and, so far as is possible, to evaluate those influences which cause the variation of the lumber price curve from the curve of general prices, in other words to segregate and appraise those pricedeterminants which are peculiar to the industry."

In criticism of the general method of the study it may be seriously questioned whether there is any one influence, even that of the price symbol, money, which has a uniformly equal or proportional effect on specific prices; whether the influences which cause a general price movement necessarily appear at all or in like measure in a specific price movement; whether coincidence of specific and general price movements warrants the conclusion that the specific price movement has been affected by no peculiar influences; and, finally, whether any variation of a specific price movement from a general price movement can be apportioned as so much to this peculiar influence and so much to that.

I

Among the influences regarded by the study as of least weight and therefore worthy of small consideration are foreign trade in lumber, the tariff on lumber, labor conditions in the industry, and transportation costs of the industry's product. The treatment accorded the latter two factors does not appear wholly adequate.

Although the wage item is the largest in lumber manufacturing costs (about 80 per cent), it is not shown that wages have increased relatively no more rapidly than have average wages in other industries. So preponderant, indeed, is the wage factor in lumber manufacturing, that were other factors in all industries to remain stationary and labor costs to increase in like percentages, total costs would increase relatively more in lumber manufacturing than in the average of other industries, resulting, other things equal, in relatively higher prices. It is pointed out that labor troubles have been rare with little curtailment of output arising therefrom to which a rise in price might be attributed. But any relative prices, are assumed to have been due to peculiar influences, i.e., to causes, not operative upon general commodity prices or not operative to the same degree." Ibid., pp. 108-109.

5 Ibid., p. 2.

• Ibid., pp. 7-18.

7 E. B. Hazen, Manager, Bridal Veil Lumber Co.: Chicago Hearings before the Federal Trade Commission, 1915, pp. 134-136.

8 "Since 1900 there have been occasional efforts at unionization. In 1911 "The Brotherhood of Timber Workers' newly organized among the woods

inference drawn from the infrequency of labor troubles that wage increases have lagged behind the average of other industries is not necessarily valid. Such infrequency, it is true, might be the result of non-unionization of lumbering men, a cause in turn of a relative decline in wages, or it might be, on the other hand, the result of contentment with a rising wage. As a matter of statistics the Department of Labor shows that nominal weekly wages in the lumber industry have risen from 102.3 in 1890 to 131.3 in 1913 while general nominal weekly wages appear on good authority10 to have risen in the same period from 101.3 to 134, a percentage increase in the index number only slightly in excess of that for the lumber industry.

Nor should it be overlooked that efficiency of labor is a factor in the lumber manufacturer's labor costs as significant as money wages. Evidence on the whole may be conflicting, but testimony at the hearings of lumbermen before the Federal Trade Commission was to the effect that labor was less efficient than formerly, owing to widespread substitution of European for American and Canadian laborers.11 Wages in the lumber industry increasing at approximately the same rate as general wages, efficiency of labor declining, and the wage cost proportionately larger than in other industries-such a complex should constitute a material cause for the relative increase in lumber prices.

II

The transportation costs of lumber, as developed by this study, have affected general lumber prices in the United States:

"First, when the total traffic in lumber has remained constant and the same distribution of such traffic has been maintained and mill-workers of Louisiana and Texas, was met by a brief lockout instituted by the 'Southern Lumber Operators' Association,' organized in 1906, to combat unionization among employees. A similar lockout occurred in 1912. As a rule, however, lumber manufacture has been free from the disputes which have so harassed other industries. General mill labor is unskilled; the skilled labor has been well paid. Any substantial general curtailment or irregularity of lumber production cannot therefore be attributed to adverse labor conditions." Compton, op. cit., p. 18.

* Bulletin of the United States Bureau of Labor Statistics, Nos. 129 and 153. 10 I. M. Rubinow, "The Recent Trend of Real Wages," THE AMERICAN ECoNOMIC REVIEW, vol. IV (Dec., 1914), pp. 793-817; and Bulletin of the United States Bureau of Labor Statistics, No. 194.

11 John R. Toole, General Manager, Lumber Department, Anaconda Mining Company, and President, Western Pine Manufacturers' Association: Spokane Hearings, 1915, p. 18.

among the several sources of lumber supply, while the rates themselves have been either raised or lowered;

"Second, when the rates have remained constant while the proportion of lumber from the more distant sources has increased."12 Increasing transportation cost of the second sort is due not to any change in transportation rates, as the study makes clear, but to relative exhaustion of the more accessible timber, a factor considered later.

With respect to changing transportation cost of the first sort due to changing rates, the two things assumed, constancy of total traffic and variation of rates, are inconsistent. Nor would a change in rates ordinarily be reflected wholly in lumber prices, as might be inferred, but in part and conversely in stumpage prices. Suppose that lumber rates should be lowered generally and relatively alike the country over. The immediate effect would be an increase of manufacturing profit, an inflow of new capital or an expansion of old firms to secure this profit, an increased output and traffic (contrary to the assumption that traffic would remain the same), and an enlarged demand for stumpage.

Competition for the lumber market with a decline in lumber prices would occur coincidentally with competition for stumpage and a rise in stumpage prices. The margin of decline in rates appearing first as a manufacturer's profit would tend to be divided between lumber buyer in lower lumber prices and timber seller in higher stumpage prices. If the elasticity of the buyer's demand for lumber were very high and that of the seller's supply of stumpage (equivalent to his demand for returns on stumpage) were very low, this margin might go almost wholly to the stumpage seller in higher prices for stumpage.18 Only should there be no elasticity of demand for lumber (a condition hardly conceivable with the large use of substitutes available), could we assume that under competitive conditions the total traffic in lumber would remain constant with rising or falling transportation rates and therefore that this change in rates would be reflected wholly in 12 Compton, op. cit., p. 15.

13 Assume these conditions as representative of the industry; $2 per m., the price of stumpage; $10 per m., the manufacturer's sale price of lumber at destination at which there is a demand of 1,000 m.; $.25 per m., reduction in rates. Then, under high elasticity of demand for lumber and low elasticity of supply of stumpage a reduction of $.05 per m. might increase the demand for lumber by 10 m. to call forth the requisite stumpage for which an increase in the price of stumpage of $.20 per m. might be required.

a change in lumber prices. But the point especially to be noted here is that, contrary to the assumption that lumber prices would vary with transportation rates under constancy of traffic, such prices would be affected by a change in rates, if at all, only as the volume of traffic was affected thereby.

It is also a fair question to raise, whether, if rates were changed relatively alike, distribution of traffic among the several sources of lumber supply could be maintained unchanged. Until stumpage prices were adjusted to the new condition of things, a rise in transportation rates would tend relatively to shut out lumber from the distant source whose price contains a large element of carriage costs; a fall in such rates would tend relatively to shut out lumber from the near source whose price contains a small element of carriage costs.

That there have been no considerable permanent changes in lumber rates, however, either up or down during the past twenty years and that, therefore, increasing lumber prices cannot be due to this price-determinant is convincingly demonstrated by statistical evidence from authoritative sources.14 The fact is, it could probably be shown that lumber has not carried the average increase of transportation rates on all commodities and that, therefore, influences peculiar to lumber are working in the direction of higher prices to an extent which a comparison of the lumber price curve with the curve of general prices does not disclose.15

III

Unwise public land legislation was declared by the Bureau of Corporations to account for the alienation of much of the four

14 After citing changes in lumber tariffs since 1887 from the three principal producing regions to the three or four chief markets involving fifteen different hauls, it is added: “These statistics have been furnished directly by the Division of Tariffs of the Interstate Commerce Commission. They are up to date to Feb. 21, 1914. The changes since 1894 have not been substantial nor can they have caused any considerable change in the market price of lumber." Compton, op. cit., n. 66, p. 17.

15 "Between the period of the panic of 1873 and the era of railway and industrial consolidation about 1900 there had been a gradual general decline in rates on competing lines. The reversal of policy since that time has had little actual influence on lumber rates. As even a partial explanation therefore of the rise in general lumber prices since 1897, changes in freight rates on lumber, on the average, have been inconsequential." Compton, op. cit., p. 17. Italics are mine.

18 The Lumber Industry, Part I, 1913, pp. 219-271.

9917

fifths of the country's timberland now in private hands and especially for the high concentration of its ownership in certain sections, most notably in the Pacific Northwest. That such high concentration is not an adequate explanation of rising lumber prices is evident, but that it has not contributed some considerable part to that rise and is "proof only of a situation which promises in the future to become a serious challenge to public policy,' are conclusions that seem to be reached by the study through an imperfect analysis of some phases of price making. For example, the "principle of competitive price fixation" is thus developed : "What then has determined the prices of standing timber in all lumber manufacturing regions of the United States? Ultimately, the anticipated prices of the lumber to be sawed therefrom. This price in turn has been objectively limited by the competition of lumber from other sources."'18 "Prices" as first used may be assumed to mean current market prices. The "anticipated prices" may reasonably be interpreted as market prices of lumber anticipated for the future by the owners of timber, which discounted to the present determine, under the qualification of financial ability to withhold from current manufacture, their subjective timber prices. These prices are not market prices and have not "been objectively limited by the competition of lumber from other sources," except as the owner's forecast of the future has been influenced by present competition. The market price of standing timber is determined on the supply side by the subjective valuations of all timber owners, which in turn are determined by two principal considerations-a forecast of the future market by an analysis of the probable subjective valuations of future timber owners and lumber consumers and, secondly, financial ability to withhold the timber from the consuming market. Again:

To show that such potential control [concentration in timber ownership in the Pacific Northwest] has in fact been the cause of a rise in the prices of timber by creating an artificial relative scarcity of supply, it must be demonstrated that a scarcity of timber for present use, i. e., manufacture, has actually existed. As long as an effective supply, sufficient to meet all current demands, has remained in the hands of the owners who have been willing to sell-or to manufacture— timber at current prices, can a scarcity distinct from that measure of scarcity due to the relative total exhaustion of timber supply be said to have existed?19

17 Compton, op. cit., p. 69.

18 Ibid., p. 63.

19 Ibid., p. 62.