The Basic Facts of Economics

Part 1

Transcriber’s Note: Italics are enclosed in underscores. Additional notes will be found near the end of this ebook.

The Basic Facts of Economics

A COMMON-SENSE PRIMER FOR ADVANCED STUDENTS

By LOUIS F. POST

Author’s Edition

WASHINGTON, D. C. 2513 TWELFTH STREET, N. W. 1927

Price Fifty Cents

Copyright, 1927, by LOUIS F. POST

PRESS OF COLUMBIAN PRINTING CO., INC.

BINDING BY GEO. A. SIMONDS & CO. WASHINGTON, D. C.

Accurate Observation and Clarity of Thought are the Prime Requisites of Economic Study

PUBLICATION COMMITTEE

ANDREW P. CANNING, Chairman, Chicago, Ill.

JAMES H. BARRY, San Francisco, Calif.

GEORGE A. BRIGGS, Los Angeles, Calif.

MRS. EDWARD O. BROWN, Chicago, Ill.

EDMUND VANCE COOKE, Cleveland, Ohio.

STOUGHTON COOLEY, Los Angeles, Calif.

OTTO CULLMAN, Chicago, Ill.

MRS. ANNA GEORGE DE MILLE, New York City.

JAMES H. DILLARD, Charlottesville, Va.

ROBERT E. GRAVES, Chicago, Ill.

ANGELINE LOESCH GRAVES, Chicago, Ill.

WILLIAM C. HARLLEE, Washington, D. C.

LEWIS J. JOHNSON, Cambridge, Mass.

FENTON LAWSON, Cincinnati, Ohio.

WILEY WRIGHT MILLS, Chicago, Ill.

C. L. MOULTON, Glen Ellyn, Ill.

Part 2

JACKSON H. RALSTON, Palo Alto, Calif.

WALTER I. SWANTON, Washington, D. C.

EDWARD N. VALLANDIGHAM, Chestnut Hill, Mass.

JOHN Z. WHITE, Chicago, Ill.

TABLE OF CONTENTS

PAGE

PREFACE vii

FIRST LESSON--ECONOMICS 1

SECOND LESSON--MONEY 9

THIRD LESSON--TRADE 17

FOURTH LESSON--THE BASIC FACTS 27

FIFTH LESSON--THE PRODUCTIVE PROCESS 40

I. HUMAN FACTORS 42

II. NATURAL RESOURCE FACTORS 50

III. ARTIFICIAL OBJECTS 52

IV. SECONDARY CATEGORIES 56

1--CAPITAL 56

2--TRADE 60

3--UTILITY, VALUE, MONEY, PRICE, BANKS 63

4--BALANCES OF TRADE 67

V. AN ILLUSTRATION OF THE PRODUCTIVE PROCESS 70

SIXTH LESSON--DISTRIBUTION 74

I. WAGES FOR LABOR 75

II. RENT FOR LANDOWNERSHIP 83

III. TRADE 91

IV. MONEY 94

SEVENTH LESSON--REVIEW 97

QUESTIONS FOR SELF-EXAMINATION 101

Part 3

PERSONAL ACKNOWLEDGMENTS 103

PREFACE

The purpose of this common-sense explanation of Economic phenomena is to disclose and emphasize those comprehensive and familiar primary facts which embody the myriads of secondary facts that are involved in Economic science. To avoid confusing those complicated details is to promote the clear thinking which every Economic problem demands, be the problem one of collegiate study, of political policy, or of business importance.

The following pages aim, therefore, at encouraging all thoughtful citizens so to classify the details of the general subject in their own minds as to enable them to avoid centering their mental vision upon Economic trees so intently that they cannot see the Economic forest as a whole. It aims also at discouraging the opposite inclination to view the Economic forest so exclusively as a whole that the Economic trees of which it is composed cannot be distinguished.

L. F. P.

The Basic Facts of Economics

A COMMON-SENSE PRIMER FOR ADVANCED STUDENTS

FIRST LESSON

ECONOMICS

On the surface, Economics appears to be the science of making money.

This appearance is due, however, to a careless recognition and erroneous application of the fact that Economic accomplishments are measured by money standards and expressed in money terms.

When, for example, a builder builds, he builds to make money. Money measures the Economic extent of what he is doing, and money terms express its Economic desirability. They also express and measure his motive, which is the compensation he can command in the currents of trade.

A merchant makes money when he manages a profitable business.

So does a manufacturer.

Farmers make money when they sell their produce profitably. Nor only when they sell it, but also while they cultivate it; for every day’s growth adds to the money measurement of a crop.

Wage-workers by the day, the week or month, and salary-workers by the year, also workers on commission or for percentages or for profits, make more or less money as working opportunities are more or less plentiful, and wages or salaries or percentage totals and profit totals are consequently higher or lower.

Engineers, lawyers, physicians, architects, dentists, clergymen, teachers--all professional workers,--make money to the extent of the marketability of the services they offer.

And investors, do they not invest by money measurements and in money terms for the purpose of obtaining Economic incomes measured by money and expressed in terms of money?

Manifestly, the immediate object of everybody’s activity in the field of Economics is to make money.

Does one desire food? By making money he gets food. Does one desire clothing? He gets it by making money. Does he wish for housing, furnishings, automobiles, railway or steamboat transportation, necessaries of any kind, luxuries of whatever variety, household service, professional service, legislative or judicial service, mechanical service, mercantile service, clerical service? By making money he gets them. Does one wish for slaves? If slavery be an institution of his time and place, he may have slaves by purchases with the money he makes. Should he be a slave himself, he may purchase his freedom with money if he can get it. Does land-ownership appeal to one? Let him make money and he can buy land. Whatever object the Economic field may offer for the satisfaction of human desires, that object is attainable by making money. In no other way can it be attained through Economic processes.

If gifts be cited as exceptions let the fact be noted that giving is not an Economic process. It lacks the element of exchange or trade. So, too, of theft in any of its forms. In genuine Economics there must be two gainers in every trade. There is no such science as Economics of the Forty Thieves variety.

Even in such seeming exceptions to the Economic importance of money as are offered by barter, in which no money passes and no money accounting is made, comparisons of the objects thus directly exchanged are nevertheless contemplated by the exchangers in terms of money. The owner of a horse that might sell for two hundred dollars, would not barter it for a horse that could sell for only one hundred--not unless he got “boot” enough to even up the money difference to his satisfaction. Nor would the boy with a two-dollar penknife “swap even” for a one-dollar jackknife. It is only when the two horses or the two knives seem to their respective owners to be approximately equal by money measurement that an “even swap” is conceivable.

Another seeming exception to the money-making characteristic of Economics depends upon individual isolation. That isolated individuals may gather food and improvise shelter and clothing without thinking of them in terms of money, is true enough; but the activities of persons thus isolated are not Economic exceptions, for the science of Economics is a social science. Although some Economic phases or phenomena may be picturesquely and aptly illustrated by reference to the experience, actual or imaginary, of isolated individuals like Robinson Crusoe on his island, states of human isolation are outside the limits of Economics.

Inasmuch, then, as the object of the human factor in the science of Economics is to make money, and as there can be no science of Economics without the human factor, Economics is comprehensively and accurately definable, on the surface, as the science of making money.

But making money in the Economic sense must be distinguished from narrower uses of the phrase. To manufacture coins legitimately, as at a mint, is to “make money,” but only in one Economic particular--only in the narrow mechanical sense in which weaving cloth is “making cloth.” Like weaving cloth, it is but an item in the multitudinous phenomena of that money-making which superficially defines the science of Economics. The same observation is applicable to the occupations of engraving and of printing paper currency legitimately.

Illegitimate makings of either paper currency or coin, like all other forms of forgery, are not in any sense making money within the purview of Economic science. They are varieties of theft, and Economic science excludes theft of every kind, even legal kinds, such as slavery. This exclusion is not for moral reasons, it may be well to interject for the benefit of such advanced students of Economics as recoil from mixing moral principles with Economic science. It is due to the fact that exchange, or trade--an essential element in Economics,--is in theft utterly lacking.

In the Economic sense, making money is making it for all concerned in any particular process, and not for one or more of the parties at the expense of the others. No art of getting something for nothing can be within the scope of Economic science. One-sided methods of making money, whether frankly labeled “theft” or “gambling,” or shrewdly disguised in spurious business ethics, are alien to Economic money-making. Within the domain of Economics no money-making transaction belongs unless it involves the making of money by all parties to the transaction.

To make money in that mutual sense is to augment the supply or the serviceableness of whatever commodities money terms may measure and express, and of the portions or shares of all who contribute to the augmentation.

Part 4

In phrasing more complete than that of “making money,” Economics is the science of making money by earning it. Getting money without earning it is related to Economics only in a science-disturbing sense. It disturbs the normal Economic relations of effect to cause in the production and dissemination of humanly desirable objects. To realize the truth of that statement, the student need only momentarily conceive of theft as universal. Since universal theft as an Economic phenomenon would be utterly destructive of normal Economic relationships, of beneficial effects from normal causes, so must theft to any extent operate destructively to that extent. The only thinkable relation of theft to Economics is analogous to the relation of murder to the human race. That Economic study may comprise considerations of how to exclude stealing from Economic customs, does not go to prove that stealing is a factor in Economic science. It goes no farther than to prove that stealing may become an Economic parasite.

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