I have just been reading a number of college textbooks on economics. They contain the standard chapters on monopoly, oligopoly, “monopolistic competition,” “imperfect competition,” “workable competition,” and “administered” prices. And they flash the usual warning signals: let the customer beware of price gouging, of submitting docilely to “all the traffic will bear.”

This sort of text writing has been going on ever since E. H. Chamberlin came up with his famous Theory of Monopolistic Competition, which discovered a decade or so back that competition among Big Twos, Big Threes, and Big Fives differs a bit from the competition that exists between producers of strawberries or cotton shirts. Though John Stuart Mill made the same discovery a century ago, no doubt the Chain-berlin book has its quite solid merits. It should be understood that one cannot price a Cadillac as one prices broccoli or asparagus, with a change on the marketing tag every day in the week. More-over, it may be good for the college student to be placed on guard against the possible theoretical dangers of economic Bigness as he leaves the portals of Harvard or Old Siwash.

As a person who has been paying bills for a generation, however, I often wonder about these prices that are supposedly “administered” by “oligopolies.” Have they been so huge, after all? And if they have been “administered” (whatever that phrase actually means), haven’t they been administered in a consistently downward direction? Haven’t the corporations generally followed a policy of charging much less than the traffic will bear? All to the end, of course, of increasing the traffic?

Herrymon Maurer, a Fortune Magazine writer who spent a good part of his youth in China, where prices were high and “oligopolies” few and far between, has asked himself just what connection there is between economic Bigness and the phenomenon of lower prices. His answer, contained in an excellent book called Great Enterprise: Growth and Behavior of the Big Corporation (Macmillan, $5.00), is that, like corned beef and cabbage, they go together. This is not the only important message in his book, which deals with the big corporation as a social as well as an economic unit, but it is the message that should be of special import to those economists who worry unduly about the subject of monopoly, duopoly, oligopoly, and so on.

To the lay public, which discovers things empirically by watching its bank accounts, it will not be news that Bigness is a condition of cheapness in the market place. Anyone who has given a thought to the pricing of mass produced objects, whether they happen to be Chevrolets, or washing machines, or even steaks from the packers’ “disassembly” lines, knows that Bigness has put dollars in the average citizen’s pocket. Far from charging all the traffic will bear, the Big Corporation, using its economic power and technological knowledge to allocate declining unit costs over longer and longer lines of automatically produced goods, is what has brought cheapness to America.

But if “everyone” really knows this, the academic economists often write as if the facts were quite otherwise. This being so, it is good to have the truth brought home by an Old China Hand who has some intellectual kinship with the child of fable who first called attention to the emperor’s nudity.

What Mr. Maurer has done is to buttress common sense with a statistical investigation that proves his contention beyond the shadow of a doubt. His test borings into the price behavior of different types of business establish some interesting patterns. It turns out that the greatest price increases during the post-World War II inflation occurred in such things as building materials, textiles, and farm products, none of which happens to be a field that is dominated by a Big Five or a Big Three. The so-called “monopoly” sectors of the economy, however, remained bearish during the postwar period about their own prices. “General Electric, Ford, International Harvester, and Jersey Standard,” says Mr. Maurer, “made deliberate and announced anti-inflation efforts . . . Many other companies, such as U. S. Steel and Alcoa, in effect held the line, although they did not announce the combating of inflation as their primary purpose.”

The pattern of action which shows the Big Fellows trying to keep prices down has its origin in the uniquely American economic theory first promulgated by Francis Walker as far back as the post-Civil War period. Before Walker began theorizing at the Yale Sheffield Scientific School, economists tended to think of supply and demand as a static confrontation of seller and buyer who met within the confines of a single room such as a wheat pit or a stock exchange. As Mr. Maurer points out, the price of a commodity was set between buyer and seller on a basis of how much was available and how much was wanted. Production was low; price tended to be high.

When economic units grew large, powerful, and technologically resourceful, however, all this changed. A well-heeled modern company can and does use its engineering resources to increase the number of units produced for a given amount of money. By knocking pennies out of the unit cost, lower prices can be charged even after allowance has been made for new research and constantly improving machines. Lower prices naturally stimulate consumption, the volume of profits increases, and the reinvestment of profits leads to further economies. The pattern is almost endlessly dynamic. Cheapness feeds on itself, leading to more cheapness. Meanwhile, high wages become more and more practicable, and the purchasing power of society grows.

With unit costs declining, a company with a monopoly position could theoretically settle for a quick killing. But no company with a large number of stockholders and a managerial group interested in lifetime careers can afford to conduct its business on the principle of charging all the traffic will bear. Continuity requires good continuing customer relationships. Big companies presumably try to maximize their profits over the long pull. But they do this by refraining from milking the customer in the immediate present. A “gouged” customer is never a good prospect one year, two years, or ten years hence.

Mr. Maurer nails down his dynamic production-price theories by naming specific examples of corporate behavior. He finds an interesting series of price declines in terms of both the varying dollar and the constant dollar. In terms of the 1913 dollar, rubber tires sold in 1937 at about 13 per cent of the 1913 price. Gasoline sold at 19 per cent, automobiles, trucks, and tractors at about 30 per cent, small horsepower engines at 44 per cent. Cellophane now sells at 58 cents a pound compared with $2.65 in 1924. In 1946 Westinghouse sold 10-inch television models for $375.00; in 1953 its 21-inch screen model sold for $199.95 inflation dollars and in 1954 for $169.95. In World War II GM cut its price on airplane engines to the government from $14.00 per horsepower for the first 2,000 engines to $5.50 per horsepower for more than 125,000 engines. A boy’s bicycle at Sears was $24.94 in 1953; in 1939 it was $33.95.

The truly clinching fact in Mr. Maurer’s display is the behavior of the price of aluminum during the period when Alcoa happened to be the single aluminum company in the field. In 1888 the price of aluminum stood at $8.00 per pound. The electrolytic process cut the price at once to $2.00. Between 1913 and 1937, when prices in general roughly doubled, aluminum prices declined by 15 per cent. And this despite the fact that Alcoa, according to the textbooks, was a “perfect” monopoly.

Mr. Maurer says the Big Corporations treat the consumer well because they are afraid of the “social vote” as well as the “economic vote.” This may be true in a land where the antitrust laws can always be invoked. But now that they have quite thoroughly learned the economic virtue of trying to set a price at a point that will bring out a huge and continuing demand, why should the Big Corporations ever forget it? Cutting off one’s nose to spite one’s face is not a luxury in which any good businessman would knowingly indulge.

Mr. Maurer seems to think that the price behavior of the Big Corporations somehow bypasses our old friend, the law of supply and demand. But all that the law ever said was that supply and demand tend to balance at a price. The law would seem to be one of those self-evident truisms, as obvious as the fact that fire burns. It doesn’t matter much whether balance is achieved by the higgling of an old-fashioned market, or whether it is the result of conscious experiment by people who know what their unit costs are likely to be at any given volume. To say that the law of supply and demand is suspended merely because a time dimension has been introduced into the equation is a little like saying that the laws of arithmetic do not pertain as adjuncts to higher mathematics. Just so long as lowered prices for an increased supply tend to bring out a bigger demand, one can be certain that the world of economics hasn’t changed beyond recognition.