Thanks, Michael, for the quotation. I think that I understand the source of my difficulties with your previous post about fixed cost. You opined about Wells: > In short, Wells realized that competitive forces would not allow > producers to recover their investments in fixed capital. As a result, > the market would self-destruct. He recommended that industry be > allowed to organize itself into trusts, monopolies and cartels. > Nothing could be further from the teachings of Adam Smith and the > merchants! In your quote, there is only one use of the term "fixed." It is in this quoted statement. I am sure that you will agree that Wells seems to be referring to sunk costs, rather than fixed costs as they are presented in the modern textbooks. Wells' claim, on the basis of your words, is that entrepreneurs are too stupid to avoid incurring sunk costs. He does not consider the possibility of preventing them from being stupid. Instead, he believes that the government should allow them to make up for their mistakes by improving their positions through trusts, monopolies and cartels. In explaining this view, you refer to another dubious view held by Wells that the problem faced by the entrepreneurs was occurring during of an "overproduction crisis" that causes the prices of capital goods to fall. The entrepreneurs apparently made another mistake of not anticipating the "overproduction crisis." To me, Wells' reasoning is very strange. It raises more questions than it answers. Can we trust the entrepreneurs or not? What is the cause of an overproduction crisis? How does falling prices of capital goods destroy industries? On the surface, Wells seems like an advocate of laissez faire who does not understand free enterprise. But I will have to wait until I look more thoroughly at your book to understand the context of Wells' remarks.. Pat Gunning