specialization made necessary distributing centers each creating a mechanism for reaching consumers over very diverse areas.

The chemical laboratory with its practical investigations is responsible for the multiplication of food products and the introduction of by-products. The triumphs of practical chemistry have given a commercial value to hundreds of things that were formerly considered pure waste. Things have been so cheapened that many things are now accessible to the poor which formerly were considered as luxuries for the rich. The facilities afforded for the preservation of fruits and other food products in course of transportation have greatly broadened the scope of markets. It was inevitable that such forces would make complex the mechanism for the sale of products.

The distributive factors which appeared were the manufacturer, the commission merchant or broker, or commission agent or selling agent, the jobber, the travelling salesman, and the retailer. It is not maintained that all these groups were necessary to sell all classes of products. Many commodities were distributed through other channels than these. Certain classes of manufactured goods were from the outset sold to retailers. The manufacturers often sell to retailers as well as to jobbers, while the jobbers frequently sell to consumers as well as to retailers. The groups of exchangers referred to are presented as typical for the distribution of a large class of commodities.

In the distribution of goods of foreign manufacture, the number of groups of exchangers was even greater. Many classes of goods passed through the hands of the agent of the foreign manufacturer, the foreign exporter, the American importer, the jobber and the retailer. When the producer and the consumer were so widely separated there was of necessity a large margin between the producers' and consumers' price. These distributive factors had to be supported and in absence of effective competition the profits were considerable. Since the United States became a manufacturing nation fewer middlemen were required to distribute American than imported commodities.

Up to a certain point the increased number of factories, division of labor in factory and territory, an increased number and variety of commodities produced, and better facilities for transportation, all cooperated in developing distributive channels which separated the producer farther and farther from the consumer. Within the last thirty or thirty-five years, other forces have been operating to bring them closer together, and to reduce the cost of marketing. As soon as manufacturing became an important industry in America, and when large amounts of capital were utilized in single plants, the manufacturers became more independent of the middlemen, and competition. between the latter led to economy in methods of marketing.

In the marketing of foreign goods the jobber was compelled to carry a general supply of commodities to meet the demands of retailers.

With the rise of the American manufacturer there has been introduced an important change in selling goods known as "dating ahead." Frequent changes in fashion and other changes in the wants of customers resulting in violent price fluctuations caused manufacturers to abandon the old policy of haphazard production for one of producing to fill definite demands after goods are sold. This method has now become quite general. The manufacturer sends his agent to the jobber in the fall and winter to take orders to be filled in the spring and in the meantime the goods are produced and shipped. Some manufacturers make a practice of dating twice a year, and others do so more often. The jobber goes to the retailer and dates ahead in the same way. In many cases the manufacturer deals directly with the retailer in this manner. Where the manufacturer is engaged in only one process of manufacture, orders are then taken of another manufacturer, who carries the process a stage farther.

Wherever the system has been introduced the strategic position of the manufacturer has been improved. Instead of producing what he thinks will be demanded his plant is operated to produce what has already been sold. The producer and consumer are brought more closely in contact, as orders for goods emanate from retailers who know consumers and their wants. The speculative burden is shifted to the retailer whose greatest danger lies in over-purchasing, as his goods may be ordered several weeks or months before they are offered for sale.

The role of the commission merchant is less important now than when American manufactures were but little developed. He purchased commodities on his own responsibility or sold them on commission to jobbers, retailers or consumers. He was an independent dealer and often advanced capital to the manufacturer. With the growth of the plant of the American manufacturer, the commission merchant has been compelled to give way to selling agents of the manufacturer.

With the growth in the size of the plant the manufacturer is coming. to hold the strategic position in distribution. In volume twenty-five of the Annals of the American Academy of Political and Social Science on American domestic markets, Professor Jones of the University of Michigan has shown how the manufacturer is fortifying his position by securing control of raw materials, and by undertaking the various. processes of manufacture under a single management, by producing by-products, and by controlling certain other manufacturing processes subsidiary to the main purposes of the plant. It was also claimed that the conditions under which the finished product is sold is determined by the manufacturer. The exclusive agency, the price contract, the factor or rebate plan, and the serial numbering plan are. devices employed which narrow the field of the retailer and make

him dependent upon the manufacturer. Other sources of similar import could be mentioned.

The opportunities afforded in advertising through various avenues the magazine, trade journals, daily papers, bill posters, etc.,--and the specific methods of brands, seals, and trade-marks, have done perhaps more than any single thing to bring the producer directly in contact with the consumer. As soon as the manufacturer could talk directly to the consumer, his prosperity was no longer dependent exclusively upon the various classes of intermediate agents between him and the consumer. When the reputation of certain classes of goods was established, they practically sold themselves.

The need of introducing the rapidly increasing supply of new commodities which could be conveniently produced, coupled with the conservatism of the retailer, made talking to the consumer by the manufacturer imperative. Retailers have been all along slow in introducing commodities when they can just as well sell commodities. for which there is a regular demand. If they assist the manufacturer by advertising something new, then competitors will share with them the rewards of their enterprise. In the very nature of things it was impossible for the retailer to bear the brunt of advertising and introducing new commodities. The brand, seal or trade-mark gave the manufacturer an opportunity not only to introduce a good of specific ingredients, but to keep the firm name before the public. In practically all other methods of advertising, as in this case, the manufacturer realizes exclusively on his enterprise. It is a feature inherent in the situation, then, that the manufacturer must introduce his goods and in doing so he is freed from the restraints imposed formerly by mercantile institutions.

Within the mercantile business itself have arisen organizing forces which reduce the cost of marketing. Of these the most important are the department store, the mail-order house, and the coöperative purchasing combines of various sorts.

The department store which organizes all the factors of distribution had its origin in the United States in the Wanamaker store of Philadelphia in 1876. Since then the department store business in the United States has had a steady and consistent growth.

While vast amounts of capital were being invested in transportation and manufacturing concerns it was inevitable that this tendency would find expression in mercantile life, and consequently we have the enormous retail and jobbing institutions in our larger cities.

The economies effected by the department store are many. organizing the factors of distribution in a single institution the costs and profits of other middlemen are saved. In large scale advertising goods may be advertised extensively with but relatively little cost. In purchasing in large quantities and by expert buyers good bargains

are made, while the costs of transportation are less for car-load than less than car-load quantities. The savings from discounted bills on large purchases are considerable. The rent, heating and light economies are large items.

While some manufacturing enterprises and several department stores conduct a mail-order business, the mail-order house is an independent mercantile institution. Appearing in industry at about the same time as the department store, its growth has been somewhat similar to that of the latter institution. The department store meets the needs of the consumer in the cities, while the mail-order house reaches consumers in the small towns and rural districts. Advertising through the large catalogue or purchaser's guide is its medium of reaching consumers. Like the department store, it organizes the factors of distribution in a single institution, and effects its chief economies in doing so. To accomplish the same ends retailers in several cities have organized themselves in coöperative purchasing combines. In the grocery business the chain stores or a large number of stores under a single management accomplish practically the same results.

Within the last thirty-five years many striking changes have taken. place in mercantile industry. But with these rapid changes the reduction in the costs of distribution have not kept pace with the reduction of the initial or manufacturing costs. In other words, relatively speaking, the costs of distribution have increased. causes are responsible for this:

Several

1. Generally speaking, industrially progress has been in a large measure due to the introduction of machinery. As machinery plays a much more important role in the production than in the distribution process, the reduction in costs resulting from improved machinery will be greater in the former.

In production it is much easier to compute costs of various factors than in distribution. Where this can be done it is easier to experiment and thus eliminate unnecessary expense elements in doing so.

3. The advertising costs of distribution are extremely difficult of computation. At points where this is especially true an advertising warfare between firms may result in raising the price of commodities offered for sale.

4. In production when a new machine surpasses an old one the latter is discarded without question. In distribution the wage and salary cost is a much more conspicuous item than the wage and salary cost is in production. Consequently when displacements occur in distribution, they are displacements of men to a greater degree than in production. A more homogeneous and intelligent class are engaged in distribution than in production, and resist vigorously changes which threaten them.

The Internal or Administrative Organization of Mercantile Concerns. -The development of the large mercantile or manufacturing concern has given rise to new fields of economic study, the internal or administrative organization of business. In the larger plants the leaders have seen the necessity for and the advantage of a thorough-going organization of the work. An army of employees needs to be thoroughly organized. There must be a careful differentiation of structure and functions of the organization with authority and responsibility resting in heads of the different divisions and subdivisions. In such an organization the advantage gained in the use of experts, or men of great ability at the head of divisions or sub-divisions is almost immeasurable. What is said here of the mercantile concern will apply with equal force to all other large industrial enterprises.

In traditional economic theory the subject of economics was divided into four divisions: production, exchange, distribution, and consumption, and of these exchange and distribution have received most attention. The discussion has centered very largely upon the politico-economic point of view, and the scientific work was frequently submerged in the endorsement of governmental policies. Very important topics were the tariff, the money question, ship subsidies, the justification of interest, and so forth. Economics seemed intended. to reach conclusions which would influence legislation along certain lines. (Much of the prejudice against it in the past has been due to its political bearings.) The investigation of phenomena first-hand and their classification regardless of influence of the results was never thought of very seriously.

In the department of production only the general aspects received consideration. The treatment centered about the problems of the division of labor and territorial specialization. Even here the conclusions were long-range deductions. In the discussion of the division of labor but little improvement was made upon Plato's analysis. The current economic texts of today improve but little on the theory of the division of labor of Adam Smith. But little investigation was made into the internal organization of business concerns. Until the latter half of the nineteenth century there was perhaps some reason for this absence of data. With the appearance of the large industrial units, however, we have a considerable body of new economic data subject to analysis and classification.

In the current treatment of the division of labor, two important elements, the coordination of the various phases of industrial concerns, and the unification of work, have been neglected.

In the internal organization of industrial concerns we have at present a great mass of data. Every business house employs a staff of experts to record accurately every transaction of financial significance to the management. This information puts the manager in