Signature was redacted for privacy.Signature was redacted for privacy.Signature was redacted for privacy. ii 13 35 48 59 113 127 .137 138 145 149 152 156 165 I 1 2 mother country. They were forced to trade with England on English ships; I they were relegated to being primarily a source of raw materials, for England forbade the importing of machinery into the colonies; and the tax policies seemed designed only to enrich the English treasury.Because the drives for economic freedom and for political Independence were reactions against mercantilism and because both occurred at the same time, a prejudice against control over business by any government influenced the framers of the American Constitution and colored the character of early American business morality. (61, p. 8) Adam Smith and "Self Regulation"The same year that the American Colonies declared their independence, 1776, Adam Smith published his Wealth of Nations. Adam Smith believed that there were forces working within the market which would make all business self-regulating. The market would therefore be its own guardian. This "self-regulation" was assured by allowing each individual to be guided in his business actions by his own self interests and passions.Rather than destroy the market, this freedom would result in competition within the market which in turn would bring about results "which would be most agreeable to the interest of the whole society" (49, p. 39). Under competition all market prices would tend to equal their natural price, that price which would properly compensate each of the factors of produc tion and assure continued production without providing an excess payment to any one factor. The natural price, therefore, is, as it were, the central price, to which the prices of all commodities are continu ally gravitating. Different accidents may sometimes keep them suspended a good deal above it, and sometimes force 3 them down even somewhat below It. But whatever may be the obstacles which hinder them from settling in this center of repose and continuance, they are constantly tending towards it. (105, p. 102) Public UtilitiesThe world of Adam Smith has been referred to as one of I competition" (49). The market since that time has changed. market today is still influenced by competitive conditions, characterized by the huge size of some of its participants. . , . giant corporations and equally giant labor unions obviously do not behave as if they were individual proprietors and workers. Their very bulk enables them to stand out against the pressures of competition, to disregard price signals, and to consider what their self-interest shall be in the long run rather than in the immediate press of each day's buying and Sellings (49, p. 43) An additional influence upon the market mechanism has been the growth of governmental intervention, including the classification of certain industries as "natural monopolies" and as industries which are "affected with the public interest." Gas, electric, and telephone utilities Three industries conceived in t...

them down even somewhat below It. But whatever may be the obstacles which hinder them from settling in this center of repose and continuance, they are constantly tending towards it. (105, p. 102) Public Utilities The world of Adam Smith has been referred to as one of I competition" (49). The market since that time has changed. market today is still influenced by competitive conditions, characterized by the huge size of some of its participants.. ,. giant corporations and equally giant labor unions obviously do not behave as if they were individual proprietors and workers. Their very bulk enables them to stand out against the pressures of competition, to disregard price signals, and to consider what their self-interest shall be in the long run rather than in the immediate press of each day's buying and Sellings (49, p. 43) An additional influence upon the market mechanism has been the growth of governmental intervention, including the classification of certain industries as "natural monopolies" and as industries which are "affected with the public interest." Gas, electric, and telephone utilities Three industries conceived in the late 1800*s, were soon considered "natural monopolies". They are the gas, electric, and telephone industries. The first commercial gas company to distribute manufactured gas was established in Baltimore in 1816. Gas was used primarily for lighting streets and public buildings. The price of gas was very expensive, due in part to the fact that the industry was very competitive and many communi ties had more than one company supplying it gas service. This resulted in "atomistic Although the it is also 4 the volume of business being small and the overhead costs high (9> p. 26). The real development of the gas industry dates from the 1880's when the newly developed electric industry brought a new type of competition into the lighting field. The commercial exploitation of natural gas came after 1870, and its use was expanded after 1925 due to extension of the pipelines. The telephone industry had its beginning in 1875 with the first suc cessful experiment by Alexander Graham Bell, and in 1877, the Bell Telephone Company was organized in Massachusetts. The electric lighting industry traces its beginnings back to the successful development of the carbon-filament lamp by Edison in 1879. In 1882 the "first central station distributing electric energy, constructed by Edison at Pearl Street in New York City, began operations." (9, p. 31) Each of these industries has exhibited phenomenal growth since their initial beginning. ' Characteristics of public utilities A number of conditions influenced the market structure within each of these industries resulting in their being identified as "public utilities". First, there was a special public importance or necessity for the type of service supplied by these enterprises. Second, these firms provided services to a severely localized and restricted market. Third, due to the large investments required in production and distribution facilities, there existed c...