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.

I have been invited to present to you my thesis regarding Puritanism and Democracy in seventeenth-century England. The thesis in question is simple and obvious, though some of its ramifications are (I hope) neither simple nor altogether obvious. The period of the Puritan revolution was one in which religion and even theology dominated the common modes of thought and expression. Lord Acton, who (unlike some historians) was sufficiently unenlightened to know theology when he saw it, described the period as “the middle ages of Protestantism”. It follows that the concepts whether of liberty or of authority which the Puritans developed, can be fully understood only if they are studied in their proper setting, and their native terminology. Dogma formed that terminology and the Puritan church organization constituted the setting. Without denying the validity of other approaches (the constitutional approach for example, in which the liberals have long had their own way, or the economic, in which the Marxists are, I understand, taking theirs)—without denying the usefulness of these approaches, I suggest the value to the student who would know what really happened, of a third, namely the religious approach. For the Puritan concept of democracy, if it did not spring from Puritan religion, at least sprang up in closest contact with it. Puritan religion constituted the climate of opinion in which the concept was born and nourished. The religious approach has one advantage (shared in measure with the constitutional): it can stay within the period under discussion, and it can afford to rest its case on the actual words used. It does not require a transposition of terms, whereby theology is shown to be a roundabout way of saying economics, and St. Mark's gospel gets spelled with an x. Nor does it ask us to make any large assumptions—to believe that Calvin built better than he knew: he intended a church and it turned out to be a bank! One will no doubt be told that some of the theological argument with which the pamphlets in the Thomason Collection are filled, and most of the reasons urged in the Councils of the Army at Putney and Whitehall, are what are now called “rationalizations”, and that we gain nothing by refusing to recognize this fact. So be it. But if these are rationalizations they involve the terms in which the Puritan viewed his world and they rest upon the convictions with which he was prepared to face not only his fellows, but his Maker. We shall gain nothing by brushing those terms and those convictions aside, though to comprehend them requires patient study and a modicum of historical sympathy. “Nothing”, says Lord David Cecil, “is more baffling to the imagination than the religion of another age.”

Professor Ashley was a pioneer in the most explicit meaning of that term. His work at Oxford identified him with a small group that was deeply concerned with the exploration of new fields of history. He was called to the University of Toronto in 1888 to establish a new Department of Political Science. In 1892, the subject with which he was most intimately concerned was formally recognized by his appointment to a chair in Economic History at Harvard. Distinguished work in this field, however, merely served to reveal new opportunities. Professor Ashley became increasingly aware of the possibilities of developing a programme of instruction for business executives. His work at Harvard was being developed to meet these new needs, when an opportunity was presented to develop such a programme on a larger scale at the University of Birmingham. His appointment as professor of Commerce in 1901 was thus a natural development of his thought and activity, and he gave the rest of his career to a programme which embodied important anticipations of the further development of economic history.

Two years ago the chairman of this evening's meeting stood in my place and delivered a scintillating address on “Statistics Comes of Age”. A year ago Professor Mackintosh gave his presidential address on “An Economist Looks at Economics”. I propose, therefore, to follow them in these subjects and to pursue an inquiry which occupied the time and energies of the first important Canadian economist, Adam Shortt. Economics is an older subject than statistics but I shall confine myself in this paper to the period since statistics began to leave its impression on economics and reached that stage, fatal to economics, when it came of age. Professor G. N. Clark in Science and Social Welfare in the Age of Newton (Oxford, 1937) has traced the background of statistics, in the growing importance of mathematics through astronomy, surveying, and book-keeping which followed the discovery of the new world, prior to its beginnings with the publication of John Graunt's Observations upon the Bills of Mortality in 1662, or four years before the census of Talon in Canada. An important statistical department was set up in England under an inspector-general to collect statistics on imports and exports about 1695. The effects of the imports of treasure from North America were becoming increasingly evident and William Fleetwood with a strong vested interest in stability in the value of fellowships published his Chronicon Preciosum in 1706, a first book on prices. And so the snake entered the paradise of academic interest in economics. Under the stimulus of treasure from the new world the price system ate its way more rapidly into the economy of Europe and into economic thought.

Business history is at once very old and very young. Objectively, it is as old as town economy in the ancient and medieval periods. By this, I mean that business began in the town, ancient and medieval. Subjectively, it is hardly more than a decade old. That is, as a subject for study, business history is just getting under way. Since this is the case, we may fittingly stop to consider what we are to understand by the subject.

Business history is the study of the development of business administration. Roughly, it deals with the historical background of subjects taught in schools of business.

Perhaps we may divide the subject, that is, the history of business administration, into two main parts. The first is the history of policy-formulation. We may think that there is little policy in business and has been less in the past. The fault lies in us: there is a long story and an interesting one at this point. Much of the development in policy, conscious or unconscious, is embedded in these five stages—petty capitalism, mercantile capitalism, industrial capitalism, financial capitalism, and national capitalism. Woven into these are many ingredients, but the degree of specialization and control is uppermost in the change of patterns. We shall come back to this subject later.

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.

In recent years, an attempt has been made by the present author to measure the probable slope of the marginal productivity functions of labour and capital in various economies. This has been done by computing indexes of capital (C), labour (L), and product (P) for manufacturing in the United States for the years 1899-1922, Massachusetts 1890-1926, New South Wales 1901-1927, and Victoria 1907-1929. The formula used is that P' (representing an index of computed product) = b LkC(1−k). By making the sum of exponents equal to unity, we assumed for purposes of simplicity that production could be described by a homogeneous function of the first degree and that equal proportionate increases in the quantities of labour and capital would cause the same proportionate increase in product. The exponents of L and C were found by the method of least squares, so that the sum of the squares of the deviation of P′ from P would be reduced to a minimum, and the sum of the arithmetic deviations to zero. The exponents for labour and capital in manufacturing which were found by this method were as follows:

It will be noticed that there is a substantial degree of similarity between the exponents found for these economies.

A mathematical analysis of the above function discloses: (1) that the share of the net product to be received by a factor should, according to marginal productivity theory, be equal to its exponent; (2) that the elasticity of the marginal productivity curve of, and hence, under competitive conditions, the demand curve for, a factor is the reciprocal of the sum of the exponents of other factors. This would mean a “normal” elasticity of demand for labour of between −2.86 and −4.0, and for capital of between −1.33 and −1.54.

I am happy to have been given this opportunity to pay tribute—a warm personal tribute, and a tribute from my colleagues and the University which I represent—to the distinguished Department of the University of Toronto whose half-century of accomplishment is being celebrated in this series of lectures. Though longevity provides the occasion for the celebration, it is quality that we honour. Distinguished as its history has been, at no time has the Department of Political Science in the University of Toronto commanded more respect among economists and political scientists than it does at present.

I welcome, also, the opportunity to pay loyal tribute to the founder of the Department of Political and Economic Science of Queen's University whose work did much to set the direction and the tone of teaching and studies in Politics and Economics, not only at Queen's University, but elsewhere in this country.

This paper will describe the functional relationship of the growth of industry to the traditional system of rural life prevailing in Quebec. The general course of this growth is familiar enough. Quebec has always had industries which exploited the native resources of forest, sea, and lately, of the mines. In the present phase new major industries, which make little use of native materials except water and man-power, have invaded the province. Industries of this type are generally not on the frontiers of settlement, but in the very heart of the province. In the course of the last two decades, Quebec has become more urban than rural. It is now only slightly less industrial than Ontario.

Modern capitalistic industry grew up in a few centres, coincident with an enormous expansion of sources of raw materials and markets. Its spread has taken two forms: the first, still proceeding at a slackening rate, is the extension of its far-flung frontiers; the second is an inner expansion in which industry moves from its most intensely developed older centres to nearby less industrialized regions, where it finds a population accustomed to the main features of Western capitalistic civilization but not sophisticated with respect to its more extreme manifestations. Quebec and the southern United States are among the outstanding regions in which this inner expansion or “mopping up” is taking place.

The opinion of the Judicial Committee of the Privy Council in Attorney-General for Canada v. Attorney-General for Ontario, dealing with the cornpetence of the Dominion Parliament to implement international labour conventions, has received widespread comment not only in Canada and in England but particularly in Australia and even in the United States. The Commonwealth of Australia, like Canada, suffers certain disabilities peculiar to federations, because there, too, the power to legislate on conditions of labour rests in general with the Legislatures of the several states and not with the central Parliament. It is interesting, therefore, to compare Canadian and Australian procedures with respect to international labour conventions.

The Commonwealth constitution contains no exact parallel either to section 132 of the British North America Act, giving to the Dominion express power to perform obligations of Canada arising under treaties made between the British Empire and foreign countries, or to the residuary powers of the Dominion under section 91. The Commonwealth Parliament is endowed with the power of legislation only upon certain enumerated subject-matters, the residuary powers remaining with the states. Somewhat comparable to section 132, however, is the provision in section 51 of the Commonwealth of Australia Constitution Act that the Parliament of the Commonwealth shall have power “to make laws for the peace, order and good government of the Commonwealth with respect to … (xxix) External Affairs”. In regard to the meaning of this provision a Commonwealth communication of February 26, 1909, was addressed to the secretary of state for the colonies, informing him that the law advisers of the government had expressed the view that the Commonwealth Parliament possessed the power under section 51 (xxix) “to make such legislative provision as is necessary to secure the fulfillment of treaty obligations, and that accordingly the powers of the Commonwealth Parliament are substantially identical with those of Canada”. This interpretation had been reaffirmed by Justice Evatt in 1933.

In a recent work on constitutional law one finds the chapters prefaced by quotations from Alice's Adventures in Wonderland and Through the Looking-Glass—a feature somewhat startling to the uninitiated but highly refreshing to any student of the Constitution of the British Empire. The complexities of this constitution have not been resolved with the passing of the years, rather have new difficulties arisen through the apparent achievement of autonomy by the Dominions. In search of a constitution there is almost a note of despair in the words of the Inter-Imperial Relations Committee (1926): “it [the British Empire] defies classification and bears no real resemblance to any other political organization which now exists or has ever yet been tried.”

A visitor to the House of Commons during the early days of the second session of the eighteenth Parliament of Canada might well have considered himself in Wonderland. The House had under consideration the abdication of His former Majesty King Edward VIII and the accession of His Majesty King George VI to the throne, and was concerned that rules of law should be followed and constitutional proprieties observed in this Dominion. The discussion called out an amazing variety of opinion. Eminent constitutional lawyers were in disagreement at almost every point. Probably the bewilderment of the average member was pretty well expressed by Mr. J. S. Woodsworth, leader of the Cooperative Commonwealth Federation, when he said: “I confess that as I have listened to the discussion so far I have not been greatly enlightened, but indeed somewhat confused. We have had brought before us a great many legal and metaphysical subtleties. Whether the Crown is unitary or divisible and multiple I do not quite know.” In this article it is proposed to discuss the abdication with reference to the more important legal and constitutional principles involved. No attempt will be made to examine the body of legal learning touching the nature of the kingship. Emphasis will rather be placed on the difficulties and anomalies which have developed along with the evolution of the British Commonwealth of Nations. This will involve a consideration of the propriety of the action of the Parliament and government of Canada in dealing with the situation created by the abdication of His former Majesty.

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.

Resale price maintenance raises not only economic problems but also legal ones. Indeed, much of the material on the subject is legal in origin. These legal aspects are, of course, important in showing the nature of the arguments—economic and other—involved, but their importance is mainly with respect to the technique of maintaining the system. For the immediate purpose one can assume that the economic aspects of resale price maintenance are the same, irrespective of the actual technique of enforcement and therefore the legal aspects, as such, can be ignored here.

It may be pointed out, however, that the methods used to enforce compliance with the system are various. In Great Britain, for example, the trade association with contracts for its members and dealers is common. These may be enforced by legal action or economic action such as refusal to sell. In other cases it may be handled by contracts between the manufacturer and the jobber and then jobber and dealer. The actual technique used is usually dependent upon what the law permits; accordingly it varies from jurisdiction to jurisdiction. Of course, the effectiveness of the scheme depends upon enforcement. Paradoxically enough, the better the system is maintained, the greater are the gains to any one dealer in evading it. Thus success tempts the very forces which if not checked will break it.

I speak as an economist and not as a physical scientist or an engineer. I accept as an accomplished fact, or as a fact in process, that ours is an age of technological advance. I assert that in all this there is only a limited significance unless its benefits come to the masses of the people. The lead that the British nation has given toward industrial democracy over three-quarters of a century through collective bargaining and through the other expressions of the will and desires of the workers is one of the finest achievements of modern civilization. Marching with political democracy and the democratization of education, it represents the most widespread set of benefits, materially and morally, that has come to humanity in our day and the day of our fathers and grandfathers. And I say this in full knowledge of the limited success of the British Labour party while in power in Parliament.

First, the political expression of labour in Britain is a part of the recognized functioning of democracy and as such is freely admitted. Second, the co-operative movement represents in a limited way the democratization of the property institution. Control over the buying and the production is as wide as the membership, and there is no profit running with investment. Third, the organization into unions partakes also of the nature of democracy so far as relations within the unions is concerned. But beyond that, when it comes to dealing with the powerful competing elements in an organized economy, viz., the capital-owning and profit-taking interests, it drops in large measure the democratic methods of discussion and decision and concern for the individual expression of every man. It takes up rather the weapons of the capitalist economy, viz., the concentration of power to drive hard bargains and even to force them upon the other party. Unionism—and I am thinking chiefly of its chief strand, the collective bargaining unionism—assumes a continuing opposition of interest between the propertied and controlling interests on the one hand and labour on the other, and between them battle must be done. That assumption brings in a point of view that is narrower in its compass than a democratic concern for the whole society and a methodology that seeks to elevate a single group with little concern for other sections of the community.

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.

Until last August, it was widely assumed that the Dominion's power to disallow provincial Acts was fast becoming obsolete. No disallowance had taken place since 1924; and the minister of justice, the Right Honourable Ernest Lapointe, speaking in the House of Commons on March 30, 1937, had said : “For many years the power of disallowance has not been resorted to by the government of Canada…. I do not think that in a federation such as this the power of disallowance could be exercised by the central government.” On the question of reservation of provincial bills, there was no official pronouncement; but as there had been no case of reservation since 1920, the same dictum would doubtless have been considered to apply to that power also. On August 17, 1937, the Dominion government disallowed three Alberta Acts, and two months later the lieutenant-governor of Alberta reserved three bills for the signification of the governor-general's pleasure. The discussion which arose out of these events has been more remarkable for heat than light. It seems pertinent, therefore, to try to set down clearly the constitutional law and practice governing these two powers, and incidentally the lieutenant-governor's power to refuse the royal assent outright.