condemnation. Some evolutionists ought to be hanged." With that view of economic evolution, as something requiring further explanation before being either approved or condemned, the book has been written.

The first two or three chapters, which discuss the modern business conditions leading to the formation of combinations, necessarily show their favorable side and the evils of the competitive system most strongly; later chapters, depicting their methods of work and their effects, show most clearly the evil in them.

It is hoped that the prejudices which are common to all have not prevented a reasonable degree of fairness in seeing and depicting both sides of this question, the good as well as the evil. While it is probable that the book has been written chiefly from the view point of the economist, it has been the intention not to ignore that of the publicist and of the citizen, who think of the practical as well as of the desirable in legislation, and who keep in mind the social and moral as well as the business welfare of the people.

CHAPTER I

COMPETITION: ITS NATURE

It is impossible to understand why there has been of late so strong a tendency toward the formation of industrial combinations, unless one first sees clearly the economic conditions out of which they have arisen. A brief study of the competitive system is therefore placed in the foreground.

course,

It has been a common assumption among economic writers that competition is free, and that there is no element of combination among dealers or manufacturers. Most writers, of have been well aware of the fact that in actual business dealings this assumption is not true, but it has seemed wise to make it and to take it as a basis for argument in their deductive reasoning. Too many of them, unfortunately, in their conclusions have forgotten that it was mere assumption, made for logical reasons. The most vigorous opponents of industrial combina

tion have, in like manner, tacitly at least, often made the same assumption; but it is so far from the truth in the actual business life of to-day that its adoption is certain to lead to misunderstanding regarding the nature of industrial combination.

The "friction" of competition is most readily noticed in the retail trade. Careless customers, ignorant of prices, call for goods which please them, and often purchase without striving to get the lowest price. Others, from habit or feelings of friendship, deal regularly with one merchant without comparison of his prices with those of his rivals. The convenient location of his store, or his pertinacity in soliciting custom, often enables a dealer to sell for more than the lowest market price, so that competition, from the point of view of price, is far from being free, or at least from being efficient.

A more or less formal understanding among dealers also checks the freedom of competition, and, in fact, introduces an element of combination quite similar in kind, though less in importance, than that found among large manufacturers. In many small cities there exist

butchers' associations, grocers' associations,

associations of hardware dealers, of druggists, etc. Usually without formal contract these organizations substantially maintain a general level of prices throughout the city, besides furnishing to all of the different members the opportunity of reading trade papers, of learning the condition of the wholesale markets, and calling to their attention other matters of common interest. In such cities and villages a trader from the outside, particularly if he attempts to peddle his goods from house to house, is sure to be met with united action of all the dealers. Industrial combination has begun.

Even without these associations, grocery stores, dry-goods houses, butcher shops, and other retail mercantile establishments in the same neighborhood usually have the same prices for similar goods. Occasionally one will cut the price of some article which he employs as a leader to attract customers to his store, and this will be counteracted by a similar cut on that or other single articles by his competitors. The main line of prices, however, under usual conditions, remains substantially the same without vigorous competition. There is a tacit friendly understanding that living rates shall be

maintained, and these rates will enable the most skilful to make good profits.

At times, indeed, in order to avoid the name of monopolist, a large dealer in a small village may even encourage nominal competition. It is not uncommon for a large general store to furnish goods at considerably less than the usual retail price to some small dealer on the outskirts of the town, who, while asking the same price as the large dealer, can still reserve profit enough to keep himself in business, and yet to appear in apparent competition with a rival. In one case which was noticed in a Western State, a wealthy man who had established large stores in several villages for the supply of their inhabitants as well as of mining and lumbering camps in the vicinity, found it advisable to take active measures to bring into each of the villages one, and in some cases more than one, small dealer, whom he supplied with goods at wholesale rates, in order that apparent competition might be maintained and real competitors be discouraged from beginning business.

Of course it is evident that in retail trade, as in the case of large manufacturing establishments, if one merchant goes too far in the way