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investing his capital or deriving enjoyment by consuming it. If the demands for capital in the railroad or banking business be weak, he has the option of investing in a hundred other enterprises; if no opportunities for investment offer as much satisfaction as can be gotten from consuming the capital, he will choose to do the latter. He possesses by virtue of these facts a monopoly force, which may rightly be termed optional. The marginal landowner, likewise, possesses a similar optional monopoly. The marginal rent which he can command by using his land for agricultural purposes will never be less than he can secure by changing his farm into pastures or ranches. The rent which he can secure by raising wheat will not be less than he can obtain by growing corn, oats or barley. In a similar way an individual wage-earner has a monopoly force, due to the fact that he has the option of several kinds of work. The option is, of course, limited to the group of laborers of which he is a 'member. He does not have the option of entering another non-competing group; but within his group he may choose between several kinds of manual labor, between bookkeeping and running a small store, or between many other employments. His option allows him to command the wages of the most advantageous occupation in his group. Reference is here had to non-differential wages; if the person possess greater skill or intelligence than other workmen doing the same kind of labor he will also be able to secure differential wages.
The other kind of non-differential monopolies was termed exclusive, because they represent factors of production that are able to exclude competition. In the differential and optional monopolies the various subjective and objective conditions to which attention has been called bring about a restriction of competition, but not an elimination. Land rents and personal rents are competitive. Marginal rent, surplus wages and interest have each a very definite maximum which competition will not let them pass. In certain
industries, however, it is possible to exclude competition, and they thus possess an exclusive monopoly force. This exclusive monopoly force may be possessed by a business as a whole, or may be held only by certain branches of a large enterprise; every complex business necessarily includes many factors of production under one common organization; some of these factors will be differential monopolies, some optional and others exclusive.
Exclusive monopolies are classified as Private and Public. What each of these is and what kind of an income each obtains require a discussion of some length. Before beginning this it will be well to stop at this point in the discus'sion of monopolies long enough to bring out more clearly the relationship of the foregoing classification of monopolies with the general theory of distribution that was represented by Figure II on page 73. The following diagram will show that relation graphically:
The exclusive monopolies are here represented as receiving all the free surplus, they being of two kinds, public and private. The former kind will be discussed more at length later on; it is the monopoly which the State holds in her
taxing power, a power that enables her to take of the surplus of production such a sum as she may desire. Under private exclusive monopolies are included those that are able to exclude competition.
There are several means through the aid of one or more of which an industry or a factor of production can exclude competition. Legislation affords one of these means in granting patents, copyrights and charters. The charters granted to transportation, electric lighting and gas companies often furnish the only condition necessary for the exclusion of competition. By the combination of capital in large amounts, also, competition is often prevented. The operation of the trust and pool is well known. The industrial enterprises, thus combined under one ownership or management, may consist principally of the differential monopolies, land and intelligence or skill, as in the case with the Standard Oil Company, or the businesses which these unite may be but secondarily differential monopolies, and consist chiefly of the optional class. Land may be required in but comparatively small amount, and the employment of labor and capital be necessarily large, a condition of things which holds true of the Sugar Trust. The Standard Oil monopoly was made possible because of the limited area of oil lands; the Sugar Trust has been established because Mr. Havemeyer has great sagacity, and has had command of very large amounts of capital. The Sugar Trust has driven competition from a field where it was strong, and holds it out at present only by a very sagacious management of large amounts of capital.
The various special ways by which competition is actually excluded or restricted in industry need not be dwelt upon at length. Suffice it to say that the more fully competition can be excluded from an industry the stronger becomes that industry's position in production, the more is it able to check the rate of its increase, and thus to compel society to pay liberally for any rapid expansion that may be desired of the business. The slowest increasing factors of production are
those that are able to exclude competition, in other words, the exclusive monopolies. Theirs is the industrially strong position. The differential and optional monopolies possess forces which give them definite portions of the producer's surplus; the exclusive monopolies obtain these portions and more; to them goes the free surplus.
As Figure III indicates, the producers on the margin of production obtain none of the fund secured by holders of differential monopolies. If these marginal producers possess only optional monopolies, they will, as a class, receive, at any given time, only that portion of the surplus which the monopoly forces of marginal rent, surplus wages, and interest are able to command. The individual members of this class of producers will be able to control differing portions of the fund thus distributed, because they possess options of unequal strength.
If the holders of optional monopolies are not producing along the margin, they will also secure a part of the differential fund distributed as rents, land and personal. Any producer or business having only differential and optional monopoly forces is operating in the realm of competition. If, however, the subjective conditions controlling consumption, and the objective conditions of production, to which reference has been made, be such that the increase of any form of production can be rendered slower than the rate with which society enlarges its demand for the products of that particular kind of production, then the producers in that field possess a monopoly due to the exclusion of competition. The comparative strength of the monopoly forces thus held depends upon the relative rates of the increase of those factors of production in which the exclusion of competition is possible. The exclusive monopolies divide among themselves the free surplus which exists for distribution at any given time in the ratio of their relative strength.
The restricting phrase, "at any given time," is inserted. in the preceding sentence because the different portions of
the fixed surplus change in amount from time to time. The monopoly forces yielding the incomes, rents, interest and wages vary. While agricultural rents, for various reasons, are falling in America, urban rents are rising with the growth of cities, and with the increase of economic and social conditions which give to limited areas great value, as business sites or as fashionable quarters" for the residence of the wealthy. The differential incomes which skill and intelligence command as personal rents are probably increasing somewhat. Surplus wages are growing with the rise in the standard of life. Interest is doubtless falling. In a word, the fixed portion of the producer's surplus is a definite sum at any given time; but changes constantly, and is at present probably increasing. But the growth of the fixed surplus, as a whole, does not keep pace with the progress in production. The free surplus is becoming steadily larger as society advances.
The free surplus has been shown to go to exclusive monopolies. At present the monopoly force which commands. most of the free surplus is held by private individuals. will be shown directly that the State may possess herself, through tax laws, of as strong an exclusive monopoly force as she may choose to have. The income derived by private exclusive monopolies is one with which economic literature thus far has not dealt. It has no name. In the classification on page 78, I have called it “tallage." The term suggests a levy which the politically or industrially strong make upon those who are weaker. According to Webster the verb "tallage" still means "to lay an impost upon; to cause to pay tallage." In presenting this word for introduction, I have sought to coin a term whose meaning suggests as much of the new idea as possible. This tallage does, and, at the same time, has the advantage of not being in common use.
It was said that in order to explain the law of distribution fully, it was necessary to show which are the slowest