Evening star., 1933-10-29
REPEAL WITHOUT CONTROL
VIEWED AS CRAVE MISTAKE
Hasty Schemes and General Dissatisfac.
ton Feared-Reasons Against Govern
ment Price Fixing Are Enumerated.

What I fear most is the return Of old
conditions and renewed agitation for
suppression. All this could have been
avoided by leg1timizing beer and wine
and by taxing them so little as to make
them very cheap, together with such
control Of the manufacture OF spirits
as would insure quality without excess
sive prices. But all this Is apparently
not to be done. The golden opportunity
is slipping by.
some time within the A. A. A. and
N. R. A. about the interpreting Of "de-
structive price cutting" the phrase
used in the recovery act. Many of those
who advocate the price-hx1ng provi-
sions, which have already found their
way into some codes and are proposed
for others, have a sincere desire to pre-.
vent the "chiseling' within their in
and pickering. It is doubtful whether
consumers gain anything from loss
leader sales or any Of the other forms
Of price cutting. On the other hand.
the rigid fxatfon of prices has dangers
SO great that 1t must inevitably lead, IL
seems to me, to further and quicker
governmental supervision over prices
than any one wishes to see Just at pres
ent. There ere many reasons for dis
paraging too long step in this direc-
ton at once-the best of which. perhaps.
is that the Government is not ready. It
REQUIRES a lot OF planning and long
training Of personnel, which have not
yet begun, to take on task Of this kind.
It Is true, Of course, that In this. as
In the other things, we learn by doing.
This may be the only way. And yet
the beginning Of such q Job always
must cause q withdrawing shudder.
Task for Government.
There will be those who will not
agree that the adoption Of these clauses
in the codes necessarily involves any
such task for the Government. Yet I
does. Certainly it is not contemplated.
This Is clear from arrangements made
to turn the matter over to the indus
tries themselves. The lumber code, for
example. makes It possible for the in
dustry to set almost any desired price
as q minimum: the code authority Is
empowered to establish and from time
to time revise minimum prices" The
real dinculty appears when the stand
ard Of measurement is mentioned.
Such prices, 1t Is said, are not to be
more than cost Of production"
rsti Esonomists shuader . when cost OF
regard it as bog Of imponderables
which has been used for years by in
dustry to hide unwise investments, OBJ
solete plants, exorbitant selling ex-
pense and inefficient methods All Of
these can be made to appear as "costs"
and 50 can be defended when other
wise their vulnerabinty would be obvi-
Gus.
All this is made only too clear hv
reference to available illustrations. In
the lumber code reference Is made to
the current weighted average cost of
production as defined by the authority"
Also mention Is made Of depreciation
on stra1ght-line method, and based on
the fair value or cost, whichever IS
lower" on plant and equipment whether
operating or not. This would allow de-
probation. for instance, on worn-out
saw mills to be included as a cost, since
this fair value really depends on what
profits the existing price will allow the
mill to make. Any "fair value" could
thus be justified by the price charged.
We begin to see in this the circular
reasoning which finally becomes per-
iect. It Is said that cost will include
standing timber cut for. cur
value" But since the value of Standing
timber presumably depends on the
price for which the product can be
sold. to fix a price for the product by
reference to the value Of standing tim
Der Is to be perfectly circular. This
could result In the fixing OF anv nrice
which might seem desirable to the in
dustry, and amounts to allowing price,
liking to be carried out without anv
governmental protection for consumers,
Public Controls.
The continued use Of such criteris
Will almost certainly precipitate criti.
ctsn by all those who are familiar with
pubic uftlity vaiustion ana rateemsS- EN- *
Ing, and " will surely brinp a demand
for more and more interference in favor
OF .esans x11ae r tHss = ne1s s9a fS.a
prices can be left wholly to enlightened
self-interest. They are always kept too
high. It Is easy to argue that industry
will be better off If 1t keeps prices low
and SO enlarges its market, but outside
pressure always has to be applied in the
interest Of this wisdom.
Perhaps the time has come to force
industry to accept this enlightened
point Of view in spite Of itself, but the
governmental task involved is immense
Complete systems Of common account.
ing will have to be installed. with ade-
quate provision for central analysis
And enforcement will require the use
of those powers In the recovery act
which have hitherto not been re-
sorted to.
The stopping Of competitive price
cutting can be achieved In q simpler
way merely by defining loss leaders as
anything below net invoice cost and
prohibiting as unfair any sales below
this level. Put even here the problem
OF consumer protection Is not met.
Competition in reducing prices is in
general a good thing. Prices ought to
go down as efficiency increases; other
wise total purchasing power will never
be great enough to absorb production.
To the extent to which industries
gain power over prices-which unuues-
tionably they do under N. r. A.-pub-
Lie controls will have to be imposed to
insure level at which production will
disappear into consumption. Only In
this way can factories be kept running,
unemployment be avoided and the
standard Of living to which our pro-
ductive capacity entities us be insured.
For all these reasons, whether or not
We approach 1t reluctantly, at least a
gradual expansion OF governmental con-
troll seems likely. Certainly the prob
lem Is merely postponed by such ar
rangements as are illustrated in the
lumber code.
Copyright, 1e33J
Hawaiian Protests Keen