The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1934-10-26
ECONOMIC Theory
DOESN'T HOLD IN
DEPRESSION FIGHT
Noted Marketing Expert De.
tends AAA A ainst Law Of
Supply and Demand

~NHPsy SAssN ~SsVSAssN
BY LOUIS BADER
Associate Professor Of Marketing
New York University
AS the courage Of business men
rises with q gradual improvement in
economic affairs. certain phases in
the federal governments program to
restore prosperity come under at
tack. Much Of the criticism has to
do with reforms such as the price
fixing features of the MIRA codes and
the AAA attempts to regulate supply.
Most of the criticism takes this form:
price fixing cannot be enforced be-
cause the only way prices can be
satisfactorily enforced Is through the
law Of supply and demand; the re-
form, therefore, cannot reach at
tainment and Is impossible" From
the wistful look on the faces Of
those who parrot-like recite that
formula one would think that the
speaker wanted to give the impress
sion that the law of supply and de-
lnand was some natural or supernat-
ural force that IS at work. irrespec-
tive Of what men wish to do, and
when flouted visits upon society
some dire consequences. An econo-
mist may, perhaps, be charged with
having coined the phrase but most
economists probably do not so regard
1t. When 1t Is used in that manner,
unless ignorantly, it Is purely propa-
ganda. Economic principles are gen.
eralized statements Of many similar
observations of what men do trying
t, make living under given set
o: conditions. When those condi-
lions do not exist then it becomes
necessary to make further observa-
tons and arrive at the principles dis
closed by the new study.
Rule Doesn't Fold
In the case Of the so-called law Of
supply and demand all the econo-
mist did was to say that his ohserva-
lions suggest that under conditions
o! perfect competition prices Of par
t!cular commodities will 60 up or go
down Is the supply or demand for
them vary. As q result of these
various movements equilibrium be-
tween demand and supply must
quickly result and consequently we
could never have wide fluctuations
IL prices and business activity, and
the business cycle would not be .
part Of our economic life.
BY perfect competition Is meant q
market In which thousands OF pro-
ducers and consumers sell and buy
goods and where the withdrawal Of
any one Of them, for example, Q
wheat farmer or an -unskilled laborer,
or . housewife. vill Mt haSe IN ap-
probable effect a The prize. Il, u
assumed that eynEpr-aisS~ " them
knoES.. - much NoAonk anpply and
d1mand - every 80 el1o, end that
IN have equal ba@yo1n1ng abilities
Under these conditions the forces of
supply and demand operate roughly
6 outlined above. The tendency
under such conditions Is for profits
to disappear for all but the most
efficient producers.
Conditions Never Ideal
The economist also says that prob
ably We have never had these ideal
conditions In any market: that prob
ably they are impossible Of attain
ment, and that markets are char
acteriSed more In prosperity and less
III depressions by conditions of i'm
perfect competition. For proof we
need only to look around; on the one
hand. steel rails sold for 20 years at
e43 . ton: many branded, nationally
advertised articles similarly did not
change prices for years. Even in the
depression organized labor maintains
its wage rates year in and year out,
while utility rates tend steadily up
ward rather than to f!uctuate. On
the other hand the prices Of many, II
not all, farm products fluctuate
severely from day to day as condi-
lions Of supply and demand change:
sclme unbranded, manufactured pro-
ducts change in price reasonably
rapidly, and organized labor ranges
from substance to poverty planes OF
Living and back again as We pass
from prosperity to depression ana
again to prosperity. Interest and
rents are frequently so rigid the
fluctuations downward meet them
selves coming back as prosperity
emerges from depression. These are
the usual conditions and denote i'm.
uerfect competition.
These dtsparities In prices between
particular goods and services cause
stresses and strains which finally
burst and begin the down-swing OF
The cycle. They are inherent In a
earitalistic economy. Everyone in
business desires to earn q profit.
Profits can best be earned under q
control Of the supply or a manipula-