Thus far in the economic history of America the scale of prices has been
as temporary and uncertain as the indications of the mercury in a
thermometer. Prices have gone up and down for all kinds of reasons, and
indeed they have often seemed to do so without any apparent reason. An
increasing number of people feel that this is not as it should be. It is
not easy to formulate an unfailing remedy, of course. Neither is it
possible to say whether price fixing would prove a success or a failure.
It does look reasonably sure, however, that prices should be stabilized
in some just and proper manner.
There are always those who are ready to tell us that it is not necessary
to attempt to do anything about the price situation. They say that the
scale of prices will automatically take care of itself according to the
operation of the law of supply and demand. This sort of a situation might
do very well if only it existed in some other world than that of fancy.
There probably was a time in the earlier periods of the history of the
market place when the law of supply and demand governed all prices.
That time, however, seems to have passed.
Tradesmen have learned methods by which they can so successfully juggle
the situation as to supply and demand as to entirely reverse the action
of the time-honored law so often invoked in defense of the profiteer. The
cold storage method of preserving eggs, for instance, has been used to
make them cost most during that season of the year when they are most
plentiful, and to be cheapest during that portion of the year when the
greatest number of hens are on a vacation.
As a matter of fact, the law of supply and demand is not the rightful
governor of prices. It does not take into account the one thing which
should be the deciding factor in the cost of an article, namely the cost
of production. It requires as much labor and as great an investment to
produce a bushel of cheap wheat as it does to produce the same amount of
wheat at a good figure. The cost of a bushel of wheat should always be the
cost of production plus a fair rate of profit to the producer. The
producer would then be sure of his profit, and the consumer would know how
to estimate his expense.
A fluctuating price scale does not make for certainty in financial
transactions and stability in commercial organization. Except in the most
general way, no one is able to say today what things will cost or bring
tomorrow. In considerable part, this condition has been brought about by
the deals of speculators who make their living by the rise and fall of the
markets and often by forcing prices up and down by arbitrary methods.
In other words, an uncertain system of prices not only makes it possible
for a group of men to gamble upon them, but it does much to reduce all
dealing to a process of gambling. Even if all other conditions are
favorable. The producer does not know whether he is to gain or lose.
Neither does the consumer know whether he is to be able to obtain things
at a fair price.
Such a condition is unsatisfactory to both. For each advantage or
disadvantage are alike possible, and they usually alternate. The advantage
of one, moreover, must generally be brought about by the disadvantage of
the other. Such is not a necessary state of affairs. One does not need to
lose either in his buying or selling. Neither should his gain be abnormal.
The establishment of prices upon a fair and permanent basis could make it
possible for a transaction to be always to the mutual advantage of the
seller and the purchaser. In other words, it would lift the markets above
the gambling level.
There is another way in which an uncertain system of prices works a great
injustice in the economic system. They offer no real incentive to
industry, ability, and preparation. We have done and heard a great deal of
preaching to the point that these things pay because the man who prepares
best and works hardest will be best rewarded.
As things are now, the worst trouble with this claim is its falseness. A
man may work ever so hard in almost any process of production and have his
reward shrunken out of all proportion to his toil by some sudden slump in
prices for which he was in no way responsible. On the other hand, he may
neglect ever so important a task and at the last moment be favored with
a rise in prices which will turn things to his profit.
On the one hand, he always stands a chance of failing to receive what
rightfully should be his, a situation which does not represent good
business. On the other hand, he also stands a chance of receiving what he
does not earn, a situation which does not represent good business either.
It should be possible by means of having a stable price scale to make it
practically sure that every person concerned in the process of production
would receive his due. Naturally the highest reward would come to the man
of greatest earning power. The result would be the placing of a premium
upon industry and efficiency. Until we do so we shall have no oversupply
of either.
Uncertainty of prices has one serious social tendency. It produces a
certain spirit of unrest on the part of the consumer. It may be true that
the average person overdraws some of his conclusions on this question. It
may be, too, that he bases some of them upon insufficient reasons. At the
same time, however, his attitude is a fact which must be met and
reckoned with.
What the consumer thinks is no inconsiderable matter. He is not a small
minority without power or influence. He is a vast majority, swaying the
very life of the State as he will, for in one way or another we are all
consumers. Moreover, the consumer has the last word in every argument.
He holds the purse-strings, and when he is tired of talking, he can stop
buying. It does not bode well when he conceives the feeling that undue
difficulty attaches to trying to exist on the planet.
He is not unreasonable. On the contrary, he is quite reasonable. He wants
the other party, as well as himself, to have all that is his due. He has
no objections to meeting the real cost of an article. He has some notions,
however, as to what that cost should be. If prices go up, he expects them
to have some proper reason for doing so. He works for his living, and he
expects others to do the same. When he cannot count on what a day may
bring forth, he cannot plan his financial future, for he has no idea one
season what it is going to cost him to live the next. He has a feeling
that it is time to get prices adjusted as they should be in fairness to
all concerned, and then keep them so.
One of the worst difficulties with our fluctuating system of prices is the
fact that it does not make adequate provision for the economic life of the
country. Our commercial system has the same function in the service of
society that the blood has in maintaining the life of the body. Its work
is to carry supplies promptly, effectively, and regularly to all the
points where they are needed.
The body is not in good health when the blood overfeeds it part of the
time and starves it the rest of the time. It is not proper, either, to
have congestion at one point and anaemia at another. The function of
circulation must go on with uninterrupted constancy.
The world needs a practically fixed amount of food, clothing, and supplies
for the maintenance of its life and activity. It has also a practically
fixed amount of wealth to keep them moving. Unsteady prices are always
changing the value of a dollar and making the necessities of life easier
or harder to get. The world cannot, therefore, supply its wants with the
same ease and in the same abundance at any two successive times. The value
of supplies and the value of money should both be constant. The world
could then meet its needs at every point. No worker would lose his reward;
commodities would be certain to yield their worth; and no one would be any
the poorer for the change.