Most economists in the United States seem captivated bythe spell of the free market. Consequently, nothing seems good or normal thatdoes not accord with the requirements of the free market. A price that isdetermined by anyone other than the aggregate of consumers seems pernicious.Accordingly, it requires a major act of will to think of price-fixing (thedetermination of prices by the seller) as both "normal" and having avaluable economic function. In fact, price- fixing is normal in allindustrialized societies because the industrial system itself provides, as aneffortless consequence of its own development, the price-fixing that itrequires. Modern industrial planning requires and rewards great size. Hence, acomparatively small number of large firms will be competing for the same groupof consumers. That each large firm will act with consideration of its own needsand thus avoid selling its produces for more than its competitors charge iscommonly recognized by advocates of free-market economic theories. But eachlarge firm will also act with full consideration of the needs that it has incommon with the other large firms competing for the same customers. Each largefirm will thus avoid significant price-cutting, because price-cutting would beprejudicial to the common interest in a stable demand for products. Mosteconomists do not see price-fixing when it occurs because they expect it to bebrought about by a number of explicit agreements among large firms; it is not.
Moreover, those economists who argue that allowing thefree market to operate without interference is the most efficient method ofestablishing prices have not considered the economies of non-socialistcountries other than the United states. These economies employ intentionalprice-fixing, usually in an overt fashion. Formal price-fixing by cartel andinformal price-fixing by agreements covering the member of an industry arecommon-place. Were there something peculiarly efficient about the free marketand inefficient about price-fixing, the countries that have suffereddrastically in their economic development. There is no indication that theyhave.
Socialist industry also works within a framework ofcontrolled price. In the early 1970's, the Soviet Unionbegan to give firms and industries some of the flexibility in adjusting pricesthat a more informal evolution has accorded the capitalist system. Economistsin the United Stateshave hailed the change as a return to the free market. But Soviet firms are nomore subject to prices established by a free market over which they exerciselittle influence than are capitalist forms; rather, Soviet firms have beengiven the power to fix prices.