Knowledge that Transforms

Most persons recognize that a free enterprise system will survive only as long as competition keeps business energies within socially desirable channels. Business mergers are a worrisome public problem because some mergers are destructive of competition, while others promote competition.' A large proportion are innocuous, yet whole industries have been transformed by the accretion of scores of small mergers that individually seemed to be only of slight consequence. For these reasons, and others also, it is difficult to assess the long-run significance of the stream of merger reports in the press. Some reported mergers are never consummated, while others more logically are viewed as divestitures of isolated assets or isolated segments of a large company's business. Still other announced mergers are not mergers at all, inasmuch as the companies involved already were under common control. One index of the impact of mergers on a particular sector of the economy is the percentage of the largest companies at some past date that subsequently disappeared as a result of mergers.2 For manufacturing, newspaper publication excepted, such a list is available for the i,ooi largest companies on December 3I, I950. With slight modifications, this is the list of i,ooo largest companies identified in the Federal Trade Commission's Report on Industrial Concentration and Product Diversification in the I,000 Largest Manufacturing Companies: I950.1 3 In restricting the scope of the Commission's list to exclude newspapers, for which adequate information is lacking, it is necessary to delete three companies for which newspaper publication was the principal business. Two other companies are deleted because they appear to have been part of another enterprise with which they subsequently merged.4 The five deletions are offset by the addition of six companies which were overlooked.5 After giving effect to these changes it is possible to report the experience of the I99 largest manufacturing companies, the next largest 302 manufacturing companies, and the next largest 500 manufacturing companies. The smallest company included on the list of the i,ooi largest manufacturing companies had I950 shipments (including interplant transfers) valued in excess of $I3,000,000, and assets as of December 31, I950 of at least $II,5oo,ooo. The companies ranking iggth and 5oist had shipments (including interplant transfers) of $I20,000,000 and $40,000,000 respectively. Although there were over 300,000 manufacturing companies in the United States in I95o exclusive of newspaper publishers, the first 199 companies as a group made 4I per cent of the shipments originating in all manufacturing plants in the continental United States, 'Every firm that acquires another business expects as a result to be a more effective competitor. Even though its expectations are realized, it does not necessarily follow that competition has been enhanced by the merger, for competition rests on a balance of the capabilities of many rivals. Provided there are no unfortunate side effects, a merger is salutary if it places productive facilities under more vigorous management, or if it enables the seller to transfer his resources to the exploitation of a more attractive business opportunity. A merger of two relatively small firms also promotes competition if the necessary scale of operations has doubled as a result of changes in technology or the size of the market, and the companies lack the resources for rapid expansion. But beyond a certain point it is not necessary to be larger to compete effectively with still larger companies. To be sure, the bigger and more diversified a company is the better it is able to bludgeon its rivals by long-sustained sales below cost, favoritism to full line patrons, and reciprocal deals. But such tactics are not to be condoned, because their effect is to eliminate (or intimidate) competitors, rather than to outdo them with more attractive offers to customers generally. 2 To result in a disappearance a merger must reduce the number of firms on the roll of largest firms. Two companies among the i,ooi which merged to form a firm operating under a new name (for example, the merger of NashKelvinator and Hudson Motor Car to form American Motors Corporation) are considered to have occasioned one disappearance. A merger between a company on the roll of largest companies and a company not on the roll is considered a disappearance only where control clearly passed to the latter. A prominent instance is the merger of Consolidated Vultee and Electric Boat Company. With the exception of companies having ties with alien concerns (for example, Lever Brothers) only independent enterprises are considered companies. Thus a company would be counted as a disappearance if it were acquired by another but continued to operate as a subsidiary corporation. A company that sold off its manufacturing business and continued to operate in some other business (for example, Willys Overland) also is treated as a disappearance. 'Washington, Government Printing Office, January I957, Appendix F. The difficulty in preparing a list of this sort for an unregulated sector of the economy is the identification of all large unregistered corporations. Most such corporations jealously guard information on the size of their business. The 'Commission included 200 such companies on its I950 list which do not appear on its List of I,ooo Large Corporations in Manufacturing and Mining . . . as of two years earlier. 'Clark Thread Company and Eddy Paper Company. 'The Humko Company, Minute Maid Corp., Park & Tilford Distillers Corp., H. K. Porter Co., Inc., Reliance Manufacturing Company (Illinois), and Rotary Electric Steel Company.

T HIS paper presents estimates derived from federal estate tax data of the numbers of top wealth -holders 1 and of the aggregate amounts of wealth held by them for selected years between I922 and I 956. Changes in the concentration of wealth during that period are delineated by relating the numbers of top wealthholders to the population and the amount of wealth held by the top group to independent estimates of the amount of wealth held by all persons. The discussion is organized under the following headings: (I) History of Wealth Distribution Study; (2) Sources of Data and Methods of Estimation; (3) The Share of Top Wealthholders in I953; (4) A Comparison with Survey of Consumer Finances for I953; (5) Historical Changes in Inequality; (6) Comparison with Wealth Distribution in England and Wales; and (7) Summary.

T HE minimax strategy is the foundation of the theory of games of von Neumann and Morgenstern. It may sound surprising that after a decade of discussion, objections based on certain misconceptions still prevail in the professional literature. Although one may take comfort in the thought that the impact of most theoretical development, such as that of modern physics, is often not appreciated till after decades, yet such persistent misunderstanding of this basic theorem should certainly be dispelled. Three papers deserve particular attention because they encompass a broad range of common criticisms. papers are: Hans Neisser, The Strategy of Expecting the Worst '; Carl Kaysen, The Minimax Rule of the of Games and the Choices of Strategies under Conditions of Uncertainty2; and Daniel Ellsberg, Theory of Reluctant Duelist. 3 To avoid repetition, I shall single out only certain aspects of each paper to illustrate my point, since some of the remarks can be directed to the others as well.