Scarcity of supply, however caused, whether by man's withholding (artificial) or by nature's niggardliness or destructive ways (natural), is of the same general character, viz., an insufficient available quantum to supply all wants without money and without price; and it exerts a pressure on market price in the same upward direction. So long as a price must be paid to secure any part of that quantum, scarcity exists. Any timber that, converted into lumber under existing conditions and marketed at current prices, would pay manufacturing and selling expenses and competitive profits, is physically available and a part of the total effective supply, and exerts an influence on price by affecting the subjective valuations of buyers and sellers of timber. Any timber not thus immediately available, but which through physical growth or changed conditions of manufacture, distribution, or market may become available, forms a part of the potential supply; and as such affects market price through its influence on the subjective valuations of owners and speculative buyers of timber.

The withholding of any available timber from the mill restricts the amount of lumber offered at a given price, tending to increase the current price of lumber, and so affecting upward the subjective valuations of all available timber. It is an influence working in the same direction though not in the same measure as the destruction of such timber by fire-not in the same measure, since it is a comparison of subjective valuations of the several owners with current market prices of timber that determines the total timber offered and thus influences immediately ensuing market prices of timber. Both timber withheld and timber destroyed curtail the potential supply of lumber in the immediate future. In the one instance, however, the timber's existence, even though withheld, makes the subjective valuations of the owners of other timber lower than they would be if the timber were destroyed.

To assert, therefore, that "As long, however, as enough timber has been released at current prices to meet the entire current demand, it cannot be said that the withholding of a part of the total remaining supply of standing timber has necessarily caused an increase in the price,"20 is to beg the question. It assumes that the current demand in the sense of the amount taken is a fixed thing, alone determining price, whereas it is itself determined in part by price, and can mean anything only as it attaches to some specific price. Price is the resultant of total demand ex20 Ibid., p. 62.

pressed by a scale of the subjective valuations of all demanders and total supply expressed by a scale of the subjective valuations of all suppliers. To withhold supply because the supplier's subjective valuation is higher than market price is to exert through limitation of supply at market price an upward influence on the immediately ensuing price quite as truly as to suppress demand because the demander's subjective valuation is lower than market price is to exert through limitation of demand at market price a downward influence on the immediately ensuing price.

The bearing of a correct analysis of price determination on the influence of concentration of ownership on price making is apparent. Concentration of itself, however great, does not, it will be conceded, cause higher prices. It is only as it affects withholding that it becomes a price-determining factor. It needs, therefore, only to be demonstrated (1) that concentration, through mobilization of large financial resources with the expectation of controlling the future timber supply, tends to greater withholding and (2) that high concentration does exist, to establish it as a potential price-making factor; and (3) that such concentration has already resulted in the withholding of larger amounts of timber from the mill than would otherwise have been withheld to . establish it as an actual price-making influence in the setting of present high prices.

The demonstration of these propositions the study in review practically makes for us: (1) "The financial strength of many owners has enabled them to withhold their timber from use, while the increase in its value has more than absorbed the accumulated charges against the holdings, i. e., taxes, insurance, interest on investments, etc. . . . Concentrated ownership and superior financial strength have been closely correlated." (2) That high concentration does exist, especially in the Pacific Northwest, is evident if we accept with the study the figures of the old Bureau of Corporations22 that: "Of the total privately owned timber in the United States, 11 per cent is owned by three corporations; 31.6 per cent by ninety and 38.4 per cent. by one Thus one-half of the pri

hundred and ninety-five holders. vately owned timber in the Pacific Northwest is owned by thirtyeight individuals or corporations."23 And, finally, to clinch, as it

21 Compton, op. cit., p. 61.

22 The Lumber Industry, Part I, 1913, pp. 12, 20.

28 Compton, op. cit., p. 61.

were, a line of reasoning pointing to a conclusion not accepted by the study, it appears (3) that this concentration in the Pacific Northwest accompanied by extensive withholding actually began as long ago as 1894: "Extensive withholding of timber from use or sale in deliberate anticipation of higher future prices has been a comparatively recent development in the United States. . . As a factor affecting supply, the concentration of holdings for investment cannot have been influential before the period, beginning about 1894, of the extension, directly encouraged by the railroads, of the market for West Coast lumber.""24

The count against concentration, then, is that it squints in the direction of monopoly. It is not that it would exert an undue upward pressure on present timber valuations were these based on an anticipated régime of free competition, but that it tends to valuations based upon the present worth of a future price determined, not in a free and open market but, through a unified control of a dominant portion of the remaining supply, by "what the traffic will bear." So long as the subjective valuations of the owners of such concentrated interest rest on the hypothesis of a free market in the future, the influence thus exerted on present prices will be no different from, nor greater than, that exerted by many small holders whose holdings in the aggregate are equal in amount, whose financial ability is proportionately as great, and whose subjective valuations are similarly based. But when, as is likely to be the case at once, concentration increases the subjective valuations of the owners of such interest, as well as those of others, to an amount equal to the present worth of nearfuture monopoly prices, present market prices will be increased. The concentration becomes not only a potential factor in future monopoly prices but an actual factor towards present higher prices-higher than they would be did not the blossom of concentration promise to ripen into the early fruit of monopoly.

Most (approximately 98.5 per cent) 25 of the timber standing at the beginning of any one year is withheld from manufacture during that year. It is not denied that much of this should be included in the potential supply of timber and has value only as a speculative holding. Nor is it denied that considerable is owned by small holders. But it is held that large interests, constituting

24 Ibid., p. 66.

25 The Lumber Industry, Part I, 1913, p. 79. The percentage of total stand cut in 1909, a year of large cut, was 1.6 per cent.

about 55 per cent26 of the total privately owned timber, contribute to the mill only a small fraction of the cut and that if their cut were' in proportion to their stand lumber prices would be substantially lower.

IV

With respect to organized restraint of trade and association activities as a price-determinant the conclusion is reached that greater unformity of lumber prices on possibly a slightly higher level has thereby been attained but that they are no considerable part of the efficient cause of the long upward movement of prices the country over. Where advances have occurred due to restraints, they have been temporary, local, and insignificant." In this respect the study takes issue with the report of the Bureau of Corporations that "association price lists and the so-called 'individual' price lists which were formulated at conferences of lumbermen ‘acting as individuals,' have had and do have an important effect on the actual sale prices of lumber."28 Evidence alone, unimpeachable and ample, is competent to settle the point in dispute.

The increasing potential use of substitutes for lumber is cited as a strong deterrent to the upward tendency of prices.29 To what extent this influence is peculiar to the products of the lumber industry is not disclosed by the inquiry. If it is not peculiar, i. e., if it is not found here in greater measure than on the average it is found in the consumption of general commodities, it has no proper place in an explanation of the relative rise of lumber prices. If among price-depressing influences it is peculiar to lumber, the rise in lumber prices due to peculiar price-advancing influences is greater than a graphic comparison (such as is given. in the study) of the lumber price curve with the general price curve would indicate.

26 Compton, op. cit., pp. 12, 13. 69.2 per cent of the timber in the investigation area (this representing 80 per cent of the total privately owned timber of the United States) was in holdings of 60,000,000 feet or more. This would equal 55.36 per cent of the total privately owned timber.

27 Compton, op. cit., p. 143.

28 The Lumber Industry, Part IV, 1914, p. 12.

29 Compton, op. cit., pp. 126-129.

V

It is in the relative exhaustion of timber that the study finds the only adequate explanation of the relative increase of general lumber prices, i. e., of the margin of increase of lumber prices over that of general prices.30 Elaborate data are given to substantiate this fact of exhaustion.81

There are two ways in which exhaustion of timber has tended to cause an increase in the prices of lumber. First, through an increase in the cost of stumpage, logging and delivery to the mill. This effect is summed up in the higher price of logs "in the water," i. e., laid down at the sawmill. Second, through an increase in the average cost of the transporting the lumber from mill to market. This means that there has been an increase in the proportion of the lumber supply which has been marketed at a high transportation cost per unit.32

"Cost of stumpage" should hardly be included as a cause of lumber prices. It is clearly an effect of such prices just as land values are an effect of the values of land products. Practically, the "two ways" referred to above are embodied in the one factor of availability. This, together with quality, determines in timber its productivity of a given utility laid down at the point of consumption, as availability and quality of land determine its productivity of a given utility at the point of consumption. Demand remaining constant or increasing, any diminution in the total actual or potential supply of the producing agent results in a higher valuation of the utility produced.

This statement of the case, however, seems to need further clarification. Only as relative exhaustion affects the current supply of lumber relative to the demand, can it affect lumber prices; and it can affect this supply of lumber only by affecting the supply curve of timber—a curve plotting a series of subjective valuations at which the several owners would respectively part with their timber. As this exhaustion becomes more apparent and its meaning more evident, these valuations tend, other things equal, to rise, and, the demand curve of timber constant, to cause the amount of timber offered at the resultant market price to

30 "Analogy to Canadian price phenomena constitutes strong presumptive evidence that natural causes, of which the most influential has been the relative exhaustion of timber supply, are an adequate explanation of the lumber price movements in the United States for the period for which statistics have been presented, 1880 to 1912." Compton, op. cit., p. 124. See also p. 119.

31 Ibid., pp. 116-122.

82 Ibid., p. 116.