spite of a movement the size and rapidity of which broke all records.

The principal limitations placed upon the mills affected the prices which they might charge for their products, the quantity of wheat which might be used in making a given quantity of flour, and the kind of flour which might be made. The Food Administration had got over its scruples concerning its own powers as to price-fixing and imposed upon the mills a fixed operating differential or margin a figure by which the combined prices of flour and feed might not exceed the price (reckoned on the government purchasing basis) of an equivalent amount of wheat. The ratio of extraction was continued at 74 per cent (i. e., 4.4 bushels of wheat per barrel of flour), and the differential for the combined prices of a barrel of flour and the corresponding amount of offal (about 68 pounds) above the price of 4.4 bushels of wheat was set at $1.10. In other words the differential of $1.10 per barrel of flour included costs and profits. Thus, if the government price for No. 1 Northern wheat at Minneapolis were set at $2.20 per bushel, the price of 4.4 bushels would be $9.68, and the combined prices of flour and feed at the mill door might not exceed $10.78; further, if the government named price for mill feed (at say 41 per cent of the price of wheat) averaged $30.00 per ton, or one and one-half cents per pound, at that point, the maximum price for flour at the mill door would be $9.76. These regulations were easy to police since prices could be readily checked. by the reports required from flour jobbers and buyers. Furthermore, they were compulsory; there was no element of voluntary agreement in them, as with the arrangements of 1917-18. Hence it became possible to dispense with the elaborate and expensive machinery of

the Milling Division, which accordingly went out of existence. In its stead a milling section, with a representative miller at its head, was established in the new Cereal Division, of which the Grain Corporation also became a part.

It is too early yet to form any conclusion as to the efficacy of the new plan of regulation, but at this writing (August, 1918) it seems to be working well. There has been very little, if any, complaint as to inability of farmers to secure the full guaranteed minimum price which the Grain Corporation stands ready to maintain at all times and in almost all places. If, through lack of competitive bidding at local points, farmers fail to secure the full government price, the Grain Corporation will accept direct consignments, paying the shipper at least $2.00 per bushel f. o. b. shipping point, less commission. The fixed differential mode of controlling the price of flour has the advantage of simplicity; it is easily understood in general principle; it definitely establishes maximum prices. Its application was possible only with the fixed base price of wheat to the producer and the requirement of a uniform grade of 100 per cent straight flour; the fixed wheat price became the datum point from which the prices of flour and feed could be reckoned; under the "100 per cent straight "rule" flour is flour," while before this requirement there were as many different grades as there were mills.2

SUMMARY AND CRITICAL ESTIMATE OF RESULTS

Broadly speaking, the problems of the Food Administration at the outset of its career in the regulation of the wheat and flour trade were: (1) to attain price stability, for the protection of both producer and consumer; (2)

to enforce conservation, in order both to guard necessary supplies for home consumption and to save for export; and (3) to distribute the available wheat to the mills so as to maintain relative equality among them and secure their milling coöperation. How far did the Food Administration realize its aims in meeting these problems in the crop year, 1917-18 ?

XXII

1. The stabilization of wheat and flour prices speaks for itself. It is a matter of record and represents an achievement of the first importance. The efforts of the Food Administration to control and eliminate speculation in wheat and its products may be said to have been almost completely successful. The grain exchanges at once complied with the request to suspend dealings in wheat futures; the spot market practically disappeared under a system where the mills did all their buying in terminal markets through the Grain Corporation. The licensing of all elevators and mills having storage facilities, and the limitation of the storage period to thirty days, put out of business the line and terminal elevator companies, so far as the speculative handling of wheat was concerned. More effective still was the practically universal agreement entered into by the millers not to pay for wheat a price in excess of the fair price adopted by the Food Administration for government purchases. This fixed the upper limit for prices offered by domestic purchasers; export buying was confined to the Wheat Export Company, the Grain Corporation, and the representatives of neutral nations - all acting in concert. There was no place for price speculation; the almost universal control by the Grain Corporation of the movement of wheat from farm to mill and to the sea

board left no scope for speculative activity; it simply became an unremunerative business.

Only to a slightly less degree did the Food Administration succeed in eliminating speculation in flour. All licensed mills (some 6000 in total) were prohibited from taking orders for flour more than thirty days in advance of shipment, and from knowingly selling to any buyer such quantities of flour as would give him more than enough for his requirements for a reasonable period of time (defined by rule as thirty days). A national flour distributor was appointed, who got the flour jobbers in the most important consuming centers to agree upon maximum profit margins, based upon pre-war standards. Fictitious sales between a number of brokers or other intermediaries in the distributive chain, and resales within the trade with successive price enhancements, were strictly prohibited. Altho there were sporadic cases of violations of these rules, the response of the trade in general was excellent, and flour was kept moving in as straight and direct a line as possible between producer and consumer. After the first few weeks of Food Administration control there was a marked reduction in the price of flour at wholesale and this reduction was generally reflected in retail and bakery prices. The mill door price of flour at Minneapolis remained fairly constant at a figure around $10.00 per barrel from early in November, 1917, until the close of the crop year, with a tendency downward rather than upward.

Of course, the wisdom of the whole policy of price stabilization may be, has been, questioned by some economists, who express skepticism as to its practical utility as a war measure. Without entering upon a discussion as to the relative efficacy of the system of price variability and price fixation as types of economic organization in war time, a few words may not be out of

place at this point as to the desirability of a stabilized market in the wheat and flour trade in 1917.

The case against price-fixing, i. e., the establishment of maximum prices, is easily stated. It is urged that to fix a maximum price for a commodity defeats, or at least retards, the normal equilibrium of demand and supply; that by fixing the upper limit to the figure which the producer may expect for his goods, production is, pro tanto, checked at the very moment when it needs to be stimulated. Leave the market alone, let buyers pay what price they will, and the price of the commodity in question finds its natural place in the whole scheme of prices and settles at that point which will exactly equate the supply (or production) to the demand, as measured by its price relative to all other prices whatsoever.

The matter is not so simple as this, however. The argument assumes a degree of flexibility in consumers' demand schedules and in the organization of production, as little in accord with the facts as is the tacit implication that the psychological aspect of extreme price variations is a matter of no consequence and may safely be ignored. Nor is it necessarily true that, once a policy of price-fixing is embarked upon there is no logical stopping place that all prices, broadly speaking, must be worked out in nice adjustment to each other. A more moderate statement, and one nearer the truth, is that all interference with the normal operation of economic forces is to be recognized as an evil and that such interference should proceed no further than is necessary to attain the end absolutely required. Each case must be met as the necessity arises, and such action taken as the totality of social forces dictates.

1 For example, see W. C. Clark: "Should Maximum Prices be Fixed?" Bulletin of Queen's University (Canada), 1918.