Basing point methods of price quoting represent one form of imperfect competition in a group of industries, the underlying characteristics of which make some form of imperfect competition inevitable. They are departures from “normal” competition, by our simple inherited theoretical standard. But those who have had contact with the N.R.A. experiment in the United States must have had reason to doubt whether any industry is “normal” by such standards. Possibly the trouble was with what we had conceived as normal. In any case, this form of pricing deserves study uncontrolled by inherited preconceptions.

It appears to arise in industries having four main characteristics or predisposing conditions. The first is a standardized commodity, such that purchasers will not buy from one producer if another producer offers even a very slightly lower price. This is true of the main product of the cement industry, and approximately true of basic tonnage steel products, but less so of the higher grades of steel.

In the second place, production is localized, with a considerable number of producing points at considerable distances from one another. Some centres of production include a number of rival producers, others only one.

The brief period since 1935 has produced in the attitude of the Canadian Government and people towards national armaments and defence policy a change so sudden and striking as to merit the name of revolution. Observers who in the quite recent past had remarked the obstinate refusal of Ministry, Parliament, and public to pay the slightest attention to the apparatus of defence, have been astonished during the past three years by the energy with which the present Government (headed by a statesman who in three previous terms in office had shown no special interest in this phase of the national life) has attacked the problems of military policy, and by the vigour with which the Canadian electorate has fallen to discussing them.

Students of the past, of course, are aware that Canada is merely running true to form. Her history is marked by an alternation of long periods when the national defences are utterly neglected with short violent interludes, arising out of sudden foreign complications, when the country awakes to the inadequacy of those defences and tries to make up for earlier inactivity by measures taken in the teeth of the crisis. In the light of this record, it is not surprising that a desperately perilous international situation has now forced the Dominion into one more military stock-taking. Nevertheless, the episode is arresting; and its possible ultimate implications for all Canadians are of such necessary interest that it may be worth while to record here the things that have been done, and to assess, in however imperfect and conjectural a fashion, the ideas that lie behind the new departures and the policies which they are designed to serve.

The Canadian Manufacturers' Association arose to deal with the problems of manufacturers which emerged as a result of the economic expansion and social changes of the twentieth century. The opening of the West and the widening of the market, besides increasing the number and size of manufacturing enterprises, strengthened those groups such as agriculture and labour which were opposed to privileges secured by the manufacturers, or which advanced claims upon the state damaging to manufacturing interests. At the same time, the development of cheap newspapers and the diffusion of the habit of reading made possible the organization of these groups upon a broad basis of popular support. Thus, while economic expansion meant an increase in the number of interests making demands upon governmental authorities, improved means of communication made these interests more vocal in advancing their claims in the wider community. The result was evident in the increasing number of issues such as the tariff, eight-hour day legislation, and workmen's compensation brought to the attention of the electorate, in the greater participation of the state in economic and social life, and in the elaboration of new forms of organization and control on the part of those groups, such as manufacturers, which had to bid for the support of the general voting public.

A first attempt at a census of distribution, designated the “Census of Trading Establishments”, was made in Canada during the years 1921-4 in connection with the Population Census of 1921. Names and addresses of merchandising concerns were collected on a special schedule by the regular census enumerators and were subsequently checked with local directories, gazetteers, and other sources of information. A questionnaire was then sent by post to each address. Pressure of work in connection with the compilation of the Population Census rendered it impossible to distribute the questionnaire until 1924. By that date many of the addresses were obsolete. Moreover, owing to the necessity, during the economic stringency of 1924-5, of reducing staff to a minimum, it was not possible to have a proper follow-up after delinquent returns, either by mail or supplementary investigation in the field; consequently the census was incomplete. Returns were obtained from 66,814 establishments as compared with 138,143 in 1931. These were classified as retail, wholesale, or wholesale-retail. There were 60,181 retail, 3,782 wholesale, and 2,851 wholesale-retail stores. The questions asked included value of sales, value of purchases, salaries and wages, number of employees by sex, expenses, and capital investment. Thirtynine classifications by kind of business were used. It is probable that approximately 60 per cent of the value of retail trade was covered, but the wholesale coverage was much smaller, the proportion of wholesalers proper being much greater than that of other types. Probably less than one-third of the value of wholesale trade was included. In spite of the shortcomings of this 1924 census, it did give some idea of the importance and operating results of “trading establishments” in the general economy and paved the way for a more comprehensive census.

The past few decades have witnessed a steady growth in the importance of marketing activity in the Canadian economy and rapid alterations in marketing methods. These developments have posed new problems of economic efficiency and of public policy. The rapid multiplication of retail stores, for example, has raised the question whether there are not too many stores to permit of the greatest efficiency of each, and whether high over-head costs due to “excess capacity” is not a more serious problem in this field than in manufacturing industry. The rise of large distributors has presented the issue whether their buying and selling policies are not so oppressive as to call for legislation to protect the independent merchant, the manufacturer, and the wage-earner. Discussion of these issues has been for the most part cursory. Few attempts have been made to apply to them the methods of economic analysis which have been used in the study of manufacturing and other industries. It is essential, however, that such attempts should be made. The price of a finished good to consumers does not depend merely upon the manufacturer's price-policy, but upon a succession of price-determinations made in a series of markets, running from the farmer or miner at one end of the chain to the final purchaser at the other. Monopoly elements in any one of these markets may affect the final price quite as much as that monopolistic competition among manufacturers to which so much attention has recently been devoted. It is therefore necessary to study commodity distribution, not as an isolated, descriptive, and barely respectable “subject”, but as an integral part of the theory of prices.