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Volume Title: Report of the Committee on Prices in the BituminousCoal Industry

Volume Author/Editor: NBER

Volume Publisher: NBER

Volume ISBN: 0-87014-187-2

Volume URL: http://www.nber.org/books/unkn38-2

Publication Date: 1938

Chapter Title: Preface, introduction, table of contents

Chapter Author: NBER

Chapter URL: http://www.nber.org/chapters/c9515

Chapter pages in book: (p. -16 - 2)

Report of the

Committee on Prices in the

BITUMINOUS COAL

INDUSTRY

Prepared for

THE CONFERENCE ON

PRICE RESEARCH

National Bureau of Economic Research

New York 1938

OfficersGEORGE SOULE, ChairmanDAVID FRIDAY. President

W. L. CRIJM, Vice-PresidentSHEPARD MORCAN, Treasurer

JOSEPH H. Wiw, Executive DirectorW, J. CASSON, Assistant Executive Directoj

MARTHA ANDERSON, Editor

Directors at LargeCiwzrER I. President,

New Jersey Bell Telephone CompanyHENRY S. DENNISOI.J, Dennzson Manufacturing Company

GzOacE M. HARRISON, President,Brotherhood of Railway and Steamship Clerks

Osw W. KNAUTH, President, Associated Thy Goods CorporationHARRY W. LAmsiR, Executive Director,The League for industrial Democracy

L. C. MARSHALL, Johns Hopkins UniversityGEOIIGE 0. My, Price, Waterhouse and Company

SHEPARD MORGAN, J'ice-Pi-esident, Chase Nationai BankGEORGE E, Roltuti's, Economic Adviser, National City Bank

BEARDSLEY RUML, Treasurer, R. H. Macy and ConpcznyGEOir.c Soutz, Director, The Labor Bureau, inc.

N. 1. STONE, Consulting Economist

Directors by University AppointmentWzujAM L C*u,g, Harvard Ha*y ALVIN Musts, ChicagoWtxoN H. HAMILTON, Yale Wzst.y C. MITCHELL ColumbiaHAIRY JEROME, Wisconsin Jomeu H. Wnms, Pmnaylvania

Directors Appointed by Other OrganuatioFnsuwcz hi. FEI, American Engineering Council

DAVID FRIDAY, American Economic AssociationLEz G*uw*y, America,t Management Association

MAIZOU( Muss, Muio,,aj Publjsk, AssocitoWmmu W. RmI.,jt, American Stat ist ic.J Asoci.on

Mrnstw Wou., American Federation of Labor

Research StaffWULEY C. Mrrassu., Dfr

C. W. Buimu Fij L MACAULAYA&mui F. JuRNs JWE C. MiwSoi.osaon F*aascns DAvm L. WIcW5Mii.ron FRIEDMAN Lw Wo*nSnio Kuzm Eucipi ALTScUIJL, Aociate

RELATION OF THE DIRECTORS

TO THE WORK OF THE NATIONAL BUREAU

OF ECONOMIC RESEARCH

a. The object of the National Bureau of Economic Research is to as-certain and to present to the public important economic facts and theirinterpretation in a scientific and impartial manner. The Board of Directorsis charged with the responsibility of ensuring that the work of the Bureauis carried on in strict conformity with this object.

2. To this end the Board of Directors shall appoint one or more Di-rectors of Research.

. The Director or Directors of Research shall submit to the membersof the Board, or to its Executive Committee, for their formal adoption, allspecific proposals concerning researches to be instituted.

4. No study shall be published until the Director or Directors of Re-search shall have submitted to the Board a summary report drawing aLtea-Lion 10 the character of the data and their utilization in the study, the natureand treatment of the problems involved, the main conclusions and such otherinformation as in their opinion will serve so determine the suitability of thestudy for publication in accordance with the principles of the Bureau.

. A copy of any manuscript proposed for publication shall also be sub-nutted to each member of the Board. If publication is approved each memberis entitled to have published also a memorandum of any dissent or reservationhe may express, together with a brief statement of his reasons. The publicationof a volume does not, however, imply chat each member of the Board ofDirectors has read the manuscript and passed upon its validity in every detail.

The results of an inquiry shall not be published except with the ap-proval of at least a majority of the entire Board and a two-thirds majorityof all those members of the Board who shalt have voted on the proposalwithin the time fixed for the receipt of votes on the publication proposed.The limit shall be forty-five days from the date of the submission of thesynopsis and manuscript of the proposed publication unless the Board ex-tends the limit; upon the request of any member the limit may be extendedfor not more than thirty days.

A copy of this resolution shall, unless otherwise determined by theBoard, be printed in each copy of every Bureau publication.

(Resolution of October 25, 1926, revised February 6, x9j)

Copyright, 1938. by National Bureau ol Economic Research, Inc.

1819 Broadway. New York, N. Y. All Rights Reserved

Prjntejj and Bound in the United States of Americab) H. Wolff, New York. Designer: Ernst Reichi

Preface

THE report of the Committee on Prices in the BituminousCoal Industry is published by the National Bureau of Eco-nomic Research for the Conference on Price Research. ThisConference is composed of representatives from universitiesand governmental and private research agencies interestedin the advancement of knowledge in the wide field that isroughly defined by the term 'price economics'. As the FCSLIIIof a meeting in November 1935, called at the initiative of acommittee representing the National Bureau of EconomicResearch and departments of economics in a number ofAmerican universities, a permanent, autonomous organiza-tion was created to stimulate and coordinate research deal-ing with costs, prices, and related topics. The presentmembership of the Conference includes the Universities ofChicago, Columbia, Cornell, Harvard, Minnesota, andPennsylvania; the American Institute of Accountants; theNational Association of Cost Accountants; the Bureau ofAgricultural Economics, the Bureau of Labor Statistics, andthe Central Statistical Board; the Brookings Institution; theFood Research Institute of Stanford University; and the Na-tional Bureau of Economic Research.

As its initial undertaking the Conference ek'tcd to stir-vey fIve industl-ies---bitllm inous coal, cotton textiles, petro-

vi'

Viii PREFACEleum, steel, and automobilesfor the purpose of definingthe industrial and economic problems that center aboutprices, appraising existing data available to research work-ers and outlining programs of needed research. The presentstudy is the first product of these investigations.

In no industry, perhaps, are issues involving prices ofmore interest to the public and to economists and of greaterconcern to public administrators than are those of bitumi-nous coal. Here are problems of competition among rivalproducers and with substitute products; here are regionalzones, imperfectly defined and cutting across one another indiverse ways, yet placing their impress on the pattern ofproduction and distribution; here are varying grades andqualities, with corresponding price differentials; here arcfound a wide variety of users, ranging from households torailroads and great manufacturing industries; here are in-tricate connections between producers and carriers, andownership relations that complicate pricing and distribu-tional problems; and here, more recently, have been intro-duced elements of federal price control that are of especialinterest, not alone because of their hearing on the organiza-tion and operations of this industry, but also because theyexemplify issues of far wider import.

The objectives of Professor Fisher and his associates areclearly set forth in the opening pages of this monograph.With imagination, objective detachment, and rigorous fi-delity to scientific standards of accuracy they have under-taken an experimental, exploratory survey of the tangledproblems that center about bituminous coal prices. Theirmajor purpose has been to clear the ground for needed re-search, rather than to make substantive contributions oftheir own, but the report that embodies their findings con-tains much that has value in its own right, as an addition toour knowledge of the bituminous coal industry.

This report points the way to research that will be of ob-vious and immediate value to the industry and to govern-ment, and of no less utility to those who are concerned withthe more general aspects of economic organization today. It

PREFACE 1X

is the hope of the Conference that the studies outlined inthe report will be undertaken by interested agencies and in-dividualsby governmental bodies, organs of the industry,private research agencies, and favorably situate(l students.The Committee has indicated needed action. The field isopen for the active work.

In defining some of the major problems that beset the in-dustry and outlining research that will illuminate theseproblems, time Committee on Prices in the Bituminous CoalIndustry has amply fulfilled its original purpose. But thework of the Committee has done more than this. It has pro-'ided a convincing demonstration of the possibility of (us-

interested cooperation in attacking contemporary industrialproblems. Under the skillful and tactful leadership of Pro-fessor Fisher, a group o men of widely different connec-tions, having a common interest in the economic problemsof this troubled industry, were able tosit down together andexplore, objectively and dispassionately, ways and means ofobtaining a better understanding of the organiiation, oper-ation, and market relations of the industry. Here, as in otherlields in which the Conference on Price Research has soughtto effect similar cooperation, good-will, and an active desireto clarify and solve perplexing issues have been encounteredinvariably. There are grounds here for hope that, on a widerfront, such cooperation in the study of industrial ills maygenerate the knowledge essential to their solution. Thefuture activities of the Conference will be directed towardthe furtherance of this cooperation.

FREDERICK C. MILL.cuAIRMA

E,ec,,tive Corn ,niti'ee, Conference on Price Resrnrcl.ANNE BEZANSON (University of Pennsylvania)

M. A. COPELANI) (Central Statistical Board)E. S. MASON (Harvard University)

HENRY SCHULTZ (University of Chicago)0. C. STINE (Bureau of Agricultural Econornic.')

W. L. THORP (Dun and Bradstreet)I0U I)FAN. ixu:I' riti sI:CRFT.RY

C. L. LEE.. SFCRFT%I(V

%%'Aux I.. FISHrR, Chairinjn, Unü'e,cit of J'euiasyhiaiR. D. Gy, Vice Chairman, CoimecliegU State College

H. N. E.'rsso, t.avenson, Alford and .4ischmr,tI' A. HoLIAR, Slalistician

!IJ J1.rr LucK, H'. J. Lauck 0,1(1 AssociatesF. G. 'ERvON. Valium,! JIitinj,,ouç Coal Co,nmjscju,,

k. J. WATKINS, University of PittsburghAILN VH.i.rrr, \rational Coal Ascruiation

V. El. Yotna;, .\'alio,,al flulutni,,o,,.s Gout Cmn,jjc,j01,

.I)'lSORY MF\IRERS

.N'I: BFiSNSON, 1_'u:u.'e,siiv of Peusns/,'a,,i,A. R. BURNS, Columbia Unu'ersily

J. M. Ctrrrs, Bureau of Labor Stat jslicsE. 8. CoRpos, Office of the Consumers' Cou,,s,'l

.Valjnnol Bituminous Coal Cm,,mjs.cjg,,,S. A. H.t.,, Coal dge

J. W. ?.IcBiiw, Iturt'a (if Labor Slut is! itsF. C. Mitt_s. .Valio,,al Bureau of £COflOfltu Jtvspn,l,

STILL'. STKW ART, Bureau of Laboy Stat ist itsS. W. WItcox, of Labor Stat isl jes

Conimittec on Prices iii the

BI1UMINOVS COAL INDUSTRY

Introduction

THE Committee on Prices in the Bituminous Coal Industry

completed its report early in September 1937, four and a

half months after the passage of the Bituminous Coal Act of

197. Because the Commission created to administer theAct found it necessary to apply its energy to such pressing

problems as developing an organizations promulgating a

coal code, establishing statistical bureaus, approving thecomposition of district boards, developing standards of

classification of coal, formulating marketing rules and regu-

lations, and prescribing procedures. for setting minimum

prices, little had been accomplished up to that time in the

development of a broad program of research and in the

conduct of studies other than the compilation of 1936 costs

and related data which were absolutely necessary for price-

fixing purposes.On July i, 1937, the Commission took over the U. S.

Bureau of Mines' statistical service for bituminouscoal. In

more recent months the Commission'sstatistical and re-

search objectives and organization have beendeveloped

under the leadership of F. G. Tryon, formerly of the United

States Bureau of Mines. The services to herendered fall

under two major divisions: (i) administrativestatistics and

(2) research and analysis.xi

XII!NTRODUCTt

The "administrative statistics branch" villCOncern itselfwith the collection and compilation of data Pertaining tocosts, sales rcatjon, sales, priccs, Siuiplilents, andtracts. Sales realization and detailed cost data have beencompiled by divisions and areas for the years ' and '937In January ig8 the monthly collection of similar data wasbegun. Copies of all invoices and contracts are flOiv being

forwarded to the Commission. The analysis ofin process, will make available not only prices, transportstion charges, discounts, premiums, and allowances for dif-ferent classes and sizes of coal but also will show the quantityof coal shipped from producing fields and districts to variouscities, states, and market areas, as well as the type of con.sumers supplied and the method of transportation

Meantime to finish what is regarded as an indispenssblebase for its operations, the Commission is collecting de-tailed statistics of the movement of coal from each produc.ing district to each destination in the United States, clasj.fled by size and grade.The work to be carried out. by the "research and analysisbranch" will include market service reports, economic re-search, and technical research. The market service reportsconsist of "rapid-fire measurement of trends of all the fac-tors of the marketproductiot,

consumptio,1, stocks onhand, distribution, exports, imports, and price movements.To give a background for current changes, the long-timetrends will also be developed to show demand, capacity,mechanical equipment, operating practice, employment andrunning time."Those responsible for economic research, according topresent plans, will "conduct fundarnentsl studies of theeconomic principles underlying market control, price de-termination, and trade practices, as a basis for Commissionpolicy", make "special investigations on particular prob-lems, test and critically reviev the price structures" to beestablished by the Commissj011 and examine "their effectsupon consumers, the competitive standing of districts, andtile demand for coal." The technical research division in

I

I

INTRODUCTION xiii

addition to supplying "technical advice on problems di-rectly related to the administration of the system of mini-mum prices and fair trade practices", will "supervise cer-tain special studies of 'new uses', 'conservation', and 'safety',specified in Section i4-A of the Act" and will make engi-neering studies relating to competing fuels and factors con-trolling costs such as seam conditions, mechanical equip-

ment, and mining practices.If the statistical studies now being carried on can be con-

tinued and if the contemplated program of research can bebrought to completion and the data and findings obtainedthereby published or otherwise made available to privateresearch agencies and individuals, the execution of many of

the projects suggested in this program of research for bitti-

minoUs coal will be greatly facilitated and the comprehen-

siveness and value of their findings will be materially in-creased. Moreover, the statistics on consumption. flow of coal

to markets, and inter-fuel competition will be substantially

improved and much information previously supplied atirregular intervals will undoubtedly be regularly collected

and compiled. Finally, should the research activities of the

Commission be continued over a period of years, economists

will be afforded an opportunity to test out in this industry

many of the assumptions and theories which now prevail

about the present functioning of the industrial system.

WALDO E. FISHERINDUSTRIAL RESEARCH DEPARTMENT

UNIVERSITY OF PENNSYLVANIA

S

Objectives

Business and social policies can be formulated intelligently only if they arebased upon realistic descriptions and interpretations of the Wntinuallychanging organization and functioning of the industrial system. The devel.opment of this background of information depends upon: (i) accurateand comprehensive factual records relating to the functioning of industry-(2) an intimate knowledge of the forces and circumstances that lead businessmen to make decisions on policy and procedure in specific situations. Theprerequisites of policy formation involve intensive study of selected indus-tries and the coordination and integration of the data obtained and ofthe conclusions reached.

On the assumption that price research is not an end in itself but is rathera point of attack, the Committee on Prices in the Bituminous Coal industryin furtherance of the general purposes of the Conference on Price Research,has set itself the following specific objectives:i) To state clearly the scope and operating charac(eristjes of the bitit.minous coal industry that influence its price levels and price problemi(see Part 1)

2) To ascertain svhat price and related data are being currcntl coHectedfor this industry (see Appendix 1)

) To appraise these data and to suggest means b which the factual rec-ord of the bituminous coal industry may be made more useful to the indus-try, the government,economists, and the public (see Appendix II)

To indicate those phases of the problems of prices that need furtherstudy and research and that are of greatest significance to the industry,economists, and the public (see Part ii)To outline a program of research (see Part 11)

y areuafly

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Contents

Preface, Frederick C. Mills vii

Introduction, Waldo E. Fisher xi

PART ONE

Characteristics of the Industrythat have a bearing on Price Problems

A The Bituminous Coal IndustryB Kinds of Bituminous Coal

6

C Consumers of Bituminous Coal 7

D Distribution of BituminouS Coal8

E The Price Structure10

F Factors that determine Price Levels and

Pricing Policies12

Characteristics of the Industry that affect the Average

Level of Coal Prices12

Factors influencing Capacity and Production Costs12

Other Factors influencing Selling Prices and De-

mandi6

Characteristics influencing Certain Mine Prices20

Factors influencing Production Costs21

Factors influencing Selling Prices and Demand25

xv

PART TWO

Program of Research

Need and Opportunity for Research in Bituminous CoalThe Committee's Objectives in developing its Research

ProjectsProgram of Studies 30

3'A Regional Studies in Production, and in Distributionand Consumptioni Studies of Major Producing Fields

Outline of Project and Procedure34Sources of Data36

2 Studies of Important Market Aieas 38Outline of Project40

Procedure and Sources of Data42B Studies of Special Functions or Aspects of the I ndus-

try43i Price Structure and Pricing Policies 432 Flow of Capital into and out of the Industry

Outline of Project48Sources of Data and Procedure49The Bituminous Coal Industry under Govern-

mental Regulation50Fuel Administration during the War 5'Emergency Regulation during the strike of 1922 52United States Coal Commission53Bituminous Coal Code under the NRA53Bituminous Coal Conservation Act of 1935 53Hitunijnojjs Coal Act of 193755Analysis of the Pricing of Bituminous Coal un-der the BituminousCoal Act of 584 Distribution Channels and the Flow of Coal to

Consuming Markets595 Consumption of Coal by Use in Important Mar-kets and Areas62Program Recommended636 Economies in the Use of Coal647 Changes in Sources of Energy utilized in theUnited States with reference to Competitionfaced by Bituminous Coal66Outline of Project

CONTENTS

58

59

3

33

33.3436384042

4343

4748

49 1:S

2 Investment and Profit Data io6

a Federal Trade Commission 107

b United States Coal Commission io8

i Cost, Sales Realization, and Margin Data50 a Federal Trade Commission5' b United States Coal Commission52 c Research and Planning Division, NRA53 ci National Bituminous Coal Commission53 e United States Bureau of the Census53 f United States Bureau of Mines55 g State Departments or Bureaus of MInes

C Other Related Data collected currently or periodically 109i United States Bureau of Mines 110

a Labor Statistics 1 io

b Consumption 114

c Distribution 1 14

d Stocks of Coal held by Consumerse Equipment and Methods of Mining and Prepa-

"5

ration 115

2 Census of Mines and Quarries 1 i6

CONTENTS XVII

C Studies dealing with the Development and Improve-ment of the Factual Record of the Industry 68

Development of Price Series 69a Series of F.O.B. Mine l'rices by Producing

Areas and Destination Prices by Markets 69b Series of Retail Prices by Markets 72

2 Preparation of Source Books 74a Costs, Sales Realizations, and Margins 74b Other Related Data 75

APPENDIX I

Survey of Available Datapertaining to the Bituminous Coal Industry

A Price Data collected currently 78i Prices collected by the Bureau of Labor Statistics 78

a Wholesale Prices 78b Retail Prices collected prior to 1937 83

2 Prices collected by Trade Journals, Newspapers,and Private Organizations 87

B Cost, Sales Realization, Margin, and Invectme: Data 4949498

100

103

104

losiofi

CONTENTS

3 Supplementary Data on the Bituminous Coal In-dustry compiled by other Federal AgenciesFederal Investigation and Regulation of the Bitu.minous Coal Industry

5 State Departments of MinesD Chronology of Federal Investigation and Regulatioii

of the Bituminous Coal Industry

APPENDIX II

A Wholesale PricesRecommendations

B Retail PricesModifications of Procedure duringRecommendations of the Committee

Appraisal of Price Series collected by the Bureau ofLabor Statistics and Reconinieiidations for

their Revision

127

129

134

138

NTS

120

120I 20

121

Tables127129134 a

138144 i Value of Mineral Products, United States, 1935 4

2 Production Costs Per Ton of Coal Mined by Com-mercial Operations in Mininium Price Area No. i,1934 21

Labor, Supply, and other Production Costs of Com-mercial Mines, Selected Coal Fields, '934 23

APPENDIX I

I, Quantity Weighting Factors used in calculating In-dex Numbers for Bituminous Coal Prices 8i

1-2 Number of Quotations from each City for Bitumi-nous Coal included in the Bureau of Labor Statis-tics Wholesale Price Reporting Service 82

1-3 Publication of Retail Prices of Coal and Periodscovered for Series, 1907-1916 and 1913-1936, inclu-sive 84

1-4 Sources of Current Prices of Bituminous Coal 88

1-5 Cost, Sales Realization, and Margin Data for the Bi-tuminous Coal Industry available in Published Re-ports 96

1-6 Data on Production compiled by the United StatesBureau of Mines 111

1-7 Supplementary Data on the Bituminous Coal In-dustry compiled by Federal Agencies 118

XIX

XX TABLES1-8 Publication of Surveys of Wages and Hours of La-

bor in Bituminous Coal Mining, United States Bu-reau of Labor Statistics

APPENDIX II

11i Number of Reporting Companies and Percentageof Total Production by Producing Districts

11-2 Distribution of Retail Fuel Schedules and Report-ers, by Regional Areas and Cities

1I Relative Heating Requirements of 51 Cities, basedupon Dwelling-Day-Degrees

11-4 Retail Fuel Price Weighting Factors for Richmond,Virginia

11-5 Preliminary Weighting Factois for Richmond, Vir-ginia

i Retail PricesCoal2 Retail PricesFuel A

Retail PricesFuel B

PLGURES

132

139

I 40

141

142

73I 36

I 37

Report of the

Committee on Prices in the

BITUMINOUS COAL

INDUSTRY