New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-07-09


value of these profits put lack into
the industries cannot be told until 1t
is known what the new facilities are
worth in normal times.
We do not know how long the war
will last, but while il lasts the safe
policy is to go on charging the vital
industries, even If there is great
surplus capacity after the war. 1t
cannot be too often repeated that in
time of scarcity the emphasis is not
upon prices but upon production, and
policies should centre upon the lat
ter, affording inducement and stimu-
lus, and avoiding the creation OF
risks and deterrents. At a time
when demand exceeds supply prices
are natural method of regulating
consumption and Of diverting de-
mands to every possible substitute.
The leading statisticians of the grain
trade are agreed that the high prices
of wheat during the last year have
reduced consumption in the United
States by about 50,000,000 bushels, as
compared with the year before. This
does not mean that people went hun
cry, but that consumption was
shifted to other foods less affected
by the European demand. Again
prices perform a function in the dis
tribution of limited supplies. There
is no favoritism in selling to the
highest bidder, and it is fair pre-
sumption that as a general rule the
highest bidder is the one TO whom
the goods are most indispensable.
This does not apply to the neces-
sares, but does apply in large degree
to such commodities as steel. 1t is
a hradship to pay high prices, but the
fact that they are paid shows that 1T
would be a greater hardship to do
without the goods.
Efforts are now being made to
regulate prices through the medium
of governmental interference. 1t is
difficult to reach a fair basis for
price fixing, as so many factors enter
into the equation. In the first place, it
is hard matter to define fair prices
and fair profits. Of this the National
City Bank says:
1t is a recognized principle among
economists that the price of commod-
ity at any given time tends TO be fixed
at a level where it will afford a work
ing profit upon that portion of the
market requirement which is pro-
duced at the highest cost. There may
be, for instance, a wide range of
costs in producing and delivering
wheat TO a certain market, resulting
from differences in distance from
market. fertility of soil, efficiency Of
the producers, etc. The price is the
same for all wheat, and must be high
enough to induce the continued pro-
duction of the highest-cost portion
OF the required supply, but as the
supply is increased from low-cost
sources, production on the margin Of
the supply is no longer required, the
price falls, and the high-cost pro-
Queer is eliminated.
The same thing occurs in all lines.
There is range of costs, depending
on the location of the producer, the
character of his equipment, efficiency
of management. etc. One producer
NAV be up-to-date in methods and
equipment. perhaps the last in the
field. or he may have turned earnings
back into improvements. while an
other has chosen to distribute earn
ings in dividends, with the result
that the former has lower operating
costs than the latter and correspond
ingly higher profits when they sell at
the same price. That is his reward
for being progressive and constitutes
the inducement 10 progress. The
constant tendercy in industry is tow
ard improvement, lower costs and the
elimination of the high-cost pro-
ducers. The leaders make the best
profits, but all improvements soon be-
come common property. and new
leaders are always making the pace.
If it is true that our industries are
far below their possible output, and
that not only industrial but living
conditions may be revolutionized by
bringing the average up TO the level
CT the best. the public cannot afford
TO discriminate against efficiency, in
its plans for taxation or regulation.
Allowance must be made for war con-
dtions and necessities; taxation can
not be scrutinized az critically in all
its bearings as in time of peace; il
is true that in time of great national
peril the government must look for
money where money is, and that war
time profits are not to be judged on just
the same basis as peacetime profits.
But il is well to keep an understand
ing OF sound principles. even when
they must be compromised, and this
is particularly true in view Of the
certainty that the same kind Of taxes
will be advocated for permanent
adoption.