diminish. This appears significant in that a proper interpretation of the above qualifying phrase, "other things equal," includes the factor of financial ability to withhold supply of timber from the market, an ability almost invariably possessed by the large holder. Subjective valuation of supplier is determined by his ability to withhold supply from the market quite as much as is the subjective valuation of demander by his ability to purchase.

83

If no one, however willing, had ability, financial or legal, to withhold timber (or any other natural resource) from use, such resource would have no market value. The price of the product therefrom would, with free use of resource, just equal manufacturing and distributing expense and profits. The less accessible resource would not be drawn upon till the more accessible was exhausted. With the exhaustion of the more accessible the price of the product would rise by the amount of the increase of cost of manufacture and distribution. A resource whose product had considerable elasticity of demand would tend to disappear more rapidly under such a régime of free use, since low price accompanied by elastic demand accelerates consumption. If it were deemed socially advisable that the benefit should be spread over a longer period as well as confined within national limits, a charge alike to all would be made by the government for the resource as used.

But in any case, whether consumption were fast or slow, all would share alike either in the gifts of nature (as when society collected from consumer a scarcity-relative-to-demand value distributed in turn to all on a per capita basis) or in the proportion of consumption of those gifts (as when no social limits on individual use were imposed). Such would have been the status had the government retained the title to the timber with freedom of use to all under certain common restrictions. Somewhat approximating this status is one of ownership widely scattered, as is

33 The Lumber Industry, Part I, 1913, p. 106: "Persons of small means are not so likely as the large capitalists to share in the gain of timber speculation, even in proportion to their means. Persons whose property is small are likely to want a current income from it; timber held for the rise gives no current income. The small absentee owner can do nothing to protect his property from theft-a danger to which timber is particularly liable; and the speculative owner is apt to be an absentee. Moreover, timber is ill fitted for speculation on a small scale, because, as is fully shown in Chapter V (p. 178), the small owner usually gets materially less than the large owner for precisely similar stumpage."

measurably true of agricultural lands, and inequality of benefit correspondingly diminished. Concentration of ownership, on the other hand, even without monopoly conditions, throws the common heritage of all into the hands of the privileged few, who, contrary to reason that any should profit out of nature's exhaustion without rendition of service, benefit at the expense of the many. That this unearned increment in timber ownership is not small even under a degree of competition is admitted by the lumbermen themselves."

34

VI

As bearing upon the determination of lumber prices through the withholding of timber, two policies of the government somewhat cursorily treated by the study should be here examined.

First, state and local governments are charged by many with imposing unequal and increasingly heavy taxation burdens on timber lands. It is the fear that future taxes will, together with interest on the investment, more than absorb any future increment in timberland values (an increment itself uncertain) that constitutes the menace to the timber owner and perhaps disposes him towards a present realization on his timber. While the study asserts that "One of the most potent limitations to the withholding of timber from sale is the influence of the taxation of such property," it minimizes throughout (as shown above) the in

34 E. B. Hazen, Manager, Bridal Veil Lumber Company: Chicago Hearings before the Federal Trade Commission, 1915, pp. 146-147. He said: "Yes, I made a calculation based on $2.50 an acre for stumpage, our timber running about 50,000 to the acre on the coast, making 5 cents, which was the original price at which the timber passed from the Government in 1890. I had that compounded up to 1915 at 6 per cent, and added one per cent for taxes and one per cent for administration, and I found that stumpage today would stand the owner if there were any such, and I don't know of any operators who have any stumpage that has cost them as little as that, but it would stand them 34 cents and they could sell their lumber for the next 20 years and carry that load at about a fixed price."

Socially, it matters little whether present owners of a valuable stumpage or prior owners secured it a few short years ago for practically nothing. The fact remains that the aggregate holding profits of a succession of owners are enormous, amounting to 1,000 per cent, 2,000 per cent, and even 5,000 per cent, according to local conditions (The Lumber Industry, Part I, 1913, p. XVIII). The Weyerhaeuser purchase from the Northern Pacific is a case in point. In 1900 this tract of 900,000 acres with an average stand of 50,000 feet per acre was bought at 10 to 12 cents per m. Ten years later its average value based on sales of like timber was $2.50 per m. (Ibid., pp. 170, 208-209,

25 Compton, op. cit., p. 6.

35

fluence of withholding timber on lumber prices. In the discussion on taxation, however, it is declared "that lumber prices have been affected by timber taxation, if at all, only through its effect upon the holding, and conversely upon the cutting, of timber." While admitting that the evidence collected shows that lumber prices have been thus affected by timber taxation in certain localities and not so affected in others, the study nowhere in detail gives this evidence nor does it substantiate by evidence the conclusion so far as it pertains to taxation that "Neither taxation of timber nor the tariff has had substantial effect on average lumber prices. "30

The facts in the case may warrant this conclusion but neither facts cited nor reasoning followed makes clear that result. It is as though to reach this conclusion the argument, with missing links supplied, ran thus: Taxes under certain conditions constitute a menace to the timber owner's speculative profits, thus accelerating cutting; taxes under those conditions have been imposed (not proven); therefore, timber cutting has been accelerated thereby. But timber cutting has little effect on lumber supply or lumber prices (not positively affirmed here but held elsewhere); therefore, the taxation of timber has had no "substantial effect on average lumber prices." Or, the argument may be supposed to run thus: Taxes have not been such as to imperil speculative profits (the converse seems to be affirmed); therefore, timber cutting has not been accelerated thereby; and, therefore, even though timber cutting should affect lumber supply and lumber prices (not admitted elsewhere in the study), taxes as actually laid have had no such effect.

It is an almost universal complaint of lumbermen and a complaint of many forest service experts that unequal and burdensome timber taxation generally exists and is a powerful price depressor through limitation to withholding. But before this conclusion is drawn it is incumbent on the one drawing it to show either that these taxes are so heavy, even though constant, that together with interest they menace an uncertain future increment rendering the holding less profitable than immediate cutting, or that taxes now moderate but growing heavier may together with interest exceed a fairly certain future increment. If uncertainty as to both future taxes and future increment can be shown to exist with probable increase of taxes and decrease of increment 26 Compton, op. cit., p. 129.

an incentive to accelerated cutting is reasonably established. And before the opposite conclusion is reached, such as is drawn by the study, it is incumbent that the opposite showing be made.

If this complaint of the lumberman is borne out by facts which show that taxation is, in the judgment of the timber owner, endangering the increment over other fixed charges thus accelerating the cutting of timber and depressing the price of lumber, and if such taxation is largely peculiar to the industry, then, as in the case of lumber substitutes, the rise in lumber prices due to peculiar price-advancing influences is greater than the study's graphic comparison of lumber and general price curves would disclose, and leaves something to be explained; but if not, taxation has no place in the discussion of a relative rise in lumber prices, except as is competent to show that its burden and effect are not unusual or different.

Second, the government (largely the federal) holds the title to about 629 billion feet, more than one fifth of the total standing timber-a concentration of ownership, even after allowing for differences of quality and accessibility, many times that of the largest single private interest. The policy of the federal government today is to retain title to its timber land set apart as national forests, disposing of the timber, if at all, by sale for cutting within a stipulated future time. The average annual sales from the national forests for the five-year period, 1909-1913, amounted to less than one fifth of one per cent of the stand, whereas the average annual cut from all other standing timber for the same period was almost two per cent.38 The government not only is the largest single holder but sells its timber for cutting at the rate of only one tenth of that of the average private holder and much less than one tenth of that of the average small holder— a degree of withholding which exerts an upward influence on lumber and stumpage prices exceeding that of the largest of private interests. Yet it is asserted by the study that the government's policy with respect to the sale of its timber constitutes "a check to any indefinite increase in the prices of stumpage. The relatively small amounts of timber offered for sale, even

9939

37 The Lumber Industry, Part I, 1913, p. 65. 539 billion feet are in national forests.

38 Statistical Abstract of the United States, 1914, pp. 156, 161, 162. Data from reports of the Bureau of Census and the Forest Service.

29 Compton, op. cit., note, p. 62.

though the minimum price is set at a low point, can have little deterrent effect on general lumber prices. The government's heavy ownership may be regarded as potentially a menace to future private monopoly, yet uncertainty as to its future policy respecting its own holdings only adds to the speculative element in private holdings.

40

If the lumber industry during the years immediately prior to the Great War was suffering more from excessive competition, overproduction, and business losses than was the average industry (as has been stoutly affirmed by its representatives before the . Federal Trade Commission), it appears not at all unlikely that its distress was due to private timber speculation. Herein also lies the explanation, in part, of rising and unstable prices to the consumer of lumber, contradictory as these statements may at first appear. Miscalculations respecting future conditions in the lumber market, unwarrantably high subjective valuations on timber, large withholding, high market prices of both timber and lumber, an unloading of timber at high prices on the lumberman who is buying for a long-time period-such is the train of circumstance which may set off a mine of trouble. The demand for lumber is unusually elastic, quickly responding to changes in both price and industrial conditions. If subjective valuations have raised market prices unduly high or disturbance in the industrial mechanism has produced uncertainty, curtailment of demand follows. With ability to meet his carrying charges and with faith in the future the lumberman could be expected to keep his current lumber cut within an amount he could profitably sell, thereby insuring considerable elasticity of total lumber supply and relatively small variations of price. But inability to carry fixed charges under both curtailment of individual output and probable lower prices, and fear that the future holds nothing better in store, cause the lumberman to continue output undiminished, marketing even at a present loss as preferable to greater subsequent loss. True, a great many timber owners are holding their timber in the expectation of ultimate profit if they can but weather the industrial storm. But either their faith in the future or their financial ability is not equal to the additional burden of carrying the timber of the owner forced to liquidate; or, more probably, the profitableness of overseeing and developing widely scattered small tracts under one management appears too uncertain.

40 Hearings at Chicago, Spokane, and Tacoma, 1915.