3. _The men uniting to form a trust always declare that its formation is the necessary result of excessive competition._ The statement is often true in the sense that a hard fight and lower prices have preceded the formation of the trust. But as this excessive competition usually is for the very purpose of forcing the combination, this explanation is a begging of the question. It is fallacious also in that it ignores the marginal principle in the problem of profits. Profits are never homogeneous from factory to factory, and to those that are on the margin competition may appear excessive. It is generally the largest and strongest factories, in the more favored situations, that, in order to get rid of troublesome competitors, force the smaller, weaker, industries to come into the trust. When, therefore, it is said that competition is destructive, it may be a partial truth, but more likely it is a pleasantry reflecting the happy humor of the prosperous promoters of the combination. [Sidenote: Financial gains of combination] 4. _Another strong motive for the combination is the profit to promoters and organizers._ There are indirect as well as direct gains to the managers of a large business. There is the gain from the production and sale of goods to consumers, and there is the gain from the financial management, from the rise and fall in the value of stock. The promoters of a combination often expect to make from sales to the investing public far more than from sales to the consumer of the product. A season of prosperity and confidence, when trusts and their enormous profits are constantly discussed, has an effect on the public mind like that of the discovery of a new El Dorado, a California, or a Klondike. Then is the time for the wily promoter to offer shares without limit to investors. These considerations show that the trust is not simple in its cause, nor in its nature. In a sense the most artificial of industrial arrangements, in another sense it is a natural evolution of industry. More and more it is being recognized that though it has in it something of evil, it has as well something of good, and certainly much of the inevitable. CHAPTER 35 EFFECT OF TRUSTS ON PRICES § I. HOW TRUSTS MIGHT AFFECT PRICES [Sidenote: Economics of the trust problem]