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Principles of Economics with Applications to Practical Problems

<h2>CHAPTER 57</h2> <h3>FUTURE TREND OF VALUES</h3> <h4>§ I. PAST AND PRESENT OF ECONOMIC SOCIETY</h4> <div class="sidenote">Definition of economics recalled</div> 1. The meaning and scope of economics can be better seen at the end than at the beginning of its study. The proposition with which this inquiry opened may well be recalled in the closing chapter. The words of the formal definition of economics should at this point convey a fuller meaning. In the wide range of subjects passed in review has been sought the answer to one question: What determines and affects the values of good? <div class="sidenote">Influence of economics on practical life</div> Perhaps now also can be better appreciated what the influence of such a study might and should be on practical action. At times economic students have gained the ear of statesmen and rulers, and have exercised much influence upon practical politics. It is sometimes bemoaned that economists have to-day so small a direct part in the government of our republic. They certainly have a greater part to-day than they had twenty years ago, but if they had not, there would be small occasion for regret. The immediate influence of the specialist on those in authority is at most times less in a republic than it is in a monarchy, at those rare times when a ruler shows the students his favor. That influence in America is mostly indirect, but it is no less sure and lasting. The results of the earnest pursuit of economic inquiry in the universities and outside of them are already appearing, not in dramatic ways, but in the more subtle, surer form of an intelligent public opinion. [Pg 556] <div class="sidenote">Examples of mistaken social prophecy</div> 2. Economic science has not reached a stage that permits of much prophecy. Prediction is sometimes given as the test of science. This test, however, is one that only astronomy can meet in any remarkable degree. Chemistry can tell much of what will happen in the laboratory, but nothing of the date of future powder-mill explosions. Geology answers the question "What?" with surmises, and "When?" with an estimate of a few million years more or less. Is it surprising that in human affairs still less prediction is possible? There are countless unmeasured factors in human action. Such generalizations as are possible must be based on actions that appear and reappear with practical constancy. Though a number of facts unite to suggest some conclusions as to the immediate future, the experience of the last century bids one beware of sweeping predictions. The close of the French Revolution was a period marked by much speculation regarding the future of society. The optimists, with faith in the perfectability of human nature and of society, believed that all social ills were due to bad government; if despotism were but overthrown, man's nature would develop, untrammeled, to perfection. The economists of that day were sceptical, because, looking deeper, they saw sources of misery in the scantiness of man's environment, and in the sloth, ignorance, and incapacity of human nature. The pessimists—the communists, and socialists of that day—seeing the same evils, had other explanations to offer. While the economists of that day believed the conditions of poverty and misery to be inevitable, the pessimists pronounced them unendurable, and advocated a radical social change as the only hope of saving the masses from starvation. In such a variety of mutually contradictory views there must have been much error, but likewise much truth if it could be disentangled. <div class="sidenote">Economic prophecies of the nineteenth century</div> 3. The unexpected changes in transportation and in industry altered the course of economic development in the last century. Much of the economic theory of that day appears absurd in the light of history. The inventions of the period,[Pg 557] from Adam Smith's writings to Ricardo's (1776 to 1820), were mostly for use in manufacturing. This suggested to the minds of that time the progressive cheapening of cloth, iron, pottery, and of all other products of machinery, but not the cheapening of food. Indeed, the situation in western Europe then suggested strongly the opinion that the products of the soil would steadily become more difficult to get. The railroad was not of practical importance until after 1830; the steamboat was not applied to ocean travel until 1837. The opening of a rich continent and its annexation, by these new agencies, to the available resources of the older countries were not dreamed of. It was not fully appreciated that a great change in social standards, controlling the growth of population, was in progress. This was the panorama of the progress of society as seen by both the conservative economists and the socialists of less than a century ago: continued invention, an increasing population, low wages, scanty food, growing wealth for the few, and growing poverty and misery for the masses. <div class="sidenote">Unexpected course of development in the nineteenth century</div> 4. The actual course of economic development in the nineteenth century falsified the predictions alike of optimists, economists, and pessimists. Not foreseeing the great supplies of natural resources soon to be made available for the older countries, the men of that day naturally thought of the supply of land as limited and fixed. Supply in the economic sense means the amount available at the given time in the market; but despite the great areas since brought into the world-markets, the false idea of a century ago still persists in the text-books, and shapes economic reasoning. It is vain to say that the circumstances have been unique and that the general principle is still valid. Much of the so-called orthodox economic analysis was essentially erroneous as applied to the conditions of the past century; it is erroneous to-day and will be so for years to come, if it ever fits the facts. New continents are about to be opened. The building of railroads the length of South America and to the center of Africa will[Pg 558] make available new mineral wealth, rare woods, enormous forests, and some of the greatest food-producing areas on the globe. Population in Christendom has increased more rapidly than ever before in the history of the world, but it has not overtaken the progress in resources. The rate of increase of population is slackening. The result of this combination of events has been a general rise of the conditions making for popular welfare. Despite the problems and the abuses that every new change brings, the civilized world undoubtedly is more prosperous to-day than ever before. The greatest misery and discontent is in the more backward communities. This is past and present; what of the economic future? Is the present condition a normal one—is this prosperity likely to grow or to decline? Thus far, surely, the economic student may question the oracles; for though the distant future is veiled from man's view, the role of economic theory is to show causal relations, to convert mystery into reason, and thus to give a lamp to the feet of the present. <h4>§ II. THE ECONOMIC FUTURE OF SOCIETY</h4> <div class="sidenote">Exhaustion of certain natural resources</div> 1. Present industrial progress is largely due to material conditions, temporarily favorable. Many of the materials now being destroyed in immense quantities have been slowly stored up through the ages and are not renewable.[4] Till modern times man knew little of the world beneath its crust. Living, he scratched the earth's surface, and dying, left his bones to fertilize the soil. But to-day, man exhausts the stores in the interior of the earth, burns the treasures of the carboniferous age, casts the fertilizing elements into the ocean, and leaves the world an empty shell. Forests are being so rapidly cut off that the price of fuel-wood and lumber in many parts of the United States has, within twenty years, been multiplied[Pg 559] by three. The world's store of iron ore is not yet fully known, but much of it has been measured, and of the deposits known to be within the United States over one half are said to be owned by one corporation, and they are enough to continue its present output no more than sixty years. Many other natural products are in like manner gathered by civilized man from a stock created long ago. While the supply of vegetable food promises to be ample, the supply of meat will be maintained with difficulty as population becomes denser. <div class="sidenote">Possibilities of other resources</div> 2. Many other inexhaustible sources of essential materials have not yet been developed. What has just been said is the darker side. The coal-mines can be emptied, but so long as the sun shines and the rains fall, Niagara will remain as a source of light, heat, and power. The tides flow on forever. In every thunder-storm enough force is dissipated to run thousands of factories. The heat in the center of the globe, though not inexhaustible, would suffice for man's needs for many centuries. The force in Mount Pelée, if chained and utilized, would run a million factories a million years. It is not too much to hope that engineering skill will some day reach and utilize these sources. Such a cheapening and diffusion of power would put a new face on many of the problems of industry. New sources of materials undoubtedly will be developed. It is reasonable to hope that before iron ore has become extremely scarce, a cheap and practicable method of extracting aluminium from clay will have been perfected. Secure of these permanent sources, civilization will stand on a firmer foundation. <div class="sidenote">Effect on values of shifting centers of power and materials</div> A great displacement of local values must accompany this shifting of the centers of power and materials. When the coal districts are heaps of slag and cinders, industry will be found near the water-power. Because of distance from raw materials, New England even now finds herself hard pushed in her rivalry with the Southern states in the manufacture of textiles. The industrial map of our country will be greatly altered a hundred years hence. The possession of rich natural[Pg 560] resources to-day does not insure a community enduring prosperity. <div class="sidenote">Effect of accumulating wealth</div> 3. The mass and quality of wealth will increase rapidly if social and political conditions remain stable. The main method of increasing wealth must be the putting of energies and resources into more abiding forms. In order that a motive for saving may be present, there must be stable conditions. Increasing subordination of present to future will be accompanied by a fall in the rate of interest. The growth of wealth means a higher quality of all artificial productive agents. A larger part of the energies of men will then be directed merely to supervising the developed machinery. Man will live in a better environment, in a better and richer world. Wages must rise as the quality of tools and machinery improves. Population most probably will not increase proportionately and the relation of the labor-supply to the resources with which it works should be more and more in favor of the laboring classes. The difficult problems of the concentrated control of industry and of the control of wealth must be solved in the interests of all. <div class="sidenote">Social progress vs. race progress</div> 4. Improvement of the race biologically, through selection of the ablest individuals, has been a great factor in human progress. Social progress is not necessarily the steady biological betterment of the native ability of men. The education of the average member of society is becoming yearly better; it is doubtful whether the innate capacity of a new-born babe in Europe and America to-day is greater than it was among our Germanic ancestors in Roman times. Indeed, the progress of the past two thousand years has been in social organization, in the enlargement and simplifying of the mass of knowledge which has to be reappropriated by each new individual, rather than in race-breeding and in quality. <div class="sidenote">Nature vs. culture</div> Few thoughtful persons now hold the view that the race can be rapidly improved biologically by the process of educating the individual. Education is cumulative in so far as it builds up a better environment into which other children[Pg 561] will be born, but the betterment is not due to the inheritance by the child of the acquired knowledge and skill of the parent. If this question is open to dispute among biologists, it is only as regards a minute increment of improvement. Practically, selection is the only means of improving the innate capacity of any species in any large measure. Many forces were at work in the past to lift man above the brute, and especially to increase the average brain-power of the human race. The weak, the ignorant, the incapable in primitive societies were ruthlessly killed off. The strong, the sagacious, and the enterprising left the largest numbers of descendants. <div class="sidenote">Decrease of the successful elements</div> 5. Progress will be checked if the native quality of the race declines. Under modern conditions, especially within the last quarter of a century, the successful elements of society are becoming less fertile. Large families were the rule among the capable pioneers of America; now they are rare except in the lower industrial ranks. Democracy and opportunity are favoring this process of increasing the mediocre and reducing the excellent strains of stock. Caste and status kept successful generations of capable men in humble social ranks from which only by chance some remarkable individual could rise. In a democracy, those of marked ability can more easily move into the better-paid callings and professions. This individual good fortune, however, reduces the probability of offspring. In the higher social ranks are more bachelors and old maids than in the lower ranks, and fewer children are born to each marriage. The president of our oldest university has shown that one fourth of the graduates of the last generation have remained single, and that the average number of children of the married graduate is two. That group of men, therefore, has left only three fourths enough descendants to maintain its numbers, and as the population has doubled within the same generation, that class represents only three eighths as large a proportion of the American stock as formerly. <div class="sidenote">The menace to progress</div> This sterilization of ability has cumulative results. If society[Pg 562] were composed in equal parts of two distinct strains of stock, not intermarrying; if the total population kept intact from one generation to another (say each period of thirty years), but the superior strain contributed only three fourths of its own number, at the end of five generations it would have sunk from one half to a little more than one eighth of the population. A period brief in the life of nations would serve to leave it an almost negligible factor in social life. There can hardly be a doubt that at present our society is on the average increasing far more from the less provident, less enterprising, less intelligent classes. There has not yet been time for many of the cumulative effects of this process to appear. Progress is threatened unless social institutions can be so adjusted as to reverse the present process of multiplying the poorest, and of extinguishing the most capable families. <div class="sidenote">Sympathy and selfishness in relation to progress</div> 6. If progress is to continue, there must be left a wide field for the ambitions and for the competition of individuals. The results of any given ability are dependent upon the energy with which it is used. The social machinery finds its motive force in the nature of men. In taking economic wants as the starting point of our study, it was not implied that men were entirely selfish. Sympathy widens; economic wants include family, friends, and, in a growing measure, humanity. The happiness of a truly socialized man consists in part in the happiness of his fellows. As social sympathy broadens, the sense of duty becomes a stronger economic force. Men change, but not rapidly, and not always for the better. It is unsafe to overestimate the generosity of men. Individual wants and interests must, so far as can now be seen, continue to be among the stronger forces that move society. Progress is made because to exceptional ability in general is now presented the hope of large rewards. <div class="sidenote">Status endangering progress</div> <div class="sidenote">Envy endangering progress</div> These dynamic forces making for progress are at present, however, threatened from two sides. Enterprise is threatened from the side of privilege or status. The avoidance of[Pg 563] certain kinds of work which, by social convention, come to be regarded as degrading, takes much ability out of business. The freedom of America to so great a degree from this disdain of honest labor has been a large factor in her progress, but it is endangered when men become timidly conservative of social position. Progress is threatened, secondly, by democracy, with its tendency to carry the notion of literal equality over into industry. When democracy becomes envious, it denies to exceptional ability an exceptional reward. The line of growth must be the resultant of the positive forces in these two principles. The energy of the social reformer must be directed along rational lines. If this can be done, the economic outlook is for a great development of wealth and popular welfare. Economics must be looked upon as the study of the forces in human nature as much as of the material resources of the world. <hr class="chap" /> [Pg 565] <h2>QUESTIONS AND CRITICAL NOTES</h2> The Questions.—These questions are not intended to be used merely as[Pg 567] tests of knowledge of the text. They leave untouched many of the most important questions in the reading, and they raise other inquiries hardly hinted at in it. The list began ten years ago with one or two questions on each topic, assigned in advance of lectures and recitations, with the object of arousing the student's thought, quickening his observation, and stimulating his interest in the subjects. The possibilities of helpful questions of this kind are hardly more than suggested by the examples given, and every teacher will find peculiar opportunities in his own neighborhood for other similar inquiries. Other questions are more of the nature of those in Problems in Political Economy, by W. G. Sumner (published by Holt & Co., New York, 1884), which are intended to be reasoned out in the light of principles given in the class-room. Many teachers and students have found much help in that little book, which in turn acknowledges large obligations to earlier lists of questions. The changed point of view in economic theory has, however, made most of the older problems of this nature unusable except after reformulation. Fertile in suggestions of both of the kinds of questions mentioned are two books by H. J. Davenport, Outlines of Economic Theory and Outlines of Elementary Economics (The Macmillan Co., New York, 1896 and 1897), though some of the questions imply theoretical views differing from those of this book. Excellent lists of questions with references to reading have been prepared by W. G. L. Taylor, in his Exercises in Economics (The University Publishing Co., Lincoln, Neb., 1900). The list of problems of this kind can easily be extended to meet the special conditions of each community. THE BIBLIOGRAPHICAL NOTES.--The few references and critical notes given are intended as a help to teachers and advanced students desirous of following some of the more recent contributions to controverted points in economic theory. No attempt has been made to furnish a list of books for the beginner or the regular reader. Among accessible books containing helpful lists of that kind may be mentioned: [Pg 568]The Reader's Guide in Economic, Social, and Political Science, by Bowker and Iles. Outlines of Economics, by R. T. Ely (published by Macmillan, New York, 2d ed., 1900). Contains both questions and bibliographies. Introduction to the Study of Economics, by C. J. Bullock (published by Silver, Burdett & Co., 2d ed., 1900). The references to the literature are given by pages or sections at the end of each chapter, and at the back is a list (about twenty pages) of the most useful texts, documents, and materials. Financial History of the United States, by D. R. Dewey (published by Longmans, Green & Co., 1903). Contains excellent references on public finances, tariff, banking, and taxation of the United States. Introduction to Economics, by H. R. Seager (published by Holt & Co., New York, 1903). Each of the first twenty-six chapters is followed by fresh and well-selected references varying from one line to nearly a page in length. A good general bibliographical note is given on pp. 61-2. <h4>Chapter 1. The Nature and Purpose of Political Economy</h4> 1. Has political economy anything to do with woman suffrage, the liquor problem, a republican vs. a monarchical form of government, the silver question? 2. Is political economy a study of things or of men? 3. Shall a piece of coal be studied in geology, botany, physics, chemistry, or economics? 4. Do you expect to acquire wealth more easily as a result of the study of political economy? 5. Of what practical use do you think political economy is? 6. Is political economy necessary to the understanding of the business world, or vice versa? 7. How wide a knowledge would a complete understanding of industrial society require? 8. Did the discovery of America make the study of political economy more important? <h4>Chapter 2. The Economic Motives</h4> 1. If you found $10 to-day on the street, what would you do with it? 2. What would be the chief differences between your use of it now and at the age of five or the age of twelve? [Pg 569] 3. Name Crusoe's wants in the order of their importance. 4. Is it well to be contented with your lot? Is it well to be discontented? 5. Why does a horse like hay and a man prefer meat? 6. Are the wants of a savage more easily satisfied than those of civilized men? Why? 7. How many motives led you to come to college? 8. If you ever worked for wages, or a salary, was that the only motive? What else? 9. James Bryce says that the incomes of American university professors are much less than those of men of corresponding ability in law and medicine. If true, why? 10. If you could, would you do nothing always? Why? 11. Which would you prefer, to clerk in a store at $1.50 a day, or to lay masonry at $2? Why? 12. Do men work better under threat or when their pride is appealed to? 13. Is pride as powerful a motive as greed, in economic action? 14. Do you know any persons that work from a sense of duty alone? 15. Are charity workers usually well paid? Why? <h4>Chapter 3. Wealth and Welfare</h4> 1. What is it to be economical of money? 2. Why did Crusoe work at all? 3. When he began to work at one thing, why did he ever stop to work at another? 4. What is the difference in utility between the water in a solid mountain reservoir and the same water when it is flooding the valley? 5. Does it change the utility of a load of powder to touch a match to it? 6. Is water useful? Is dynamite? 7. Is the last bait worth more when the fish are biting well? 8. Are the following wealth: food, tobacco, medicine, whisky, good looks, good health, a wooden leg? 9. Is a book full of useful information, wealth? Is a head full of useful knowledge, wealth? 10. Is a ship at the bottom of the ocean, or gold in the mine, wealth? 11. Is well-being in proportion to wealth? Why? 12. Are services, music, a theatrical performance, a gambler's pack of cards, wealth? <blockquote> Note.—The theory of marginal utility broadly outlined in chapters 3-5 has been worked out in detail by the group of writers called[Pg 570] the Austrian economists. The mechanism, or the technique, of marginal utility and exchange as they conceive of it, is essentially what this text seeks to explain. Our application and development of the conception of marginal utility differs from theirs, however, in ways that will appear as the text advances. For more detailed discussion of many points in chapter 3, see Smart, Introduction to the Theory of Value, pp. 9-17; Wieser, Natural Value, pp. 3-16; Böhm-Bawerk, Positive Theory of Capital, pp. 129-153. </blockquote> <h4>Chapter 4. The Nature of Demand</h4> 1. Give illustrations of the difference between desire and demand. 2. Do people actually expend their incomes so as to get the maximum utility judged by a standard they would admit to be morally sound? 3. What causes a demand for an additional supply of food? Of books? 4. If you never eat corn-bread, will the failure of the corn-crop affect your grocery bill? 5. Give examples you have seen of a higher price of one thing causing an increasing use of another. 6. Do you buy what you most desire? 7. Give examples of cases where supply is fixed, and demand varies. 8. Give examples of demand shifting from one product to another. <blockquote> Note.—For a more detailed discussion see works cited: Smart, 18-33; Böhm-Bawerk, 159-169; Wieser, 16-36. </blockquote> <h4>Chapter 5. Exchange in a Market</h4> 1. Are merchants producers of wealth, or are their profits merely subtracted from the wealth already produced? 2. Is the railroad productive? Why? 3. Give examples within your observation of improved productive processes increasing exchange; of the reverse. 4. Why is exchange profitable if it is fair? 5. Would doubling all commodities affect their exchange value? 6. Is part of a stock of goods ever worth more than the whole? Examples. 7. Do you ever take account of a difference of five cents in deciding whether to purchase? 8. Is barter more or less frequent now in America than formerly? In the world? 9. Is there any causal relationship between commerce and manufactures? If so, in what way? 10. In a time of high excitement gold was sold for more at one side of the room than at the other side; how account for this? [Pg 571] 11. Give examples of, and reasons for, two prices in the same market. 12. What effect on prices should be expected from an invention that makes possible the carrying of fresh meat from South America to England? 13. Describe the method of selling any product you know about. What is the market in which it is sold? <blockquote> Note.—See works cited: Smart, pp. 40-63; Böhm-Bawerk, 193-222; Wieser, 39-53. </blockquote> <h4>Chapter 6. Psychic Income</h4> 1. Is it possible to compare the value of the portrait-painter's service with that of the gardener? 2. To call the teacher's work unproductive, and the ditch-digger's work productive was once usual, but is so no longer; give reasons for either view. 3. It is usual to call the use of a house for business purposes a productive use, but its use as a residence an unproductive one. What reasons are there for and against this? 4. Give a list of material agents that are yielding non-material uses. 5. Give examples of personal services that are most immediately expressed as gratifications. <blockquote> Note.—The phrase "psychic income," used here for the first time, expresses a conception long neglected, but essential to the advancement of psychological economics. The idea has been recognized in the writings of Edwin Cannan, Irving Fisher, W. M. Daniels, and perhaps of late by others. It was discussed by the author in the Quarterly Journal of Economics, Vol. XV, pp. 19-30, especially pp. 25-26, in an article called "Recent Discussion of the Capital Concept" (November, 1900). </blockquote> <h4>Chapter 7. Wealth and its Indirect Uses</h4> 1. Give reasons for attributing exchange value to the waves of the ocean; to a waterfall, a water-wheel, a loom, a piece of cloth, a dress made of the cloth. 2. Show the connection between these things. 3. How can the use of a flock of sheep be of value to one who must return them all to the owner? 4. Why should the use of a machine that never can be a direct cause of gratification, have a value that men will pay for? 5. Give examples of wealth never becoming a direct cause of gratification, yet whose possession is greatly valued. [Pg 572] <blockquote> Note.—The conception in this chapter was ably presented by Böhm-Bawerk in Capital and Interest, Bk. III, ch. v, pp. 219-227. He does not, however, make use of it in a theory of rent. </blockquote> <h4>Chapter 8. The Renting Contract</h4> 1. What things beside land are rented? 2. What is the form of contract used in the renting of farms, business buildings, and residences, in the community where you live? 3. Does the rent of pianos, type-writers, or masquerade-suits depend on the value of the thing rented? Is the rental a moderate return on the investment? 4. What are the difficulties in determining tenants' improvements? <blockquote> Note.—Various writers have recognized that social, class distinctions had an influence on the conceptions of rent and capital in England in the eighteenth century; see Fetter, article on "The Next Decade of Economic Theory," in American Economic Association, 3d ser., Vol. III, pp. 236-246, especially 243-4; also A. S. Johnson, Rent in Modern Economic Theory, p. 19, and references there given. Heretofore, however, there has not been assigned to the form of the contract the significance here given it. A discussion of the points at issue will be found in The Relations between Rent and Interest, by F. A. Fetter and others (published by Macmillan, New York, 1904), pp. 8-10, on the renting contract. </blockquote> <h4>Chapter 9. The Law of Diminishing Returns</h4> 1. Is it possible to do twice the amount of business in any store-room by doubling the stock and the force of clerks? 2. Is it possible to expand a university indefinitely by increasing the force of teachers and the equipment, without enlarging the buildings? 3. Why do men cultivate two acres instead of one? Where land is plentiful, why do not men cultivate two acres instead of one? 4. Are there any things, not free goods, that could be indefinitely increased without increasing difficulty? 5. English farmers raise thirty-five bushels of wheat per acre, Americans perhaps fifteen; why this difference? 6. Why did people go to Dakota and Iowa when there was still room in New England? 7. Why put up a twenty-story building? Why not build a fifty-story one? <blockquote> Note.—The broad reading here given to the law of diminishing returns is so recent that even the latest texts have recognized it only in a partial manner, defining "the law" in the old terms confined to land. For the old statement see J. S. Mill, Principles of Political Economy (1846), Bk. I, ch. XII. Writers even so advanced as[Pg 573] Alfred Marshall follow Mill with no essential modification. For a good historical account of the doctrine see Edwin Cannan, History of the Theories of Production and Distribution, pp. 147-182 (1893; 2d ed., with additions, 1903), which advances no positive theory, but makes evident many inconsistencies in the older view. A keen analysis and important contribution to economic thought was made by J. R. Commons, Distribution of Wealth, pp. 116-159 (1895). John B. Clark, in various earlier articles, and in his Distribution of Wealth (1900), has done more than any one else to develop the conception of "a universal law of economic variation." In magazine articles by various writers, the same idea has been developed, but no thorough-going application of it has been made in the available text-books. </blockquote> <h4>Chapter 10. The Theory of Rent</h4> 1. Is competition severe in the renting of land in your community? 2. Give examples you have seen of a rise of rent; the cause. Of a fall of rent; the cause. 3. Does the existence of the land of California have any effect on rents in New York city? On agricultural rents in New York state? 4. If all the land on an island were equally fertile and equally convenient of access, would any of it pay a rent? 5. If you owned the Golden Gate, or the harbor of New York, could you rent it? 6. How does the hire of a team of horses resemble the rent of land? 7. How do livery charges in a college town in commencement week illustrate the subject of rent? 8. Show how a change of circumstances may raise the rent of machinery. <blockquote> Note.—Although most texts still present the older, narrow conception of land rent, its defects have been revealed by many critics. J. B. Clark has been the chief champion of the broader conception; American Economic Association, 1st ser., Vol. III, No. 2, Capital and Its Earnings (1888); and Distribution of Wealth, ch. IX and ch. XIII. See our summary of the present situation, American Economic Association, 3d ser., Vol. II, p. 241 (1900). Alfred Marshall's effort to save the older conception by compromise on a "quasi-rent" doctrine has many supporters, but this doctrine is examined in detail and criticized adversely by the writer in an article entitled "The Passing of the Old Rent Concept," Quarterly Journal of Economics, Vol. XV, pp. 416-455 (1901). For both negative and positive reasons for a change in the concept, see The Relations between Rent and Interest, before cited (in note to ch. 8). </blockquote> <h4>Chapter 11. Repair, Depreciation, and Destruction of Wealth</h4> 1. What is the difficulty in the definition: Rent is the payment for the original and indestructible powers of the soil? [Pg 574] 2. If the value of improvements on land is all counted, is there anything over? Examples. 3. What is stumpage? Does it differ from rent? 4. What do you know about the methods of renting mines? 5. What methods are adopted to keep up the efficiency of factories? <blockquote> Note.—Compare and note the inconsistent use of the term "rent" by Ricardo, pp. 34-5 and 45-6, McCulloch's edition. See also article, "Depreciation," in Palgrave's Dictionary. </blockquote> <h4>Chapter 12. Increase of Rent-bearers and of Rents</h4> 1. What are the most obvious ways of increasing the productiveness of land? 2. How does a new railroad affect the value of the land it passes through? 3. How would the rent of a rocky island be affected if it became a summer resort? 4. Mention any cases you may have seen where a greater value was imparted to land by a newly discovered use. 5. A tunnel was made to drain a mine; the stock doubled in price. Was it really the stock, the old mine, or the new hole in the mountain-side that had increased in value? 6. Criticize the statement that, in an economic sense, land is a "fixed stock for all time." <blockquote> Note.—The changes which the rent concept is undergoing can be traced in the work of Alfred Marshall. See Principles of Economics, Bk. V, ch. IX on "Quasi-rent," and ch. X on "Situation Rent," and Bk. VI, ch. IX, Secs. 6-7, in which Marshall modifies the older conception of rent. This is discussed in "The Passing of the Old Rent Concept," cited above (in note to ch. 10). </blockquote> <h4>Chapter 13. Money as a Tool in Exchange</h4> 1. Why do you value money? Do you value it more than the things it buys? 2. What functions does money perform in society? 3. Could a country better do without money, horses, or roads? 4. If money is a tool, what does it make? 5. What is the difficulty in deciding whether to call the following money: gold ingots, gold coin, silver dollars, copper cents, greenbacks, bank-checks, chalk-marks to keep account? 6. Are men wealthy in proportion to the money they have? Are countries? 7. Would a nation be poorer if, like Sparta, it prohibited all money? [Pg 575] <h4>Chapter 14. The Money Economy and the Concept of Capital</h4> 1. Are national bonds or promissory notes, wealth? 2. Is it money or things that the borrower wants? 3. If you were starting a factory on credit, would you rent the machines or buy them with borrowed money? Why? 4. When a man says he has a certain capital invested in his business, does he mean to include the value of the land and buildings? 5. What is the meaning of the phrase, "a capitalistic age"? <blockquote> Note.—We are indebted to the economic historians for a better understanding of the important influence money has had on economic organization. See Hildebrand's notable article in the first number of the Jahrbücher, and Ashley, English Economic History. J. B. Clark was the first among contemporary economists to emphasize the value concept of capital. The scholarly and judicial article by Irving Fisher on "Precedents for Defining Capital" in Quarterly Journal of Economics, May, 1904, makes possible better understanding and agreement on the subject. I am pleased to say that in this article, and in personal correspondence, Professor Fisher disavows the interpretation I had thought (see "Recent Discussion," etc.) that his words required. His conception of capital is thus, in essentials, the one here employed, differing from it not in thought, but merely in terminology. Professor Fisher's original studies of the capital concept, in the Economic Journal in 1896-7, are indispensable to an understanding of the development of this important phase of the new economic theory. The connection between the conclusions of economic history and the value concept of capital in economic theory has been made by the author in essays before cited under chapters 6 and 8: "Recent Discussion of the Capital Concept"; "The Next Decade of Economic Theory," and "The Relations between Rent and Interest." </blockquote> <h4>Chapter 15. The Capitalization of all Forms of Rent</h4> 1. What relation is there between the rate of interest and the price of land bearing a given rental? 2. If a $100 share of railroad stock sells at par when interest on loans is at 5%, what will be its price when interest rises to 6%? When interest falls to 4%? 3. If a business is very successful and its dividends double, what will be the effect on the selling price of its stock? <blockquote> Note.—The subject is almost foreign to the standard works on economics, which have continued to look upon capital as primary, and its income as derived. Numerous recent articles will be found, however, dealing with concrete problems where the logical and the practical views are seen to be the same; e.g., W. Z. Ripley, Quarterly Journal of Economics, Vol. XV, p. 106 (1900), article on "The Capitalization of Public Service Corporations"; also article in Engineering News, Vol. XXVIII, p. 492 (November, 1892). </blockquote> [Pg 576] <h4>Chapter 16. Interest on Money Loans</h4> 1. Some money-lenders in cities get 10% a day from fruit-vendors for the advance of small sums of money, and the losses are very slight. Pawnbroking pays frequently 25 to 100% per year. In these cases what affects the rate of interest? 2. Through what agency does the Western farmer borrow Eastern capital? 3. How do Englishmen invest in American railroads? 4. In what ways can a lender collect a high rate of interest without appearing to do so? 5. What would be the effect upon the rate of interest in a new state if it passed a law preventing the collection of loans by outside lenders? 6. Why has interest been about 10% in the West, 7% in the Central States, 5% in New York, 4% in Germany? 7. What is the money market? Who are the buyers and sellers, and what do they buy and sell? 8. In a panic, interest rises on short loans and prices fall, while it is almost impossible to borrow money; does this show that the amount of money determines the interest rate? 9. When gold is leaving England, the bank raises the rate of discount (interest); does this show that the quantity of money determines the rate of interest? <h4>Chapter 17. The Theory of Time-value</h4> 1. Give examples of a high cost for the use of wealth without the borrowing of money. 2. Give some examples of the neglect of repairs through lack of resources, and show how it involved time-value. 3. What would be some of the first effects on production if interest on money loans fell to one half its present rate? 4. Which is the more important for the rate of interest, the amount of money in the banks or the amount of goods in the country? 5. How would the rate of interest be affected if the amount of money were doubled at once? <blockquote> Note.—In an interesting article on "Prestige Value," by L. M. Keasbey, in Quarterly Journal of Economics, May, 1903, has been developed one phase of the thought in Sec. II, proposition 2. The very active recent discussion of "the interest problem" has done much to clarify economic theory; but almost the entire recent literature of the subject (as seen from our point of view) is based on a defective concept of capital. See in Quarterly Journal of Economics, Vol. XVII, pp. 163-180 (November, 1902), article entitled "The 'Roundabout Process' in the Interest Theory," the author's criticism[Pg 577] of Böhm-Bawerk's Positive Theory. All the recent "marginal productivity" interest theories are at fault, we venture to say, in trying to derive income from capital instead of deriving the amount of capital from rent. </blockquote> <h4>Chapter 18. Relatively Fixed and Relatively Increasable Forms of Capital</h4> 1. Why not raise seals in California and fruit in Alaska? 2. Has the rainfall any relation to the density of population? 3. Has the isothermal line any relation to the number of millionaires? 4. What physical reasons account for the greatness of ancient Egypt, of Venice, of Holland, of England, of the United States? 5. Is all land useful? Is all land wealth? 6 Is there a different term for land that is wealth and land that is not? 7. Are there different economic terms for hewn and unhewn blocks of stone? What makes the difference? <blockquote> Note.—A meritorious though fragmentary essay to rethink the old conception of natural resources and to express them in new terms, is Natural Economy, by A. H. Gibson, 1901, reviewed by the writer in Journal of Political Economy, March, 1902. </blockquote> <h4> Chapter 19. Saving and Production as Affected by the Rate of Interest</h4> 1. The savings of the people of the United States are nearly a billion dollars a year. What and where are they? 2. What are the main social conditions necessary to saving? 3. What influence has commercial morality on saving? 4. Do savings-banks and insurance companies stimulate saving, or do they exist because of a disposition to save? 5. What influence has the formation of joint-stock companies on saving? 6. Will you save more or less if the rate of interest falls? 7. Distinguish between hoarding and saving. 8. A woman cut the wool from a sheep's back, spun and wove it by old hand-methods, and within twenty-four hours wore the dress made of it. Is more or less time needed in production with the best machinery and processes? 9. Ricardo said that on account of the cheapness of food in America there was less temptation to employ machines than in England, where food was high. What is the fact about this temptation in America? [Pg 578] <blockquote> Note.—The older abstinence theory of interest is given by F. A. Walker, Political Economy, Secs. 87-93. A noteworthy advance was the able article, by T. N. Carver, in Quarterly Journal of Economics, Vol. VIII, p. 40 (1893), "The Place of Abstinence in the Theory of Interest." A number of writers have written (fallaciously, in our judgment) on the "fallacy of saving," arguing that the capital-market easily becomes glutted; the contrary view is well presented by Cassel, The Nature and Necessity of Interest (1903), pp. 96-157, in chapters on what he calls "The Demand for Waiting," and "The Supply of Waiting." </blockquote> <h4>Chapter 20. Labor and Classes of Laborers</h4> 1. Is dancing labor? Is the dancing of a dancing-master labor? If he would rather dance than eat, is it labor? 2. Enumerate some kinds of labor necessary to produce bread. 3. "Washing of clothes is unproductive labor; therefore as little of it should be done as possible." Criticize the argument. 4. Would you say that differences in ability at manual trades are due to practice or to native talent? If to both, in what proportion? 5. Do sons usually follow the father's trade? Is it more or less common than formerly for them to do so? 6. Do you know from personal observation whether a Mexican, a German, or an American, is the best workman? 7. What important personal traits are needed to make a man an efficient market-gardener? 8. Which would be of the greatest economic advantage, to increase by 50% the intelligence, the physical strength, or the integrity of the workers of this country? <h4>Chapter 21. The Supply of Labor</h4> 1. Has the principle of the survival of the fittest any influence on the population of America? 2. What limits the number of wild rabbits? Of tame pigeons? Do the same influences act in the case of men? 3. What other influences affect population? 4. What relation is there between population and mountains, temperature and water-supply? 5. It has been said that the supply of labor is fixed by biologic laws. Is it therefore not subject to economic influences? 6. What application do you think the principle of diminishing returns has to the question of population? 7. What is meant by the standard of life? <blockquote> Note.—The subject of population generally is discussed under the name of "The Malthusian Doctrine" and much space is given to it[Pg 579] in the texts. So much useless controversy has been occasioned by the ambiguities of Malthus's argument that it seemed best not to introduce this difficulty into the text. The subject is discussed with broadest view by A. T. Hadley, Economics, Secs. 47-60. The writer attempted to make a judicial study of Malthus and his work in Versuch einer Bevölkerungslehre, Jena, 1894, and sought to put the discussion on higher ground in an article in the Yale Review, August, 1898, "The Essay of Malthus, a Centennial Review." </blockquote> <h4>Chapter 22. Conditions for Efficient Labor</h4> 1. Is hunger the cause of food? 2. Is there any relation between a republican form of government and the growth of manufactures. 3. What are the necessary conditions to the building of a house: (a) natural forces; (b) changes in material things; (c) human activities; (d) social conditions? 4. Is the public school system an economic factor? Where among the four preceding heads would you classify it? 5. From an economic standpoint, can we say that robbery really reduces the wealth in existence? 6. When does an industrious man stop working on his own farm, and why? 7. With a given number of workers, what may be causes of differences in the labor-supply? 8. Would men work better if they ate more? 9. What moral agencies increase the efficiency of labor? 10. Is there a strong selfish motive for men to increase their efficiency in most industries? How effective is it? 11. What effect has republican government on the efficiency of labor? 12. Why is the variety of occupations greater or less than formerly? What is influencing the change? 13. What cases have you seen where great skill came from practice? 14. What gain is it for men to work together instead of singly? 15. With increasing division of labor is there greater or less opportunity for the payment of laborers according to the piece-wage plan? 16. Discuss the following statement: Under the piece-work system the foreman looks out for the quality and the operative for the quantity of the work; under the time-wage system the foreman looks out for the quantity and the laborer for the quality of the work. 17. What remedy has the foreman for an inefficient laborer working under the time-wage system? 18. Is time- or piece-work best adapted to the following kinds of[Pg 580] laborers: coal-miners, coopers, farm-hands, printers, engravers, shoe-factory hands, railroad brakemen, telegraph operators? <h4>Chapter 23. The Law of Wages</h4> 1. What is the effect of free common schools on the comparative wages of skilled and of unskilled laborers? 2. What would be the effect of technical and industrial schools on the wages of artisans? 3. If a man is not content with $2 a day, why does he not do work that is paid $5 a day? 4. What is the effect on wages of differences in the danger, pleasurableness, social distinction, expense of preparation, of occupation? 5. If women are paid less than men for the same work, why are men employed at all? 6. What is the difference between these definitions: wages is the share of labor; wages is the payment by one man to another for his services? 7. If the supply of labor of any class were to be decreased 10% would wages rise in like proportion? 8. Since under the piece-work system a man is paid only for what he does, is there any reason for discharging a workman employed under this plan whose efficiency falls below the average? <h4>Chapter 24. The Relation of Labor to Value</h4> 1. May a singer of songs or a mixer of drinks be called a productive laborer? 2. Are fine products high in price because wages are high, or vice versa? 3. Is common, unskilled labor "scarce" (in any reasonable sense of the word) in China? in the United States? 4. Can a manufacturer pay the same to laborers if the product will be marketed next year, as he can if it is to be marketed to-morrow? If so, how is the value of the labor adjusted to its product? <blockquote> Note.—An able discussion of the effect of discounting in the sale of labor in the market is given by Böhm-Bawerk, Positive Theory of Capital, pp. 313-318 et seq.; see also Wieser, Natural Value, numerous passages. The changes in industrial organization are treated with historic insight by Hadley, Economics, Secs. 341-354. F. W. Taussig's Wages and Capital (1896) gives a sympathetic interpretation of the wage-fund doctrine; the work is especially valuable for its excellent review of the history of the subject and for the chapters analyzing the modern industrial process. </blockquote> <h4>[Pg 581]</h4> <h4>Chapter 25. The Wage System and its Results</h4> 1. Why has machinery changed the relations of workman to master? 2. In what ways does labor get paid for its share, and who pays it? 3. Will a day's work of a common laborer buy more to-day than it would a half century ago? Why? 4. Are the opportunities for workmen to rise to the rank of masters as great as formerly? 5. Are wages independent of the other kinds of income? <h4>Chapter 26. Machinery and Labor</h4> 1. Do you think that the amount of work is reduced by new machinery? Point out ambiguities in the question. 2. What is the difference to the workman whether he becomes more efficient or works with a better machine? 3. Is the work of any kind fixed in quantity? What would cause it to change? 4. What kinds of laborers were thrown out of employment by the invention of the type-writer? What kinds of labor found employment as a result of its invention? Was the net result a gain or a loss of employment? 5. Answer the same questions with regard to the invention of railroads, mowing-, binding-, and threshing-machines; or the new roller-process of flour milling. 6. Can you describe from your own experience any example of readjustment of labor due to introduction of new machinery? <h4>Chapter 27. Trade-unions</h4> 1. Does it make any difference in the permanence of an increase of wages brought about by a strike, whether the employer is one of the more successful or one of the less successful in that business? 2. Is there any similarity between the methods of trade-unions and the etiquette of the medical and the legal professions? 3. If you were an officer of a trade-union, would you begin a strike when trade was good or when it was poor? 4. If you can do more work in two hours than in one, can you do more continuously in sixteen consecutive hours than in eight? 5. What determines the maximum study-time for the earnest student? 6. If as much is produced in a general eight-hour day, who benefits? 7. If production is reduced one fourth by shorter hours, is "work made" to that degree for the unemployed? [Pg 582] 8. If all day-laborers should agree to work with one hand tied behind them, would their wages go up or down? Would it be good or bad for the whole class of laborers? <h4>Chapter 28. Production and the Combination of the Factors</h4> 1. What is production? Does the economic idea of production conflict with the physical principle that matter cannot be created? 2. Is it production to buy fifty cents' worth of yarn and knit a pair of socks worth twenty-five cents if you enjoy doing it? If you do not enjoy it? 3. Give examples of factors of production. 4. What factors of production must be combined by a savage to produce a canoe? 5. Outline the combination of factors that has produced New York bread made from Minnesota wheat. 6. What is the largest manufacturing establishment in your home town? Would a number of smaller establishments of the same sort and with the same aggregate capacity succeed as well? Why? 7. Have you observed the growth of any local industry from a small beginning to large proportions? If so, how do you account for it? 8. Would you prefer to begin your business career with a large company or with a small merchant? Why? 9. Through what historic stages has production passed? 10. Give examples of the industrial advantages of America as compared with Europe. <h4>Chapter 29. Business Organization and the Enterpriser's Function</h4> 1. What is the relative importance of organization in sawing wood, building houses, running a small store, or a large factory? 2. Which wins the battle: the general, the soldiers, or the armament? 3. What determines whether a crop is poor or good: the ground, the weather, or the farmer? 4. Why do some businesses give increasing returns as they grow? 5. One has said: "The natural differences in powers and aptitudes are certainly not greater than are natural differences in stature." Is this sound in an economic sense? 6. Who runs the business in a large store owned by a large family? Who has the risk? 7. Who is the enterpriser in a stock company where there is a[Pg 583] superintendent elected by a board of directors, themselves elected by shareholders with one vote per share? 8. Who is the employer in a coöperative cooper-shop whose superintendent is elected by the workmen? 9. Has "a good chance in life" much to do with success? 10. What are the chief elements of business success? 11. Is modern business competition a competition of men only? <h4>Chapter 30. Cost of Production</h4> 1. What is the cost of a good you have made entirely with your own labor? 2. What is the difference to the employer between rent, interest, and wages as items of cost? 3. Is there anything in common between "cost, the onerous exertion necessary to get goods," and cost as the money expenses of production? 4. Why does a merchant engage in one business rather than in another? 5. When prices fall, what determines which factories shall close, and which workmen shall be discharged? 6. Does the value of a product conform to the capital that has been put into it. <blockquote> Note.—For a fuller treatment of the more recent view of the subject, see Smart, pp. 64-83; Wieser, Natural Value, pp. 171-214; Böhm-Bawerk, Positive Theory of Capital, pp. 179-189, 223-234. The defects of such revisions as that attempted by Alfred Marshall are pointed out in Quarterly Journal of Economics, Vol. XV, pp. 432-452, article "The Passing of the Old Rent Concept." </blockquote> <h4>Chapter 31. The Law of Profits</h4> 1. Business being poor, one employer is making good profits; how different will be the wages he pays from those paid by the unsuccessful employer? 2. How many of the men you know at the head of large businesses started life poor? 3. Was the rise in fortune due most often to chance, inheritance of wealth, or exceptional ability and power of work? 4. How should the income of an inventor be classified, as wages or profits? 5. Are the profits of the employer deducted from wages? Are the high wages of skilled labor deducted from the wages of unskilled? [Pg 584] <h4>Chapter 32. Profit-sharing, Producers' and Consumers' Coöperation</h4> 1. Describe any case of profit-sharing you may have seen in operation. 2. Is advertising of any social service or is its sole purpose to divert trade from one merchant to another? 3. In what ways are retail stores wasteful in their expenditures? Can this be avoided? 4. If you have seen a coöperative store in operation tell what was its success. 5. Are you willing to pay more for goods in order to have a choice of stores? <h4>Chapter 33. Monopoly Profits</h4> 1. How is the blacksmith free to compete with the physician and how not? In what sense have we assumed that competition exists? 2. Is there competition between the owner of good land and the owner of poor land? 3. Has the owner of a poor gold-mine a monopoly? Has the owner of a rich mine a monopoly? 4. Does the ownership of land give a monopoly? The ownership of a horse? 5. In what sense is a street-railway a monopoly? What is the value of its franchise? 6. Why does the public consent to grant patents or public franchises? 7. If one company controlled all the petroleum in the world, what would it consider in fixing the selling price? 8. Why will railroads issue commutation tickets? <blockquote> Note.—Of the very large recent literature bearing on monopoly and trusts may be mentioned as especially useful: J. B. Clark, Control of Trusts; R. T. Ely, Monopolies and Trusts; J. W. Jenks, The Trust Problem (a summary by the expert for the Industrial Commission); J. E. le Rossignol, Monopolies, Past and Present; Report of the Chicago Conference on Trusts, 1899; Report of the United States Industrial Commission, 19 vols., 1900-2 (a mine of information). </blockquote> <h4>Chapter 34. Growth of Trusts and Combinations</h4> 1. What advantages are there to manufacturers in combination? What to the public? 2. What relation has improved transportation and other means of communication to trusts? 3. Name as many economic monopolies as you can. [Pg 585] 4. What large trusts have recently been formed? 5. Does the public consider the growth of trusts to be good or bad? What do students of the question think of it? <h4>Chapter 35. Effect of Trusts on Prices</h4> 1. Can the large factory always outsell the small one? Why? 2. Why are trusts or selling agreements formed? 3. Describe any agreement of which you know, made between merchants or manufacturers for the purpose of regulating prices. Did prices go up or down as a result? 4. Would it be a good thing for society if a trust made great economies in production, crowded out its smaller competitors, and maintained prices just where they were before, dividing among its shareholders the amounts saved? 5. How would the effects on society be different if prices were reduced by better organization and the prevention of waste? 6. Is it good public policy to allow a trust to undersell its smaller competitor in one district while it keeps up its prices elsewhere? <h4>Chapter 36. Gambling, Speculation, and Promoters' Profits</h4> 1. Do you think that store-keepers fix the price of the produce they buy of the farmers? If so, to what extent? 2. Can brokers fix the price of grain on the market? How, and to what extent? 3. What is speculation? Give examples you have seen. 4. Were they, on the whole, good for the community? 5. Give other examples showing the difference between a gambling-house and an insurance company? 6. Is the immorality of betting based on economic grounds? 7. Ought lotteries to be permitted by law? 8. Ought speculation in mines to be permitted by law? 9. Ought the profits of the farmer from a sudden rise in the value of wheat be confiscated to the public? <blockquote> Note.—The ablest study of the subject is by H. C. Emery, Speculation on the Stock and Produce Exchanges of the United States, in Columbia University Studies in History, Economics, and Public Law, Vol. VII, No. 2, 1896. </blockquote> <h4>Chapter 37. Crises and Industrial Depressions</h4> 1. What is a financial crisis? An industrial depression? 2. Define the expressions "over-production" and "under-consumption." [Pg 586] 3. In a period of depression is there less money than usual in the country? In the banks? 4. If there were twice as much money in the world, would panics take place? 5. Before a financial crisis how are prices, high or low? After a panic? 6. What economic changes occurred in your own community in the panic of 1893-4, or in the years 1903-4? 7. Do people save more in good times or hard times? <h4>Chapter 38. Private Property and Inheritance</h4> 1. If the law permits certain classes to be fleeced without redress, is wealth thereby reduced? 2. What are vested rights? Do they ever stand in the way of progress? Examples. 3. Is it right that the lucky inventor of a popular toy should make $100 a day from it? 4. Is it right that an inventor should by patent laws be able to keep the profits of his business high? 5. Do you know of any father who created more wealth because he could bequeath it to his son? 6. Does the son work as hard when he inherits his father's wealth? 7. What is the effect of private property on saving? 8. If capital is needed in production why is the question of justice raised when its use is paid for? <h4>Chapter 39. Income and Social Service</h4> 1. What is it to earn a living? How many people do it? 2. When is a man poor? 3. Would it be a good thing if the boot-black got a dollar a shine? 4. Does luck have greater influence on business success in an old country or a new one? 5. Ditto in agriculture, mining, commerce, or manufactures? 6. A rare coin and a piece of land sold for the same price one year, and the next year both sold for double the amount. Was there an unearned increment in both cases, and of the same kind? 7. If rewards were equal, what would determine the choice of work? <blockquote> Note.—The most important contributions to the theory of consumption have been made by S. N. Patten in his numerous writings, among them: The Consumption of Wealth (1889); Theory of Dynamic Economics (1892); The Theory of Prosperity (1902). A[Pg 587] number of the ideas are well restated in more simple terms by E. T. Devine in Economics, especially pp. 375-396, and 73-111 (applies to chapter 41). </blockquote> <h4>Chapter 40. Waste and Luxury</h4> 1. Can we determine what luxury is, or give the notion definiteness? 2. Do you feel a sense of injustice when you read of a millionaire's ball if you are not a millionaire? 3. Can you excuse the sense of injustice felt by the hungry man when he sees you wear patent-leather shoes and kid gloves? 4. Under private property, can men complain of the use made by others of their wealth on the ground merely that it was unwise? 5. Is luxury necessary to give employment to labor? 6. Is the spendthrift the best friend of labor? 7. Ought legislation attempt to prevent luxury, or can public opinion affect it? 8. Is smoking high-priced cigars economically justifiable, assuming that the smoker is wealthy and does not injure his health thereby? 9. Wines, balls, pensions are said to be good because they put money into circulation. Criticize. 10. What is the difference between the consumption of wealth and its destruction? 11. In what ways can a piece of iron be consumed, economically speaking? 12. Was the great Chicago fire, which led to the rebuilding of the city, a good thing economically? <h4>Chapter 41. Reaction of Consumption on Production</h4> 1. What are complementary goods? Give some illustrations. 2. Can people live on the future, consuming in advance of production? How is it with the nation in time of war? 3. Does economic theory throw any light on the ethics of miserliness? 4. It is said that the demand of the day-laborer for cheap white shirts has reduced the wages of the women who make them. Criticize. 5. What effect on wealth would a change of climate have, whereby the consumption of coal would be decreased? 6. If manna fell from heaven daily in a climate where clothing and shelter were unnecessary, what effect on wealth would result? <h4>Chapter 42. Distribution of the Social Income</h4> 1. What different ideas does the expression "distribution of wealth" suggest to you? 2. What different methods of obtaining an income have you noted among the men you know? [Pg 588] 3. How can a yard of cloth be said to be distributed to the labor and capital producing it? 4. If two men of equal skill go fishing together, how would they find a rule for dividing the catch? 5. If one is more skilful or stronger, or owns the boat and the tackle, how would it affect the division? Would any rule be attainable? 6. If socialism reduced the total product, would it still be desirable because of the better distribution? 7. What classes of thinkers are most inclined to take up socialism? (Classes considered socially, industrially, as to race, as to economic and historical training.) <h4>Chapter 43. Survey of the Theory of Value</h4> 1. Mention any cases you can think of where merely changing the place of things added to their value; or changing their form; or where the mere lapse of time added to the value of the thing. 2. What effect on wages and interest does the bringing in of foreign capital have? 3. If, through greater efficiency of labor, wealth increases, which share benefits? 4. What would be the effect on wages, interest, and land rent of a sudden addition of rich land to the country? 5. What would be the effect on interest, land rent, and wages of a great increase of national saving? 6. What concern have the poor in the abundance of capital? The rich in the abundance of labor? 7. Walker says that the laborer gets what is left after the other shares are deducted according to their law; wages are the residual claimant. Are the other shares independent of wages? 8. Can wage-earners be shut out from all advantages in the land of the country? 9. Are high wages and high interest seen to go together? Give such examples as you think of. 10. Do improvements in agriculture increase or decrease the rent of land? <h4>Chapter 44. Free Competition and State Action</h4> 1. What is economic freedom? How different from political freedom? 2. Does the presence of a policeman increase or diminish competition among men? [Pg 589] 3. Are most positive laws intended to hinder competition or make it freer? 4. In what ways does competition reduce the total product? 5. Is custom a better regulator of economic action than competition? 6. Criticize the doctrine of economic harmony, giving examples. <h4>Chapter 45. Use, Coinage, and Value of Money</h4> 1. If gold were to become as plentiful as iron, would it be worth more or less than iron? 2. Some say Providence has indicated gold and silver as the materials for money. How has this been done? 3. Why does nearly all the gold produced in California leave the state? What keeps any of it there? 4. Who makes coins? Would jewelers make better ones? 5. When gold comes out of the mine is the gain to the community greater or less than when the same value of grain is harvested? 6. Does gold cost the day-laborer as much in California as in New York? 7. What are the principal things besides money uses that cause a demand for gold and silver? 8. The mint price of an ounce of gold, .900 fine, is alike at San Francisco and Philadelphia, $18.604. Why is gold ever shipped from California to New York? 9. Give examples of things that increase the demand for money. 10. Note any habits of friends that result in their carrying more or less money than others of the same income. 11. What determines the amount of money needed by different persons, towns, states, and nations? 12. When goods are exchanged for money or money for goods, what is the gain? 13. On an isolated island would it make any difference as to the value of money if there were but one gold-mine or several competing ones, supposing that the output were the same? <h4>Chapter 46. Token Coinage and Government Paper Money</h4> 1. Define legal-tender as applied to money. What is meant by fiat money? 2. Show the difference between convertible and inconvertible money. 3. The government of the island of Guernsey having no money, issued paper-notes to pay for the building of a market. They circulated and were gradually taken up as the market earned its cost, during ten years. When they were all redeemed and burned, the[Pg 590] island had the market free of cost. Explain how this could be done. (This is from Sumner's Problems in Political Economy.) <h4>Chapter 47. The Standard of Deferred Payments</h4> 1. If every piece of money should miraculously be doubled in a night, whose interests would be affected? 2. Is the fact of one man's gain and another man's loss by chance of any economic or political importance? 3. What gives rise to the belief sometimes held that money is an invariable standard of value? 4. Is there anything in the nature of mining that keeps the ratio of the supply of gold and silver nearly uniform? 5. Is the value of gold and silver due to the action of government? 6. Does the principle of the substitution of goods have any bearing on the value of metals under bimetallism? 7. Note carefully, and indicate the different meanings of bimetallism; of demonetization. 8. What is the extent of the influence one nation can have on the ratio of the two precious metals? 9. If money wages are higher and general prices are lower, how is the laborer affected? Is this due to the appreciation of money? 10. Can you get a kind of money that will make the things that are sold, dearer, and the things that are bought, cheaper? 11. What are the main reasons given for the ratio of 16 to 1? <h4>Chapter 48. Banking and Credit</h4> 1. What does a bank do for a community? 2. What are the sources of income to a bank? 3. Can a bank that issues its own notes afford to lend cheaper than the ordinary capitalist? 4. What is discount and deposit? 5. Do all banks issue notes? Why? 6. What is the function of a clearing-house? 7. If there are twenty banks in a town and no clearing-house, how many collections would have to be made by all the banks daily assuming that each day depositors of each bank receive checks on the other nineteen banks? 8. Does a clearing-house enable the banks that belong to it to get along with a smaller cash reserve? 9. What element of security is furnished by clearing-houses during panics? [Pg 591] <h4>Chapter 49. Taxation in its Relation to Value</h4> 1. Does taxation ever infringe on the right of private property? 2. What is it a citizen gets in return for his taxes? 3. Is there any relation between the taxes paid and the benefits secured from government? 4. A recent newspaper item says: "This is the year real estate is assessed. Turn the cow loose in the front yard, tear down the fence, make things look generally dilapidated, for it will be money in your pocket." What does this indicate regarding taxation? 5. The parts of an estate divided into fifteen equal shares by expert real estate agents were soon after assessed variously from $900 to $2850 for purposes of taxation. What does this indicate? (From Sumner's Problems.) 6. In what ways may we understand the proposition that taxation should be proportioned to ability? 7. Can taxation be used to secure some of the profits of large corporations? <h4>Chapter 50. The General Theory of International Trade</h4> 1. Is it bad policy to let the people of Palo Alto spend money in San Francisco for things that could be produced at home? 2. Pensions are defended as putting money in circulation. Is this like any tariff arguments you have heard? 3. Is it bad policy for California to buy New England manufactures? 4. If there were no legal bar to a tariff between the states, would a tariff probably be imposed? If so, would it be a wise measure? 5. A nation with n dollars in circulation has to pay a war indemnity of n dollars to another country having the same circulation, how much money will each then have, and what will be the effect on prices, foreign trade, rate of exchange? (From Davenport.) 6. If large shipments of wheat are made to England, will bills of exchange on London be higher or lower in New York? 7. What effect on exchange has the holding of American bonds abroad? <h4>Chapter 51. The Protective Tariff</h4> 1. If all trade is exchange do not the members of a trust reduce their income when they raise the price of their products by artificial agreement? 2. Is there any likeness between trade-unions and tariffs? Between tariffs and factory legislation? [Pg 592] 3. Can it be of advantage to trade freely with one nation if general free trade is bad? 4. Who gained when Hawaiian sugar (before annexation) was admitted free of duty, while other sugar was taxed? 5. If it would pay us to admit goods free, may we be justified in taxing them to force concessions from the other country? 6. What have you read this year about reciprocity? <h4>Chapter 52. Other Protective Social and Labor Legislation</h4> 1. Is granting patents an interference with trade similar to tariffs? 2. What reasons are given in justification of laws closing barbershops on Sundays? 3. Can a person owning a lot on a residence street of a city erect a glue-factory on it? 4. What have you noted as to the benefits or hardships of restricting child labor in factories? 5. Are men less able to bargain for the loan of money than for other things? 6. Can law fix the rate of interest at any point desired? If so, then why not at zero; if not, then why fix any maximum rate of interest? 7. Are interest rates changing in America? 8. In what ways is the rate of interest affected by the rise or fall of the value of money? <h4>Chapter 53. Public Ownership of Industry</h4> 1. What are municipal franchises? Where are they? 2. What kinds of municipal industries have you seen in operation? How successful were they? 3. What are the main arguments for and against the city ownership and control of gas and waterworks? 4. What troubles arise from city politics? 5. Name the industries that are owned and controlled by towns and cities of which you have a personal knowledge. 6. Which of them are most satisfactory in your judgment? Which the least so? 7. What is the public sentiment in your home community as to the ownership of industries by the town or city? 8. What forms of state activity favor survival of unfit men and bad traits of character? What forms help the fittest to survive? <blockquote> Note.—For exhaustive and well-arranged references on all aspects of municipal control and municipal ownership see R. C. Brooks,[Pg 593] Bibliography of Municipal Problems, pp. 157-169, in Municipal Affairs, Vol. V, No. 1 (March, 1901). </blockquote> <h4>Chapter 54. Railroads and Industry</h4> 1. Why is transportation a greater problem in the United States than in Europe? 2. Show in what way natural waterways have determined the location of leading cities in America. 3. Give examples of cities whose growth has been caused by railroads. 4. What interests favor and what oppose the building of an isthmian canal? 5. Mention in order of economic importance four things that would happen if all American railroads were suddenly to be destroyed. 6. What cases have you seen where the railways impose unjustly on the public? 7. Give instances you have seen or heard of where two shippers paid different rates for the same service. 8. Why should preachers get half-fare rates? 9. If your neighbor rides on a pass and you pay your fare, are you helping to pay for his ride? 10. Do you know any large cities that are more favorable shipping-points than neighboring towns? Give reasons. <h4>Chapter 55. The Public Nature of Railroads</h4> 1. What legal rights do the builders of a railroad have that are not enjoyed by all citizens? 2. Can you see any clear distinction between the public nature of a railroad and of a horse and carriage? 3. What harm can there be in the acceptance of passes by judges, legislators, and other public officials? 4. Ought the law prohibit the sale of tickets by "scalpers"? 5. Who has the greater political power, the president of the Pennsylvania Railroad, or the governor of that state? <h4>Chapter 56. Public Policy as to Control of Industry</h4> 1. What effect would it have if the state should make laborers work for unsuccessful employers at lower wages than for successful ones? 2. Or should reduce rents for the less capable merchants and manufacturers? [Pg 594] 3. Is there any rule for determining the limits of state interference? 4. Why does the question of the control of the railways in the interest of the public present especial difficulties in America? <h4>Chapter 57. Future Trend of Values</h4> 1. Make a list of the things discussed in this course that tend toward improving the average condition of men. 2. Make a list of those that tend toward worse conditions for the mass of men. 3. State what kinds of material agents will probably increase in value relative to other kinds, giving reasons. 4. State what to your mind are three important economic problems whose answer is most uncertain, giving reasons. 5. If you had the power, what single public measure that you believe would be practicable and effective would you put on the statute books, in order to make a juster division of the social income? Give reasons. <blockquote> Note.—On the subject of this chapter, see Devine, Economics, ch. XVII (disposition of the social surplus); Jenks, The Trust Problem, pp. 190-211; Marshall, Bk. VI, chs. XI and XII. </blockquote> <hr class="chap" /> [Pg 595] <h2>INDEX</h2> [Pg 597] Ability, variety, 177-83; physical differences, 178; intelligence, 179; training, 180; moral qualities, 180; inequality, 181; scarcity, 182; and occupation, 203; grades, 212; types, 264; selection, 270-2; sterilization, 561-2 Abstinence, definition, kinds, 163; see Saving Acquisition vs. social production, 259 Affection in personal distribution, 402 Agricultural classes, opposition to commercial, 113 Agricultural stage, 261 Agriculture, machinery in, 238 Alternative uses, relation to costs, 277 America, farms let on shares, 59; land changes hands, 60; exhaustion of the lands, 82; use of interchangeable parts, 85; destruction of forests, 87; coal deposits, 88-9; improvement of horses, 91; watch-factory, 92; price of horses in Boer War, 95; discovery of mines, 102; varied industrial conditions, 108; use of money, 109; expression of wealth, 114; land became part of world's supply, 155; standard of living, 192; size of families, 193; food supply, 194; increase of population, 194; army rations, 196; standard of food, 196; caste, 199; democracy and efficiency, 200; wage system dominant, 227; wages, 232; changing occupations, 234; favorable effect of machinery, 242; difference of race among workers, 247; industrial superiority, 262; Oriental competition, 263; fortunes, 271; profit-sharing, 283; producers' coöperation, 296; consumers' coöperation, 300; industrial stage, 313; crises, 352; gifts by wealthy men, 368; law of inheritance, 373; fortunes, 375; dress of workers, 397; colonial policy toward, 425, 426; custom, 426; gold standard, 432; silver supplies from, 441; gold supplies, 442; paper money, 448-9; effect of silver supplies from, 454, 457; effect of gold output, 457; banks, 468-70; discussion of taxation, 479; prices in California, 483; in different sections, 484; protective tariff, 491-503; growth of manufactures, 497; factory laws, 509-12; state enterprise, 514-17; early settlement on the coast, 526; trade in War of 1812, 526; canals, 528; railroad building, 529; aid to railroads, 535 American Federation of Labor, 245; claims of, 254 American Revolution, economic issues in, 8 Animal economy, provision for wants, 40 Animals, problem of numbers, 185-6 Antisocial profits, 289; of monopoly, 311; from speculation, 377; antisocial use of ability, 378 Appropriation stage, 261 Ashley, W. J., 575 Assignats, 448 Attribution of product, 176 Austrian economists, 570 Authoritative distribution, 406-8; [Pg 598]use of, 410-11 Balance of trade, international, 486-7; so-called favorable, 493 Bank-notes, and paper money compared, 447; typical, 465-8; in United States, 469 Banks, and credit, 462-70; functions, 462-5; in United States, 468-70 Barter, definition, 31; under simple conditions, 32-5; difficulty of, 99; decline, 108-14; economy in Middle Ages, 110 Bequest, limitation of right, 368 Bets, see Gambling Bimetallism, international, 457-9; national, 459-61 Biologic doctrine of population, 186, 187 Biology, shows inequality of talents, 181 Birth-rate, of animals, 187; decreasing American, 193, 561 Böhm-Bawerk, E. von, 570, 571, 572, 577, 580, 583 Boycott, 251 Brooks, R. C., 593 Building laws, 505 Bullock, C. J., 568 Buyers, bidding, 34; margin of advantage, 35 Canadian bank-notes, 468, 470 Canals, as carriers, 528-9 Cannan, Edwin, 571, 573 Capital, origin of term, 112; concept in modern business, 114-7; definition, 115; not identical with money, 115; purpose of borrowing, 116; sum, expressed in years' purchase, 121; sum of expected rents, 122; value not primary, 123; stock, 127; value of stocks fluctuate, 134; time-value and, 142; fixed and increasable forms, 152-3; use by enterprisers, 285; insured by enterprisers, 286; in coöperation, 295; large, 312; amount in factories, 315; value affected by protection, 501 Capitalistic, age, 114, 117; monopoly, 306 Capitalization, of all forms of rent, 118-30; rent-charges as an example of, 118; of land rents, 124; of uniform or varying series of rents, 125-6; increasing role, 127; of any continuing income, 128; of franchises, 129; of corporate incomes, 130; rate, 147; and interest, 168; influenced by taxation, 475 Capitalization, theory of crises, 353-4 Carlyle, T., on wage, 229 Carnegie, Andrew, 268, 270, 372, 377; economies of gifts to libraries, 387, 390 Carver, T. N., 578 Cassel, 578 Caste, and efficiency, 199 Chance, unavoidable, 333; average in industry, 334; artificial, 334; legitimate and illegitimate, 335 Character, affected by expenditure, 398; highest point of production, 400; unity of choice determining, 401 Charitable distribution, 405-6 Charity, public, 507 Cheating and gambling, 335 Child-labor legislation, 509 Choice, of goods, harmony in, 400 Cities, wealth of, contrasted with feudal estates, 111, 113; growth, 504; large, on waterways, 528 City ownership, 514-5; see Public ownership Clark, J. B., 398; theory of profits and wages, 418, 573, 575, 584 Clews, Henry, on Wall Street finance, 378 Climate, and income, 48 Closed shop, 249-50 Clothing and efficiency, 196; effect of choice of, 396 Coal, use and exhaustion, 88, 558; strike of 1902, 251, 252 Coinage, 433-6; definition, 433; free or gratuitous, 434-6; token, 443-7; free and gratuitous, 443 Coins, light-weight, 443-7 Collective bargaining, 248 Collective enjoyment, as a mode of distribution, 408 [Pg 599]Collectivism, 552 Combination and wages, 253-6; of the factors, 260; opposes competition, 429; of capital, see Trusts Comforts, relative meaning, 11; and luxury, 388 Commercial monopoly, 306 Commercial paper, discounting of, 132 Commissions, to control railroads; 541-3; to control corporations, 545 Commodity-money theory, 450 Common denominator of values, see Money Commons, J. R., 573 Communism, among Germanic tribes, questioned, 365 Comparative costs, doctrine of, 482-3 Competition, definition, 33; one-sided, 33; present limitations on, 228; the worker in, 229; reduced by trade-unions, 248-50; costly in mercantile business, 298; free, not equality of efficiency, 303; alleged cause of trusts, 322; persistence of, 331; and state action, 422-30; and custom, 422-5; economic harmony through, 425-8; social limiting of, 428-30; modern restrictions, 504 Competitive distribution, 409-10 Competitive price, forces governing, 308 Complementary agents, and value, 78; intensive use of, 78; labor and wealth, 175 Compulsory distribution, 404 Conquest theory of property, 363 Consolidation of railroads, 539-40 Consumers, determining costs, 280; gain from trusts, 325 Consumers', choice influences value, 392; choice influences wages, 394; coöperation, 298-301; League, 394 Consumption, reaction upon production, 392-401; definition of economic, 392; reaction upon material agents, 392-5; reaction upon efficiency of workers, 395-410; effects on consumer, 398; as a conventional division of political economy, 419 Consumption, tax on, 475 Consumption goods, definition, 20; immediately enjoyable, 21; a part of income, 41; differential advantages, 73-5; diagram, grades by quality, 75; proposed uses, 161; saved, 166; see Goods Continental notes, 448 Contracting out, forbidden, 512 Contract interest, see Interest Contract rent, see Rent Contract wages, see Wages Coöperation, producers', 295-7; consumers', 298-301 Corporation, securities, 127-8; public-service, 129; increase of, 133 Cost, involved in improvements, 90; of operation, 168; in larger production, 319; of government, 474; see Comparative costs Cost of production, 273-81; from the enterpriser's point of view, 273-6; psychic, 273; alternative, 274; money, 274; and price 276; from the economist's standpoint, 276-81, 422 Courts and industrial legislation, 543, 550-1 Credit, sales involve interest, 134; and banking, 462-70 Crises and industrial depressions, 345-55; caused by sudden tariff changes, 502-3 Crusoe economy, subjective valuations, 30; time-value, 131, 140; saving, 166; economic wages, 208; present and future goods, 219-20; need of judgment, 265 Cultivation, margin of, 64; see Utilization Custom, and rents, 56; and efficiency, 199, 200; affecting distribution, 409; and competition, 422-5, 429 Daniels, Winthrop M., 571 [Pg 600]Davenport, Herbert J., 567 Death-rate, decreasing, 192 Debts, public, as investments, 133 Deferred payments, standard of, 453-61; definition, 453; ideals for a standard, 455-7 Demand, definition, 27; social aspect of choice, 28; law of, 28; curve, 29; elasticity, 29; reciprocal, becomes exchange, 30; curve, diagram, 35 Democracy, and efficiency, 199; effect on race progress, 561, 563 Deposit and discount, 462 Depreciation and rent, 85-7 Desire, see Wants Destruction, and rent, of wealth, 87-9; accidental, of wealth, 381-2; intentional, 382-3 Devine, Edward T., 587, 594 Dewey, Davis R., 568 Differential advantages, in consumption goods, 73-5; in indirect goods, 75-80 Diminishing returns, law, 61-72; definition, 61; of all agents, 62; technical, 62; economic, 63; other meanings of term, 66-9; general application to space relations, 67-8; confused with large production, 68; technical, 68; historical, 68; development of the concept, 69-72; applies to all wealth, 70; and population, 184; and productivity of labor, 215; the broadest principle of value, 420 Diminishing utility, law, 22; diagram, 24; relation to diminishing returns, 71 Directors, of railroads, obligations of, 539 Discount, commercial, 132, 135 Discovery enlarges natural resources, 156 Discrimination in rates, by monopoly, 310; in railroad rates, 530-3 Distribution, personal and functional, 359; impersonal, 360; personal, nature of, 402-3; definition, 402; of the social income, 402-11; methods of, 404-11; as a conventional division of political economy, 419 Dividends, manipulation of, 130 Division of labor, 201-4; definition, 201; kinds, 201; advantages, 202; calls for directive ability, 264; growth of territorial, 480-2 Dollar, meaning of, 435 Drink, effect of, 396 Durable agents, see Goods Durableness of rented agents, 55 Economic goods, definition of, 19; see Goods Economic harmony, through competition, 425-8; definition, 427 Economic law, nature of, 206 Economic monopoly, 306 Economic motives, see Wants Economic production, 258; see Production Economic rent, see Rent Economic wages, see Wages Economics, nature and purpose 3-8; definition, 3, 4; subject matter, 4; place among social sciences, 5, 6; as a science, 7; synonym for political economy, 7; democratic in aim, 8; importance, 8; aim of study, 412; a part only of social science, 413; central point of, 413; redefined, 555; relation to practical life, 555 Economy, involves choice, 27; the barter, 108; the money, 108-14 Education, free public, 507 Efficiency, talent, and training as factors in, 180; resultant of many qualities, 181; of labor, 195-204; equality of, not essential to competition, 423; see Ability Ely, Richard T., 568, 584 Emery, Henry C., 585 Employer, adjusts labor to interest rate, 220; see Enterpriser Employment, no lack of, 183 Energy, sources of, and income, 50 Engels, Frederick, 416 England, idea of rent in, 59; long leases, 59; food supply during Napoleonic wars, 69; coal deposits, 89; wages, 232; [Pg 601]changes in 18th century, 237; loans, 240; abnormal effect of machinery, 241; coöperation, 296, 299; use of term monopoly, 304; cotton crisis, 345; crises, 348; endowments limited, 368; grants to royal families, 373; gold standard, 432; prices in Napoleonic wars, 442; bank restriction act, 448-9; balance of imports, 493; discussion of protection, 496 Enjoyable goods, see Consumption goods Enterprise, income, and social service, 376-7 Enterpriser, function of, 265-72; qualities of, 267-70; selection of, 270-2; his task, 273-5; his costs, 275; medium for consumers' estimates, 280; profits of, 283; origin of term, 284; his services reviewed, 285-8; his risk, 287; intermediary in industry, 287; lacking in coöperation, 297; relation to profit-sharing and coöperation, 300; as risk-taker, 338 Environment, betterment, 92, 162 Ethics, definition, 6; and economics of time-value, 144; of consumption, 395, 398, 401; of railroad problem, 532, 539; see Morality Europe, industrial methods of, 262 Exchange, in a market, 30-8; and demand, 30, 31; advantage, 31; isolated, 32; of present and future goods, 145-9; as a conventional division of political economy, 419; foreign and domestic, of money, 463; international, see International trade Extensive margin of indirect goods, 78-9; see Utilization Extravagance to give employment, 386 Factors, definition, 260; combination of, 260-4; cost of, 274; proportioning of, 275; mutual employment of, 420 Factory, system, growth and effect, 243-4; change in number, 314; limits to growth, 319; legislation, 509-13 Farmers and the tariff, 498-9 Fauna and income, 49 Feeling and utility, 26 Fiat-money theory, 450-1 Fisher, Irving, 571, 575 Fixed charges, 168 Flora and income, 49 Food, and income, 50; and efficiency, 196; effect of, 396; laws and inspection of goods, 506 Foreign exchanges, theory of, 485-8 Forestry, need of, 88 Forests, destruction of, 87-8 Franchises, for public utilities, 96; capitalizing of, 129; granting monopolies, 522 Free competition, see Competition Free coinage, money value, 435 Freedom, economic, 422-30; definition, 422 Free goods, definition, 19; on the margin of utilization, 75 Free-silver movement in America, 459-61 Free trade, see International trade Future rents capitalized, 125 Gambling vs. insurance, 333-8; definition of typical, 334; economic theory of 336 George, Henry, his theory of value, 417 Gibson, A. H., 577 Gilman, N. P., on profit-sharing, 293 Glut theory of crises, 351-2 Gold, fitness as money, 102; as money, 432-3; supply of, 435; discoveries, 442; as a standard, 455, 457; increased output, 461; shipping point, 485 Goods, definition, 19; adjustment to wants, 21; shifting series, 27; substitution, 27; series of, 39; relation of indirect to gratification, 46; enjoyable, 47; durable, 47; unripened, 47; [Pg 602]degrees of durableness, 48; limited number, 52; free and unlimited, 152 Government, a condition of efficient labor, 198; as consumptive good and productive agent, 473; paper money, see Paper money Granger stores, 300 Gratification, defined, 16; and marginal utility, 22; temporary, 39; at different times, 45; time-value of, 141, 143 Greenbacks, 448, 451 Gresham's law, 446-7 Hadley, A. T., 579, 580 Happiness, and wealth, 18; and ostentation, 388; and character, 401 Hildebrand, 575 Historical diminishing returns, 68; confused with technical, 70; see Diminishing returns Home-market argument for protection, 498-9 Honesty, a condition of efficiency, 198; of public officials, 551 Household industry in America, 313 Immigration and protection, 498 Improvements to increase products, 90 Incidence of taxation, 476 Income, as a flow of goods, 39-42; national, social, individual, private, objective, money, 40; gross, net, 41; of consumption goods, 41; present, future, 41; funded, unfunded, 42; as a series of gratifications, 43; psychic, 43-5; all sources of, are productive, 43; affected by objective conditions, 48-52; affected by increasing capital, 152; and social service, 370-80; from property, 370-6; from personal services, 376-80; justice of large, 389-91; distribution of the social, 402-11; and taxation, 474-7; affected by crises, 354-5; personal and impersonal shares, 359-62; personal, 361; complex sources of psychic, 403 Increasable agents, 153-5; scale of increasableness, 158 Increase, of product, 90; of agents, 92, 95; of rent-bearer affects others, 93 Indestructibility imputed to rented agents, 55 Indirect goods, see Goods Individualism, extreme, its ideal of competition, 410 Industrial depressions, definition, 346 Industrial revolution caused by machinery, 237 Industrial stage, 261 Industry, changes in, affecting money, 101; money reacts upon, 102; diversity of condition in America, 108; changes in Europe, 109; growing complexity as interest falls, 168 Infant-industry argument for protection, 497 Inheritance, effect on industry, 12; social effects, 369-73 Insurance, origin, 337; economic theory of, 338; sound conditions in, 338 Integration of industry, 321 Intensive margin, see Utilization Interest, opposition to, in Middle Ages, 112; the modern contract forms for borrowing wealth, 114; contract and rent contract, 116; on loans contrasted with rent-charges, 120; increased use of, 121; permitted by Rome, 122; two modes of approach, 123; "the prevailing rate" and capitalization, 124; on money loans, 131-7; gross and net, 132; in credit sales, 134; concealed, 135; evasion of legal rate, 135; adjustment of business to the rate, 140; rate of contract, 147-8; in sacrifice sale, 149; and time-value, 150; relation to rent, 150; [Pg 603]first use of term, 151; rate divides present and future uses, 159; and future goods, diagram, 160; equalizer of time-values, 162; rate of, and saving, 165; and capitalization, 168; and improvements, 168; rate relates present and future, 220; contract, with enterpriser, 285; conventional conception of, 413; contract, and deferred payments, 454 Intermediate products and costs, 279 Internal revenue, 475 International demand, ratio of, 484-5 International trade, general theory of, 480-90; as a case of exchange, 480-5; definition, 480; equation of international exchange, definition, 483; cash balance of, 486; real benefits of, 488-90 Interstate Commerce Act, discussion of, 537, 542; workings of, 543; importance of, 545 Inventions, affect rent, 85-6; to increase rent-bearers, 91; adds to supply, 156 Investment, and rate of interest, 148; and saving, 165; in stock of corporation, 342 Ireland, tenants' improvements in, 59 Iron law of wages, 216 Jenks, J. W., on trusts, 327, 584, 594 Jevons, W. S., on the coal-supply, 88 Johnson, A. S., 572 Justice in taxation, 477 Just price, 547 Keasbey, L. M., 576 Knights of Labor, 245 Labor, the old distinction between productive and unproductive, 43, 260; and classes of laborers, 173-83; definition, 173; and play, 173; pleasurable, 174; and wealth, 175; direct and indirect services, 176; grades of, 177; scarcity, 182; supply of, 184-194; employer's and social view, 184; conditions for efficient, 195-204; objective physical conditions, 195-8; social conditions, 198-201; division of, 201-4; of different grades, 212; relation to value, 215-25; productivity of, 215; distance from gratification, 219; no unit of, 224; value of product insured by enterpriser, 286; economized in large production, 318; legislation, 509-13 Labor theory of property, 364 Laissez faire, ideal of, 518 Land, rented in Middle Ages, 57, 110; and diminishing returns, 69, 70; and repairs, 81-2; continues to be rented, 113; products of increasing cost, 154; relatively fixed in quantity, 154-5; economic supply of, 155-6; produced, 157; not monopoly, 303 Land grants, to railroads, 535 Large industry, social effects of, 244; in United States, 312-7; advantages of, 318-20; economics of combination, 321 Large production, confused with diminishing returns, 68; sharing of the economics of, 325 Lasalle, Ferdinand, 416 Latin Union, 458 Law, definition, 6; nature of economic, 206; in relation to wealth, 361 Legislation and local interests, 549 Liberty of wage-worker, 231 Lloyd, Henry D., on coöperation, 296 Legal theory of property, 364 Legal-tender, quality of paper money, 447 Loans, short-time, 132, 137; long-time, 133, 138 [Pg 604]Luck and profits, 289 Lump of labor, error of notion, 240 Luxury, relative meaning, 11; 385-91; definition, 385; fallacy of, 386-7 Machinery, need of repairs, 83-4; and natural resources, 91; definition, 236; and labor, 236-44; extent of use, 236-8; age of, 237; effect on wages, 239-44; evils of sudden introduction, 239; economy in large production, 318 Malthus, Robert, on fixity of land, 154; on population, 579 Malthusian doctrine, 578 Manual workers, social service of, 379 Manufactures, fallacious contrast with agriculture, 67; do not fix interest rate, 124-5; machinery in, 283 Marx Karl, 416, 417 Marginal contribution of labor, 213 Marginal labor, 210 Marginal pair, 34; diagram, 35 Marginal utility, definition, 23-7; in barter, 32; in use of goods, 64; of consumption goods, 75; of indirect goods, 78-9; of wages, 211, 213; fixes cost of factors, 277; applied to gambling, 336-7; in insurance, 338; of income, 399; extension of the principle, 420-1 Margin of advantage, 34; diagram, 35 Markets, definition, 36; exchange in, 36-8; widening, 36-7; growth, 263 Market value, built on subjective valuation, 35, 38; of time, 145 Marriage, postponement, 190 Marshall, Alfred, 573, 574, 583, 594 Material resources, relation to efficiency, 195 Material wants as motives, 9 Medium of exchange, see Money Merchants impart utility, 31 Middle Ages, markets, 36; customary rents, 56; renting contract, 57-9; limited use of money, 109-13; rent-charges, 118-22; use of term interest, 151; death-rate, 192; caste, 199; system of labor, 227; industrial changes, 237; marine insurance, 337; no crises, 348; favored classes, 373; sumptuary laws, 390; custom, 424; competition, 425; prices, 441; depreciation of money, 444-5; small political units in, 481; control of industry in, 553 Mill, John Stuart, on fixity of land, 155; on coöperation, 296, 361, 368, 398, 417, 572 Money, as a tool in exchange, 98-107; origin, 98-103; nature of use, 103-5; value, 105-10; as medium of exchange, 99; qualities, 100; materials, 101; an indirect agent, 103; as common denominator, 104; as storehouse of saving, 105; commodities with monetary use, 106; general use of, 107; defined, 107, 431-2; and the concept of capital, 108-17; use in various countries, 109; increasing use in medieval cities, 111; not identical with capital, 115; time-value and, 142; form taken by saving, 167; movement of, before a crisis, 346; use, coinage, and value, 431-42; the precious metals as, 431-6; quantity theory of, 436-42; standard, or primary, 432; fundamental use, 436; average demand for, 437; effect of changes in supply, 454, 457, 459; territorial distribution, 487-8; and foreign trade, 484 Money-changing, 463 Money market, for short-time loans, 137; for productive loans, 139 Money theories of crises, 352-3 Monopoly, of labor, 253; profits, 302-11; nature of, 302-5; definition, 304; kinds of, 305-8; test of, 308; price fixed by, 308-11; meaning, 312; and supply, 324; [Pg 605]profits, social burden, 326; in protective tariff, 500-1; in localized public utilities, 519-21; public gain from, 522; power of the railroad, 530, 533 Moral qualities in industry, 180 Morality, as motive, 13-14; of luxury, 389; opposes competition, 429 Mortgages, nature of security, 133 Motives, economic, 9-14; see Wants Nail trust, 329 Natural economy, 110 Natural law, philosophy of, 426 Natural resources, and income, 49; exhaustion of, 89, 558; adapted and improved, 90; machinery an adaption of, 91; development of, 560; see Land Natural-rights theory of property, 364 National ownership, 516-7; see Public ownership Necessities, relative meaning, 11 Negro, simple wants, 11; caste sentiment regarding, 199; working hours, 201 Normal price, 37 Occupation and talent, 203 Occupation theory of property, 363 Oil trust, 328 Open shop, 249-50 Organization, of workers, need of, 246; required for efficiency, 262; and the enterpriser's function, 265-72 Orthodox economists, 415, 416; predictions of, 557 Over-production theory of crises, 351 Ownership, forms of, 363 Paper money, bank-notes as political, 466; experiments, 447-9; definition, 447; theories of, 450-2 Par of exchange, definition, 485, 486 Pastoral stage, 261 Patten, S. N., 586 Permanent possession, 53; see Capitalization, Property Personal distribution, see Distribution Physiocratic school, 415 Political corruption and industrial legislation, 550 Political economy, see Economics Political money, see Paper money Political monopoly, 305 Political security, and saving, 163; a condition of efficiency, 198 Politics, definition, 6; and the tariff, 503; influence of railroads in, 538 Population, growth in Europe in 18th century, 69; doctrine of, 184-7; related to resources, 184; animal stage of problem, 185; human population, 186; in human society, 187-90; excess, 188; control, 188; current aspect of, 191-4; resultant of many forces, 191; growth not fatalistic, 191; quality, 193, 561, 562; increase in the 19th century, 194 Present and future, wants, 44; rents, 125; goods, 145; competing for labor, 220-21 Price, definition, 36; market and normal, 37; under competition, 308; under monopoly, 309-310; of trusts affected by competition, 331; a social fact, 360; changes, see Money Primitive society, war in, 188; custom in, 424 Private property, and saving, 164; and monopoly, 306; and inheritance, 359-69; origin, 362-6; limitations, 367-9; vs. socialism, 376 Producers injured by trusts, 330 Producers' coöperation, 295-7; definition, 295 Production, and rate of interest, 166-9; agents of, 175; two sources of economic, 222; and the combination of the factors, 257-64; nature of, 257; economic and personal, 258; [Pg 606]social, 259; vs. welfare, 398; unity of process, 418; as a conventional division of political economy, 419; by transportation, 525 Productive goods, definition, 20; affect output of labor, 195 Productive and unproductive industries, 260 Productive labor, see Labor Profits, unearned, by some directors, 130; on purchase of capital, 138; margin of, 275; loss of, 282-91; definition, 282, 291; meaning of terms, 282-5; a species of economic wages, 284; fluctuation of, 288; statement of law, 289; pseudo, 289; chance, 289-90; conditioned on skill, 290; risk theory of, 291; to promoters of trusts, 322; of promoter, 342; of trustee, 343; before and after a crisis, 347; relation to wages, 415; Clark's theory, 418; in foreign trade, 495 Profit-sharing, 292-5; definition, 292 Progress, of the masses, 232; cause of, 232-3; must grow out of wage system, 234; marked by control over nature, 261; stimulated by luxury, 388; and refinement of desire, 399; by wise method of distribution, 411; due to temporary conditions, 558; social vs. racial, 560; depends on race quality, 561; depends on competition, 562; endangered by status and envy, 563 Promoter, services of, 342; profits, 342-3 Property, private, effect on industry, 12; effect on population, 189, 190; and wealth, 361-2; definition, 362; and social expediency, 370; in land, 374; defense of, 374-5; see Private property Property tax, 475 Protective social and labor legislation, 504-13 Protective tariff, claimed to be socially expedient, 374, 491-503; definition, 491; nature and claims of protection, 491-6; measure of justification in, 496-501; values as affected by, 501-3; compared with other social legislation, 512 Psychic income, 39-45; complex sources of, 403; see Income Psychology of crises, 354 Public control of industry, examples, 544-8; difficulties, 548-51 Public interests, limiting private property, 367; paramount in social legislation, 505-9 Public officers, interested in corporations, 343 Public ownership of industry, 514-24; examples of, 514-7; economic aspects of, 517-24 Public policy as to control of industry, see Public control Public utilities, increase of rents from, 96 Public wants, development of, 472 Publicity of corporation management, 546-7 Quantity theory of money, 436-42; definition, 438; objections to, 439-41 Railroad, need of repairs, 83; and industry, 525-33; as a carrier, 527-30; economic vs. technical efficiency, 527; public nature of, 534-43; privileges of, 534-8; obligations of, 536-8; political and economic power of, 538-40; commissions to control, 541-3 Railroad rates, discrimination in, 530-3; similarity to taxes, 538 Rank of goods, technical, 46 Rapp, George, 266 Real wages, definition, 207; raised by machinery, 242 Recreation, influence on efficiency, 397 Religion, as economic motive, 13-14; [Pg 607]opposes competition, 429 Remuneration, profit-sharing as a method, 295; methods of, see Wages Rent, the renting contract, 53-60; origin of term, 53; several meanings, 54; essence, 55; as usufruct, 55; imputed durableness of rented agents, 55; gross and net, 55; economic and contract, 56-7; history of contract, 56-60; rent charge, 58; economic rent wider than renting contract, 60; connection with gratification, 73; varies with quality, 75; with quantity, diagram, 77; limits of, 79; economic and contract, 79-80; of wealth, affected by repair, depreciation, and destruction, 81-9; changes in, 90-7; of money, 106; basis of capitalization, 122-4; discounted, 123; relation to time-discount, 150-1; and wages, mutually influence, 175; "of ability," 178; and wages, 205; "of labor," 205; relation to wages, 215-8, 221; as personal or impersonal income, 359; conventional conception of, 413; as usufruct, 414; in Middle Ages, 424 Rent-bearers and rents, 90-7 Rent-charges, 58; sale and purchase, 118-22 Renting contract, 53-60; definition, 57; in the Middle Ages, 57; narrow use, 58, 59, 60; and economic rent, 60; hindered improvements, 110; contrasted with interest contract, 116 Repairs, and rent, 81-84; do not prevent decay, 85; and time-value, 143 Replenishing agents, 154 Rhodes, Cecil, 372 Ricardo, David, on fixity of land, 155; labor theory of value, 224, 398, 417, 442, 574 Ripley, W. Z., 575 Risk by enterpriser, 287 Risk theory of profits, 291 Risk-taking, legitimate and illegitimate, 335 Roosevelt, Theodore, efforts to control corporations, 546 Rossignol, J. E. le, 584 Roundabout process, 46, 576 Sage, Russell, on great corporations, 377 Satisfaction, see Gratification Saturation point for coinage, 443 Saving, and rate of interest, 159-63; conditions favorable to, 163-6; influence on methods of production, 166-9; benefits, 169; future effect of, 560 Scarcity, basis of economy, 19; effect on utility, 73; of various goods, 76; of present goods, 146; of common materials, 153; of all economic goods, 153; of human services, 182; of labor, 207, 225; not synonymous with monopoly, 302 Seager, H. R., 568 Seigniorage, definition, 434; and value, 443-7 Self-interest, social effects of, 427 Sellers' margin of advantage, 35 Serfdom, conditions, 227; see Middle Ages Services, a condition of income, 207; and wages, 210, 213; social and individual estimates of, 379; see Labor Shifting of taxes, 476 Silver, fitness as money, 102; as money, 432-3; as a standard, 455 Single-tax, purpose, 374; theory of value, 417 Skill, condition of continuing profits, 290; of labor, see Ability Slavery, as a system of labor, 227 Smart, 570, 571, 583 Smith, Adam, on money, 103, 181, 182; his "Wealth of Nations," 425-6, 484, 557 Social amelioration, various kinds, 504-9 Social changes, and rents, 94; temporary, 95 [Pg 608]Social classes, volitional control in, 190 Social control, progress of, 551-4; see Public control Social effects of a tariff, 498 Social-expediency theory of property, 365-6; basis of private property, 370; of inheritance, 370-3; of class legislation, 373; of protective tariffs, 374; of rewarding talent, 378; in taxation, 478 Social institutions and personal incomes, 360 Social legislation, growing need, 197, 504 Social sciences, nature, 5; complexity, 5, 6 Socialism, extreme, its ideal of distribution, 410; radical, vs. social reform, 552 Socialistic theory of value, 416 Socialists, predictions of, 553 Social prophecy, 553 Social regulation of bank-notes, 467, 470 Social service and income, 370-80 Specialization, and size of market, 263; of risk-taking, 339-40 Speculation, in goods, 336; as risk-taking, 338-42; in all business, 339; as insurance, 340; by lambs, 341; legitimate and illegitimate, 344; income from, 376-7 Spencer, Herbert, 518 Spiritual needs as economic motives, 13-4 Stages of industry, 313 Standard of deferred payments, see Deferred payments Standard of living, definition, 191; Asiatic, 191; American, 192; theory of wages, 216; result of sudden change in, 387-8; change in 19th century, 557 State, function to direct competition, 429-30; function of the, 471-3; regulates railroads, 541-2; regulates corporate industry, 544-8; increasing functions, 548 State ownership, 515-6; see Public ownership State socialism, growth of, 551-2 Status, as method of distribution, 409 Storehouse of saving, see Money Strength of men and women, 179 Strikes, 251; violence, 252; cost, 252 Subsidiary coinage, 445-6 Subsistence theory of wages, 217 Sugar trust, 328 Sumner, W. G., 567 Supply, relation to utility, 24-6; curve, diagram, 35; of land in economic sense, 155; limitation of better qualities, 158; of labor, 184; and monopoly, 324; and trust prices, 331 Sympathy, as an economic force, 13, 235 Talent and occupation, 203; see Ability Tariff for revenue, 491; see Protective tariff Taussig, F. W., 580 Taxation, in its relation to value, 471-9; definition, 471; purposes of, 471-4; forms of, 474-7; principles and practice, 477-9 Taxes, as a mode of distribution, 407 Technical diminishing returns, 68; confused with historical, 70; refers to limited time, 71 Technical rank of goods, 46 Temperance legislation, 507 Temporary use, 53; see Rent Tenement-house laws, 505 Time, in relation to wants, 44; relation to gratification, 161 Time-discount, of future rents, 125-6; rate fixed in practice, 126 Time relations of goods to wants, 46 Time-value, and interest, 131; theory of, 141-51; definition and scope, 141-5; fixing of rate, 145-51; and rate of interest, 159-50; relation to wages, 219-22; the highest problem of value, 414 [Pg 609]Tin-plate trust, 329 Token coins, 445-6 Trade-unions, 245-56; objects, 245-8; methods, 248-53; claims of, 254; effects, on wages, 253-6; and profit-sharing, 294; monopoly of labor, 308 Transportation, as a form of production, 525; changes in 19th century, 529-30 Trant, book on trade-unions, 254-5 Trustee, speculating, 343 Trusts, in United States, growth of, 312-22; recent organization of, 315-7; economic possibilities of consolidation, 321; causes of, 320-2; in legal and popular sense, 320; effect on prices, 323-32; control of, 332 Under-consumption theory of crises, 351 Unearned increments, various kinds, 96 Unions, see Trade-unions United States, see America Unproductive labor, see Labor Unripe goods, see Goods Usufruct, see Rent Usury, in Middle Ages, 113; usury laws, 508 Utility, broad sense, 19; see Marginal utility Utilization, intensive margin, 64; extensive, 65; diagram, 65; equilibrium of two margins, 66; of indirect goods, 78-9 Value, definition, 20; relation of labor to, 222-5; characteristics of, 258; cost of production explanation, 277; genealogy of, (diagram) 278-80; law of, and monopoly price, 311; law of, and trusts, 323; survey of the theory, 412; the unit of, 413; stages of value, 414; various aspects, 419; generality of the law, 420; effect of taxation on, 475-7; future trend of, 555-63 Value theories, relation to social reforms, 415-8 Volitional control, of population, 188, 189, 191, 193, 561 Wage contract, terms of, 229 Wage-fund theory of wages, 217 Wages, related to scarcity, 182; and efficiency, 196; law of, 205-14; nature of, 205-8; and rent, 205; economic and contract, 206; real and nominal, 207; modes of earning, 208-11; methods of remuneration, 211; and the general law of value, 211-4; term "general rate," 211; differences in, 212; statement of law, 213; and rent, 215-8; and time-value, 219-22; law of wages, 215; iron law, 216; and ambition, 230; rise of money form of, 232; real, changes in, 232; more better-paid callings, 233; raised by machinery, 242; in general industry determined by impersonal economic forces, 255; and profits, 284; and profit-sharing, 295; as personal or impersonal income, 359; influenced by consumers' choice, 394; relation to profits, 415; and protective tariff, 495; laws regulating payment, 511 Wages system, and its result, 226-35; defined, 226; development, 227; as it is, 229-31; progress under, 232-5; gloomy view of, 233 Walker, Francis A., theory of wages, 417, 578 Wants, material, 9-12; non-material, 13-4; of animals, 9; primitive, 10; civilized, 10; and progress, 11; growth, 12; refinement, 12; complex, 14; dependence on things, 15; relation to goods, 16; kinds, 21; changing, 26; recurrence, 39; in series, 39; present and future, 44; see Consumption War, to remedy over-population, 188; affects productive agents, 394 Waste, and luxury, 381-91; of wealth, 381-5; individual, 384; in public outlay, 384-5; fallacy of, 385 Water routes, influence on local advantages, 526-7; [Pg 610]economy of, 528 Wealth, and welfare, 15-20; definition, 17, 18; and income, 41; related to gratification, 44; and its indirect uses, 46-52; conditions of economic, 48-52; in city and country, contrasted, 111; loan of, in Middle Ages, 112; concept, and capital concept, 116; and property, 362; inequality of, 375 Welfare, and wealth, 15-20; and instinctive choice, 395; vs. production, 398 Wieser, 570, 571, 580, 583 Wind and water as sources of power, 51 Woman's work, 510 Work, see Labor Workers, effect of machinery on, 239-44; need of organization, 246; need of direction, 265-7; and profit-sharing, 294; gains from trusts, 325; health in factories, 509-10 Years' purchase, 120 <div class="footnotes"><h3>FOOTNOTES:</h3> <div class="footnote"> [1] Compiled from data given by "The Journal of Commerce and Commercial Bulletin," reprinted in "The Commercial Year Book," Vol. V, 1900, pp. 564-569. </div> <div class="footnote"> [2] John Moody, "The Truth About the Trusts," 1904. </div> <div class="footnote"> [3] These statements are retained as they were made in March, 1903. In the following September occurred a very remarkable panic in stocks which had the minimum of effect on general business. While stock prices have somewhat recovered since that time, general business conditions, on the whole, tended for a while toward the worse until the spring of 1904. </div> <div class="footnote"> [4] Though at first glance this may seem contradictory to the statement in the foregoing paragraph regarding the nature of supply, it will not be found so on closer examination. </div> </div> <div style="break-after:column;"></div>

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