Evening star., 1940-01-24
Monopoly Committee
Expert, u. 5. Steel Man
Differ on Price Cuts
Former Challenges
Contention Little Boost
In Demand Would Follow
BY the Associated Press.

BY the Associated Press.
A monopoly committee economist
challenged yesterday a United
States steel corporation contention
that price reductions in the in
dustry during times of depression
would not result in sufficient in
creased demand to justify them.
The witness was Melvin G. De
Chazeau of the University of Vir-
ginia. He disputed the basis on
which an economist for the steel
corporation had concluded that "a
reduction in steel prices does not
provide an effective means of in
creasing production and employ
ment in the industry"
Conceding that steel demand
was relatively inelastic on the basis
of price alone, compared with other
products, Mr.. De Chateau asserted,
however. that this was of little
significance. Other economic fac
tors which would be varied with
fluctuations in steel price. he con-
tended, would tend to make greater
"long-run" shifts in demand that
would result directly from a price
reduction.
Chicagoan Differs.
Theodore o. Yntema of the Uni
versity of Chicago, employed by the
corporation to make special studies
s,1 M0onY>n1y
Committees steel investigation, as
serted that full production and en-
ployment cannot be maintained in
the steel industry during depression
by means of reduction in steel
prices"
Mr.. Ymema's testimony was an
outgrowth of steel hearings held by
the committee last year. At that
time committee economists sought
to show that maintenance of rela-
lively high price levels by the steel
industry had tended to aggravate
periods of depression. whereas price
reductions might have stimulated
activity in the durable goods in
dustries and thereby helped busi-
ness generally.
Benjamin F. Fairless. president of
the corporation. presented the sur
vey. which included hundreds of
pages of printed matter and scores
of charts showing trends in the
steel industry.
Steel Demand IneIastic.
The quantity of steel that can
be sold is relatively unresponsive
to changes in the level of steel
prices" Mr.. Yntema testified in
summarizing the work. In other
words, the demand for steel is in
elastic
"A reduction in the price of steel,
therefore. will bring only a small
increase in its consumption. The
fluctuations in the production of
steel have been due primarily to
shifts in demand caused by changes
in general business activity, con-
profits. In comparison with these
factors the price of steel has been
a minor influence on the quantity
of steel sold.
The reduction in average costs
resulting from increased output is
much less than the reduction in
prices which is necessary to induce
such increase in output. All but a
small percentage of the costs of
producing steel in good times and
bad are cash out of pocket eX-
penditures.
Bankruptcy Seen.
"Unless wages and other costs
could have been further reduced in
depression substantially lower
price level for steel during the last
10 years would have brought gen.
eral bankruptcy in the industry"
A major difference between Yn-
tema and De Chazeau cenrered
around the formers computation of
fixed and variable costs. under
Yntema's methods the increase in
volume needed to compensate for a
price reduction of 10 per cent would
be 48.75 per cent.
"If the contentious of the corpo-
ration with regard to cost and de-
mand are admitted" the committee
economist declared. "one is forced
to conclude that from any break
even point a price reduction will
bring losses and an upward price
movement will bring continuous and
increasing profits"