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Materials for the study of elementary economics

Leon Carroll Marshall, Chester Whitney Wright, James Alfred Field

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HARVARD COLLEGE LIBRARY

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MATERIALS FOR THE STUDY OF ELEMENTARY ECONOMICS

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THB UNIYEBSITY OP CHICAGO PRESS CHICAGO, ILLINOIS

KttwtM THB CAMBRIDGE UNIVERSITY PRESS

LONDON AND KDINBUBOH

THE MARUZEN-KABUSHIKI-KAISHA

TOKYO, OSAKA, KYOTO

KARL W. HIERSEMANN

LBIPZia

THE BAKER A TAYLOR COMPANY

NEW YORK

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MATERIALS FOR THE STUDY OF

ELEMENTARY ECONOMICS

EDITED BY *

LEON CARROLL MARSHALL

CHESTER WHITNEY WRIGHT

JAMES ALFRED FIELD

OP THE DEPARTMENT OP POLITICAL ECONOMY THE UNIVERSITY OP CHICAGO

THE UNIVERSITY OF CHICAGO PRESS CHICAGO, ILLINOIS

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HARVARD

UNIVERSITY

LIBRARY

COFYUGBT 1915 By Thb Univxrsity 01 Chicago

All Rights Reserved

Published September 10x3 Second impression October 19x3

Composed and Printed By

The Univertity of Chicago Press

Chicago. lUinols, U.S.A.

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PREFACE

The materials collected in this volume are intended to acquaint the student with economic principles as they are manifested in the tangible facts of economic life. A few extracts of primarily theo- retical character have been included to represent important aspects of contemporary or historic thought; but for the most part the selections are not so much authoritative formulations of economic laws as con- crete case-material embodying such laws, or aflFording a background of information which the systematic treatises on economics can hardly give and which the teacher certainly cannot often assume that his students will possess. Various sources have been drawn upon, in- cluding not only the writings of recognized economists but also official literature of governmental and private organizations, conmiercial and financial periodicals, and the daily press. Some of the material has been prepared especially for this book. As regards form, the selections comprise expository and descriptive readings, statutes, judicial decisions, the findings of commissions, news reports, statistical tables, schematic analyses, and a number of maps, charts, and diagrams.

In the choice of the materials the editors have been guided by actual classroom experiment. The nucleus of the book was originally printed as a series of bulletins which have for three years formed a part of the reading required of beginning students in economics at the University of Chicago. During this time imsatisfactory selections have been eliminated and much new matter has been added. Copies of the bulletins have been submitted for criticism to teachers in several other institutions. The volume which now appears may thus be said already in a measure to have demonstrated its usefulness as an aid in college instruction.

The book is not designed to take the place of a systematic text- book. Rather, it should be used in conjunction with such a text. No attempt has been made to weld the readings into a hard-and-fast system. They have purposely been left to be utilized as the preference of the individual teacher may dictate. There has been no desire to dogmatize, or to force upon the student any particular interpretation of the evidence. In some cases conflicting views are set forth in different selections in order to stimulate critical thinking; and several

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VI PREFACE

extracts have been included precisely because they seem to involve unsound thinking, or a point of view so remote from the academic as to deserve consideration for that very reason.

The editors wish to acknowledge their obligation to the many authors and publishers who have kindly permitted the use of extracts from copyrighted publications. Every effort has been made to give due mention of author and publisher in each instance. Where a selection is stated to be "adapted from" the writings of a certain author the reader will understand, not that the changes from the original have necessarily been considerable, but simply that some change has been made for which the author is not accountable. Where no source is indicated for a selection, either by footnote or by the obvious nature of the topic, it may be understood that the editors assume responsibility.

L. C. M. C. W. W. J. A. F.

September, 19 13

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TABLE OF CONTENTS

PAGE

I. Introductory

1. The Maladjustment of Man and Nature. T. N,

Carver i

2. Man's Adaptation of His Environment. Max Nordau 8

3. Wajrs of Getting a Living. T, N. Carver .... 10

4. Competition and the Industrial Revolution. Arnold

Toynbee 11

5. Exchange Co-operation. Adam Smith 17

n. Wants and tee Means of Their Satisfaction

6. A Study of Himian Wants 20

7. The Apportionment of Expenditures. F. H. Streighioff 27

8. The Standard of Living. F. H. Streightoff .... 33

9. A Normal Standard of Living. Massachusetts Com-

missum on the Cost of Living 37

10. A Classification of the Means of Satisfying Wants.

T.N.Carver 41

11. Typical Cases Illustrating the Existence of Wealth

Behind Property Rights. Irving Fisher .... 42

12. Forms of Wealth. Irving Fisher 44

13. Forms of Property Rights. Irving Fisher .... 44

14. Estimate of Uie Wealth of the United States. Special

Census Report 45

15. The Production of Economic Goods. /. A. Hohson . 45

16. A Classification of Industries. /. A, Hohson ... 55

m. Natural Resoxtrces as Economic Factors

17. The Fimction of Natural Agents. O. T. Mason . . 58

18. The Influence of Geographic Factors. E, C, Semple . 61

19. The Frontier in American History. F, J, Turner . . 66

20. An Illustration of the Law of Diminishing Returns 73

21. Factors Coimteracting Diminishing Returns. /. 5.

Mm 74

22. Natural Resources of the United States and Their

Conservation. Natumal Conservation Commission . 77

23. The Economic Possibilities of Conservation. L, C,

Gray 102

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IV. Human Beings as Economic Factors

24. Some Definitions of Labor 105

25. The Relation of Labor to Natural Agents in Produc-

tion. J. S. Mill 106

26. The Increase of Population in the United States.

Henry Gannett 108

27. The Malthusian Theory of Population 109

28. Economic Influences on the Marriage-Rate. G. U,

Yule Ill

29. The Quality of Population

a) Non-Survival of the Fittest. W.R.Greg . . . 112

b) Eugenics 118

30. The Cost to Society of a Family of Degenerates.

R, L. Dugdale 121

31. The Conservation of Human Energy. Irving Fisher 123

32. Causes of the Growth of Cities. A, F, Weber . . . 134

33. Inunigration to the United States, 1820-1912 (Chart).

Commissioner-General of Immigration 137

34. Sources of Immigration and Character of Immigrants.

Immigration Commission 138

35. Causes of Emigration. Immigration Commission . . 140

36. The Problems of Inmiigration. /. W. Jenks avd W. J.

Lauck 144

37. Immigration and the Birth-Rate. F. A. Walker . . 146

38. Fecundity of Native and Immigrant Women in Rhode

Island, 1900. Immigration Commission .... 149

39. Inmiigration and the Use of Machinery. /. R, Com-

mons 150

40. The Recommendations of the Immigration Commission

Immigration Commission 152

V. Capital Goods as Economic Factors

41. The Roundabout Process. E. von Bdhm-Bawerk . . 157

42. Machinery Used in the Making of Pins. Commissionct

of Labor 158

43. Hand vs. Machine Methods. Commissioner of Labor 160

44. Machinery vs. Hand Labor in the Raising of Small

Grains. Commissioner of Labor 161

45. Machine Methods in Agriculture. H. V, Quain'ance . 164

46. Relative Increase of Capital and Employees in Manu-

facturing 170

47. Some Sources of the Supply of Capital. Wall Street

Journal 170

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TABLE OF CONTENTS ix

PAGX

48. Capital ^Demand and Supply. Journal of Commerce 172

49. What Is Meant by Depreciation. P, A. Delano . . 175

50. Inroads of War on the Savable Fund. Special Com-

missioner of the Revenue 179

VI. The Organization op Industry

A. Specializalion:

51. Limitations of the Division of Labor. /. S, Mill . . 181

52. The Tin-Peddler and the Development of Connecti-

cut Industries. R. M, Keir 182

53. Classification of Occupations. Census 183

54. Stages in the Production of Iron and Steel Products.

Commissioner of Corporations 189

55. The Localization of Manufacturing Industries. Census 189

56. The Division of Labor in Pin-Making. Adam Smith 198

57. Division of Labor in Meat Packing. /. R, Commons 199

58. Division of Labor in the Shoe-Making Industry.

Census 200

B. Management:

59. The Problem of the Business Man 204

60. Problems of Farm Management. T. N. Carver . . 206

61. The Principles of Business Organization. The System

Company 207

62. Scientific Management. F. W, Taylor 219

63. Criticisms of Scientific Management. H, 5. Person . 228

64. Partnership Articles 233

65. Form of Corporation Charter 234

66. A Charter "Object Clause" (United States Steel Cor-

poration) 236

67. Corporation Charters Granted Before 1800. S. E,

Baldwin 238

68. The Holding Company. Interstate Commerce Com-

mission 239

69. A Classification of Bonds. P, A, Cleveland . . . 241

70. Examples of Typical Investment Securities . . . 244

71. The Basis of Capitalization. Industrial Commission 252

72. Methods of Stock Watering. Industrial Commission 257

VII. Examples op Modern Capitalistic Organization A. Railroads:

73. Transportation Costs in the Pioneer Middle West.

Isaac Lippincott 259

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74. Widening of the Market through Improved Transpor-

tation 360

75. The Relation of the Transportation Charge to Prices.

L. G, McPherson 261

76. Costs in Railroad Operation. /. F. Strombeck . . 266

77. A^ded Traffic Pays. A, M.Wellington .... 269

78. A Result ot Railroad Competition. A, J.Cassatt 269

79. Some Forms of Railroad Discrimination. Commis-

sioner of Corporaiions 270

80. Extracts from the Interstate Conmierce Act. U. S,

statutes 274

81. Railway Rate Theories of the Interstate Commerce

Commission. M, B, Hammond 286

82. Valuation of Public Utilities. Judicial decisions . . 289

83. Suggestions for Effective Public Utility Regulation.

E, H. Downey 291

B. Industrial Combinations:

84. Forms of Combination. Industrial Commission . . 299

85. The Steel Rail Pool of 1887. Commissioner of Cor-

porations 304

86. The Continental Wall Paper Company. Judicia'

decision 307

87. The American Tobacco Company. Commissioner of

Corporations 308

88. The United States Steel Corporation. Comm.ssioner

of Corporations 313

89. The Steel Corporation Underwriting Agreement.

Commissioner of Corporations 318

90. Companies Acquired by the United States Stee: Cor-

poration. Commissioner of Corporations .... 323

91. An Example of Trust Efficiency. Commissioner oj

Corporations 327

92. Trust Advantages, Disadvantages, and Remedies.

Industrial Commission 329

93. The Sherman Anti-Trust Act. US, statutes ... 338

VIII. Markets and Trading

94. Methods of Marketing. A. W, Shaw 340

95. Marketing Farm Products. Department of Agriculture 352

96. Retail Distribution of Farm Machinery. Commissioner

of Corporations 356

97. The Distributmg System of the International Harvester

Company. Commissioner of Corporations , , . 359

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TABLE OF CONTENTS xi

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98. Co-operative Fruit Marketing. Department of Agri-

culture 361

99. Organized Exchanges: The Grading of Cotton. Com-

missioner of Corporations 364

100. Organized Exchanges: Futures, Puts and Calb. Com- missioner of Corporations 367

DC. Value

loi. Demand and General Overproduction. /. S. Mill . 371

102. Advertising and Demand. A.W.Shaw . . . .373

103. The Ability of the Consumer to Defend Himself. P. T.

Ckerington 374

104. Some Cases of Demand and Supply. Daily Newspapers 376

105. Demand and Supply in the Market for Agricultural

Products. H. C. Taylor 380

106. Organized Speculation and Its Regulation. H. H.

Brace 391

107. A Cost Diagram 396

108. Items Entering into. Cost. W. C. Redfield .... 397

109. Analysis of the Retail Price of Eggs. C. W. Thompson 407 no. Middlemen's Charges in Marketing Agrioiltural Prod- ucts, r. N, Carver 408

111. Costs in the Retailing of Shoes. Harvard Bureau of

Business Research 410

112. Prices to the Small Purchaser. P. H. Streightoff . . 414

113. Package Goods. Massachusetts Commission on the

Cost of Living 415

114. Different Costs of Production in Paper MiUs. Tariff

Board 417

115. Joint-Product Prices: Beef. Commissioner of Cor-

porations 418

116. Direct and Indirect Costs. /. P. Strombeck . . . 419

117. Diminishing Cost of Production. Wall Street Journal 421

118. Joint and Composite Demand and Supply (Diagram) . 422

119. The Complexity of Competitive Price Making. /, M.

Clark 422

120. Selling Below Cost: Tobacco. Commissioner of Cor-

porations 426

121. Price Policies of the Distributer. A.W.Shaw . . . 426

122. Monopoly Price: Coffee Valorization. Robert Sloss . 429

123. Discriminating Prices: Oil. Commissioner of Cor-

porations 436

124. The Burden of Advertising Costs. P. T. Cherington . 438

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xii TABLE OF CONTENTS

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X. Money and Prices

125. Exchange by Barter. W, S, Jevons 443

126. The Early History of Money. W. S. Jevons . . .445

127. A Monetary Chronology. U,S, Treasury circular 451

128. History of Coins and Currency of the United States.

US. Treasury circular 452

129. Redemption of United States Money. U,S. Treasury

circular 455

130. Legal-Tender Qualities of United States Money. U.S.

Treasury circular 456

131. Statement of United States Money in Circulation.

U,S. Treasury bulletin 457

132. Principles of Token Money. Indianapolis Monetary

Commission 458

133. Production of Gold and Silver since 1492. U.S.

Treasury circular . 461

134. Commercial Ratio of Silver to Gold Annually since

1687. U.S. Treasury circular 462

135. Gresham's]Law: French Coinage 1817-69 (Diagram) 463

136. Increase in the World's Production of Gold, 1800-1906.

National Conservation Commission 464

137. The Increased Cost of Living. Massachusetts Com-

mission on the Cost of Living 466

138. The Correction of Price-Changes. David Kinley . . 474

139. A Compensated Dollar. Irving Fisher 474

140. The Compensated Dollar: A Criticism. F. W. Taussig 479

141. Methods of Regulating a Paper Currency. W. S.

Jevons 483

142. Paper Money: the Continental Currency. David

Ramsay 485

143. Table of the Depreciation of the Continental Currency.

Thomas Jefferson 492

144. Greenback Prices During the Civil War (Diagram).

W.C.Mitchell 493

145. Depredated Paper Money in the Confederacy. G. C.

Eggleston 493

146. Depreciated Money and Wage-Earners: The Strike at

Iquique. /. Laughlin 496

XI. Credit and Banking

147. Credit Instruments 499

148. The Use of Credit Instruments. David Kinley . . 500

149. The Clearing House. /. G. Cannon 503

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150. The Journey of a Check. /. G, Cannon . . . . 512

151 . Weekly Statement of New York Clearing-House Banks 514

152. Anal)rsis of a New York Weekly Bank Statement.

Journal of Commerce 517

153. Statements of Typical American Banks 518

154. Number of Private, State, and National Banks, 1877-

1909. (Diagram.) G, E. Bamett 522

155. Statements of the Bank of England, The Bank of

France, and the Reichsbank 523

156. The Elasticity of Currency. Indianapolis Monetary

Commission 525

157. The Aldrich-Vreeland Act of 1908. U,S. statutes . . 531

158. A Summary View of the Work of the Independent

Treasury. David Kinley 533

159. Bankers* Views of Our Banking and Currency Needs.

American Bankers* Association 537

160. The Case against State Guaranty of Bank Deposits.

A. P. Andrew 545

XII. International Trade and Foreign Exchange

161. The Foreign Trade of the United States, 191 2-13.

Journal of Commerce 547

162. The Trade Balance of the United States. George Paish 549

163. The Balance of Trade and Gold Shipments. WaU

Street Journal 559

164. Conmiercial Credits in the Financing of Imports and

Exports. Franklin Escher 559

165. A Documentary Commercial Long Bill .... 566

166. The Par of Exchange and Approximate Gold Points . 566

167. Foreign Exchange Transactions. Howard K. Brooks . 567

168. Foreign Exchange Quotations. Howard K, Brooks 568

169. The Foreign Exchange Market. Franklin Escher . . 570

170. Factors Affecting the Rates of Foreign Exchange.

Journal of Commerce 574

Xni. Tariff Policy

171. A Simmiary of the Tariff History of the United States 578

172. PrincipalSourcesof Customs Revenue, 1 91 2. Statistical

Abstract of the United States 585

173. The Balance of Trade and Protection

a) A Mercantilist Point of View. Charles King . . 585

b) An American Argument Association of Wool Manu-

facturers 590

174. A Home-Market Argument. William Lawrence . . 590

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175. Improved Transportation and Protection

a) An American Campaign Argument. Republican

Campaign Text-Book 591

b) A Spanish Analogy. FridSric Bastiat .... 592

176. Two proposals for Increasing the Demand for Labor.

Fridiric Bastiat 593

177. The Law of Comparative Costs and the Working of the

Tariflf. F. W. Taussig 597

XIV. Rent

178. The Origin of Agricultural Rent. F. M, Taylor . . 609

179. Rent Diagrams 617

180. Some Factors Affecting Land Values. R. M, Hurd . 620

181. Railroads and Land Values. /. D, Andrews . 627

182. Land Valuation. R, M, Hurd 628

183. Car-Fares and Suburban Site- Values. Grosvenor Alter

bury 634

184. The Value of a Chicago Quarter-Acre, 1830-94. lUinois

Bureau of Labor Statistics 635

185. Examples of Real Estate Transactions. Chicago

Daily Tribune 639

XV. Wages

186. Labor as a Source of Income. F. 11, Streightojf . 640

187. Two Early Theories of Wages

a) A Cost of Subsistence Theory of Wages. David

Ricardo 643

b) The Wages Fund. James Mill 645

J.S,MUl 646

188. Wages and Hours of Labor. Statistical Abstract of the

United States 647

189. Women's Work and Wages. J. A. Hobson . . . 647

190. Time Wages and Piece Wages. Industrial Commission 659

191. Wage Systems and Labor Management. C. B. Going 661

XVI. Labor Problems

192. Purposes of the American Federation of Labor.

Official statement 668

193. Structure of the American Federation of Labor (Dia-

gram). Official report 670

194. Membership of the American Federation of Labor.

Official report 671

195. Union Charters Issued by the American Federation of

Labor. Official report 67 1

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TABLE OF CONTENTS xv

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196. Extracts from the Constitution of the International

Union United Mine Workers 672

197. Joint Interstate Agreement of Coal Operators and

Miners. Text of the Official A greemetU .... 683

198. A Plece-Work Wage-Scale Agreement. Potters' Asso-

ciation 691

199. The Attitude of the Typographical. Union Toward

Machinery. Industrial Commission . . . 693

200. The Dayton Employers* Association. A, C. Marshall 694

201. The National Founders' Association. Official pamphlet 695

202. The United Tjqwthetae of America. Official pamphlet 698

203. Industrial Unionism and the Industrial Workers of

the World. Vincent St, John 700

204. Statistics of the Extent of Strikes. US. Commissioner

of Labor 705

205. Causes of Strikes. US. Commissioner of Labor . . 706

206. Estimates of Losses Due to Strikes and Lockouts

a) Twenty Years of Losses from Strikes and Lockouts.

U.S. Commissioner of Labor 708

b) Losses from the Anthracite Coal Strike of 1902.

Anthracite Coal Strike Commission 708

207. Unemployment and a Proposed Solution of the Prob- ^

lem. Royal Commission on the Poor Lous . . 709

208. Seasonal Unemployment (Chart) 715

209. Long Hours versus Efficiency. Josephine Goldmark . 716

210. The Sweating System. Industrial Commission . . 721

211. The Economic Theory of a Legal Minimum Wage.

Sidney Webb 723

212. The Minnesota Minimum Wage Law of 19 13. Minne-

sota statutes 733

213. Machinery and the Quality of Labor. /. A. Hobson . 737

214. Employers* Liability. G. L. Campbell 747

215. A Survey of Workingmen's Insurance in the United

States. C. -R. Henderson 756

216. Summary of Workingmen's Insurance Laws in Ger-

many. L. K. Frankel and M. M. Dawson ... 761

XVn. Intesest

217. Theories of Interest. Irving Fisher 762

William Smart 764

218. Interest Rates. W. A. ScoU 773

2x9. Conditions in the Money Market. Journal of Com- merce 783

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xvi TABLE OF CONTENTS

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2 20. Differences in Rates of Interest on Public Loans.

a) Special Census Report 785

b) StaUsticd Ahstraci of the United Stales .... 785

221. Table of Bond Values 786

222. The Relation of Interest Rates to Rising or Falling

Prices. H. G. Brown 787

223. The Theory of Bond Values During a Rising-Price Era.

W.E.Clark 788

XVIII. Profits

224. Walker's Theory of Profits. F. A. Walker .... 790

225. The Risk Theory of Profits. F. B. Eawley . . . 795

226. Classes of Risks to Capital. A. H, WiUett .... 796

227. The Classes of Risk-Takers. F, B, Hawley . . . 799

228. Hedging as an Insurance Against Risk. Commissioner

of Corporations 801

229. Fire Insurance and Credit. 5. 5. Huebner .... 807

230. Embarrassment of Industry through Lack of Insurance.

Journal of Commerce 810

231. Some Functions and Effects of Insurance. John

Haynes 811

232. Financial Statements of Two Corporations. Annual

reports 814

233. Monopoly Profits: The Tobacco Trust. Commissioner

of Corporations 818

234. An Example of Fortuitous Profits. Special Commis-

sioner of the Revenue 818

235. The Profits of an Underwritmg Syndicate. Commis

sioner of Corporations 819

236. A Classification of Business Failures by Causes. Brad-

street's 822

237. Two Instaaices of Failure. Financial journals . . . 823

XIX. Public Finance and Taxation

238. The Growth of State and Local Expenditures. W, F.

Gephart 824

239. Federal Expenditures (Chart) 828

240. The Cost of Government, National, State, and Local.

E, V. D. Robinson 829

241. Total Debt of the United States, National, State, and

Local (Diagram). Special Census Report 841

242. Public Debt of the United States, 1791-1911 (Chart) . 842

243. Statement of the Public Debt of the United States,

1913. U,S. Treasury Bulletin 843

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TABLE OF CONTENTS XVli

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244. Total and Per Capita Debt of Different Countries.

Statistical Abstract of the United States .... 847

245. Principal Sources of Federal Revenues by Decades,

1800-1910 (Chart) 847

246. The Adequacy of th^ Customs Revenue System. R.F.

Hoxie 847

247. Some General DiO&culties in Our State S)rstems of

Taxation. E. R. A. Seligman 853

248. A System of State and Local Taxes and their Appor-

tionment. Minnesota Tax Commission .... 855

249. The General Property Tax. Special Committee^ Inter-

national Tax Association 860

250. The Taxation of Intangible Personalty. Minnesota

Tax Commission 862

Commissioner of Corporations 864

251. Taxation of Corporations. Commissioner of Corpora-

tions 865

252. The Inheritance Tax. C. /. Bullock 870

253. The Income Tax in Wisconsin. Minnesota Tax Com-

mission 874

254. Separation of State and Local Revenues. Minnesota

Tax Commission 880

255. The Taxes on Land in Western Canada. Minnesota

Tax Commission 883

256. The Single-Tax Argument. C. B, FiUebrown ... 889

257. The Land- Value Tax as a Social Reform. Pels Fund

Publication 894

XX. Some Programs of Social Reform

258. Profit-Sharing in the N. O. Nelson Manufacturing

Company. N. 0, Nelson 898

259. Profit-Sharing and Labor-Copartnership. T. C. Tay-

lor 899

260. A Promising Venture in Industrial Partnership. R. F,

Foerster 901

261. The Rochdale Plan of Co-operation. James Ford . 904

262. Co-operative Creameries. James Ford 905

263. Co-operative Stores. James Ford 907

264. Causes of the Failure of Co-operative Stores in America.

/. B. Cross 908

265. Wastes in the Competitive Distribution of Milk . .911

266. Socialism. 0. D. Skelton 911

267. The National Platform of the Socialist Party . . . 921

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I. INTRODUCTORY

I. THE MALADJUSTMENT OF MAN AND NATURE*

The question, Why do things have the power to satisfy wants? would lead us back through physiology and psychology quite to the borders of the unknowable. The question, Why are they scarce? "would lead us also toward the tmknowable, but by a some- what different route. Into this philosophical hinterland of his science the economist has generally refrained from biusting lest he should be fotmd poaching upon the preserves of the philosopher; but there are some things in this region which, when seen through the eyes of the economist, may come to have a new significance.

Of course the first and most obvious reason for the scarcity of goods is that nature has not provided them in sufficient abundance to satisfy all the people who want them. Of some things, it is true, she is bounteous in her supply; but of others she is niggardly. Things which are so bountifully supplied as to satisfy all who want them do not figure as wealth, or economic goods, because we do not need to economize in their use. But things which are scantily supplied must be meted out and made to go as far as pos- sible. That is what it means to economize. Because we must practice economy with respect to them they are called economic goods or wealth. In fact the whole economic system of society, the whole system of production, of valuation, of exchange, of distribu- tion, and of consimiption, is concerned with this class of goods toward increasing their supply and making the existing supply go as far as possible in the satisfaction of wants.

The fact that there are himian wants for whose satisfaction nature does not provide in sufficient abundance ^in other words, the fact of scarcity signifies that man is, to that extent at least, out of harmony with nature. The desire for fuel, clothing, and shelter grows out of the fact that the climate is more severe than our bodies are fitted to endure, and this alone argues a very con- siderable lack of harmony. The lack is only emphasized by the fact that it is necessary for us to labor and endiu-e fatigue in order to provide ourselves with these means of protecting our bodies against

•Adapted from T. N. Carver, "The Economic Basis of the Problem of Evil," in The Harvard Theological Renew, I, 98 ff. (January, 1908.)

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2 MATERIALS FOR ELEMENTARY ECONOMICS

the rigors of nature. That labor also which is expended in the pro- duction of food means nothing if not that there are more mouths to be fed, in certain regions at least, than nature has herself provided for. She must therefore be subjugated, and compelled to yield larger returns than she is willing to do of her own accord. And that expand- ing multitude of desires, appetites, and passions which drive us as with whips; which send us to the ends of the earth after gewgaws with which to bedeck our bodies, and after new means of tickling the five senses; which make us strive to outshine our neighbors, or at least not to be outshone by them these even more than our normal wants show how widely we have fallen out of any natural harmony which may supposedly have existed in the past.

That there is a deeper harmony lying hidden somewhere be- neath these glaring disharmonies is quite possible. Certainly no one can positively assert that it is not so. It may be true, as some profoundly believe, that these natural discomforts, with the necessity for work which accompanies them, furnish a discipline which is necessary for our highest good. Being thus driven hy sl vis a tergo toward our own highest good, we may be in harmony with our sur- roimdings in way^ which do not appear to our inmiediate sense of self- interest. But this whole question lies within the field of philosophical conjecture, and nothing positive can be afltaned on either side.

Whatever our belief upon that point may be, there is not the slightest doubt that men are sometimes cold and hungry and sick; and that these discomforts would be much more frequent than they now are, if men did not work to prevent them. But work causes fatigue. Obviously the individual cannot be expected to see in this situation any sign of a complete harmony between himself and his material environment. So far as the individual can see and understand, the lack of harmony between himself and nature is a very real one.

Viewed from this standpoint, the whole economic struggle becomes an effort to attain to a harmony which does not naturally exist. As is well known, the characteristic difference between the non-econo- mizing animals, on the one hand, and man, the economizer, on the other, is that in the process of adaptation the animals are passively adapted to their environment, whereas man assumes the active r61e in attempting to adapt his environment to himself. If the climate is cold, animals must develop fur or blubber; but man builds fires, constructs shelters, and manufactures clothing. If there are enemies to fight against, the animals must develop claws or fangs, horns or

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INTRODUCTORY 3

hoofs, whereas man makes bows and arrows, or gims and ammunition. The whole evolutionary process, both passive and active, both bio- logical and economic, is a development away from less toward greater adaptation, from less toward greater harmony between the species and its environment.

That phase of the disharmony between man and nature which takes the form of scarcity gives rise also to a disharmony between man and man. Where there is scarcity there will be two men wanting the same thing; and where two men want the same thing there is an antagonism of interests. Where there is an antagonism of interests between man and man there will be questions to be settled, questions of right and wrong, of justice and injustice; and these* questions could not arise under any other condition. The antagonism of interests is, in other words, what gives rise to a moral problem, and it is, therefore, about the most fimdamental fact in sociology and moral philosophy.

This does not overlook the fact that there are many harmonies between man and man, as there are between man and natiure. There may be innumerable cases where all human interests harmonize, but these give rise to no problem and therefore we do not need to concern ourselves with them. As already pointed out, there are many cases where man and nature are in complete harmony. There are things, for example, which nature furnishes in sufficient abundance to satisfy all our wants; but these also give rise to no problem. Toward these non-economic goods our habitual attitude is one of indiflference or unconcern. Where the relations between man and nature are perfect, why should we concern ourselves about them? But the whole industrial world is bent on improving those relations where they are imperfect. Similarly with the relations between man and man; where they are perfect, that is, where interests are all harmonious, why should we concern ourselves about them? As a matter of fact we do not. But where they are imperfect, where interests are antagonistic and trouble is constantly arising, we are compelled to concern ourselves whether we want to or not. As a matter of fact, we do concern ourselves in various ways; we work out systems of moral philosophy and theories of justice, after much disputation; we establish tribimals where, in the midst of much wrangUng, some of these theories are applied to the settlement of actual confficts; we talk and argue interminably about the proper adjustment of antagonistic interests of various kinds, all of which,

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it must be remembered, grow out of the initial fact of scarcity that there are not as many things as people want.

Fimdamentally, therefore, there are only two practical problems imposed upon us. The one is industrial and the other moral; the one has to do with the improvement of the relations between man and natiure, and the other with the improvement of the relations between man and man. But these two primary problems are so inextricably intermingled, and they deal with such infinitely var)dng factors, that the secondary and tertiary problems are more than we can count.

But whence arises that phase of the conflict with natiure out of which grows the conflict between man and man? Is man in any way responsible for it, or is it due wholly to the harshness or the niggardliness of natiure ? The fniitf ulness of nature varies, of course, in different environments. But in any environment there are two conditions, for both of which man is in a measiu-e responsible, and either of which will result in economic scarcity. One is the indefinite expansion of human wants, and the other is the multiplication of numbers. The well-known expansive power of human wants, con- tinually running beyond the power of nature to satisfy, has attracted

the attention of moralists in all times and places Even

if the wants of the individual never expanded at all, it is quite obvious that an indefinite increase in the number of individuals in any locality would, sooner or later, result in scarcity and bring them into conflict with nature, and therefore into conflict with one another.

These considerations reveal a third form of conflict ^perhaps it ought to be called the second a conflict of interests within the individual himself. If the procreative and domestic instincts are freely gratified, there will inevitably result a scarcity of means of satisf)dng other desires, however modest those desires may be, through the multiplication of numbers. Either horn of the dilemma leaves us with unsatisfied desires of one kind or another. We are therefore pulled in two directions, and this also is a condition from which there is no possible escape. But this is only one illustration of the internal strife which tears the individual. The very fact of scarcity means necessarily that if one desire is satisfied it is at the expense of some other. What I spend for luxuries I cannot spend for necessaries; what I spend for clothing I cannot spend for food; and what I spend for one kind of food I cannot spend for some other. This is the situation which calls for economy, since to economize is merely to

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INTRODUCTORY S

choose what desires shall be gratified, knowing that certain others must, on that account, remain tmgratified. Economy always and everywhere means a threefold conflict: a conflict between man and nature, between man and man, and between the different interests of the same man.

In this antagonism of interests, growing out of scarcity, the institutions of property, of the family, and of the state, all have their common origin. No one, for example, thinks of claiming property in an3rthing which exists in sufficient abundance for all. But when there is not enough to go around, each unit of the supply becomes a prize for somebody, and there would be a general scramble, did not society itself tmdertake to determine to whom each imit should belong. Possession, of course, is not property; but when society recognizes one's right to a thing, and undertakes to protect him in that right, that is property. Wherever society is sufficiently organized to recognize these rights and to afford them some measiure of protection, there is a state; and there is a family wherever there is a small group within which the ties of blood and kinship are strong enough to overcome any natural rivalry and to create a imity of interests. This imity of economic interests within the group is sufficient to separate it from the rest of the world, or from other similar groups among which the natiural rivalry of interests persists. Saying nothing of the barbaric notion that wives and children are themselves property, even in the higher types of society it is the desire to safeguard those to whom one is boimd by ties of natural affection, by sharing the advantages of property with them, which furnishes the basis for the