The Principles of Economics, With Applications to Practical Problems

PART I. Page

PAGE THE VALUE OF MATERIAL THINGS 1-169

DIVISION A--WANTS AND PRESENT GOODS

CHAPTER

1 THE NATURE AND PURPOSE OF POLITICAL ECONOMY: NAME AND DEFINITION; PLACE OF ECONOMICS AMONG THE SOCIAL SCIENCES; THE RELATION OF ECONOMICS TO PRACTICAL AFFAIRS 3

2 ECONOMIC MOTIVES: MATERIAL WANTS, THE PRIMARY ECONOMIC MOTIVES; DESIRES FOR NON-MATERIAL ENDS, AS SECONDARY ECONOMIC MOTIVES 9

3 WEALTH AND WELFARE: THE RELATION OF MEN AND MATERIAL THINGS TO ECONOMIC WELFARE; SOME IMPORTANT ECONOMIC CONCEPTS CONNECTED WITH WEALTH AND WELFARE 15

4 THE NATURE OF DEMAND: THE COMPARISON OF GOODS IN MAN'S THOUGHT; DEMAND FOR GOODS GROWS OUT OF SUBJECTIVE COMPARISONS 21

5 EXCHANGE IN A MARKET: EXCHANGE OF GOODS RESULTING FROM DEMAND; BARTER UNDER SIMPLE CONDITIONS; PRICE IN A MARKET 30

6 PSYCHIC INCOME: INCOME AS A FLOW OF GOODS; INCOME AS A SERIES OF GRATIFICATIONS 39

DIVISION B--WEALTH AND RENT

7 WEALTH AND ITS DIRECT USES: THE GRADES OF RELATION OF INDIRECT GOODS TO GRATIFICATION; CONDITIONS OF ECONOMIC WEALTH 46

8 THE RENTING CONTRACT: NATURE AND DEFINITION OF RENT; THE HISTORY OF CONTRACT RENT AND CHANGES IN IT 53

9 THE LAW OF DIMINISHING RETURNS: DEFINITION OF THE CONCEPT OF (ECONOMIC) DIMINISHING RETURNS; OTHER MEANINGS OF THE PHRASE "DIMINISHING RETURNS"; DEVELOPMENT OF THE CONCEPT OF DIMINISHING RETURNS 61

10 THE THEORY OF RENT: THE MARKET VALUE OF THE USUFRUCT: DIFFERENTIAL ADVANTAGES IN CONSUMPTION GOODS; DIFFERENTIAL ADVANTAGES IN INDIRECT GOODS 73

11 REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH: RELATION TO ITS SALE AND RENT: REPAIR OF RENT-BEARING AGENTS; DEPRECIATION IN RENT-EARNING POWER OF AGENTS KEPT IN REPAIR; DESTRUCTION OF NATURAL STORES OF MATERIAL 81

12 INCREASE OF RENT-BEARERS AND OF RENTS: EFFORTS OF MEN TO INCREASE PRODUCTS AND RENT-BEARERS; EFFECTS OF SOCIAL CHANGES IN RAISING THE RENTS OF INDIRECT AGENTS 90

DIVISION C--CAPITALIZATION AND TIME-VALUE

13 MONEY AS A TOOL IN EXCHANGE: ORIGIN OF THE USE OF MONEY; NATURE OF THE USE OF MONEY; THE VALUE OF TYPICAL MONEY 98

14 THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL: THE BARTER ECONOMY AND ITS DECLINE; THE CONCEPT OF CAPITAL IN MODERN BUSINESS 108

15 THE CAPITALIZATION OF ALL FORMS OF RENT: THE PURCHASE OF RENT-CHARGES AS AN EXAMPLE OF CAPITALIZATION; CAPITALIZATION INVOLVED IN THE EVALUATING OF INDIRECT AGENTS; THE INCREASING ROLE OF CAPITALIZATION IN MODERN INDUSTRY 118

16 INTEREST ON MONEY LOANS: VARIOUS FORMS OF CONTRACT INTEREST; THE MOTIVE FOR PAYING INTEREST 131

17 THE THEORY OF TIME-VALUE: DEFINITION AND SCOPE OF TIME-VALUE; THE ADJUSTMENT OF THE RATE OF TIME-DISCOUNT 141

18 RELATIVELY FIXED AND RELATIVELY INCREASABLE FORMS OF CAPITAL: HOW VARIOUS FORMS OF CAPITAL MAY BE INCREASED; SOCIAL SIGNIFICANCE OF THESE DIFFERENCES 152

19 SAVING AND PRODUCTION AS AFFECTED BY THE RATE OF INTEREST: SAVING AS AFFECTED BY THE INTEREST RATE; CONDITIONS FAVORABLE TO SAVING; INFLUENCE OF THE INTEREST RATE ON METHODS OF PRODUCTION 159

PART II

THE VALUE OF HUMAN SERVICES 171-355

DIVISION A--LABOR AND WAGES

20 LABOR AND CLASSES OF LABORERS: RELATION OF LABOR TO WEALTH; VARIETIES OF TALENTS AND OF ABILITIES IN MEN 173

21 THE SUPPLY OF LABOR: WHAT IS A DOCTRINE OF POPULATION? POPULATION IN HUMAN SOCIETY; CURRENT ASPECT OF THE POPULATION PROBLEM 184

22 CONDITIONS FOR EFFICIENT LABOR: OBJECTIVE PHYSICAL CONDITIONS; SOCIAL CONDITIONS FAVORING EFFICIENCY; DIVISION OF LABOR 195

23 THE LAW OF WAGES: NATURE OF WAGES AND THE WAGES PROBLEM; THE DIFFERENT MODES OF EARNING WAGES; WAGES AS EXEMPLIFYING THE GENERAL LAW OF VALUE 205

24 THE RELATION OF LABOR TO VALUE: RELATION OF RENT TO WAGES, RELATION OF TIME-VALUE TO WAGES; THE RELATION OF LABOR TO VALUE 215

25 THE WAGE SYSTEM AND ITS RESULTS: SYSTEMS OF LABOR; THE WAGE SYSTEM AS IT IS; PROGRESS OF THE MASSES UNDER THE WAGE SYSTEM 226

26 MACHINERY AND LABOR: EXTENT OF THE USE OF MACHINERY; EFFECT OF MACHINERY ON THE WELFARE AND WAGES OF THE MASSES 236

27 TRADE-UNIONS: THE OBJECTS OF TRADE-UNIONS; THE METHODS OF TRADE-UNIONS; COMBINATION AND WAGES 245

DIVISION B--ENTERPRISE AND PROFITS

28 PRODUCTION AND THE COMBINATION OF THE FACTORS: THE NATURE OF PRODUCTION; COMBINATION OF THE FACTORS 257

29 BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION: THE DIRECTION OF INDUSTRY; QUALITIES OF A BUSINESS ORGANIZER; THE SELECTION OF ABILITY 265

30 COST OF PRODUCTION: COST OF PRODUCTION FROM THE ENTERPRISER'S POINT OF VIEW; COST OF PRODUCTION FROM THE ECONOMIST'S STANDPOINT 273

31 THE LAW OF PROFITS: MEANING OF TERMS; THE TYPICAL ENTERPRISER'S SERVICES REVIEWED; STATEMENT OF THE LAW OF PROFITS 282

32 PROFIT-SHARING, PRODUCERS' AND CONSUMERS' COÖPERATION: PROFIT-SHARING; PRODUCERS' COÖPERATION; CONSUMERS' COÖPERATION 292

33 MONOPOLY PROFITS: NATURE OF MONOPOLY; KINDS OF MONOPOLY; THE FIXING OF A MONOPOLY PRICE 302

34 GROWTH OF TRUSTS AND COMBINATIONS IN THE UNITED STATES: GROWTH OF LARGE INDUSTRY IN THE UNITED STATES; ADVANTAGES OF LARGE PRODUCTION; CAUSES OF INDUSTRIAL COMBINATIONS 312

35 EFFECT OF TRUSTS ON PRICES: HOW TRUSTS MIGHT AFFECT PRICES; HOW TRUSTS HAVE AFFECTED PRICES 323

36 GAMBLING, SPECULATION, AND PROMOTERS' PROFITS: GAMBLING VS. INSURANCE; THE SPECULATOR AS A RISK TAKER; PROMOTER'S AND TRUSTEE'S PROFITS 333

37 CRISES AND INDUSTRIAL DEPRESSIONS: DEFINITION AND DESCRIPTION OF CRISES; CRISES IN THE NINETEENTH CENTURY; VARIOUS EXPLANATIONS OF CRISES 345

PART III

THE SOCIAL ASPECTS OF VALUE 357-563

DIVISION A--RELATION OF PRIVATE INCOME TO SOCIAL WELFARE

38 PRIVATE PROPERTY AND INHERITANCE: IMPERSONAL AND PERSONAL SHARES OF INCOME; THE ORIGIN OF PRIVATE PROPERTY; LIMITATIONS OF THE RIGHT OF PRIVATE PROPERTY 359

39 INCOME AND SOCIAL SERVICE: INCOME FROM PROPERTY; INCOME FROM PERSONAL SERVICES 370

40 WASTE AND LUXURY: WASTE OF WEALTH; LUXURY 381

41 REACTION OF CONSUMPTION ON PRODUCTION: REACTION UPON MATERIAL PRODUCTIVE AGENTS; REACTION UPON THE EFFICIENCY OF THE WORKERS; EFFECTS ON THE ABIDING WELFARE OF THE CONSUMER 392

42 DISTRIBUTION OF THE SOCIAL INCOME: THE NATURE OF PERSONAL DISTRIBUTION; METHODS OF PERSONAL DISTRIBUTION 402

43 SURVEY OF THE THEORY OF VALUE: REVIEW OF THE PLAN FOLLOWED; RELATION OF VALUE THEORIES TO SOCIAL REFORMS; INTERRELATION OF ECONOMIC AGENTS 412

DIVISION B--RELATION OF THE STATE TO INDUSTRY

44 FREE COMPETITION AND STATE ACTION: COMPETITION AND CUSTOM; ECONOMIC HARMONY THROUGH COMPETITION; SOCIAL LIMITING OF COMPETITION 422

45 USE, COINAGE, AND VALUE OF MONEY: THE PRECIOUS METALS AS MONEY; THE QUANTITY THEORY OF MONEY 431

46 TOKEN COINAGE AND GOVERNMENT PAPER MONEY: LIGHT-WEIGHT COINS; PAPER MONEY EXPERIMENTS; THEORIES OF POLITICAL MONEY 443

47 THE STANDARD OF DEFERRED PAYMENTS: FUNCTION OF THE STANDARD; INTERNATIONAL BIMETALLISM; THE FREE-SILVER MOVEMENT IN AMERICA 453

48 BANKING AND CREDIT: FUNCTIONS OF A BANK; TYPICAL BANK MONEY; BANKS OF THE UNITED STATES TO-DAY 462

49 TAXATION IN ITS RELATION TO VALUE: PURPOSES OF TAXATION; FORMS OF TAXATION; PRINCIPLES AND PRACTICE 471

50 THE GENERAL THEORY OF INTERNATIONAL TRADE: INTERNATIONAL TRADE AS A CASE OF EXCHANGE; THEORY OF FOREIGN EXCHANGES OF MONEY; REAL BENEFITS OF FOREIGN TRADE 480

51 THE PROTECTIVE TARIFF: THE NATURE AND CLAIMS OF PROTECTION; THE REASONABLE MEASURE OF JUSTIFICATION OF PROTECTION; VALUES AS AFFECTED BY PROTECTION 491

52 OTHER PROTECTIVE SOCIAL AND LABOR LEGISLATION: SOCIAL LEGISLATION; LABOR LEGISLATION 504

53 PUBLIC OWNERSHIP OF INDUSTRY: EXAMPLES OF PUBLIC OWNERSHIP; ECONOMIC ASPECTS OF PUBLIC OWNERSHIP 514

54 RAILROADS AND INDUSTRY: TRANSPORTATION AS A FORM OF PRODUCTION; THE RAILROAD AS A CARRIER; DISCRIMINATION IN RATES ON RAILROADS 525

55 THE PUBLIC NATURE OF RAILROADS: PUBLIC PRIVILEGES OF RAILROAD CORPORATIONS; POLITICAL AND ECONOMIC POWER OF RAILROAD MANAGERS; COMMISSIONS TO CONTROL RAILROADS 534

56 PUBLIC POLICY AS TO CONTROL OF INDUSTRY: STATE REGULATION OF CORPORATE INDUSTRY; DIFFICULTIES OF PUBLIC CONTROL OF INDUSTRY; TREND OF POLICY AS TO PUBLIC INDUSTRIAL ACTIVITY 544

57 FUTURE TREND OF VALUES: PAST AND PRESENT OF ECONOMIC SOCIETY; THE ECONOMIC FUTURE OF SOCIETY 555

QUESTIONS AND CRITICAL NOTES 565

INDEX 595

PREFACE

This book had its beginning ten years ago in a series of brief discussions supplementing a text used in the class-room. Their purpose was to amend certain theoretical views even then generally questioned by economists, and to present most recent opinions on some other questions. These critical comments evolved into a course of lectures following an original outline, and were at length reduced to manuscript in the form of a stenographic report made from day to day in the class-room. The propositions printed in italics were dictated to the class, to give the key-note to the main divisions of the argument. Repeated revisions have shortened the text, cut out many digressions and illustrations, and remedied many of the faults both of thought and of expression; but no effort has been made to conceal or alter the original and essential character of the simple, informal, class-room talks by teacher to student. To this origin are traceable many conversational phrases and local illustrations, and the occasional use of the personal form of address.

The lectures, at the outset, sought to give merely a summary of widely accepted economic theory, not to offer any contribution to the subject. While they were in progress, however, special studies in the evolution of the economic concepts were pursued, and the manuscript of a book on that more special subject was carried well toward completion. That work, which it is hoped some time to complete, was, for several reasons, put aside while the present text was preparing for publication. The economic theories of the present transition period show many discordant elements, yet the author felt that his attempt to unify the statement of principles, in an elementary text explaining modern problems, and consistent in its various parts, helped to reveal to him both difficulties and possible solutions in the more special theoretical field. The unforeseen outcome of these varied studies is an elementary text embodying a new conception of the theory of distribution, an outline of which will be found in Chapter Forty-three. It is, in brief, a consistently subjective analysis of the relations of goods to wants, in place of the admixture of objective and subjective distinctions found in the traditional conceptions of rent, interest, and price.

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