ent or necessary to vest these vital functions directly in the supervising authority. Such a course would require a government organization as flexible, as well-informed and as ubiquitous as the business to be supervised, and it would substitute the judgment and initiative of government officials for the judgment and initiative of insurance carriers. Rather than adopt this extreme measure, it has seemed the part of wisdom to utilize the extant machinery and information of the carriers themselves, so coördinated as to remove the warping effects of competitive interest. Altogether the most effective instrumentality hitherto devised for this purpose is the representative rating bureau, made up of all compensation insurers operating within the state, and empowered, subject to the approval of the supervising authority, to formulate risk classifications, rules, basis (or class) rates, and merit rating plans, to assign individual risks to existing or special classifications, to apply merit rating through inspection or otherwise, and to scrutinize the underwriting of all risks by means of a policy "stamping office." Bureaus upon this general plan, though with many variations of detail, have been established in New York,14 Massachusetts, 15 California, Pennsylvania and Colorado.16 Experience of their actual working has been too brief to afford a decisive test,17 and there is even some question of their full legality,18 but their a priori advantages are so

17

13 The "Stamping Office" receives, examines and approves or disapproves a duplicate of every policy declaration. This practice was first established by the Industrial Commission of Wisconsin under the anti-discrimination law of 1913, and has since been adopted by the rating bureaus of California, Colorado and Pennsylvania.

14 The order is chronological.

15 The Massachusetts Bureau accepts company inspections, subject to such verification as may be required.

16 The Colorado Bureau is in a state of suspended animation, pending determination of its legal status.

17 The oldest state bureau, the Compensation Inspection Rating Board of New York, dates from midsummer, 1914.

18 A rate maintenance association might have been held illegal at common law or under anti-trust statutes, but all questions on this head are set at rest by the adequate rate laws, provided these are valid.

The points of attack (fathered especially by the Travelers Insurance Company) upon state compensation rating bureaus are the right of a public official to delegate supervising authority to an unofficial association, and the ability to make the approval of rates or of merit rating conditional upon application by such an association. In reply it is argued that no supervising authority is delegated to the

great that they promise to become a permanent feature of rate regulation.19 A representative rating bureau, just because it comprises every type of insurer, will ordinarily be impartial as between stock and mutual interests,20 at the same time that it may fairly be said to embody the collective wisdom of the business. Whence it is at once the most potent agency at the disposal of the government for giving effect to rate regulation, and almost the sole source of advice which is both competent and disinterested. For the routine work of rating individual risks in accordance with the existing code, the bureau supplies a trained and impartial staff, while it brings to bear the collective views of rival insurers upon all those questions which involve the exercise of discretionary judgment or the compromise of opposing interests.

When all is said, however, rate making transcends the limits of any state. Notwithstanding many local variations, there is a striking similarity of industrial technique, and consequently of industrial hazards as well, throughout widely separated territories. By the same token, the problems of industry classification, of classification rules and of schedule rating-to say nothing of statistical and actuarial methods are common to the whole country. To which it must be added that no state has a sufficient volume of exposure for dependable rate making in every classification or is wholly independent of the experience of other states in more than a very few classifications. Out of these conditions arises the need for a supra-organization to coördinate the activities of territorial rating bureaus. This need has been in part supplied by joint standbureau since all its acts are subject to supervision to the same extent as the like acts of individual insurers, and that the supervising authority may properly make his approval of rates conditional upon their application by an impartial agency— else his approval were a farce. These questions have not been judicially deter mined.

19 Local branches of the National Compensation Service Bureau have been recognized as official rating bureaus, for the purposes of merit rating, in Kentucky and Maryland. The parent body is a voluntary association of some twenty stock companies, but these local branches have been opened to non-members, even including mutuals. The great weakness of this plan is that it vests the ratemaking function in a single group of competitors.

20 In the Pennsylvania Bureau the Insurance Department has a casting vote in case of a tie in every committee. During the first year's experience, notwithstanding the great number of controversial subjects passed upon, this power was exercised on only two occasions,

ing committees, representative of the several state bureaus and of the various types of insurers among their constituents.21 The federative organization so constituted is as yet somewhat invertebrate, but it has at least effected a large measure of uniformity in manual rules and classifications, in the structure of schedule rating and even in the basic pure premiums from which state rates are derived.

Rating bureaus, state or inter-state, be they ever so efficient for their purposes, will not obviate the need for independent knowledge on the part of supervising authorities. The questions to be passed upon involve something more than the maintenance of fair competition among insurers; they extend as well to that equitable distribution of work accident cost with which the state is more immediately concerned. The ends of equity are not served by the mere uniform application of rates, unless these latter are reasonably proportionate to the industrial hazards involved. Neither can such proportionality be lightly assumed of classifications and rates. evolved by compromise between competing insurers. To assure the results professedly sought, the whole system of insurance classifications, rates and merit rating should be subjected to rigorous analysis in the light of all available information. Characteristically enough, however, no state which has undertaken to supervise compensation insurance has seen fit to provide facilities at all commensurate with the responsibilities assumed. The actual work of supervision falls, in every instance, upon a subordinate appointee and a handful of clerical assistants, unprovided with technical advisers and without either means or leisure for independent research. It has not been possible, in any of the adequate rate jurisdictions, to compile accident statistics in correlation with insurance classifications and exposed pay rolls, to say nothing of such analyses as would serve to throw light upon the validity of the classifications themselves or the reasonableness of merit rating deviations from basis rates. Yet the raw materials for such statistics, in the shape of accident and pay-roll reports to public authorities, exist in every

21 The Standing Committee on Compensation Insurance Rates comprises three stock companies, two mutuals, a (competing) state fund, and an insurance department. The Standing Committee on Schedule Rating is similarly constituted. Both these committees meet monthly and to them are referred all manual or schedule rating amendments proposed by the constituent bureaus, though the findings of the Standing Committee are not binding until ratified by the bureaus.

one of these jurisdictions. The failure to make the necessary correlation a failure attributable as much to divided authority as to insufficient appropriations-is a striking instance of systematic ineptitude.

The argument thus far goes to show that effective supervision of compensation insurance rates imposes far-reaching restraints upon competition. Neither rate making nor the application of rates to individual risks, neither policy forms nor underwriting rules, not even the amount of commissions to be paid for the acquisition of business, is left to the discretion of individual insurers. It only remains to point out that competition so straitened and bound loses many of those attributes which admirers of the competitive system have always ascribed to it. When uniform rates are prescribed by government and uniform underwriting is enforced by a rating bureau, there is little scope for competitive selection of business and less for that competitive adjustment of price to minimum cost of service which the classical economists so fondly expounded. Competitive selection of business is handicapped by the prohibition of discretionary rate cutting upon preferred risks and the competitive advantage of economic management (as respects stock companies) is taken away by the incorporation in basis rates of a uniform expense loading. Even the flexibility which is claimed as a chief advantage of private insurance disappears under rigorous regulation. Quick adaption to changed conditions is impossible when every manual change has to be worked out by representative committees and assented to by supervising authorities. Competition under such conditions tends prevailingly to take the form of salesmanship, more or less disguised as "service."22 Economic waste, indeed, is the only characteristic of competitive insurance that is untouched by regulation.

22 It is not denied, of course, that there is competition in real, as well as fictitious, service.

BOOK DEPARTMENT

THE BUSINESS MAN'S LIBRARY

ADVERTISING AND SALESMANSHIP

ADAMS, HENRY FOSTER. Advertising and Its Mental Laws. Pp. xi, 333. Price, $1.50. New York: The Macmillan Company, 1916.

Three distinct types of books relative to the field of advertising have already appeared: those which relate to problems of advertising, those which tend toward an emphasis of the economic problems involved in advertising, and a combination of the two. Professor Adams' book would be classified among the first, or a book which more nearly conforms to the psychological interpretation of advertising. It presents in simple language the basic facts and principles of psychology which are related to advertising and points out the applications of the principles; it reduces the complexity of the printed advertisements to its elements and shows with mathematical exactness the effect of the various elements; and it compares results of experiments which have been carried on in the laboratory with the results of actual advertising campaigns. This book could be used admirably in conjunction with a general course in advertising, but only in a supplementary way, as it does not unify the entire subject of advertising, including the economic problems involved, but merely emphasizes a quantitative analysis of the psychology of advertising. Professor Adams' work, however, will be used continually in connection with the rapidly developing teaching field of advertising.

H. W. H.

BRISCO, NORRIS A. Fundamentals of Salesmanship. Pp. xiv, 322. Price, $1.50. New York: D. Appleton and Company, 1916.

This book succeeds in presenting simply and effectively the psychological phases involved in training successful salespeople, and the relationship between the manager and the sales force. The human element is emphasized throughout and involves a clear exposition of the factors necessary to be considered in developing the right kind of personality in connection with selling. The general criticism from a teaching point of view would be regarding the arrangement of the various chapters of the text, for if the principles discussed are not presented in a way so as to unfold themselves in the consciousness of the student a large part of the effort has been wasted.

The book emphasizes two phases of thought; first, the training of the individual to meet the responsibilities of salesmanship, and second, an emphasis of the system of which the individual finds himself a part and which involves objective factors relating to his life; as, for instance, the element of fatigue in connection with the demonstration of problems in selling, welfare work, special training, etc.