Most economists in the united States seem
captivated by the spell of the free market. Conse-
quently,nothing seems good or normal that does
not accord with the requirements of the free market.
(5) A price that is determined by the seller or, for
that matter, established by anyone other than the
aggregate of consumers seems pernicious. Accor-
dingly,it requires a major act of will to think of
price-fixing (the determination of prices by the
(10) seller) as both “normal” and having a valuable
economic function. In fact, price-fixing is normal
in all industrialized societies because the indus-
trial system itself provides, as an effortless conse-
quence of its own development, the price-fixing
(15) that it requires. Modern industrial planning
requires and rewards great size. Hence,
a comparatively small number of large firms will
be competing for the same group of consumers.
That each large firm will act with consideration of
(20) its own needs and thus avoid selling its products
for more than its competitors charge is commonly
recognized by advocates of free-market economic
theories. But each large firm will also act with
full consideration of the needs that it has in
(25) common with the other large firms competing for
the same customers. Each large firm will thus
avoid significant price-cutting, because price-
cutting would be prejudicial to the common interest
in a stable demand for products. Most economists
(30) do not see price-fixing when it occurs because
they expect it to be brought about by a number of
explicit agreements among large firms; it is not.
Moreover, those economists who argue that
allowing the free market to operate without inter-
(35) ference is the most efficient method of establishing
prices have not considered the economies of non-
socialist countries other than the United states.
These economies employ intentional price-fixing,
usually in an overt fashion. Formal price-fixing
(40) by cartel and informal price-fixing by agreements
covering the members of an industry are common-
place. Were there something peculiarly efficient
about the free market and inefficient about pricefixing,
the countries that have avoided the first
(45) and used the second would have suffered drastically
in their economic development. There is no indica-
tion that they have.
Socialist industry also works within a frame-
work of controlled prices. In the early 1970’s,
(50) the Soviet Union began to give firms and industries
some of the flexibility in adjusting prices that a
more informal evolution has accorded the capitalist
system. Economists in the United States have
hailed the change as a return to the free market.
(55) But Soviet firms are no more subject to prices
established by a free market over which they
exercise little influence than are capitalist firms;
rather, Soviet firms have been given the power to
fix prices.