The principal natural agents which are necessary to production, and whose supply may be so limited to cause an appreciable monopoly, are: (1) Land for agricultural purposes; (2) land for purposes of manufacture or commerce; (3) transportation routes, such as mountain passes, room for railway tracks in a city street, or for gas-and water-pipes beneath its surface; (4) natural deposits of minerals and metals; (5) sources of water supply or water power. (The latter is unimportant now compared with a score of years ago, because of the lessened cost of its competitor, steam.)
Let us be especially careful not to confound this seventh law of competition with a certain doctrine which is now receiving more and more credence, which is, in brief, that the private ownership of the gifts of Nature used in production should be abolished. The grounds in opposition to this doctrine we will discuss in a later chapter. The law we have stated says nothing of the right or wrong of the private ownership of the gifts of Nature. What it does say is, that when any of these are limited in amount, those who control them are given an advantage over other would-be competitors, which constitutes a monopoly.
In considering the natural agents enumerated above, we can easily see the truth of the law. Agricultural lands, the most important of natural agents, are in this country so abundant that their rental is entirely fixed by competition. In England, where they are so much more limited in area, rent is fixed by custom. As regards land for purposes of manufacture or commerce, we have already pointed out the cases in which monopolies are prominent, as also for transportation routes. As regards mineral wealth, deposits of iron are so numerous and widespread that no monopoly has ever yet succeeded in controlling competition in the manufacture of pig-iron to any great extent. But the rarer metals, like copper, tin, nickel, and others, are largely controlled by monopolies.
Now, while this seventh law says nothing as to the right or wrong, the expediency or inexpediency of the private ownership of natural wealth, it does follow from it that this private ownership generally constitutes a monopoly, as we have defined it. For of no class of natural agents is it true that their richness and availability are absolutely equal. Those competitors who have the richest and best natural resources to work with have an advantage over their competitors which is essentially a monopoly. Thus the owners of fertile lands near a large city have an advantage over the owners of less fertile lands far removed from markets, which is of a monopolistic nature. If any one doubts this, let him say how this case is logically different from that of the ownership of a mine of native copper so near to New York City that the cost of laying it down in the market there will be half what it is from any existing mine; or, for a second case, take the New York Central railway, which has the control of such a valuable pathway between the Mississippi Valley and the Atlantic seaboard that it has an advantage over all competitors in the business of transportation between those points.
We have now to turn our attention to other variations in competition besides the variation in intensity. We need to distinguish the different species of competition. That competition which is in daily operation in most branches of industry we may call actual competition. That competition which would spring up in any industry in case an increase in profits called it out, we may call potential competition. The third class is instanced in the letting to the highest bidder a franchise for city water or gas-works, or street-car lines. Here competition acts at a single time to fix the price for perhaps twenty years. We may call this, for want of a better name, franchise competition. It possesses the evident advantage that it avoids both the waste of competition and the fluctuation of prices. It has the disadvantage that, unless the owners of the franchise are held strictly to their contract, quality is apt to be sacrificed; also that if the purchase is for a term of years, cheapening in processes may result in undue profits to the franchise holders. The discussion of this matter, however, does not properly belong to this chapter.
Arranging in their logical order the laws of competition which we have found, we have the following diagram:
In any given industry the tendency toward monopoly increases:
(1.) As the waste due to competition increases.
The waste of competition increases in proportion to its intensity.
(1.) The intensity of competition increases as the number of competing units decreases.
(2.) The intensity of competition increases with the amount of capital required for each competing unit.
(2.) As the number of competing units decreases.
(3.) As the amount of capital required for each competing unit increases.
(4.) As the number of available natural agents decreases.
(1.) As the waste due to competition increases.
The waste of competition increases in proportion to its intensity.
(1.) The intensity of competition increases as the number of competing units decreases.
(2.) The intensity of competition increases with the amount of capital required for each competing unit.
(2.) As the number of competing units decreases.
(3.) As the amount of capital required for each competing unit increases.
(4.) As the number of available natural agents decreases.
The waste of competition increases in proportion to its intensity.
(1.) The intensity of competition increases as the number of competing units decreases.
(2.) The intensity of competition increases with the amount of capital required for each competing unit.
(1.) The intensity of competition increases as the number of competing units decreases.
(2.) The intensity of competition increases with the amount of capital required for each competing unit.