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able practice not only of courts but of all arbitration tribunals to require that the whole of an instrument applies if any part thereof is applied. Your Board finds, therefore, that the basic eight hour day was intended to apply to cotton and tobacco rollers. They cannot be found entitled to the new rate of 65 cents while still working under a ten hour schedule. Either one or the other might hold good, according as they are comprehended under the award or not. But both cannot possibly apply.

Third: Cotton and tobacco rollers have, both before and after these changes, worked on a nine hour basis waiting on the screwmen's time; namely, until five o'clock P.M. If, however, as already held, they are entitled to a basic eight hour day ending at 4.00 o'clock, your Board finds that they are entitled to overtime at the rate of $1.00 per hour for the additional service up to 5.00 o'clock. This fixes the standard pay for a day's work at $6.20; namely, eight hours at 65 cents and one hour of overtime at $1.00.

The foregoing interpretation is based upon the awards of the National Adjustment Commission. It is necessary to justify the foregoing rate also by the terms of the original contract between the longshoremen and the steamship agents. This contract contains the following clause:

"Members waiting on gangs shall receive gangs' time in the full sense of the word."

It is agreed by all parties, as already stated, that the time of a cotton or tobacco gang has remained unchanged at nine hours. This clause, therefore entitles them to pay for nine hours work. The proper compensation for nine hours work under a basic eight hour day is identical with that already figured at $6.20. This calculation based upon the contract therefore agrees literally with the calculation based upon the award.

In the application of the foregoing interpretation we hold furthermore that longshoremen waiting on cotton or tobacco gangs, shall be paid for the customary lunch hours of cotton screwmen 9.00 to 9.30 A.M. and 3.00 to 3.30 P.M.

W. Z. RIPLEY, Chairman,


W. H. HENDRON (For steamship agents),
J. E. BYRNES (For the longshoremen).


INTERESTING questions of theory are raised by Dr. Taussig's article on price-fixing. What are the economic forces that determine long-run or normal price? At one time economists were content to say that it was the cost of production. When it was discovered that there were many costs of production, the question arose, which? The question had already been answered in the case of commodities subject to the law of diminishing returns that it was the highest or marginal cost. President Walker then attempted to extend the same doctrine to all commodities with his well-known theory of the “marginal entrepreneur" and "rent of ability." There were different degrees of fertility in gray matter as well as in land. In this theory the normal price is clearly the cost of production to the least efficient entrepreneur, whom the increasing demand for the product calls into being.

Recent economists, while adhering to the doctrine of marginal cost as a price-determinant in the case of commodities subject to the law of diminishing returns, have been disposed to accept Marshall's theory of the representative firm in the case of commodities subject to the law of constant or decreasing cost. It is not towards the cost of production to the least efficient producer that price gravitates, they say, but to that of the well-established, solid business man - the man doing a conservative, prosperous, but not phenomenally brilliant business. The latter, the great" captain of industry" may be conceded, even in Marshall's theory, to reap a rent of ability. The high-cost producers, those whose costs are greater than that of the representative firm, are not tending to establish normal price, they are tending to effect their own elimination. Every year a sheaf of failures is thrown off, but every year a new sheaf of failures appears. The individuals change, the class is constant.

It may be remarked as a comment on this theory that a single year is too short a period to determine which of the

competing firms is the representative firm whose cost determines normal price. Accident, a poor season, the newness of the business bring it about that every year some of the competitors produce at a cost higher than the price, and hence are doing business at a loss, who nevertheless in the long run are doing a profitable business. Such will ordinarily be the history of the hypothetical representative firm itself. Good years will offset bad years. However, making allowance for such vicissitudes and taking long-time averages, Marshall's theory appears to be more in harmony with facts. It is not the highest-cost firm nor yet the lowest-cost firm that determines normal prices, it is a firm somewhere intermediate between them.

But, after all, Marshall's theory is supplementary rather than antagonistic to Walker's. President Walker was applying economic reasoning to a human society much as a mathematician applies the principles of applied mechanics to the construction of a bridge. He works out his strain sheet as tho all the struts and ties were mathematical lines, as tho they were uniform in texture throughout, as tho they met at geometrical points. He knows as well as the practical bridge builder that not one of these conditions is realized in fact. Yet his strain sheet is none the less valuable and, even after allowing an adequate coefficient of safety, results in great saving of material. So Walker for the purposes of theory assumed a standardization, a fluidity in the action of economic forces operating in a human society which he would probably have been the first to admit is not to be realized in fact. The moment the supply of commodities which the most efficient entrepreneur is able to turn out is insufficient to meet the demand, and a rise of price follows, he supposes another entrepreneur to step in of precisely the right degree of mediocre ability just barely to reimburse himself at the slightly advanced price.

Now what Walker assumed in regard to different grades of entrepreneurs is precisely what Ricardians assume in regard to land. They also are presenting for the purposes of theoretical reasoning hypothetical conditions which they know well

enough can never be more than roughly approximated in actual life. There will always be a fringe of land that is worked at a loss. The cost of production that determines or, better, equals normal price is never the marginal in the sense of highest cost of production. A certain number of producers will always be found occupying land which is as yet of too low a grade to reimburse them at the current price of the product. Even if land could be conceded to be taken up step by step in infinitesimal gradations, the human factor cannot be omitted. Even then it would be the representative firm operating marginal land that would produce at the price-determining cost. The business genius or the business weakling operating marginal land would produce at a cost, the one less, and the other more than the normal price. In short the two theories are seen to be in fact the same theory, except that in one an attempt is made to adjust reasoning, applicable to an hypothetical society, to an actual society. Walker's marginal entrepreneur operating in a conceptual society becomes Marshall's representative firm operating in an actual society.

But when this is admitted we seem at once to make the whole theory valueless for any practical application. So long as we could conceive ourselves to be working in a society, shall I say, geometrically perfect, we had only to collect from all firms statistics as to their costs of production, tabulate the costs in order, and then note which was the highest, in order to determine the normal price. But if the marginal cost or the representative firm cost is not the highest, which one is it? We are driven, perforce, to reverse the process, to determine by averaging price data what is the normal price, find which of the costs is equal to it and call that cost the marginal or representative firm cost. That is, we make normal price determine marginal cost. Having done this, to go on and say that it is marginal cost which determines normal price is to reason in a circle. In truth, neither does marginal cost determine price, nor does price determine marginal cost. Both are results of a more primitive underlying force. That efficient force is human want measuring itself against resistance, whether the resistance be the limitations of nature or human

nature, land or brain. Under the impulse of this underlying force, as human want, manifesting itself in demand, presses against land and brain limitations there result a price and a series of costs, tangible evidences and measures of both want and resistance. Among these costs one will be found equal to the price, and so long as the conditions of want and resistance remain the same that cost and price remain the same. The price, so determined, may be called "normal." Whether we call the cost "marginal" or "representative " is a matter of terminology. In the cost curves so far examined it is found to be near the right hand extremity, indicating that by far the greater portion of the output is produced at a cost equal to or less than that cost. For it, therefore, the term "marginal" is objectionable in that it is too uncompromising; it suggests the absolute last term of the series, the highest cost. "Representative" is objectionable in that it is too compromising; it somehow suggests an average or modal cost, whereas, as just stated, it is ordinarily very near the end of the series. Provisionally, however, and subject to the above explanation, the term "marginal" will be employed in this paper when referring to the cost which is equal to the normal price.

The above analysis is not inconsistent, as might appear at first blush, with the doctrines of constant and decreasing cost. It is merely necessary that they be modified to adapt themselves to an actual society instead of the mentally fabricated society with reference to which they are ordinarily discussed. "Constant cost" implies, that however much the output be increased the price-determining cost will be neither increased nor diminished. It is usually represented by a straight horizontal line, thus adding to the concept of constant cost another concept, unnecessary even for the fictitious society of the economist, that it is also uniform. Even in such a society, if the theory of the" rent of ability " be admitted, it should be an ascending line, with the proviso that as demand increases it should always ascend to the same level at the point where it meets the demand curves, thus:

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