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operations analysis work for the Chief of Naval Operations. Lectured in the School of Business Administration, University of California, at Berkeley, 194749. Acting chairman of statistics department of American University in 1947. Chief of Retail Building Materials Price Section, OPA, in 1946. Naval weather officer, 1943-45. Acting head of the Research Section in the Machinery Price Branch of OPA, 1942.

Research assistant of the National Bureau of Economic Research in 1942 working on industrial pricing practices. 1941 university fellow at the University of Chicago. 1938-40 was teaching assistant in the University of Minnesota School of Business Administration. Graduated as AB from Brown University 1938. Member of Phi Beta Kappa, American Economic Association, Institute of Mathematical Statistics, and Econometric Society.

Question a. The validity of over-all supply and requirements estimates: The validity of over-all supply and requirements estimates may be affected by two sources of error: The assumptions and definitions concerning what to estimate, and the accuracy of judgments of facts. Errors arising from incorrect. assumptions and definitions are especially difficult to analyze. For example, it is hard to resolve the differences of opinion concerning the four categories of requirements: Stockpile, gross export, civilian, and military. Even if there were no question of definition or assumption, some error would inevitably creep in because of the obvious impossibility of knowing all the information accurately. DMA has the responsibility of reducing errors to reasonable proportions at reasonable cost and also to keep accessible records of how large the estimated errors are. DMA is proceeding along these lines.

In general DMA is not the agency primarily responsible for requirements estimation, but it has been forced to form its own opinions in this area in order to judge how fallible are the requirements data it receives from other agencies because other agencies do not universally assess the reliability of their requirements estimates. DMA may retain doubts concerning the requirements estimates it must abide by, but it must accept them as limitations upon its programing for expanded production. This agency is constantly pressing for improvements in requirements estimates, and is doing its best to anticipate such changes in its planning.

The balance sheets which show how supply and requirements match over the next few years are classified information and can be discussed in detail only in executive session, but general remarks can be made without danger of breaching security to show how the development of programs affects their validity. The present supply and requirements estimates used by the Defense Minerals Administration are considered to be the best that could be obtained under the limitations with which the agency has had to work. These estimates are constantly being revised and improved, but for critically scarce minerals it can be stated that the supply estimates and requirements data are reasonably good.

Stockpile requirements for the immediate future are clearly given to DMA and other defense agencies, but for later years these requirements are likely to change and some effort must be made to forecast such changes. Exports are generally a small item for minerals and their requirements status is rather similar to stockpiling-they are determined for the immediate future by other agencies, but it is necessary for DMA to guess what those agencies will demand in later years.

Civilian requirements are estimated under the supervision of DPA and are generally assumed to encompass needs for increased inventories and for normal growth of postwar consumption. Under total war, of course, civilian consumption would be drastically cut. Special problems arise in connection with estimating some mineral requirements because of temporary related shortages and technological changes.

Military requirements are handed down to DMA by the Department of Defense through DPA, and major problems of assumption and definition exist. It is the policy of DPA that the appropriate military requirements to use for policies of stimulating production expansion, allocations, and many other emergency actions are the military requirements keyed to the present military budget supporting 3,500,000 men in uniform. This is not the military requirements for total war with 15,000,000 or more men in the services, but it is a fair guess as to what military effort will be considered appropriate by Congress and the administration for a few years. The stockpile is designed to get us over any hump involved in rising from requirements based on these assumptions and the requirements of total war. Moreover, for some minerals the total of all-out war requirements 82354-52-10

will not differ greatly from present total requirements because much of the difference in military requirements can be matched by changing civilian requirements.

There are serious problems in estimating accurately the indirect requirements of military programs as well as judging whether or not other components in requirements have not been too generous (and how much). That is, how much fat there is in the butter-how much of, say the 1950 civilian requirement arose from speculative increases in inventories.

DMA has had much more success in estimating supply. Furthermore, it is believed that the accuracy of supply estimates are much greater than that of requirements. There has not yet been complete success in recording how reliable all supply estimates are believed to be, but this aspect of DMA programing is improving.

Categories of supply are designed to assist DMA in examining the effects of each type of assistance at its disposal. The most reliable supply estimates are those connected with assistance from accelerated amortization, guaranteedprice contracts, loans and other material aids because the statistical data from applications are filed in DMA. Good estimates can generally be made for unassisted supply. For above-market assisted supply and supply resulting from research and exploration only fair estimates are at hand. Fortunately, most of the supply is forthcoming from the categories which are most amenable to accurate estimation. So it is believed that DMA supply estimates are acceptable. Of the various programs enumerated by Mr. Parsons, those of his first category which were most complete are also the most valid and accurate, largely because most work has been done on them. The next group of tentative balance sheets are reliable to a usable extent in determining the assistance to be rendered through tax amortization and other obviously required instances of further assistance. The third group for which requirements are still needed, have satisfactory supply estimates but those are still of little use without requirements data.

Question 5b. Purchase programs at above-market prices: The various forms of Government assistance which are available for the stimulation of mineral production were outlined yesterday by Mr. Feiss. Of these various methods, it has been directed that the technique of Government purchasing at above-market prices should be resorted to only when other methods are either not adequate or not suitable.

In line with this viewpoint, very little purchasing at above-market prices, in relation to the total value of mineral output, is being contemplated. Under current programs, there would be no such purchases for iron ore, copper, lead, or zinc. Due to uncertainties of estimated requirements and supplies, however, it may prove desirable to institute a limited above-market program for zinc and lead to tide us over the next year or two safely. The same is true, also, for most other metallic and nonmetallic minerals under DMA jurisdiction. The only area in which above-market purchasing seems reasonably likely now is for some of the smaller volume, strategic minerals (such as some of the ferro-alloys and minerals used in electronic applications) where the cost of such purchases is small in relation to the results achieved.

It should be pointed out that these larger economic effects of subsidies are the primary responsibility of agencies other than DMA. It is for the Defense Production Administration, in particular, to examine each of their mineral expansion programs formulated by DMA and to see how they fit into the broader pattern of expansion for defense production, so that the various component parts of the economy remain in proper balance, and so that the cost of each expansion program, both in terms of Government expenditure and in terms of cost to the economy in men and materials, is not out of line with the part the particular expansion program plays in the total defense effort. DMA merely recommends programs to DPA, and cannot proceed until that agency has determined their validity.

This does not imply that DMA is in disagreement with DPA on the specific types of mineral expansion methods which should be undertaken. Where DMA is convinced that a certain line of action is necessary, you may be sure that DMA makes forceful representations to DPA (or to Economic Stabilization Agency, where that organization is concerned) to get that line of action adopted. All of the defense agencies are agreed upon the principle that those

methods for production expansion should be employed which involve the minimum Government interference with the normal workings of the economy and which keep the cost of defense expansion, to the Government directly, to civilian consumers in the form of higher prices, and to the Government indirectly in the form of higher prices for purchases of military material-at the lowest possible levels. If more expensive methods of minerals expansion are recommended, the burden of proof is upon the recommender, to show that the higher cost is compensated by benefits to the defense effort which could not have been attained without it.

Question 5c. Price stabilization proposals: There has been only one price stabilization proposal from the Defense Minerals Administration: that of the ceiling price for tungsten. It is now believed that this will be the last such proposal because it is not expected that the unusual circumstances which caused this proposal to be made will be even closely approximated for another mineral.

DMA is constantly watching foreign prices and domestic minerals industry costs to make sure that there is not an unfair squeeze placed upon the industry as a result of excessively inflexible price ceilings. So far, no actions have been taken nor recommendations made in this connection.

STATEMENT OF H. A. MONTAG, DIRECTOR, REQUIREMENTS DIVISION, DEFENSE MINERALS ADMINISTRATION

With reference to the personal history requested, I am a graduate of Ohio State University, having spent 2 years in the college of engineering and 2 years in the college of marketing.

My first experience with mining equipment was with Jeffrey Manufacturing Co., one of the larger manufacturers of mining machinery, where I was in charge of their sales and market statistics. This experience covered 12 intermittent years from 1927 to 1940.

During World War II, Mr. Knoizen, Director of the Mining Division of the War Production Board, asked me to come down to take a job as Deputy Chief of the Program Branch. In this capacity I was charged with providing the programs for maintenance, repair, and operating supplies for all the mines of the country and certain South American nonferrous mines, and for the production materials for the manufacture of specialized mining machinery.

As the minerals programs developed and the work tapered off, I became Chief of the Program Section and, as the Mining Division was liquidated, I progressively took over the duties of each section until I finally wound up as Chief of the Mining Branch under the Civilian Production Administration.

When this liquidation was completed in 1946 I took a job with the Joy Manufacturing Co., another large manufacturer of mining machinery. Here I was charged with the responsibility of developing the production programs and correlating them with the sales and marketing programs, because mining machinery is a tailored product designed to meet the vagaries of ore deposits. After these programs were developed, I was charged with screening the production releases to the various plants so that the needs of the mining industry for machinery were properly met.

Because of these years of experience with the mining industry through the medium of mining machinery manufacture and my 42 months' experience with the priorities problems of the mining industry during World War II, James Boyd asked me to come down to set up a priorities shop for the Defense Minerals Administration.

My division is comprised of a Mining Machinery Branch, a Maintenance, Repair, and Operating Branch, a Manpower Branch, a Transportation Branch, and a Housing and Utilities Branch. The proposed Energy Branch has not yet been activated and may not be needed if the Defense Electric Power Administration can continue to handle our problems in this field. These offices are manned to the greatest extent possible with mining engineers who had previous experience in these identical jobs. Our primary assignment is to provide all of the tools and facilities essential to maintain the current production rates of all the minerals under the jurisdiction of DMA and to implement the expansion projects

for increased production of the critical minerals as these programs are developed.

In a time of all-out mobilization these requirements must compete with large military demands but in a time of partial mobilization imposed upon a fullfledged civilian economy, the mining needs must compete with both the military and the civilian requirements. At the moment there is no formal system of priorities or allocation of production materials and the assistance which can be given in regard to materials or machinery must be done by programing definite requirements to meet definite programs of minerals production and to use so-called spot relief to break bottlenecks in the supply picture. The Requirements Division has had a fair amount of success with spot relief and we believe that no mining operation has been forced to shut down because of material or machinery shortages.

We have succeeded in developing and having approved a formal program for production materials for specialized mining machinery items. We have also been successful in every case in obtaining the necessary project identification. of mineral expansion projects and to obtain either complete project rating or sufficient spot ratings to get the new mining facilities under way.

We are not satisfied that the present priority order of the NPA which provides for self-assignable ratings for maintenance, repair, and operating supplies for all industries is properly designed for the needs of expanding mineral activity. At the moment we are working with the NPA to solve this particular problem.

Machinery Branch

SUMMARY STATEMENT

The following summary of the dollar value of the material expedited for the manufacturers of mining machinery does not represent the value of the machinery but is only the value of the production materials or components which the manufacturers were not able to obtain without a preference rating.

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Program for steel for mining machinery starting in June for approximately 20,000 tons per month with a value of $1,935,000.

MRO Branch

The following summary of the dollar value for materials and equipment was expedited by this Branch representing equipment and material for maintenance of present mineral production and also expansion and new facilities for increased mineral production.

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Applications processed from February 1 to March 27, 1951.

Completed to Bureau of Public Roads and in construction

AR-1: Calera Mining Co., Idaho, cobalt, 46.5 miles-cost $288,000. Producer -of an estimated 3,300,000 pounds annually.

AR-2: Bradley Mining Co., Idaho, antimony and tungsten, maintenance $15,000One of the four largest producers of tungsten.

Completed to Bureau of Public Roads for field survey

AR-3: Strawberry Mine, California, tungsten, short road about $10,000. Potentially an important supplier.

AR-4: United States Vanadium Co., California, tungsten, length and cost unknown. Will produce 15,000 units monthly; very important.

AR-5: J. R. Simplot Co., Idaho, fluorspar, 15.6 miles, $90,000 (?). Government contract for 30,000 tons.

Completed to DMA field teams for investigation

AR-7: A. M. Stevens, Colorado, beryl, 0.75 mile $12,000 (?). Claims huge -deposit of this important mineral.

AR-11: U. Leon Guy, New Mexico, mica, 6 miles $30,000 (?). Might be an important producer of strategic grade.

Processed to applicant for further detail

AR-6: United States Mining Co., Washington, chrome-road detail lacking. Can ship large tonnage of high-grade ore.

AR-8: Northwest Magnesite Co., Pennsylvania-request for forms.

AR-10: Consolidated Uranium Mines, Inc., Utah, uranium-road details unknown.

F. B. Andrews, Oregon, copper-road details unknown.

Utah Construction Co., Utah, iron, 12 miles, $130,000. A very important source of ore.

J. H. McCready Co., Florida, copper-request for forms.

Fulton J. Cox, New Mexico.

William Frandson, Colorado, beryl-road details unknown.

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