1. Difficulty of the subject.—The word "manipula tion" is commonly used in a broad inclusive manner with a meaning that is vague and elusive. The opera tion itself is more easily seen than defined since it is always easier to see something in retrospect than when it is actually taking place. Yet no subject relating to brokerage is more hotly debated and none possesses, perhaps, so much intrinsic interest.
Probably the most comprehensive explanation of manipulation is this: "Putting up prices by virtue of ability to do so." Manipulation almost invariably conveys the idea of artificiality. It always connotes skilful and ingenious management. It is in a sense an art. Usually a group of men, a pool perhaps, or at any rate interested parties, buy or sell securities or produce in such a way as to give the public the idea that the activity involved in such buying or selling is the result of natural forces. This is the usual mean ing of the word but there are many others. As John G, Milburn, counsel to the New York Stock Ex change has said: The term manipulation is one of comparatively recent ori gin. Like all such terms it is necessary to define it to avoid confusion in its discussion. We get nowhere if it has differ ent meanings to different minds. It has been so much used of late that it should have a definite meaning and applica tion ; but that is far from the truth. It has, for instance, been applied argumentatively before this committee to trans actions to which it does not at all apply. It is also im properly confused with speculation. It is not easy to say what the meaning commonly attributed to it is, because it is generally used as a term of vituperation rather than as de scription of a definite class of transactions. Perhaps as ac curate a definition as can be given of it is, the giving by the same man or group of men of contemporaneous, or prac tically contemporaneous, orders to various brokers to buy, and to other brokers to sell the same security at the market price whatever it may be, from time to time, for the purpose of realizing a speculative profit, in some cases from an ex pected or intended rise in the price, and in other cases from an expected or intended fall in the price, the vice of such a system of orders being that their execution may not involve a change of ownership.
In popular imagination and in the interested attacks of certain self-styled reformers almost every extraordi nary movement of prices on the exchange is explained by the magic word manipulation. It is a common and ancient custom to ascribe to manipulation the increase in the price of any of the great staples. Any one identified with such operations, it is said, is an enemy of society. Did not they try to mob James A. Pat ten in the Cotton Exchange in Liverpool for the part he played as a leading "bull" in one of the cotton cam paigns about eight or ten years ago? If there is a wild opening in a certain stock and it rises abruptly there is said to be manipulation, al tho the real cause is the foolishness of certain buyers and their brokers in placing all their orders at one moment instead of biding their time. A much advertised example was the Rock Island episode of December 27, 1909, when twenty brokers each buying 2,000 shares drove the stock up from the 50's to 90's in a few minutes. This was in no sense manipulation but the result of a freak order given by a capitalist at the end of a long Christmas Eve party.
Thomas F. Woodlock, a widely recognized author ity on stock exchange subjects, says that manipula tion as an independent factor in price-making may almost be neglected. "It is an auxiliary factor to a small extent." 2. What is manipulation?—The present writer treated the subject of manipulation in an address given before the American Economic Association at Prince ton, New Jersey, in December, 1914, in which he Now there may be manipulation on the Stock Exchange, but it is only fair to observe that the great fundamental changes in prices of the exchange appear to bear little if any relation to manipulation, or to any artificial influence. These changes, in recent years at least, and going back for a number of years, have been due to the changes in the value of the properties the stocks represented. It is maintained by numerous economists that speculation arises from changes in the value of property, and certainly there is ample evi dence that the great price movements, which after all are perhaps the best test of what is going on, have been due to the rise or fall in the value of certain corporations.