Part 6

In describing Trade as consisting essentially of interchanges of human services, we are of course to be understood as including not only such services as are embodied in tangible commodities, but also personal service. Nor does it make any Economic difference whether the personal service be of the “servant” type or of the “professional” type.

“Professional” services, such as those of Economists, Engineers, Architects, Clergymen, Lawyers, Physicians and Teachers are in the Economic domain of Trade. Not only are they exchanged for tangible commodities, but they contribute to the production of such commodities by conserving, and it may be by increasing the efficiency of more obvious producers. The Economist studies productive relationships for the purpose of securing harmonious industrial adjustments; and so vital is his function that righteous social relationships are imperiled, and righteous readjustments obstructed, if he mistakes chaos for order. The Engineer designs, plans and directs; and so important is his function that the work of hosts of producers depends upon it. If he mistakes, great structures may fall. The Architect is an Engineer in a special sense: if he makes mistakes, buildings may lack stability or beauty or both. The Lawyer may disentangle societary complications that would operate as a check upon production and Trade. The Clergyman may discourage obstructive conduct; the Physician may conserve the health of more direct producers so as to increase their efficiency; the Teacher may increase their efficiency by instruction. And so of personal services of the Personal Servant type. Whatever a Personal Servant may do for a commodity specialist which otherwise the specialist must do for himself at the cost of contributing less to the production of tangible commodities, is to that extent a contribution to the production of those commodities. Interchanges of human service, if the interchangers act in freedom, each getting from the channels of Trade the equivalent in service of the service he renders, are contributions to Economic production.

The relative desirability of human services rendered in promoting production, whether directly or indirectly, is commonly as well as commercially and Economically known as Value, which, as already explained, is expressed in Money terms and compared by Money measurements.

To receive a share in the continuous distribution of commodities through Trade is the human motive for all Economic activity, from leadership in Economic service to service for “wages.”

A “wage-worker,” for illustration, lends a hand--becomes “a hand,” if you please,--at harvesting wheat. His compensation is to be, let us assume, his food and lodging during harvest and twenty dollars in Money at the end of his job. The work being done, his food and lodging having been meanwhile supplied to him, and the twenty dollars in Money having been duly paid him, what has been the Economic nature of his transaction? Has not this “harvest hand” exchanged his contribution of service to the production of wheat, for his living while helping to produce it and for a twenty-dollar measurement of any commodity or commodities he may wish to draw from the channels of Trade?

Assume now that he draws from those channels a pair of shoes, a hat and other commodities at the village store, including, perhaps, some tobacco for his pipe and a bit of candy for a little friend. As matter of Economics, then, what has he done but Trade his service at harvesting for his living while at work and some service-produced commodities for still further satisfying his desires?

And the Economic leader in that connection, the farmer who hired the “harvest hand,” what has been his part in the transaction? In the last analysis has he not for harvest service traded food, house accommodations, household service, and his Money title to twenty dollars’ worth of any commodity or commodities that may be flowing through the channels of Trade--a title for which he presumably has given, or through debit and credit adjustments must in the future give, his own service or the service of others which he may naturally and justly or only customarily and unjustly command as his own?

When an employer in any branch of Economics pays an employee “wages” or “salary” or other compensation for service, he buys his employee’s service by an interchange, through Trade, of human service for human service.

Nor are interchanges of service limited to employers and employees.

The point of final interchange is almost invariably like the illustrative instance of the “harvest hand” at a retail store. Through the processes of Trade, myriads of commodities for the satisfaction of human wants, commodities produced by human service to the point of delivery to ultimate consumers, flow to ultimate consumers out of retail stores. These depots for final delivery in Trade are the customary terminals of production, where certifications of service in terms of Money are usually exchanged for products of service in the form of commodities.

Although such exchanges, like other exchanges throughout the processes of Trade, are made in Money terms and by Money measurements, these terms and measurements testify, as explained in the preceding Lesson, only to the relative values which govern the exchangeable relations of any commodity or commodities with any other commodity or commodities.

Curiously enough, Economic students who ignore “value levels” readily recognize “price levels.” But what else are “price levels” than “value levels” expressed in Money terms? If a hammer will exchange for a chisel in the processes of Trade, they are of equal value--not price, but value. If the Money price of one is two dollars and that of the other is also two dollars, they are of equal price as well as equal value. And except as Money may vary in purchasing power through lack of stabilization, or commodities may vary in relative desirability or industrial cost, the price level and the value level tend to rise and fall together. That is to say, the essential consideration is one of relative values of commodities (which is determined by difficulties of production and delivery), but the superficial consideration is the purchasing power of Money, by which those relative values are more or less accurately measured and expressed in price lists.

Values thus expressed rise and fall. They do so in terms of Price when measured by Money; they do so in the essentials of Value when measured by comparisons of commodities. As a rule, however, Money-prices are fair guides to Commodity values. Commodity values rise and fall according to cost of production, inclusive of delivery; and in so far as Money is stable, the rise and fall in prices is evidence of variations in production cost.

The relative rise and fall in Value, be it measured by prices in Money or otherwise, is so common a phenomenon of Trade that critics might be pardoned for denying a Value level.

Nevertheless there is such a level. It may be illustrated by “sea level.” We readily understand and confidently base important physical calculations upon the assumption of a constantly level sea. Yet there is no such thing. Waves rise above the surface of the sea at their crest and fall below it in their hollows. Tides contribute other variations. So with Value in Trade. Literally a level of Value is unknown. Values continually rise and fall, like the waves and the tides of the sea. Yet there is as to Value a “mean level.” Such a level or tendency may be found in the relation of service-cost to consumption-desirability.

Though we measure service-value by Money, though Money fluctuates as a Value-measuring device, though some individual services fall in product value relatively to the productive power of service, though some individual services may increase in Value for one reason or another, there is nevertheless a Value level in Trade which tends constantly to maintain an equilibrium between service-value and service-utility. Money-measured Value and Money standards of Value may rise above or fall below the service-cost of produced commodities. Nevertheless, service-cost in commodities is the determining fact--the Value level in Trade. Measured and expressed by Money, that Value level is the Price level.

Trade phenomena, to which this Lesson has been devoted, though they lead down to the Basic Facts, the foundation facts, of Economics, do not themselves, either wholly or in any of their details, belong in the Basic Fact region. Though nearer to the Basic Facts of Economics than the phenomena of Money, our consideration of which immediately preceded our consideration of Trade, the phenomena of Trade are one layer above the Basic Facts toward which we have been delving down from the Economic surface, Money, and through the subsurface, Trade. To the Basic Facts of Economics our next Lesson will be devoted.

FOURTH LESSON

THE BASIC FACTS

The purpose of the preceding Lessons has been to pierce through the surface and the immediate subsurface of Economics down to the Basic Facts. On the surface, as we have seen, Economics appears to be the science of making Money, whereas Money is in fact only the medium and measure of Value in Trade. We have further seen that the immediate subsurface, Trade, consists apparently in exchanges of tangible commodities but essentially in interchanges of human service. We are now to inspect the Basic Facts.

The Basic Facts of Economics consist of natural groupings or categories of all the myriads of minor facts with which the science of Economics is concerned. Of those categories there are exactly three. By no possibility can there be more; by no possibility can there be less. Natural law fixes the number.

The first Basic Fact--not first in order of creation, but first in our perceptions of Economic necessity--is Man. Without Man, Economics could have neither incentive nor power, neither cause nor effect.

The second Basic Fact is Natural Resources, without which Man could not exist. Natural Resources comprise the surface of our globe, together with all natural objects external to Man and in their natural condition, upon the surface, under the surface, and above the surface, including the air surrounding the surface.

Through applications of the energies of the first to the offerings of the second, Artificial Objects are produced, and these constitute the third of the three.

To one or another of those three natural categories every variety of detail that may be involved in any Economic problem must be assigned. Not so to assign those details to their appropriate categories is to invite confusion of thought and to risk arriving at false and socially dangerous conclusions.

The Economic student who mixes such Natural Resources as building sites with such Artificial Objects as buildings, or natural deposits of minerals with mining machinery, or natural surfaces with railway roadbeds and tracks and equipment, or farming tracts with farm improvements, or human slaves with real estate or stocks of merchandize or factory mechanisms, makes an inexcusable blunder.

Such mixtures may be unobjectionable in accountings of the assets of a private business for private purposes; but in general Economics they are perplexing and misleading. In this comprehensive social science every Economic detail must be classified in harmony with the three Basic Facts--Man, Natural Resources and Artificial Objects,--or confused thinking will result. To make those classifications, however, is to lay a firm foundation for correctly estimating Economic phenomena of all possible kinds and in all their relations.

The human factor, Man--an impossibility without Natural Resources in the comprehensive sense of that term,--applies his energies of mind and body to the Natural Resources of our terrestrial globe and its enveloping atmospheres, thereby producing and for his satisfaction consequently consuming every variety of Artificial object within the range of his Economic desires and his Economic capabilities. This is true of Man and of Man only.