cost. This resulted in fixing uniform prices for large areas within which conditions differed widely. As time went on the work was more and more carefully done. A few words should be said, however, concerning the work of the Oil Division of the Fuel Administration. This furnished an illustration of unusually close cooperation between the industry and the government, and its operations were controlled by men who were personally interested in the industry. Certainly, its work was effective in securing the needed supply of products, which was the chief end to be accomplished. It is a fair question, however, whether the same quantity of oil could not have been secured at less cost to the government and the people. The last advance in crude oil prices was, in our opinion, entirely uncalled for, and this opinion is shared by many oil producers. Indeed, the advance was not made as large as that which the Oil Division had originally intended. The principal factor in oil scarcity was not the price but a shortage in equipment and transportation. It is our opinion also that the figures given out by the Oil Division did not always convey a correct impression. For example, the same argument for "gasless Sundays" that was made in 1918 could have been made in any year from 1914 to date, as it is always the case that surplus stocks of gasoline are accumulated from December to April, and that such stocks thereafter decline until the fall months, when the refineries run practically from hand to mouth. Moreover, it is doubtful if the figures showing a great decrease in crude oil storage after June, 1918, can be justified, a sudden decrease of approximately three million barrels being indicated which cannot be explained by the export figures. Finally, the public was led to believe that the stationary price of gasoline was an achievement, while as a matter of fact, to hold gasoline prices up at the same time that the prices of fuel oil and lubricating oil were greatly increased, was virtually equivalent to advancing the price of gasoline. The oil industry, with the exception of cotton, was the one great basic industry of the country for which there was virtually no price regulation. This was the achievement! With regard to the Food Administration, it must be said in advance that the problem was peculiarly difficult, as it involved prices to the consumer, and almost every case was one in which there were substitutes. Nevertheless, as long as the attempt was made, it must be judged, and it is a fact that the Food Administration's price regulation illustrates too many of the evils of the so-called "cost-plus basis". The attempt was made to regulate margins, and, especially as fixed margins were named, much manipulation of accounts was invited. Little was done, however, to determine costs. The object was, largely, to impress the public and to allay social unrest. Prices were agreed upon at conferences between groups of interrelated industries and were fixed on a rough and ready basis, dependence being placed upon what had been the usual return in the past. Any one will look into the results of price regulation in the case of flour and canned goods (vegetables, fruits and milk) will find how unsatisfactory the results were. In the case of canned milk, for example, the price of raw milk was not fixed. Manufacturing costs were not checked. At one time, as high as 50 cents per case of "talls" was allowed. The price of interrelated products was not controlled, as a result of which cheese makers could not afford to pay the price for milk that the condensers could pay. On the whole, it may be said that price fixing in the United States suffered from the lack of a program. No adequate study was made of interrelations between commodities or of the various complicated factors affecting demand and supply. No general principles were formulated. Too frequently, each step was taken up as a separate proposition. Much trouble would have been saved by a better understanding among the different price-fixing agencies and by the adoption of certain broad fundamental principles, such as the basis for determining marginal cost ("the bulk line figure") and the basis for determining investment. There should have been a general board of strategy to supervise the entire price-fixing program and to coördinate it with the government's fiscal arrangements and with the various steps taken to control production and consumption through priorities and rationing. Some progress was made in this direction, as has been pointed out in a preceding installment of this article.' 1 POLITICAL SCIENCE QUARTERLY, vol. xxxiv, pp. 115-118. But it remains true that the price-fixing operations were not sufficiently correlated with taxation and borrowing (inflation) on the one hand, and with rationing and priorities on the other. The price of eggs e. g. was regulated without regard to the price of hen feed, with the result that hens were slaughtered. The price of wheat was fixed without fixing the price of other grain substitutes therefor. The price of coal was fixed, but not of fuel oil; of cottonseed, but not of cotton,-while a different body, actuated by different motives, fixed the price of cotton linters. After all, price fixing, control of production and consumption, taxation, and government borrowing, all are concerned with price, and all affect the adjustment of labor and capital, saving and the distribution of wealth. The lower the price and profits, for example, the less the inflation required, while not only is the source of income taxes reduced, but also the need for such taxes. As a result of not coördinating price regulation with taxation policy, conflicting purposes were allowed to function, loose methods were encouraged, and prices were not so carefully fixed, nor taxes so carefully applied, as would have been the case had the two matters been considered together. This fact is concretely illustrated by the virtual clash between the "cost-finding" principles of the Federal Trade Commission and the rulings of the Internal Revenue Department with regard to the determination of investment. The lack of coördination between price regulation and the control of demand and supply is illustrated by the fact that prices were sometimes raised unnecessarily when the real need was for priority (e. g, oil); and, in the case of cement, prices were actually raised to keep plants alive, while at the same time the output of the industry was curtailed by a reduction in the coal allowance. When the whole price-fixing and industrial-control "program" is regarded as it should be, that is as a national policy, it becomes apparent that it was highly opportunistic. While intimidating some to observe retail grocery prices and to buy liberty bonds, while compelling some to live up to the rationing regulations concerning sugar and flour or to sell at prices carefully fixed on the basis of cost, the government was appealing to others on the score of patriot ism and was virtually bribing still others through high profits and was facilitating the whole scheme by the dangerous expedient of continual inflation. 4. Conclusion It is our conclusion that price fixing is, in war time, a necessary evil. In the first place it is necessary. The chief grounds of necessity, some of which did not have much influence if any, were as follows: (1) To replace competition where this force disappears or becomes abnormal. Unified government buying increases the field of monopoly, and conditions of ignorance and panic make a reliance upon the forces of demand and supply in many cases impracticable; (2) To serve as part of a system of control of demand and supply. The use of priorities, rationing etc., causes changes in demand and supply forces which require an appropriate adjustment in prices; (3) Price fixing in the shape of a guaranteed price is necessary in some cases to insure the adequate production of needed commodities; (4) Price fixing may be used to advantage for the purpose of stabilizing markets when such markets would otherwise take on a "run-away" condition. Nevertheless, price fixing even when necessary in time of war, is an evil or at least has its evil side. Any price fixing is bad in the sense that some of the advantages of free competition are abandoned, the most notable loss being that of the "weeding out" process which attends competition. As a result, there is no guarantee that the margin of production will be economically determined. The adjustments required among different industries are also sure to involve some which are discriminatory in character. The evils of price fixing may, in our opinion, be reduced to such a minimum that in war time the advantages gained thereby outweigh the disadvantages. On the whole, it is our opinion that such was the case in the United States, but that the balance in favor of the price fixing was, on account of the way in which it was done, much slighter than it should have been. LEWIS H. HANEY. JACKSONVILLE, Florida. HOW MASSACHUSETTS ADOPTED THE INITIATIVE A AND REFERENDUM I GITATION in favor of the initiative and referendum began to make headway in Massachusetts in the early nineties and secured the indorsement of a Republican governor. But repeated attempts to obtain from the legislature the passage of a resolution for submitting to the people a direct-legislation amendment met with discouragingly adverse majorities. After years of disappointment, a flank movement was resorted to. Abandoning for the time their campaign for outand-out direct legislation, the advocates of the initiative and referendum for several years concentrated their forces upon an attempt to enact a "public opinion" law, under which, upon petition of a certain number of voters, specific questions of public policy might be submitted to the people at the state election, the supposition being that their yes or no verdict would have weight as an instruction to the senators and representatives in the legislature. There was little enthusiasm for the successive public-opinion bills; they fell far short of what their sponsors were really seeking, while their opponents not only assailed the theory upon which they were grounded but easily exposed the fallacy involved in the claim that such laws would restore the traditional practice of instructing representatives,—as if a random majority vote from all over the commonwealth were the same thing as a specific instruction to a representative passed after debate in his presence at the very town meeting before which he was standing for election. In 1913, however, a public opinion law was passed which eliminated that objection. It provided that on petition of a certain number of voters in a given district a question of public policy might be submitted to the voters of that district, but no vote under this law was to be regarded as an "instruction" un |