the phrase implies that there may be an unhealthy competition, and if so, what is it? Is it not that competition whose intensity is so great that it causes a large waste of capital and labor in work other than production; whose intensity is so great that, like an animal or a machine working under too great a load, it labors intermittently,—now acting with great intensity and forcing prices far below their normal plane, now pausing in a reaction, when a temporary combination is formed, and allowing prices to spring back as far above the point indicated by the relation of supply and demand; and finally reaching the natural end for unhealthiness—death. In fact, a recent economic writer declares that especially intense competition should be called war, as, indeed, it frequently is called, rather than competition.
Looking about us for other causes of variation in the intensity of competition we discover a fifth law: The intensity of competition tends to vary directly in proportion to the amount of capital required for the operation of each competing unit, especially when the interest on the capital invested forms a large proportion of the cost of production. Take, for example, the case of a railway line. All the capital invested in it is wasted unless the road is in operation. Hence it will be better to operate the road, so long as receipts are any thing more than the expense of operation, than to abandon it. An enterprise in which no capital is invested will cease operations when receipts do not exceed its expenditure and there is no prospect of betterment. But in the total expense of operating a railroad, a large item is the interest on the capital invested, which is as truly a part of the total cost of carrying the traffic as is the daily labor expended in keeping the road in good repair. (In railway bookkeeping only an arbitrary line can ever be drawn between capital account and operating expenses.) Now, in order to pay operating expenses and fixed charges, railways must secure traffic. We suppose that they are doing this by competition, and that they have not yet combined to form a monopoly. Let us suppose that this competition cuts down receipts to a point where they are just sufficient to pay the whole cost of