On the Economy of Machinery and Manufactures Part 21

On Combinations of Masters against the public

376. A species of combination occasionally takes place amongst manufacturers against persons having patents: and these combinations are always injurious to the public, as well as unjust to the inventors. Some years since, a gentleman invented a machine, by which modellings and carvings were cut in mahogany, and other fine woods. The machine resembled, in some measure, the drilling apparatus employed in ornamental lathes; it produced beautiful work at a very moderate expense: but the cabinetmakers met together, and combined against it, and the patent has consequently never been worked. A similar fate awaited a machine for cutting veneers by means of a species of knife. In this instance, the wood could be cut thinner than by the circular saw, and no waste was incurred; but 'the trade' set themselves against it, and after a heavy expense, it was given up.

The excuse alleged for this kind of combination, was the fear entertained by the cabinetmakers that when the public became acquainted with the article, the patentee would raise the price.

Similar examples of combination seem not to be unfrequent, as appears by the Report of the Committee of the House of Commons on Patents for Inventions, June, 1829. See the evidence of Mr Holdsworth.

377. There occurs another kind of combination against the public, with which it is difficult to deal. It usually ends in a monopoly, and the public are then left to the discretion of the monopolists not to charge them above the growling point--that is, not to make them pay so much as to induce them actually to combine against the imposition. This occurs when two companies supply water or gas to consumers by means of pipes laid down under the pavement in the street of cities: it may possibly occur also in docks, ca.n.a.ls, railroads, etc., and in other cases where the capital required is very large, and the compet.i.tion very limited. If water or gas companies combine, the public immediately loses all the advantage of compet.i.tion, and it has generally happened, that at the end of a period during which they have undersold each other, the several companies have agreed to divide the whole district supplied, into two or more parts, each company then removing its pipes from all the streets except those in its own portion. This removal causes great injury to the pavement, and when the pressure of increased rates induces a new company to start, the same inconvenience is again produced.

Perhaps one remedy against evils of this kind might be, when a charter is granted to such companies, to restrict, to a certain amount, the rate of profit on the shares, and to direct that any profits beyond, shall acc.u.mulate for the repayment of the original capital. This has been done in several late Acts of Parliament establis.h.i.+ng companies. The maximum rate of profit allowed ought to be liberal, to compensate for the risk; the public ought to have auditors on their part, and the accounts should be annually published, for the purpose of preventing the limitations from being exceeded. It must however be admitted, that this would be an interference with capital, which, if allowed, should, in the present state of our knowledge, be.

examined with great circ.u.mspection in each individual case, until some general principle is established on well-admitted grounds.

378. An instrument called a gas-meter, which ascertains the quant.i.ty of gas used by each consumer, has been introduced, and furnishes a satisfactory mode of determining the payments to be made by individuals to the gas companies. A contrivance somewhat similar in its nature, might be used for the sale of water; but in that case some public inconvenience might be apprehended, from the diminished quant.i.ty which would then run to waste: the streams of water running through the sewers in London, are largely supplied from this source; and if this supply were diminished, the drainage of the metropolis might be injuriously affected.

379. In the north of England a powerful combination has long existed among the coal-owners, by which the public has suffered in the payment of increased price. The late examination of evidence before a Committee of the House of Commons, has explained its mode of operation, and the Committee have recommended, that for the present the sale of coal should be left to the compet.i.tion of other districts.

380. A combination, of another kind, exists at this moment to a great extent, and operates upon the price of the very pages which are now communicating information respecting it. A subject so interesting to every reader, and still more so to every manufacturer ofthe article which the reader consumes, deserves an attentive examination.

We have shown in Chapter XXI, p. 144, the component parts of the expense of each copy of the present work; and we have seen that the total amount of the cost of its production, exclusive of any payment to the author for his labour, is 2s. 3d.(1*)

Another fact, with which the reader is more practically familiar, is that he has paid, or is to pay, to his bookseller, six s.h.i.+llings for the volume. Let us now examine into the distribution of these six s.h.i.+llings, and then, having the facts ofthe case before us, we shall be better able to judgeofthe meritsofthe combinationjust mentioned, andtoexplainits effects.

Distribution of the profits on a six s.h.i.+lling book

Buys at; Sells at; Profit on capital expended s. d.; s. d.

No. I--The publisher who accounts to the author for every copy received; 3 10; 4 2; 10 per cent No. II--The bookseller who retails to the public; 4 2; 6 0; 44 Or, 4 6; 6 0; 33 1/3

No. I, the publisher, is a bookseller; he is, in fact, the author's agent. His duties are, to receive and take charge of the stock, for which he supplies warehouse room; to advise the author about the times and methods of advertising; and to insert the advertis.e.m.e.nts. As he publishes other books, he will advertise lists of those sold by himself; and thus, by combining many in one advertis.e.m.e.nt, diminish the expense to each of his princ.i.p.als. He pays the author only for the books actually sold; consequently, he makes no outlav of capital, except that which he pays for advertis.e.m.e.nts: but he is answerable for any bad debts he may contract in disposing of them. His charge is usually ten per cent on the returns.

No. II is the bookseller who retails the work to the public.

On the publication of a new book, the publisher sends round to the trade, to receive 'subscriptions' from them for any number of copies not less than two These copies are usually charged to the 'subscribers', on an average, at about four or five per cent less than the wholesale price of the book: in the present case the subscription price is 4s. 2d. for each copy. After the day of publication, the price charged by the publisher to the booksellers is 4s. 6d. With some works it is the custom to deliver twentyfive copies to those who order twenty-four, thus allowing a reduction of about four per cent. Such was the case with the present volume. Different publishers offer different terms to the subscribers; and it is usual, after intervals of about six months, for the publisher again to open a subscription list, so that if the work be one for which there is a steady sale, the trade avail themselves of these opportunities ofpurchasing, at the reduced rate, enough to supply their probable demand.(2*)

381. The volume thus purchased of the publisher at 4s. 2d. or 4s. 6d. is retailed by the bookseller to the public at 6s. In the first case he makes a profit of forty-four, in the second of thirty-three per cent. Even the smaller of these two rates of profit on the capital employed, appears to be much too large. It may sometimes happen, that when a book is enquired for, the retail dealer sends across the street to the wholesale agent, and receives, for this trifling service, one fourth part of the money paid by the purchaser; and perhaps the retail dealer takes also six months' credit for the price which the volume actually cost him.

382. In section 256, the price of each process in manufacturing the present volume was stated: we shall now give an a.n.a.lysis of the whole expense of conveying it into the hands of the public.

The retail price 6s. on 3052 produces 915 12 0

1. Total expense of printing and paper 207 5 8 7/11 2. Taxes on paper and advertis.e.m.e.nts 40 0 11 3. Commission to publisher as agent between author and printer 18 14 4 4/11 4 Commission to publisher as agent for sale of the book 63 11 8 5. Profit--the difference between subscription price and trade price, 4d. per vol. 50 17 4 6. Profit the difference between trade price and retail price, 1s. 6d. per vol. 228 18 0 362 1 4 7. Remains for authors.h.i.+p 306 4 0

Total 915 12 0

This account appears to disagree with that in page 146. but it will be observed that the three first articles amount to L266 1s., the sum there stated. The apparent difference arises from a circ.u.mstance which was not noticed in the first edition of this work. The bill amounting to L205 18s., as there given, and as reprinted in the present volume, included an additional charge of ten per cent upon the real charges of the printer and paper-maker.

383. It is usual for the publisher, when he is employed as agent between the author and printer, to charge a commission of ten per cent on all payments he makes. If the author is informed of this custom previously to his commencing the work, as was the case in the present instance, he can have no just cause of complaint; for it is optional whether he himself employs the printer, or communicates with him through the intervention of his publisher.

The services rendered for this payment are, the making arrangements with the printer, the wood-cutter, and the engraver, if required. There is a convenience in having some intermediate person between the author and printer, in case the former should consider any of the charges made by the latter as too high. When the author himself is quite unacquainted with the details of the art of printing, he may object to charges which, on a better acquaintance with the subject, he might be convinced were very moderate; and in such cases he ought to depend on the judgement of his publisher, who is generally conversant with the art. This is particularly the case in the charge for alterations and corrections, some of which, although apparently trivial, occupy the compositors much time in making. It should also be observed that the publisher, in this case, becomes responsible for the payments to those persons.

384. It is not necessary that the author should avail himself of this intervention, although it is the interest of the publisher that he should; and booksellers usually maintain that the author cannot procure his paper or printing at a cheaper rate if he go at once to the producers. This appears from the evidence given before the Committee of the House of Commons in the Copyright Acts, 8 May, 1818.

Mr O. Rees, bookseller, of the house of Longman and Co., Paternoster Row, examined:

Q. Suppose a gentleman to publish a work on his own account, and to incur all the various expenses; could he get the paper at 30s. a ream?

A. I presume not; I presume a stationer would not sell the paper at the same price to an indifferent gentleman as to the trade.

Q. The Committee asked you if a private gentleman was to publish a work on his own account, if he would not pay more for the paper than persons in the trade; the Committee wish to be informed whether a printer does not charge a gentleman a higher rate than to a publisher.

A. I conceive they generally charge a profit on the paper.

Q. Do not the printers charge a higher price also for printing, than they do to the trade?

A. I always understood that they do.

385. There appears to be little reason for this distinction in charging for printing a larger price to the author than to the publisher, provided the former is able to give equal security for the payment. With respect to the additional charge on paper, if the author employs either publisher or printer to purchase it, they ought to receive a moderate remuneration for the risk, since they become responsible for the payment; but there is no reason why, if the author deals at once with the paper-maker, he should not purchase on the same terms as the printer; and if he choose, by paying ready money, not to avail himself of the long credit allowed in those trades, he ought to procure his paper considerably cheaper.

386. It is time, however, that such conventional combinations between different trades should be done away with. In a country so eminently depending for its wealth on its manufacturing industry, it is of importance that there should exist no abrupt distinction of cla.s.ses, and that the highest of the aristocracy should feel proud of being connected, either personally or through their relatives, with those pursuits on which their country's greatness depends. The wealthier manufacturers and merchants already mix with those cla.s.ses, and the larger and even the middling tradesmen are frequently found a.s.sociating with the gentry of the land. It is good that this ambition should be cultivated, not by any rivalry in expense, but by a rivalry in knowledge and in liberal feelings; and few things would more contribute to so desirable an effect, than the abolition of all such contracted views as those to which we have alluded. The advantage to the other cla.s.ses, would be an increased acquaintance with the productive arts of the country an increased attention to the importance of acquiring habits of punctuality and of business and, above all, a general feeling that it is honourable, in any rank of life, to increase our own and our country's riches, by employing our talents in the production or in the distribution of wealth.

387. Another circ.u.mstance omitted to be noticed in the first edition relates to what is technically called the overplus, which may be now explained. When 500 copies of a work are to be printed, each sheet of it requires one ream of paper. Now a ream, as used by printers, consists of 21 1/2 quires, or 516 sheets.

This excess of sixteen sheets is necessary in order to allow for 'revises'--for preparing and adjusting the press for the due performance of its work, and to supply the place of any sheets which may be accidentally dirtied or destroyed in the processes of printing, or injured by the binder in putting into boards. It is found, however, that three per cent is more than the proportion destroyed, and that damage is less frequent in proportion to the skill and care of the workmen.

From the evidence of several highly respectable booksellers and printers, before the Committee of the House of Commons on the Copyright Act, May, 1818, it appears that the average number of surplus copies, above 500, is between two and three; that on smaller impressions it is less, whilst on larger editions it is greater; that, in some instances, the complete number of 500 is not made up, in which case the printer is obliged to pay for completing it; and that in no instance have the whole sixteen extra copies been completed. On the volume in the reader's hands, the edition of which consisted of 3000, the surplus amounted to fifty-two--a circ.u.mstance arising from the improvements in printing and the increased care of the pressmen. Now this overplus ought to be accounted for to the author--and I believe it usually is so by all respectable publishers.

388. In order to prevent the printer from privately taking off a larger number of impressions than he delivers to the author or publisher, various expedients have been adopted. In some works a particular watermark has been used in paper made purposely for the book: thus the words 'Mecanique Celeste' appear in the watermark of the two first volumes of the great work of Laplace.

In other cases, where the work is ill.u.s.trated by engravings, such a fraud would be useless without the concurrence of the copperplate printer. In France it is usual to print a notice on the back of the t.i.tle page, that no copies are genuine without the subjoined signature of the author: and attached to this notice is the author's name, either written, or printed by hand from a wooden block. But notwithstanding this precaution, I have recently purchased a volume, printed at Paris, in which the notice exists, but no signature is attached. In London there is not much danger of such frauds, because the printers are men of capital, to whom the profit on such a transaction would be trifling, and the risk of the detection of a fact, which must of necessity be known to many of their workmen, would be so great as to render the attempt at it folly.

389. Perhaps the best advice to an author, if he publishes on his own account, and is a reasonable person, possessed of common sense, would be to go at once to a respectable printer and make his arrangements with him.

390. If the author do not wish to print his work at his own risk, then he should make an agreement with a publisher for an edition of a limited number; but he should by no means sell the copyright. If the work contains woodcuts or engravings, it would be judicious to make it part of the contract that they shall become the author's property, with the view to their use in a subsequent edition of the works, if they should be required. An agreement is frequently made by which the publisher advances the money and incurs all the risk on condition of his sharing the profits with the author. The profits alluded to are, for the present work, the last item of section 382, or L306 4s.

391. Having now explained all the arrangements in printing the present volume, let us return to section 382, and examine the distribution of the L915 paid by the public. Of this sum L207 was the cost of the book, L40 was taxes, L3S2 was the charges of the bookseller in conveying it to the consumer, and L306 remained for authors.h.i.+p.

The largest portion, or L362 goes into the pockets of the booksellers; and as they do not advance capital, and incur very little risk, this certainly appears to be an unreasonable allowance. The most extravagant part of the charge is the thirty-three per cent which is allowed as profit on retailing the book.

It is stated, however, that all retail booksellers allow to their customers a discount of ten per cent upon orders above 20s., and that consequently the nominal profit of forty-four or thirty-three per cent is very much reduced. If this is the case, it may fairly be enquired, why the price of L2 for example, is printed upon the back of a book, when every bookseller is ready to sell it at L1 16s., and why those who are unacquainted with that circ.u.mstance should be made to pay more than others who are better informed?

392. Several reasons have been alleged as justifying this high rate of profit.

First, it has been alleged that the purchasers of books take long credit. This, probably, is often the case, and admitting it, no reasonable person can object to a proportionate increase of price. But it is no less clear, that persons who do pay ready money, should not be charged the same price as those who defer their payments to a remote period.

Secondly, it has been urged that large profits are necessary to pay for the great expenses of bookselling establishments; that rents are high and taxes heavy; and that it would be impossible for the great booksellers to compete with the smaller ones, unless the retail profits were great. In reply to this it may be observed that the booksellers are subject to no peculiar pressure which does not attach to all other retail trades. It may also be remarked that large establishments always have advantages over smaller ones, in the economy arising from the division of labour; and it is scarcely to be presumed that booksellers are the only cla.s.s who, in large concerns, neglect to avail themselves of them.

Thirdly, it has been pretended that this high rate of profit is necessary to cover the risk of the bookseller's having some copies left on his shelves; but he is not obliged to buy of the publisher a single copy more than he has orders for: and if he do purchase more, at the subscription price, he proves, by the very fact, that he himself does not estimate that risk at more than from four to eight per cent.

393. It has been truly observed, on the other hand, that many copies of books are spoiled by persons who enter the shops of booksellers without intending to make any purchase. But, not to mention that such persons finding on the tables various new publications, are frequently induced, by that opportunity of inspecting them, to become purchasers: this damage does not apply to all booksellers nor to all books; of course it is not necessary to keep in the shop books of small probable demand or great price. In the present case, the retail profit on three copies only, namely, 4s. 6d., would pay the whole cost of the one copy soiled in the shop; and even that copy might afterwards produce, at an auction, half or a third of its cost price. The argument, therefore, from disappointments in the sale of books, and that arising from heavy stock, are totally groundless in the question between publisher and author. It shold be remarked also, that the publisher is generally a retail, as well as a wholesale, bookseller; and that, besides his profit upon every copy which he sells in his capacity of agent, he is allowed to charge the author as if every copy had been subscribed for at 4s. 2d., and of course he receives the same profit as the rest of the wholesale traders for the books retailed in his own shop.

394. In the country, there is more reason for a considerable allowance between the retail dealer and the public; because the profit of the country bookseller is diminished by the expense of the carriage of the books from London. He must also pay a commission, usually five per cent, to his London agent, on all those books which his correspondent does not himself publish. If to this be added a discount of five per cent, allowed for ready money to every customer, and of ten per cent to book clubs, the profit of the bookseller in a small country town is by no means too large.