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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
Digitized by
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
Digitized by
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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.
Digitized by
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
Digitized by
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
vii
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PAGE
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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X TABLE OF CONTENTS
PAGE
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
PAGE
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
PAGB
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. /. L» 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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TABLE OF CONTENTS XlU
PAGB
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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nv TABLE OF CONTENTS
PAGE
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
PAGE
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
PAOS
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
PACK
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
Digitized by
Digitized by
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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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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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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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