13 FEBRUARY 1959, Page 27

The Price of Cars

The Motor Industry. By George Maxcy and Social Economics. By Walter Hagenbuch. (Nisbet'

• and C.U.P., 12s. 6d.)

To the general public, Cambridge economists are probably best known by their habit of offering unsolicited ad/ice, usually of a politically extreme kind, to the government of the day. To the profes- sion, on the other hand, Cambridge is the source of efforts to extend Keynesian theory to problems of economic growth and the trade cycle, and a- centre for statistical and econometric research. These volumes express a less well-known aspect of Cambridge activity, for they are all examples of the kind of applied economics usually left to

• be carried on in humbler institutions.

The first two volumes inaugurate a Cambridge Studies in Industry series. The motor industry study is definitely the more interesting. The authors have given special attention to the problem of costs and have discovered that, con- trary to the general impressidn, unit overhead costs are not exceptionally heavy. In consequence a price cut must greatly expand sales if it is to be profitable in the short run, a fact which explains both the stability of prices and the particular kind of 'model-price competition between firms preva- lent in the industry. A careful analysis of long- run costs leads to the conclusion that if the industry were to double its size, unit costs might fall by about IS per cent,—gains which might be achieved in the Common Market: The economies of scale also lead the authors to expect further men- gers. The question of whether mergers are against the public interest is the central problem of Effects of Mergers, which consists of case studies of six industries. Each answer requires a bold judgment as to what might have happened instead: and since mergers were usually created out of chaos in response to the prospects•of economies of scale or the need of technical progress, it is scarcely surprising that Dr. Cook's cautious verdict favours the merger. She also says much of interest about what causes concentration of industry to take the form of mergers—the key factor is slow technical change—though some of it is expressed in the tautologies to which the Marshallian tradition is prone. Both boOks, incidentally. follow Cambridge tradition in assuming that lower costs are to be preferred to a wider range of choice of products for consumers. Social Economics is one of the new series of Cambridge Handbooks; and nothing could illus- trate the change in economics' in the past thirty years better than .the contrast between the elegant generalisations of the pre-war volumes and these densely factual pages. Indeed, the facts about social problems are packed too tight, and what economics there is is pitched too high for the uninitiated at whom the series is aimed; but those who know something already will easily learn more. This applies equally to Mr. Marris's Economic Arithmetic, which attempts the original and ambitious task of teaching statistical courses and methods in the light of the economic theory pertaining to their use. As a textbook it does not come off, but the effort deserves a cheer.