prevented from coming too far east with their product; while, if the price had been fixed f.o.b. the plant, there would have been no limit to the area covered by the low-cost producer, except cost of freight and desire for profit. Had the war continued much longer, there can be little doubt that adjustments in railway rates would have become an important part of the price-fixing programme. Special railway service was given in a number of instances as a direct part of pricefixing, as, for example, the arrangements made to furnish transportation to the Douglas fir lumber mills for the purpose of relieving them of accumulations of low-grade lumber. In the case of pricefixing for manganese ore produced in the United States, an integral part of the scheme was the application of special railway rates.
When a controlling part of the supply of any given product is produced by concerns which are not completely integrated, especially as to the earlier stages of the industry, it is practically necessary, in price-fixing, to control the price of the chief semi-finished products; but when a controlling proportion of a product comes from producers who are more or less completely integrated, this necessity does not exist, although some protection may be required for independent producers in the earlier stages. Also when the object is to protect the consumer of products which are distributed by separate wholesale and retail agencies, it is necessary to control the wholesale and retail prices as well as the price f.o.b. factory or mill.
Prices were fixed for various periods of time, but in general it may be said that on account of changing conditions the periods were short. Perhaps the period most frequently chosen was three months. A much shorter period would have created too much risk and uncertainty in marketing, to say nothing of the strain upon the price-fixing machinery; while a longer period was not, as a rule, desired by the representatives of the industries, especially during a period of increasing costs. Various exceptions might be cited, such as the case of wheat, in which the price was fixed for the crop of a given season. The prices of meat and coal were fixed for indefinite periods, and the same was true of manganese ore. Various bases for determining the reasonable maximum price to be fixed were used, but it may be said that, on the whole, the prevailing tendency was to fix prices on the basis of cost, a reasonable allowance being added for profits. In this connexion the Federal Trade Commission did important work in ascertaining from the books of the producers the actual cost of production and the investment.
In the ordinary case of price-fixing, the gist of the method used by the Price-Fixing Committee was as follows :-First, some estimate was made of the probable quantity of the product wanted, which, of course, involved a knowledge of the stocks on hand. Second, the quantity which each producer could turn out was ascertained. Third, each producer's cost of production was computed for the most recent period available. Fourth, the average investment involved in the production of the commodity was determined and reduced to the basis of investment per unit of product. The first three of these items bear directly upon the determination of the representative or marginal producers for price-fixing purposes. The fundamental question in fixing prices that are based on cost, is the determination of what may be called the " marginal cost." This cost may be explained as follows: it is frequently the case that when the several individual costs for a group of producers are accurately ascertained and are ranged in their order from low to high, there will be a variation among them of ',Do %. the high cost being double that of the low cost. Ordinarily the bulk of the production comes from those producers whose costs are below the average, though this is not always the case. It does not follow, however, that the average cost gives the basis for a fair price. If 25%, or even to %, of the production comes from high-cost producers and the entire output is needed, the average cost cannot be the basis of price. It is true that in many cases prices were fixed on the basis of average cost, both by the War Industries Board and by other price-fixing agencies; but as time went on methods were perfected, and the practice of taking a " representative cost " developed. This representative cost was very similar to what the economist calls the marginal cost, meaning the cost at which the highest-cost producer is able to produce without loss at a given price.
Of the conditions which facilitate the determination of a reasonable marginal cost for price-fixing, a knowledge of the requirements of the market, or in war-time a knowledge of the needs of the Government and its agencies, is most important. Price-fixing in the United States was handicapped by uncertainty as to the quantity which it Yearly and Quarterly U.S. Fixed Prices, 1913-8.
| Year | COAL, bitemnoous per | COPPER, electro- lytic per lb. | LUMBER, Southern yellow pine 6 inI l x 8 in. x 16 ft. per M. | PIG IRON, Bessemer per | SUGAR, fine gran u- lated in bags or barrels | FLOUR, standard bar. 196 lb. | BEEF, fresh carcass (Chicago) | WOOL, Ohio fine unwashed per lb. | LEATHER shoe upper 2nd grade per sq. ft. | 19 1913 | Si.18 | $ 0.15 | $14.46 | $17.13 | $0.0428 | `$4.58 | $0.1295 | $0.238 | $0.19. | 1914 | 1.16 | .13 | 12.87 | 14.89 | .0171 | 5.09 | .1364 | .250 | .209 | Quarters | First . | 1.16 | .14 | 13.21 | 15.04 | .0389 | 4.57 | .1300 | .229 | .205 | Second . | 1.17 | .14 | 13.42 | 14.90 | .0395 | 4.55 | .1322 | .248 | .205 | Third . | 1.16 | .12 | 13.14 | 14.90 | .0583 | 5.34 | .1402 | .271 | .218 | Fourth . | 1.16 | .12 | 11.71 | 14.71 | .0523 | 5.86 | .1435 | .251 | .215 | 1915. ... . | 1.13 | .17 | 12.90 | 15.78 | .0556 | 6.66 | .1289 | .300 | .205 | Quarters | First | 1.16 | .14 | 11.64 | 14.56 | .0538 | 7.34 | .1229 | .298 | .214 | Second . | 1.12 | .18 | 12.21 | 14.61 | .0585 | 7.39 | .1214 | .291 | .201 | Third . | I. I I | .18 | 12.46 | 15.91 | .0546 | 6.22 | .1330 | .301 | .200 | Fourth . | 1.14 | .19 | 15.31 | 18.03 | .0752 | 5.74 | .1375 | .308 | .204 | 1916. .. . | 1.24 | .28 | 15.76 | 23.88 | .0688 | 7.26 | .1382 | .352 | .275 | Quarters | First | 1.17 | .26 | 15.92 | 21.61 | .0610 | 6.32 | .1375 | .328 | .216 | Second . | 1.20 | .28 | 15.21 | 21.95 | .0729 | 6.05 | .1388 | .335 | .246 | Third . | 1.21 | .27 | 15.21 | 22.05 | .0696 | 7.37 | .1388 | .351 | .265 | Fourth . | 1.40 | .31 | 16.71 | 29.93 | .0712 | 9.26 | .1375 | .396 | 375 | 1917.. . | 2.07 | .29 | 21.75 | 43.60 | .0771 | I I.39 | .1672 | .664 | .385 | Quarters.. . | First | 1 47 | .33 | 17.42 | 36.48 | .0686 | 9.29 | 1431 | .485 | .428 | Second . | 2.40 | .32 | 22.14 | 47.18 | .0788 | 13.57 | .1606 | .598 | .410 | Third . | 2.24 | .27 | 23.89 | 53.51 | .0797 | 12.39 | .1762 | .745 | .355 | Fourth . | 2.17 | .23 | 23.53 | 37.25 | .0814 | 10.34 | .1888 | .750 | .350 | 1918... . | 2.56 | .24 | 25.51 | 36.66 | .0779 | 10.14 | .2213 | 740 | .359 | Quarters | First | 2.20 | .23 | 25.14 | 37.25 | .0735 | 10.15 | .1750 | .750 | .351 | Second . | 2.71 | .23 | 25.92 | 36.21 | .0730 | 9.79 | .2227 | .746 | .350 | Third. .. . | 2.67 | .26 | 25.42 | 36.60 | .0769 | 10.39 | .2423 | .746 | .360 | Fourth. .. . | 2.67 | .25 | 25.57 | 36.60 | .0882 | 10.21 | .2450 | .720 | 375 was desired to have produced, which uncertainty was in some cases due both to ignorance of the available stocks and to uncertainty as to future requirements. While prices were generally fixed on the basis of cost, there were necessarily many exceptions. Sometimes no costs were available. Sometimes cost was only partly available as a basis, as in the case of " joint products " and of products for which complete cost data did not exist. Sometimes, again, no effort was made to use cost, as in the case of substitutes whose prices were fixed on the basis of the commodity in the place of which they might be used. In a few instances the price was fixed without regard to cost, merely on the basis of preexisting prices, such prices being taken for what was presumably a normal period. Perhaps the chief difficulty in most cases was to ascertain a fair return on investment. This phase of the matter was never satisfactorily dealt with by any U.S. pricefixing agency during the war. The Federal Trade Commission in connexion with its cost findings frequently reported to the PriceFixing Committee of the War Industries Board a figure representing the investment, but time did not permit the careful investigation that would have been necessary to ascertain the actual money invested, nor was the attitude of the price-fixing agency, as a rule, one which favoured the strict construction of " investment." In general, it may be said that in a majority of the price-fixing operations of the War Industries Board, some consideration was given to the estimated investment, and that in such cases the figure used was one which lay somewhere between the book value claimed by the companies concerned and the actual net investment made. On the other hand, a majority of the price-fixing operations of such agencies as the Food Administration appear to have been made on the basis of a margin (interest and profits) per unit of product, determined upon with reference to past experience. And of course, exceptions to any usual practice were at times necessary. In general there were three chief purposes in fixing prices: (i) to secure production of needed commodities; (2) to prevent social unrest by checking profiteering, coordinating food prices and wages, and stabilizing industrial conditions; (3) to assure Government economy of purchase. The greatest success was attained with regard to the first purpose. The accomplishment of the second, which was more vague, is difficult to measure, but appears considerable. The most that can be said concerning the third is that things might have been worse had there been no price-fixing. The table on page 148 shows the yearly and quarterly average prices of important articles whose prices were regulated. On the whole, it may be said that price-fixing in the United States suffered from the lack of a programme. No adequate study was made of interrelations between commodities or of the various complicated factors affecting demand and supply. No general principles were formulated. Too frequently, each step was taken up as a separate proposition. Much trouble would have been saved by a better understanding among the different price-fixing agencies and by the adoption of certain broad fundamental principles, such as the basis for determining marginal cost and the basis for determining investment. There should have been a general board of strategy to supervise the entire price-fixing programme and to coordinate it with the Government's fiscal arrangements and with the various steps taken to control the production and consumption through priorities and rationing. Some progress was made in this direction, but it remains true that the price-fixing operations were not sufficiently correlated with taxation and borrowing (inflation) on the one hand, and with rationing and priorities on the other. (L. H. H.) Copyright Statement These files are public domain. Bibliography Information
Chisholm, Hugh, General Editor. Entry for 'Price-Control in United States'. 1911 Encyclopedia Britanica. https://www.studylight.org/encyclopedias/eng/bri/p/price-control-in-united-states.html. 1910.  Ads FreeProfile |