ABSTRACT
Chiozza Money stresses the general advantages of large size. Young inserts a caveat: that the advantages of larger size not only grow more slowly, but eventually disappear, such that further increase becomes a detriment rather than a benefit. Chiozza Money says that combination may lower cost, and this is good. But what is evil is that they may also raise price. The rest of this chapter consists of Young’s own analysis of combinations.]
The only way to get a trustworthy answer to the question of whether or not a combination tends to increase prices is by turning to the records of past experience. It has been the almost universal opinion of contemporary observers that monopoly in most cases has meant higher prices. Popular hostility to the numerous monopolies created by the royal favor of Queen Elizabeth was based in part at least upon the extortionate prices some of the monopolies charged. Hume says that the price of salt was multiplied tenfold by monopoly action. In later years, the problem of the effect of monopoly on price has been very carefully investigated by Professor J.W.Jenks for the United States Industrial Commission. Professor Jenks found that the old whisky trust, which had a distinctly checkered career, advanced the price of spirits whenever it felt that its domination of the field was strong enough to make such action feasible. A sugar trust was formed in 1887. A decline in the price of sugar between 1882 and 1887 reflected the strong competition which then dominated the market. But as soon as the trust had been formed, the price of sugar rose 65 percent. But high prices made high profits, and these attracted new competitors so that the price of sugar fell in 1890 to a new low level. In 1892 the trust absorbed its principal competitors, secured again a temporary monopoly, and once more the price was advanced. Again competition came into being, and prices fell. It would be tedious to examine in detail the history of the prices of other products. But in general there seems to be adequate evidence that the whole tendency of combination, just so far as it is successful, is to raise prices, and the hope of the profits resulting from increased prices has been one of the principal stimuli to the formation of combinations. In theory, as we have seen, it is conceivable that the economies of combination would be such that the most profitable monopoly price,—that is, the price which would yield maximum profits for its product,—would be lower than any price that would be possible if production were parceled out among a large number of competitive concerns. In general, however, this advantage remains just a logical possibility, not a fact of experience.
