gest houses in the trade, who are able to
force prices lowest, come to a sort of tacit understanding that their
salesmen "will respect each others rights a little and not force prices
down beyond all reason." It is plain that _here_ the foundation is laid
for the establishment of a monopoly. Yet the agreement certainly seems
to be nothing more than these two firms have a right to make. Its result
is seen, however, in a slight increase in the price their customers have
to pay. Soon the tacit agreement becomes a formal one. Then other firms
are taken in. The first seed has borne fruit. The combination grows
larger and stronger. The number of producing units is growing less.
Finally it includes practically all the paper manufacturers in the
country. Whoever wants paper must buy of the combination, there is no
other source of supply. Competition is dead.

If the combination is strong enough and is managed well enough, it may
be permanent; and prices of paper will be regulated by other laws than
the law of competition. But suppose that the number of paper makers is
so great and that they are so widely scattered that the combination
proves difficult to maintain; local jealousies creep in, and charges are
made of partiality on the part of the managers. The combination finally
breaks up. Can we expect a perfect return to the old system of free
competition? When men have once reaped the enormous returns that are
yielded by the control of a monopoly, the ordinary profits of business
seem tame and dull. There will surely be attempts to form the monopoly
anew on a stronger and more permanent basis; and even if these attempts
do succeed in producing only short-lived monopolies, the effect will be
to keep the whole trade and all dependent upon it in a state of disquiet
and uncertainty. Prices will swing up and down very suddenly between
wide limits; and it is everywhere recognized that _stability in price_
is a most important element in inducing general prosperity. A perusal of
the trade journals for the years 1887 and 1888 will convince one of the
truth that when a combination is once formed, its members are loth to
try competition again. A considerable number of combinations which were
formed in 1887 were soon broken up, often from the strength of old feuds
and jealousies. But in almost every case they have been formed anew on a
stronger basis after a short experience of competition.

This matter of the variation in price is a very