The Principles of Political Economy

Henry Sidgwick

Book III

Chapter IX


§3. There is another question remaining. If, on the grounds above explained, the fair price of a commodity is the price that an ideal competition would determine, it seems to follow that a monopolist who raises his prices by an artificial restriction of his commodity---not merely availing himself of the advantages of natural scarcity---is to be disapproved as deliberately sacrificing common to private interest. And I think some degree of disapproval is generally felt for this procedure; except so far as the total reward thus obtained by the monopolist is thought to be possibly not more than a normal remuneration for the total labour and outlay that he has been required to give in order to bring his commodity to market---as may easily be the case with monopolies secured by patents or copyrights. I am not sure, however, that the teaching of `orthodox' Political Economy has actually tended to support this disapproval; because it has often produced a blind confidence in the economic harmony resulting from natural liberty, which has obscured men's perception of the opposition between the pecuniary interests of a monopolist---even when the monopoly is natural---and those of the community. This opposition, I think, has been more clearly seen in cases where the monopoly results from combination: the raising of prices by ``rings'' is held to be `sharp practice' by many traders and by the general sense of non-traders. In recent times, indeed, a disposition has prevailed among philanthropic persons to exempt from this disapproval combinations of workmen to raise wages, even when these have been seen to involve some restriction in the supply of the commodity furnished by the combining workmen; but there are various special reasons for this exception. 1. So far as such combinations have aimed at resisting a fall in wages rather than obtaining a rise, the result sought---though no less divergent from the normal effect of competition---has not offended the moral sense of the community; partly from a general sympathy with the distress caused by loss of income, and a sense of the advantage of protecting the incomes of labourers from the fluctuations that the changes of modern industry naturally bring with them; partly too, perhaps, because the old pre-economic identification of `customary price' and `fair price' has not altogether lost its influence even with the disciples of economists. 2. Even when combinations of employed labourers have aimed at raising wages, the effort has usually been made when their employers have been believed to be making profits above the average; and a vague notion of implied partnership among producers lends to this attempt a certain air of resistance to unfair division of gains among partners. 3. The difficulty of preventing combinations of employers---especially tacit combinations---and the fact that large employers have frequently a partial monopoly from the very magnitude of their business confers on the counter combinations of the employed, to an indefinite extent, the character of legitimate self-defence. 4. Even independently of combination on the part of employers, their services tend to be purchased by society at high scarcity values, owing to circumstances before explained; and it seems not illegitimate that other persons dealing with them should make a systematic attempt to get some share of these larger gains, if this can be done in the mere exercise of freedom of contract.

We have seen in an earlier chapter that there are various other ways, not strictly involving violations of law or contract, in which individuals or combinations may promote their interests at the. expense of the community. Thus they may raise or maintain the price of their services by increasing the need that others have of them---as when solicitors encourage litigation---or by resisting the introduction of more economical methods of satisfying this need---as when artisans, combine against machinery; or again, within a margin allowed by the inevitable vagueness of their contract, they may reduce the quantity or quality of the services that they have engaged to render; or they may make what seems, rather than what is, useful, and endeavour to succeed by obtrusive advertisement rather than superior workmanship. The vague condemnation passed by the moral sense of the community on these and similar anti-social practices tends to be sharpened by a keen apprehension of their economic consequences: though it would seem to have been rather blunted than otherwise by the influence of the writings of the laissez faire school, owing to their too optimistic reliance on the ultimate tendency of mere self-interest to eliminate the evils condemned. It may indeed be truly said that such practices are often, in the long run, contrary to the interests of the persons who have recourse to them; but in other cases, especially when rendered respectable by custom, it seems impossible to prove that they are not really the readiest way to private gain; and certainly they are often judged to be so by the majority of persons most keenly concerned in estimating their utility for this end.

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