Evening star., 1938-07-17
Industrial Price,Making Book
Wins New Fame for Brookings
Timing of Report Almost Too Perfect, What With
Monopoly Probe Near-Left.Wingers
Won't Like 1t.
BY H. R. BAUKHAGE.

BY H. r. BAUkHAGE.
IF BUILDINGS could express their emo
tions, it is safe to say that the other.
wise dignified limestone tower which
houses the Brookings Institution would
look down on Lafayette Square this week
end with twinkle in its windows.
This famous organization Of research and
inquiry, which has been at once guide
philosopher, friend as well as severest critic
Of governmental policies ever since the days
when it gave the United States a budget
system, has dropped another bombshell on
the economic front.
The latest Brookings contribution, a re-
port entitled Industrial Price Policies and
Economic Progress" issued only this week,
already promises to be one of the most
talked of publications the institution has
produced.
Early returns indicate an interest in the
volume which has caused even the tradi-
tionally objective doctors of philosophy
who fill the gray building on Jackson place
to drop some of their objectivity and in
dulge in some very subjective and human
smiles of satisfaction.
Almost Too Perfect Timing.
Appearing just as Senator O'Mahoney
and his committee are about to look into
the monopoly question. the timing of the
book seemed almost too perfect But that
has happened before. The whole Brookings
idea Is to lay hold of current problems"
and although the studies take two or three
years to prepare they are usually still cur
rent when they appear
That was the case with its report on
the French debt back in the days when we
still thought we could collect from our
late allies. The study was in the hands
Of the Treasury and the French commits
sioners when they sat down to their first
meeting in Washington. 1t was true again
In the case of the N. r. A. study which dis
covered symptoms of pip in the old Blue
Eagle. diagnosis begun much earlier but
confirmed only three weeks after the VOL
ume was off the press by the Supreme
Court itself
The latest study. prepared by DR.. E. G.
Nourse, director of the Institute of Eco
nor1ics, largest of the Brookings units, and
DR.. II. 3. Drury, made news when it ap-
peared with the implications that monopo-
lies are not all nearly as bad as they are
painted. Naturally those who view with
alarm the trust investigation now going
on as potential witch hunt, were greatly
cheered to find authority in the report for
the assertion that big business isn't bad Just
because it is big and and that "today's biz
combinations were formed largely for the
purpose of affecting economies and pro-
noting efficiency" not like the trusts of
q generation ago whose chief aim was "to
control markets, suppress competition and
raise prices"
In No Sense a Defense.
The book. however, is in no sense "de-
fense' of big business as SUCH 1t includes
q number of case studies of the price pol
icies of great corporations. Some are
named, some are not. Some of the ma
terial has never been published before and
some is Of such confidential nature that
the name of the business is withheld.
But the study attempts no oversimplified
conclusions from these specific cases. 1t
does, however, describe what is called
dynamic" as opposed to static" price
making and allows us to deduce that if
the pace makers" as they are called in
American industry who have adopted the
dynamic" policy, were generally followed,
most of our economic troubles would be
cured from within, Government regulation
would be unnecessary and the capitalistic
system would demonstrate its superiority
over any other
The static method, the Brookings report
explains, is relic of the old days when
supply and demand were the sole factors
to consider and when prices were born in
the market" Now prices are born in the
ofhce of the executive but some are still
largely a matter of supply and demand,
for, neglecting to consider the complicated
nature of modern conditions, the business
man arrives at his prices by a cost-plus
method which sets an arbitrary margin
Of profit. If the price proves so high that
volume OF sales drops of, the industrialist
attempts to shift part of the burden to
labor by cutting down production But the
cat comes back, in the form of reduced
consumer purchasing power, taxes for re-
lief. factory obsolescence and other ills that
attend on a depression. He saves at the
spigot and loses at the bunghole
No Pigment of Imagination.
On the other hand, the dynamic price,
makers look on the problem like this:
These are orders which the consum-
Ing department of our society places with
the producing department. 1t is our TASK
as executives to keep the plants going so
that these orders may be filled Shutting
down plants and discharging men because
we are dissatisfied with prices will not ac-
complish the result Hence we must devise
way which will so economic in the proc
ess that the potential order can be filed.
So long as people have unsatisfied wants
and we have available productive resources,
way shall be found of bringing them to-
gether. That is what business is, not polio
ing an idle plant"
This kind of pricemaking, says the study,
us no fgment Of the economists inlagina-
ton" and the facts resulting from the
Erookings investigations of corporations
themselves are the proof offered for this
statement. 1t neatly quotes such men as
Ford, Alfred P Sloan lammont du Pont
and others who sound the same note
Adequately to review this book is the
task Of an economist, but layman can
easily follow its reasoning and any one
"a q IN - - 40