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The C]iA«U«qui LlUnrj Md Seieaillle Cirele. 

STUDIES FOR 1889-80. 

LN Introduction to Political Economy. Ely |i oo 


low TO Judge of a Picture. Van Dyke 60 

>UTUNE HiSTOSY OF RoMB. ViDcent and Joy 70 

'hysics. Steele x 00 

Preparatory and College Latin Course in English, x vol. 

Wilkinson 1 30 







Chautauqua Press 


The required books of the C. L. S. C. are recommended by a Council 
of Six. It must, however, be understood that recommendation does not 
involve an approval by the Council, or by any member of it, of every 
principle or doctrine contained in the book recommended. 

«r b 

b V k • V 

• • 

« • 

• • 

• • • 

Copyright 1889, by Hunt ft Eaton, New York. 


It has frequently been iloubted whether the present is the 
beet time for the preparation of a text-book of political 
economy, and it baa been said that the attitude of mind 
vhich should characterize the political economist under ex- 
isting circumstances ia one of " pause and retrospection."" 
There is active dispute concerning fundamental conceptions, 
and when one listens to the controversies now going on tho 
impression is apt to grow on one ibal in political economy 
nothing is settled. Topics as important as wages, rent, and 
protits are nuw under active diacusaion by scholars who hold 
widely divergent views. It is true that in reality many 
things are tolerably well settled in political economy, and 
that progress in the science wiis never so rapid as now; but 
precisely ihis hopeful outlook for the future renders the 
preparation of a t«xt-book at present difficutL 

The author's experience as a teacher and a writer has 
convinced him that brief economic manuals have in the past 
done immense harm. They have conveyed little positive 
knowledge, but they have provided their readers with a lot 
of catch- words and simple "rules of thumb" for the solu- 
tion of tho various socio-economic problems which arise in 
our complex modom industrial civilization. Tbey have thus 
turned the minds of a multitude of half-educated persona, 


away from the careful obaervation of the phenomena of 
aotoal life, and have shut their eyea to truths easy enough 
of perception. 

RefleotiODB like the foregoing could not fail to occur to the 
author when be was rcqncsted to prepare a brief text-bouk 
of politieal economy, which, while designed primarily for the 
Cbantanqoa Literary and Scientific Circle, should at the same 
time be suitable for use in schools and colleges and for gen- 
eral reading. It seemed to him very clear what ought to be 
done. Many things must be passed over and left for fur- 
ther diwuerion in monographs by scholars before they are 
included in an elementary tezt-bctok. NerertfaeleM, a gen- 
eral surrey of the field is important. If special questions 
ar« studied without the previous, or, at any rate, subsequent, 
perusal of an outline of the entire soienee, the sense of unity 
is lost A framework is needed in order that special topics, 
like taxation, labor organisatioDs, socialism, may be con- 
veniently placed within it. 

The intention of the author has, then, been to write a work 
descriptive rather than logical, and the ordinary distribu- 
tion of space in text-books has been abandoned. More than 
one third of the book has been occupied with a description 
of the growth and characteristics of industrial society and 
an exposition of the nature of political economy. Many a 
person has read through a text-book of political economy 
without knowing what political economy really means. It 
has been the aim of the aatlior to make, at least, the true 
significanoe of poIiUoal economy apparent. 


The character of the work and the strictly limited space 
have led the author reluctantly to omit many topics. It has 
been thought better to write something suggestive, and in 
keeping with the spirit of the book, about a comparatively 
few topics than to attempt to say a word in didactic style 
about every topic which comes under the general subject of 
political economy. 

The book is called an Introduction to PolUicai Econ- 
omy, It is hoped that this work will interest its readers, 
will excite curiosity, will open their minds, and will thus 
lead them to continue their economic studies, for which 
suggestions are given in one of the parts into which the 
work is divided. The impression which it is desired that 
titis book should leave is something like this: '^Political 
economy is an interesting and most important branch of 
human knowledge. I now see what it is all about, and hav- 
ing surveyed the field I propose to take up special questions, 
like taxation and the labor movement, and study them care- 
fully. I do not feel so much that I really know a great deal 
about political economy as that I "km now in a position to 
learn something.'' 

The author's indebtedness to various authors is sufficiently 
acknowledged in references throughout the book. It may 
be, perhaps, proper to say that he is especially indebted to a 
treatise of Professor Schdnberg, several times mentioned, 
in the preparation of that part of the present work which 
deals with the development and characteristics of economic 

At the close of tfao chapters rererencea sre frequently 
given to works which will still further elucidate llie toi>it.'8 
thereiu treated. 

The author has fflt so keenly the responsibility which 
rested upou liiin in pi-eparlug a text-book for tlie truly 
immeDse Chautauqua public that he has asked Professor 
Frankliu H. Giddiiigs, of Bryn Mawr College, to read his 
manuscript and proofs, and Professor J. B. Clark, of Sniith 
College, Professor Woodrow Wilson, of Wealeyan Uni- 
versity, and Piofessor Amos G. Warner, of the University 
of NL'braska, to read the proofs. For the snggeslions and 
encouragement received from these gentlemen he is deeply 
indebted, and he wishes here to express hia thanks. The 
author is also indebted to Mr. John R. Commons, one of the 
most gifted members of bis graduate class, for assistance of 
many kinds given during the preparation of the present 

All persons whose interest is specially awakened, leaders 
of circles and teachers who use the book, unlcMs tbey have al- 
ready enjoyed thorough instruction in political economy, will 
find it to their advantage to take the correspondence work 
in political economy in the Chautauqua College of Liberal 
Alts, about which the registrar. Professor Frederick Starr, 
of New Haven, Conu,, is always ready to give information. 
KicnASD T. Ely. 

JUHXB Hopkins Usiveiuutt. Baltucokb, Febrvary, 1889. 



. PART I. 





Isolated AKD Social Eooxomc LiFs. 19 


voMio Lin or a People 26 


Thb Two Gbbat Factobs or a National Ecokoict 81 


Thb Eoonomt or ▲ Nation an Histobical Pboduot 36 


Tbb Staobs in thb Eoonomio Dbtblopmbnt or Cifilization. 39 


EcoNomo Stages Viewed ntOM thb Stand-point op Production and 
FROM THB Stand-point of Tbanspebs or Goods A2 


A Few Main Causes fob the Existence of Present Egonojiic Prob- 
lems. 66 


Some Gb^tbeal FEAtintES of the Eoovomt of the Modern Nation.. 71 





. ... 106 1 



PART n. 



iRBODncrOBT. . 


Hotrm » EooNomo AcnrnT 


Thi Factors or Pnoprcnos 







MOKBT 184 


Credit and thb Ivstbuiibnts or Credit — Banks and Clearing 
HousKS 196 


Thx Rbqulatiov or International Commerce 204 



Intboductort 213 


Wagbs AND THE Wages Ststem., 221 


Labob Obganizations 228 



Socialism 240 

chapter vi. 
Monopolies 249 


A Few Additional Rbmabss on Soolal Pboblbms amd i^"«mr»y 
fob Social Eyilb 269 







PUB i 




... 1 

:: :. i 









1. Quimoira and I 






Some wrilerB have been inclined to discard formal deGni- 
tions of sciences as unprofitable. An entire scientific treatise 
is notbing but :in expanded definition. A text-book of 
physiology is nothing but an answer to the question, "What 
is physiology ? " The present work is a aimilai- endeavor to 
aiswcr the question, What is political economy? While 
conscious of the imperfections of definitions, partieularly 
when placed at the beginning of a treatise, the student linds 
it an advantage to have described to him, in advance, in 
rough outlines, at lea^l, the field which he is about to in- 
vestigate more minutely. We wilt attempt to frame some 
kind of an idea of political economy, and of that larger 
branch of knowledge of which it is a part, at the outset of 
our studies, and will then later return to a more detailed 
description of the nature of political ceonomy. 

Political Economy a Paxt of Sociology.— Political 
economy is a social Rcience, but it is not social science in its 
broadest sense. Another name has been reserved for that 
larger branch of knowledge, and that is sociology. Pohtical 
economy is a part of sociology. Sociology deals with all the 
phenomena of society ; that is to say, with all that concerns men 
living together and having certain necessary, agreeable, and 
desirable relations with one another. It does not deal with 
individuals as snch. It does not tell us something about John 
and Henry and Robert and George, Susan and Jane and Sarah 
and Mary as separated, isolated personalities, but it treats 
them and other human beings as members of an organiza- 
tion, and that organization is called society. 


The fact of the necessary relatioaahip of human beings to 
one another U brought out in a thousand ways in the lan- 
guage of every-day conversation. When we say "human 
beings " we separate men from otlier beings, and imply a 
common tie in humanity. This idea is brought out still 
more clearly when we speak of othei's as our fellows. With- 
out dwelling upon words which imply this intuitive feeling 
in various grades of intensity, it may be remarked that 
Christianity offers us our highest conception of a society 
which embraces all men, and in that conception sets ui> a 
goal toward which we must ever move. The fatherhood of 
(Jod and the brotherhood of man are the expressions of this 
relationship. Human progress can never pass that goal, for 
it satisfies the highest aspirations of which we are capable. 

Society eoi Organism.— As a first step in the study of 
souiolugy, nnd in that branch of sociology called political 
economy, it must be clearly understood that society is an 
organism; that is to say, it is composed of interdependent 
parts performing functions essential to the life of the whole. 
Society expresses a will in various ways, and particularly, but 
not solely, through government, and it finds methods for the 
execution of its purposes. Society punishes those who offend 
it and violate its well'known desires, and this punishment as- 
Bumes almost infinitely varying degrees of severity, inclnd- 
ing even torture, disgrace, and death. At the same time 
society differs from many other organisms in the fact that 
its separate parts are themselves organisms, and thai each of 
these parts has a purpose and a destiny of its own. Society 
is composed of individuals, but individuals find their true 
life in society. 

Sociology Defined. — Sociology is the science which deals 
with society. It may be more proper to say the group of sci- 
ences, as sociology, at present, is only developed in parts, and 
these parts have as yet scarcely been connected into one whole. 
Sociology is identical with social science properly understood, 
but the term social science has unfortunately been used in 
a narrower and less correct sense. Social science has been 


used 38 equivalent to that branch of knowledge whieh la 
coDcerncd with the proper treatment of the (lepen<leiit, delin- 
qaent, and criminul dasses. What propriety there can be in 
restricting soeial acienuo, or the science of eociety, to a con- 
sideratioQ of the lowest and mont uufortuuate classes of soci- 
ety is not apparent. 

Sociology deals with social phenomena, and so does polit- 
ical economy ; but probably all readers of this work instinc- 
tively feel that the two are not identical. When we open a 
treatise on sociology we aie not surprised to see an exhaust- 
ive treatment of the social phenomena of religion, of intem- 
perance, of marriage, and of divorce, but it can hardly be 
necessary to say that in themselves these things do not belong 
to political economy. The political economist may very 
properly have more or less to say about these topics, but he 
does not get at them directly, but only indirectly, as bearing 
on other phenomena or as themselves affected by other social 
forces. The entire life of man in society is truly one, but it 
is BO great, so complex in all its almost infinite variety of 
manifestations, that it seems necessary to separate it into 
parts by more or lexs artificial lines ; not that any part has 
an independent existence, for each part affects vitally every 
other part, but that in this manner we accommodate things 
better to the limited powers of man's intellect. 

The Departments of Social Life. — Dividing the life of 
society or of a people organized as a politically independent 
society into part^, wc may call these parts territories of social 
life, or department* of social life, or we may use the expres- 
sion social life-spheres. Eight great departments of social 
life have been enumerated; namely, first, language; second, 
act; third, science and education ; fourth, the family life ; 
tilth, social life in the narrower sense, that is, the intercourse 
of friends and associates as seen in enteitainmcnts, parties, 
and meetings of various kinds, the interchange of ideas and 
courtesies; sixth, religious life; seventh, political life; 
eighth, economic life. The economic life means briefly tliat 
part of man's life which is concerned with what is commonly 



called "getting & living." Now it is with this eighth great 
fundamental life teiTitory of a people that political economy 
haij to do, aud we must examine its character. 

Helation of Economic to other Lifa-Spheres.— But 
the reader must first be warned that the flcope of our science 
is neither smaH nor insignificant because we have excluded 
BO muuh, and more especially because we have excluded the 
higher life-spheres of society. Our department touches all 
others, modifies and conditions all others, ought to subserve 
all others, and in studying it we are examining those things 
whifh aro fundamental, those things which serve as an indis- 
pensable basis for the highest flights of the soul in art, 
music, and in i-eligion. There ia scarcely a phenomenon of 
society, perhaps none at all, which does not come sooner or 
later within the range of the economist's discussion, although 
he arrives at all from his own i)eculiar slarting-poiiit. 

The Present Condition of Sociology. — Attention must 
also be called to the fact that we are about to consider one 
of the most fruitful fields of sociological inquirj-. Sociology 
as 3 whole is m vast a subject that comparatively little prog- 
rese, it must be confessed, has been made in its prosecution. 
This will undoubtedly be different in the future, but the con- 
dition of sociology is rather disheartening at present. Only 
few men have done valuable work aa sociologists. The 
French philosopher, Auguste Comte, who lived during the 
first half of this century, is often called the faiher of soci- 
ology, and undoubtedly in his Positive Philosophy and otiier 
works he has made valuable contributions to sociological 
knowledge, and Htill more valuable contributions to socio- 
logical method. His greatest service was, however, the im- 
pulse which he gave to sociological studies, and this impulse 
is still felt. The disciples of Auguste Comte are called Posi- 
tivists, and are found chiefly in France and England, but his 
influence, transcending the sphere of hts own followers, has 
touched all modern students of sociology- 
Several German writers have attempted work in the 
broad field of sociology, of whom, perhaps. Professor Albert 


Sctiiiffle is most <liBtiDguished, Schiiffle is (be Author of a 
great work, in four volumes, called The StrncCure and Life 
q/ the Social Body. It is erudite, but eitggestive rather than 

Herbert Spencer is the beat known English sociologist, and 
iti liis varioDB works, Study of Sociology^ Social Statics, 
J'rinciplea of Siology, and others, he has covered a widr 
field, but for the most part superficially, and especially tta- 
perticial are all tiiose parts which treat of economic liie and 
institutions. While it is not, too much to call some of his 
speculations crude, in iLeir dogmatism and blindness to the 
faots of social life, it must be admitted that he Ii;ir rendered 
distinguished service to the study of sociology in the work 
which he has mapped out for others to do, and in the very 
considerable interest in soelologiciil inquiries which he has 
awakened both in England and America. 

One part of sociology, thai which de.ils with the growth 
of society, has been ably treated by an American, Professor 
Lester F. Ward, in his Dynamic Sociology, a work in two 
stout volumes. 

This may not exhaust the list of sociologists, but these 
four names include the principal sociologists, and in reading 
their works, while making full and frank acknowledgment 
of their erudition, patient research, and ability, it must be 
confessed that the impression left by alt is that of work un- 
finished, of work, in fact, scarcely more than begun, and of 
work of very uneven excellence. They are men who are 
feeling their way, and who, like other explorers, often stum- 
ble and fait. Suggestion and irapidse describe the debt we 
owe to sociologists. 

Political Economy the Best Introduction to Soci- 
ology. — Political economy, on the olhcr hand, is a science 
which is making rapid progress at the present time, and men 
young and old, hut principally young men, in all civilized 
lands, particularly in Italy, (lermany, England, and the 
United States, are devoting themselves to its advancement 
with anior justified hy results already achieved. While it is 



recognieed that political economy has not long left beliiiid 
the period of infancy, that a great deal of vhat passes under 
that name is crude and imperfect, it is safe to say that it is 
to-day in a most hoptfiil condition, and that at the present 
time politica! economy is the best introduction to the various 
social BcieaocH enihraoed under the creneral name sociology. 

Read F. H. Oiddings's 

d Political Eiionom 




The Economic Life.—It is not difficult to understand 
what is meant by economio life, as the mention of a few ele- 
mentary facts explains it. Man has wants which must be 
satisfied in order that he may live at all, and other wants 
which must be satisfied in order that he may live worthily, 
and still other wants the gratification of which ministers to 
vanity or other evil traits of human character. These wants 
of man are of the most diverse kinds. Some can be satisfied 
by tangible, material things, others only with immaterial or 
non-corporeal goods. Man is constantly striving to satisfy 
his wants in order to protnote his welfare or to increase his 
happiness in some way. In so far as he is engaged in cffprts 
to secure material goods for the satisfaction of his wants, we 
may speak of his activity as economic, and the regular suc- 
cession of these efforts we may call his economic life, just as 
we may call efforts and experiences of another sort his relig- 
ious life. ''In so far as the activity of man is directed to 
the acquisition of material things for the satisfaction of hu- 
man wants it is called economic, and, . . . like any other 
human activity, it is conclitioned in its manifestations by the 
nature of man and by his historical development.'' * 

It is to be noticed that this activity is of two kinds ; 
namely, first, in the acquisition, second in the employment 
of material means. 

Isolated Economic Life. — Theeconomicactivity of man 
may be isolated or it may be social. It is exclusively or even 
chiefly the first only in the earliest stages of human develop- 

* Schonberg, in his Handlmch der FiflUischen Oekofumie^ Bd. i, S. 4, 2te 


ment PoMibly it is nerer (rtrielly itolateci, beointe mSAmt 
in history nor in aocoanti of the ezperienoes of ooniemponury 
travelers and explorers do wo find human beings living soldy 
in and for themselves. The beasts of the field are not alto- 
gether isolated in their efforts to obtain food^ nor in thmr 
consumption of it, altboQ||^ they diflbr ooosiderably among 
themselves in this respeeli Tb» lowest of the human raoe 
resemble most closely beasts ia the individQalism of their 
economic life. 

Homer has described the aooDoniio liolatimi of barbiriaiia 
in these lines, which refer to the Oyelops: 

"NolawshiivstiMy, Oisyhold 
Ko oounons. On tbs moimlsfai h«i|^ tiiey dindl 
In Tsulted csyss, whers sssh ens miss his wifss 
And ohUdrsn as he plsssas; none gits heed 
To what the others do.*** 

It has been said that the wild men of Australia never co- 
operate with one another in their economic efforts, and the 
• individualism of the blacks of ''the heart of Africa" has 
been described by Professor Drummond, in his work, Trop- 
ical AfiricOf to be such that in some districts three natives 
cannot be sent with a message, for in that case two of them 
would combine and sell the third before they return. Sir 
John Lubbock uses these words of savages in general : ''The 
savage is always suspicious, always in danger, always on the 
watch. He can depend on no one, and no one can depend 
on him. He expects nothing from his neighbor, and does 
unto others as he thinks they would do unto him. Thus hb 
life is one prolonged scene of selfishness and fear." f 

While we do not find individuals living a strictly isolated 
economic life, we do discover families or households organ- 
ised as isolated economic units, and the family in one shape 
or another is probably the first social unit No opinion is 
here expressed as to the particular form of family which first 

* IV (Myaeiy, Bk. ix, 136-140, Bryant's 
f PrfkUtono Tbam% chapter ztL 



arose. It is simply meant to state it a^ probablo that any 
life of man preceding the existence of some institution wliich 
may be called the family could not have been social ; that 
where we find eooiety, there we find the family as a unit, 
though, of course, larger composite units, as tribes, etc., may 
exist above the single family. We find in history, and we 
diacover in the records of travelers, an economic activity of 
the family which we may call relatively isolated. It begins 
and ends in itself. Products are gathered from nature, and 
these are used directly, or after their form has been changed, 
to satisfy the wants of the various members of this economlu 
unit. But this is the case only in early times or among peo- 
ple in an early stage of development. Probably even in 
this relatively isolated economic life, economic goods were 
exchanged occasionally by families, and thus a social eco- 
nomic life was begun. Nevertheless, the progress was slow, 
and a condition of relative isolation lasted for many centu- 
ries aud has continued on a large part of the globe up to the 
present day. • 

Social Eoonomic Life. — Modem civilixatioa has, how- 
ever, produced rapid changes, and it may be said that 
the economic activity of civilized man is, to-day, chiefly 
social. The greater part of what is produced in our indus- 
trial centers is not for the consumijtion of the producer, but 
is destined to satisfy the wants of others ; while the wants 
of the producer are satisfied by others give in ex- 
change for his products. If the reader goes to Gloversville, 
in New York State, he will find people engaged solely in 
the production of gloves who seldom, and perhaps never, use 
a glove of their own making; if he goes to Westfield, Massa- 
chusetts, he will find men manufncturing horsewhips who 
never have occasion to use a whip they have made; if he 
goes farther east, to Ilaverhill, Lynn, Spencer, Natick, Marl- 
boro, Brockton, or Worcester, in the same State, he will see 
almost the entire labor of thousands of human beings, young 
god old, men and women, expended in the marvelously rapid 
production of boots and shoes — and not merely that, but in 


each place chiefly in the production of one kind of foot- 
wear, 08 women's and misBes' fine shoes in Lynn and Hav- 
erhill, men's medium and fliieahocs in Brockton, heavy boots 
in Spencer, brogans and men's heavy coarse shoes in Natick, 
and heavy boots and shoc-s of coarse grades in Marlboro — 
yet he will doubtlesis find, on inquiry, that a considerable 
portion of these working-men and working- women, and of 
these capitalists with whom they join their forces, have never 
worn a boot or shoe on which they have labored. The same 
thing hohls true, though to less exteDt, in agriculture, and 
cot ton -plan tci-a in the South often obtain nearly every thing 
which they use in exchange for cotton; wheat-growers in the 
North-west frequently procure most of the economic goods 
consumed by their families by means of purchase, and it is 
probable that in a near future grape-growers along the shore 
of Lake Erie, in Chautauqua County, New York, will procure 
nearly all the commodities which they use in exchange for 
grapes. There is, in fact, as we shall see in the progress of 
our studies more clearly, a unity in the economic life of ft 
civilized people, bat not as yet & unity in the economic life 
of humanity. We may thus apeak of the economic life of 
the American people, of the German people, of the French 
people. The economic life of a politically oru^aoised inde- 
pendent people is often called a national econofity,' as the 
national economy of the Italians. We cannot as yet speak' 
of the economic life of the world an a unity, or as any t^ing 
other than the sum of several unities, although economic 
interrelations among various nations are rapidly extending. 
These interrelations we may call economic internationalism, 
and it is possible that this will grow until we have a real 
World econn ly. 

Productive Elements Often Overlooked. — Tt is nec- 
essary at this point to call attention to some important 
facts which are frequently overlooked. A large part of 
production even now is household production, as it may be 
called, and is not designed for the market-place, which in- 
deed takes no note of it. Every well-regulated household 


ia an establishment where valuable thiL-ga or i{Mantitic!i of 
niility are produced. Food is prepared for nae, and pre- 
pared food in worth far more than unprepared, as we dis- 
Oliver wbeu we purchase it at a boarding- Louse, restaurant, 
or hotel. Often the prepared food sells for more than 
twice the cost of the unprepared food. But other utilities 
are produced in the household. Clothing is prepared anil 
repaired, comfortable shelter is aSirded, and strength of 
boiiy and mind of the chief productive factor, the human 
being, is nourished. It has been claimed that the labor of 
at least hnlf of the women of a country "is expended in > 
producing material good things for the use of the produc- 
ers."* Now it is a fact that more than half of the human 
race in civilized nations is composed of women, and if it ia 
admitted that women I»bor as long and as severely as men 
it follows that a fourth of the labor of men and women com- 
bined is destined for tlie Imuselmld and not for the market. 
But this is only a p.irtuf the annual Income of the country 
of which no account is taken in ordinary money-estimates 
of annual income. Three fourths of the population of the 
TJniled States is rural, and in the country a vast amount of 
material good things produced is destined for the household, 
and is rarely financially estimated. Vegetables, small fruits — 
cultivated and wild — butter, eggs, meat, fish caught in pub- 
lic waters, and game miiy be mentioned. Even wild nuta 
gathered are not altogether insignificant. Large as is this 
aggregate income neglected in estimates of annual produc- 
tion, it is by no means all. Properly yields nn income by 
use. My own house when occupied by me as truly produces 
a part of my income as when I rent it to some one else, for 
in either case I receive simply a quantity of utility. Horses, 
carriages, wagons, furniture, books, works of ait, and the 
like, all annually produce quantitie* of utility, and these 
often have a large market value when offered foi- sale. Yet 
lliese utilities, when produced by goods owned by those who 
enjoy them, largely escape valuation. All this will show 
■ Sea ISdwia Oaaaaa'a EUmeoian/ PoliUcai Economy, Put ij, § S. 



bow miserably inadcQunte and even absurd are .carrent 
estimates of average per capita production of wealth, as 
that llie average wealth daily produceil in the United 
States is only forty cents, or fifty cents, per capita, aa the 

Misleading Comparisons between the Past and 
the PreB9iit.~AiiollKT imgiortaut f;ict to be iimiced in lliis 
coDiiectiuii is the misleading nature of ordinary eompariimns 
between the wealth annually produced at the present time 
and tlie wealth annually produced at ait early day, say fifty 
years ago. While household production is now large, it un- 
doubtedly lias i-elativuly diminished in importance. Produo- 
tion of things which are bought and sold in the marketrplaoe, 
and are consequently readily cHtimated in money, is con- 
Rlantty gaining in importance on honsebold production of 
material good things. Hence annnal prcKlu<!tion of material 
good thingB, or, broadly speaking, of economic goods which 
we estimate in money, increases more rapidly than real an- 
nnal production; and there is, consequently, a tendency 
always to exaggerate [irogress, and, indeed, to count as prog- 
ress some things which are retrojrression. Shoidd boarding- 
house and hotel life totally displace private housekeeping it 
wonld increase the apparent annual pro<luction of wealth. 

Economic Life Defined. — Summing up what has been 
said, we may define the economic life of a |>eople as its regu- 
lar system.itic activity for the acquisition and employment 
of material goods for the satisfaction of it* wants. We may 
in a similar manner speak of the economic nclirity of any 
person — natural or artificial; as of a merchant, a farmer, a 
',.ii*unfacturer, or a city, a township, a county, a StaVe, a 
• ^nway company, a bank, or a manufacturing corporation. 
Wfl also use the word economy for economic life, as the 
«Cenomy of a family or of a nation. 

Tile economic life of a people embraces the economic ac- 
tivities of all its individual membei-s and of all its political 
units for the acquisition and employment of material goods, 
not mei'ely for the satisfaction of individual wants, but for 


the satidfaction of wants of schools and charches and gov- 
ernments, local and general.* 

The Economist not Confined to the Material Life. 
— But, again, it is necessary to remark that we are not con- 
cerned merely with the material life of men in its narrow 
sen^e, for there can scarcely be a phase of the life of society 
which does not come within the province of the economist. 
But other phases of social life than the material are consid- 
ered, rather indirectly than directly, as influencing the pro- 
duction of material goods or influenced thereby. The econ- 
omist and the physician, for example, both discuss the san- 
itary condition of cities, and both propose measures to lessen 
the awful mortality among the children of the urban poor, 
but they come to the consideration of this same topic by 
very different routes. The physician takes up directly the 
health of the people, while tlie economist proceeds from a 
consideration of labor as one of the factors of production, 
and from the welfare of the laboring population. The econ- 
omist iinds one factor in production in an unsatisfactory or 
diseased condition, and searches for causes and proposes 
remedies. Likewise the educator and the economist both 
discuss industrial training, but each from his own peculiar 


* ScUduberg is followed closely here. 


1. The Economic Life not for Self. — It is charAuteris- 
tic of the economic life of the modern man that it is not for 
self but for others. As liaii alreaily been shown, giioda are 
produced not fur uxe but for exchange. It follows as a direct 
consequence of this that the division of society into economic 
classes with the wide-extended division of labor is one of the 
fundamental fatits of modern economic life. One class pro- 
duces one thing and another class a second thing, and so do 
indeiinitely, and as the variety of commodities is great the 
number of economic or indnslnal claases must be l;irgo. 

2. Dependence of Man upon Man. — The de^iendence 
of man n]ion his fellows is auotlier fundamental fact. We 
speak of the increase in the number and im^rtance of com- 
mercial and industrial relations, and wo simply give expres- 
sion to a movement which all can observe. But relationship 
in itself means dependence. There cannot be a relation of 
one; it must be a connection between two or more. 77iie 
economic tlependence of ninn upon mnn Ihits iucrtaws iaith 
th6 proiirena of iiiiUntrinl civilization / and in ibis single 
phrase lies lucked np the explanation of many of the com- 
plicated and distressing phenomena of our times. "In his 
economic position, in the manner and in the success of bis 
econumio activity, in all that pertains to lii:^ income and to 
his i-ea<mrces, the individual heoomen dependent upon the 
economic activity and acts of others," * 

We may take as an examjile of this dependence of the 

modern man the manufacture of watches. If a man nianu- 

* Scltouberg. 


factares a whole watch he is depenjent upon others. If the 
hasbandman is shifllesH or tiniikilll'iil he will have no Eiirplus 
graiD to exchange for a watch. If the miner aiop iiia M'ork, 
the silver, gold, and other metals which enter into the watch 
will not be snpplied. If the spin»er and weaver cease their 
operations the watchmaker will sutler for clothing. If the 
shoemaker becomes indolent the watchmaker will be forced 
to go witlioDt covering for his feet, and no on indetinitely. 

Let tiN now tnke another step. Suppose a man manufactures, 
not a whole watch, aa formerly, but only a small part of one, 
as at present — let us say the three hundredth part of a watch. 
Huw greatly is his dependence upon others increased I He 
is now dependent upon hundreds of others engaged in the 
production of watches, as well as upon other industrial 
classes. It is not improbable that he may be dependent 
a])on a million others for the necessaries of life, so wonderful 
is the socio-economic organism iit which and through which 
we live. E\-ery day brings fresh illustrations of the growing 
eeonomiu dependence of man upon his fellows, showing that 
production is becoming more and more social in its nature, 
and less and less individual. Railway strikes offer a good 
illustration of the interdependence of mnn in Industrial so- 
ciety. Tlie entire economic Hie of the nation, and the life 
even of other nations, is affected by acts of a comparatively 
few. A recognition of this economic dependence of man 
upon man has even led to consequeuces in legislation and in 
Judicial decisions, liraiting the industrial liberty of those 
engaged in particularly imporlant occupations. Some have 
gone so far as to wish to make it a criminal offense for those 
engaged in transpnrt.atiim to manage " their own alTairs in 
their own way," as the saying is ; that is, freely to com- 
bine their forces and obtain tor their labor the highest 
remuneration and most favorable conditions possible by 
peaceful means, including threats to quit work. It is replied 
that their occupation is not merely iheir own business but 
the business of the entiie community, and that, therefore, 
they are under obligations to the genera! public. This \g 


trae, bat it shoald be re m emb e r e d that obligstion esniee 
with it, as its correlative, daty . The genmid pabUc can cbim 
that employes of traDsportation eompanies ue imder obli- 
gations to it in case it recognises that it owes a daty to these 
employes, and that daty mast be to see that they are &irly 
paid for reasonable, not ezoesMTe, Uril, and that the daogem 
to which they are exposed ue ledooed to a minimam. It 
has been held by a distingnished judge of New York that 
transportation companies, having reorived something from 
the general pablic, namely, franchises, are boand to raider 
service to the pablic, and mast so treat their own ^nployAi 
as to render them willing to work. This is fiar more reason- 
able becaase duties are in this case imposed in oondderatioB 
of valuable things received* 

llie purpose of this illostration is to bring clearly to the 
mind of the reader some of tlie features of our industrial 
organism. It is plainly admitted that in special cases a 
man's work concerns not merely himself but the general pub- 
lic, and the difierence between one sort of work and another 
is not so much of kind as of degree. When the Reading 
Road coal miners in Pennsylvania struck in January, 1888, 
it was found to affect in many different ways millions of 
their fellow-beings. Coal became dearer, and this was felt 
by consumers of coal all over the eastern part of the United 
States at least. But this higher price affected not merely 
fuel consumed for heating and cooking purposes, but also 
that used in productive establishments, and thus caused a 
cessation of labor in some of them, and threatened to throw 
out of work a whole army of men when the strike stopped in 
February of the same year. The blizzard and snow-storm 
in the spring of 1888, which interrupted communication by 
rail and telegraph on the Atlantic seaboard of the United 
States, demonstrated clearly the interdependence of sections 
of our country. 

The old household economy was, relatively speaking, in- 
dependent. What the household produced it enjoyed, and 
it might live in the midst of plenty while its neighbors were 


BulTeiing fniiri all kinils of fconomic calamities, Thero 
may Laic been, anil woa, snnie kind of iimtual ilepcuilcnce 
in an immediate neighburliood, but thia rapidly grew leas 
with increase of di!ttaii<:e, and often almont dinappeared at a 
distance of a Imndied uiilca. OliailtH Egbert C'raddotk'a 
book, The Prophet of the Great Smohy Minmtaiiie, desoribeA 
well a riidc kind of isolated eoouomic independi^Dce. Tii« 
people of this region, exchanging goody for goods and using 
no money, were troubled hj no quesliona of the currency. 
Speaking of the settlement in the lilg Smoky, Cradduck 
Bays: " It wa^ hard to say what might be bought at the 
stoi-e exeept. powder and eoffoe, and sugar perhaps, if ' long- 
sweetenin" might not suiRce; for each of the half -do/tin 
xniail farms was a type of the region, producing within Its 
own confines all its necesHitiea. Hand-looms could bo 
glimpsed thro'jgli open door^, and as yet the dry goods 
trade is unknown to the homt'spun-elad deniwns of theset- 
llement. Beeawas, feathers, honey, dried fruit, are bartered 
here, and a night's rc«t has never been lost for the pcrplexi- 
lies of tile currency question on the Big Smoky Mountaina." 
Silver legialalinn and greenbaek deoisiona were alike indif- 
ferent to them. Yet how wretched thisindejiendencc 1 how 
illuaory! Fur the chief and most trying dependence of man 
is broU':ht about by physical laws, and associated effort to 
rule nature may and does increa'^e the real freedom <if men, 
white it reitdera man more dependent than formerly upon 
his fidlowa. At the name time law and custom attempt to 
regulate and control this dependence of man upon man so 
aa to mitigate its severities. When the dependence of one 
person upon another takes the form of mutual ohtigation be- 
tween eqnals in strength, it is often not I'elt as a hardship at 
alL It was evidently meant by the Governor of tlie uni- 
verse that man should seek union with his fellows. This is 

3. Political Independence the Basis of a National 
Economy. — A nation whose economic activity and institn- 
tions wc designate by the term economic life or natiunal 


economy must always be a politically independent people, a 
number of men wlio are organically joined together in an in- 
dependent political unity and who form in this unity an 
independent State.* Thiit presupjioseB a common possession 
of a territory, independence of other peoples, and the exist, 
ence of a Lighesl State power which dedarea law and right, 
which prescribes the oecessary iegal rales for the execution 
of the desires of its individimlx, including cconouiic attionx, 
and enforces obedience. This is substantially a definition 
of a State, but it may perhaps be better formulated in these 
words: The State is the union of a stationary people, occu- 
pying a defined territory, under a supreme power and a 
definite constitution. It is a continuous courtcious organism 
and a moral personality which has its fonnd^tlous laid in 
the nature of man, and its purpose is the welfare of the 
people, t 

*Tlie American Union conNtitDtex the reol Atnerican Slate. Our com- 
aon wenlUiH hsre only a Umiied aoTercigntj, and nro imjierrect Suites in Um 
leal sense of Ihe word State) thcj arc oa)j purU ors greBt Slule. 

f Tliia deQnition is chiefly taken [rom Uulford'a work, Titt Satie*. 



The economic life of a nation is the ]jroduct of two great 
factois ; tile first of iheae to be considered is the territory, 
or |)oriioii >■{ thv earth occtipied, 

1. Territory. — When we examine the influence of terri- 
tory on eeonomie life we must ilireut our attention, first, to 
tbe character of iho sitrfiice. It will make a vast differenee 
in the features of the economy of a nation whether the sur- 
face of the i;ouutry is level or liitly or mountainous. 

Soil. — We should in the second place take note of the 
soil itself, and of what is below the surface of the earth. 
The inipoilance of these considerations becomes manifest 
when we reflect on the character of the national economies of 
various conntrics, as, for example, of the United Slates, Ger- 
many, and Swilzerlimd. American prairies are at least a par- 
tial explanation of the invention of the steam-plow; the treas- 
ures below ihe earth's surface, of the peculiar economic life 
of eastern and indeed western Pennsylvania; while sunny hill- 
aides in Germany account for the vineyards along the Rhine, 
and the mountains of Switzerland give a cine to common 
property in pastures, to fine cheeses, nnd to numerous small 
industries, as well as to the sturdy independence and demo- 
cratic institutions of the Swiss people. 

The Water Privileges and their special character must in 
the third place claim our attention, for they are of peculiar 
importance in shaping the economy of a nation. A fine 
coast on an ocean favors international commerce, and great 
inland atreims like the Mississippi and Missouri, and mag- 
nificent lakes like Michigan, Superior, Erie, and Ontario, en- 
courage the growth of domestic trade, Kine falls of water 


pi-omote mauufacturcs, as we may see in the v^iHey of tbe 
Connecticut, and in Augusta, Georgia, favorably situated on 
llie Savannah. The scarcity of water in tlie " far West," and 
the wrong policy which has allowed private individuals to gain 
control over such streams as exist, go far to show how land- 
monopoly ill certain i-eglons of our country wait establiuhed 
and instill supported. 

The Atmosphere is the fifth feature of the physical 
attributes which go to make up territory. Diffcronoes in 
atmospEero explain peculiarities of economic life. The favor- 
able climate on the shores of Lake Erie is an indispensable 
condition of the fine fruii grown in the wcKtcru part of 
New York State. 

Size must next be mentioned. The great size of a coun- 
try like the United States, admitting of a rare degree of 
national economic independence and of most diver^ilied pur- 
suits, is an immense advantage to the American people. 

Neighboring Nations. — Finally, the position of a coun- 
try with respect to neighbors must affect materially its en- 
tire life. Germany, situated in a great plain on the continent 
of Europe, surrounded by hostile nations, is an illustration. 
The bare statement of the facts relating to the situation of 
Germany shows that the Germans must, as things are, be a 
warlike nation. 

2. Man. — The necond great factor of the two which pro- 
duce a national economy is the human factor, man; and we 
must treat this also under various Hub-hcads: 

a.) Economic Activity of Individuals. — The economic 
activity of the indiiiduals in the country will first receive 
our aticntion. The ufitional economy is not a mere addition 
o( all private economies in tlie nation, nor of all privan.' 
economies plus all public and quasi-public economies. The 
economic life of a nation may perhaps be belter compared 
to a chemical compound which is something different from 
the elements composing it, and !» yet determined in its 
character by these elements. Water is not merely oxygen 

« hydrogen. It is a new thing. We must, then, pass oa 


from a consideration of the physical situaiion and environ- 
ment to the euonomiti traits of tlie human boingH who make 
up the nation. Their activity, tlieir pei-severance, their in- 
tegrity, their skill, all must he. examined if we would under- 
Ntaiid the national economy. 

b.) Legislation and Administration. — The decoml 
8ii1>-liead comprises legislation and ailmiuiHtratiutt, and, liki.- 
the firet, h one form of the human factor. It in diftieult tu 
'oay whL'ther this dhonld precede or follow the firRt Huli-huiid, 
in a perfectly logical arrangement. Individual eomtimic 
ftQtivllie» largely ehape legislation and administration, but 
these in turn profoundly affect individual ecoiioiniuactivitics. 
Thacydide." saya that the eiplanatii>n of alt historical occur- 
rences in that A causes Jt and B causes A. Action ix accom- 
panied by reaction. Tlii!! i^ also the case with respect to 
men and lawn. Men make laws, and these in turn in their 
reaction make men what they are. 

The industrial importance of legislation and adjiiini^tra- 
lion is generally underestimated. Even where gnveinmenl 
is reduced to its lowest terms it must do much to make pof- 
sible the eiciatence of an orderly, jieaeeable society. Whnt 
would be the condition of property and inheritance without 
laws? Property could not exist at all, in our pnsent scn-u 
of that word, without government — for we are now cousidc;- 
ing the right and not the things over which that right is ex 
ereised. Laws regulating the inUoriiance of property exist 
every-where, and profoundly affect the character of the na- 
tional economy, making one country radically unlike another. 
liAWB governing the illations of man to wife are found in 
every ejvilizeil nation, and the<e have to d'> with economic 
relations as well as other relations. Laws of contract, laws 
establishing patent-rights, laws designed to protect children 
and other helpless classes, may also be mentioned as illuslin- 

A comparison of France and England reveals mi st marked 
differences in their economic life. The English farmer, 
renting a farm of a great landlord, and the agricuhural la- 

Air nrntODucuos to political bcohomt 

borer are prominent features of rural lil'e in Enr^land, while 
small peasant proprietors, farmers tilling their own little es- 
tatefl, attract the attention of tiie ti-aveler in France. What 
is the oanRe of this difference? Certainly the law has miit^h 
to do with this; for in England primogeniture and entail ob- 
tain, while ill France a '-"•-- = ellod by law to diviiie 

the bulk of his propertj g his children. 

Factor one becomes 

two becomes relatively 
Tances. Man gains inci 
the wilderness blossom 
Halle on the Saale, whei 
said, naturally barren, bn 
skill has produced the change. 

. important and factor 
ant as civilization ad- 
aver natnie and makes 
!. The country about 
)nce studied, was, it is 
like a giiriien. Man's 
laa subjugated nature. 

Once a city could exist only on a great body of water, but 
the highways of modern times enable cities to spring up a 
hundred miles from any important navigable streaiu. 



The Law of Change.— The next main point to engage 
oor allenlion in our examination ol' the characteristics of a 
national economy is tlie faut of tiucccssive changes in its liis- 
toncal formation. All know llow the uneducated talk. 
Suppose changes in laws or inHtitutions are suggested. Peo- 
ple frequently smile in a superior kind of way and aay, "It 
does very well for the theorist to talk about such things, but 
it is ouly theory," Conditions of property, labor, and capital 
cannot, in their opinion, be changed, and they assume that 
such as they are now they will continue to bo. "No," aay 
they, " things will go on in pretty much the s.ime good old 
way." Now, if there is any such thing as a goofl old way in 
nature or in society, the man has never yet appeared who 
discovered it. There is none. The at^sumption that there is 
BUch a thing is a mero fiction. Take the one economic factor 
of labor. It is found in a condition of wlavery, in a condition 
of serfdom, and in a condition of free contract. But these are 
only names for the three general conditions in which labor has 
been found, and within earh one of these conditions there 
has been a multitude of changes. Slavery has assumed a vast 
variety of forms, some extremely harsh and some extremely 
mild, with almost infinite gradations between the two ex- 
tremes. Serfdom at timcH appears as harsh as slavery, and it is 
also found in forms which differ little from freedom, and which 
are doubtless in some respects superior to the condition of 
the ordinary laborer who is free to make his own bargains, 
or who, as we say, lives under the rigime of free contract. 
Free contract in its turn means many different things: some- 
times, indeed, the oppression by the employ^ of the one 

83 AX rymoDrrcrroy to political ecohomt. 

who employs labor, but oftener the prat-tical dependence of 
the labort^r on account of the pressure of economic nei-eHsity; 
at tiraea, indeed, a dependence which virtually amounts to 
slavery, as has been seen in the case of tailors in London 
employed by so-called " sweaters," or small contractors, who 
have reduced their workmen to such a condition that perhaps 
a dozen Itave only one coat among them, and they are kept 
prisoners in Ihe dens where they work. Combinations of la- 
hoterfl are now introducing changes in tlie reffirnea{ fi'ee con- 
tract, for organizations make contracts for a multitude of 
individitaU. Laws undergo change, and institutions, which 
are the outgrowth of laws and custom, are gradually but per- 
petually undergoing modification. Property is in a eimtin- 
ual flux. A large part of landed propeity was once common 
property ; that is to say, owned by a body of persons, town, 
state, or city, in their organic capacity. Village communi- 
ties once owned land wliii-h was parceled out among the 
citizens or used in common. Thv grcaler part of land in 
civilized nations has become the property of individuals, 
but we now obnervc a reverse process of some significance. 
Forests are becoming in modi^rn countries public property 
once more, and the process has begun even in the United 
Suites. It ia bound to continue. We see cities idso puralias- 
ing — in some cases repurchasing — land for public purposes, 
especially for pleasure grounds. One great species of prop- 
erty, railways, has in Prussia mostly passed out of privale 
hands into the property of the State, and charter conditiona 
of railways are likely to bring tliis about in Austria, France, 
and elsewhere in a comparatively near future. The tenure 
of private property, or the conditions under which it is held, 
also i-hange from time to time, now in one direction, now iu 

Ths Evolution of Law. — A distinguished student of 
early law. Sir Hi-nry Sumner Maine, has clearly shown the 
perpetual changes wliieh all law undergoes. " We are in 
danger," says ibis jurist, "of overestimating the stability 
o' legal conceptions. Legal conceptions are indeed ex- 


tremely stable; many of them have their roots in the most 
solid portions of our nature. , . . This great stability ia npt 
to suggest that they are absolutely pennanenl ami indt'- 
structible. . . . What I have staled as to the eEFuets upon 
law of a mere ineohanical improve' men I in land registratioti 
ia a very impressive warning that this position la certainly 
doubtfiti, and possibly not true. The legal notions whieh I 
have desi^ribed a* decaying and dwindling have always lieen 
regarded as belonging to what may be called the osseous 
Btrneture of jurispnidence; the fact that they are neverthe- 
less |>erishablo suggests very forciljly that even jiirisprudenL-e 
itself cannot estrape from the great law of evolution."* The 
evolution of property, especially of property in land, has 
been described in great detail by a learned Belgian, Pio- 
feasor de Laveleye, in a work which bears the title I'rimitiot 

The Necessity of Historical Study.— We find marked 
economic differences hetwuen v^irioua perindu in the life of 
one nation, and almost equally marked differences between 
the economic inslitul.ions of contemporaneous nations. All 
this shows first the necessity of a careful historical and sta- 
tistical study of economic activities and institutions in the 
past and in the present. It reveals to us, in the second place, 
the folly of iho^ who would prescribe the same laws for all 
people and fi»r all times, or who would pass judgment on tlur 
institutions of Prussia under Fredi'Hck the Great as if these 
same institutions existed to-day in America or in Engl.ind. 

Peculiar Position of Political Economy. — 'I'he 
changea which continually take place in our economic life 
are in great part the product of human will, for this will of 
ours is a chief economic factor. Polilieal economy is a pr-- 
cutiar science, occupying a position midway between natural 
sciences and mental and moral sciences. It deals with rela- 
tions between mind and matter, or, more broadly s|>eaking, 
man and the external physical universe. Our economic life 
is in part governed by laws over which we have little con- 
■ U»inc'3 Karly Lata and Ctalom, chap. x. 


trol, and to a atill greater extent by pbysical laws wliith we 
cannot alter in the least, but which we cau only use; but our 
power in nevet- tit (.less very great, and it is daily becoming 
greater as we learn better how to use natural laws, and thus 
to subjugate natui-c. Witliin certain limltd we can have just 
8ucb a kind of economic life as we wish, and Iierein lies our 
responsibility, as a penpfe, for the character of our national 
economy. It is at our peril that we try to evade or shift thiti 
responsibility. We must continually progress, and " Piog- 
ress in economic life consiata in this: that our economic activ- 
ities and institutions realize in a higher degree than hereto- 
fore the demands of lumanity and justice, and become the 
basis of a higher civilization of individuals and nations."* 

Read Ward's D'/miniiP ■'•'"'■/../'i^/y, introdticlion to vol. i, 
and M. de Laveleye's I^-imitioe Property, author's preface to 
original edition, and chap. L 

* Sch&nberg, I e. 




Change in Economic Life. — While the evolution of our 
economic life proceeds without interruption, in taking a sur- 
vey over human history we discover such marked difierences 
gradually appearing at long intervals that we divide this 
evolution into pails which we may designate as stages. We 
mean, then, by stages in economic development changes and 
advances in the methods of procuring economic goods, in 
their character, variety, and number, in the distribution of 
goods, in the manner in which material and immaterial wants 
are satisfied; in short, in all that is included in the designa- 
tion economic life. 

Prehistoric Economy. — ^There seems to be evidence of 
the existence of a prehistoric man who obtained material 
goods like beasts, by simply taking possession of natural 
products, exercising little or no control over nature, and 
protecting himself from the elements only by caves or the 
simplest contrivances. The construction and use of his 
rude buildings appear to have been learned from the lower 
animals. Man was in such a condition a slave of nature. 
Human law did not restrain him. There was no law, as 
there is no law t<)-day in the "heart of Africa." Never- 
theless, the modem man, whose daily life in a thousand 
ways is guided, directed, and controlled by the statutes 
framed by himself and others, is a thousand times freer, 
and wise laws even increase freedom. Economic freedom 
is a far more important thing than political freedom, but 
the two are quite different. What advantage is it to me to 
have the legal right to take a trip around the world if I 



never have the economic meana to enable me to do eo? 
What advaotage U it to be able to seek another employer, 
provided there U no other who caresfor my 8(;rvices,and my 
present employer alone atandit betwei?n nie and death by 
starvation ? So the savage is free to come oi- to go, to work 
or to play, so far as laws uf man are concerned, bat nature 
enslaves him more pitilessly than Draconian lawB, " The 
true savage," says Sir John Lubbiick, "is neither free nor 
noble ; he is a slave to bis own wanl.«, his own passions ; 
imperfectly protected from the weather, he Kiiflers from the 
cold by night and the heat of thf sun by day; ignorant of 
agiiculmre, living by the chase, and inijirovident in success, 
hunger often stares liim in the face, and often drives him to 
the dreadful alternative of cannibalism or death." • 

Modem Man. — With the foregoing pa^^sage shonid be 
compared the following sentence from Sir Henry Maine; 
"With ua, I need scarcely say, there is little con scions ob- 
servance of legal rules. The law has so formed our habits 
and ideas that oonrts of justice are rarely needed to compel 
obedience to it, and thus they have apparently fallen into 
the back ground." f 

The Economic Stages.— This earliest existence of the 
human species — earliest at any rate from the stand-point of 
evolution — is something so lemote, and something about 
which our knowledge is so fi-agraentary and uncertain, that 
we are scaicely able to treat it as a separate stage in economic 
evolution. We Iwgin in our descrijition of economic stages 
with the time when men had learned to kindle fires, to eat 
meat, and to live in some kind of communities, how- 
ever imperfect. We then divide economic development from 
this time up to the present into five sta<;es when viewed 
from the stand-point of the production of material goods, 
and into three stages when viewed from the stand-point of 
the transfers of thexe goods. This second classification of 
stages must be regarded as subordinate to the first. The 
• PnAislorie TSmea. clinp. xv't. 
^ Early Lnw and Cuitirm, clin|t, xi. 


following are the stages into which we may rouglily divide 
economic progress when it is viewed from the stand-point of 
him who inquires how goods are produced : 

1. The hunting and tishing stage. 

2. The pastoral stage. 

8. The agricultural stage. 

4. The trades and commerce stage. 

5. The industrial stage. 

We may ask the question. How are goods transferred from 
person to person? When we examine the methods of trans- 
fers of goods with which we are acquainted we find that we 
may divide economic progress from the feeble beginnings of 
civilization to our own day into three stages with respect to 
these transfers, and these three stages are the following: 

1. The period of truck economy. 

2. The period of money economy. 
8. The period of credit economy. 

These stages will be briefly described in the following 

Sir John Lubbock treats of savage man and his evolution 
in a most interesting manner in the last chapter of his Pre- 
ht$taric Times. It is chapter xvi, and entitled, " Concluding 
Remarks." The student would do well to read also chap- 
ter iii of Drummond's Tropical Africa^ on '* The Aspect of 
the Heart of Africa : The Country and People." 


L EcONOmc Stages Veeweli fiiiim the Staxd-ppist op Pi.onrcTios. 

1. The Hunting and Fishing Stage.— Nature is tlie 
principal factor in produclion in this stage. Labor, imd more 
especially capital, play very subordiuale roles. Man still con- 
tents himself with what nature gives. Labor is Gxpen<]ed 
ebietly in procuring her bounties. Animals are not tamed 
and rendered subject to man; still leas can any traces be 
found of attempts to improve useful animals by brcc<ling, or, 
to Hse Mr, Alfr<?d Rntisel Wallace's happy phrase, by the 
substitution of man's selection for natural selection. Pi-od- 
ncts are not transfoi'med by mannfacturing processes ; 
goods are not even stored tip in time of abundance to make 
provision for a fnturo time of dearth. The American wild 
Indian, a type of this stage of evolution, lives in a condition 
of gluttony when the bunt is successful, wasting good food 
with unconcern, and suffers the following week when good 
fortune no longer waita on his bow and arrow. In this re- 
spect as in others he exhibits the traits of a child among 
I'ivilised men. 

Economic action is relativi'Iy iHoIated. It is confined 
mainly to the family, within which there is a nidimentary 
division of labor ; but there is no common organic activity. 
It i», for the most part, each man for himself. Goods are ac- 
quired not for exchange but for immediate use, nitbough 
there seems to be no unwillihgne:is to make exchanges when 
opportunity offers to get something new and attractive, if 


vie may judge from ibe traits of American Indians and the 
negroes of Africa. 

Aa there is no real division of labor, but all perfonn the 
same tliing.there are no economic classes; no employers and no 
employes and no industrial conflicts. Tlie very vocabulary 
of modern political economy, like wageH, capital, strikes, 
lockouts, taxation, arbitratiuu and contiiliation, eustoma 
duties, must be wanting. The phenomena of so called over- 
production or under-consnmptiun and uritieB .ire as unknown 
to people living in this stage as the economy of the possible 
inhabitants of Jupiter to us. The greater part of property is 
common, as is all land. Private property is conliiicd lo one's 
arms, one's household goods, and thu immediate rewarda of 
one's labor. 

Hunting Tribes. — There is some difference between 
those living primarily on the products of the chase and only 
secondarily on fish, and those who rcvrrse the process. The 
enviroimivnt of each class modifies essentially its character- 
istics. Confining oni'selves for the moment to those living 
m the hunting stage, we find a high development of such 
qualities as cunning, endurance, skill, bodily sti'ength, but 
the mode uf life does not lead to the development of tech- 
nical skill nor to a reflection upnn the processes of nature. 
This condition of life presupposes large territories and a 
sparse population. It has been estimated that in a popula- 
tion like this, living purely on the products of the chase, 
each hunter requires fifty thousand acres, or seventy-eight 
square nules,for his support, an area which in Belgium would 
support twenty-five ihnusand people. There seems to be 
reason to suppose, however, that this is an under-estimato 
of the population which can be .supported by the chase; cer- 
tainly so if any subordinate means of support exist, like 
fishing. Berries have almost always been a partial means of 
support-, as has other wild fruit. Certainly, however, the 
popnlation must be tliin, and wars may be regarded as an 
economic necessity for the barbarians living in this stage 
whenever there is not an abundance of unoccupied land, 


juHt aa canniballBm has been described &e an ccunomio ni>- 
ccsuity for buman beings of the moat degraded aurU; hunmii 
beings to wbom Sir John Lubbock is scaruely willing to 
atlribiite resiionsibility. The perpetual warfare with m;in 
and beust wliii-li is a. condition of existence devi^lops ibe 
bravery wliicb boa been so much admired in the American 

FiBhing Tribes.— Thoue living primarily and chiefly 
from the products of ti:ihiiig are different. As might be 
CKpected, tbey are more peaceable and popniatiun is denser, 
as BO large a territory is not required for the support 
of a given number of jieople. A larger nccnmulalion of 
the products uf \ya»t Ubor, or capital| is found among fisher- 
tribes, as there is less need of mlgraiionB. Dwellings are 
of a more permanent ebarneter, and iKiats and fisliing imple- 
ments are eonstruetcd. Laboi- is a infire important factor, 
and on iho whole the power of man over nature is greater 
than among bunting tribes. People living in the fishing 
BtBgc now be found only in the frigid Rone. Tribes liv- 
ing on the produce of fishing have seldom become nomads, 
but generally agricultural, and often they have taken early 

2. The Pastoral Stage. — When bunting tribes begin 
to domesticate animals they enter asunlly upon the pa^ 
loral stage. The earliest chapters of the Bible give us 
vivid pielnros of peoples living in the pastural stage. Man 
does not live merely by taking what nature offers, but htt 
acta upon nature. He gains a partial eonlrnl over nature. 
The element of labor comes forward more prominently. 
Labor is required to seek out pastures and'- to protect ani- 
mals. Families, clans, and tribes living in this stage have 
no settled abiding place, hut lliey wander to and fro on the 
face of the earth to find food for their fiocks. As land Ls 
not cultivated it requires a large area to support a single 
family, and over-population in a frequently recurring phe- 
aomenon. Tribes separate, part going one way and part 
another, or they attempt to get more land by conquest of 


otbers. Sach a separation is described in the Bible in tlie 
tbirteeoth cliapter of Genesis, where it tB aaid that " Abrara 
was very rich in cattle, in silver, and in gold. . . , And Lot also, 
which west with Aliram, had tloL-ks, and herds, and tents. And 
the land was not able to bear them, that they might dwell 
together: Fur their substance was great, so that tlicy could not 
dwell together. And lliere waa a f-lrife between the herd- 
men of Abram's cattle and the herdnien of Lot's cattle, , , . 
And Abrnm said unto J»t, Let there be no strife, I pray thee, 
between ine :imiJ thee, and between my herdiuen and thy herd- 
men, ... Is not the whole land before thee? Separate thy- 
self, I pray thee, from me: if thou wilt take the left hand, 
then I will gu to the right ; or if thou depart to the right band, 
then I will go to the left." Thus thi'y separated, and is it 
not a perfect pieture, setting before us the eeonnmic condi- 
tions of th« time and place ? 

But ailempted cimqaestfi freqtienily take the place of 
peaceful separations, and tribes of brethren which are too 
lat^e for the territory already occupied seek in gahi more by 
displacing nther tribes. This overpopulation explains the 
warlike incursions of barbarian hosts into Europe from the 
heart of Asi:i, and the wanderings of tbo nations in the early 
centuries of the Christian era. This [lart of history, liko 
otbers, cannot be nnder.^tood without a knowledge of political 

L.ind was for the most part common property; common, 
llial is, to members of the tribes, for rights of other tribes 
to property or even to life were not recognieed. Wilbin the 
tribe or nation— if we may properly use the latter expres- 
sion — tliere was a very real brolherhooil, but etliical lies did 
not pass beyond tribal bounds. Stranger and enemy are 
often expressed by the same word. But even the tribal 
claims to land can scarcely be designated by the modern 
word properly. The only right in the land was one of 
possession; the right of use as distingnisheil from the right 
of property. This must not be understood to mean that in 
any hictorical time there was do such thing as a right of 


private prop<>rty in land, and that land was nover bought 
and sold. Stationary peoples existed eouieniporaneously with 
wandering tribes, and, while tfao greater part of land was 
held in cummnn, pieces of land may have been private prop- 
erty. Abraham, it will be remembertd, bought of Ephron, 
the son of Zohai', a lieM for a burial-place for Sarah his 
wife, and paid four hundred shekelK of silver for it. Yet 
the ceremonies oonneoted with it indicate, as has been well 
shown by Sir Henry Maine in similar cases, that the land 
had belonged to the tribe, and that at the time it was a mat- 
ter in which the tribe felt themselves coni;erned, and not 
merely a private ti'ansactton between Abraham and Ephroa 
the son of Zuliar. 

The pastoral stage, never! h el ecs, allowed large accumula- 
tions of property in thi^ form of cattle anil of precioua 
Btoneis precious metals, and finely woven fabrics, or, in gen- 
eral, of capital. 

Extremea of 'Wealth.— We also find in this stage enor- 
mous differences between the possessions of various members 
of the clan and the tribe. The poor, the well-to-do, and 
the rich already exist. Abraham, for example, was ''a 
mighty prince." Among the sons of Heth men are divided 
into employers and employed — the latter generally slaves — 
and economic classes are formed. Slavery was not a possi- 
bility in the first economic st^ge, for maintenance with 
weapons was impossible, and masters could not arm their 
slaves. The conquered were slaughtered in the earlier 
stages, but in the pastoral stage their lives were frequently 
spared and they were reduced to slavery. A milder form 
of warfare was thns introduced. Women and children were 
evidently spared earlier than conquered males, who were fte- 
qnently massaci-ed after the beginning of the pastoral stage, 
and also even after the later stages began to exist. 

A more regular economic life and a higher degree of 
probability of permanent sufficiency of food succeeded the 
dormer irregularity of superfluity and direst want. 

Exchanges in the pastoral stage are still the cxoepUoD. 


The economy of each family or household is for the most 
pai't suflident anlo itself. 

The leisurely and often quiet mode of life, the nature of 
the work — watching the tlocko in the open fields— leads to an 
observation of natural phenoincnn, especially those of the 
heavens, and astronoruical kuuwkdge exists in a rudimentary 
form. Religiou and poetry were the outcome of a coulem- 
plative and reflectivo life, and in the language of shepherds 
highly figurative speceh in eommun. 

We find among nomads a high appreciation of personal 
freedom, warlike cnstomtt, hut no feeling for home. Patri- 
otism, aa we understand it, was of a later growtlu All the 
civilised nations of Kurope once led the nomadio pastoral 
life on the highlands of middle Ada. 

3. The Stationaiy Agricultiiral Stage. — Agriculture 
is in the third stage added ui the keeping of flocks, to the 
chase, and to fishing. A ijreiiter variety of food is offered 
to man, who now ceases his wandering life. A denser popu- 
lation becomes possible, and the union of different settle- 
ments into a larger political whole gradually forms the mod- 
ern nation. Dwellings now become finer and more substan- 
tial, and there is an increase in the conrsc of time in the 
nnniber of objects included in private property, and the 
interests on the side of quiet and orderly progress become 
stronger. It is not, however, clear that the transition from 
the pastornl and the nomadic stage is always at onuL' or even 
for some time accompanied by an increased number of ob- 
jects included in private property. There would, on the 
contrary, from the researches of Sir Henry Maine, appear to 
be evidences of an opposite movement. Village communities 
were probably the earliest form of settled agiiculturul life 
among the Aryans, and these continue in East India, in Rus- 
sia, and elsewhere, even to the present day. Land belonged 
to the village, and the arable portion of the common terri- 
tory was allotted from year to year or for longer periods to the 
members of the community, while pasture-land and forest-, 
land were used in common. This is generally recognized, 


but it appoivi'8 that fix-qiieiitly movables were cunimon prop- 
erty, and evi-'n to-day in M«iiti<ni'gro ttiore are village coiu- 
luunities in which thu uaniinga of a member who faas left tlio 
t»)wiuuDity ai>d gone out into the world arc etill claimed by 
the commuiiily. ^\y lleury Maine tells ua aUu of a Russian 
village whose uhi«t' ineonie is derived from a board ing-Bcliool 
kept by ladiet) who are nientbers of tbu community. Wliere, 
however, thv village cuiuui unity docs nob i^xiet at all, or has 
ceased to eiList, rights uf private pioperty appi'ar gradnally 
and steadily to expand, and locovftr an inCToacing numbt:r 
of things. Tiie general rule in thiti stage ix eoaununal prop- 
erty ill land with personal rights of nsnfniet. Each one has 
' uurtain rights according to hia needs and ^tuation, possibly 
aeeording to rank, in the common pastures and eommuii 
lands. Love of homo and vountry now arise. Frodutrtiun is 
still largely carrioil on in ccim]urative isolation. Things 
produced are consumed chielty In the househuld, and few 
eti-hanges lake (ilacc. Siieh irumnierce as exists ministcra 
ehielly to hixnry, and this long eontimied U> be the iMse, 
which partially, at least, explains the hostility of ancient 
philosophers and of the fathers of the Church to commerce. 

This stsge endured for ccntaries among many peoples 
nnlil the StiUKtlrihhtnrf — the building of the cities — in Iho 
tenth and eleventh centuries. It was not wholly displaced, 
but only modilied, unceasingly mndified, with the prognssof 
time, by subsequent stages of economic life. To-day the 
marks of this stage of life arc clearly discernible in our in- 
dustrial life even in America. Tlie word "common" is an 
instructive Burvival, The Boston " Common " and " com- 
mons " of other Neiv England towns, piecos of land still left 
in common ownership, are parts of larger trncts once held in 
common, and on which all citizens had rights r>f pasturage 
and other rights of iisufmct, 

4. Trades and Commerce Stage.— ITand-Iabor, so- 
called, becomes an important factor in this stage. Raw 
.materials arc transformed by the skill of man, and his power 
over nalnro becomes uiuve maikcd. Commerce does nut 


Bpring lip, for this has already exialed, but it begins to play 
a far inoro iiiipoitaiit part iii life, and tlio finer 
products of oue region or country are eitclianged for llioae of 
anolLer. Even bulky jirodiicta not qiiii-kly ptTiahitble are 
transported l»Ng distancui wlicn this oan bo duuu by water. 
Important cities on the sea-uoaal and on great rivers arise, 
and these become ceuleiti of cnltui-e and refinement. Mines 
are worlced, the use of money becomes more general, and a 
radical change in the entire economic lile of the nation la 
observed. This life becomes a real organism, and the people 
who live it have entered upon the era of modern civilization. 

Economic Classes and the Rise of Cities. — The divis- 
ion of labor, beginning on estates of powerful temporal and 
epiritnai lords and in convents, gr.iilnally extends, and popu- 
lation is divided acuording to occupation into a large num- 
ber of economic classes. Cities, the most active centers of 
the new life, become objecla of hostility to olil magnates, 
and frcijuenlly unite with distant and more powerful 
princes against feudal lords fur protection, and at the same 
time strengthen central powers. Dependents of feudal lords 
are encouraged to fly to the cities, and the legal maxim ia 
established, " City air makes free." Residence in a city 
makes a former serf a free man. Guilds of free men are 
gradually developed, ami these foster the growth of trades 
and commer<'>e, using their power for good at first, but later, 
in a period of decay, for evil, in the establish me ut of exclu- 
sive privileges and onerous monopolies. Changes ii 
nomic legislation and administration take place, Non-material 
products are bought and sold. Writers, teachers, and art- 
ists are found as classes in the economic organism. In a 
tiquity the Egyptians, Indians, Phenician>:, Assyrians, Medi 
the Persians, the Oreeks, and Romans occupied this positic 
The civilized nations of the present day lived in this stage 
until ihe nineteenth century, and in our South until the Civil 

5. The Industrial Stage. — The industrial sta^e is the 
period in which liie great civilised uiilions of the earth are now 


living, and to a description of which the rest of ihis book will 
be chiefly devoted. We observe in this stage far-reaching 
changes in the economic organism of society, due largely to 
a marvelous extension of the principle of division and com- 
bination of labor. This was made possible, was indeed ne- 
cessitated, by the application of steam to industry nnd tlie 
improvement in the means of communication and transport. 
The political freedom and nominal legal equality of nil men 
— formerly regarded as a mere Utopia — are now realized. 
Sciences and arts have advanced with giant strides. 

As we call this stage the industi'ial, we may speak of the 
industrial nittional life as well as economic national life. The 
two expressions are often used interchangeably. We can ' 
speak of industrial society as well as economic society. The 
difference to be observed betweeii the two words is that 
economic is more general in its use, and that industrial is fre- 
quently confined to this stage of derelopment. Kcon- 
omy has also a wider range of use than industry. We thas 
speak of a national ecouomj', but not in the same sense of a 
national industry, for the latter expiession would be generally 
understood to mean one pursuit or occupation in the national 

Before we pass on to a description of some of the general 
oharacteriHticB of modern economic life it is necessary to 
speak briefly of the three stages into which economic prog- 
ress may be divided with respuct to transfers of goods. 

T or TnisaFBRS op 

1. Tnick-Economy. — Truck-economy is the term used 
Lo denote the period which precedes the ase of money. 
Barter is often used, but it is too narrow. Barter implies 
mutual or two-sided transfers, whereas the element of re- 
ciprocity is often absent in transfei's of goods. There are 
one-sided transfers as well as two-sided transfers. Taxes, 
presents, inheritances, are examjiles of one-sided transfers of 
goods. Barter is included as a sub-head under truck-econ- 


omy, but it includes, to be euie, the greater part of tbc trans- 
fers. We have, then, 

A. One-eidcd transfers of goods. 

li. Two-sided transfers of goods, or barter. 

Under B we have three surtti of barter: u, material goods 
for material goods; 6, material goods for services; c, services 
for services, 

2. Money-Economy. — The use of money as a medium 
of exchange becomes common and displaces truck for tfae 
raost part, though tnuisfei's without the intervention of 
money are fre<[iieTit. 

3. Credit-Economy. — Credit is the instrument for the 
greater number of exchanges. Money is siill used, but, in 
the latest development of credit -economy, only aa "small 
change." Banica are the chief organs of society for credit- 
economy. We live now in the period of credit, and the 
volume of money is small when compared with the amount 
of annual transactions in what are called instraiuents of 
credit, by which we mean pnncipally checks, drafts, and bills 
of exchange. The receipts of banks are calculated in terms 
of money, but an American hank in a great city will in a 
day's business frequently handle over forty dollars in instru- 
ments of credit for eiery dollar in actual money. Many 
modern phenomena are due to credit. Crises and so-called 
over-production are closely connected with credit-economy. 
More will be said about the features of our present credit- 
economy in subsequent chapters. 

The Economic Stages not Exclusive.— Tlie division 
gress into three stiigej* with reference to the 
r in wliicli goodti are transferred has been criticised, 
and one criticism has been alrea<]y mentioned. This second 
classification ia subordinate to the first. The period of Irnck 
would, in a rough kind of way, be coincident with the hunt- 
ing and fishing and |)a)itoral stages, and would continue on 
into the stationary agricultural stage until that began to pass 
over into the trades and commerce stago. A deal of 
truck and barter still occurs in the trades and commerce 

P 52 ANDfTl 

AN nrrRODUcnon to politwal ecOkomy. 

stage, but money has become a general medium of exchangi 
and probably l\i\» stage could be calJud a ponod of moneyJ 
ecDDomy, Credit-euoimmy is really only a part of tlie induf 
trial stage, :ind belongs to tliu uineteeulli uentui'y. 
alone is Bufficient to show tlie ehange from ibe eigbteenth " 
ventury to tbe nineteenth. Banks existed before the pres- 
ent century, but wore conipurattvely lew in number, were 
uhiefly confined tu a few citiex, and were not an essential ^ 
part of the entire national economy. There were, for exam 
pie, only three banks in tlie United States a hundred year 
ago, and now some tliree thonaanil national banks a' 
business in our country in addition to banks organized nndei 
State laws. Uanking means credit economy. 

It its also said that money does not exclude track, an^l 
credit docs not exclude money, but this can scarcely bal 
urged as a valid ground against this division of economia I 
progress into Iheae three periods. Money is even found ia | 
the period which we ought to call truck-economy. Tlies< 
terms used simply signify the dominant characteristics i 
periods which gradually and pcrliaps almost imperceptible 
(lass into one another, just as the vegetable kingdom pas 
over into tbe animal kingdom. 

Prehisttirio arcli«ology bas been divided into three ] 
rioda, namely, the stone age — sub-divi<led into two parts, tlw" 
paleolithic and the neolilhic — the bronze age, and the iron 
age, bnl the later period does not exeludethe earlier. Stone 
implements are used both in the bronze and iron iiges. 

The literature in touching this economie progrea 
of man through stages is inadequate. Many valuable works 
exist on the origin and growth of civilization, but they do 
rot deal with the subject from an economics siand-poiot, and 
it is necessary to place many incidental remarks together to 
obtain s picture — even sn imperfect — of ibe economic life 
«f the tribes and nations discussed. The following works 
fill be helpful: " 

ECOyoyiC STAGES. 53 

Rlr Jnliii ).ii)jlii)ck'« IWliigtoric Times, p^rtionlarly the 
last cliapiur, and alsa lib wui-k, Origin of Cioilizmion and 
Pi-imitii^. Comliti'w of Muh. Dr. Duiiicl WJlaon'a Pre- 
historic Mill, dealing chiefly « itii nativps of AmorU-a. Be- 
porlH of the llurfau of Eihiiolngy connt-'itcil with the 
Smilhsoniaii InsiiLntion, Washington. Morgan'« Ancient 
Soei^y. Tylor's .-I"W(f«pfi/«'/y, (larticularly clinplers ix t" 
xi. Sir Ui-nry Mainu's worka are BtaiidariJ amhority on vil- 
lage communities, paitiuularly in India. The four works 
written l>y him of importancu in connection with iIiih utiap- 
' tcr are Ancient Lair, Viliage Communitire in the Emit and 
Went, Eirli/ History of Inatitnliont, and Earl<j Luie ami 
tj'nttoni, eapcciaity clmpter vlii in the laMt named book, on 
<-JSt-Bnro|tean huiisu <x)mmunitie9. A popular account of 
Russian coinmunilies ia given in the interesting work on 
JiuMta by Mackcntie Wallace. A very clear piciure of life 
in the Russian village commiiiiiiy, the Mir, is given in (he 
first chapter of Rntiia Undf.r t/i< Diarg, hy Stvpniuk, jmh- 
lishH ill t'iicap form in the ITarpcr'a Franklin Square 
Library. A«]iecta of Kngltsh progress during the past sir 
centuries are deacrilicil in Work and Wnffft, by ThoroM 
BogcrM. Toynbee's Litlngtri-il Remilntion irealM admirably 
of recent chmigea. Parts of ecotiamic treatiiWH in Eng1it>1i 
deal iiiftdi-<\uateiy with the iinhjeet-matler of this chapter, 
as, f«r example, the Ffdimimtrif Hemnrk* of John Stuart 
Mill's I\>li/ictil B-onom;/, and chapter vi'i of Book I of Mar- 
BJiall's £lwJO«(i'c« ty' /.i(/«a(ry. German literature is richer 
in wui-ks ilcaling with the evolution of economic life, but 
|MThap8 DO brief sketch ix better than SehonlxT^'n Voiks- 
vsirthMh'ift, which nerves ns the first monograph in the 
Handbttvh der Politixr/im Ofioiionue which he >?ilited. The 
present author ha-* derived more from Schunlioi-g for Fart I 
for this work than fmra any other source. Knies has treated 
Ihe subject admirably in his work, Potitisdie Oekonomie 
vom ffotf/i ic/itlic/tcn Ikundpinikte. These woiks have un- 
fortunately nev«T lieen inmslated. An imix)rlant sketch of 
economic development has been given by ihc able protec- 


tionist, Frederick List, in hifl book Dot NaUontUe ^aUm 
der I\>Utiachen Oe&onomie. Two tnuwlslionB of thia work 
exist: an early one by O. A. Matile, vbioh appeared in the 
jeta 1850, and a later one by Sampson 8. Lloyd, M. P., 
which appeared in the year 1686. M. de Idveleye's Tork 
on J^miHve ProperUf ihonld be read by all vho desire to 
familiarize themselves with the evolntion of proper^, eifte- 
cially in land. Valuable raggestioiw for young ooonMe* 
like the United States are offered. 




Economic Problems not Local.— We have reached 
the highest stage yet attained of economic life, and yet there 
were never so many economic questions pressing for solution 
as at present. Ilie situation of no nation is peculiar in this 
respect, though narrow ignorance in each nation assumes 
that discontent in that particular land is without foundation. 
It is particularly noticeable that it is very general in mod- 
em countries to ascribe discontent to the agitation of for- 
eigners. The truth is, however, that the general features of 
industrial society are very similar in all modern countries, 
and it is in the nature of industrial society itself that we 
must look for causes for the existence of pressing economic 
questions. What are these causes ? 

1. The Industrial Revolution. — We must first notice 
the fact that far-reaching changes in the socio-economic or- 
ganism have recently taken place and that these have suc- 
ceeded one another with surprising and unprecedented 
rapidity. These changes have been brought about by ad- 
vances in science and art, through discoveries and inventions. 
So rapid have been the changes of the past century that it is 
customary to speak of them as the industrial revolution. 
Space is so limited in a work like this that it is impossible to 
dwell long on the remarkable features of this recent develop- 
ment. Let the reader, however, call to mind the many things in 
our economic life which the world never saw before. Pie will, 
of course, think at once of the railway and of steam navigation, 
and of other applications of steam to industry. But these have 
brought about other important new phenomena. The con. 

.v ixT/tourcnoy to folitjcal bcohomt. 

ct'tiLration of large niaases of working-people in great faoto- 
1 iea of wliidi thfy own no part, ami iintler a single employer, 
Buch as Wf Sff daily, is Kotneiliiiig ut-w for xkillt-d mwlianics > 
iiot lliat iiotliiiig of tile kind ever existed liefore, but its ex- 
iaience is bo inuL-li more common and affecis so many moiv 
people tiial in its social aspects it is new. In the last century, 
and in previous eenturii's of llieMiddle Ages, artisans owiiod 
tiie toola whicL they nsed, and after they had liilly mastered 
their trades usually called no man master, bat worked in their 
own iittlt' shops. Even within the memory of the author, 
still comparatively a young man, this condition of things has 
become less common. Tlie smith auiler the spreading tree, 
of whom Longfellow eang, is disappearing. He has left the 
cross-roads in the little village and m'W works in a maehine- 
nho]). His friends, the carpenter and the shoemaker, have ac- 
companied him. A few artisans may stay to do repiiiring naA 
other small work, but the cheaper processes of vast establish- 
ments have rendered this migi'alion inoiitable for the many. 
Only the few among aitisans can live in the old style. This can 
he seen in the immediate neighborhood of the meeting place 
of the Chantauqua Assembly in Chantauqna County, in New 
York State, as well as elsewhere. Looking across C'liaatan- 
qna Lake one sees Mayville; a few miles to the west is West- 
field; a few miles norih-east of W'cstficld is Fredonia, and 
there are many other small pliii'es within a radius of tilVeen 
or twenty miles of which very few have kept pace in their 
growth with the growth of population in the United States, 
Jamestown, at the foot of the lake, being a notable exception. 
Aillcles formerly made in these small villages are now manu- 
factured in Buffalo, Cleveland, and other great eilivs. Houses 
are constructed in Buffalo in large establishments, and they 
are sent to small places where it is only necessary to put 
them together. Merchants h:ive also been obliged to leave 
tho villages where they wore owners of independent estab- 
lishments to seek employment in immense city retail and 
wholesale shops because the railroad has carried their cus- 
tomers away from tln-ni. Tlie amount of production in- 


creases contlunally, 1>tit tlie numbor of BCpnraic cstabllah- 
ments where pruOuction is carriod oa tlecrease-i iininlurrnpt- 
edly. Milling aervea as a good illu^Lnition. "The coiuplelion 
of tile great milU lia» caused ibe abanduninenl and >lecay of 
liuiidreds of the picMireBque, old- lasbiuned Deigbborhood 
mill*. Iti 1870, according lo tbe wiihus of that year, tber>' 
vfiira in tbe entire (country 22,573 grist milU, GS,44S hands, 
r>;|ireseiiting tl51,&l)0,0i)U of uaji'.tal, and making a prodnet 
worth t44t,S<)D,0UiJ. Id 1B8U the tiutiiber of CHlaUixhmeiiia 
was 24,3.18, the number uf bands 58,4U7, tbu f.ipilal iiivc.tted 
tl77,30U,OUli, and the value of ibe ),roiJui:t wnH t505,lUU,0U0 
(the price of flour bad deuliued ten |>t'r cent, in ihifi decade). 
The inciv:iBe nliown in the niinilter of establishiuantx . . . ts 
more apparent than real, tbe great bulk of the flour having 
been made in a decidedly ttnialler number uf mills in 1880 
than in 1870. Sinee IK80 tlie hiigbling effect of the great 
■nerchatit milli* upon the i^niall establishments has become 
visible to every Mtn. Aoeordiug to the MiUer'a Directory 
fur 1884, . . . thei-e were at that time »ome 23,0io mills in 
the country, a decline of l,lt)S from tbe census figures of 
188U. . . . From 1834 to 183« . , , the number of milling 
establish men Is has declined to 16,856. ... a loss in two 
years of more than twenty-six per cent." • The number of 
mills in the South lias declined more rapidly than elsewhere. 
In 1880, in North Carolina, 1,31.1 mills employed only 1,844 
men, but in the same State there were only 632 mills in 1886. 
It is said that the number of mills in the country is destined 
to become very muuh smaller still. Readers can readily 
gather from i^enaus and trade reports many similar Illustra- 
tions of tliis concentration of business, which is one of the 
main causes of tbe eJtistenoe of jiresent eeonomio problems. 
Self-employment or the employment of others becomes eoii- 
istantly more diflicult, and the number who succeed in escaping 
the condition uf employes is relatively diminishing with tbe 
progress of industry. A few escape from the ranks to be- 
come sell-made men, as we say; that is, great and wealthy 

• AWien Shriiv, id The Ckaabxu^aan. tat Octubrr, 1887. 


cmployerB of hundreds and thousands of workingmea ; hut 
they are the exceptions, and must be, so long as present indus- 
trial movements continue. Thiift, frugality, and temperance 
of the masses cannot alter this in the slightest degree. One 
who excels may rise to indiititrial power, but bis sitperiority 
would cease should others emulate his qualities. This fact, 
which is as simple as multiplication and division, is becoming 
very generally recognized, and produces a wide-spread leat- 
lessiiess and uneasiness. Alany perceive that they can never 
escape from the lot of workingmen, and that the only way to 
improve tlieir condition is to elevate their entire class. The 
solidarity of all interests is felt as never before. 

Corporations. — The study of corporations i-eveals an- 
other aspect of the industrial i-evohition. They now control 
a large proportion of the wealth of the world iind count their 
employes by the million; yet in 1TT6 Adam Smith gi-avely 
argues, in his Weatth of Nutitmt, that ns a rnle corporations 
cannot succeed, and nt that time there were few eJtamplesof 
Buccessful corporations. The writer does not remember that 
he mentions one example of a successful manufacturing cor- 
poration, and the number of such corporaiions was certainly 
very few. If the reader will, however, take the trouble to 
look through the columns of any paper devoted chiefly to 
manufacturing interests he will probably find that the names 
of more than half the establishmcntN mentioned show clearly 
that they are corporate concerns. 

But another step has been taken in the evolution of in- 
dustry which tends to minimize the individual still further, 
and to social i see production more than was even dreamed of 
by our forefathers. As corporations are combinations of in- 
dividnala we now have trusts, which are combinations of cor- 
porations, and a great part of many industries is now car- 
ried on nnder one general management. 

Banks. — The increase in the number of banks has al- 
ready been mentioned, and their existence in every town in 
the civilixcd world is another evidence of the industrial 
tevoliiliun. Business could not lo-day he c:irried on without 


liaiiko, and the failai'e of n few Urge banks at finnncial cen- 
ters like New York and Boston is sufficient td CAUse a wide- 
fpread panic, lotu-linig even London, Berlin, and Paris. But 
one hundred imd fifty years ago theie was not an institution 
in the United Slates perforiniug the functions of a modern 
bank, and the oldest existing American bank, the Bank of 
North America, in Philadelphia, waa not founded until 1781. 

Commerce, domestic and international, means a different 
thing from wliiit it did a hundred yeara ago, when Adam 
Smith assured English larmei-s that even with free trade 
tliey need never fear any cun^derable importation of wheat 
and beef from Ireland, on account of the expensivenesa of 
transportation! Comnieice on the one hand ministers to the 
necessities of life, and not chiefly to Inxury, as formerly, 
and on the other hand it intensities international competition. 
The question of the tariff assumes a new importance. 

Free importation of foreign laborers is something of un- 
precedented magnitude on account of cheap transpoi-tation. 
The labor market comes to embrace the world. This also 
modifies the tariffqueslion. 

Problem of the ■Working Day. — Now this industrial 
revolution is, on the whole, in the direction of progress, but 
it has come so suddenly that it has forced problems on ns 
which we have not as yet solved. Take the question of the 
eight-hour day. It has become a live question because, on 
the one hand, machinery enables ns to produce more in eight 
honra than formerly in three times eight hours; on the other, 
because those engaged in great factories and other manu- 
factories find modern production more wearing on the nerv. 
ous system, thus predisposing tlinm to the use of intoxicating 
stimulants, and more deadening to the intellect, and thus 
requiring more leisure for recreation and the development of 
the higher faculties. It can hardly be disputed that if all 
able-bodied members of society worked either with body or 
mind, that ie to Hay, rendered themselves useful. enough could 
he produced in eight hours, or even les", to satisfy every legiti- 
mate want of every human being. These facts must not be 

tfO Ay /ifTiiODtrcTioy to political scoyoMY. 

taken as a concluBive argunieut in favor of the eight-liour 
day for those engaged iti manufactures — ^manifestly Uiecase 
of agricultural laborers is different in some pavliculirs — but 
tbey do show wliat bae made the eigbt-hour day a live 

Resistance to Improvements. — These changes in pro- 
duotioii and in distribulion, in domestic and internatiunal 
fonimerce, bave been followed by an aUnusl infinite variety 
of new plienomena, some of them welcome, others unpleaa- 
ant, distressing, and dangerous to the social structure. These 
ebangee mean diB|)Iaeemeut of labor and capital, and 
every extensive displacement of labor and eajiital is pain- 
ful for the time being. If it be said Ibst " in llie long run " 
tbey are benefieial to all, it may lie rc|>1ied that nien'a 
lives do not last {or "the long run." "Tim short run, if 
the expression may be nsed, is often qiiile long enough to 
make the difference between a happy and a miserable life."* 
Every new invention which renders former skill of no ac- 
oonnt is extremely pninfiil to skilled laborers and their 
families, who see their industrial and social station thereby 
lowered. Improvements have often been foolishly roHisted, 
bnt artisans have in this rcsjrcct sliowii only (■i>mmoii human 
traits. Lawyers have as slrenuonsly, and far more successful- 
ly, resisted reforms which would have dirainishod their fees. 

Sudden Riclies. — The abuse of freeilom on the part of 
those at the same time strong and unscrupulous has been a 
fruitful cause of trouble. There m.iy have been an unnsnally 
numerous class of those at the same time strong and lin- 
Bcrupulons, because manifold changes have suddenly cn- 
riohed poor people, and often by mere chance, as in the case 
of owners of oil lands, natural gas lands, and farm lands 
where cities have sprung up. Mow it is a great strain to a 
ftnan's nature to subject him to the temptations involved in 
new and sudden aequi!<iii{>ns of material power, and inferior 
natures have not been able to endure it. Pnrvemis have 
given a demoralizin-.; example of soulless, materialistic lux- 
*Cailuii'l Kkmentary Pulllirol Ecoaemf/, Purt 11, g 15, p. 93. 


nry, and other inferior natnreH have tried to apo tliem in 
their extravagance, Thiix has arisen a race in display whidi 
has promoted spei;nt»tion, fraud, ami I'mljcezlemenl, Proba- 
l(ly also the hardest employers, who have most aggravated 
soeial troubles, are U> be firuiid among the iiew-iicli. 

Confusion of Private and Public Business. — Thf 
improper extension of private acfuiiy lo piibiie splieivs, 
Aflin the ease of gas supply, electrical service of all kinds, 
and railivays, may bo mentioned as a fruitful cause of ytob- 
I«ma. Vast increase of wealth ittirnulated egoism, and as 
(ivery one was bent on his own concerns few stopped to in- 
quire into the proper lines lo be drawn between public and 
private oiiierprisex. Mistakes easily made are wilh great 
difliculiy remedied. The railway and the steamship have 
liroiight us many good things, and the railway ad\ocate who 
reeenlly ontitlcd an artide, "Are Railways Pnblio Kne- 
niiea?'* asked an absurd question. Nt-vertheless, they have 
brought much evil with the good, and are the c lusc of per- 
plexing problems. The domination of private corporations 
and the eeisure by them of public property without just 
oompcnsatioii are a further cnu!<e of uneasiness and anxiety. 

For the relations which exist in modern society, for all 
these new ami heretofore unknown conditions, we require 
new laws, new institutions, and new ideals in legislation. 

3. The New Importance of Capital. — It may be 
well enough on account of its special signilicnnce to single 
out one recent development for more particular treatment, 
"and that is the new force indicated by the word capital, and 
brought out still more clearly in the exyresBion " capitallHtio 
production." It is this new force which has created modern 
socialism. It is not meant that capital never existed before. 
It manifestly always existed, because capital simply meanf< 
an accumulation of products of past toil which may be used 
for purposes of further production. What is meant is that 
as a separate, distinct, and mighty force capital as it exists 
to-day is something new. Capital is the point about which 
social discus:«iou largely turns, and the phrase "capital and 

02 Av r.vTRODUorioy to political economy. 

labor" is, in some connectioD or another, conlinaally on 
every body's ]i|)s. Yt^t it is said that the rallying cries 
for and against capital would not have been even under- 
stood in the Middle Ages. It may be iiakccl, "How cnn 
this be?" Tlie truth is that no one attaiiks capital in itiself, 
itnd no Bensible man deems it neeesnary to defend the ei- 
ititenoe of capitiil in ilMcIf. The socialist who leads a 
crusade agaiiisl "ea]>ital" is as much in favor of the use 
of capital as any unv else. Socialiists wish to extend the une 
of capital. But capital, accumulations of past lull in the 
shape of food, shelter, clothing, and partieularly tools and 
implements, like railways, locomotives, steam-engines of all 
kinds, tolegra[ih and electric pliint, and the like, while it in- 
creusea the production of goods marvclously, has become a 
disintegrating force. Differentiation has accompanied in- 
diiKlrial development. It is the present capitalistic mode of 
}iroilu(ition which is called in (incflion. The capital, that is, 
the tools, are owned by one elates and the labor is furnisbed 
by another etas:'. Now, as we liave two disrinct classes in 
production, disputes over the division of goods produced by 
those two clasNes are certain tu urise. The fini«hed product 
being given, the more one class receives the less remains for 
the other, and it is mere sophistry to claim that the interests 
of the two can be perfectly identical. The diversity of in- 
terests which manifests itself in very real indu^itrial conflicts 
IN an inuvital>le ]>art of that system which assigns labor to 
one class and capital to another. It has already been re- 
marked that in earlier times this separation did not exist. 
It was obviated by. a multitude of contrivances. Slavery 
Wft« one, for that united in the same hands labor and capital. 
Sorfdiim was another nnd closely nllied one. Craft-guilda 
Were another mode. Manufactures were carried on in the 
Middle Ages by labor and capital organized together in these 
gailda, aud during their best period the results were satia- 
iMtory, and harmony prevailed in the main. There was a 
gnidnal progrission from apprentice to journeyman and 
'roiQ Journeyman to master owning his tools, and all grades 

UAiy (7.1 USES OF PRKSEyr EcoyoMia problems. 

worked together. The apprentice lived with the master, and 
frequently, after passing through the grade of journeyman 
and preRcnting his masterpiece, married the daughter of the 
roaster. The very worJ manufacturer a hundred years ago 
meant one who toiled with his own hands. Adam Smith 
speaks about growing rich by employing a multitude of 
manufacturers, by which he means simply skilled artisans. 
Custom haK been a powerful factor in maintaining industrial 
peace in the previous centuries of the world's hintory. Cus- 
tom regulated prices and wages, and was often so fixed and 
settled that it was taken as something almost as much a 
matter of course a'9 the hiws of the physical universe. 

Plans for Uniting Labor and Capital.— We liave al- 
ready seen that nature was the dominant factor in the earli- 
est economic stages. Labor is a minor factor ; and capital, 
except in the most ruilimeniary form, does not exist. As in- 
dustrial civilization gradually develops, the power of man as 
■eon in labor gradually gains a greater and greater ascend- 
ency over wild nature. Labor is assisted by tools and im- 
plements always connected with it, and scarcely thought of 
as existing apart from labor. Labor is the pivotal point of 
production. Time passes. Tools and implements are 
evolved which are a thousand-fold more efficient than those 
of older cenlHi-ies, but a thousand limes more costly. What 
formerly required a year is now done in a day ; but many 
must work together, and great weahli must own the tools. 
Those helps in production which are represented by capital 
are no longer mere appendages to labor and subordinate to 
labor. They become <)omiiJant, and when they I»eeome most 
powerful they ai-e owned by a distinct class, ihe capitalists. 
Capital thus is the pivotal point of modei'n economic life, 
and capital causes trouble because it is a neparate force. It 
pulls apart men and divides them into sharply pronounced 
classes. This explains the socialistic definition of capital. 
" A negro," says Carl Marx, the gi-eat German leader of so- 
cialism — "a negro is a negi-o. In certain relationshebeuomes 
a slave. A cottoU'Spinning machine is a machine for spin- 



ning ootton. It becotnes capital only in certain relationt 
Capital is a social relation existing in the processtiH of pro- 
(luolion. It is an histoiioal relation. The means of pruiliiu- 
tion are not capital when they are the propt^rly of the 
imme<li.iic producer. They beeoine capital only under con- 
ditions) ill which they serve at the same tiipe ae the mennK 
of exploiting and ruling the laborer," That is to say, Marx 
limits capital to economic goods in the hnnds of employers 
at a time when thene goods, accumulated by paiit toil, have 
assumed an importance uover before known in the world's 
history. Quesiious of production on a large scale and on a 
8mall scale turn on relative eRiciency of capital under, vari- 
otia forms of orgaaization. The great problem of the fiitura 
organization of industrial farces centers in qiieRtionn con- 
nected with capital. The old methods of production have 
gone never to return. How shall the benefits of the old be 
anited with the advantages of the new? There is a wide- 
upreail belief that labor and capital must again be united, 
but diffoi'cnces arise when llic ()Uestion of method is raised. 
Many think the problem can be solved along existing lines 
by savingfl banks, buihling associations, and (he actiuisition 
by lalmrers of shares in the corporations which employ them. 
Others hold that opccial efforts should he niatle to induce 
laborers to put their small savings together and to acquire 
capital to employ themselves. Let its say a thousand dollam 
capital is required for each laborer in a cortatn kind of busi- 
ness, then a thousand laborers would require one million of 
dollars; a very large sum, but when it is divided into a. thou- 
sand paits it by no means apjiears hopeless. This is what iH 
meant by co-operation as onlinarily nnderstood : the supply 
of capital by laborers who are to manage their own business, 
or, at least, to select their own managers. Oihcrs, who do 
not believe that the olisiacles in the w.iy of self-manngement 
can be overcome, look to a voluntary sharing of profits by 
employers with their employes; a method which hns been 
Hncc«ssfully adopted by m.iny capitalists recentlvi and which 
thus to an extent unites the interests of labor and cajllal. 


Still Other reformers, who do not believo that voluntary 
agreement can evtT bring about joint ownefHliip of capital, 
look to the power of government to cdtablisli this, Those 
are the socialists. Various reforms will be discussed at 
length hereafter. It wilt be seen, however, that all the priij- 
eotd mentioned turn upon diseussions of capital, ami that 
all those who advocate these projects want to mnke the ta- 
boier at the same lime a capitalist. It is trusted that this 
discussion has made clear what i^^ meant when it is naid that 
capital lias become u new force, 

3. PoBsibility of ImproTement. — Hconomic science 
has shown ns the possibility of better things for the masses, 
and we cannot rest quietly with things as they are. It is im- 
possible. Our responsibility for conditions which have been 
mentioned is something we feel in spite of ouraelves. We 
may deny it ; we may ask indignantly, " Am I my brother's 
keeper?" But down deep in our hearts and conseiencos we 
feel tliis responsibility, and even while denying it we show 
that we feel it by our acts and by our conventation. As 
Schouherg well says: " Our economio life is a social strnct- 
ore for which men are responsible, and its improvement, its 
formation in the manner best fur the well-being of the whole 
body of society, is one of the weightiest problems <if nations. 
This tisk becomes more difficult the hiaiier the ecomiraic- 
Btage of development and the greater the nation. It becomes 
10 difficult in time that a speeini science— political economy 
— was developed to aid in its solution." 

4. Higher Ethical Standards. — A fourth canse of 
social problems is clearly related to thc^ third. It is the 
progress of religion, in particular of Christianity, and the 
development of humane sentiments in all ela.sses. Things 
trouble us now which one hundred years ago we would have 
taken as a mere matter of course. The conti-adiction be- 
tween things as they are and our social ideal is painful. 

Some passages from Sir Henry Maine's Villaf/e Cammuni- 
tia will make us understand the significance of the progress 
of Christianity. Sir Uenry Maine seeks an ex])lanation for 



the fnct that what he roganls as economic pi-inci]>lea are not 
universally received. By economit: priiiciijks he mcanB self- 
Heeking in economic matters: asking tike highest price uh- 
tainable tor salable commodities and purcha^iig commoili- 
tiuB at the lowest price, or buying in the cheapest and selling 
in the dearest market. Sir Henry Maine evidently approves 
of self- interest as a supreme factor, but he nptices that a 
moral feeling common in mankind rebels against what he 
styles and what are erroneously supposed to be economic 
principles, Tlie explanation of the reluctance with which 
self-interest as Hupreme guide is accepted is historical. 
The " market " was originally neutral ground lying where 
"tile dominion of two or ihi-ee villages converged." These 
were the village communiiies in which custom rather than 
competition regulated ]>rices, but in the market all went as 
strangers, and for the market the idea of "sharp practice 
and hard bargaining" obtained. " Here, it seems to me," 
says Sir Henry Maine, " the notion of a man's right to get the 
best price for his wares took its rise, and lience it spread 
over the world." Then, after further comments on the growth 
of "market law," he illustrates as follows the survival of 
older ideals : " The repeal of the usury laws has made it law- 
ful to take any rate of interest for money, ytt the taking of 
usurious interest is not thought to he respeeiable, and our 
courts of equity have evidently great difficulty in bringing 
themselves to a complete recognition uf the new principle. 
Bearing this example in mind you may not tliink it an idle 
question if I ask, What is the real origin of the feeling that 
it is not credilable to drive a hard bargain with a near rela- 
tive or friend? It can hardly be said that there is any rule 
of morality to forbid it. The feeling seems to me to 
the traces of the old notion that men united in natural groups 
do not deal with one another on principles of trade. . . . 
The general proposition which is the basis of political econ- 
omy made its first approach to truth under the only circum- 
stances which admitted of men meeting at ann*s length, not 
as members of the same group, but as strangers. ... If the 



DOlion of getting tlie best price for movable jiraperty lias 
only crept to reception by insensible steps, it is all but cer- 
laiii that the idea of taking the highest obtainable rent for 
land is relatively of very moiiem origin. The rent of land 
corresponds to the priee of goods, but doiibtleiis was infinitely 
slower in conforming to ecoiiomieal law, since the impression 
of a hrotlierliooil in the owiiersliipof land still Burvivt^l wben 
goods had long since become the subject of individual prop- 
erty. So strong Is the pre»nmptiun against the existence of 
competitive rents in a coiuuiy peopled by village communi- 
ties that it would require llie very olcnrest evidence to con- 
vince me thnt they were anywhere found under naiive con- 
ditions of society. . , . It iti noturi.>us that in England, at 
least, land is not universally rack-rented.* But where is It 
that the theoretical right is not exercised? It is suLstau- 
tially true that, where the manorial groups substituted for 
the old village groups survive, there are no rack-rents. What 
ifl sometimes called the feudal feeling has much in common 
with the old feeling of brotherhood which forbade hard bar- 
gains." \ 

Let us now endeavor to understand the significance of 
these qualifications. 

Politioai Economy and Ethics, — Political economy is 
supposed by some to bo. the science of " sharp practice and 
hard bargaining." It is held to assume the existence of 
sharp practice and bard bargaining and to justify both, as, 
on the whole. Sir Henry Maine does. Yet we see that these 
so-called economic principles could arise only when men met 
as strangers, and that even up to the present time they are 
incompatible with the feeling of brotherhood. We may be 
assured as often as one pleases that it is creditable to " drive 
a hard bargain with a near relative or a friend," but it is of 
no avail. There is within man au ethical feeling, which has 

* Itiick-reat is Che ume tiling m compclitiTe ronL It means simpl; tlie 
higliMt Ka\ n-liicli can be obtained. The ardiuorf citj renU in llie Cuited 
Slatea nre ntck-rents. 

t ViUagt Communitia, Lecture VL 


growu up as a result of inluition combined with luBtoneal 
cxpLrienccs, and which has been clarified by religion, telling 
us tliat in uur ecouoinic life as well as elsewhere we must 
seek tu [iromotc the welfare of our ntighbor and brother. 
This ethioal feeling is not to be lightly regarded, for it is 
the best product of centuries of striving of the l>est men, 
N'lW Sir Iluury Maine looks to a disappearance of this feel 
ing of brotherhood for the triumph of the " market" where 
only sharp practice and hard bargaining obtain. It may 1)0 
that thu first effects of modei-n improvements in the means 
of communication and tran8|>ortation have been to destroy 
or raihur greatly to weaken the feeling of brotherhood, and 
old local groups have doubtless been broken up and their 
members scattered. It has become easy to wander off to any 
quarter of the world. But still further improvements in the 
means of communication ami transportation, especially, per- 
haps, the national and international postal sy8tems,are drawing 
all parts of the world closer together than ever before, and in- 
stead of a local group of brothers to whom all strangers are 
:ilien8 the feeling is extending and embracing all 
men. With an extension of fraternalism there is at firKt a 
great weakening of the feeling, but economic bands and tho 
progress of Christianity, which teaclies that all men are broth- 
ers, are rapidly strengthening it. An economic world-union 
of brothei'>4 is in the process of formatihii, and tlus explains 
a large part of our anxiety and uneasiness with respect to so- 
cial oonditions. It is of no avail to say that business is ex- 
eluded from the domination of ethical principles, for it ia 
precisely in our economic life that ethical principles of any 
real validity must manifest themselves. It is only in an im- 
perfect condition of society that sharp praciic* and hard bar- 
gaining oan ever appear to men to be morally right. There 
is a very general determination to m^ike all departments of 
social life confoi-m to ethical ]ivinci]ilc», and ihis ir what is 
meant by tiie phrase nscd by the Christian, " Tlie world is the 
subject of redemption." 
Absolute aud Relative Deterioration of the 


Masses. — We liave examined certain general caasen for tho 
exialenceof soiTio-et'ononiic problems. Accompanying eacli 
of thewe a muUituiIe of forces may be at work aggravating 
or mitigating troubles. A delerioiatiou in the cconomiu 
»itnstion of the masses may be a cause of discontent ami 
agitation, nn<l ihia deterioralion may be of two kinds. It 
may l>e ab-olnte or ivlative. AliHulnte deteriikration means 
oomlitions i>oorer in tlicnisulves witliout regard to the eco- 
iiomio aitiiatton of others or the changed retgiiirements of 
new times. Absolute deterioration it) the exception, but still 
it 13 not eo nnvnmmon aa is generally supposed. Cbanges 
involving displaut^ments of labor and capital injuro large 
numbem, and of theae many never regain tlii'tr old position, 
Ei;onomic evils when of a certain magnitude tend to increase 
Bponlaneously, as it were, and to aggravate themselves. 
Children ai-e not educated, a lowpr standard of life is taken, 
and progress ceases. This abmlute deterioration has, during 
the last fifty years, been excejitional, though not so in earlier 
ages, and we have no waiTant for the hypothesis that in the 
future it will not again become common, unless special efforts 
are made to prevent it. 

Relative Deterioratioa.— A relative detei-ioiation is far 
vomiaoner. Tiiis means that large sections of the population 
have not kept pace in their economic progiess with tho ad- 
vance of wealth on the one hand, on the other with the de- 
velopment of their i-atiimal wants and aspirations, to Kay 
nothing of the cr.iving for mere luxuries which has been 
stimulated by the lavish expondituros of the new-rich. We 
are here concerned with higher demands of people, and, pro- 
vided these take !t right direction, they are to be welcomed, 
for ihey are a condition of civilization. Missionaries among 
degraded' heathen tind it neces-^ary to awaken wants, even if 
for mere ornament-, in order to incite the savages to aclion, 
and this i8 the first step in progress. Every succeeding step 
in civilis.iiion is accompanied by new want^, and unless these 
are awakened civilisation comes to a stand-still, as seen 
among poitioDS of the Caniidian French in the Province of 



Qaebec, Canada. Professor Drammond speaks of the few 
wants of the Africans as an obstacle in the way of the de- 
velopment of their country. 

Wants and Civilization. — ^This has a bearing on many 
present problems in the United States. We do not want 
among us a people with few wants and no aspirations. They 
can only serve as a drag on the progress of American civili- 
zation. At the same time not all wants are legitimate or 
desirable. Wants are graded, and as man advances material 
wants ought to give way to higher social, mental, and qpirit- 
ual wants. Materialism indicates a dangerous tendency of 
wants in the United States to-day. What is needed is not 
to try to check the growth of wants, bat rather to direct tha 
current into proper channels.* 


Tbi-en eharaotei-istic fe&tures of modern economic life are 
to be found in tlio rolatlons whtcli it bears (1) to freedom, 
(2) to ethics, and {i) to the Sute. Thuse will be examined 
briefly in tlie order named. 

1. Sconomic Freedom. — Economic fi'eedom must he 
regarded as merely rehtive. It baa been absolute only in 
that condition of anarcliy in which savages have lived jirevi- 
OU8 to organised government, A re -introduction of absolute 
liberty vrould mean a return to primilive anarchy, and any 
idea of realising it is a mere Utopia. This freedom is rela- 
tive. Legal restrictions are exceptional; in particular, Buch 
legal reBtrictions as are felt to be burdensome, because, as 
Sir Henry Maine has ahowit, obedience to law is in civilized 
nations nnconRcions. Lnw has to such an extent formed us 
that we for the most pan spontaneously obey it. We can- 
not move without law. It is a condition of the existence of 
modern civilization. Law makes it possible for us to live 
our lives in security. Do we own a house? That implies 
law. Do wo go to businesB every day in a street-car ? The 
construction of street-car lines is always made possible by 
laws. Do we read telegrams ? We can do so only because 
law has made possible the existence of telegraph companiea. 
Do we send and receive letters? It is through an institu- 
tion, the creature of law, owned and operated by the govern- 
ment. Bat, after all, this is nut felt to be a limitation o1 
freedom. It is only in this state that freedom can be real- 
ized, as has been shown by a distinguished American writer, 
Dr. Mulford, in his work. TTte N^ition. Yet nearly all laws 



carry wilh them a " Tlioii shalt " aud a " Thou ehalt not." 
Restrictions which do exist are now general, aud in the inter- 
est of the whole ptople, not of a t'evi privilegi'd individuals 
or classes. Their aim as a whole is to prevent an ahuse of 
liberty ; to keep the strung and cunning from injuring others, 
thus to increase real liberty. 

Restrictive Laws May Increase Real Freedom. — 
The way in which re.strictive laws often increase real freedom 
may be illustrated by an occunence in Baltimore. The barbers 
of that city wished to close the barber-shops on Sunday. One 
barber could not close his shop unless all did the same, as he 
would be likely to lose regular customers. A voluntary agree- 
ment was not felt to be sufficient seiurity for Sunday observ- 
ance. The barbers accordingly raised several hundred dol- 
lars to secure the passage of an ordinance compelling them to 
close iheir own Fttuips. Tliey were suicessful, and thus the 
law enabled them to carry out their own desires. They were 
enabled to do what they pleased, and thns restrictive legis- 
lation increased freedom. The writer has frequently hoard 
a photographer in New York who did business on Sunday 
lament grievously the necessity for Sunday ]3bor,and express 
a willingness to contribute one hundred dollars to secure the 
passage of a law closing all photograph galleries. It is thus 
seen that restrictions to liberty arise outside of the law, and 
that the law may increase liberty by helping us to remove 
these restrictions. 

Increase in Qovemment Regulations. — We speak 
continually of the increase of freedom, and imagine often that 
we have been moving in the direction of no-govemment. It 
is probable, however, thai laws were never more numerous 
nor more far-reaching in their consequences than toKlay, 
Lot lis take the law under which national banks are to-day 
organized. We consider that law as an excellent one, and 
never speak of it as an infringement on liberty. Yet every 
Btepin the life of a national banking establishment is taken ao- 
cording to law. The amount of capital is prescribed, the man- 
ner of investment of a part of the eapita) is rigidly prescribed, 


and tlieinveaimetitof tliewholeofit iulimiteil, the nine of each 
share is proscribed, the amount which rausi be paid in is pi-e- 
scribed, tlie officers to be plocted are prescribed, llie voting 
power of share» is prescribed. After tlie bank comes into 
being it is ordered five times a f e^r, and four of these times 
without previous warning, lo publish a minute statement of 
its condition in the loi;al prt^ss, and examiners may without 
warning be sent from Wiishington to inspect its books. It 
is necessary to examine into these phenomena. It may be 
said that the laws are now neither less numerous nor less 
powerful than tbrmei'ly, hut wiser. They construct a frame- 
work within which we wi!!iii};ly move. 

Laws no longer Special but General, — Laws formerly 
were often special and not gi^nural, and aroused animosity 
because tliey did not bear on all alike. The laws formerly 
authorized A. to do what B. was espreswly forbidden to do. 
A. might follow the tiade of a carpenter, while B. was ex- 
clnded. C. might establish a bank, but D. would be thrown 
into prison if he attempted to do the same. Laws of the 
last century and previous centuries were individual in their 
application and became oppressive. Banks serve again as 
an illustration. Early in this century, in all of the States of 
the American Union, it was necessary for any body of men 
desiring to engage in the hanking business to secure a spe- 
cial legislative chni-ter. Now any Imdy of men who comply 
with the laws for the formation of hanking institutions may 
organize a bank. The rcslrictions in the laws are of a sever- 
ity that would not have been tolerated fifty years ago, but 
they bear on alt alike; they are framed in the interest of the 
people as a whole, a'ld are not felt to be oppressive. Laws 
have not been abolished, but exclusive privileges have been, 
and this is the peculiar triumph of the nineteenth century 
in legislation. We have established the principle that legis- 
lation mnat bo and not special. 

"What is Freedom? — It is well in this connection tore- 
fleet on the ri'al nature nf freedom, the absence of restraint 
ou our actions. Freedom is negative. It may be compared 



to an empty veBeel. Its value depends upon what we put in 
it. Absence of restraint in itsi'll* can hardly be called a good 
in itself. It may be a curse or a bleusiing. It gives oppor- 
tunity for the development of our faculties to a full and 
harmonious whole; yet, if we are not ripe for it, it may in- 
volve our degradation. Children are not fit for it, because 
under the controlling influeuce of a higher authority tlieii' 
development can better be secured. Not all nations are til 
for it. Tlie Declaration of Itulepeiidence was the assertion 
before thii world that we were fit for free and uncontrolled 
belf-develupitient. American democracy means the ripeness 
of Americana for political freedom. 

Economic freedom manifests itself in five different ways: 
a.) Freedom of labor iu three respecis: I. J-heedom of 
peraoti, as seen in the abolition of bondage and the establish- 
ment of tlic principle of legal equality. This freedom of 
tlio person has become unirersal in the civilized world only 
within the present generation. 2. J^eedom 0/ movement and 
acqitiaitioii, I'his means the right to settle where you please 
and to follow any pun^uit you please, so far as any special 
and individual legal restrictions are concerned. Legal re- 
strictions of a general nature framed in the interests of the 
public welfare exist every-where, and they are, on the whole, 
continually increasing in severity. A recent decision of the 
Supreme Court of the United States has declared tluit they 
violate no provision of the Federal Constitution. Some of 
these restrictions, as apon those engaging in certain occupa- 
tions, like banking, have been mentioned. To engage in any 
one of many kinds of business it is necessary to comply with 
certain prescribed rules and regulations. The busiDess of a 
plumber in Maryland and elsewhere is an example. The 
business of an ajKtthecary is another, and in other countries 
tlie reqnirements are severe, and lliey should become severer 
in all our States. Professional pursuits, like the practice of 
Uw and medicine, sene as further examples. Formerly, 
that is, during the Middle Ages, it was necessary to belong 
to some guild, or trade corpomtion, to engage in any one of 


the bailing iiiduittrial occiipntion.t, and these nRsodationa 
regulated, generally under legal supei'visiou, tbe oonditious 
under wliieh biisiiifs>es should be fulloweiL 

The Freedom of Movement for working people has be- 
come general ovur ilie uiviliEcd world only wilhin the presi'nt 
eenliiry. It did not exist in England when Adam Smith 
wrote his Weaith of Nationt. It i»< intini-sting to note that 
restrictions on the freudora of raovement arose in connection 
with the laws for the relief of ihu [toor. Each parish waa 
anxious to avoid tfae care of the poor of other pariaheij, and 
many parishes endeavoi-ed to escapi! their fair burdens by 
Bending away ihtiir poor to be supported by other parishes. 
Consequenlly, it was provided that a, workingmiin should be 
required to demonstrate his ability to support himself without 
help from the parish before he was allowed to settli?, or that 
he should bring certiiicates from his former parish authori- 
ties by which these bound themselves to be<iome responsible 
for his maintenance should he become n public charge, and 
for his removal to bis former home. This was so dilticult a 
thing to do that it kept a hirge part of the l.tboring popula- 
tion stationary in the parishes where tbey were born, These 
laws regulating residence were called laws of settlements, 
and of the English law of settlements Adam Smith goes so far 
M to say : " There is scarce a poor man in Englanii, of forty 
years of age, I will venture to say, who has not in some part 
of Ms life felt himself most cruelly oppressed by this ill-con- 
trived law of settlements." * 

"Tramp Laws." — It is well to notice recent revivals of 
restrictions on freedom of movement of wage-eamera. The 
abuses of this freedom in the United Stales have led in 
many of our States to tlie passage of " tramp laws," which 
imprison a man who wanders about the country without 
financial resources. Such a person is called a vagalxtnd, an<l 
in cases may be punished even by a year's imjirtsonment in 
a penitentiary. In Southern States like Georgia he is put in 
the chain-gang, and compelled to work for the State. There 
■-. ' ?bap. I, Part IL 

Aif i.vmoorrcT/oy to political economt. 

fsan be no donbt that the public sufftred severely from vagi 
bonds, and lliat women in rural districtH were insulted i 
even asHauited by unprincipled tramps. Property was de- 
Btroyod and Btolen. Incendiarism was in many instances 
traced to tramps. The European laws oC setlleraents grew 
up in efforts to correct real evils, and in precisely the same 
we are erecting barriers against freedom of move- 
ment without, perhaps, appreciating their full significance... 
Wiiile the evila inflicted in portions of the country were 
tolerable, we should in matters like this proceed with cautioi 

Many workingraen in America claim that ihey have beenl 
cruelly oppressed by tramp laws; that they have been mis- 
uaed and even imprisoned for efforts to seek an opportunity 
to gain an honest livelihood. lUiere can be no doubt that 
innocent poor people have Buffered under tramp laws^ 
Workingmen have felt this so keenly as to demand in som 
of the jilatforms of their political parties t)ie abolition of a 
tramp laws, which is undoubtedly going too far. Labor or- 
ganizations, like the International Cigar Makers' Union, for 
example, have partially remedied the evils of these laws and 
encouraged the free movement of labor by providing fimds 
for traveling members out of work. Labor pafiers aud liibor 
oi^anii^lious help to keep workingmen informed of oppoi^ 
tunities where work may be procured, and thus atiU furtha>s 
promote the free movement of labor. 

Foreign Immigration,— New limitations of the freedoni 
of international movements of wurkingmen are uoteworthjB 
The anti-ChinoKe legislation of the United States and Aiioi^ 
tralia is designed to keep from these countries cheap foreigi 
laborers, and is the most marked example of this re 
Tival of ancient restrictions. Tiie United Siaten law whiof 
forbids Americans making contracts with foreign lal>orei 
to come to this country to work is another example. K{^ 
forts are being made still further to resti-ict free intern! 
tional movements of u orking people, 

3. 77ie JYcedoin of contnut leith respect to labor ; 
the third form in which the Fi-eedom of lubor manifests i 


8oir. This means tlie legal equality of employera and em- 
|ilayefl in labor coDLracU. ThiD in a general way may be 
Biiid to date from the French Revolution, although it waa not 
universally introduced in civilized countriea until much later, 
Adam Smith aud the men of his day expected frum it benef- 
icent results, which have been at beat only partially real- 
ized. Philosophers of the latter part of iho eighteenth 
century assumed the natural equality of all men, and held 
that oppressive iuequalitict were the result of legal institu- 
tions. It has become evident, however, that their assump- 
tions were not valid. Economic inequalitit's place the tirdi- 
nary employer in a very different position from the ordinary 
einployi^, and thus the natural tt-ndenoy is for the industri- 
nlly strong to show their superionty in free labor contracts. 
The industrially strong in all countries are consequently 
ardent cliampiont of tho freedom of the labor conrracL 
Working-men attempt to equalize conditions preliminary to 
the arrangements of labor contracts by the formation of labor 
organizations, in order that, as capital speaks solidly through 
one representative, as, for example, the president of a street- 
car company, labor may also present itself as a unit throngh 
some chosen leader. 

Bestrictions on Labor,— 'I'he freedom of the labor 
contract exists nominally in countnes like France, Germany, 
Knglanil, and the United States. Every-where, however, 
there will be found restrictions on the riglit of combinations 
of laborers to make their own bargains in their own way, to 
work or tore-fuse to work, to select their own companions 
during work, and the like. These restrictions are nowhere 
so numerous on capital combinations. The effect of recent 
jndiaial decisions in the United Stales has been still further 
to restrict tho freedom of the labor contract where organiza- 
tions are concerned, and to-day this freedom is more limited 
in tile United Stales than in England, probably not than in 
France, Germany, or Italy. 

b.) Freedom of Landed Property. — Freedom of landed 
pro;ierty means the right to buy and sell landed property 



williout legal restrictioos. This &gain ie a new right, and it 
is not fully recognized iu Englatid to-day — where a great deal 
of the land is entailed. It was iutroduued in Prussia early 
in this century by the reforms of the etatesmon Stein and 
Uardeuberg.* It is sometimcH called free trade in land. It 
doea not exist with respect to lands granted by act of tlie 
last Congress to Indiann, for they are inalienable for tweu- 
ly-five years. Among the Jews it was not known. Jehovah 
waa the one iu whom the title U> their land was vested, and 
the usufruct was granted to families who could part with it 
only temporarily. It was returned to them in the year of 
jnhilee. It is in thia connection instructive to read the Mo- 
saic legislation with respect to land. There are thnse who 
think that the nineteenth century has yet much to leain 
from MoBes. Many, in fact, are dissatisfied with existing 
land luwK, and think that free trade in land as now known 
does a vast amount of needless harm, and is a robbing of the 
masses for the benefit of the few. This opinion is not shared 
by the majority of the best thinkers on Hocioeconomic 
topics. Perhaps lliere is a wide-spread feeling tliat land 
laws onght to he amended more or less, without, however, 
in the main changing the fundamental principles on which 
they rest. 

o.) The Freedom of Capital with Respect to 
IjOans. — By the freedom of cajiital with respect to loans 
is meant the abolition of prohibitions of intereat and of 
restrictions on the rate of interest. Tlie Mosaic legisla- 
tion prohibited all interest, for usui-y in older literature 
means not merely excessive interest but any interest at 
all. Mosos allowe<i the taking of intpreat from stranger!), 
but in certain special cases it was unlawful to take it even 
frora them. The greatest philosophers and statesmen of 
^'lassical antiquity, and of the Christian era until modern 
timex, have been opposed to the taking of interest, and the 
laws have refteoied more or less perfectly their views, Ile- 
c«Dt opinions have fiivored interest, and it is now almost 
• Soe Swili-y'a ii/e and Tima of SMn, toL ii, p. 30. 


nuiverwtlly taken on loans, and a. mail like John Ru^kin, 
who habitually makes loans without iiiit^rust, id regai'ded an 
very peculiar, if not erraliu. But the rate of intui'tist is still 
g«uei-ally n-giilated and limitt!i]. Any rate ol' iiiierest is 
le<ra] in EngUml, bnt resirictiuns prubabiy exist in all other 
uountriea. Ri'strictions on iho rate <if interest were abol- 
icheJ in Germany, but wei-o re-established on account of 
lht> abuses of the freedom. A fiied limit was not placed 
to lawful interest, but the jndges have been given a wide 
diserelion to determine what is, under the circumstances 
of the parlicnlar caae, excefsive, and therefore usurious, 

Restrictions on the rate of interest on loans exist in most 
of the Slates and Territories of llie American Union. There 
are, according to a recent statement, only eleven out of the 
forty-seven Slates and Territories where no limit is fixed to 
tlie rate of intei-est, and thirteen wliero no penally for usury 

d.) Freedom in the Establishment of Enterprises. — 
The riylil of individii.ils to establish enterprises on comply- 
ing with general regulations is of a far more ancient date 
than the right of combinations of individuals to engage in 
industriui iiudertakings. These combinations of individuals 
usually take the form of joint-stuck associations, generally 
oalled in the United Status simply corpora tinns. The right 
of free establishment of cor|>orate enterprises on compliance 
with provisions of general laws is a new right, barely a gen- 
eration old. It did not exist in England until 1856, and in 
Bome of our American Slates it dates frnm an earlier period, 
and in others it is of later origin. It dates in Gt-rmany from 
the formation of the empire in IRTl, and in Austria it docs 
not exist yet. It formerly reqnired a ppecial law to enable 
a body of men to associate themselves for productive pur- 
poses, especially if the li.ibility of associates was limlteil. 
The older idea in the United States and elsewhere was that 
eomhinalions of capital eqnally with combinations of labor 
were dangerous; but there was this difference: special laws 

Ni lime to time authorizing the formatior of 
luiations nf capitalists, hut iiot of labfirers. Each fresh 
Application fur a charter uf incorpoi-aiioii was presumed to 
be examined on its merits. If a body of men desired to 
form a bank, the legislature was supposed to examine into 
their finajicial and moral fitness for the enttTprise, perhaps 
also into the need for siieh an enterprise, and to grant a 
charter only when all the conditions of the contemplated 
undertaking were satisfactory. It never worked well, 
especially in more modern times. With the best will the 
task transcended thu powei-a of legislatures, and the best 
will was often wanting. Bribery on an immense scale was 
frequently resorted to, and uliariers were also made a part of 
the system oi political spoils. Thus early in Ihis century it 
was considered as an unwarrantable pre9nm])tinn for the 
Democrats in New York State to expect a bank charter 
when the Federalists were in otfiee, and when the Democrats 
were in office the Federalists fared no better. It was only 
by stratagem that Aaron Burr secured a bank charter when 
liis politicid opponents wore in power in New York, lie ob- 
t;iined a charter for a water com]iany, one clause of which, in- 
nocent enough at first glance, really gave the company power 
to engage in the banking business. The system of special 
charters has been for the most part abandoned, and is in 
some parts of the industrial field being still further limited. 
Conditions are severer and more far-reaching than formerly, 
but are general in their application. 

Restrictions on the Establishment of Knterprises. 
— Important exceptions to the niodeni rule musi not fail of 
notice. Tlie right to supply certain services to cities, like 
light, water, and transpoitation of passengers by street-car 
lines and elevated railways, is secured by special oliaiter, 
ftct, or ordinance, and often an explicit monopoly is granted 
wiib what must in the nature of the case be a rfe/oc(o monop- 
oly. All of the evils connected with the old general system 
of special charters is connected with spei'ial privileges granted 
to parties to engage in these enterprises, and many new evils. 


They are in one way or anotUer connected with moat of the 
evils of municipal politics. Aa free competition is impossi- 
ble in the case of electric lights, gas, water, and atreel-car 
and elevated ruilwuy service, it has seemed to many that the 
only way to correut these evils is to abolish the corporations 
engaged in snub unduriakiiigH, and that can only be done 
by turning ovir these siTvicea to the muaicipalities tbeiii- 
eelvcs; and this opinion is shared by the author. A re- 
markable movemejit in this direction haa already bogon, 
and the resulla thus far experienced have lieeii most 
bcneScial. Water supply ia, fortunately, nearly every-where 
in the complete control of cities. UaB-woi'ka are mostly 
owned by municipalities in Germany, and iiuilc largely and 
to an Increasing extent in England. The gas consumed in 
American cities is moatly supplied by private parties, Phil:i- 
delphia, Richmond and Alexandria, Virginia, and W'licelin^, 
West Virginia, being exceptions. But tbeic is every reason 
to expect an increase in the number of cities owning and 
operating gas-works in a near future. Electric lighting plants 
are often owned by cities, and English laws look to the ulti- 
mate Mci[uisition of private establish rnenta. Twenty or thirty 
American cities, as Painesville and Xenla, Ohio; Chicago 
and Champaiffn, Illinois; Bay City, Michigan; Dunkirk, New 
York; Eaaton, Pennsylvania; Lewiston, Maine, own and 
operate electric lighting plants, and with the most satisfac- 
tory results, the general cost for are lighta of two thousand 
«an(ile-power burning all night being from twelve to twenty 
cents per night, whereas private corporations charge front 
forty to sixty cents, and even more. 

New limitations on the freedom to engage in railway en- 
terprises are now being enacted In the United States, while 
the freedom of enterprise h^ts in other countries for some 
tiraa been abolished. Parlies in Massachusetts who desire 
to build a new railway must show that there is a publii; 
need for the unilerlakitig, and a similar law has been urged 
upon the authorities of New York State. This prevents a 
great deal of waste, in doing a\vay with the construction uf 

S2 A.y i.vmoDucTios to pulitwal economy. 

parallel and other useless lines uf railways, but as it acids 
to ihe value of existing railway property by removing pos- 
sible competitors it would seem tliat it is only proper lliat 
ill the form of taxes im gross revenues or otlierwise <lie 
i-ailwaye ebould be made to pay for the special privileges 
they enjoy after the abolitiou of freedom in the estublish- 
meut of railway enterpiisea. It should never be done 
until publio control over these enterpriseB has been estab- 
lished OQ the firmest basis. 

It may, perhaps, be laitl doion a» a general rule that Klten 
for any class of bvemesa it becomes iiecessary to abandon 
t/te principle of Jreediim in the tstiiblishmerU of euterprixea 
this business slioubl be entirely (tinted over to the ffovemnieiit, 
eil/ier local. State, or federal, accordiny to t/te nature of the 

e.) Freedom of the Maxket.— The freedom of the mar- 
ket means the right to buy and bcU where one pleases. This 
IB another new right and one not every-whcre ricngnized. 
We accept this jirinciple in the United Stales with respect to 
domestic trade, but not with respect to foreign commerce, on 
which WG lay heavy taxes for the expruss purpose "f restrict- 
ing it. Restrictions on dometttic trade were the rnle rather 
than the eiEception in the last century, not only in the Ameri- 
can Stales but in Europe. Our Federal Constitution of 1789 
established in the United Slates the piiiieiple of frecilom of 
dome»itic trade, and reforms accompanying or following the 
French Revolution led to its general establishment else- 
where. England abandoned the policy of rcstricling foreign 
commerce in 1846, and it was then etipeuted by free-traders, 
as those are called who believe in the principle of fi-eedom, 
that other nations would speedily follow her example 
Those anticipations have not been realiKod, but, on the con 
trary, new restrictions have since thtn, especially in recent 
years, been established, atid old restrjotinns sharpened. 

The cause has been the policy of protection, which will 
be discussed hereafter. Protection achieved a great triumph 
in tha abandonment of free trade principles and the estab- 


Hahment. of a higli tariff by Gorniany in 187fi, and the prewi- 
dential election of 1888 in the Uiiitud States was by many 
regnrtied as a triumph of ]iroli'ctioti. 

Advantages of Competition. — ^The advantages of gen- 
eral freedom of the maiket are more talked about than the 
disadvantages, and are couBequeatly hotter understood. 
Under the system of freedom capital and labor tend to flow 
to places where tia-y are most needed, and ihat is generally 
where they arc mi>-t pruduottve. The absence of reslriciiuiia 
Bpiire the induBiiially gifted on to activity in enterprises, as 
the rewards of nuccess are enormous. Competition develops 
new forced, and reveals new resources of eeuunmy, cxcetleuce, 
and variety of producls. The modem man, like the modern 
trotter, has been developed in the race-coiirHe. Every one 
must be active and alert or suffer loss. I'rognss in techni- 
cal processes has been rapid, and the formation of new en- 
terpriser has been encouraged. 

DisadTantages of Competition.— When wo come lo 
speak of tlie di-advantages of the modera wystem of free- 
dom, that is to say, of competition, it occni-a to us liiat the 
moral atmosplicro of a raoe-cnursc is not a whojo.iome one. 
Competition tends to force the level of economic life down 
to the moral standard of the worst men who can su.>itain 
themnelvia in the busini-sn community. Adulteraiion of 
products introduced willingly by the nnscrapulona is fol- 
lowed reluctantly by a higher type until it becomes general, 
Ix)ng hours, child labor, and labor of married women in 
stores, in factories, and even in mines underground, are all 
bronght about in a similar manner. Cheap prines raiist be 
met by cheap prices. A tendency to reduce wages is like- 
wise explained. On the other hand, when the industrial 
situation favors labor, competition is apt to raise wages, es- 
pecially where well-managed labor combinations exist. 

Quality also often suffers under the race for cheapness. 
The report to the German government on the exhibits of 
Oermanv at ourCentennial Exhibition in 1876 was "tchlecht _ 
und billit/^^ bad and cheap. 



Hubble vomjianies and all sorts of ewiiidleis defraud and 
degrade iniiltitudi-h, and the good suffer with t 
tual monopolies oj)|tre»s the [leople worse than lormer legal 
moiiopoHee, beeanse comparatively few men have as yet 
learned to diBtinguiah between the industrial functions of 
private individuals and curporations and those of public 
bodies, such as city, Slate, and Union. 

The danger of very unequal distribution of wealth, and 
wide gaps between social classes so that tliey are to one an- 
other like foreign nations, are evils closely connected with 
those already enumerated. 

Social Evils also Economic— It may be argned that 
some of these evils, while social, are not economic, and that 
others are purely moral, and that consequently they do not 
fall within the premises of political economy. As has been 
said, however, the economic department of social life cannot 
be separated from otlier gi'eat socjal life-spheres. Social and 
moral evils react on wcalth-crtalion, and that in a very sim- 
ple manner. The chief factor in production is the human 
factor, and whatever affects this will certainly influence 
wealt h -c reat io u. 

We must remember in all this discussion that the pro- 
duction of goods is only a means to an end, ami to show 
that a practical measure will create wealth is not enough 
to commend it. The main question is, What effi-ct will it 
have on the entire life of the nation, also of humanity? 
Tlie true starting-point in economic disoiissiona ia the ethical 
community, of whii'li the individual is a member. 

Remedies for the Evils of Economic Freedom. — 

We are not helpless in the face of economic evils connected 

with freedom. Combinations of interested parties, like work- 

. ing-men in their labor organizations, also capitalists itt their 

I chambers of commerce, merchants' and manufacinrers' as- 

[ AOoiations, ami the like, can set themselves against the evils 

under which we suffer, and some of the worst of them can 

be corrected by laws, and thus the moral level of competition 

I can be raised. Sunday work series ns nn example. Also 


laws (llroeted against llie employ men I of children under a 
certain age in factories. TlieBe laws whea cnforoed by 
factory initpecturs and other etiituble agencies do not destroy 
competilion. A, iind H,, former rivals, are still left to com- 
pete with each other, but under altered conditions which ap- 
ply alike to all. The moral level of competition has been 

There is a danger of the iiijiirions development of vast ee- 
tablishmeDts and the crushing out of tlie small man under 
the" system of freedom. Co-uperalion i^an do something lo 
airetjl tliis evil. Il has already achieved considerable results 
in England, Gennany, France iind the United Stales, and is 
destined tu accomplish more in the future. A great deal 
can be accomplished, not by resisting powerful euonomic cur- 
rents, like the tendency of production lo concentration, but 
rather by guiding and directing the current in such a manner 
as to minimize the evils coimccted with it, and lo maximize 
the good. 

It has been laid down as a general rule by an English 
writer that experience has deui oust rated two things; the ad- 
vantages of freedom iu trade and ciinimcrce ; the necessity 
of restrictions in the Held of labor and in behalf of labor. 

2. Ethics and the Economic Life of Nations. — 
Il is recognized now that there should be no contradiction 
between ethics and economic life, and that ethics demands a 
truly civilised life for each individual; demands that so far 
as this is |>ossible each should be supplied with economic or 
material goods so as to satisfy all his reasonable wants and 
to give opportunity for the complelest development of all 
Iiis faculties. It is further demanded that the production of 
goods should so be conducted as to minister to the advance. 
ment of the producers and to the advancement of society in 
general. There has been a return of political economy in 
this respect, as iu so many others, to older and sounder con- 
ceptions. We have gone back lo the Greeks, notably to 
Plato and Aristotle, who subordinated all economic inquiries 
lo ethiL-al considerations. Thev never asked merelv, ^' How 

.iN lymoDucTioy to poutwal bcoxomy. 

cat] a nation become wealtliy?" but "How can the economio 
inslilutions and arrangements of a naiiun be so ordered that 
the highest welfare of all citizens may be beat promoted P " 
This mode of thougtit was uommoD, it is scarcely too much 
to say, to ail great writera on so<;io-economic and political 
topics until a ware <jt' i-evolutiouary materiatiiim in the last 
century swept over the world, and since then there ha« been 
an effiirt to divorce utiiics and economicE, which practically 
means the subordination of ethics to economics. The higher 
aociat life-spheres have been asked to minister to the lower, 
the feel have been exalted above the head, and men discnsa 
social questions, like child labor and Sunday work, in parlia- 
ments and legislatures in snob a way as to show that the 
main thing in their minds is the greatest possible wealth- 
creation, and that they think humanitarian considerations — 
very likely called st^ntimenialism — ought to bend to that. 
It is necessary to show that |>o|iii!ar enlightenment will add 
to the productive powere of ihc community, or will hi-lp to 
protect wealth against depredations, in order to secure a)>- 
propriations for public schools; and any thing so far removed 
from the lowest materia) considerations as art and music is 
considered in most instances as an improper field for the 
fosterini; care of government, at least in the Unitt'd States, 
and politicians turn a»*ay disdainfully frotn tlie highest 

Ideals for Economic Progress.— Happily there seems 
to be a revival of truer conceptions, and, as said, there ia a 
tendency logo back to the best thought of earlier periods. 
Several economists have presented social idenlsto which ew)- 
nomio life slionid, so far as may be, minisler. Four of 
those will be presented herevtith. The following is quoted 
by Professor Fnwoett in the sivth edition of his Political 
Economy : " That only true and most supreme hajipiness — 
the development of the human faculties to a harmonious and 
oonsistcnl whole." 

Professor SciiUffle, a German writer, in his answer to the 
question, " What is the best distribution ? " presents a social 


ideal. " It is," naja he, " that distribution of income whl^h 
brings society &a a wiiolc, and in all its subdivisions, nearest 
to perfection,"* 

Professor Wagner, the distinguished Berlin professor, 
gives as this ideal of industrial Hociety: "Large uational 
resources and large national incomes, and at the same time 
such a distribution of the same that even the less favorably 
ailuated may be certain of a siiRiciuiit income to tialitify all 
necessary wants and to enable thum to participate in the 
enjoyment of the more important higher goods of our age,"t 

A well-known Belgian professor of political economy pre- 
sents this ideal in his treatise on political economy: "The 
complete and harmonious development of every faculty." 

3. Economic Life and the State. — The third and at 
present the last feature of cconomiL' life to bo mentioned is 
its relation to the State. 

When John Stuart Mill attempted to enumerate and class- 
ify the functions ol" the State he found that only one thing 
wan common to them all, and that was public expediency. 
These are hi* words : "The admitted functions of govern- 
ment embraiL- a ranch wider field than can easily be inclnded 
within tlie ring-fence of any restrictive definition, and , , . 
it is hardly possible to find any ground of justification com- 
mon to them all, except the comprehensive one of genei'al 

Utility the Criterion of State Action.— There seems 
in the nature of things no more reason why the State should 
do one thing rather than another except that it is more nse- 
ful. If both are equally essential to the public welfare there 
is no more reason why the State should punish crime than 
why it should construct and operate a steam railway. There 
is great confusion of thought on this subject, and the duties 
of the State will be referred to again ; but it may be asked. 
Whence the source of the authority of the State to do any 
thing at all ? There is an ancient theory according to which 

■ See Scbonberjt's Ilaadbach drr FulitiKkai OtkunomU, lal edition, vol. i, 
p. 435. f Ibid. 


il in aswimed that all citiKena have entered into contract rela- 
tions with cine another aii'l have cstiibliHiicd guvenimeiil. 
It can be scarcely necessary lo discuss tliis tiction at present, 
eo generally baa it been diauardeil by thinku'ra. Ko one baa 
fteen this contract, and all the elements of a contract ar« 
wanting. Any thing so vague and inileQuite as the assumed 
contract could not stand as a contract in a court of law for 
one instant. Sometimes the writing which the Pilgrim 
fathers signed on the Mayjlofoer in IU20 cstabliehing civil 
government is adduced as an illustration of a contract origia 
of government. But the Pilgrim fathers then originated no 
new government. Tliey were already living under a govem- 
ment, that of England, to which tor over a century their 
successoi-s professed loyal adherence. They did not claim 
to eetablish a, new Bwveieignty, Even had they done no, is 
ontract once uigned to bind men forever? Are the living 
to be slaves of the dead ? Great political thinl(er!<, like John 
Stuart Mill of England and Uluntschli of Heidelberg, ttay^ 
that the validity of contracts of a governmental nature, aa, 
for eiample, ti-ealios, should he limited lo one generation, 
nay thirty-five years. But if a contract is signed, whence 
nea the authority of the signers \X> sign a contract binding 
Ihemselves and others to mnintain ami obey government? 
The creature becomes superior to the creator, and may call 
on the creator to lay down his life, xr may lake it against 
his will. But this absurdity will not be considea-d further. 
Granted that contract is the origin of government, how can 
it be shown that government has any right to do one thing 
more than another except "U gronnds of cxjiedien.y ? What 
other indications of the nature of the contract have we 
than the laws, constitutions as fundamental lawf included ? 
Would not then the functions of government change with 
' changes in the laws and constitutions ? 

If utility be regarded as the justification of government 
of conrgc the whole cause of controversy falls away. It is 
simply necessary to show that a thing is useful to justify it. 
If Ood is the source of authority and the jiistificattun of gov- 


ernment, its nltimate ground, then let some one show any 
other limitations than expediency whiuh He has established 
to the functions of government. 

Government and Democracy. — The modern concep- 
tion of the State is that it is a co-operative coraniunity, car- 
rying with it the power of coercion, and thus differs from 
voluntary co-operative associations. The State is a coercive 
co-operative commonwealth. The people act through the 
State and its various aiibdivisions and minor civil divisions. 
" We, the people," establish through our federal government 
a post-office. " We, the people," do other things through our 
government of New York State, or Maryland, as the case may 
be. "We, the people," do still other things through our 
agents, the mtinicipal authorities of New York, Boston, or 
Baltimore. An older conception, inherited from European 
despotisms, pronounces State action " paternalism," but those 
who call such a thing as the establishment of gas-works by a 
municipality "paternalism" have never grasped the funda- 
mental idea of modern democracy, which is that government 
is not something apart from us and outside of us, but we 
ourselves. Government activity is not dreaded as, under 
the influence of ideas disseminated by French revolutionary 
leaders, it was early in this century. Governmental action 
if one of the most powerful factors promoting civilization, 
and in a country like Germany we observe a high civiliza- 
tion, every part of which is largely the result of govern- 
mental activity. 

Individual Enterprise also Necessary. — On the other 
hand, it is felt that tlje domination of any one principle in in- 
dusti-ial life must be disastrous. Accordingly, outside the 
field of governmental activity, we desire a field for the indus- 
trial activity of individuals and of voluntary combinations of 
individuals in partnerships, co-operative associations, joint- 
stock corporations, and some will say — while others will dis- 
pute it — for combinations of corporations, as in the newest 
development of industrial organisation, the trust. 

Some of the Functions of Government. — The pur- 

AH nrmoDucTioi! to poutjcal Ecosonr. 

pose of the St;itc tben is, in its broadest terms, to promote the 
welfare of the people, anil, more in detail, to estubli^li and 
regulate econumtc institutions, such as property" and inheri- 
tance, to separate public from ])rivate property, to protect 
persons and property, to establicb the conditions of contract, 
and to enforce contracts under these cunditions; to promote 
ci]ucatton, mornitf, science, art, to guard the public health, to 
administer oharitJes, to raise the level of competition by pro- 
hibiting ibose forms of it which are disastrous, to manage — 
itself, or through some subdivision like the municipality — 
natural monopolies, such as gas, electric light, water supply, 
8treet-cnr lines, steam railways, etc., and to guard certain 
permanent interests of the nation, Hnch as the maintenance 
of a sufficient area of forests, suitably selected. These 
things private individuals cannot do, or cannot ilo so well, 
and it may be maintained without fear of succetisl'iit contra- 
diction that, in recognition of this, civilized nations are, to aa 
ever -increasing degree, performing these functions. 

Forestry, — It is not desirable in this place to dwell 'nion 
these several functions. Treatises on political M:ience ex- 
plain the reason why many of them should be performed. 
The expediency of other functions has already been explained, 
and more will be said abont them in hiter ch.iplers of this 
work. A few words, however, may be said about forestry 
in this place. All governments are taking upon themsetvee 
the ownership and management of forests. New York State 
has acqnired foresls in the Adirondacks, and has entered 
upon forestry, having in her employ forester,-". Bills have 
be^n brought before Congress which look to management of 
forests as a permanent function of our national government. 
Bwitxcrland, France and Germany are increasing the area of 
governmental forests. The leasons are very obvious, Fii-st 
of all, it may be said that rational fori^try rei^uires plans to 
be made for one hundred and twenty years in advance. 
Trees must be planted to be iclli'd at the expiration of thai 
long period, for it takes that length of ;ime for them to grow 
to their full sixe, and when they are allowed to grow to full 


size ilic ninouni of timber needed cao l>c grown on the "mall- 
est amotint of land. Private individuals will not, however, 
invest money from wbieh they cxpeut to i^eceive no return for 
over a Century. Second, forej^ts ought to be cultivated on 
a vast suale, on land especiallv adapted for foreats — lan<l ofti-n 
goi)d for nothing else — and certain great regions, like Ktieji 
ni'xintain siden and sources of streams, ought to be entirely 
covered with forests. Their cliniatiu influences are generally 
believed to be important, and forests with tlieir leaves and 
undergrowth eertainly prevent rainfall from r:i].idly roahing 
down mountain sides and deluging the country below, For- 
esta prevent a waste of soil. It is said that whcri' urests have 
been rashly removed from mounta.ii sides iu iladen, Ger- 
many, and iu Switzerland, it will take three hundred years to 
repair the damage. Soil must be slowly formed again. Pri- 
vate individuals will not select for forestry vast tracts of land 
propirly situated. In America farmers have quite generally 
kept a few isolated acres in woodland, hut this is not what is 
wanted. Very likely the land kept in trees is better ndapted 
for something else, and furesia may not be needed at this 
particular point. Third, it re(]uires highly trained scit'ntiiic 
men to lake care of a f'lrest. It is necessary to go through 
high schools, to follow aconree for several years in a forestry 
academy, and then to supplement this by an apprenticeship 
of several years in practical work in forests. Only a Stato 
owning tens of thonsamla or hundreds of thousands of acres 
oan train up and organise a properly qualified body of scien- 
tific foresters. The difference between a forest which grows 
up wild and one which grows up under a proper system of 
culture iit so great that the trained eye can detect the differ- 
ence nearly as far as sight can reach, and it is probably safe 
to say that it takes twice as much land to supjdy a given 
need when forests grow up of themselves as where a rational 
system of forest culture obtains. Fourth, when forests are 
cultivated in large tract.*, as they should be, covering per- 
haps an entire mountain, very considerable qusinlitics of game 
can be grown, and this forms an important element in the 


food of a people. Our old private system of forests in Amer- 
ica results in almost a total Iims of game in the settled parts 
of the country. Fifth, although forests do not pay private 
individuals, the profits of Belgian forests, for example, not 
exceeding, it is said, one percent, on their selling value, they 
do pay the (wople as a whole, on account of their general 
beneficial effects. 

More might be said on this topic were not space too lim- 
ited. It is manifesl from this that petty mojisures which 
some of our States .ire introducing, like tax exemption for 
planting a few trees or covering even a lew acres with trees, 
will never accomplish any thing of coonomic sigiitfic:ince. 
Even "arbor days" are of no account save for their educa- 
tional value. On that account, and on that account alone — as 
well as perhaps for the sake of another holiday — they should 
be encouraged. 

Public and Private Responsibilities.— It Is seen in 
general that there is no limit to the right of the State, the 
sovereign power, save its ability to do good. Duty, func- 
tion, is co-extensive with power. The State is a moral person. 
It may be further said in general that the fundamental prin- 
ciple, the basis of the economic life of modern nations, is in- 
dividual responsibility. It is designed that each grown per- 
son should feel that the welfare of himself and of his family, 
if he has one, rests upon himself. The State enters where hia 
powers are insufficient, or we may express it better in this 
way: for the attainment of certain ends he finds it advanta- 
geous to co-operate with hin fellows through town, city. State, 
federal government, and the performance of public duties as 
well as private duties is helpful in the development of the in- 
dividual and of the race. The performance of the true func- 
tions of government tends to promote energy and self-reli- 

It will be noted that by far the greater part of economic 
life, namely, in the main agriculture, commerce, and manu- 
factures, is left to individuals and voluntary associations of 
individuals. However, wherever mistakes have been made, 


and private parties have been allowed to encroach upon tlie 
fanctions of the State, these mistakes cannot be corrected 
in a day. It requires long, laborious, and patient work to 
remedy evils of this character. On the other hand, it is al- 
ways easy for the State to give up any industry if it is desir- 
able, and to turn it over to private parties. 

Read H. C. Adams's Relation of the State to Industrial 
Action, This is undoubtedly one of the best treatises ever 
written in the English language on the functions of the State. 
A work by the late gifted English economist, W. Stanley 
Jevons, The State and Labor^ may also be consulted with 
profit on the subject with which it deals. 



Derivation of the Term. — We have now surveyed the 
cliaraeleristicB and growth of euotiomic society, and are in a 
position to inquire moi'c uarefully into the nature of the sci- 
ence which deals with lliis society; namely, political economy. 
The terra political economy is derived from three Greek 
words. Economy is derived from oIko^ and vo/io^- olnog in 
this o;iso meaning household goods, and v6\to^ law, custom, 
or nsage, government or regulation. Political comes through 
the corresponding Greek adjective from woAi^, and this means 
state as well as city; for in Greece cities were of such pre- 
pundemtiug importance and influence in the Stales that the 
same word was used for both, just as on account of the rela- 
tively greater signiticance of the rural districts we have come 
to use land and country to denote the entire State. Econo- 
my, theii, means, etymologically, the regulaiion of the house- 
hold, or housekeeping, and it can be used to designate the 
science or art of housekeeping, although a separate word 
like economics would really be better. Political economy 
is, then, the housekeeping of the State, or the management 
of the goods in or pertaining to the State, or of the goods of 
the citizens so far as they have any public significance, which 
happens whenever private economics enter into reciprocal 
relations. Political economy, then, means the economic life 
of the nation, and afterwards the science of national house- 
keeping, although here again, it' obstinate uiiage did not stand 
in the way, another expression like political economics would 
really be preferable. National housekeeping is apt to sound 
strange to English ears, but it is sanctioned by as high an 
authority as Mr. James Russell Lowell, and it seems desirable 


ihat it should becume familiar. It is an espreasion full ot 
meaning, and if rightly nnderstuod an excellent defiuttion 
of polilical economy. It corresponds to the tierman word 
*' Volkstairthschii/talehrt: Volk, nation, irdA^ — toirthaehaft, 
housekeeping, ol«of — and /t/irc, science, v6/jof. 

Political Economy Defined. — We may define politiroi 
tcononnj in its rit'jsl yeiterai terms as tlie adettce which treu i 
of man as a member of economic sociHy. It deals, then, witli 
Hocial relations, like other branches of sociology; but these 
social relations which form the subject-matter of political 
economy iire of nn economic or industrial nature. Nearly 
all social phenomena have their economic aspects, so that it 
may at first appear that theru is no limitation lo political 
economy whatever save the bounds uf sociology. Such is 
not the case, however, for the limitation of political economy 
is found in its peculiar starui-poini. This may *i": Brought 
out by some such definition as this : PolittciU •XMnomy m the 
scienoe which deuU teith social p/'enomam/rom the fonontic 
atand-point. Social phenomeua connected with the produo 
tion and consumption of material good things are the prov- 
ince of political economy. The political economist deals 
with religious phenomena, with the social phenomena of art 
and literature, with urban sanit.ition, and any number of sim- 
ilar subjects, but always as in i<ome way or another connected 
with the production and consumption of material good things, 
'llie physician and economist will both discuss child labor 
and excessive hours of toil in over-heated factories; but the 
8|>ecialty of each will be apparent in their utterances. Differ- 
ent classes of men who concern themselves with society do not 
treat of separate classes of social phenomena, but treating of 
the same phenomena from various points of view the labors 
of each should be supplemental to those of all the Others. 

A more detailed definition of political economy is on some 
accounts desirable, and one is presented herewith which im 
taken from a German author, Pi'ot'cssor vun Schcel, and 
slightly modified. It may be properly prefaced by remind- 
ing the reader that the word economy is technically used to 


AX rxmoDUCTioy to pouttcal ecoxomt. 

express the entirety of tliose actions of a person wbicb relate 
to the acquisition and employment of material goods for llie 
satisfaction of human wants. We may then say that polit- 


DisttQction Between Private and Political Econ- 
omy. — This definition maiks off the sphere of domestic 
ecotjomy from that of political economy. Political economy 
considers social matters. It does not attempt to give direc- 
tions lor the acquisition of weallh by » eingle individual, but 
to inquire into the nature of those phenomena which appear 
when mdividnals in tlieir efforts to gain a livelihood and in 
their employment of material goods enter into relations will) 
one another. It seeks to explain these phenomena both by 
mere description and by the discovery of causal relations 
connecting them together ; and it aims to show how the 
true welfare of a nation may be promoted in the acquisition 
and employment of material good things. Tecbnologica! 
treatises on agriculture, minings manufactures, electricity, 
show how an individual may enrich himself. This distincthm 
must not be misunderstood. Technical Kcienees and political 
economy both treat of society, and bntb treat of individuals, 
but the technical sciences subordinate the social stand-point 
while political economy subordinates the individual stand- 
point. Political economy, in seeking the welfare of society, 
of course must aim to promote tbc welfare of the groat mar^s 
of individuals and fiimiliea in the nation and in the world, 
but that is something different from the welfare of a particu- 
lar individual or even of the great mass of men at a given 
moment. Political economy looks at (jiiestions from the 
point of view of the gcnei-al and permanent welfare. 


Political Economy Simpler than Private Econ- 
omies. — It may be well in this place to mnko cleiirer some 
of lliese ])oints by Viirimis illustralioiia. It might s<!ein a far 
easier thini^ lu lull iiuw Juhri Smith could aecui-e his eco- 
nomio welfare lliati liow the n^ttiua of which lie is only one 
member may become pru^peruiis, but such is not the case. 
Accidental and disturbing causes and indivilual peculiaritiea 
make it extremely dlRicult to formulate general principles 
for an individual private economy, but these irregular ele- 
ments disappear when we observe a large mass of individual 
economies. Mortality serves as a good illustration. No one 
can say when John Smith will die. The chance element is 
so pronounced as to make prediction impossible. But when 
we are called upon to make calculations upon mortality 
among several railliotis of people at a given period in a given 
country it becomes a comparatively easy matter. Individual 
irregularities become social regularities, and calcul.itions for 
great masses of facts of this kind can be made with so much 
accuracy that vast business transactions like those connei-ted 
with insurance can with safety be based njion them. In a 
nation we can count upon a regularly ri-curring amount of 
inundations, drought, grasshopper plagues, and similar catas- 
trophes, accidents to the persons of inhabitants involving a 
diminution of labor power, of disease .ind death, even of 
theft, robbery, .ind other forms of wickedness, vice, and 
paai>erisni. We make allowances for all these wealth- 
annihilating factors, and consequently they do not disturb 
oar generalizations. Given a country like the United States, 
a fruitful soil and all other desirable physical properties, 
a population on the whole thrifty, indiistrlons, tempei-ate, 
moral, intelligent, and enterpj'ising, a tolerable government 
whose laws are in the main obeyed, and we know lo a cir- 
tainty that the country, as a whole, must in time become 
very we.iltliy, and in its economic life things as they occur 
at the same time, that Is to say, jilienomeua In their co-exist- 
ence, are obterved to fall into great classes which may be 
ieecribed and explained, and things as they occur one after 



the otber, or phenomena in their sncoeasion, are likewise ob- 
s«rvecl to do so in some kind of regular order, which also 
may be described and explained. 

Let ns suppose that we seek to know how Jo)m Smith 
may acquire wenlth. He follows general piinciplcs, but 
disease and death at an early stage of his career destroy all 
his property. It is not necessary to suppose bo extreme a 
case, 'llie land of the country is on the whole fertile, but in 
some way or another, possibly by inhirritance, John Smith 
may be the owner of a piece of poor land on which he is 
obliged to struggle for a bare subsistence. Ilts farm may be 
fertile, but an overflow of a riyer, sneh as has not been 
known fur a century, sweeps away his cattle, buildings, and 
the year's produce, and cripples him industirally in so serious 
a manner that he never recovers from it. In.itances like the 
following have fallen ander the author's observation. John 
Smith is a clever artisan, receives good wages, accumulates a 
small property, which he is induced by an nn$cmpulous man 
to exchange for worthless Western lands. He returns to his 
work for his old employers to begin life over again penniless. 
Others may learn from his experience to be more suspicions 
of planvihle men with Western lands, hut John Smith has 
lost his noon mutations. Tliese illustrations can be continued 
indeflnltely by the reader, and observation of what is going 
on about him every day will furnish him with numberless 
concrete examples. They all make clear the statement that 
it is far easier to say how a nation mar become prosperous 
than bow a particular concrete may secure eco- 
nomic well-being. 

Private not Identical with Public "Welfiire.— It is 
Raid that political economy seeks the welfare of society. The 
prosperity of individuals may be secured at the expense of 
Horiety, for it by no means follows, as superficial writers 
have Rssurncd, that he who gnins wealth has added that 
amount of wenlth which he secures to the total wealth of 
the country or of th« worhL Lotteries serve as one of the 
beat illustrations. They are one of the most disastrous 


iuatUutiuns, boili as regards (lie coonomic welfare ami the 
moials of a fummunity. Large numbers in the industrial 
community, especially, perhaps, among the ponrer clasnes, as 
Borvant-girla in Gertminy, may be turned away from aafe and 
remunerative investment of their small earnings, in the ag- 
gregate large, to a feverish pursuit of chanue-gaiu. Society 
as a whole loses, but proprietors of lotteries have beeu 
known to gain, large fortunes. 

When American cities have given away or been robbed of 
valuable franchises for street-car lines individuals have 
gained, but the people as a whole have lost. Baltimore 
Btreetrcar compniiii's pay nine dollars nut of every hundred 
they collect for the maintenance of public parka, in additiou 
to Stale and city taxes. Unscrupulous politicians, for rea- 
sons best known to themselves, but not difficult to divine, 
have desired to ri'licve streetcar companies of this very 
proper although inadequate payment for valuable privileges 
enjoyed. This would add to the wealth of individuals, but 
would injure the people of Baltimore as a whole. 

Oilier countries, like France and Austria, have limited all 
charters for railways to periods of less than one hundred 
years. These have been accepted under conditions that, with- 
out compensation, the entire property sboulcl, at the expira- 
tion of the period, revert to the people in their organic 
capacity; that is to say, to the State. Our general principle 
of unlimited charters has enriched enormously a lew indi* 
viduals, bnt the country as a whole is correspondingly poorer. 
One other illustration must suffice. The city of Chicago owns 
and operates an electric lighting plant, and the cost of each 
arc light of two thousand oandlo-power burning all night !s 
said to he about fifteen cents a night, interest on the invest- 
ment included. If Chicago paid fifty cents a night per arc 
light to a private corporation, as does the city of Baltimore, 
a few individuals would grow wealthy, but it would be at the 
expense of the city. It is the business of the political econ- 
omist to describe the best rae.^ns for the promotion of the 
welfare of the people as a whole. In a certain sense, the 


political (economist is to tlic general public what tlm attorney 
is to the private imlividual. 

Political Kconomy Hegards Fermanent Interests. 
— It lias b('(.'n said that llii.' political economitit muet have 
regard to periuarieiit interests. He may call upon the pres- 
ent generation to make a Bacrifice tor future gcnet'ations, as 
did the city of Heidelberg eome time since, when it passed 
over to tile eyBtem of " high foreat-culliii'e ;" that is to say, 
when it decided to allow a large part of the extensive forests 
it owns to stand until the treea had attained their full size, 
and that means, in some cuse^, one hundred and twenty 
years. As has been already stated, that is best for the per- 
manent interests of the city and nation, but it put aside all 
procpect of fiuaneial return for several generations. 

PoHtioal Economy both a Dynajnic and a Static 
Science. — The definition of political eoonoray which has 
been adopted calls atlention to the actual condition of indus- society in the past and to its desirable constitution or 
structure in the future. Political economy embraces both 
the BtaCicB and dynamics of society, The one treats of the 
interrelations of existing economic phenomena, including 
their causal forces, and the other embraces a discussion of 
the progressive movements of economic society. The one 
considers this society as it is, the other inquires bow It has 
become what it ia and what is the course of Us evolution at 
pi-esent. Htatics treats of forces at rest or in a stale of 
equilibrium; dynamics deals with changes and the law of 
changes, and what John Stuart Mill calls their ultimate 

It may be remarked in this place that one of the chief errors 
of the uninstructed, in the past as well as at the present, con- 
sists in the failure to regard political economy as a dynamic 
science at all ; and this has led to a false and dangerous 
view of society. It induces men to try to stop the gi-owth 
of society, which is about as Siife as to seal tightly the 
cover of a boiler of boiling water, and to try to prevent 
thereby the expansion of steam. Change we must have; 


the only question is, Wlinl will bo the nature of the change ? 
Growth can bo guided and diveeted hy inielligenee, or by 
what Professor Lester F. Ward, in his Dynamic Sociulogy, 
callfl leIcolcigic:il ac^tion. 

Importance of our Social Ideals In the Stndy of 
Political Economy,— This naturally leads to a further re- 
mark ab^ut the nature uf econumlc upiuJona. At the uulseb 
of any e.-irnust study of poliiieal economy we should make ii|j 
our minds as to what we really desire for society. And in this 
respect let us be honest with ourselves. Do we regard all 
human helnys as brothers, and have we a sincere longing for 
the welfare of all ? Du we think that the earth and all the 
riches of art, science, literature, and industry are for all, to 
bo enjoyed by all so far aa practicable in proportion to their 
real needs? Do wo, in short, take the ethical view of polit- 
ical economy? Or do we, on the contrary, perhaps without 
a full consciousness of the fact, hold that some are born to 
subserve the gain of others ? Do we think that only some 
of us, and not all of us, have talents which we ought to ira- 
prove; that is, to develop in the most complete manner pos- 
sible alt faoulties, physical, mental, moral, spiritual? Are 
we indeed striving to protect ourselves, our friends, or our 
clasa in special privileges ? As political economy has U> da 
with what we desire, that is, as it is teleological, the one 
aim or the other will be felt in all economic discussions, 
in particular in so far as they relate to pvaclical measures. 
This is why political economists in all countries are necessa- 
rily divided into two more or less antagonistic groups, dif- 
fering chiefly in practical aim^, and a** that part of political 
economy is more concerned with such aims, in the dynamics 
of political economy. 

Ethical Aims an Essential Part of Economio 
Activity. — Political economy, then, distinctly includes 
within its province an aim. It does not tell us meifly how 
things are, but also how they ought to be. Economists deal 
with human activities, and these must have a piirposo, A 
purpose is not something accidental, hut a true cssenlial part 



at the activity. Then we may compare various purposes at 
the preueol time and pronounce some praisewortliy and 
ottaere leii^hensible. We can speak of ai-tual purposes and 
of desirable purposes. 'iTie development of economic life 
brings OJU clearly t)ie signiticancc of elhical nims in industrial 
eociety. What exists now as a mere matter of course was 
once a lUture ideal, or, to use ro«re teclinical languai^e, the 
" Is " includes what was once the " Ouglit-to-he." The ac- 
quisition of material goodd by I'obbcry has for ages been 
lielt) -o be legitimate, and the abolition of plunder as a 
soutxie of individual gain could once among savages have 
oeen only an ideal. The acquisition of material goods by 
turoe of arms hatt during the greater part of the world's his- 
tory been held more honorable than honest toil, and in the 
^neral peaceful pursuit of economic well-being we have in 
avilised nations only recently reached an ethical goal longed 
for by the best for many generations. Slavery has until 
within thirty years been a part of the industrial life of the 
United Slates, and only in the present generation have we 
realized in its abolition an etiiical goal in our economic 
life. Further illustrations will on reflection occur to the 
reader. Eihical purposes for the future cxiiit now as they 
have alw.iys existed, and they will mold our economic life. 

An American economist. Professor F. H, Giddings, arrives 
at the same conclusion from a somewhat different starting- 
point.* Political economists deal with tlie actual, be says 
in «ubstance, but the nctual contains the social ideal, because 
in striving for the realization of a social ideal we strive to 
make that generni which already exists as something uscep- 
tional. Living men go before us as luminaries to show us 
the way. They are our iibal. 

Tlie "la" embraces I he future "Ought." This in itself 
answers the question whether political economists should 
deal merely with what is, or also with what ought to be. 
The two cannot be BC|iarated. Also, merely to know what 
is in all its bearings itself often shows what ought to be, aa 
* See liid Hueii-liigy and Political Eamomy. 


in the case of llie evils of child labor, and itaelf suggests a 
remedy for evils. Anotlier reason for thin concluBion is 
this: we want to knoff what ought lo be and how it can 
be, and who can tell us so well aa he who has studied what 
exists and the processes by which it came to exist ? There 
i* no separate science of the economic " ought," and it cer- 
tainly does not at present seem desirable to separate it on: 
as something distinct from political economy. 

" Is Political Economy a Science ? " — Political 
economy has been spoken of as a ^ience, and thus far no at- 
tention has been paid to the question no frequently asked, 
"Is political economy a science?" No propriety in the 
question is perceived. Science means systematized knowl- 
edge with reg;ird to a body of related phenomena. It i^ or- 
dered knowledge with definite bounds, taken out of the 
great sea of knowledge because it pertains to groups of 
facts conceived as fnrming a whole, as therefore more closely 
connected with one another tlian with other groups of facts. 
Science is a branch of learning. It has been said that a body 
of knowledge is a science only when it carries with it the 
power of prediction ; but there can scarcely be such a thing 
as any branch of learning worthy of a name and of the at- 
tention of men which does not carry with it more or less 
power of prediction, how much cannot be known until it 
is complete and finished. Sciences may diflfcr in this re- 
spect as in others ; some may be very imperfect, others 
more advanced, and still others in a condiiiou yet nearer 

A use of the word science is frequent, in England and 
America, which implies a reproach to both nations. It is 
used aa equivalent to natural science. We may thus hear a 
acliool-girt say, " I am studying science," when she means 
some branch of natural science. It may not show that we 
have given too much attention to physical sciences, but it 
does clf^arly prove that wo have unduly neglected mental 
and social sciences of all kinds. It is in the minds of some 
'cimected with that materialistic view of the world which 

J04 AX ixruoDucnox to political ecoxouv. 

refuses to admit the possibility of positive knowledge about 
tilings wliieli cannot bo seen, liaudletl, and weighed. Why 
political economy is less woi-lby to be called a science ilian 
biology, for example, is hard to be understood, unless it is 
simply that it is less advanced toward completion. 

Those who read German will find an admirable artK-ie 
bearing ou topics discussed in this chapter by Professor 
Gustav Suhmoller in the tifth volume of his Jnhrbueh far 
Geaetzgehicng, Veriealluny, xttid VolksteiHliachafl. It is enti- 
tled, "Die Gerechtigki'it in der Volkswirthschaft." Professor 
Gu.*tav Cohn has also suggestive remarks which have been 
helpful to the author in the " Einleitung " to his System der 
2fatiim(U Oekoiioinie, Kapitel I, " Gesctze der National Oe- 
kouomie," s. 69-78. 



Three Classes of Definitions.— Coocpptioiis of political 
economy may be divided into three classes, and definitions 
may be formed to fit eauh class of conceptions. Writers 
frequently fail to describe aci'iirately their eoncejitiona of 
the nature of political economy in tlieir definition-', but they 
may be divided into classes according to tlieir fundamental 
ideas respecting the scope and put'(H>se of political economy, 
wliether they have accurately expre.ised these in their defini- 
tions or not. 

Writers of ihe first class regard political economy as a 
science which has to du with external valuable things or 
economic goods — that is, with wealth, as that word is used 
by economists; writers of the second class, as the science 
which has to do with economic goods in their relations to 
man ; writers of the third cla«s, as the science which has to dr 
with man in his reliitioiis to economic goods. The- logica 
evolution in observed. Economic goods are first made the 
primary thing, and they are treated almost as if their pro- 
duction was an iu<lependent process apart from the will of 
man, one extreme writer going so far as to say that the laws 
}{oveming the production of wealth would be just what they 
are if man did not exist. The social relations involved 
in the production and consnmption of economic goods are 
ihenconsideicd more carefully, and finally the original process 
is reversed, and it is distinotly assciled that "the starting- 
point as well as the object-point of our science is man."* 

The definition of political economy found in Mrs. Faw- 

tetfs little Political tX-Oiiomy may be taken as a fair pres- 

* Bosdier'a ^titieal EcoMmy. vuL i of Lalor a Inuislalioii, p. S3. 



dilation of the first dass of conceptions. It U as follows: 
"Political economy is the scieniie which investigates the 
nature of wealth and ihe laws which govern its piuduetioa, 
exdiange, and distribution." 

Tho detinition of political euonomy found in John Stuart 
Mill's treatise may be taken as a tolei-aWy accurate presen- 
tation of the Eeuoiid class of conceptions. " Writers on po- 
litical economy," sayM Mill, " profess to teach or Investignte 
the nature of weallli aud the laws of its produi'tion and dis- 
tribution, including directly or remotely the operation of 'all 
the causes by whicli the condition of mankind or of any so- 
ciety of human beings in respect to this universal object of 
human desire is made prosperous or the reverse." Social 
relations are dragged in through a back door, as it were. It 
Is perceived that political economy must concern itself with 
them, bnt they arc not at once placed in the foreground as 
the main thing with which we are to deal. MillV position is 
perhaps brought out still more clearly in the full title of his 
work, which is, Principe* of Political Ecntionii/, with Som« 
of their AppUcfHionH to Social Philosophy. Social philoso- 
phy is evidently viewed as something outside of political 
economy rather ihnii as a larger whole of which political 
economy is only a part. 

Professor Henry C. Adams, of the University of Michigan, 
in the second edition of his Onttiiies ofLeclums ujmii Pvlit- 
ieal Economy, offers a alateraent about political economy 
which may be placed among definitions of political economy as 
it is understood by those who hold the third class of con- 
ceptions, although he himself docs not call his statement a 
definition. It is as follows: " Political economy treats of 
industrial society. Its purpose as an analytic science is to 
explain the industrial actions of men. Its purpose as a con- 
sti-uctive science is to discover a scientific and a raiion.^l 
basis for the formation and government of industrial so- 

While the wording of not all definitions is such as to place 
thera clearly in any one of tiieae three classes of con cmil ions, 


and wliili' nil pQlilioal econoinUtH are not true to the concep- 
tion expressed in their own definition, econoniiels lliemnelve* 
may be arranged, in a rough sort of way, at least, under one 
or the other of the classen (.-or responding to the conceptions, 
and llins divided into thref groups. There may he more or 
less shifting of Rland-poiiit iirid wavering of eonocptioii, and 
certain eoonomists may stand near the boundary line of two 

The Growth of Political Economy,— The order in 
which the deMnitions have been Li;iven ithuws the evolution 
ol our si'ience. It bus grown from the first conception to 
the fecond, and then frum the second to the Uiird, and 
with this growth ihe chnracler of political economy itself 
has changed Komewhat. The words political economy do 
not mean now preciKidy what they did once. Bat this evo- 
lution of economic scioncu has not been strictly a chrono- 
iogicai one. It has been rather a logical one, and the most 
we can say is that in the main the chronological movement 
has corresponded with the logical development of the science. 
Political economists did not adopt definitions of the first 
cla^B, then of ihe second, and finally of the third. It may 
be stated more correctly in this way: Beginning with this 
century these various lonceptiona or ideas of political econ- 
omy have been engaged in a contest. At first definitions 
of the first class embodied the prevailing conception, then 
definitions of the second class, and now definitions of the 
third class. But there has always been some one of 
prominence to challenge the prevailing conception. Thus, 
early in this century, Sismondi, the Swiss economist, defined 
political economy as " the science of human happiness," and 
.Malthus, his Iriend, the distinguished English economist, 
subordinated wealth as a secondary consideration to the wel- 
fare of man as the primary consideration, opposing those who 
treated publio questions merely from the stand-point uf 
pounds, shillings, and pence. Ue regarded political economy 
as the science of we.ilth in hs relations to man. emphasizing 
strongly the latter p.irt of the conception. While the pre- 

A.v /ymoDUCTioy to FOimciL ECONOnr. 

vailing conception of pnlitipal economy at the present lime is 
pi'esentcil fairly well in tlie definitions of Professor Adams, 
Pi-ofessor von Scheel, and (lie author, it is also contested by 
lliose who adhere to definiiionsof the first class. 

Political Economy and a Natural Beneficent Order, 
— The first conception of jiolltical economy may be traced 
back to French writers of the second hall' of the eighteemli 
century, called the Physiocrats, usually regarded as the 
fouudera of the science because they were the first to try to 
treat national economic life in its entirety in a rounded-out, 
systematic nianiier. It is closely connected with ideas con- 
cerning a beneficent external order of natnre which domi- 
nated the political philosophy of the time of the French 
Ilevoluiion. Nature was regarded as a power outside of 
man, who had drawn up, as it were, a codu for the entire 
conduct of the individual and social life of man. Natnre 
was loolied upon as wholly gi)od, and all the evil in the world 
was traced to man, who, although a product of nature, and 
good in hia essence, yet somuhow had managed to act con- 
trary to his being and to otherwise universal law, and had pro- 
duced alt sorts of evil institutions. There was then a constant 
cry, most loudly uttered by Jean Jacqiic-> Rousseau, "Back 
to Nature." Government was held responsible for most of 
the sufierings of humanity because it was an artificial prod- 
not of man's contriving, and hence some wished to abolish 
government altogether, while others ndvocated the reduction 
of its functions to a minimum, and gave as the watchwoi-d, 
"Laissez/alie," that is, let alone, do not interfere with this 
heneficeni order of nature. Now space is too limited to 
permit the author in this place to trace this theory of nat- 
ural law back through writers to Uoman juris- 
^iriidence and thence to Greek philosophy, nor can it here bo 
«liown how full of contrailietions and absurdities it was, but 
it will readily be understood how it led to the first concep- 
tion of political economy. Nnlure had esiablielied laws ex- 
ternal to man for the production, distribution, iind consump- 
ion of economic goods, and it only remained for man to 



discover tliese, and to conform to them in all his nctiuiis. 
Gradually, however, it became more and more apparent to 
thinhers that the coDceptioQ of evunomic goods, or wealth, 
to employ the more usual term, was itst^lf a otibjeutive term ; 
that wealth, properly speukiug, uoiiM not exist apart from 
the needa and desires of man, although material thjngn 
might, and that the will of man was a main fa<;tur in uU 
economic life. It was seen, moreover, that I'rogress cotiKiated 
not in blind subjection to eicterual natural laws, but in a con- 
quest and subjugation of wild nature. The conception of 
political economy has accordingly been modified until finally 
man is made the beginning and eud of all inquiries, and 
natare is regarded as his servant. 

The Mercantilists. — Curiously enough, the must mod- 
em conception of political economy is a return lo an older 
and sounder one, current before tlie domination of the polit- 
ical and social ideas of the Fi'ench KcvoluLiiin. The econo- 
mists calh'd ihc Mercantilists, the forerunners of the Physi- 
ocrats, made their inquiries center about legislation and 
human activity, and to lliem political economy was the art 
of the statfidman in its economic aspects. The s))eculations 
of the ^Ici'cantilists culminated in the Political £i:onomt/ of 
Sir James Steuart, published in 17C7, nine years before 
Adam Smith's Wealth of Katiorte, and in that we find this 
definition of political economy, in which the old spelling, 
pointing to the origin of the word, is still retained : " (Econ- 
omy in general is the art of providing for all the wauls of 
a family with prudence and frugality. . . . What (economy 
is in a family, political ceconomy is in a State. . . . The great 
art, therefore, of political (economy is first to adapt the differ- 
ent operatiou»< of it to the spirit, manners, habits, and customs 
of the people, and afterward to model these circumstances so 
as to be able to introduce a set of new and more useful insti- 
tutions. The principal object of this science is to secure a 
certain fund of subsistence for all the inhabitants, to obviate 
every circumstance which may render it precarious, to provide 
every thing necesjary for supplying the wants of the society, 

^.v nrruoDuvTiox to political Eoomjrr. 

and to employ the iuliabUanta (suppsHing them to be free- 
men) in flucli a manner as naturally to civale rL'cipi-ocal rela- 
tionsand dependenuieslietwuen tliem, Boaa tumaketbeir sev- 
eral interests lead them to supply one another with their 
recipi-ocal wants." 

The fine historical scnee disclused in St<;uai't'B definition 
contrasting with the abstract speoiilations of the French, 
should be noticed. Institutions must first be made to con- 
form to the genius of a nation, and th<;n spirit, habits, and 
customM of the nation must be so modified that new and 
better institutions can be iiitroduoed. It is not pussilde to 
disregard the past, ami lo legis1at«i a^ if that did not exist. 

Different Coaceptions of Man and External Nat- 
ure. — I'olitical ei:iinonij' occupies a middle ground between 
natural sciences and suicnoes. It deals with man, 
btit wilh him in nlation to exltrnal natnre, furnishing him 
with material for goods to supply his wants. It must pre- 
Btipposo the existence of natural physical laws, not at all the 
product of liiiman volition. Somewntei-s have been inclijied 
to overlook the part of extcrn.i] natnre in economic life, and 
consequently to go to an extreme in their conceptions of 
political euonomy. Starting with definitions which overlook 
man we finally come to definitions which overlook the phys- 
ical univerhe outside of man. Professor de Laveleye, in his 
Ptilitieal £konomy, gives a definition which Tnay »er\e as an 
illustration : "Political economy is the sciene* which deter- 
. mines what laws men ought to adopt in order thai they may, 
with the least possible exertion, procure the greatest abuu- 
daiice of things useful for the salisfaeiion of their wants, 
may distribute ihem justly and consume them rationally." 

Professor de Laveleye himself is not true to his defini- 
tion, for he discuss<.'s many things which do not by any 
means exclusively pertain to legislation. 



Political economy has bucome so large a seienue that it 
han been found desirable to divide it into parts, each of 
which is often treated in sepjirale works or volumes of t)ie 
Bame work. Sumetimea each one of the great parts is treated 
ftlniost like a seiiarale science. Sociulogy has been dpokea 
of as a group of aciences. With the evolution of imlitical 
economy it also is beginning to assume the appearance of 
a group of sciences, althougli this evolution cannot go so far 
on account of the much smaller range of politlunl economy. 
The connection between the main parts of polilical economy 
has so far been well preserved, and their unity in the larger 
whole rarely escapes the consciousness of the student. 

Political economy is most commonly divided into ihree 
parts. The first is concerned with general princi|iles. This 
shonid properly include an outline review of the entire sub- 
ject, the parts of which may be further elnhorated later." The 
second part deals with the detailed practical application of 
general principles, as in the diKcussion of forests, canab, rail- 
ways, banks, and the spliere of the Slate with reference to 
these economic factors. The third part treats of finance; 
that is to say, the collection and administration of public 
revenues, taking up a discussion of the vai'ious sources of 
the revenue, as productive property, taxes, and loans, and 
entering into an examination of public debts with reference 
to their origin, growth, management, and extinction. 

General PoUtical Economy. — These jiarts of political 
economy are given different names. The Hral part is sorae- 
timea called theoretical political economy, but this is objeo- 
tionable. It is as practical as any part, &s practical, in fact. 



as tbe foimdation of a house. This first part takes aciount 
of Buch practical mattera aa tliG functions of guvernnieut. 
But there are certain m»in facia in economic lite more gen- 
eral, more neatly universal than others, and these can be ad- 
vantageously treated by lht<mselves before certain topics are 
taken out of tlieir connection fur more careful special inves- 
tigation. This first division of poliliiial economy we may 
call general political eeonomi/, ov general economics. Under 
this head we diitcuss dtfinilioiis atid general conoepnons, 
land, labor, capital, rent, wages, profit, mout-y, intereKt, the 
organization of industry. This part of pulitical economy is 
nearly ail we find in the older toxt-booke. 

Special Political Economy, — The second part of polit- 
ical ecouoniy may be called Hpec/al political economy or 
simply special teunotnics. When the first part is uiifortu- 
natiily called theoretical political economy this is also unfort- 
unately called practical political economy. This second 
part is called economic admiiiisCralion in tlie great work 
edited by SchOnberg, "Das Haudbuch der PolUiacken Oekon- 

Finance. — The third jiart is always caWed^finance. 

Other divisions of puHiicat economy into main parts are 
not unusual wherever the sjiecialization of the sciences is 
carried far. Professor Wilhelm Roscber, of the University 
of Leipzig, published the first votnme of a great treatise 
thirty-five years ago, and, W'irkiirg ou it ever pince with Ger- 
man thoroughness and perseverance, has nearly completed 
the last of his four volumes. The fullowing arc the titles of 
the Tulumes : 1. General Political Ei^oiiamy, 2. Affricitllnre 
and Other Branehesof Induatri/ Coi'cenied with the Piodtic- 
t ion of Raw Material. This incliidea, among topicadiscussed, 
forestry, care of grain, pastures, agricultural laborers, breed- 
ing of animals, a. Coinnier<:eandManuJ'acture». 4, .Finance 
and Core of the P<i<>r. 

Professor Adolpb Wagner, of tbe University of Berlin, 
published in 18T2 the first volume of a reviseil edilion of 
AU older work un political economy, by Professor Rau, at 


Heidelberg, who was in his ilny llie most dislinguiaheil econo- 
mist of Germany; and iii 1877 lie publislied a new edition of 
the second volume of the same work. When a later edition 
of Professor Wagner's revised volumea was called for it be- 
came apparent that Rail's name could no longer be retained, 
because changes in the revision giew so numerouE and far 
reaching in character that it became substantially a new woik. 
This work by Professor Wagner is still going forward, and 
as planned it will comprise at least seven vohiiues, anil in all 
probability more. It is the most exteiiitive as well as the 
profouiidest economic treatise ever written. The woik is 
divided into three main parts, and each of them is subdi- 
vided into volumes, as follows : 1. The first main pari is 
general or theoretical political economy. This part is divided 
into two volumes, the first called Faiidatnental Principles, and 
the second Gettrral Political Economij, Kith f^>ei!ial Jit/ereiice 
to the S;/8tein o/Prioate Meonomiea. 2. The second main part 
bears the title, Special or Praeltcal Pulitiail Economy, and is 
likewise divided into two volumes, the lii'st uallcd Mmii* of 
TVanfporlation and Commwiication, and the second, Puhlia 
JKilici/, teich respect to Ar/rimtlture, Manufactures, and Com- 
merce. 3. Part third is called t^hiance, and is divided into 
three volumes ; namely, firei, Iiitrwlnation and General Con- 
siderationa Conrerning the Finaiieial Ecouomt/ of the Stale; 
second, F«es and Geiterol Theory of Taxation ; third. Special 
7%eory of Taxation and Public Debts. The third volume 
of the part on finance will be devoted largely to practical 
application of general principles. 

Of this immense work three volumes, the first, fifth, and 
sixth, have appeared, and the seventh is at the time of thu 
preparation of this book being issued in parts. 

The proper division of an economic treatise seems to be, 
as already indicated, into a first part, containing a general 
view of the life of the socio-economic organism in all its 
parts, and then an elaborition of some of these parts, and 
in this elaboration the needs of the public will be a guide. 
Anyone of the leading parts of a general economic treatise 

114 AJf isTEOiHrcamt wm 

could be esLurgeil ml& m 
man J of theoL ThM wM 
wnhdiYhnons <tf treatises em 

into four parts or book^ 

creation ai ntOitiesL 2^ 

ctus^ion of tiie nkumle 

what b pfodnced; or, as 

ble degree of exacinesSy Ike 

members of indvstrial iiicwty> 

better, the Transfers of CieeiH i 

of Goods. 4. Consui|ilMi eff Geodk Rvt 4^ tkongii infi- 

eating the p«rpDc>e for vlndi al %aaB«Bia a ct iiilj tnkaa 

place, b sometimes oaulteA. 

If we speak of tbese fivittQns at peBlkal ee o a omy mio 
parts as perpendicnlar, we conM call ks ^YiMi into eco- 
nomic dynamics and economic statics a bortaontal diTision. 
It cuts across all the otkersw Jokn Staart MiU, bowerer, 
wbo giTes too little attention to econoaftie dvnaaucs in gen- 
eral, has one book on this snbject in bts political economy. 
It is entitled, iMjUwKf o^ /Vo^prvw i^** JSadi^ o« T V od bt ti oa 
and I>Uerihtttitm^ Mill bas no book on con&nmption, bnl bis 
fifth book is on the /M^iWucv ^'^ fi^octerMSMiilL 

Professor Gnst.-iv Cobn bas Prided bis G^nerai PoHHeai 
JStonomy^ the first volume of an exbanstire treatise, into an 
lotrodaction, treating of scientific method, of tbe relation 
of political economj to other si^encesy of tbe bistorT ol 
fiolitical ecoDomj^ and of fnndamenlal conceptions^ and into 
the System of Economic Life. Tbe Sv^em of Economic 
Life treats (1) of the Elements of Economic Life — namely, 
|x^»paIatioD, nature, labor, capital; (2) tbe Stmctnre of the 
Economic Life — inclading tbe ordering of tbe common Kfe, 
the forces connecting the members of tbe social body, sncb 
as competition, association^ private and collective property, 
the differences in society, and groups in tbe social botly; 
(3) Processes of Economic Life — namely, prodnctiott, trans- 
fers of goods, and distribution of income* 



It will be readily seen that a topic like population can he 
treated in an independent work, and it has been so treated 
by Malthas, a great English economist Land, and the price 
paid for its use, called rent, may also be treated in an in- 
dependent work. An American economist. President Francis 
A. Walker, has written a book chilled Land and lU Rent 
Capital, another factor in production, has been made the 
title of an important work by Carl Marx, the German so- 
cialist. The present work follows a plan which i^ new in 
some respects, particularly in the division of space assigned 
to the various topics discussed. The author aims to give 
his readers an insight into the real significance of political 
economy, and a general view of the entire ground, whereby 
it is hoped that many will be led to continue their economic 
studies further. A large part of the book is, of design, de- 


ECONOMIC il r; T !I D s. 

Metiioi>S whereby knowledge is a(.'quire(l &re properly 

diacuast^d id logic, but as a I'amiliarlty with logic cannot be 
assumed, as tbere Is fi'cqiu'nt change in logical treatigen, 
and ns there is a lack of unanimity of opinion about the 
proper method fur mental and social Bciences, a short chapter 
must be devoted to a discussion of methods suitable for th? 
discovery of economic truth. 

Logicians have usually sjioken of all methods for tbe ac- 
quisition of knowledge aa either deductive or inductive, but 
recently a third method, tbe titatistical, has been assign.ed 
an equal rank, and it has been claimed that the statistical 
method is the one peculiarly adapted to the study of all the 
Bocia! sciences. 

The Deductive Method means reasoning from the gen- 
eral to tlio particular. Tin.' most familiar illustration is this: 
All men are mortal; John is a man; therefore, John is mortal. 
We begin with a statement respecting a class, we see that 
B, particular individual belongs to this class, and then we 
assert that what is true of the class is true of tbe individual, 
This if" self-evident. This kind of reasoning is often called 
in oolloqnial English "putting two and two together." 

Inductive Llethod. — Now, inductive reasoning reverses 
the process. It finds that certain thinga are true of an in- 
dividual which by observation is declared to be a fair type 
of a class, and then what is true of the individual is said to 
be true of the entire class. It is seen that John dies. John 
is mortal. Observation shows that James, Richard, Robert, 
and others likewise die. Observation as reported in history 
tells us of no man who has not died. We s.iy then John is 


B. typical man, and we conclude thai all men are mnrlal. 
Tliesc two methods nianife»tlj sitpplcmi'iit each othei*. 

Statistical Method. — But when we mass Logethur large 
numbers of facts about the lifo of man as a raembyr of soci- 
ety, in other woide, social phenomena, we observe certaia 
regularities amon^ them. No one of them can be taken as 
a type, yet we can arrange and group tbem and gather in- 
formation about them. SuicideH serve as an excellent iUiis- 
tration. What could appear to be less regular than the 
means adopted by human beings to put an end to tlieir own 
lives? Yet when we study a largo number of cases, say 
tbomiands, we iind that a certain proportion in each hundred 
will bnng themiwlves, another proportion will poison them- 
Belvec, another proportion will drown themselves, etc., etc. 
Lilcewise wo discover a regularly recuri-iug proportion be- 
tween met) and women. We find that a certain percentage 
will chiiose a. rainy day, another percentage a clear day ; a 
certain percentage will be married, another percentage un- 

Mortality in general serves as an excellent illustration, and 
this has in another connection alrea<1y been cited. It is not 
easy to tell whether Robert, aged forty, will die during the 
next twelve months, but it is easy to tell bow many meii among 
a hundred thousand aged forty in a particular country will 
die. The observation of those regnlarities in large masses 
of facts, and the acquisition of knowledge thereby, is called 
the use of ibe statistical melhod. 

Deductive School. — Economists during the first half of 
this century generally made use of what they called the de- 
ductive method. They started with a few general proposi- 
tiims afforded them by their own consciousness or by obser- 
vation of familiar facts, or by other sciences, and sought to 
explain the economic life of man thereby. One of these 
general propositions is the assumption that the main mo- 
live, almost the exclusive motive, and the only one to be 
taken inlo account in rejisonings respecting economic 
life, is self-interest. Manifestly, if we can assume that men 

JIB AS OTRoaccnoK to M 

mn alTKjs Mtut«d bj wlfiiteMt it is mIt "riMiij ts 
find oBt where aelf-inUnift will \mA l» pnfiot Iks awans 
which tbej via pnne. gaJaafcn Jly, ifcii Hi»Bi » looJaf 

light on econoBie [ihiiiiiiwi asi explMB BMf «f tlMB. 

A aecond geneni pnninMiJwi twJ * tW wnlngp •( Ae 
older dednctire ccobom' 
erea» f sster than the ma^m wt Mih 

A third propontioB M « m» Aat c^pilal iMnoas tkB yiw- 
dactiTitT or Ubor, and tbiS f 

nur be nude which wiU n 
ecoDumic goods annmllf f 

A fornth proposiiioa amatt vtai is eiD tJ Ar 'Isv of 
dimhitshingretaras;'' ttMi li — i— til iftiir ■ rmiTw — iwrt 
of labor ud capital hare braa appBed to aginhwral had 
it does not pay to apply RKMre, bccane the ntma wiD aot be 
in proportitm to increased oatlar. It m.-ij paj to hoe com 
three time<s but not four or fire tiBMS. The ecoaomist who 
fonnnlated these propositioDs said that poGtical ceoBomj is 
not eager to gather facta, becaaae these gMeial propoutiou 
explained all facts of the aoeio-ecoBoaue orgamea. 

The ijedaetire method is also called m priori, aad we often 
bear of i priori ecotMHOira. 

The Historical Schocd.— Aboat the aiiddle of (Iub eent> 
arr there arose in Germanv a stroajtw and more rigonxu 
protest against the dedactire toethod thaa ever before^ 
Isolated Toices had been raised against it pveriottslj. An 
Engliah economist * bad, abont IS*), daim^ that we «mM 
not ont of onr own inner cooscioosows with the aid f>f a few 
general propositions eiplain the complex pheaoaeaa of the 
»o(rio-e«>nomic organism, and said if we wwtld know bow 
men live we most " look and see." Other eeoooaiBts bad 
giren ntteiance to similar opiniooa. bnt ibey had not been 
heard. Bnt three gifted men in GwmasT, C*rl Kniee, Wil- 
helm Roecher, and Brano HUdebrand. all ■nirersitT pn>fe*> 
aoTS, coming forward with what they caUed the AjAwaml 

• Bot- Biehmd J«M»- '" 1>» fc~^ "^ ******** ^'^ "*•■ "^ *• **^ 


method, made qniekly an impression in their own couuiry, and 
tlieir influi:n<jc lias gradually spread throughout the civilized 

We ought ratlier lo speatc of an historical school than his- 
torical method. The term is used in a broad sense. It ia 
better than inductive, beuanse it includes much more than 
induction. Thenamehistoricalianot accurate, but it is taken 
from one prominent characteristic of the bcIiooJ. Men of the 
historical school, believing in observation, regarded the past 
experience of man in history as a valuable source of infor- 
mation. Men had, they claimed, been conducting experiments 
in their economic life during their entire past existence on 
this earth, and they had recorded the results of their experi- 
ments with more or less accuracy. History was considered 
then as a proper field for observation. At the same time it 
was never claimed that history alone was sufficient to enable 
us to construct a science of political economy. Otiier nations 
were to be studied, and lieme we find the expression compar- 
ative method. Generalization from large inductions of facts 
was advocated, and we accordingly cnconnter tlie term sta- 
tistical method. 

But this is not all that is meant by the tendency designated 
as historical school, less accurately described as historical 
method. The expression historical school meant, and titill 
means, many things. Perhaps it primarily signifies a pur- 
pose or even a philosophy of life. The ethical aim comes 
firsL Most marked among the (characteristics of the histor- 
ical school of political economy is tlie supremacy ascribed to 
ethics. To the demands of ethics, it is felt, should the entire 
economic life be made subservient. The historical echoul 
means a bi-oad, progressive spirit. It carries with it a differ- 
ent view of the State. The attitude of the philosophers of 
the period of the French Revolution is rejected. The State 
is held simjily to mean a co-operative commonwealth. The 
historical -school in its spread over the world may I>e termed 
a wave of humanltarianism. It both a neijative and a 
positive meaning. It means rebellion against the old, at 



first, naturally, strongly pronouiiccHl, .and a eoiistructiTe effort 
toward improvement. 

This prepares us better to return to modern methods. The 
hUtoricii] school is catholic as to methodfl. All methods are 
used. Undoubtedly a limited place is given to deduction in 
the old sense. The old eehool sturtcd with general proposi- 
tions, called in logic premises. The new school believes that 
it is an essential part of political economy to gather those 
premises from which coneliuions are drawn. 

It may be said, then, that inodei-n political economy nnes 
these methods: deduction, indnition, observation and de- 
scription, statistics. Deduction and induction have already 
been discussed, and eitaraples will be afforded by the sub- 
sequent chapters in this book. DerlucUon ia and should ba 
used, and e^ciaUy for certain classes of p/ienomenu where 
other methods fail. International trade may be cited as an 
example. It is difficidt to separate and interpret the facta. 
England has prospered, let us admit, under free trade. Was 
free trade the cause ? Certainly other forces have been at 
work tending to make England a wealthy country. France 
has prospered under protection, and so has our own country. 
Wna protection the cause? How difficult <u answer ! AVe 
seek aid from known general iirinciplei^. 

Insufficiency of the Deductive Method. — At the 
same time we must recognize that deduction is in a sense a 
dangerous method. Granted promises, conclusions will 
follow, and there is a likelihood that men will choose pi-ein- 
iiies even unconsciously which will lead to the conclusions 
desired by tliem. The factory legislation of England, de- 
signed to protect the hihorlng population of that country, 
lierves as an illustration. It might have all been reasoned 
out deductively. Jjittle children, almost infants, were em- 
ployed for long, weary hours in factories and in mines under- 
ground, and jthysicians asserted that the rising gcneratioD 
was being ruined phy.sii-rdly and morally. Now how did this 
happen? It has already been explained. A few employers 
led, and force of competition compelled others to follow them 


in llieir bad practioea. We know enough about human nature 
lo conviiiue us that it is a boptless task to inspire all members 
of an industrial class with lofty motives nod firm purposes, 
and that conseqm'Rtly the moral plane of competition muxt 
be raised by the stioiig arm of the law. Yet the so-called 
inductive process, whiuli in tbiei ease means experimentation 
and observation, was ihu method which taught economic 
truth. Ab a matter of fact, reforms were carried through by 
an appeal to ethical sentiment. As stated, this entire scheme 
of reform can now he reasoned out deductively, hut at tlie 
time deductive Gconomists almost unanimously oppo.sed it, 
talking all sortn of nonsense about the ruin of England's in- 
dustries from foreign competition if child labor were abol- 
ished and hours of labor reduced, and claiming that the 
entire profits of capital came in the last half-hour of toil, etc., 
etc. Observation has Convinced economists that Englisli fac- 
tory legislation wa.s a good thing, and that It has established 
the industrial xupremauy of England on a firmer basis than 

So many premise* are possible, and so many combinations 
of preraises, that deduction is apt to mislead. When used, 
oonoliisions should always be carefully tested by actual ex- 
perience, and we must be ready not merely to lest conclusions 
but to draw conclusions from facts evea in cases suitable for 
deduction, because human passion has such play in deductive 
processes. Deduction oould not convince the hard lieaits of 
English Grailgrinda that factory legislation was a good thing, 
but facts as bard a^ their bard hearts were arguments which 
they knew not h'lw to resist. 

Obaeivation and description have a largo place in political 
economy. Loi^ical processes have Loo exclusively dominated 
a great deal of political economy. More plain, simple de- 
scription is needed. Labor organizations, co-operation, and 
profit-sharing experiments, the workings of systems ol taxa- 
tion, are to be observed and described. Institutions and 
customs are to he observed ami described ; also tlie eflects 
of desires on production. Nothing is so little cultivated in 


general aa the Iialiit of oltservation of economic and, in gen- 
eral, social p}ienymen3. Text-books, wrictfn by tboae whose 
little learning was a dangerous thing, bave aroused prejudices 
and have provided mc;n with a sut of tihlbboleths, terras and 
phraaes, by which they decide all practical [iroblema of etatea- 
niaiiahip in an offhand way, much more ea:«ily than by patient 
inqniry. Words have been taken for knowledge, and prog- 
ress bus been olistnicted. If readers of this book will keep 
their eyes open, their minds and hearts open for new truth, 
and consecrate tbemselvea to truth, they will advance r.ipidly 
in economic knowledge. A brief outline or sketch of a 
science dues pniiitivc harm when it leaves readera with the 
imprttssion that they are well-informed. The aim r>f this 
book is not to leave readers with a satistied feeling, but to 
awaken ciiriusity and to stimulate them to further study; in 
particular to arouse in them habits of eareful and accurate 
observation of the economic life of all clnssea of men, hours 
of labor, wages paid, housing of the laboring claas and other 
classes, various taxes paid iu one's own town, the relation of 
local taxes to Slate tiucH, the methods of granting franchises 
to corporations for the use of the streels, comparsions be- 
tween the cost of electric light when the electric lighting 
plant is owned by the city and when it is owned by private 
corporations, etc., etc. 

Analysis. — The statistical method has been described, 
and it remains to say a woi'd about analysis. Analysis would 
seem to be an aid to other methods rather than an independ- 
ent method. It consists in separation of ci)m[ilex phenomena 
into parts so that they can be better nn'leratood. Economic 
knowledge is impossible without careful analysis. One of 
the most frequent causes of error is a lack of analysis, or, as 
is more commonly said, a failure to discriminate. Monopolies 
serve as an illustration. Some are good, others bad ; some 
are good under certain conditions and bad under others; 
some are brought about of iieeessity by tlie inherent prop- 
erties of certain kinds of businesses ; others are artibcial 
products whicli can be abolished. Nevertheless, monopolieB 



are asoally judged '* in a lump." They are praised or blamed 
indi^rimiuatelyy and legislators too ofteu desire to treat 
tbem all alike. Analysis enables us to separate monopolies 
and arrange tbem in groups so that each may be discussed 
and treated in an appropriate manner. 

Read Statistics and EoonomicSy by Professor Richmond 
M. Smith. The monograph on '* Statistik " which Chan- 
cellor von Rflmelin contributed to SchOuberg's Handbuch 
der Politischen Oekonomie should also be consulted by those 
who read German. Morselli's work on Suicidey in the In- 
ternational Scientific Series, gives illustration of statistical 
method in that subject. 



** Natural Laws." — ^Lawa in the e 
IfMrn much diM;ni>sed, mnd there has been a patade of "mat' 
nral IftWM " which we have been called apon to adwn aad 
fj oWy. Now the word lutiual maj be nwd in two aoweL 
If nature includes man and every thing in Uw naiTen^ it ia 
m';r'! taut'il'igy to saf that every tlung whiefa happe— ia 
natural, hut nature is generally ctmctived as indaffii^ 
evirry tliiitg except man's mind and its roluntaiy aednty 
as manirtMted in bis acts. By natural laws are meant laws 
prc^ivfly like those of the external physi*.-al universe. If 
tbio nenM; of tbe term be employed, it may be said that ibeie 
arc no natural laws in political ecoDomy. Why shmild there 
\n:'f l'"lili(-al economy deals with a different order of facta 
fr"m ill" natural scieacet^ and its lawti are of a different 
kind. Tin? marvc-louH progress of the natural sciences, eom- 
)/in*-d w ith wliat may be called a wave of materialism which 
in r':<!"»t ytizn has passed over us, has led to an nndne ex- 
altati'/ii of natural lawx, and people come forward triumph- 
antly with the claim (hat they can demonstrate the existence 
'tt natural liwii in the business world or even in the spiritnal 
w'/rl'l. All that they appear to accomplish, however, is to 
sb'iw aiialocioH Ivetween certain orders of fact& It is no 
di«{iaraf{i-m<-nt either to the social organism or to tbe re- 
ligi'/us life to admit frankly that they are not governed 
by natural laws, that is, tbe laws of the external pbyncal 

" LalsB6Z-Falre."— What are these natnral laws of the 
socio-economic organism ? Let some one ennmerate tbem. 
When this has been attempted no progress has been made 

Ecnxoiiic LA ws. 


beyond a few truiRms and aelf-cvident propoaitiotis which 
politioal ecouoray never eHUblished. One writer speaks of 
the maxim lai»sez-/aire, the theory of non-interference and 
pasaivity of goveritmeiit, as natural law, "It carries with 
it," says this writer, " the i-eveiation of our science, and an- 
nounces the presence of those natural laws which it Ib the 
misfiion of the science to study. At the same time this 
maxim is the first-fruit of this revelation." Unfortunately 
for the theory of natural laws, this maxim, laUsez-fatre, 
has generally been abolished both by science and practice in 
all civilised lands. It is thuught that it performed good 
servii-e at the time it became powerful, but that it h no 
longer suited to the needs of the modern world. Imagine 
physicists as renouncing the law of the attraction of gravita- 
tion as nn longer adapted to our world! 

Self-interest. — But have not men always been actuated 
by self-interest ? Were not thu Mcdes and Persians thou- 
sands of years ago, like the Americans of to-day, moved by a 
desire to advance their own inteiosts ? Is not here a natural 
law? at any rate — .ind this is usually meant — a law whioh 
acts with the regularity and certainty of the physical uni- 
verse ? By no means. Self-interest is not a constant force 
whiuli can be accurately measured. It leads one man to 
cheat, another to steal, it leails a thii-<l to imderhand busi- 
ness practices which just keep within the law. It prompts & 
fourth to deal honestly, to describe his wares as they are, 
and to sell them at a " fair piiee," and at the same price to 
all. Self-interest induces some men to smuggle, hut induces 
others nnt to smuggle. We observe the projiorlion between 
smugglers and non-smugglers. Now let us change the laws, 
reducing or raising taxes on imported commodities. Lo! 
the proportion between smugglers and non-smugglers has 
changeil. Some adulterate theirgouds; others do not j some 
manufacturers do all they can to secui-e the passage of laws 
regulating and restricting child-l.ibor ; other manufacturers 
oppose the passage of these laws and break them alter they 
have oome into force. Then we hear about real self-interest 


and apparent self-intereftt. Dmibtless there is Riich s dif- 
ference, but must uot a man be niuved by differeal mo- 
tivts tban self-interest to perueive his leal self-interest? 
Some claim that self-interest may be compared to the attrac- 
tion of gravitation. They say that other forces act luunter 
to the attraction »f giavitation, as the friction of the air or 
tlie force of the wind. Yet all these forces do net, and the 
motion which takes place is a resultof their combined action — ■ 
a resultant. This is not the case wilh human motives. \Ve 
choose, and one motive diiiplaces another. Again, back of 
motives tliere arc laws and iustitutions on which motives 
act. How will self-interest act when custom fixes prices? 
how when competition fixes prices? 

Scx:iaJ La^s. — It must be apparent that we have to do 
with laws different from those which govern the physical 
universe. Our laws may be called relative laws, or histor- 
ical laws, or, if one pleases, social laws. They are the result 
of the peculiar constitution of our politico-economic life, 
which is made what it is by the aciion of humau desires 
and passions and efforts upon the physical universe governed 
by its own laws. The will of man is a main factor in all 
politico-economic phenomena, and thi-* will must be regarded 
by students of society as itself a creative ener;ry, introducing 
new forces. We can observe certain regnlarities and ten- 
dencies in all social phenomena, and when statistics begao 
to make rapid strides these regularities and tendencies were 
called laws. When it was observed that out of ten thousand 
people n certain detinile nninber every year got married, an- 
other definite number procured divorces, still a different but 
definite number comniitlod crimes, a precise number which 
(Hiuld be told in advance took their lives — when, in short, 
all social plienomcna appeared to recur rcgiihrly year after 
year — a leeling akin to fatalism arose, and some statisticiana 
were inclined to look upon these re!>n1arilii« as laws of the 
external world beyond the conlrnl of niiui. Further in- 
quiry revealed diffei'ences in these proportions between dif- 
ferent lands, and showed fnrtfaer that dlSereooes eonld be 



hronght aboat by the action of man. The phenomena of 
intemperance have in parts of England and other countries 
been defipitely altered by agitation of various kinds for 
reform. We have at times to do with powerful tendencies 
ill economic lite, and these for a period appear to resemble 
laws of the physical universe, llie tendency of certa* 
pursuits, like gas service, street-car service, telephone service 
and the like, to become monopolies acts with a power like 
that of a mighty river, and we can with safety predict that 
apparent competition in the field of natural monopoly will 
piove both illusory and temporary. Most instructive is the 
observation of great currents in our economic life and the 
etudv of the forces back of them. 

Read the author's monograph, T/ie Past and Present of 
PolUieal Eeonomy^ published by the Johns Hopkins Univer- 
sity in its Studies in History and Political Science, 



1. Political Economy a Uaefiil Science. — The pre- 
esding pages have, it is hoped, ccuivinecil llie reader that 
politicial economy is a useful Btudy, and one worthy of the 
greatest minds. It affords room for the speculative intellect, 
nnd yet Bpeeiilations can be tested by the experiences of 
actual life, Faney and imagination, ho necessary to all sci- 
enees, have here ample scope for their exercise in attempts 
to construct hypotheses to explain social plienomena. The 
beat powers of observation find opportunities for service, 
and experience will further sharpen them. The keenest 
analytical intellect will never he at a loss for material on 
irhich to bring all its acnmen to bear. Phi lo.«o pi ileal in- 
stinct, which seeks insij^iit into the innermost nature of 
things, is most welcome in political economy. Philanthropio 
Bentiment is gratified by the discovery of ways to benefit 
the human race. 

It is, however, frequently asserted lliat political economy 
is not practical, llial it is in fact "a mere tlieory," and as 
snch its claims are often rejected by business men. This 
is short- sigh led. Political economy has to do with the 
nocio-eoonomic organism, nnd Icnowledge can he acquired 
about this by sysiematic study in the manner described, and 
this knowledge can hv transmitted and increased by accumu- 
lation from generation to generation. The actual experience of 
theso-callod practical man does not take the place of econoraio 
knowledge. His experience is too narrow and limited. If he is 
a man of small nature he is very positive of his own iiifallihil- 
ity, and looks upon the claim of the econotnist ihat 1 


tell him Bomethin^j about the baaineas world as unwarrantable 
presumptioD. Yet hitt condusioiis are tliametriually opposed 
to those of a practical man in another line of bnshiesa on the 
opposite Ride of the street, and both of them differ in viewD 
from the opinions of piaetical men in a neighboring city. 
It is beeause the rangi' of faele of each isexceedinglynarrow 
and each has b^en entirely absorbed in his own affaii-s. Itia 
on this account that the attempt tu improve politics by put- 
ting practical biisinesa men in office has so ollcn proved dig- 
astrouA, and men have been again and again obliged to go 
back to the 8o-ealled professional politician, Buaineaa Tacta 
are not all those needed in government. Finances of govern- 
ment, for example, ought in some reBpecta to be tionducted 
on principles exactly opposite to those which obtain in private 
financiering. Political economy is a young science — as a sepa- 
rate science snareely over a hundred years old — and it behooves 
political eoonomistn, though conscious of their own value, to be 
modest in their claims and to remember that much is yet to be 
learned by the wisest of ihem. Nevertheless, how diverse are 
the elements which have contributed lo this body of knowl- 
edge! In the historical sketch it will be seen that philosophers 
have helped to build it up, that distinguished and remarkably 
successful business men have contributed their best thoughts 
to advance its growth, that statesmen of the leading dviliitcd 
nations have participated in its development, as well as those 
who ha\e been primarily political economists, white great 
philanthropists hnve helped to give it ahape. For a century, 
then, business, philosophy, jurisprudence, and practical poli- 
tics and phiIanthro]>y have helped to make pulitioal econ- 
omy what it has become, and the fruit of fo much intel- 
lectual effort and such extended experience is not to be 
regardeil lightly, even while it is recognized that on account 
ot the complexity of the subject-matter political economy is 
yet in an imperfect condition. Even where it cannot speak 
authoritatively it is always entitled to a respectful hearing. 
The truth is, every budy who is rot a fool most act accord- 
ing lo some tiieory, liut the ordinary man is often guided in 


(■conomio iitierauue^t by antiquateil theory which has gradu- 
ally percolated duwn ibrougli sevoral social strata until it has 
roai'lied him. 

A prauticat man might aa well try to gel along without a 
lawyer as a modem nation withont political euonomiBts. The 
politioal ccoiiomiat is in faot to the people as a whole what 
the lawyer is to tlie private man. It is the businoaa of the 
poiitiual economist to guard the interests of the masses, and 
to suggest measures to promote their welfare. The political 
economist may in some respects be compared to a physician, 
only that he deals with the body politic. We can imagine 
a man saying, " I know more about ray own budy than a 
mere theorist who has been stndyiug nnder college iiriifessora 
and working in laboratorit-a and has never had any practical 
eiperiencfl with my body," Yet we know that snch talk is 
nonsense. It is because the practical business man has so 
often failed to recognize this and to remedy his own short- 
ooinings, and has advanced his crude and antiquated ideas as 
prai-liual guides, that one of our deepest thinkers in political 
science han spoken of the " practical man as the bane of our 
political life." Certain it is that our government will con- 
tinue to be almost exclusively a govemmenl of lawyers until 
(looplo more generally take pains to instruct themselves in 
ihe various branches of political and social science. Gov- 
ernment can never be conducted like a manufactory or a 
mercantile establishment, and every proposal so to oondnct 
it reveals ignoi'ance of first principles. 

2. Political Economy and Other Sciences.— Every 
science eontrilmtos directly or indirectly to every other. All 
knowledge is one. But we are now concerned chiefly with 
that group of sciences which has to do especially with human 
society. Before we pass on to remarks about social sciences 
a word must be said about philosophy, physiology, and hy- 

Philosophy and Political Economy, — PhiIoao|)hy is 
useful perhaps especially as a menial irairiing. Philosophy 
seeks to look into the fundamental principles of all knowl- 


e(]ge and inquires then into the nature of the State and of 
Bociety and the aim of life. It aeetiB a final reason for things, 
Itgtves bioad and generous views, and lifts up the mind in 
the contemplation of immense themes. Philosophy helped 
to give birth to political economy, and when in England it 
Hcenied on the point of collapse philosophy gave it new lif^. 
Philosophy has again and again been a source of inxpiratiun 
to German economists, and perhaps the lack of philosophy 
explains tlie sad deadness of political ecouomy in France, 
whei'c fur a hundred vcars almost nothing has been done 
to advance the acieuce. PhiloaoplierH like Fieble, Hermann 
Lotze, must toiday assist eoi)nomisls who are competent to 
understand them. Logii', regarded as a branch of knowl- 
edge, is especially naefitl on account of the discipline it gives 
in careful reasoning, particularly in analysis, discrimination, 
and detection of fallacies. 

Physiology ajid Hygiene and Political Economy. 
— Physiology and hygiene are helpful in the discussion of 
social questiims, and loo little has been made of them hith- 
erto. Phyuiology, for example, ought to bo consulted in 
qnestions like child labor, labor of women, especially married 
women, the length of the working-day in factories and in 
open fields, etc. Hygiene fnrnishes rules for sound physical 
life. M. de Laveleye even says thiit the science of health 
ought to determine the normal rate of wages. The human 
body is the chief source of wealth, and physiology and 
hygiene must teach us how to conserve and increase our 
bodily powers. 

History and Political Economy. — History reveals 
to ns the economic life of the past with its instruction and 
teaeons. History clearly presents many of our problems, a- 
for example, the downfall of States. How can we guard 
against the evil unless we truly know its nature ? It seems 
clear that economic forces are prominent in the decay of 
civilieation. But we have not yet a suflicicntly accurate and 
detailed knowledge of them. A jirofonnder study of eco- 
nomic history must precede a satisfactory political economy. 


Ai tlie same time history cannot be understood without a 
knowledge of economic forces which give it shape. This is 
oiearly seen, and as the writer's colleague. Professor H. B. 
Adams, well says, political economy is becoming historical, 
and history is becoming economic. 

Ethics and Political Economy, — The relation of po- 
litical economy to ethics has already been eulficiently indi- 
cated. Ethics is connected with what ought to be both for 
individuals and for society, and if ethics has hei-etofore consid- 
ered man too exclusively as an isolated individual, its pfog- 
ress for the future evidently lies in the examination of social 
relations. It may be doubted whether ethics, except as a 
social science, can have any real existence. Polilical econ- 
omy takes M-hat ethics has to offer as a guide for the devel- 
opment of economic life. Ethical conceptions have always 
governed all social life more or liss perfectly. The e 
life of ancient Oriental natiouR was more under the doi 
of ethical principles than has been that of modern Occidenial 
nations. The ethical principles of the East were not of so ex- 
alted a nature as ours, but such as they were they permeated 
their life as ourji do not. The national economy of the 
Jews illustrates this excellently. During the Middle Ages 
the Church attempted, and for a time with some success, to 
subordinate all sooial life-spheres to the demands of ethics. 
Personal service, relurna for loans, and prices were regulated. 
The conception "fair price" (junfwwi /wWt'wwi) was formu- 
lated, and exerted a powerful influence. It seems clear to 
the writer that industrial peace can never be secured until 
the supremacy of etiiics ia recognized by public opinion, and 
is m.ide effective by laws and_ constitutions. It is on this 
account that the institution of " fair rents" in Ireland IB to 
i.e welcomed. It may or may not work well in this particu- 
lar instance ; that is, the proper method for giving rffect to 
ethical principles may not have been adopted, or it may 
have been ; but the supremacy of ethical considerations in 
either case is recognized and the freedom of contract dis- 
tinctly subordinated, as in American usury lawR. Courts fix 



rents wliitli are regai-<:led &b "fiiir" in Irelaod irrespeulivu 
(if all agieenientB, It may be difficult to tell ia goneral 
what is fair, but not so hard in a concrete i!i»laiice. At any 
rati! it ia actually dune. " Live and let live " is our homely 
adage wliidi expressea a popular idea of fainieia,- and this 
Huems in a rough kind of way lo give the land courts 
a guiding principle in dcU-rminlug fairness. Ethics should 
investignie more carefully than il has done the nature of 
mutual nglilB and duties. 

Political Economy and Religion. — We may prop- 
erly eiiougli iipeak of a knowledge <>f religions a8 a science, 
or ev^n of a knowledge of one religion. Theology is a t^y - 
tcmatic treatment of a certain order of related facts. But 
here we are concerned with religion not so luueh as a science 
as an inspiration, as a power to direct life, and thus as inti- 
mately connected with ethics. Religion, like ethics, supplies 
norms for conduct, but it does more. It supplies a moral 
force to induce men to acknowledge the truth, and to do what 
they know to be right. 

Every system of religion must affect the general charac- 
ter of the nation under its intlnenee. The fatalism of the 
Turks leads naturally to indolence, while the old Jewish 
religion with its high estimate of the good things of tidfl 
world tends to stimulate its followers to activity and to 
accumulation. Christianity moderates desires, sets a higher 
aim than wealth before people, but dignifies the man who 
gains his bread by honest toil, and enjoins diligence and an 
improvement of all talents comriiittcd to us. It teaolios ui 
to love our fellows, and this has encouraged enlightenment 
of the masses, and enlightenment increases prosperity. Love 
for our fellows prompts us lo promote their physical welfare 
in everj respect, and this tends to conserve and increase their 

It is not practicable at present to take up every one 
of the constarilly increasing number of branches of social 
science and to trace the relations between it and politieal 
economy. Those relaliorts must often be (jiiite obvious. The 


trvfttmoiil of the dependt-iit and criminal ellipses l>rin^ iis in 
ri'latioii to a multitode uf ecnnuiniu phenomena. These 
cliis«.>8 impair the productive power of the community, and 
Ww number of persons belonging to them is largely, thongh 
not wholly, dottTintned by industrial coudUions. If the 
laboring population is boused in crowded tenements in the 
eluma of cities, it will help to Hwell tlie raukx of vice and 
pauperism. If child labor is general, a generation in 
body and wilUpower, with depravi>d habits early acquired, 
may bo expected. Many &yiv\\ reHectiona will occur to the 
rt^ader, and observation of the life which surrounds bim 
will every day confirm what is said. Piisoii labor is one 
lupin showing the omniection, though only a small part of 
the cunniftion, between penology and economics. Contract 
labor has iignred llio working-men and their employers. It 
hns ill Bnltimon.' desti-oyed for free labor an important branch 
nf a largr indtiMry—namel}', the manufacture of marble slabs 
Ibr wDNh-NlaiidFi, I' f^leepers, bureaus, and the like, 
lint if iho labor of prisoners is not to be hired to contractors, 
to ihti injury of the uprijiht, how shall it be organised ? for 
idleneiw is barbarous inhumanity not to be tolerated. Here 
we eomc to economic quemions. Poor relief, public and pri- 
vate, U a« intimately connected with economics, and it has been 
dUeuWHxl, [lerhapH, ohielly by economists. It was an English 
<ioonoml«t, MallhiiM, who, on economic principles, helped to 
introduce a ivform^tlnn of the poor laws of England iu 

Anthropology may be -neniioned under this general 
head, It is HometimeM conceived of in a large sense as the 
Hcienco of man. It would then include sociology and every 
Ihiud pl»e about man which could not be brought under the 
general designation social relations. Very often, Imwever, ii 
liieanH prehistoric and early man, man in the lowest stages of 
IiIm development, nnd discusses the dawn of civilization. It 
includes the economic life of prehistorio and early man as 
one part of its field. 

Law and Political Sciences.— The relation of political 


economy to law is a close one, especially in our day, for pcilil- 
ical (economy explaiiie the reasoni; tor a great part of ilie 
laws, their nature and the principles which shoald control 
their devdopment. Many of the subjects which belong to 
political economy belong also to law. Both treat of ]k>s»os- 
nion, property, inheritance, sale and purchase, loan?, gifts, 
wages, rent, taxation, combinations of labor and capital, and 
like topics. Political economy touches the innermost nature 
of law questions. It might not be altogether inapiiropriate 
to call political economy " the spirit of the laws," talcing the 
name from Montesquieu's book which bears that title. 

As we have seen, political economy has by one writei* been 
dcfiacd in such a manner as toconvuy the impression that it 
has to do exclusively nith legislation. This was rejected as 
too narrow a conception. Yet if we tliink of live economic 
questions we shall find that tbey are, very generally at 
least, in part legislative questions. Topics such as 
occur to one : the tariff, local taxation, iho silver question, 
bimetallism, railw.iys, child labor, industrial training. 

When we open a law book on real estate, what is found ? 
If it is an American or English book, probably very littlo 
save present legal facts. The law it thns and so, says your 
legal authority ; nothing more. Political economy tells us 
how private property in land came to exist, why it exists, 
and explains the reason why some changes in land laws 
should be made, and why some people think they should be 
radically altered and private property in land, as at present 
understood, abolished, and why others reject this view. 

What has been said abont real estate holds equally with ref- 
erence to laws of beqnest and Inheritance. No man is fit to 
legislate on these subjects who knows nothing about politioal 
economy. Commercial laws and the laws pertaining to cor- 
porations can likewise never be properly handled without the 
iiid of our science. 

Political ccoitotny is needed as a corrective of certain 
teudencies in the law. Private law has to do with iibdi- 
vidual rights, and lawyers acquire a habit of looking at 


all qiicstions from nn individual etand-pnint. This be* 
oomos painfully apparent in reading Knglii^li and Ameri- 
can judicial decisions. The rights of ihe people as a 
whole, that is, of the many, are overlooked too often for 
the sake of a few interested parties. It is not meant to 
attack the integrity of American and English judges, because 
with (Comparatively few exceptions they have been men of 
blameless character. The trouble lies with the point of view 
which naturally arises from an exclusive consideration of 
private law. Every judge is familiar with the bearing of 
legal questions on the private interest of individuals, but too 
often loiics sight of the millions not present before him. If 
we go back to olden limes or foreign countries, about which 
our judgment is fairer, we can all see this tendency of law- 
yers as a class, both in legislatures and on the bench, to sacrl- 
iice the many to the few. The common lands of India serve 
as an illustration. English lawyers could not £rras]i the fact 
of common properly of a village in laud, and so looked about 
for a private owner, and mistaking a taif collector for pra- 
prietor they made him a real proprietor. Thus were the 
villages robbed by legal incapacity to grasp the economic 
aitnation. The same thing happened in England, as Sir 
Henry Maine, John Stuart Mill, and othei-s have shown. 
The common land belonging to English villages was allowed 
to be inclosed by lords of manors, and thus the property 
rights of the forgotten millinna were again sacrificed. 

Private law is concerned with petty detailw, and attaching 
nndue importance to them is apt to exaggerate the importance 
of mere legality, the letter and machinery of the law. Politi- 
cal economy gives large views and general principles. 

Voltaire called lawyers conservators of ancient abuses, and 
Professor Bluntschli speaks of law in itself without any cor- 
rective influence as *' tending to the numbness of death," 
failing "to keep step with the development of life." Rule 
by judges tends to petrifaction, and is conservatiBm of a rev- 
olutionary because obstructive type. Lawyers have doubt- 
less caused by obstruction many revolutions, and they can 



rarely reconcile themselves to great progreesive cbangea like 
the independence of llie American colonies or the unity of 
Germany or of Italy iinlU after these Ihings have taken 
place. The reason is that lawyers are always looking hack 
to the past for legal precedent, never al^ead, and this begets 
a dangerous habit unless other tendencies are at work to 
correct, or perhaps, more properly, modify the force of this 
conservatism. PoUtieal economy is progressive, and helps to 
counterbalance a dangerous tendency towaid revolutionary 

Law is concerned with modem industrial life. To an increas- 
ing extent are legal questions becoming almost purely eco- 
nomic, as seen in boycott, black-listing, conspiracy, and combi- 
n cases. Legislators make laws to apply to these cases, 
and judges, in their decisions, donot merely tind the law; they 
make it. Recently in such cases American judges have been 
c active in legislation than legislators themselves. Yet leg- 
islators, and parlicnlarly judges, are unfit to make decisions, 
and cannot make decisions which will stand the test ol' time 
without a profound knowledge of political economy. It is 
thus with propriety that France and Prussia require a knowl- 
edge of political economy in all candidates for admission to the 
bar, and that some of our best law schools have rendered in- 
struolion in political economy at least accessible to law stu- 
dents. It should be a part of every law course, and every 
candidate for admission to the bar shouhl be compelled to 
pass a thorough examination in political economy;. 

But political economists need law. Perhaps no study is 
more useful to them. It is a splendid training for the mind. 
The material of law and political economy is the same, but 
in law we have a ripe experience of thousands of years in 
analysis, arrangement, and exact statement. It gives precise 
I'ants about present institutions, ft shows the basis on which 
progress must build. It shows how deep are the roots of our 
present social order. It emphasizes the importance of the 
statics of political economy and corrects a tendency toward 
revolutionary rashness which is the opposite of all true prog- 


nam. FinelT do Uv ind potiUcal eeoaoajr raiipleBiettt 
cadi other. 

We bare been BpMfcing of private Uv, wWiA has to do 
wiU) legal relations of private partin. We mast aJlnde to 
public law, whieb » concerned with the relations of public 
bodiea to one anntber, or w'lxU rvlationa of public bodice aad 
private parlte£.* Pnhlie liw and potitiet coastitute political 
tcience. The relation of them to politiea] eeoftoinjr is soS- 
ciently obvious. Pulitu-al economy places aims befoR polil- 
ica] acience. and political science strives to realise these along 
with its other ends, Constitntiona, tbe higheat expf«aion 
of public law, must be made to confonn to industrial eondt- 
tiofia, and this conformity can be brought about alone by 
poiKical economy. The trouble with our Amerit-an unn- 
stitntiona with respect to taxation, banlu-uptcy, and di- 
Torce and marriage — and divorce aiid marriage imply the 
Teigfatiest kind of economic relations — is that ihey have 
not kept pace with i-conomic changra, and the difficulty of 
doing this is precisely the most et-rioua danger of written 
oonslitutions. That is the weaknes.*: of oar federal constitu- 
tion. Economic life changes continnallT, but that, practi- 
cally unchangeable, cannot be made to conform to industrial 

Jiilemational law, treating of tbe relations of sovereign 
States, is a department of law which is constantly increasing 
in economic importance. Economic relations are becoming 
international with a Intly astounding degree of rapidity. 
Competition is inlernaiional, and we have world markets for 
staples. Combinations of labor and capita) arc 
Govemroent itself forms international postal and telegraph 
unions. Switserland has formally proposed to other gov- 
ernments intemaLional factory legislation to protect women 
and oiiildrcn, and other wage-receivers, so ns to place manu- 
facturers in different lands on the same footing in competi- 

'Seeihaeicrlleiilwork on Junrpruiltn^.hf T. E. Uollnnd. fourth edition, 
diftptcr ii. Ujr deAtiitioa of public law is tomawbat brouler than 



tion. A body of international law with effective means for 
its enforcement is needed^ as never before, for the organiza- 
tion and regulation and preservation of international eco- 
nomic relations. 

Read chapter i of Introduction to Bluntscbli's Modem 
StatCj of which an English translation exists. Those who 
read German will do well to consult Cohn's National Oeko- 
nomiey second chapter of the Introduction. Professor Henry 
C. Adams's article on ''Economics and Jurisprudence," in 
the pamphlet Science Economic Discfission^ may be read 
with profit. It is published by the journal Science in New 

PART 11. 




Utilities.— Man cieales no new matter. Neither the farm- 
er nor the merchant nihl.s one atom to the existing m»lerial 
of the earlli. Yet lliey are both properly called producers. 
What do they produce ? Simply quantities of utility. And 
how do they produce quantities of utilities? Simply by put- 
ting thtnga in their proper plaueii. Man can only move 
things, and when he moves tbero in a suitable tnaaner be cre- 
ates utilities. "This one operation," says John Stuart Mill, 
"of putting things into lit places for being acted upon by 
their own internal forces and by those residing in otlier nat- 
ural objects, is all that man does or can do with matter."* 

It has seemed to some that the faimer is more truly a pro- 
ducer than the manufacturer, and the manufacturer than the 
merchant; bur. such is not at all the case. All of these in- 
dustrial classes do the same thing. They produce utililies 
by moving the places of things. The farmer adds nothing 
to the material of the globe, but he gives direction to the 
forces of nature so that existing material becomes better 
adapted to the wants of man, and thereby more useful. He 
drops corn into the earth, and thereby puts it into a fit place 
for being acted upon by external natural foi-ces. From time 
to time he removes weeds and throws earth about the elalk 
which grows up, and portions of earth, air, and moisture take 
now relaiive poaiiiona and the result is again corn, and more 
com. Changed places and natural forces have rendered 
things more useful. All this while man has dune nothing 
but put things in fit places. 

The manufacturer changes forms and combinations of raw 

• PtiUkcai Economy, Book i, chap. i. § 1. 

i u A y JXTHODCcnosr ro paunaAL ecoitomt. 

m;iti*rial by putting things into fit fdaoet, and likewise pn>- 
dtioos utilities. The meiehant similarly lakes things from 
phiCiM) whore they are less useful to places where they are 
more useful He imniuces utilities as tmly as the farmer or 
manufaoturt^r. It may well happen that the utilities pro- 
ilucetl Uy tlM^ merch:iDt could be produoed with a smaller ex- 
petul it un« of ei*onoroie f orce, and that by a better organisation 
of the factors of produetion saving could be secured ; or it 
may be that at times the merchant has been able to secnre a 
larger return for the production of a given quantity of 
8oi*ial utility than the farmer; but all this is no Justification 
whatever for the |K>)>ular impression that he is less pro- 
ductive tlian any other person who is engaged in economio 

Production, then« means the creation of utilities by the 
application of manV mental and physical powers to the 
physical universe* which furnishes materials and forcet>^ 
This applic:ition of manV powers is called labor. 

Those quantities of utility which result from labor are 
called eco'iomic goods, but not all economic goods are the 
result of lulK>r. Ei'onoraic goods have not been defined thus 
far, but they have l>een described as material good things. 
Proliahlv anv reader of this 1>oi>k would call a vacant lot on 
Fifth Avenue in New York City a materia] good thing, even 
if no person has ever expendeii a day's labor on it. It isde- 
siralile at this point to have a clear idea of economic goods, 
and a definition is ofTereil. We will begin with the word 
good. Every thing which satisfies a hnman want we call a 
good ; and here on the threshold of onr si'ience we see how 
absurd it is to say that politico-economic laws are inde- 
pendent of man, and wonid be what they are if roan did 
not live on the earth. We cannot get half way through our 
definition of economic goods before we have brought in the 
human element. 

Goods we diviile into free gix>ds and ei^onomio good:*. 
Free goods are those which exist in superabundance, and are 
offered freely to every one without charge. Air and water 


are u-fnatly free gooJs. Land in » newcoiiiUry is fi'eqneiilly 
a free gooil. 

Economic Ooodn are those Goods ichich are usiiaBy and 
regularly obtained by man onty by exertion, ami which, or 
the use of which, may be disposed oj for other Goods. — They 
may be further characterized as directly or indirectly ex- 
I hangeable for all guods which come on the market. 
After money cornea into use they may be defined as goods 
which excbange for money or as goods which ai-e bought 
and sold. 

A few pointB require furtherexjilaiiation. " Usually "they 
are obtained by exertion. One may pick up a diamond or a 
nugget of gold n^iou which one has stumbled. Mei-e picking 
up of these articles cannot properly bo called labor. 

Man's Original and Acquired Powers. — The goods or 
iheir use may be disposed of fur olbor gouds, This enables 
us to include in our detiniiion both material and immateiial 
goods, like a person's technical skill acijuired by labor, and 
often very pro<luclive. The central point of our science is 
the conception of man in his relations to material good thlngfi, 
, but it does not eeem practicable to exclude utilities 6xed and 
embodied in human beings from the rank of economic goods, 
because man cannot bo bought and sold. Once many men 
conld be bought and sold, and they then took their place 
with horses and oxen among material goods. Now man may 
sell tfae use of his powern. It is hard to draw the line, but it 
may be done, with suflicient keeping in mind our 
central conception. We would not speak of the cultivation 
of onr faculties, merely for the sake of our own better devel- 
opment, as economic exertion in any strict seuse, although it 
might well have economic consequences. The economic life 
and its goodfl are subservient to man. We call the acquisi- 
tion of a technical skill an economic process, t>ecause it has 
reference to the creation of utilities incorporated in material 
good things. The direct labor expended on matter we may 
call a primary economic piwess, and (hat labor which pre- 
pares us to expend our augmented power on material thinga 


to render tliem useful, or more useful, we may call a second- 
ary economic process. There ia a production wlien eco- 
Domic exertions ami non-eoonoinic exertions meet, as in the 
common -Ecl loo) education of the young. There are such bor- 
der lines, where discrimination is ditticult or Impossible, 
natnrui si^iences as well as in social and mental sciences, ~ 
they need not as a rule occasion much dilUculty. 

Wealth.— Puliti<^n] economists have usually called 
nomic goods wealth, but this is objectionable, because wealtl 
in ordinary language, generally niL'aii^ large quantities of 
economic goodi!, either absuluti'ly, in prupurtion to one's wants 
or as iH oftener the case, relatively, with reference to the 
possessious of others. Wealth is also used often to denote the 
economic goods belonging to an organized society of men, 
especially of a nation. We compare the wealth of England 
with the wealth of France or Germany, We would hardly 
say Germany is not a wealthy country, but, rather, not a riidi 
country. NatwilhHlanding the ambiguity, wealth has at 
generally been nsed for economic goods, and i 
ient a term, so much more so than the larger term of t! 
words, that it may not be possible, perhaps not even di 
able, to displace it entirely. The two terms can be 
terchangeubly in many cases, care being taken to employ eco- 
nomic goods wherevet'il will make our meaning clearer or help 
to avoid misunderstanding. 

The Individual and Society.— One distinction runs all 
the way through political <.'cnnoniy, and that is the distinc- 
tion between the social and the individual stand-point. We 
bave consequently to distinguish between social and individ- 
nal wealth, for what is wealth to the individual is often nut 
wealth to society. 

Many illustrations offer themxelves. A mortgage is indi- 
vidual wealth. If the claim it siands for is extinguished 
society is neither richer nor poorer. Similarly all state, 
municipal, and federal bonds represent claicns on the indus- 
try of the people. If all these bonds should be destroyed, 
"" ' idholders as individuals woul I suffer loss, but society 

bor- I 

e, ia ^ 




as a wliolo would be ncillier rifhoi* riuf poortT, ami socU'ly ex- 
clusive oi boiidhuldoi's would have gained al their expense. 

Census Elstimates of "Wealth.— All census i-etuins of 
weallh are, in many respei/ts, of neeessily defective and mis- 
leading. First, ceiiKus returns are made In money. If com- 
nioilitiea are very abundant the price will be low, litii tlie 
ri-al wealth of the country is great. I^t us suppose the 
quantity of cotton cloth of Hhicti account is taken doubles 
between two cen^usea, and that the price falls one half. 
The wealth of the country has apparently not increased at 
all, but in reality it has doubled, because wealth consists in 
quantities of useful thinga. Second, private wealth is in- 
cluded, which is not public wealth, but which often resent- 
blee a taxing power. This is the case with many franchises 
recklessly granted to private corporations. An illustration 
will help to make the author'H meaning clear, lialtimore 
street-car companies pay to the city for the maintenance of 
public parks nine dollars out of every hundred Uiey collect 
in addition to ordinary State and city taxes. Let us suppose 
this special payment for the use of the strceti) abolished; it 
would immensely increase the value of the street-car com- 
panies' frant'hisea, and they would figure in ceusua reports 
for a larger amount, and there would be an apparent but 
altogether illusory increase in national wealth. The com- 
panies would simply have gained al the expense of the rest 
of the community. The telegraph in other civilized coun- 
tries than our-> is public property, and can only be valued at 
the Cost of the plant, land, buildings ^tc,, while in the 
United States there is an enormous additional valuation on 
account of the fact that the telegraph is private property, and 
that in the nature of things it is a monopoly. Apparently 
in this respect we are far richer than couutrteM like France 
and Germany, but again census returns are misleadijig. We 
are poorer in mimy ways. 

Take our own po»t-ofRce. It can figm-e in census returns 
only for actual value of its plant, while if it should be made 
over to a private corporation it would soon have a capitalisa- 


tion of liundn-^s of miUiuiis of (lollai-a. Apparenlly the 
wealth of llie country would be iiii^reased, but really we 
would be poorer, for we nhuiild be obliged to support nn 
army of higldy paiii olliciaU, a host of costly attorneys, and 
an expensive and demoi'aliismg lobby to shape post-office leg- 
islation for private ends. 

Most countries have granted limited charters to gas com- 
]>anies, street-car corporations, steam railway companies, and 
the like. Very often, at the expiration of a given period, as 
thirty, fifty, or iiint-iy years, the entire property, without rec- 
ompense, passes over to the people, and becomes public, like 
our poBt-offire. This is the case with street-cars in (Jlasgow, 
Scotland;and Berlin ; Germany, and steam railways in France 
and Austria. Elsewhere the right is reserved to purchase 
property at the expiration of a prescribed period, paying for 
the plant only, at an appraised valu.ition, giving nothing for 
the franchise. This prevents an inflation of values, but en- 
riches a country. 

The results of the household work of woinen do not ap- 
pear in the census returns, and yet they include a large part 
of the utilities created every year in a country. If bread 
should universally come to he b.tked outside the home it 
would increase the wealth uf the country as reported in the 
census returns. 

We have isolated production and social production, do- 
mestic production and production of economic goods for ex- 
changes, all of which expressions have been ttuflicicntly ex- 
plained in tiie previous part of this work. We have also 
individual and social production in a sense just described in 
this chapter. Individual prodnctlon is sometimes social de- 
struction of economic goods. A proprietor of a lottery may 
produce things vahi.ible to him and acquire wealth, while his 
activity is from a stand-point pestiferous. The same 
thing may bo said of the class of s-i loon -keepers, and of all 
those nnliappy wretches who minister to vice. We have 
also the familiar terms of production on a large scale and on 
a small scale, well enough understood. 

mrnoDucTORY. no 

Over-production and Under-consmnption. — The 
purpose of production iv, consumption, and if more ie pro- 
duced mora must be contnimed. Power to consume ia meaa- 
ured by purchasing power, and power of eon-iiiiiiption sets a 
limit to productiuii. There is no bucIi thing a* general over- 
prodaction, for moi-e ecDiiutniu gooils of all kindit have nerer 
been produced than men really need to 'satisfy their legiti- 
mate wants. On the contrary, not enough has ever yet been 
produced for thiji purpose. Sometimes production does not 
go forward evenly, and there is an undue amount of labor 
and c:ipiial directed to certain pursnita, hut until all men are 
irell-clothi'd, housed, and fed, and furnished with material 
appliances for their higher life, like books, pictures, musical 
instruments, church buildings, etc., it will be a manifest alr- 
Burdity to talk about a general over-production. When 
there is almost univerfial diftiinlty in disposing of goods pro- 
duced the real phi-nomenon is desi-rihed by under-mmitump- 
tion. Men want these goodn; they are willing to gi»-e serv- 
ices in exchange for them, but they cannot disjw^e of their 
Bervicea, and consequently they lack purchasing power. A 
glnt in the market always means underconsumption. Thia 
is one of (he sad and curious features of the liTe al the mod- 
ern socio-ecnnontic organism. Its parts Aa not always fulfill 
their functions harmoniously; frequently parts are partially 
incapacitated and the body Li in a diseased condition. 

Some have supposed that luxury and ejctravagannt are 
able to remedy gluts in the markets, but this is impossible. 
On the contrary, they frequently brin,' about a diseased 
condition of industrial society whi<'h leads to gluts. At 
any rate, if any one has an cxcefia of purchasing power, it 
is always easy to transfer it to some person or institution 
capable of using it for the benefit of humanity. 

Other Departments of Political Economy. — Pro- 
duction taken in its widest sense includes every thing in 
political economy except consumption of goods. The ac- 
quisition and employment of goods embraces the entire eco- 
Domic activity of man. " Transfers of gi«od^," de.-iling with 

ino Ay mriioDrcriox to poiincAL Fcosoifr. 

the circulation of goodp, and the agencies tbruugh wrhicb 
tliis iH effected, Ih oni> part of production. DistributiuD is 
in curly Biages of society nearly identical with production, 
Kud is HO to some considerable extent to-day. W'lial a man 
produces constitutes in tbu earliest stages of economic de- 
velopment Ilia income. A man catclies two fishes in a day, 
nnd these are bis income. It has been E<aid tiiat even in 
modern society there are no separate organs of the econoiniu 
body couccrned with distribution. Distribution may in the 
main, perhaps, be said to follow naturally from the existing 
■yetem of production. Yet this is not wholly so. I^wi 
»nd iitstitulions modify more or lees consciously the distri- 
bution "f wealth. Tbis is the avowed purpose of the French 
law of inlierilance, which divides the built of a father's 
property equally among his children, regardless of his 
wishes in the matter. Moi-eover, as production is at present 
carried on under our laws of property, many people who 
by their own efforts contribute nothing whatever to produc- 
tion enjoy a large nniount of what is produced. 

JTiHance treats of the acquisition and employment of 
means by governments, but there are many peculiarities con- 
cerning the housekeeping of governments which render it 
advisable to h-eiit this subject by itself, and not to distribute 
the matter among oilier main parts of political economy. We 
have, therefore, adhered to llie traditional dislribiitton of the 
matter into main parts for convenience, admitting that it is 
not strictly logical to make the divisions, prodoction, distribu- 
tion, transfera, consumption, and finance, as if these were 
equal in rank. It would be more togii-al, perhaps, to placn 
transfers and dlstributiun under production au sub-lieads, 
but it would be a more cumbrous arrangement, and strict 
logic is sacrificed to convenience. 

On the productivity of commerce, and the erroneoos opin- 
ion that agriculture alone is productive, read eliapter iv in 
Ely's Prubltma of Tv-tlu-/. 



"Tf ants. — It may be said, in a word, that tbe wants of man 
Bnpply hU economio motives. This is true, bnt tt is too 
vague to be serviceftble. Man's wants are of all kinds. 
Tliey include pleasurable exorcise of oiii- faculties, tbe disci- 
pline of toil, the physiual means for the support of one's 
own liff, tbe pliysical means for the maintenance of tbe 
existence of others, love, friendship, religion, etc., etc. No 
man except a foolish or insane person engages in economic 
activity except to satisfy some kind of want. There is a 
purpose in the action of rational mnn. 

We may Bpeak about one's own individual wants, of tbe 
wants of otber individuals, and of the wants of States. All 
of these onlerg of wants supply motives. 

Self-interest is one economic motive, and certainly a most 
powerful one. It is not exclusive, and in itself it cannot ex- 
plain the economic life of nations, as has been already seen. 
Self-interest acts diflbrently under different circumstances, 
It will in India, perhaps, lead a man to do one thing, and in 
England quite another thing. But what do we mean by 
Relf'interest ? Assuredly not always the same thing. Self- 
interest among Bavagen may incinde simply an individual. 
It is taken forgianied with ua that a man's self-interest in- 
cludes wife and children. When we say a man is prompted 
in the business world by self-interest we as-^ump that hia 
activity is directed to the benefit of his own immediate 
family at least. Self-interest thus iiieludes a narrow circle 
when reduced to its lowest terms, and this &hows itself not 
merely in using money e.trned, but in jnoduciivc proceKses; 
' •ometimes even unjustly, .ts when relationship unduly affects 


saUriex, Dumber of holidays, and other privileges. But the 
circle of self-inlerost is capalik of indefiuite expansion until 
it embracer a town, a county, a State, a nation. If self- 
iuterest becomes so broad in itHScope m to identify t^elf with 
humanity as now with one's family, wc have Christian al- 
truism. What is wanted is to extend the circ-le of eeir- 

Si-lf-iutcrest is not a bad thing. It is a good stimidun 
when it assumes its proper form. Selfinierest in eompatiblo 
with a generous considuratiiin for the materi^il welfare of 
others, I am one of mankiiul, and my love for humanity 
includes myself. If I negluut the care and development 
of myself I injure humanity. The humanitarian spirit in- 
cludes both self-love and love of one's fellows. But self-in- 
terest may become diseased, and then, placing stilf above 
others and neglecting others, it becomes sctdshnuss, which a 
moral teacher has called the true source of all sin. 

Patriotism is a motive, and a powerful one, especially iu 
limes of awakening of u.-itioiial spiril. 

Religion renderg service a duty, and [)r<>nounces the man 
who lives in this world without rendering himself personally 
tiseful in the work of mankind a thief and a robber. It Is 
a powerful economic motive, particularly in the highest 

Self-Intsrest, Brotherly Love, Public Spirit. — Pro- 
fessor W.iyner, of Berlin, has from a somewhat different 
stand-point spoken of tliree principles in national economic 
life, to each of wliiih he ascribes a special motive. There is 
the principle of individual and private enterprise, in which 
self-interest i» dominant ; there is the principle of public 
activity, the social principle a.s opposed to the individual prin- 
ciple of private business. This second principle corrects, 
modifies, and rounds out the first. Private and public ac- 
tivity supplement each other. We have finally the third 
principle, that of brotherly love, the caritative principle, 
filling in gaps, supplying omi-'sions, mitigating the severities 
of individual and of public action. Selt-intereat, brotherly 

uoTfVES or Eco.voinc autivitt. 

love, and (laMic Bfririt are, ibeu, tlir«« motives of f 
activity, but they are not oiolusive one of the other. Tliey 
pass gradually over ioio one another and are often indiH- 

Desirable and Undesirable Wants. — We may classify 
want?, further, into desirable wants and undesirable wanta. 
Wants satisfied by those things whieh serve as a basia for 
the full and hamioaious development of our faealtiea arc de- 
eiralile wants ; wants satisfied by other material things 
which are not positively helpful or are positively iujiiriottsare 
iindeMrabte wantK. WholeBoine hwd, comfortable clothing, 
commodious isheller, books, miisieal instruments, fine works 
of art, are all thiugs wliieli minister to desirable wants. 

LllXtiry. — Luxuries are things whieh minister to sui'h un- 
desirable wants as love of display, vauitv, or selfish dcAire to 
exalt one's st^lf above' one's fellows, and tlins to produce sep- 
aration. We generally think of luxuries as eosily things, 
but ft wanton and luxurious expenditure for dress may in a 
vain woman'.- life-lime amount to far less than llie perfectly 
jimtifiable ex|ienditiii-es of her neighbor lo promote iii her- 
self, her family, and others an appreciation and love of the 
beautiful. Proportionality is one element in determining 
whether a thing is a luxury or not. If the real gain to one's 
self corresponds to the outlay it cannot be called a luxury. 
One test is to ask this question : " Would I myself, if nor- 
mally constituted, obeying ethical prinuiples, be willing lo 
undergo the toil nnd sacrifice that article has cost tor the 
pleasure it affords?" The answer must be in the negative 
in the case of articles like Itelgian handmade lace, whieh 
is the product of long, weary toil of p<<orIy paid girls who 
otlen lose their eyosiuht in this work. An economist* has 
defined luxury thU'> : " Luxury is whatever contributes 
chicfiy to enjoyment rather than to a better training of our 
vowera. Luxury is defensible only in so far as it does not 
hinder the development of a better manhood in us and in all 
thus« whom we could influence." 

• Prore^ar E, W, Bl-iuji, uF VanderLiU UnlTPrsiiy 


Public and Private Luxury.— Proportionality will show 
that ex|Ji-ii(Utiii-tH by tlie public and for tlie publitt and by 
private individuals for the public arc justifiable which wonld 
be altogether unjustifiable for a privatu party. What is lux- 
ury for a private person is not at all luxui-y for the public 
Grand public buildingn, whii^h lift up and inspire the peo- 
i-le, magnificent art galleries, grand universities, magnifioent 
ooniiDon schools and academies are excellent things, and the 
toil and sacrifice which they require are well repaid in the 
returns made in the higher and better life of the people. 
Wants to which these minister are among the best national 
wants. It is only in a morally diseased condition of a people's 
consciences that lavish outhiya will be approved for private 
individuals and parsimony prescribed for the public. 

A defense is sometimes offered for private luxury which ia 
BO manifestly weak that it scarcely deserves attention. It 
is said, " It gives opportunity to work." The same expendi- 
ture for humanity would obviously give an equal opportunity 
to work. 

Moralists, philosophers, statesmen, and religious teachers 
have all united to condemn luxury, and to it has very gen- 
erally been attributed the downfall of states. Among those 
who have spoken stiongiy on luxury we may mention Plato 
and Aristotle, all the Church fathers, and the greatest of the 
mediteval philosophers, Thomas Aquinas, ihe Scotch philos- 
opher Adam Ferguson, of the last century, and M. de Lave- 
leye in our own. There can be no kind of doubt as to the 
teaching of Christianity on this subject. We raay divide 
those things which we want into necessaries, eomforls, con- 
veniences, and luxuries. We satisfy our own wants in the 
order named. Manifestly we are not even making an effort 
lu love our neiglihora as ourselves when we indulge in luxuries 
80 long as they want the necessaries, comforts, or even con- 
veniences of life. 

Among the most pernicious things wliich satisfy nndesir- 
abte wants may he mentioned tobacco, opium, iutoxieating 
beverages. The best ihat can be claimed for even a moderate 


use of these apart* from medlcinai purposes is ihat tliey <lo 
nu positive barm to the iiidividuarH physical well-being, ainl 
that tbey afibrd at least a teiuporacy s>>la(.:e, and tend to 
sociability. The followiog tigiires will show the enormous 
amount annually expended for tliest commodities, and will 
suggest the question, even Buppiide no exeess or otherwise 
injurious consequence, could not uU these renources he better 
employed ? 

The total amount of dialilled spirits (ronsumed in the 
United Slates in the year 1887 was 71,004,73;! gallons. The 
consumption of malt liqimra was 71 7,74«,851 giillons, and the 
Gousiimption of wines was 32,618,290 gallons. Of course we 
cannot tell just how much was paid by the consumers for this 
immense flootl of intoxteants, which, if poured together, would 
Sll a channel twenty feet in depth, twenty feel in width, and 
forty-six miles long, but mnTiy estimates have been inadu 
botli by those who defend and those who o|>pose the use of 
liquors. They place tlie cost at from 1700,000,000 to *1,000,- 
000,000. If we deduct the liquors which ave used in the arts, 
and for other purposes besides that of drinking, it is proba)>le 
that the first estimate, namely, seven hundred millions gf 
dollars, is not too high a figure to represent the amount of 
money that is yearly paid for intoxicants which arc used an 
beverages. This is equal to an ex]>enditHre of twelve dollai-a 
for every man, woman, aid child in our country. 

In comparing the nmonnis expended for liquors with what 
oar people ex{iend for olhcr purposes there have been many 
misleading estimates made which in the long run can be of 
no real service to tlie cause of temperance. For instance, 
some persons in comparing the cost of drinks with the cost 
of all the food consumed in the United States ha\e placed 
ihe former at the not eztravagant amount of about nine 
hundred millions of dollara, but the cost of food they find to 
be only nine hundred and sixty-three millions of dollars. 
At this estimate the cost of liquors would be fifteen dollars 
per capita, while the cost of food would be only sixteen 
dollars lor every man, woman, and child in the United 



Staten. There is \n important difference overloukecl, namely, 
that nearly all of the liquor consumed comes on the market 
and is there estimated in dollars and ucnts, while perhaps 
loss than one fourth the food consumed is brought under the 
conditions necessary for a money valuation. 

It is impoilanl to note that if the seven hundred million 
dollars DOW spent for grain In the form of liquors were ex- 
jiundt'd for food and other farm |irodui;ls to satisl'y the ra- 
tional wants of the thousands of fitmiliea wlio are rendered 
destitute by intemperance it would purchase at least seven 
times as much grain in the form of flour as it does in that of 
liquor; because it is true with regard to liquors, as with all 
luxnries, that the amount of raw material used in their pro- 
duciJoii is far less, compared with iheir cost to the consumers, 
than it is in any of the olher products that satisfy human 
wants. Thus wc can see that those farmers who think that 
the liqnnr industry creates a demand f'lr their commodities, 
and those brewers and distillers who endeavor to instill this 
belief, are both deceived and deceivers. How much lietter 
it would be if farmers could secure high prices for their 
grain and other products by ministering to those rational 
and higher wants which strengthen human nature and enable 
the consumers to produce in turn a greater abundance of 
wealth, rather than by satisfying the demands of base appe- 
tites that degrade men and lessen the community's wealth- 
producing power! It is, of course, obvious that if men sjicnd 
less for liquors, tobacco, opium, and the like, they will have 
eo much more to xpend for other things, and the oppor- 
tunities for employment will not be at all lessened. On 
the contrary, as other eitpenditures are more likely to be 
productive, opportunities for employment will inevitably be 

The indirect cost of liquors to the community at large is 
far more tremendous and impossible of estimation than the 
direct cost. We all have to pay for the support of the armies 
of policemen, detectives, lawyers, judges, whose chief occu- 
pation gmwa from the use of intoxicants ; for prisons, peni- 


tentiaric!', insane-asylums, alms-hoiisee, fifty to eighty per 
cent, of wbose occupants nre the victims, direct or indirect, 
of intemperance ; while all share in the loss of iniliiatrial 
power that cornea from weakened constitution?, disxy heads, 
and extravagance. Many books aud articles have bi-i^n writ- 
ten and many pnlilic speecbeH have been m:idp upon tljese 
manifold and visible es*ils. Those who suffer the most from 
drink are the working classes, and they are alao those who 
i;annot conceal their excesses and misfortunes. But it is a 
mistake to suppose that Working-men alone furnish the 
drunkards, or that there are not great numbers of earnent 
temperance men among them. The rich have their social 
clubs whei'e intoxicants perform tlieir work n^ heinously as 
they do in the gutters, but less publicly. Tlie only social 
men's clubs in the United States without 9 bar attached are, 
so far as the writer has observed, working men's clubs. 
These appear to be generally devoid of that institution. 
If there is a faxhionabte club-house in the United States 
where intoxicating beverages are not soM the writer has 
yet to discover it.* While intemperance is a monstroua 
evil, and cannot be too earnestly fought ac^ainsi, we should 
not f:ii] to see that it is at the same time both an effect 
and a cause. Farmers are proverbially a temperate class of 
people, and when we look for the worst effects of intem- 
perance we go to our crowded cities and great industrial 
centers.! ^nt here we find industrial and social conditions 
which force us to believe that, until they are remedied, we 
can look for no lasting growth of temperance or strengthen* 
ing of character: on the one side, immense wealth, with its 

• Sinco writing Uie nbove the aiilhor a told tliai the Winihrop Club, of 
Spriiigtield, Uaas., wliirJi )ms elegiinl rooms itnd appointmnnta, anil indiidfs 
UHiat of llie lending biiwinuHB and profesnional mi^n o( tlie citr. has no bar. 
•nd no liquor ofniiy kind U sold or uited m iIb roiims. The opinion is ex- 
pressed that llLCrii nre ctlier micli, 

t A friond writes to the aiiilior m fnllDwa: '■ M}- obserTiilioii is that In 
■he Kaatem Stntas fnrmers in reglon> remote tram ocnturs ortociol activity 
«re mucli addicted to drink. The uider- brandy dialiUery has long been Hw 
eurte o[ LitcbSeld Couety, Connecticut." 


temptations of jiride and luxury ; on the other, cii'wdu 
tenemeiili', liut anil noxious in Biiinmer, always loaltisonie and 
repulsive, occupied by those who do not know whether tliey 
will find work that day ur not. Their eoiidition is often the 
effwt of their forinur intemperate iiabita, and in turn it 
liivcs them and their children into further depths of iuelm- 
'ly. An important reason for the craving for intosicanlti, 
as is 8hown by one of the foremost of American physiolo- 
gLsts, is the lack of siiffieient food or of a sufficient variety 
of wholcinnie food, andvspecially poorly cooked food. Thc-o 
and many other facts with regard to the economic condi- 
tions of our day admonish us that the thoughtful temper- 
ance advocate must embrace in his cUtortu both tetnpsi'auce 
and industrial reforms. 

Another serioua waste of w(?alth results from the use of 
tobacco. In 18se there were 743,400 acres of land dev.-led 
to the production of this weed, and the quantily of cigars, 
cigarettes, and cheroots consumed by the American people in 
the year 1880 reached the enormous number of 2,821,776,282, 
representing an outlay on the part of consumers of at least 
♦ 140,000,000. In the year 1888 the number probably in- 
creased to over three billions, or more than fifty tor every 
human being in the country. The tobacco that was con- 
sumeil by chewing and in the form of snuff was, in 1880, 
136,27s, 833 poimds, at a cost to the consumers probably of 
(70,000,000. Tlie indirect loss resulting from the use of 
tobacco is not so great, nor are its effecla upon the con- 
sumers so disastrous as is the onse in the con-umption of 
liiiuors, but it is at Ivast doubtful whether the enormous out- 
lay shown by the above figures is compensated by any in- 
creased happiness of the people. 

Th« opium habit is said to be rapidly growing in America. 
Its effects are even worse than those of alcoholic intemper- 
ance, destroying both the mind and body, and transforming 
its victims from productive members of the community into 
a public burden. 

There are other objects of foolish and harmful gonsump- 



tion. How often is the usefulness of women destroyed or 
lessened by extravagant display of jewelry and precious 
stones which minister only to vanity and envy ! 

Those w^ho have access to a file of the Populiir Science 
Monthly will do well to read an article on '* Morals of Lux- 
ury " which appeared in that magazine for March, 1881, by 
M. de Laveleye. also his remarks on luxury in hi'? 
EUn^enia of Political Ecoiiomyy Book IV chapter ii, § 1. A 
French author, M. Baudrillart, has written a history of lux- 
ury in four volumes — Hiatoire du Luxe^ Prioi et Public. 
Sidgwick's Uistory of EthicSy chapter iii, may be consulted 
on the ideas of the early Church on luxury. The first 
Tolume of Roscher's Political Economy has been translated 
into English — divided into two volumes in the translation — 
and chapter ii of Book II treats of luxury, giving an histor- 
ical sketch with many valuable references. It will be observed 
that various definitions of luxury have been given. Of course 
it can be so dcHued as to include expeuilitures that are praise- 




TiiERK arc tlii-fu fft(;tora of production, of wliich two, natai'fi 
umi labor, are primary, and the third, capiul, is secondai-y. 
We will consider these briefly in the order nnmi-d. 

1. Nature. — The purt played by nature in produulion lias 
already been disouBstwi at some length, in Part I of lliis book, 
(iiidt^r the head of territory as one of the two main fat^lors 
which mnko up the national economy, the other being the 
f.tctnv man, We include under nature all natural forces use<J, 
a* thi> wind, the movement of water, attraction of gravitatiou, 
(■obi'dion, oto,, eto. Many of these things furuiHhcd by nature 
ai'ii free gauds and not economic goods. Nature, econuniicially 
(■onuidcred, ia genei-alty called simply land, beeaui^e, of what 
bdlongM to external nature, it is with land that we have prin- 
cipally to do in political economy. It must, however, he ob- 
■crved that land has a very br.iad meaning, and includes what 
is below tlie Murfaee of the earth, and tvater no far as it is 
appmpriated by private partien; also in some rcH|>ect*< the 
entire surface of the earth. This factor is in early stages 
generally common property, but in later stages nf life it has 
been private properly, and a return for its iwe has been 
secured by private individuaU, or, !n cases, by the public 
when owned by the public and leaiwd to private parlies. 
The return which land in itself, apart from capital or labor, 
yields is called rent. This is pure rent, or economic rent, 
which is different from rent aa oi-djnarily underMood, for 
rent in pnpular usage includes recompense for the other fac- 
tors (if production. Pui-e rent can best be observed in cities, 
where it i^ the annual value of lots on which buildings 
stand. A large portion of the land of Baltimore, Philadel- 


pliia, ami London is owned by men who do not owii the 
buildings and other impruvt ments but ic'c«iv« from owners 
of iinprovemenU an annual renL 

Land rendei-a three services to production : Hi-st, it gives 
a "standing place." It ix t^omeibing on which we can 
rest and move about while conducting productive processes. 
Mere spact; in itself is often extremely valuable, as can ha 
seen in the cose of city real estate; and as popul.illon is rap- 
idly growing, and nx a continually increasing proportiim of 
the population dwells in cities, this service is constantly be- 
coming mure itnporlant, and the return in rent will probably 
auguieut rniiidly for a long time to lome. Second, land con- 
tains the eleniL-nt needed by plant-life, and thus serves agri- 
culture. We call this property of the soil its fertility. 
Third, land contains natural products below the surface of 
the soil, like coal, natural gas, potrolemn, iron, gold, silver, 
and other metals. These ai^ the natural ti'easures of the 
earih. Man does not create them nor give direction to nature 
in tlieir formation. It baa seemed to some nations unfair 
that these natural treasurt^s should become the projicrty of 
individuals, am) they have treated them as a common heritage, 
exacting a rent or royalty for the opportunity to appropriate 
them. This is perhaps generally the casi' on the Continent of 
Europe, but English law, with its Inclination to the exaggera- 
tion of private rights, established the principle that he who 
owns the snrfnce owns to the center of tlie earth, and upward, 
to the sity. It is a peculiarity of land that its quantity can- 
not he increased appreciably, and thus it is spoken of as a 
natural monopoly. This seems hardly accurate. It is a \\m- 
itei) fautnr, but in the ownership or management of land 
there is no inevitable tendency to monopoly. 

2. Labor. — Ijahor is the second of the two primary things 
in productiiin. It is sorvii-o sirpplied by human beings, and 
is different from other goods because it is always connected 
will) a |tersonality. 

Moral and intellectual qualities increase its productive- 
aess. Temperance, trustworthiness, skill, alertness, quick 




perception, a cumpreliensive luenUil gnup, alt these and other 
goiiil ijualitiea belonging to tlie soul of ■man are iif cliit-f 
itnportuDL-e in man. Man's, ineve physical in ilsulf 
is a. poor thing, being surpnssed by that of lower anIinaU, as 
oxen and horses ; but man is far ranre productive, and evi-n 
as a slave sold for far more tiian the lower animals. The 
L'Conomio value of intellectual training is genei-ally not Eufii- 
cienily appreciated. It hua been ascertaiueJ that, with uo 
noteworthy exceptions the hi^lier in anv part of the United 
States tile per cupita expenditure for schools the higher is 
tlie average iif wages, and the larger, coiiseiiueutly, the pro- 
duction of wealth. 

Qrowth of Population.— The supply of labor i 
creased with tlie growth of population, and to ibis therefl^ 
no limit save the means of siibaiiitUNOe. Fear hati been en 
pressed that the growth of population may outi-nn thb 
niEuins of subsistenoe. A theory of population has been ad- 
vanced by the English ecouomist, Malthus, which is called 
MaltbuBiiinism. It is simply this: population tends to in- 
crease as 2, 4, 8, 10, 3'2, etc., or in geometrical progression, 
wfaile the best we can hope is that food supply will increase 
as 2, 4, (I, 8, 10, etc., or in antbraetical progression; eoti- 
sequenily if there were no check to the natural increase 
of population men would in a short time starve to death. 
But there arc checks to the growth of population, ami these 
are of two kinds; namely, positive and ]irevenlive. Positive 
checks are those whifh keep down population by killing off 
people, like plagues, pestilence, intemperance, vice, crime, 
war. Preventive cheeks are those which keep down popula- 
tion by preventing the birlh of an undue number of people, 
OS prudence in contracting marriage or abstinence from mar- 
riage. These are checks of a moral ch.iraoter. Men who 
are conscientious will not many until they feel that they 
will probably be able to support a wife and bring up 
oliildren worthily. As population becomes denser this 
postpones marriage, and as the age of marriage increases 
the average number of births will decrease. Imiumcrabl^ 



cufttotnt [:xist all ot'er ibe world, especially iu older coiintric!<, 
postiioiiiiig the ago of mArriiige, and ihese tend to prevent 
an undue growth of population. The only practical cuti- 
clusiun which Maltlius drew from his doctrine was this : let 
no one marry until he has a reasonable prospect that he will 
be able to support and bring up a family of the aveiagu 
size. He wished to intensify the feeling of parental respoii- 

At the present lime nothing more in the way of restraint 
to population seems necessary in the United kStiiies than to 
keep from oiirphoi-es the lnwest classes of fureigners and to 
exercise in contracting marriage that prndcnce which has 
long characterized the really best classes of Aiuci'ican society. 
Nevertheless, it must be admitted tliat by no human possi- 
bility cati population long continue to increaue in the United 
States as it has done in the past, for in a comparatively short 
period there would not be standing-room on the surface of 
the eiirth for all the people. It is said that our population is 
now doubling in lew than twenty-five years. If it continues 
to increase at this rate we have a geometrical progession. Lei 
Ds fiupposc it is now sixty millions and that it doubles once 
in twenty five years. Two hundred and fifty yeare is a short 
period in the world's history, but our population at the expi- 
ration of that period would exceed sixty thousand millions of 
people, which is forty times the estimated population of the 
globe at present. 

How terrible a thing a geometrical progression is has been 
shown more clearly still. Let us suppose that there are only 
two people on the face of the earth, and that population 
doubles only once in fifty years. At the expiration of three 
thousand years the whole surface of the earth, laud and sea, 
would be covered with people piled one on top of the other 
eight hundred deep.* 

Manifestly the present rapid rate of increase of populntion 
cannot continue forever ; yet il docs not cause great uneasi- 
ness. It has been urged by some writers that as man de- 
• Uarahall'a Eainomica if Iiida^try, chiipter v. 


velops more highly his fecundity will decrease anil tlie growth 
of ))o|iiilation will hiK:c»ne slower. Othen think that pru- 
dential and moral restraints will be ample to prevent an 
undue increase uf population. 

The chief cause for anxiety is this : For some reason or 
another it seems to be mui'e difficult for a large population 
to live peaceably together under present industrial conditions 
than for .1 small one, and there is yrouud for the anticipation 
that the growth of population will te>t the worthiness of our 
oiviliitation to endure, iw other causes have tested older civili- 
zations. We may be suiv that if there is a moral governur 
of the universe modern nations, like ancient nations, will be 
called upon to xhnw their fitness to survive. Every time ihu 
sun rises it looks upon a larger population than ever before 
in the United Stales, and consequently upon a more complex 
industrial civilisation, A forueraighly, and it almost teems 
irresistible, is at work, day and night, day and night, never 
ceasing, fori'ing upon us more nnd more ecHous social prob- 
lems. These problems can never be solved by the police- 
man's dub or the soldier's bullet, for this quiet on-moving 
foi'ce laughs such repression to scorn. Unly righteousneas 
can solve them, for only in righteousness is there power to 
enable us to adjust ourselves to our new environment. 

3. Capital. — Capital ih the third factor in production. 
It is not one of the two firat things in political economy, but 
it is a combination of these two. Land and labor together 
produce capital, just as oxygen and hydrogen combine and 
produce water. Capital is neither land nor labor, but, re- 
sulting from the two, it is a new thing and has properties of 
its own. Capital u eoery product laid hi/ ipAt'cA mai/ be 
iued for purpose* of /inrther production. There are two eli- 
ments in this conception : lirst, that of stored-up goods, and 
second, that of a possibility of use in the future. 

It w often said that capital is the result of saving, but this 
is misleading. Saving is merelv a negative act and cannot 
produce any positive result. We must have something to 
Mve, that is, we mast fint produce, «nd then over and above 


tbe necessities of life tlicre miiHt be a surplus ; if tlua is laid 
hy or saved it becomes capital. 

I'he aid wliicfa capital rentiers to production is eseential to 
Any production of economic goods Rsve the most primitive 
and limited. Capital means food, sbelter, hntlS(.'^<, buildings, 
tools, machinery, etenmsliips, railroads, telfj^raphs, telephones, 
niannfaotiiring and lutmincrcial establishments. Of those 
things which man nveAa to sustain life it means a surplus, 
and this renders possible an effective combination and or- 
ganization of the productive laclui's, ^lothini; ii^ inoi-edis- 
ftHtrons than to be obliged to work to day i'ui' the food of 
to-day. When this is nei'es»,iry no aystomatio a<'tivity i« 
puseibic, but we must seiae tbe first opportimity which offers 
to get food, however miserable. Capital .ict-amulated means 
that we can postpone eunsumption, working to-day I'ur the 
food supply of some future day. We ean thus organize 
productive forces, we can survey tbe field of industry and 
secure the best place to apply these forces. We can put iu 
our seed-r^rn ami wttil until it producer sixty or a hundred 
fold instead of WRndcrinp through ihc woods lor nncertaiu 
game, which when taken is slaughtered, and losing ils power 
of increase remlers it no whil easier to produce to-morrow's 
snpplien. As capital is a protlnctire factor it elaims a part 
©f the product, and ihi* part is cnlied interest. Often we 
■peak of profits, but nlien profits include more than interest 
tbey erabraee r^om^thiiig else besides the simple return on 

ScKnal and Individual Capital. — We must alw.ijs dis- 
tinguish between what is capital to ibe individual and what 
is capita) to siH'ieiy; that is, between social and individual 
capital. Only socio-economic goods, or material goods and 
accumulated j>ereonal products of past toil, can be regarded 
as social capital. Bonds, mortgagCK, and all evidences of in- 
debtednesH, are no part of social cajrita), but they are indi- 
vidual capital. Fi-ancbises nre no part of sotnal capital; 
tbey are simply peruiisainn to make use of existing social 
capital, or to create social capital. Tbe capital of t-oi-iety is 

lae A\' ixT::oDC':Tiny to political economt. 

not dimiuished wben tho value of corporate properly, like 
railroads, telegraphs, telephmieM. and the like, is reduced lo 
n fair valuation for the actual social capital invested. It 
may or may not be morally right, it may or may not be le- 
gally possible, to equalize in a concrete case social and indi- 
vidual capital ; only tbe particular circumstances Burround- 
ing that caae can determine. It Is now- simply desired \o 
bring out clearly tbe distinction. 

Fixed and Circulating Capital.— A common diviuion 
nf capita] is into fixed and circulating. Circulating capital 
is capital n hicb can be useil only once, or in one round of 
operations, Its entire value p-isBes over into tbe product, 
Fixe<l capital, on the other hand, \» capital which lasts for& 
Buccesxion of operationH, and only a part of the valne of 
which pat<Res over into the product with each use. Coat used 
in a furnace is an example of circulating capital ; the coal- 
cart in which the coal is hauled is fixed capital. 

Capital Saved by being Consumed.— Capital, although 
saved products, is consumed. When food is used for product- 
ive purposes it is consumed as truly as when used for present 
enjoyment. Let ua suppose I can raise a certain amount of 
produce on my farm. I raise necessaries and also delicacies, 
and. consume all I raise. Let us suppose now I raise only nec- 
e8Haries,and since! raise twice as much food ss I can use I give 
half of my produce to a man who constructs a bam for me. I 
have accumulated capital, but the consumption of food has not 
been diminished thereby. Obvions as this i.i, it is not un- 
derstood so generally as it should be. There is a wide-spread 
impression that it is belter lor a man to spend his substance 
in riotous living than to save it; but tbe man who builds 
houses makes as large purchases as ho who expends the 
sann! sum in feasts, and society is richer because of tbe latter 
consumption ; the houses still remain. 

Increase of Capital. — Capital is a growth, and, as a re- 
turn is exacted for, capital begets capiial, as it were. 
This makifS it intinitely ea.tier for a man who has capital to 
ftcoumulate it than for a man who has no capital. So inti- 



mately is present capital connected with past capital that it 
has been said that there is not a nail in all England which 
could not be traced back over eight hundred years to savings 
made before the Norman Conquest. 

On Population read chapter x of Book I of MilPs Political 

Economy^ and chapter v of Book I of Marshall's £konomics 

of Industry, Chapter xii of Part VI of Herbert Spencer's 

JPrinciples of Biology may be consulted with advantage. On 

wasteful expenditure and saving see Ely's Problems of To' 

day, chapter xv. 



Barly Simplicity. — ^The organization of the factors of 
production, miiiiple nt fii'st, becoiaes on the whole continually 
more complex with tbe development of iudusLrial civilisation. 
Diffcrentiiition accompanies development. The old house- 
hiild ecotioiny is organized in auch a manner tliat the esist- 
OTice of three separate fnctors iu production is scarcely per- 
ceived. The earae man ia owner of land, taboi*. and c:ipital, 
and all the products flowing into his hand are distributed by 
liiin among those who participate in pi-oduction according lo 
the manner which he deems proper. When prodnction is 
carried on by a village community we have polleotive own- 
ership of the instruments, management by a common author- 
ity, and a division of products according to regulations based 
on custom. The products are not divided into parts corre- 
sponding to tbe factors of production, bat the same man 
receives in every case wages, interest, rent, and i)rotite. It 
is, in fact, only recently, with a new organiEation of indus- 
try separating these fat^ors and assigning them to different 
industrial classes, that the factors of production have become 
commonly recognized as distinct either in production or in 
the distribution of products. Even to-diiy this separation is 
in a large portion of the inda^trial field not effwted, and, con- 
Moquenlly, there is not then' llial nnlngonism between classes 
elsewhere observed. The Americjin farmer in oiir Northern 
States is usunlly land-nwner, L-iipitaliHt, laborer, ami manager, 
and rereivi's rent, interest, wages, and prolilp, and in tho 
total produi't cannot distinguish one from tin* olbur. 

The G-uilda. — T\^e old guild organisation of indnstry 
and commerce united the factors of production in the same 


man. The guild of the Middle Ages embraced apprentice, 
joarneyraan, and master, and regulated induatry and com- 
iiteree under governmental supeivitiUm. Tlie master man- 
aged the busincBs, owned the capital, and worked with bis 
own handx. He received tUo entire product of the bufliaesa 
after supporting the apiirenticee and paying Iiis journeymen. 
Apprentices and journeymen were, it ie true, laborers, and 
conflicts about wages arose not infrequently, although for long 
periods harmony prevailed, particularly dnring the best days 
of the guilds. There was a [larlial separation of labor from 
other factors, it is trne, but not complete, and the man who 
supplied labor looked forward not without reason to the time 
when he should become capitalist, employer, and manager. 
This advance was a rei^ular part of the guild system. 

Growth of Complexity. — The present eeutury has 
witnessed a great change in ihe organization of the prodno- 
tive fai^tors, especially iu commerce, manufactures, and trans- 
portation. We have a large class that furnishes labor only, 
another class that furnishes land and capital, and a third 
class that organizes and manages the undertaking. A mod- 
em railway corporation serves as a good illustmlion. The 
stock and bondholders furnish capital on which they receive 
interest; the stockholders carry on the business through 
managers, and for this service they hope to receive a Mir- 
plns al>ovo interest, called protlts; tabor is remunerated by 
wages and by salaries, wages being the remuneration of 
snbnrdinates and salaries of oRieials. Land is supplied by 
stock and bond holders, a part of their capital being ex- 
changed for land, and consequently ^^■e have rent also, al- 
though not usually appearing as a separate factor. Yet land 
may appear an a sepai-ate fiictor when land is leased. \o 
dnnbt railways in Baltimore and Philadelphia pay ground 
rents, annual returns for land itself, to those who do not 
own the improvements. We observe then all these various 
dasses, and perceive that the product or revenues of the un- 
dertaking are divided into a corresponding nnmbcr of por> 
tiuns. It can readily be understood how controversy re- 


Bpecting portions allotted to tlie differi>ut classes can arise. 
It is said tbat the busiuess comniuuity is always io debt, be- 
oause it carries on business with more or leas borrowed 
muney. The owner of the business enterprise is aa organ- 
iser and manager, and receives wages of saperiDtendeuce, a 
salary whiih he pays himself ; he receives a return for risk, 
he pays interest and receives interest on any money he ha« 
invested, liu pays wages and rent. 

The Entrepreneur. — The one who manages biie^iiiessfor 
himself was fornii-rly called an undertaker or an adventrirei-, 
but the tir^t word has been appropriated by one small ulass 
of business men and the latter has acquired a new meaning, 
carrying with it iho implication of rashness and even of dis- 
honesty. We have consequently been obliged to report to 
the French language for a word to designate the person who 
organizes and directs the productive factors, and we call such 
a one an etUirprenear. 

The function of the entrepreneur has become one of the 
most important in modern ecunomic society, lie has been 
well called a captain of induiitry, for he commands the indus- 
trial forces, and upon him more ih.-in anyone else ree^ts the re- 
sponsibility forsnccess or failnra A business which has 
aohieveil msgnifioent success often becomes bankrnpt when, 
owing to death or other clause, an imfortunate change in the 
entrepreneur is made. The prosperity of an entire town has 
sometimes been observed to depend upon half a dozen 
shrewd captains of industry. It may be said, then, that the 
large ivward these often receive is only a legitimate return 
for splendid social servit^es. Such is tlie case, provided this 
i-cward ia gained honestly and without oppression. Somi- 
times gains are partially legitimate and parti^illy illegitimate. 
It is this mixture, observed by all in notorious cases, which 
has probably more than any thing else led to indiscriminate 
attacks on the profits of the captains of industry. It must 
be added tliat the fact that a man has gained legitimately 
as a return for services an enormous fortune does not mor- 
ally entitle him to use it as he pleases, for morally a man 


is obliged to use every Ihing lie has, himself included, for the 
benefit of humanity, and if he has great |>owerH to gain 
wealth this but iiivasures the extent of the moral though not 
of the legal obligation to society, 

The productivity of iiiduntiy depends largely upon the 
harmonious dcvelopnii-nt of all ihe factors. Sometimes labor 
in p]>ecially needed, sometimes capital, sometimes land: must 
frequently what is needed above every thing else is a better 
organization of proiiiictive factors. OrganiEation is defect- 
ive, and talent for organization and management is unfortu- 
nately rare. 

The Division of Products. —The more efficient all the 
factors the greater the piodnct to divide; but the share of 
each factor will de]:>end upon the industrial strength of the 
class which supplies it as compared with the industrial 
strength "f other classes. One great element in strength Is 
what we may call " staying-power." The one whii cnn wait 
while the necessities of the other press him makes the best 
terms in the division. It is on this account that labor organ- 
iaaiions spring up. Capital is necessarily united under one 
management, and labor seeks to put itself under one manage- 
ment that it may gain like staying-power. An important 
element in determining staying-power, and thus industrial 
strength, is the relative rate of increase of the factors. If 
labor supply is increasing with relatively greater rapidity 
than capital it will be obliged to seek capital, and it cannot 
wait to be sought. Labor org;inization cannot in itself cor- 
rect this difhcuUy, because it docs not directly increase capi- 
tal supply. Capital organization enables capital to exploit 
fully this unfortunate position of labor. If capital supply is 
abundant and labor scarce, capital must seek labor, and or- 
ganization here again enables a factor to gain the full advan- 
tagoa of a favorable situation. If land supply does not keep 
pace with the growth of other factors, it can force them to 
give a large share of the product for rent. Better means of 
communication and transportation have recently enormously 
increased the available supply of agricultural land, and 


agriciilluml rents liave fallen. The supply of city lantl I139 
not iiicri-nseil equally with demand, and urban rents have 
inoreaiied unoiniou-.Iy alt over the world, owners of bnilding 
HiteH favorably situ:ited in large cities often obtaining a large 
proportion of the entire pi-oduct of the businetts earned on in 
buildini^H ereeted on tlieir sites. 

Division of Labor. — A chai-aeteristic feature of tho 
orgunir.atiuii ol' the fHetora in the present etage of indastrtal 
cnttrrpriees in what in commonly called a divinion of labor, 
bui. which mi^ht with equd propriety be called a co- 
operation of labor. Productive processes, especially in 
manufacturer, are divided into minute parts, and one part, 
or perliAps two or three very small parts, given to each la- 
borer. Cine man makes one little part of a watch, anotl)er 
a Eeoond, and there are so many little parts that it is said 
that it requires the co-operation at least of three hundred 
persons to organize pi-operly a watch-making establisliment. 
Tliere are sixty or seventy distinct branches in the manufact- 
ure of a piano, and as many in the maiiufac^tiire of a boot. 
But the word co-operntion used shows that the men are 
working together. The parts divided must be united to 
form one whole. When the phrase division of labor is used 
we look at one side of the procoss; when the word co- 
operation, at another. Division of labor, machinery, and 
the use of natural powei-s, like water, steam, and electricity, 
are the chief part of the explanation of the marvelous in- 
crease ill the productivity of the productive factors; one man 
perforniiug the labor now which formerly requii'ed the labor 
of ten, one Imruhvd, or even a tliousand men. 

Advantages of Division of Labor. — ^Tbe advantages 
of a division of labor have been enumerated as follows: 
First, a gain of time. A change of operations costs time. 
Lesfl time also is consumed in learning one's business, as the 
labor of each is more Bimple. Second, greater skill is ac- 
quired Ijecauae each pernon confines himself to one operation 
and in that beeomL'S remarkably proficient. Third, labor is 
used more advantageously. Some parts of an industrial 


proce.« can bo pcrformoil by a weak person, otlien; require 
imuHual phy§icflt strength ; eome require extraorditmry intel- 
ligence, some can be performed by a man of very ordinary 
iutellec-tual powers, and so on, indi,'fiiiitely. Eaeh one is so 
employed that hit entire power in utilized, and work ia found 
for all, young and oM, weak and ntrong, stupid and intellect- 
ttally giiled. Fourth, inventions are more frequent, because 
the induatrial processes are so divided that it is easy to see 
just where an ijtiprovemeiit is possible. Besides this, wiien 
a person is exclusively engaged in one simple operation, he 
often reflects on this, underetands it thoroughly, and sees 
how the appliances he uses ooutd be improved. Lahnrera 
huve made many important inventions. Fifth, capital is 
better utilized. Each laborer uses one set of took or one 
part of a set, and keeps that emjiloyed all the time. When 
each laborer does many things he has many tools, and some 
are always idle. 

DiaadTautages. — The disadvantages of a division of Isr 
bor should be noticed. It makes it possible to employ women 
and chililren, and the proportion of men employed decraasen. 
Child labor and labor of women often displace men, and in 
American cities one sometimes finds fathers at home keeping 
house while children and wives are at work in factoriea. 
The home Is thus demorallEed, and the rising generation l>e- 
coraes weak in body and mind and deprived in character. 

The dependence of man upon man is increased in the man- 
ner previously described, and this ia frequently, at least, par- 
tially an evil. An international dependence arises whidi 
occasionally produces intense suffering. The so-called "cot- 
ton-famine" in the north of Kngland during the AnieHcin 
civil war illustrates this. America grew cotton, England 
manufactured it, and this seemed to work well until it be- 
came impossible for England to secure the cotton supply 
from our South, and the result was intense auflcring of hun- 
dreds of thousands of working people in no wise responsible 
for the distant war. 

Laborers are often rendered helpless on occasion of a 


change of prodnctioD, having learned to do crnty one thin^, 
wliluh ia now no longer required, anil having become too old 
to auqiiirti a nuw skill. Dii^kcos describes evils of this kind 
in hia JIard Times. 

When labor in reudered aimplc il loses both tLsattractiveofss 
and its educational valne at the same time. On« van love 
Ilia work wlicn one iniinufaciurcH a whole watch, bearing the 
Impn^se of care and skill; but who can love tbe mere rontiiie 
of raising a sledguhammur and letiing it fall for ten Iwnrs a 
day? M. do Tocqueville, in his Democracy in Amerii^ 
Kttributea the high average intelligence of Americans to the 
fact that labor, when he wrote, was not so divided with U3 
iM olsowheiv. 

Remedies for the Evils of Minute Bivision of 
Xiftbor. — K<lu(ialion, particularly industrial trainingand pop- 
ular work liki' that in wlitch Ohaataoqna is engaged, labor 
' organiEatioriH with their debates and discussions, politiiiul 
life with uitivei-sal suffrage, and increased leisure, are all 
means whereby the evils of division of labor may Ix; obviated. 
When labor beitomcs soulless, ceasing to rainistor to fullnesa 
vf lifn, inoreiwod opportunities for development outside of 
the industrial tltld must be offered. Hoars of labor mii^t 
bo ahorteiied, but not necessarily equally. A clergyman or 
profi'DMor linds opportunities for the harmonious development 
ofnllhix fiMmltii-sinhi!<<ic<'i))>ation,and the reasons for a shoit 
labor day for f:irlorv operatives do not exist in his case. 

Increased Productivity. — The tremendous increase of 
productive pnwer, duu lo illvision of lal>or,.haB often been 
Mllinatod morn or lesfl accurately. It lias been said, for 
example, that modern inventions and discoveries in tbe 
great oivilized nations have a productive power for each fam- 
ily of five persons ef|H'vaIcnt to the labor of sixty slaves in 
ol&Mical Athens. N'>w, the eivilisation of Athens was 
based on olnvery, and It is estimated that there were twelve 
alavcs to a free Atheni m family. Natural foi-ces do for ue 
five UmeH as much as slavery did for Athens. 





TEAyflPRRs /3f goods arc of two kliiilB : one-flide<] trans- 
fers and Cwo-siddd transfers of guuds. Tranflera of goods 
constitute a large jiart of our economic life. The business 
of one important industrial doss, called merchants, consists 
in eftectiDg transfei-a of goods. The operations in uhith 
merchants are engaged wn call commerce. Bui commerce 
requires a multitude of other businesses to assist it, and 
among them are especially prominent the meun» of commu- 
nication and transportation, such as public roads, canals, 
railways, telegraphs, telephones, and banks. These agents of 
commerce do not confine their fuiietinus to the assistance of 
merchants, but they aid the entire community in bringing 
about desired transfers of goods. 

Eichange. — The part of political economy dealing with 
transfers is usually called exchange, because transfers are 
mostly two-sided, and it is with these two-sided transfem 
that we are especially, though not exclusively, concerned in 
the chapters which in the present work are placed under the 
title, " Transfers of Ooods." Taxes, the chief kind of one- 
sided translers, are more conveniently trerited under finance, 
while bequest and inheritance may be better discussed under 
distribuiion, which is so powerfully affected thereby. Money 
and banks, however, which aie treated In the present part of 
this book, are agencies for assisting in one-sided transfers 
as well as two sided transfers of goods. 

Value. — Certain conceptions which quickly arise in ex- 
changes must now be defined. The first is value. What do 
we mean by value f Value is a quantity of utility. Utility 
means capacity to satisfy human wants, and when we measure 


lliin aiul iii.'ikc^ comparison between the qsaatity of atifitT 
I >rrl (lining to oner ^ood and theqoantitrof vtilitj peruinin^ 
iii MiiotliiT ^ood w«! form the conception wLLcli we dall tiIii«. 
Wlii'ii we h.'iy tliiit this horse b twiee as Talo^ble a^ this 
luw wv iiH'iin Hiiii|»ly that it b twice as asefaL 

ntility and Value. — A di:(tinction is <^en m&ie be^ 
twi'iMi Utility iiiid v«'Uiic% which is based on a logical tallacT. 
\Vp mmy w.'itrr is iim'ful but it has no valoe. When, bow- 


i<vi*r, wi* M.'iy wiitcr \h UHcfnl we refer to waier in general, 
I lilt wlini \vr Nuy w.itor has no valne we refer to a concrete 
• |iiiiiiiit y nl' w.'ttcr, as a pint of water in a pitcher. Now, a 
|initi(Mil:ir cniicrrtp (piaiitity of water has no value, bit it 
mImii ifiiiiiiiiiM iM> siK'li f|iiaiility of utility that we are willing 
til iii\i> thiii!v« ill cxrliaii^o for it which have cost an ai^pre- 
lifililn tiiiifiiiiii nf l:ilMir (»r Hiicrifirc. If we lose one glns^fnl 
III \^!iti>i \\r rr:i<)ily olitaiii another, and the exertion of get- 
liiiff iiiifitlif'i "LiMM JM IrsH than the exertion of paying even 
lliK •iiii.iNr'ii Minn, one cent, for the glas^. The utility is Ie<w< 
th'iM !i mil. It h.'iM n(» vahi(* becauHc the amouut of utilitv 
i't Mill (riiMii I'lKnij^h to )>(* measured. If, however, a partie- 
iil!ii • iiiifK ir •|ii:iriiiiy of water, anagallon of water, brought 
iiiiii III niii.iii:il I'ity liy n wateF-earncF, has an appropriable 
i|ii<iiiiii\ mI iiIiIiIx, ihrn it h:is also valiic. Something can be 

iiini nil il III 1^1 h:lil!n< fur it. 

Ail. Willi. MiiiiMJiinc .'ire useful, but as a whole they are 
iimI m|i)mii|ii iMiili' .'iml ii<ii cxi'han^eable, and consequently we 
rfiiMini I iv thMl iiM :i luh' thi>y havo value in themselves. 

ViitiiK III I Win nnd Valuoin Exchange. — A distinction 
i>i iihni niinli* Ih'Iwimmi v:ihic in use and value in exchange, 
uhirh ihint nut xrrwx to hi* well drawn. Value in use appears 
III Ih< riiM|ih>tiil\ ii'.im) mm (M|uiv.'ih'nt to utility, but sometimes 
It iM r<|iii\Mh'iii III MiilijiTlivc value as opposed to objective 
valiii', ih.'il IS V ill III* I if a thin^ to its owner as opposed to the 
niai'ki'l viiliii*, iir valup whf<'h oth(»rs a^ree to phure 9pon it. 

Elomnnttiry Vahm, Form Value, Place Value, Time 
Valnn. Various kinds of value have been mentioned, of 
of wliirli tin* folli)win^ are specially important : elementary 


valne, form value, place value, time value. Elementary value 
refers to value of raw material. It is with the productloo of 
this value that agriculture, and other branches of extractive 
production, like mining, arc concerned. Form value is due 
to form and shape given to raw material. Manufacturers 
produce this kiod of value. Time value and plaee value are 
values due to the fact that goods have heen brought to 
the place whore needed or saved till the lime when needed. 
The merclmnt jiroduces these kinds of values. He adds 
properties to goods; namely, the property of being in the 
right place and of being there at the right time. 

Values are merely relative, and consequi-ntly there can be 
no sueli thing as a general ti&k ur fall of values. Let ua sup- 
pose that to-day two husiiels of wheat exchange for tliree of 
oats, and to-morrow for four bushels of oats. We may say 
that wheat has risen in value, but it is obvious that exactly 
in the same proportion oats have fallen in value, 

Prioe, — Value expressed in money is called priie. There 
can be such a thing as a general fall or a general rise of prices, 
A genera! fall in prices means an increase in thevaltie of money, 
and a general rise in prices means a fall in the value of money. 

Demand and Supply are expressions constantly used in 
political economy as also in practical life. It is said that de- 
mand and supply regulate price, but clear ideas do not usually 
accompany this expression. Supply and demand are constant- 
ly varying quantities of things. An increaKed demand may 
lead to increased supply, but an increased supply not infre- 
quently goes ahead of actual demand anil increases demand. 
The supply at a given moment maj- be a fixed qnanlity, but 
what is the demand ? It is stated as desire accompanied by . 
purchasing power. But this fiuctuates continually. At o 
time demand may fall far .short of supply ; at another prioi 
it may far exceed supply and bring about an increase h 
ply. Demand and supply tend to equality, and this tendency 
operates through price. Prices are lowered and raised in 
such a manner that a rongb kind of equilibrium between 
aupply and demand is brought about. 

foroa* which l&flnenoe I 
Itivr* nrii nil ■'•rlit nf furnra a 
""I'l'lfi tiiwliiiitt tlirw- wliitt thvy an, Amt ^m 

|l>i ti<<l<iw niiirni'M )iliii|i(>mt!na. Lawm aaA ^HfeiM 
ilvliiniiil ii'til ii)ii>i'uLi> unaii)>[ily. Ha» f t B g i i »— y 
Willi iloitiHiiil t ( VrLAinl/. 'Hunlugiviag 4m- ■ 
ili'itiiiiiil foi liirlitiy*, an<l Eister iner 
"tlM"' 'I*'* '"(■■'"A*<"1 ileniand operates is iw« i 
ll n\*im |irl<>i>«, iitiil lliAL tuti'U to check Uke tf 
iiiiillili>l'iii'Hi)f( It'nili'ili'y. Hcc'orul, then is ■■ efln 
Iti lit" iiiiirhi'l [HI liioiniwdd miiply to satiofjr ibc ■ 
timiiilt Aliil iMiOHolKiiiilly tho 4l«ni!inil at exirtiag 
Kfixliol, wlii'ii ii>|iillil>i'liirti U rtitorud agaui by li 
Wlllull lii(iii>ii*i< ili'MiHiiil. Itutigioua bolidsjra m 
|ily, 'I'litmn ImlliliiyB w«'ro nu mimeroDa in BrmxB • 
■IllUti tlml lliti tiitHiitml iioiHiomy waHinjurioaaly a~ 
tlll'hiiuli llioiiinu'laiir till- umi>i>ror these were greuly r 
IidIiiiI' ti|'uiiiii«iilliiii* mill titlier orgsniKationa of pm»daein« 
liiicna I ry III i't> aiiiiiily and dumnitd in a manBer bene- 
Di-IhI I» IliuiMiiKlvtia, and lliia ia oftr-ii, though not ahraya, ia 
a IttHiiiiPi' lii>iii>ll'>tiil til the ({■''■''''■il pnbliR. To wtihhold lap- 
|iU fiif H lliiiii ri'iMii iIkim' ditmanding it Lends to raise prii-«a, 
wlill<'t<i|ilMKii ll ii|iiirillii>mliiftdato*'iilaugUtor-prices." What 
Wi> iiiHy locliilloally nail nn "iirci'ney" of anpply and "nr- 
HON'iy " nf dniliatiil ni'i' 1 liuri Importnnt L'lement«in determining 
[itWa, KiMlitim Niiddi'tily IniTreuen and aa suddenly decresKfl 
dxriiniiil, Hlid liy lU ni]ilit nhanKea producen loes. Inheritance 
•ml lHi(|iifit nlTi'<>t domiind and iiu{)])ly tlirongh their action 
III! llto illatrltMitlDii iir wHrtltli, and this ta the case with all 
lliws t>f ))r(t]iiiriy, WIihii ifreal Inillc of national reaouroe- 
!■ wl'lnly ill*lrtliiit«il »•' l)iat tnaiiy have a comjietence, bat 
r«W woaltli) tli« d»mand for i^ommoditiea and the supply of 
*-timmiii|lll(i« til aatlvfy thin dcniniid will both be of a very 
riilKiiHiit nharnetur from demnnd and Mipply In a time in which 
ft Iftrit" projHirtliin of matorini wealth is in the hands of a few. 
furmor (««ii tlicre will be a large production c 


forts and conveniences with resulting general well-lfeing, as 
in the best days of tlic Roman Hepublii;, while in the latter 
there will be wanton luxury laboriously supgilied, a& the feasts 
ol'the emperors, by searching sea and land for things diffi- 
(Milt to obtain. This wanton luxury in Kunie, so finely sat- 
trleed by Juvenal, will be accompanied by loose morals, 
decay of civio virtues, general rottenness, whib the magnifi- 
cence of the few contra»ts vividly with the beggarly wretch- 
edness of the depraved masses. 

Back of demand and supply we have such forces as these 
to consider : disposable surplus, for the amount I will give for 
a thing I want dept^mls more or less on how much \ citn give ; 
thrift, industry, and inl«lligenf« increasing demnnd, lint at 
the same time, by application and by improviiuent, iiici'easing 
supply with less actual outlay of economic goods for the at- 
tainment of a given result. 

CoBt of Produotion. — When pi-oduciion of commodities 
can be indefinitely increased, as is the case with cloih, stoves, 
manuractureil articles generally, also agriciillnral produce, 
the cost of production ia the factor amoii!; ihosc atliug on 
the surface of industrial society, as it were — that is to say, 
leaving out ihe deeper causes — which, apart from temporary 
fluctuations, regalates price. There is a price which will 
recompense the vai-ious productive factors. Production ia 
carried on so long as that price for commodities can be ob- 
tained. If demand for any commodity admits at any time 
of a higher price, this is followed by increased production, 
prooidinff always tfiat the movement* of lalmr and cupiCal are 
J^eevsitk retpect to the. branck of proihtatitm eoticemrd. If 
price falls below the price necessary to remunerate the fac- 
tors, pi-oduction will fall off, providing capitai ain be wU/i- 
drawn from the puranU wit/ioul large proportional lo»«. 
Leaving out of view deeper causes, we may say price depends 
immediately on demand and supply, and secondarily, and in 
the long run, on cost of production, provided we have free 
competition ; that is to say, provided the flow of labor and 
capital is unobstructed. 


Freedom of CompetltioiL— Bat we miwi obeerve tins 
phenomenon: that precisely at the present time, owing to 
oonibiuAtionH and the growiog imporUnoe of n«tural monop- 
olies in an over-increasing proportion of the indnstrial field, 
the movements of labor and capital are not free. The dty 
of Baltimore pays fifty cents a night for each electric light 
burned in the streets. This is truly exorbitant, for Chicago 
supplies itself with electric lights for fifteen centn a night* 
eiicb, and other cities for still less. Sappoee, however, I 
winh to furnish the city with lights for thirty-five cents each. 
The opportunity to do so will not be given me, because those 
who furnish t)ie lights have a de facto monopoly. We have 
tb(*n monopoly prices, and these are prices which do not de- 
pend on cost of production, but which are fixed at the most 
remunerative ])oint. If price increases, demand falls; if price 
is lowere<I, demand increases. Intelligent monopolists will 
fix ]>rie(»« at that point which will yield largest net returns. 
A ^reat full in prices of service rendered by monopolists, like 
Htr(H>t-car corporations, will often be followed by such an 
increase of demand for services that net returns will in- 
cn^aHo. 'riiis brings about limited but insufficient control 
of mcmopoIieH. 

Sooial and Individual Cost. — Cost of production must 
be view(*d in two aspects: the social and the individual. The 
cost of |)n)(luction to society consists in efforts and sacrifices ; 
to the in(livi<lual, in what is paid for these efforts and sacri- 
fic(*H. What is tlie cost to society of a house ? It is the days 
of labor nnd the materials used, with wear of tools and im- 
plements, or services and things which have been consumed. 
These are real wealth, and society has lost that much unless 
it is saved in the house. These services and things have been 
diverted from other possible uses. The individual cost to 
me is what I pay for it, say five thousand dollars, but so- 
ciety is neither richer nor poorer because that sum of money 

* This ilgiire is taken from a leading newspaper of that city. It has bj 
Rome been called in question. Of course tbe value of the illustratioa does 
Dot depend on its precise accuracy. 

lias been transferred by me to a builder. 'Hiat is an indi- 
vidual transaction. Social cost is what Adam Smitli calls 
the ** real cost " of production. 

Fair Price. — A conception of fairness is powerful in its 
inflaence upon prices. During the Middle Ages the Churcli 
and also the public authorities attempted to regulate all 
nrices by ideas of fairness. Fair pncejjustum j^retiuniy was 
perhaps the economic topic most discussed for centuries, and 
in the writings of the most renowned of the philosophers of 
the Middle Ages, Thomas Aquinas, we find fair price treated 
with great learning in all its details. Excommunication was 
not regarded as too severe a penalty for violations of fair 
price. To-day, as has been stated, Irish land courts iix fair 
rents. To-day city authorities and State authorities fix fair 
prices for many services, as street-cars, gas supply, even cab 
service, railway transportation of goods and passengers. 
When public authorities furnish commodities and services 
they try to fix price by considerations of fairness. Univer- 
sity trustees try to pay fair salaries to college professors, 
and fees charged by lawyers and professional men are dis- 
cussed with reference to fairness, being pronounced by pub- 
lic opinion now fair, now unfair. 

Bead the author's article " Natural Monopolies and Local 
Taxation" in the magazine I^nd a Uandy published in Bos- 
ton, March, 1889; also chapters xvii-xxiii in his Problems of 
To-day. One of the best discussions in the English language 
of the theory of value and of the law of demand and supply 
will be found in Professor J. B. Clark's Philosophy of WeaU/i^ 
chapters y and vL 

Thesr are three different conceptions of money; namely, 
the popular, the legal, and the politico-eoonomic. 

The Popular Conception-^What do people mean in 
every-day language when they use the word money? Pres- 
ident Franuis A. Walker has answered Ms ciuestion in the 
definition of money found in his excellent little work, Money, 
Trade, and Lidiustry. It is as folSowa: "Money is that 
which paaaes freely from hand to hand throughoat the com- 
mnuity in Bnal discharge of debts and full payment for cotn- 
modiiies, being accepted equally without reference to the 
charaeler or credit of the person who offers it, and withont 
the intention of the person who receives it to consume it or 
enjoy it, or apply it to any other use than, in turn, to tender it 
to others in discharge of debts or full payment for commodi- 
ties." This is what men ordinarily mean when they use tha 
word money. 

The Legal Conception is different. Whatever the law 
declares a legal tender is money in the legal sense. A legal 
tender is that which the law compels persons to receive io 
payment of debt. 

The PoUtico-Economio Conception. — BtiI political 
economists have framed still a third definition of money, 
which we may for lack of a better term call the politico-eco- 
nomic conception. Money in the politico-eeonomic conception 
must perform all of the following functions: First, it must 
serve directly and immediately as a measure of value; but 
value measures value as length measures length. We most 
lake as a unit a definite concrete value like our gold dollar, 
consisting of 25'3 grain* of gold, nine tenths fine — that is. 

nine tentlw pure gold ami one tenth alloy. When we oay 
that a commodity is worth nine dollars wc mean that its 
value or quantity of ntility is nine times that ol'our "unit of 
Talue-measurement," conseqncDtty money in tliis aenee 
must be composed of material in itself valuable. Second, it 
must serve as a medium ol' cxcbaiifft'. This Ja tlie prini-ipal 
function of all kinds of money. Commodities are not ueually 
directly exchanged for one another, but indirectly through 
tile medium of money. The farmer selling his uorn for ni<in- 
ey, and with this money buying sugar, reiilly exi^hangen corn 
for sugar, the money serving merely as a convenient medium. 
Third, money in the prexent sense must serve as a means of 
making payments, and this is facilitated usually by having a 
legal-tender quality attaclied to ii. Payments are often one- 
sided transfers of goods, and on that account the third func- 
tion differs somewhat from the second. Fourth, money in 
the politico- economic sense must serve as a store or recepta- 
cle of valne^ It must store up valuo so that it can he trans- 
ferred from place to place and time to time. Roman gold 
money, preserved for two thousand years, has brought value 
down lo our own time; and gold money taken across the 
Atlantic bears with it stored-up value. 

These distinctions render it easy to answer nlherwise per- 
plexing questions. Are national bank-notes money V In the 
popular sense, undoubtedly, but not in the legal sense nor in 
the politico economic sense. Are national treasury notes 
money? Yes, in the popular and legal sense, but not in the 
third sense. Gold money in the United Slates is money in 
every sense of the word. 

Ftinctions of Mone7. — Jloney has been called one ot 
man's greatest inventions, ranking witli the alphabet. Cer- 
tainly present civilleation would bo impossible without it. 
Its sen'ices are so obvious, however, that it is not necessary 
to dwell upon them. The reader has only " to look and see," 
Exchange would be awkward ami tedious without money, 
and now that labor is so divided exchanges form a part of 
cur dally life. We enjoy few material good things which 


have DOt been exchanged in one way or other many tinM 
before they reach as. Without any medioni of ezdiaiige 
the man with a horse who wanted a eoat inrtead woold be 
obliged to hunt for a tailor who derired a horM» and after 
finding him the exchange would very likely be defeatoi 
owing to inequality of valuea of articles to be ezehanged. 
The coat desired might be only half as yaluable as the liorse, 
and the tailor might have nothing else wanted by the owner 
of the horse. Simple illustrations like this can be continued 
indefinitely. We can also keep values easily in mind and com- 
pare them readily when we have one common measure. Money 
enables us to travel, carrying stored-up value with us, and 
assists in the accumulation of capital by providing, as it 
were, a receptacle for it. If we raise more potatoes than 
wc need, we can keep them only a short time, but we can 
exchange them for money, which can be kept. Thus we 
save our surplus. Money is a form of capital which has 
been called free. It can by exchange be turned hither or 
thither, being ready for the best use which may offer. 

Qualities Desirable in Money. — ^Many things have 
been used as money during the world's history. Among 
them the following may be mentioned: Cattle nearly every- 
where; furs, especially in northern countries; oil; wampum 
among the early New Englanders; tea at Russian fairs; to- 
bacco, as in Maryland and Virginia; iron; copper; all the 
baser metals and the two precious metals, gold and silver. All 
civilized nations have finally found gold and silver best 
adapted among all the metals for money, and they are so used 
to-day in every part of the globe. The following are rea- 
sons why gold and silver are especially suitable for money- 
metals: They are universally desired, and every one is will- 
ing to accept them. They can be used not only in the arts 
but for ornaments, and this helps to give them stability of 
value, for if their value begins to fall the demand for them 
for other purposes than money tends to increase, and this 
prevents so great a fall in their value as would otherwise 
take place. Gold and silver are desirable on account of the 

MONEY. 187 

vast qnan titles already iu existence. The gold in coin and 
barSy and silver in coin is now estimated to be worth some six 
thousand millions of dollars, and compared with this the 
yearly production is small, ranging at present from about 
two hundred and ten millions to two hundred and thirty-five 
millions of dollars. 

The production of one mine in one year, even if extraor- 
dinarily large, produces a comparatively small effect, being 
like a glass of water thrown in a pond. It must diffuse itself 
over a vast surface. 

Their high specific value— that is, high value in proportion 
to weight — adapt them to use for money, because easily trans- 
portable. Their value at different places widely separated 
is more nearly equal than it could otherwise be. Durability 
and indestructibility are valuable qualities, while extreme 
divisibility without loss of value makes it possible to meas- 
ure any desired value, great or small. Malleability renders 
coinage easy, and homogeneity makes any one ounce or 
pound just as valuable as any other pound or ounce. They 
are readily recognizable by their color, their peculiar ring, 
and by other attributes, and thus they are adapted to popu- 
lar use. No other metals seem in like measure to combine 
80 many desirable qualities. 

Paper money has been extensively used. Paper money 
consists of promises to pay on demand, which people are 
willing to receive in place of metallic money. They are 
usually promises either of banks or of governments. People 
take them because they believe the promise will be kept, or 
because they think that others will accept them, or because 
they have been made a legal tender, and people must accept 
them for debt, or because, as usually happens, they are re- 
ceivable for taxes. Where this confidence in paper money is 
complete it is preferred to precious metals, because more 
convenient. If any one will read all that is engraved on the 
paper money circulating in the United States he will per- 
ceive its nature, and he will discover that it is of two kinds: 
notes of national banks and notes of the federal government. 



Adam Smith has cora)>are<l paper mooey to a road through 
the air. It saves the use of the precious melalii, and capita), 
otherwise employed as a medium uf exchange, caa be used 
for other pruductive purposes. It is thus, he »a,y», as real a 
saving as if rn could travel thi-ough the air and use the 
ground now occupied by roads for agriculture and other 
purposes. The " greenbacks." or paper money of the United 
States, now amount to a little over three hundred and forty- 
six millions of dollars. 'J'hey perform the function of gold 
and silver even better than gold and silver — in foreign puna, 
like Hamburg, often selling for a premium — and this saves 
the country this amount of capital. To withdraw them from 
circulation would he simply a waste.* 

"Inflation." — t'ertain dangers connected with paper 
money issued by government must not he overlooked. It is 
easy to set the priuting- presses at work and to issun an 
illimitable amount of money. This is much easier than lax- 
ation, and has often promoted waste and extravagance. Be- 
gidcfi, only a litnited amount can be kept in circulation at its 
nominal value, and when this is exceeded it falls below 
"par," which means that paper money will no longer pur- 
chase as much as the same amount of gold and silver money. 
This produces gre^t inconvenience and suffering, because 
the inferior money drives the better out of circulation, and 
prices rise nn ai^count of the large supply of money. This 
diminishes the value of fixed salaries and of all fixed incomes, 
of in te lest- pay men Is on all debts and of w:^es, until thesu 
rise correspondingly, and this takes a long time. It is an 
inconvenience in international trade, because foreign coun- 
tries do not recoguize the legal tender qualily of paper money 
and will not reireive it for taxes, and because foreigners 
lose faith in a p:i]>cr money which is not kept at par with 
the prectons mct^tls. 

Is Paper Money Safe ? — Some have so keenly appreci- 
ated the dangers of paper money that they have entirely op- 

* TliD wriler has paid a premium fur French pnpEr-moiiej in GoDCva, 
Bwitzerlund, where be oould bnvt obUiiicd gold muney lor par. 

MOSEY. 189 

posed its nse. This does not seem reasonable. Pa(>cr moneys 
like other instraments of a high civilization, should be em- 
ployed with care ; bat the damage which the best instru- 
ments and appliances may do when unskillfuUy handled 
oaght not to induce us to renounce the advantages which 
they offer. Rather we ought to acquire prudence, and this 
is the course which modem nations are actually pursuing. 
SeTeral countries are now using paper money, and our own 
among the number. When Congress decided to leave three 
hundred and forty-six millions of "greenbacks" in circula- 
tion, alarm was expressed in many quarters ; but experience 
has proved that apprehension was groundless. It may be 
said that paper money should always be kept at '^pnr," that 
is, government should always pay coin for paper on demand. 
When this is done paper money is saiil to be redeemable; 
when It is not, paper money is said to be irredeemable. 
Irredeemable paper money is bad; ledciMnable i>aper money 
good. Attention should then be directed to this consider- 
ation : How can paper money always be redeemed? or, how 
much can be issued with safety ? Possibly the amount the 
people will keep in circulation at par may have some rela- 
tion to the gross revenues of government, for these are })ay- 
able in piper money, and consequently in making these 
payments paper money is as good as gold. The grt>ss revt*- 
nues of our various governments, federal. Stale, and local, 
payable in pnper may l>e three times the amount of our 
** greenbacks. ** Perhaps we may say that for a prosperous 
community the paper money which the people will gladly 
absorb and prefer to gold and silver is equal to one-third of 
all government revenues payable in this kind of money. 
Possibly, under certain circumstances, more can be kept in 
circulation. Only careful experimentation can determine, 
and an adequate " reserve " — that is, supply of coin for pay- 
ment of paper on demand — should be maintained. Our ex- 
perience in the United States is an instruclivo example of 
economic experimentation. 
The Amount of Money Needed.— The question has 

intry nee^^^H 

orrnoDucTioy to political ecoxomt. 

often been asked, How much money does a country n« 
It has been replied, " It makes no difference. If t 
is abuiiJant, prices will be high ; if the supply is smsll, 
prices will be low and the same amount of money will go 
farther. A little money will do the work of money as well 
as a large supply." It is true that there is a relation be- 
tween the supply of money and its value, and that targe sup- 
ply means HmntI value aud small supply large value, bill the 
eonclunion drawn does not follow. When the amount of 
money is small b:irter U always extensively used, and this ia 
an inconvenience, obstructing trade and causing loss. Enough 
money is needed so that it can bo used in all ordinary trans- 
Acuons of life and to enable us to avoid a too extensive em. 
ployment of barter. But one of the most common business 
transactions is the payment of wages. We need enough 
money so that it will not be too valuable to use for that pui^ 
pose; in other words, the day's labor of an ordinary laborer 
should not be inferior to the value of a piece of legal tender 
coin which can be conveniently carried. We need, then, 
enough money so that the value of a coin of convenient size 
shall not exceed a day's wages of an unskilled laborer. But 
it is desirable that money should be still cheaper, so that 
wages may be divided into parts. It is not necessary for 
money to be cheap enough to enable us to make our smallest 
purchases with full legal tender money, because in addition 
to full legal tender money all countries have subsidiary coins, 
like our fractional parts of a dollar, containing less coin in 
proportion to nominal value than full legal tender, and legal 
tender only for a small amount, with us ten dollars, and 
minor coins like " nickels" and "coppers" legal lender for 
still less, with ns for twenty-five cents. Silver dollars fnlfl" 
the conditions laid down, but gold does not. Gold is n 
oonvenient for large payments. The two supplement e 

Fluctuations in the Volume of Money. — The groui 
just given for the need of a certain amount of money, i 

V<ied by circumstances, is not the only consideratii 


to be kept in mind in det<;rmiiiiiig the ammml of money re- 
quired liy a country. After the altove rccguirement haa 
been satisfied it luity make camparatively littlti difference 
trheliier wu )iave much or little, but it niakua a gi-eat deal 
(if diAWrence whether we increase or deci-case the amonnt. 
It is not the " moch or little," Imt it i« the " more or less," 
that is of vital coneern. Nothing produiH-s more intense 
BulFeriDg than a deurease in the ainuuni of money, and thia 
t« on actonnt of the t'onnection between past, present, and 
future in our economic life. lie who trcaia every economifl 
qnestion a« if every day were a iieiiod of lime apart by it- 
self baa scarcely taken the first »tep toward the compre- 
lienttioii of economic soctely. Oblig^itions have been in- 
curred in the past, and these are payable in the present or 
in the future. Now, to decrease the amount of money 
raises the value of 'every debt and adds to the bunlcn of 
every debtor, public and private. It increases the value of 
notes, mortgages, railway bonds, and local. State, and federal 
bonds. It enriches the few at the expense of the many. 
An increase in the amount of money does not have the re- 
verse effect if it is small, because on account of the growth 
of wealth, the continually diminishing use of barter, and the 
extension of trade into countries formerly oataide of inter- 
national commerce, the opening up of new countries in 
Africa, Auiiii'alia, and elsewhere which need a supply of 
money, the valne of money tends to augment unless there is 
a growth in the supply. If the amnunl remains stationary, 
the creditors are enriched at the e«irense of the debtors. 
If the amixinC of money is arbitrarily increased, so that the 
value of all debts m ly fidl, it amounts lo virtual robbery of 
the creditors. When arbitrarily the amount of money is 
decreased it nmonnt-i to virtual robbery of the debtor class. 
President Walker lias come to the conclusinn that while 
it is dangerous to incrt'a«e the sup]ily of money arbitrarily, 
as by the issue of paper, it is a fortunate thing if the amount 
of money slowly and continually increases without direct 
government action, as by the discovery of new and more 


fruitful gold mines. His reason for this ia tbat the buainess 
lonimunity is always a debtor community, wfaile the idle 
eloBses are credilors, and that a slight depreciation in the 
value of money brought about by natural causes, and which 
coDsequontly does nut destroy ooiifideuce on the part of 
capitalists, gives a " fillip " to business and makes it pros- 
peroDS. It may also be urged that with the progress of 
improvementB in industry prices lend to fall, and that unless 
money increases in aninunt tbo.-e who take no active part 
in these improvements nevertheless gain the t>enefit of them. 
Silver Q-aestioii and Bimetallism. — The discussion of 
the amount of money needed by a country naturally brings ns 
to two topics, called the eiloer q'ie«llwtan'\bhnetalliiin. Silver 
and gold are both used as motiey, and aa government coins them 
it determines the ratio in wliich it will do this. A ratio which 
has been commonly etjtabHsbed has been one lo fifteen and 
a half, which means that in full legal tender coins one ounce 
of gold shall be equal to fifteen and a half ounces of silver. 
This is the European ratio, but tbe United States has estab- 
lished the ratio of one to sixteen. The Euro;>caa ratio was 
maintained for about seventy years during this century by 
the action of a combination of lOUDtrics called tbe Latin 
Motutari/ Umon, in which Belgium, Fram-e, Switzerland, 
and Italy were most prominent. These countries opened 
their mints for both gold and silver to every one, and coined 
money in the ratio of one to fifteen and a half. Every one 
who bad gold or silver could have it changed into money. 
About lS7a, however, Germany, having formerly used sil- 
ver, determined to replace it with gold, and thua threw an 
immense amount of silver on the market, while the demand 
for gold was corresjKiiidingly increased. Otber countries 
pursued similar course*, our own country demonetizing sil- 
ver, that is stopping llie coinage of silver, making it only a 
RUbsidiary coin, instead of a full legal tender, as it had been. 
Like Germany, we introduced what is calle<l gold monometal- 
li»m. Gold alone was henceforth lo be converted into coins for 
any one who offered it to our minis. This action alarmed 



the countries of the Latin Union, and they suspended the 
coinage of silver. To add to the confusion, large discov- 
eries of silver had inoieased considerably the supply of silver, 
and the old ratio was destroyed, silver falUog in a few years 
BO much in value as measured in gold that it required twenty 
ounue-ianii moreof silver to purchase one ouniienf ffold. All 
lliia naturally increa^^ed the value of money, and so ihe value 
of all debts, producing great distress in Germany and in nil 
other industrial lands. But tlie increase in debts was only a 
part of the mischief. Oriental and South American coun- 
tries use silver, and tra<le was easily carried on with those 
countries so long a» gold and silver would readily cxctiange 
at ail eatablished ratio, but when the ralio be^an to fluctuate 
an uncertain and demoralizing element was introduced into 
trade, wliich rendered it highly speculative, and entailed 
loss upon the business world. The merchant in Liverpool 
vho sold goods to a merchant in India agreed to reL-civc a 
fixed sum of silver money, but in England it was neeessary 
to turn thin into gold, and a fall iu the value of silver might 
bankrupt liim. 

Bimetallism has been proposed as a remedj*. This means 
that at a fixed ratio government must c<>in all gold and silver 
which any body desires to have coined. One cnuntry alone 
cannot introduce bimetallism, because other countries might 
send to it all their silver and take away its gold, just as 
Germany evidently conlemplaled draining France of at least 
a large portion of her gold. Experience seems to demonstrate 
that national bimetallism is otit of the qiie<ftion, and no 
scientific economist favors it, Eoonomists have, however, 
generally come to favor wliat is called international bi- 
metallism. International binii-tallisni means bimetallism 
based nu an international ugreeinent like that which obtained 
in the case of the Latin Union before 1674. Il is urged that 
all countries should agree to coin gold and silver at the ratio 
of one to fifteen and a half. If the principal commercial 
countries nf (be world, say France, Germany, England, and 
the United Stales, should enter into such an agrijement, there 


is no doubt that the ratio coulil be maiutained. Gold and 
silver are used })rinei)>al1y for money, and owuers of gold 
and silver woiill be uliliged tilliir to liave it ooined at the 
governmeiil nilio or sell it on llie market for lisu in tlie arts. 
The arts ^ibsorb only a small proportion of rbe annual prod- 
uct, to say nothing of the enormous existing supply of gold 
and silver money in the wor'd, Governmenls ibeu are in 
tbe position of inonopulists, and by agreement could main- 
tain a fixed ratio. The advantages of this would he. to 
insure a more adequate supply of gold and silver and tu 
facilitate business transactions between guld-using and silver- 
using countries. 

A powerful creditor class in England, wbieh gains by an 
appreciation in the value of money, it has been stated, haf. 
been {jowerful enough to keep England from joining in tbe 
action proposed by the TJniteil Stales and France for the ea- 
tablishment of international bimetallism, and Germany has 
refused to co-operate unless England's aid could be secured. 
Consequently up to tbe present it has not been possible to 
establirih internati'inal bimetallism. 

The " Bland Bill."— A fi-eo coinage of silver, that is, of 
at) silver olTered, now exists in no country whieh uses gold, 
but the United Stale-'* has inirodui-ed a limited coinage of full 
legal tender dollars. By tbe so-called "Bland Bill" of I8T8, 
at least two million dollars' worth of silver must be coined 
every month by the mints of the United Slates, and not more 
than four million dollars' worth may be coined, and in the 
ratio to gold of sixteen to one. The silver is bought at the 
market price, and the government makes the difference at a 
proUt, amounting to several million dollars a year. Al.irm has 
been axpressed because it has been feared that silver will drive 
gold out of circulation. Up to the present time this fear has 
proved rtis liasoless as the anxiety about the greenbacks. The 
gold coins and gold bullion, in mints and assay oIKcea and 
ready for eoinage, amounted to over seven hundred milliona 
of dollars on July 1, 1888, while the silver money in the 
Vuiled States amounted to a little over three hundred and 

sevpnty-five millions of dollars, anil lliis iiiclmied over bgv- 
eiily-five millioiia of subsidiary silver omna. It is difficult to 
see how so small an amount of itilver can throw out of cir- 
I'uldtioD so large an amount or<.'old, We me now coining 
about thirty million silver dollars a year, and it will takeover 
ten years for tiie amount of silver to become equal to tbe 
amount of gold which we now have, but we are abo coining 
gold, and that at the rate of twenty-tiight million dollars per 
annum. The per capita circulation of full legal tender silver 
in France is about fifteen dollars, while witli us it is about six 
dollars. At the present rat« of coiii^e, if {mpulation should 
not increase at all, it would take over fifteen years lor us to se- 
cure as large a per ca|iita silver circulation as France. At the 
same time it ia not po-^sible to view the future without some 
apprehension. Il would be a serious misfortune to the United 
States to be reduced to an exclusively "ilver basis while the 
chief conimen-ial and industrial centers of the world use gold 
as a money biisis. A recent Parliamentary t'onimission in En- 
gland has recommended that without international agreement 
England should use more silver, und it is possible that the 
extreme apprehension about the fait of silver may fail of 
realisation aa did the apprehensions about the fall of gold 
after the discovery of the gold mines in Aualralta and Cali- 
fornia about 1848. The United States has introduced a 
convenience in gold and silver cerlificates. Gold and silver 
coin may be deposited with the United States and certificates 
received. The gold and silver coins are repaid whenever th« 
certificatos are presented, and in the meantime the paper 
certificates are more conveniently and safety carried or kept. 

Read chapters vi and vii in Walker's ^fonei/, Trmh, avd 
Indiintry for on able presentation of scientific bimetallism. 
Ttie ground* for gold monometalliBm are well presented by 
Jevons in bis 3Ioney and the Sfechanism of Exchutige. 




The development of economic life has been divided into 
three stages with respect to the mode in which goods are 
transferred. The reader will remember tliat these are called 
truck-economy, money-economy, and credit-economy. The 
transfer of goods becomes continually easier as we pass from 
one to the other, and as we make progress in any one of the 
periods. Probably money is the most remarkable contriv- 
ance for facilitating transfers, but, next to money, credit and 
its instruments have rendered greatest service in that part 
of our modern economic life specially concerned with trans- 
fers of goods. Credit is defined by John Stuart Mill as 
" permission to use the capital of another person." Pro- 
fessor Kosclier defines credit as " the power to use the goods 
of another, voluntarily granted in consideration of the mere 
promise of value in return." Credit has also been defined as 
"confidence in the ability of another to make a future pay- 
ment." None of these definitions seems quite adequate. 
Credit has at least two economic meanings; namely, a com- 
mercial transaction of a certain kind, and the ability to en- 
ter into such a transaction. There are three elements in a 
business transaction to which we apply the term credit: 
first, the present transfer of goods; second, the use of 
the goods transferred; third, the future retransfer of the 
goods or an equivalent, that is, repayment. Professor 
Knies, of Heidelberg, has defined credit as merely "a com- 
mercial transaction between two parties in which the services 
or the value rendered by the one falls in the present, and 
the counter-service or counter-value of the other in the fut- 


are." But ttiis seems to err on the other siile, by neglecting 
the element of confidence which enters into creilit transac- 
itons ; not neceasarily and not always confidence in the char- 
acter of a person to whom i-redit is given, that is, to whom 
the ability to enter into a credit transaction is accorded, but 
confidence in some person, it may be a surety, or in some 
thing, as valuable things deposited as "collateral," which may 
be sold if the counter-service is not rendered. The person 
who transfers goods in a credit transaction is the creditor; 
the person to whom thoy are transferred, the debtor; the 
amount transferred, the debt. 

Instnunents of Credit.— Growing out of credit trans- 
actions we have various documents, or written evidences of 
these transactions, called instruments of credit, which are 
used as substitutes for money, and which have in great com- 
mercial centers for large trauaactions so far displaced money 
that it only remains as " small change." 

Among these instruments the simplest and moxt exten- 
sively used Is the check. It is simply an order to a banker 
with whom one has money on deposit to pay to a person 
named or sometimes " to bearer," a sum of money. Except 
in retail trade and payments of wages, payments lor goods 
and services are usually made by checks, and wages are some- 
times paid in checks, and goods bought at retail, eB])ecially 
when considerable in amount or when the purchases of a 
month or more, are paid for by checks. As an instance of 
the extent to which checks arc used the author may men- 
tion that in two years he rememlters to have received money 
for services only twice, and then it was snmclhlng so unu- 
sual thnt it seemed a strange experience. On the otjiei' hand, 
he probably makes half bis payments in money. 

Bankers use checks, and when a banker gives a check on 
another banker It is usually called a draft. If tlie bankers 
reside in two countries it is often called a bill of exchange. 

Promissory notes are promises to pay, under conditions 
named, at the expiration of a certain period. These are 
signed by the debtor. A person buys goods and " for value 


AH rxTjiosucTioy to political scoxomt. . 

received" promises to pay the person of whom the goods are 
bought. But the seller m:iy also "draiy on" ihe buyer by 
lueanB of a bill of cxuhnnge, aUo (tailed a draft. Let us fiay, 

A. is the seller, B, the luiyer, A. then writes out an order to 

B. to pay to himself or a third party, as C, *' for value re- 
ceived," the amount of the debt. A., the creditor, signs tba 
bill. If B. aeknowledges the debt, and Ja ready to agree to 
pay it, be writes on the bill when presented " Accept " and 
signs his name. It then becomes binding, and the iiiercltunl 
vho does not pay bis drafts when they fall due becomes 
bankrupt. A check or bill may be transferred by indorse- 
ment. A person to whom payment is to be made, the payee, 
writes his name on the back with an order that the money 
be paid to a fourth party, D., the indorsee. The payee who 
indorses the instrument of credit is tbe iodorser. The in- 
dorsee may assign the instrument to still another party, as K, 
by a new indorsement, and lie then becomes indprser. This 
may be continued indefinitely, and thus the instrument may 
pass from band to hand in place of money, each one who in- 
dorse!! it hecoiuing responsible proviiled that no previous io- 
dorser can be made to fulfill bis obligation. Other termsare 
readily miderstood, as payer, the one who must pay ; drawer, 
the one who draws an instrument of credit ; drawee, tbe one 
on whom it is dniwn. 

Book credit is extensively iised. When goods are trans- 
ferred a record of it is kept, or, as we ordinarily say, the 
goods are "charged,'' nnd a bill is afterward sent for tbe 
amount. A vast amount of cri'dit is granted in this simple, 
old-fashioned way, lioih in wholesale and retail trade. Re- 
cently large mercantile establishments have tried to abolish 
hook-credits, ami it may ni>t W too miirh to say that there 
lias been a general movi'inenl toward restricting it and defin- 
ing its limits more accurately. 

Advantages of Credit. — TTio advantages of credit may 
be thus summarized : I. Credit furniphes a more perfect and 
convenient means of paynit^nt in large Hums and between 
distant places than th« precious metals, saving tiioa sod 


labor. This is effected by means of notcB, checks, and biUa 
of exchange. It is thus that only small sums of moDey are 
sent from one country to another in iuteruational trade. 
Unly balances are {>aid in money- If some London me> 
chants owe Xcw York merchants a million pounds and oilier 
New York mcruhunts o\re these London merchants a million 
pounds, it isohviousihatnu money need leave either counlrj, 
Tlie London merchants will send orders to their New York 
debtors to pay their New Yuik creditors. This in the simplest 
kind of cancellation of indebtedness. In actual life it is 
uoi-e complex, but the principle is the same. If the London 
creditont of New York merchants are not the i^ame as the 
London debtors, the debtors conid buy orders of the credi- 
tors and send them to New York. If New York merchants 
owe London mercLnnts, it is possible that Paris merchantH 
may owe New York merchants an equal sum, while London 
merchants are in debt to Paris mei'chants to the same amount. 
Ily exchange of orders all debts i-ould be paid. This is 
called arbitratiiw of fxeh(tnt/e. Naturally a class has arisen 
which deals in these instrnmenis of credit, and this 'is the 
elass of bankers and brokers. Debtoi's and i-nditors both 
resort to thpm. Bankers and brokers are the middle-men 
between debtors and creditors. 

2. Credit takes the place of correapomling amounts of 
gold and silver. This is a saving, enabling us to employ the 
precious metals for other useful puriwses, 

3. Capital is employeil more productively. lie who po»- 
Beenes capital, but is for any reason unable or unwilling to 
use it, transfers it to another for compensation, and thus 
both are benefited as well as the public economy, Othci 
things being equal, it is given to him who will pay the most 
for it, and in a normal condition of things this is the one 
who can employ it most productively, 

4. Credit enables those who have business qualifications 
and no capital, or inadequate capital, to engage in business 
and to employ their taUnts for their own benefit and for the 
benefit of soctetv. Many thus st.irt without capital, and in 



the end becoine irapilaliats thi-mselves. Credit has been the 
Btarting-poiiit of luany of the lai'ge fortunes nuw existing. 
Credit brinfjs together in tiumeious inaUncee capital with- 
out business qualit]i:atiujts or iriuhnation for biisiuess and tal- 
ent without capital, and thus may lie said to be not without 
influence in uniting capital and laboi' hannoniously. This is 
)i:irticularly the case with those inKtitntions whiuh supply 
capital to the poorer classes, like the Qerman co-operative 
credit- unions, which furnish ariisans, meclianics, and small 
tiaders with capital, and with American building associations, 
which furnish the same classes with capital for the construc- 
tion of homes. 

5. Credit gathers together the smallest sums, particularly 
by means of savings hanks, and these small sums forming a 
large aggregaie are pioduotively employed by joint-stock 
oompanies and other concerns. Capital is thus concentrated 
but its returns are scattered among the people. Credit en- 
courages capital accumulation and promotes thrift. Credit 
in this manner gives employment to small accumulations as 
they are m:ide, and this helps men to provide for emergen- 
cies and for old age. Other advantages of credit will sug- 
gest themselves to the careful observer. 

Eriis of Credit. — The dark side of the credit-economy 
must not he overlonked. It continually encourages extrava- 
gance, and this is a fruitful source of fraud and embezzle- 
ment. Credit promotes precarious speculation, because those 
who engage in it have little of their own capital to lose, and 
are over-i-eckless with tlie capital of other people. Our en- 
tire land is strewn with the ruins of businesses wrecked hy 
men who have mismanaged the property which nnwise credit 
gave into their hands. As credit sometimes enables the poor 
man with gifts recognized and favorably situated to become 
an independent producer, it frequently en;ibles the one 
already producing on a vast scale to extend his gigantic 
Operations and crush out men who have been independent 

It has been said tiiat all " consumptive credit," that is, 


credit to enable one to spend money for one's personal grati- 
fication, or for personal use in any way, is bad, while pro 
diictive credit, credit for carrying on a business, is good ; 
but the line cannot be so sharply drawn, Consumptive credit 
frequently leads to extravagance, but it also has enabled 
many a young man to develop personal powers, and to be- 
come a great jirtial or scholar, while, as Jnst seen, productive 
credit frequently causes loss. 

BEinks and Clearliig-Hou8e8.^Bankei-8 have already 
been deseribed as men who go between borrowers and lenders, 
or as middle-men in credit transactions. They are sometimes 
called deaIei-8 in credit, and there is little that they do which 
la not in one way or another connected with credit. But 
banks are not mere agents. They have a capital of their 
own which serves the purpose of a guarantee fond, and they 
receive money which their customers deposit with them, and 
mingle this with their own, gaining exclusive control over 
it fill. They become the debtors of the depoailoi-a and the 
creditors of those to whom they lend money. Their source 
of profit is not cMelly their own capital, but the capital de- 
posited with them. Sometimes they pay no interest, and if 
they pay interest they charge more, the difference constitut- 
ing their profit. 

Formerly banks ia the United States nearly all issued 
notes which circulated as money, and this was regarded as 
their principal business. Now only national banks are al- 
lowed to issue notes, and they must deposit bonds at Wash- 
ington as security for this circulation in addition to paying 
a tax for the privilege. All governments in civiliiiod coun- 
tries have greatly restricted the power of banks to issue 
circulating notes to serve as money, and the number of banks 
that find a source of profit in the production of bank-money 
ie constantly diminishing. Perhaps some day all govern- 
ments will, as has been advocated by many able thinkers, 
reserve to themselves the exclusive right to issue paper 

Clearing-houses are labor-saving institutions ori 

X.V amoDUCTios to political ecoxomy 

contrived by employees of banks. Banks in a city liave eon- 
.tinaal dealings wiUi one anutlicr. A cuslotiier of a bank de- 
posita witii it all bis checks, no mailer ma what bank drawn. 
It consequently happens that a bank in Bailiinoro, fur exam- 
ple, will reeeive cbvuks every day on all the olber bank", 
while all tbe otber banks receive checks drawn on it. For- 
merly there was cuntinnal mnniitg back and forth. A run- 
ner from eaoh bank WL'nt lo all tbe other banks. Kow tbe 
represent ativea of all the banks meet in one common plact, 
and exchange checkif, drafts, etc., and only the diftereiioes 
betweon the sums ilue and the snms whiuh a bank owes are 
paid. If more is owed to a bank than is due from it to tlio 
other banks, it receives this difference from the clearing- 
bouse ; if it owes more than is due it, it payaihe diSerence. 
The sums due the clearing-house and the sums which it must 
pay of cuurso balance perfectly, and it is left without any 
money on hand. 

The clearing-house fttatistics illustrate the inadequacy of 
money to do the business of the world. The total transac- 
tions of the clearing-houses in the United States for the year 
ending September .10, 1388, amounted to over fifty thousand 
millions of dollars, or more than thiriy times all the money 
in the conntry, bank-notes inclinleil; for the money in tbe 
country at the time was unly about sixteen hundred millions 
of dollars. 

W.alker's 3/oiiev, Ti-cde, and Imhtstry, chapters x, xi, xii, 
has a good account of banking. See also his Political Econ- 
omy, advanced course, in Part VI, chapters xi and xii. An 
excellent account of banking in tbe United Statt^a is given 
by Mr. John Jay Knox in his reports as Comptroller of the 
Currency for 1375 and 1876, printed iit the United Slates 
finance reports for those years. 

Bagehrtt's Lomfxird Street is instractive, as is also Qosch- 
eai's foreii/n £i/scAa»ffe.8. Gilliart's work 7Vie History, Prin- 
cipUn, and J^aetice of iiunking, published in two volumes 


in Bolin'*s Librarr, » an inCenKliDg prodadioti writlen bj 
a sQcce^ni banker. Mr. Gilbert kaTiD«r been fur nuuiv fears 
Director and General JAanager of the great I^ondon and 
Westminster Bank. Hone on .Banl'* amd AMukin^ b a 
standard law-book on the sabject. 

The author has written an account of German ^ Peop1e^» 
Banks'* in the AiLtHiic MohM^ for Febman*, ISSL It is 
entitled "German Co-operatiTe Union:^'* Some useful sug* 
gestions about transfers of capital will be found in J. H 
Clark's CiMpiialand ii4 £arH ing4y a monograph of the American 
Economic Association, ISSS. Read an article on clearing* 
houses in Johnson's Cyduptdia, by W. A. Camp, President 
of the New York Clearing-IIouse. A gtHxl a(H:^unt of the 
London and New York clearing-houses is published for 
fifty cents by the Financier Company, 40 Broad Street, 
New York. 



Otsjeots of Regulation. — Nations have always regulated 
liiternatiunal commeive, and in an examiiiatlon of hlstorjr 
we diacoverthree motiven for lUia legulaiion. First, ancient 
nations, as tlie Greeks, ilebrewa, and others, dreaded contact 
with foreigners, and regulated commerce in order to reatrict 
it and reduce intercourse with other nations to a minimum. 
Second, nations have regulated international commerce in 
order lo make it a Bource of revenue. SometimeB, as in 
Athens, of classical antiquity, exports and imports have been 
equally taxed. Knglaml at pretient taxes only imporls, but 
taxes them with a view to a revenue for the support of the 
national government. Third, international commerce haa 
been regulated by nations in order that the force of foreign 
competition might be weakened and the home producers en- 
couraged. This is usually accomplished by means of taxea 
OR imported commodities when commuditica of the same 
kind oan be produced at home. These taxes are called pro- 
tective, and collectively tliey are spoken of as a protective 
tariC As foreign commodities are liable to special taxes, it 
U supposed liiftt thereby the domestic producers will receive 
special encouragement. They are " protected " against for- 
eign competitors. 

Protoctiou. — It ta intended in this chapter to discuss 
only regulation of internatiimal commerce of the third kind. 
This regulation is called protectionism, and it will at once 
be recognized as a vast subject which could easily be made 
to fill aeveral volumes like the present. It will here be possible 
»erely to mention the main points in the controversy between 
Ihose who believe in tiiis kind of regulation, proteuUunists, 


and those who oppose it, free-tradurs ; to conimeiit briefly 
on some of these points ; to bring forward some general con- 
siderations which ought not to be overlooked, and to say a 
word in conc-Iiision in regard to tarifl' reform, on which all 
should unite. It is hoped thus to give a general view of the 
tariff controversy and to prepare the reader for further 
etndy of the subject in works mentioned at the close of the 

Arguments of Protectionists. — It is argued in favor of 
protectionism that it promotes nationalism, and this is held 
to be a good thing. It is urged that domestic trade draws 
the citizens of a country together, while international trade ta 
cosmopolitan and tends to their 8epai<alion. Protertionists 
maintain further that ])roteetive tariffs are necessary in order 
to build up a diversified national industrial life. They claim 
that there exist in a new country like the United States 
many natural indUHtiial advantages of which the inhabiianta 
cannot avail themselves unless they are at least temporarily 
protected. Government should, they say, foster infant in- 
dustries in order to develop our natural resources- and to 
produce diversity in industrial pui'suits. The diversified- 
natural 'industry argument and the protec Li on-to-inf ant- indus- 
tries argument are thus supplementary. It is held that older 
nations with their sn|>eriur capital and acquired skill will 
break down new pursuits in their infancy in order thereafter 
to have the market to themselves. Closely connected with 
this is an argument based on military groumls. It is often 
thought by protectionists that industrial national independ- 
ence prepares a nation belter for international war. Tlie 
home-market argument for protection naturally follows. A 
home market is claimed to be superior because it is alleged 
to be a surer market. Producers are less likely to be de- 
prived of it by war and other emergencies. It is, moreover, 
urged that it is beneficial especially to the farmer, because 
it saves the espenRes of transportation of products to foreign 
lands. It ha-s also been maintained by the distinguished 
American economist, Mr. Henry C. Carey, that a country 



can ruiiialii permnneully pruaperouB only on condition tbav 
what is taken from the soil should be returned in manure 
and other kinda of ferlilizei-s, and that this will be aocoiu- 
plished unly when products ara consumed at home. 

Finally, protection has been advocated iu the United States, 
«BpeciaHy since al>out 184(i, when the labor movetneiil began 
to assume prominence, on the ground thai it has been the 
cause of higher wages in the United States than in European 
countries, and that it is necessary tu maintain these high 
wages, which are said to be one main cause of our higher 

Arguments of Free-traders. — It is frequently al- 
le^'ed ihut protective tariffs are a violation of an assumed 
naliiral light of every man to buy his gonds where he will 
tml to sell U'm products wherever he sees tit, untrammelcd by 
Jiumnn laws. This argument, based on natural right, may be 
dismissed as a "dogmaiism in disguise," as an Knglish 
jurist calls tliis sort uf reasoning. High-sounding phrases 
are substituted for arguments, and under their cover opin- 
iona are thrust upon othera without a real effort to substan- 
tiate them. How prove the natiiial right? It does not^ 
appeal to the majority of mankind as a thing right in itself 
to buy and sell where one pleases, regardless of the common 
veal, and all history is against such exorbitant claims of 
individualism. It appears to most men that the public wel- 
fare must decide questions of this nature. Protection is thus 
called robbery, because it violates an assumed natural right. 
It is much to be desired that argumtnis of thi'i sort should 
cease to be heard so frequently. 

It has been claimed that tlie protective tariffs in the United 
States are uncoustitutional. It would be most nnfortunate 
and anomalous if nowhere in our country were lodged the 
power to pass such regulations regarding international com- 
merce as might appear to be required for the promotion of 
the public welfare. Bnt this argument is idle. It does not 
correspond to the opinion of our best jurists, and it is very 
certain that we shall never see a Supreme Court in the United 


States which will ventore to prononiice prolrctionism uncon- 
Btitnlional. Protect ion ism hatt been called Bouialism, but this 
epithet of mnlignit; is so geoerally applied to wlutcver a 
person, in competent to argue a comhv, does uoi hke that it 
will scarcely ti rrify any one. 

The venlly alile arguments of free-traders are those vhich 
aim to show that protectionism on the one hand fnilH to accom- 
plish its ends, or is needless for the acconiplishineut of the 
ends it contemplates ; on the other hand, actually does accom- 
plish positive harm. It is denied that prutectiunism Ls neces- 
nary to foster uationaliHrn, and modern esperience prescnia 
strong testimony to support this deniaL During the past 
fifty years international commerce has expanded marvelonsly, 
and international communication has been in every way facil- 
itated, while at the same time we have wltncBsed a remarka- 
ble growth of national feeling all over the civiliited world. 

It is not clear that protective tariffs are neccssavy to pro- 
duct* a diversity of pursuits in a great country like the United 
States. It is admitted that a purely agricultural nation ia 
not likely to jn-ogress rapidly; hut it would seem that our 
enormous extent of country, onr varied climate, our natural 
gifts of all sorts, had in themselves amply provided for suffi- 
cient diversity, and it can scarcely be maintained that one or 
two pursuits, more or fewer, can be of importance. A vast 
number of pursuits means widely extended division of labor, 
and this is by no means an iinqualilied blessing. 

The argument for protection on the ground that it is a 
benefit to the laboring-man docs not seem to the writer con- 
elnsive. When this argument is analysed and ans'weretl in 
detail, it is seen to involve a discussion of many complex 
economic problems. One considei'ation only will be suggested 
in this place. Labor comes in competition with labor, not 
with commodities. Labor desires commodities, and the more 
commodities it receives tlie better. Now, if it is desired to 
protect labor, a tax ought to be put on imported labor, and 
].iV>or ought thus to be rendered scarce. If this were doii«, 
then those who desire labor would b« obliged to pay heavily 



ioT it, as actually happened in Eagland after the "Black 
Death " in the fourteenth century had killed off a large pai t 
of the laboring papulation. If it is desired to benefit labor, 
it would seem to the author that after importation of labor 
has been taxed, and labor thus rendered scarce and dear, the 
importation of commudilies should be encouraged in order 
that labor might secure an abundance of them cheaply. 

It is maintained by free-traders that protectionism is espe- 
cially injurious because it diverts industry from a moi-e to a 
less productive channel. It is held that industrial forces, if 
let alone, will seek those fields which yield largest returns, 
and that if f;oveniment artificially induces them to take an- 
other direction the factors of production become less fruit- 
ful iind the national economy sntTers, 

It is, moreover, allegt-d that protectionism fosters monop- 
olies, because it sLuls off international competition. Recent 
combinations of domestic producers, as seen in truHts, which 
control BO large a portion of the industrial field, vould seem 
to support this allegation. It is certainly taken for granted 
that if foreign competition is shut off or lessened home pro- 
ducers will still compete. That has been one of ilie funda- 
mental arguments of protectionists, but now we find home 
producers combining to put an end to home competition. It 
is scarcely too much to call this an abuse of the principle of 

Some General Considerationa ought to be kept in mind 
in taiiff discussions. First, its importance is exaggerated. We 
find acountry like England prosperous under free trade; we 
find countries like France and the United States prosperous 
under protection. It is of real bnt not of vital importance- 
Domestic trade exceeds in its aggregate amount in the United 
States almost immeasurably foreign trade. The domestic 
trade of the Mississippi valley nione is far greater than our 
entire foreign commerce. It is much to be desired that other 
economic questions should be more discussed. Local politi- 
cians dispute about the tariff esnitedly, and ditert attention 
from local abuses. The proper management of gas-works, 


water supply, electric lighl ing, and stri.'et-carB, ia of more im- 
portanoe to the people of New York, Bosion, or Baltimore 
than the tariff controvemy, bnt how much do we hear about 
tiiCBO local queHtions from our politicians? The place to 
begin reforms ia right at home, at our own doors. When 
we have reformed the greater abiiHets of our municipal gov- 
ernments, we shall very well know how to refoi-m the lesser 
evils at Washington. 

^ecoud, stalistios about a uountry's prosperity, orged either 
for or against protection, are, as oBually presented, of no 
value. The tarifT policy of modern countries has been a minor 
factor in their indnstrial life. Inventions and discoveries, es* 
pecially the application of steam to industry, and the growth 
of intelligence, have been the chief forces which have made 
such astounding additions to the wealth of the world during 
the nineteenth century. 

Third, had as it may be in many respects, the American 
tariff is an historical growth, and during the century of our 
national existence it haa taken deep ruot. It has become part 
of our life, and it cannot be suddenly eradicated with im- 
punity. If it is tniethat American labor would be better off 
without it, it does not follow that it ought to be removed 
suddenly in the interesls of American labor. If an indus- 
trial growth ia abnormal, it is none the less true that adjust* 
ment to normal conditions is a painful proceea and should be 
conducted cautiously. Displacements of labor and capital 
cause suffering and loss. At the tiame time, it i.^ imposaible 
to tolerate permanently a bad condition of things, and while 
rashness is to be de])rocated progress should be insisted on. 

Our capital has become enormous. Sktil has been devel- 
oped in our country, and it is nut clear that our industrial 
leaders are not quite capable of holding their own with the 
world in a free market, The fact ihat labor receives a large 
share of the product, if such is the case, does not render labor 
and the other factors of production less fruitfnl. Does the 
American farmer abandon the cultivation of land because 
out of a hundred bushel" "f wheat gi'own he must give the 



American laborer, say, fifty, while his Eiiropoati rival gives 
only thirty busliels out of a hundred ? He slili has fifty 
bushels k'ft. 

This is only a small part of the snhjeot of protectionism and 
free trade, a very am-.iU |>art, but it is trusted that it will 
prove snggective, and that no one will terminito with thia 
his tariff Htiidii'!'. 

It may be said in conclusion that reform of the tariff is 
possible both from a protectionist and from a free trade 
Htand-point. What is desired is simplicity in our tariff 
system, whiuh is now complex. No article should be taxed 
unless there ia some good reason for iL Other things being 
equal, the fewer articles taxed the better. Reductions in du- 
ties wherever practicable should be made. Speciiic duties, 
that is, duties which are calculated by weight, measurement, 
or count, as simple nnd less provocative of temptation, ought 
to be substituted in every possihle c.iee for ad valorem du- 
ties, that is, duties which are a percentage on value, a lliing 
so bard to be deterraiDed. 

List's National System of PoUr.ic<d Economy presents 
protectionism ably. Taussig's Turiff Jlieli-r}/ of the JTniteit 
States is the work of a fair-minded free-trader. Patten's 
/Vemwaa of Political Economy advocates protectionism from 
ft new standpoint, and is worthy of consideration. Thomp- 
son's Protii-tion to Home Industry is a popnlar presentation 
of protection, in four lectares. Ely's Problems of To-Day ia 
a simple ami easily grasped argument for tariff reform. 
Special attention in this work Is given to the balance -of- trade 





It has already been remarked that the production and the 
diBtribution of the annual income of society cannot be sharply 
separated, and the reader must have observed that more or 
less ])as been said about the four parts into which the prod- 
ucts of industry are usually divided; namely, wages, interest, 
profits, and rent. ^ Taxes may, perhaps, be regarded as a fifth 
part into which the annual income of society is divided, and 
we may treat taxes as the part which society, organized as 
State, receives for its participation in production. But, if 
this view is taken, we have a fifth part peculiar in so many 
respects that it is desirable to treat it neither under produc- 
tion nor distribution. 

All of distribution might undoubtedly be considered under 
the general heading production, but on the other hand it is 
frequently asserted that distribution is " the true center of 
all economic inquiries," and it would be possible to treat the 
whole of production from the stand-point of distribution. 
The truth is that these old traditional divisions of our sub- 
ject-matter indicate different points of view, and on this ac- 
count it seems desirable to retain them. When we pass 
from production to distribution we do not enter a new field, 
but we look at an old field of investigation from a new point 
of view. 

We have in this " Part " of political economy to discuss 
chiefly either actual or contemplated self-conscious social ef- 
forts to control the distribution of the income of industry 
among families and individuals, and, save in the first two 
chapters, only secondarily that distribution of products which 
flows as it were spontaneously from productive processes. It 


is, however, necessary to add a few remarks to what has al- 
ready been said nboiil prtiperty, that fundament:il ui8tiluliun 
ID iliNtributlon, and about. wages, interest, profits, aud rent, 
before we [laas on to subtteqaent chapters. 

Property. — By privale praperty we mean au exclusive 
right or eoiid'ol of a peri:ion over an econoinio good, and 
■ometimes the economic good itself over which this exclusire 
right is exorcised. It is of the nature of property that it 
carries with it the power of exclusion within its own sphere, 
but not that it is absolute. Such a thing as an absolute right 
of property never bas existed and never will exist. The 
Roman law defined pi-operty as "Jus utendi velabiUemU re," 
the right to use or coiiEume a thing. Now, abiileruli has by 
some been supposed to mean abnse, and it has been asserted 
that the Roman law gave a man the rightio abuse his prop- 
erty, but it has been shown that ahutendi in this plai-e means 
" use up," or consume, ami the Roman law confen-ed no such 
outrageous right on a proprietor. All codes will be searched 
in vain for an unlimited right of property. There are two 
elements in projwity, the and the individual, and 
sometimes the one is more prominent, Kometimes the other. 
Sometimes the one la allowed to encroach unjustly on the 
other. John Stuart Mill mentions as such an encroachment 
the assumed right of a landed proprietor to exclude the pub- 
lic from the contemplation of a great natural wonder. This 
was felt to be so anomalous in the case of the land suifound- 
ing Niiigara Falls that New York State and Canada bonght 
out the private owners and made of the land public parks. 
The general public has had from time immemorial the right 
to Qse as pleasure grounds miny forests in Germany, and 
when in Prussia this right was somewhat restricted a few 
years ago it was felt by many persons to be an unjust en- 
croachment of the individual element un the social. It ia 
only within Its own sphere that the right of property ia ex- 
clusive. The old Teutonic idea of property, appropriate to 
Kngland and America, makes the social element prominent, 
while the Iloman law, with its negative charaeterixtics, tends 


to miaimize the Boctal clumunt and exaggerate the indi- 

Every change Id the laws of property changes to some ei- 
tont the mode of pruduction of ecanomic goud^, but to stiil 
greater exteut and more immediately does it alter their dis- 
tribution. What is Deeded in flexibility in our laws of 
property sa that tbe uoncepUon may be gradually altered in 
S conservative spirit in order to meet thi^demands of existing 
economio and social civilizatiou. Inflexibility Is destruotive, 
and tends to revointimi. 

Rent. — Rent has beca deflned as the annual return of land 

in itself. Whi-n one person parts for valuable consideration 

with the uee of land what he receives is called rent, but the 

value of the use of it is rant when he retains it and uses it 

himself. Now, what determines the amount of rent ? Land 

ef various degrees of fertility is cultivated, and the poorest 

land cultivated is said to he on the " margin of cultivation." 

This is land which pays no rent. What is received cornea 

' aimply as a return on capital and labor. An abundance of 

'land can be found which pays no rent. It "just pays" to 

cultivate it, and that is all. Now the greater part of land is 

^thcr better situated or it is more fertile. It more than 

'•'just pays" to cultivate tliis land, and the difference between 

"^hat this land yields and land on the margin of cultivation 

B the amount nf rent. It is on this account that rent is said 

lot to enter into prices. When wo buy a bushel of potatoes 

Wo pay the same whether they are grown on poor or on fer- 

ilc land, whether grown witliin half a mile of the market nr 

ive hundred miles away, provided the potatoes are equally 

l&ood. But it is obvious that the cost of growing a hushel of 

■**Dtatoes varies widely. It is the cost under the least 

^*3vantageons circumstances which determines price. Price 

S^^nst be high enough to cover this cost or the Sand will go out 

MP cultivation, just as poor land has gone out of cultivation 

^Hl England since our West was by railways rendered acceasi- 

Bt.e. When the potatoes are grown under favorable circutn- 

Bt- ances the price more than covers cost, and a sui^lua is left ■ 


wliich is calleil rtnt. If rent paM were aWIJshe<1, prioe 
would not be alterei]. Ask any tenant if lie would lowei' 
llie price of potatoes if \\\h landlord would release liim from 
paying rent. 

it ie not slriclty aecnrate to Bay that rent does not enter 
into price. A part of price usually paid is rent, but price is 
not altered by rLiit- payments. Values of things exchanged 
are determined by their production under the least favora- 
ble drc! urn stances under whiuh they can be permanently pri>- 
ductid. Those who produce nuder more favorable eircnm- 
stances have a sarphis. Pure economic rent is not return 
fur capital, that is, for improvements, not at nny rate until 
they have become inseparably and an distinguish ah ly blended 
with tlie land. Return for improvements is, strictly speak- 
ing, iutero»«t and profits. It is sometimes said l.ind will not 
sell for what the im pro vements cost, ITie effect of improve- 
ments cannot last indefinitely, and they must he paid for 
year by year, and entii'cly paid for within an often ^ery lim- 
ited period, or they do not prove remunerative, as frequently 
hsiipens. In any section of onr own East, where it is said 
that there is no economic rent, the reader will be able to tind 
iiiiimprovcfl land for which people will gladly pity i-ent. At 
the same time it is hard to distinguish pure economic rent 
of agricultni'al land from profits, and perhaps iinpractieablr 
to carry out any policy which would require tlii». It is ao 
easy matter in cities to dislinguish rent from profits, and it 
is done every day in cities like London, New York, Balti- 
more, and Boston. Land can readily be boaght eeparalely 
from improvements or improvements without the land in 
cities. Whatever Niirplns land yields above returns on kahor 
and capital is rent, itnd as cily loin are mil cuktvated, what* 
ever is received per annum for them is pure rent. It is 
usually called ground-rent. 

Interest. — rerhajis the broadest generalize ion which we 
can dii^cover with respect to interest is this : 'Hie rate paid 
for cupitfil lent to others tends to become percentage 
of the capital which will equalize the capital seeking invest- 


mcnl and Uif> amount demnnilcd. If moro i» nfTered tii»ii 
people will lake al llie existinjr rate of iiileresl the i-ate of 
interest will fall, unleea some other forces, like new oppor- 
tunities for investment, intervene. The amount demanded 
will, of course, depend on upportunitiea tor investment, and 
tlje fruitfulncss of investments, as it fixes the maxirouni 
amount which can be paid, will have a largo influenee in de- 
termining the rate of interest. 

Interest covers risk and must vary with risk. Interest is 
also governed in a large part of transactions in the United 
States, especially iu rural districts and small towns and cities, 
by positive law. Commands of Mosaic legislation forbid- 
ding interest, and similar legislation in the Middle Ages, while 
never altogether successful, were powerful, and, though they 
finally broke down, lung exercised an influence. A further 
treatment of all these and many other cnnsideraliotisi must 
be omitted on aecount of the limitations of space. 

Profits. — It may be said that whatever is left after pay- 
ing interest, rent, and wages is profits. It is the return 
which is received for the organization and management of a 
business at one's risk. It is, strictly speaking, not " w.igea 
of superintendence," lor that may be deducted, and often is 

We have alroody something to guide us in determining 
rent and interest, ;md in the next chapter suggestions will lit 
offered to help the student to determine what part of tli*. 
product of industry will f:ill to labor in wages. 

Pmfits and interest are often, in practical business, 
" lumped " together. They are not separated, but the 
muntifucturer or merchant frequently speaks of his entire 
income, interest on his money, his own wages and proRis, 
as his profits, although the more careful discriminate be- 
tween the various elements of income. Profits and interest 
are calculated in percentages. We s|>e»k of profit of ten per 
cent, or twenty per cent., more or less, as the case may bo. 
It means that the returns on is invested bear that 
ratio to ihc capital invested. If capital is of the value of 

j: ? AS :yTR:z z-rn-^s to f^jUTI'Ial ecosomt. 

'ice E:iiiiire«i •^hI^t? lOil prol£u5 are tin per cesL^ of course 
rr:di* w^ h*t Ztm, doiiar>w Tki* give* na pcofMirtioa be- 

c-veen. wiij£ lib«?r r^.-^rref laii viLtt capiLiI rececTeSv as has 
te^n ab(«ir»ilj *fi| l^ -^.-L I: aa* even beea said if capital 
r-rci^'ve* tec per 'rif.-C. Lij-mt rtt^rlvtr* niacCT. It U strange 
that inT oce «nMild bvLIeve anv thiiur 3»> hdxiealoasL This 
woalJ oq'v be cme in ca.^« Hut retam on the capital and 
Lib«:>r in rr.dr^ and wage* eadi year always equaled the 
cac'icol inv^c^i; whereas th«^se retixnL§ are sometimes noth- 
ing, *.> me times f«>r; T-QTe per cent, of the amount of capi- 
tal 0^ Lipr'^D'eii in a large e^tablishmeat with a capital of 
oce million, dollars la lr<?% a:^ the aarh«>r happens to know, 
and s«:^3it:tiraet^ the i*njdt« al*Mie exceeti the capital, as hap- 
penei in the case *yi a rail war construction company in re- 
gard to which the author has trust worthy information. The 
percentage of protit.s and of interest, either separately or to- 
gL-nher, telU as notMng ahi>at the dlstribation of pru»lucts 
between lab»3r and capitaL If we know that interest and 
firrktit'i have fallen, iIiL'* also tells us nothing about the dis- 
tribution of pro«lucts between labor and capitaL We do 
not even know that capital and enterprise are receiving a 
smaller relative share than formerly. This can only be shown 
when it has been demonstrated that capital has not increased 
in so great a proportion as the rate of interest or profits has 
fallen. Let us for the present, therefore, ** lump " profits 
and interest and call l»th profits, and call the entire return 
profits on capital, although, strictly speaking, part of it is 
the share of the entrf.prenenr, and is reward for " enterprise. " 
If profits have fallen from ten to ^\e per cent, and capital 
has quadnipled in amount, profits have increased in their 
total amount one hundred per cent. 

Capital and Capitalization. — We must also distinguish 
botwoon capital invested and capitalization. Capitalization 
HKrans the amount at which a property is valued, and it may 
bo t<*n times the cost of capital actually invested. When 
wo Hpoak of profits as being ten per cent, or five per cent, 
we mcao profits on free or disposable capital, and this rate 



depends I'li o|i|jovtmiities for pi-odnotion whioli arc stitl Ojjen, 
not xhoiv whiL'li have already been aeizod. Loi ua HuppoKc 
that the rclunis on in vest men ta still open to all are about 
ten per cent., but that the returns to a telephone company 
or an electric lighting company which has actually invfstcil 
one hundred thousand dollars is one hundred thousand dol- 
lars ; the underlaking will be eapilalized at one million 
dollars, 90 as to conceal the actual rale of proHls; and an 
profits fail on new invceiments open to »U, oapitaliKation of 
old and lucrative enterprises riKcs in proportion, although no 
new capital is invested. One familiar form which this takea 
is "stock-watering," but it is also seen in higher prices. If 
a house yields one thousand dollars a year, and ten |ier lent. 
is a fair return for hoase property, it will be valued al ten 
thousand dollai-H; but if profits fall, and live per cent, is con- 
sidered a good return, il will be valued at twenty thousand. 
This increase of capitalization is sometimes an unconscious 
process, and a man will at times feel poorer when he is re- 
ceiving five per cent, on his capitalization of an investment 
than when be was receiving ten per cent., allboiigh his capi- 
talization has quadrupled without any additional investment 
of capital. 

Profits of Monopolies. — It is said profits tend to equality. 
This may be true of pure interest in a large, wcU-aupplied 
market. There are in audi niaikets constant fluetuations and 
a constant tendency ti^ward a level — a level always chang- 
ing, at least slightly. When the flow of capital is perfectly 
free the same tendency may be observed with respect to 
profits in the strict sense, although here many obstacles 
which we may call economic /rictirm render the movement 
toward equality slower and leas certain. The laws of com- 
petition bring about this tendency toward equality. If one 
branch of industry is receiving exceptionally high profits, as 
soon as it becomes known other entrepreneurs will direct 
their capital into ibis channel, and this will tend to make 
various indu.striea equnlly attractive — to reduce them to a 
level. Of course, within each kind of industry profits w 


vary according to situation, and more partioolarly according 
to the capacity of the entt'eprefieHr. All this supposes, how- 
ever, a free flow of capital, and it is a peculiarity of mod- 
ern industrial life that in an ever-increasing proportion of 
the industrial field — that represented by natural monopolies 
and artificial monopolies — the flow of capital is not free, al- 
though outside of these favored undertakings coni|)etition is 
continually incri*asing in severity. While the ordinary mer- 
chant or manufacturer may rejoice to receive ^ve or ten per 
cent., much capital is invested which yields, not on capitaliza- 
tion but on capital, twenty, thirty, forty, and even one hun- 
dred per cent. This brings us to one aspect of the so-called 
great *' social question,'' and it shows how far those are from 
having grasped its full significance who reduce it merely to 
a labor problem. It is quite as much the merchant's, the 
manufacturer's, the lawyer's, the teacher's problem. It is 
what its name, " social," indicates, the problem not of any 
class, but of society. 

On rent, read Mill's Political Economy (unabridged edi- 
tion) Book II, chap. xvi. Those who have access to the New 
York ladepemlent may find some suggestions in five articles 
on iMnd^ Lcihor^ and Taxition^ by the author, which ap- 
peared December 1, 8, 16, 22, 29, 1887. 



The •• Standard of Life." — It Kas been the opinion of 
many uf the ablest (lolitic^il eeoiioinlstH for over a century 
that what is lecliiuf^ally called ttandard of life, or Manriard 
of comfort, determines the wi^es uf labor. Thin means iKU 
labiirerd have an habitual ataudard of life, a oertaln style of 
life, and that what they receive as wages enables them on 
the average Jui^t to keep up this standard, but to do no more. 
They are able to occupy such a sori, of dwelling, to wear 
such clothes, to cat such food, and generally to do such things 
as this standard requires, but no more. This has also been 
called the iron lata of wagei. There is so overwhelming an 
.irray of facts, gathered from widely separated countries and 
from periods ho distant from one another, whieh confirm this 
conclusion, that it is difficult to resist it. Tlie iron law of 
wages is not a law tilce a law in physics, but it expresses in 
a rough sort of way a poweifnl tendency. Among the strik- 
ing evidences of the tnith of the theory of the standard of 
life as the norm for wagett, the fact is especially noteworthy 
that as a rule it seems to fail to beneSt the laboring popnla- 
tions on the whole and for any length of lime for the wile 
and children to earn money, even apart from all other cou- 
fiidarationa tiian money-getting. The world over, when it 
becomes customary for the wife, or wife and children, to work 
in factories, it very soon becomes iiecetutary for them to do 
so to support the family. The wages of the hea<l of tlio 
family and the earnings of the entire family as before just 
maintain the stind-ird of comfort among that class of the 
|iopulation. ProfeaBor E. W, Bemis has called attention to 
the fact that iu the textile industries of HLode Island and 



eastern C'niiHeelicut, where the vomcn and cliildreit work, tlie 
earnings of the entire family are no larger than in other in- 
dantries, like those in metal, in western Connecticut, where 
only the man works. Similarly an increase in the length o£ 
the working day confers uo henefit, while it has yet to be 
shown that a reduction of the length of the working day ever, 
in any part of the world, reduced wages permanently. On 
the contrary, it is more likely to raise the standard of life 
and to raise wages ultimately. Many important cmicliisious 
flow from this principle, which cannot be elaborated in this 
place. It waa probably on account of a conviction of the «■»- 
untiat validity uf this law that lion. A. H. Hewitt, when 
Mayor of New York city, refused bis sanction to an appar- 
ently phihinthropic scheme to cstabUiih lunch stands in dif- 
ferent parts of New York where eomcthing to eat could be 
obtained for a cent. Probably most political economists 
wonid agree with Mr. Hewitt in thinking that it would in 
the end do more harm than good. At any rate, dimply to 
reduce the cost ol living will in itsoLf never veuder men 
really prosperous. 

This tendency, when called the iron law of wages, has been 
nsod as ameans of agitation to provoke dis«-i>!itent,but it ap- 
plies in a rough kind of way to all classes, aud to judges and 
college professors quite as rclentleiwly aw to workingmen, 
perhaps even more so. If the ctandiird is ivhat it should be, 
what more can be a.tked than that we tthould be able to main- 
tain it? It should include proviKinn lor :dl real netsla and 
provision for accidents ; future emergencies, disability on 
account of old age, and the like should be included. A deposit 
in the savings bank and insurance policies ought to be apart 
of the habitual standard of life. The standard is unfortu- 
nately not what it should be, but it can be raised. It has been 
raised in the past, and the true kind of social reform cannot bu 
brought about unless it is raised still fuiiher, and the more 
nearly it becomes in all respects what it ought to be the nearer 
we are to our goal — a gi>al which, like all ethical go.ils, we 
can forever approach hui never reach. Perfeutloit is iufiiut^ 



The Htandarii of life has at limes falltii, ami it at times re- 
quires a, tremeDt]uiis effort to maiiiLain it, and a still miglil- 
ier effort to raise it. It requires now a struggle for our la- 
boring dasses to mairitaiu it against the onalaiiglit of cheap 
anil degi-adeil labor jioiinng in upon ub from Enrope, and un- 
til rei-eutly fiora Asia also. It is on this aoeount desirable 
to restrict immigration to some extent, for a lower standard 
means a lowei- civilization. The struggle to maintain a 
standard of life, when not too severe, has beneficial results 
which ought not to be overlooked. When the struggle is 
sncceasful it results in increased eWciencj, and is a spur tvhich 
human nature, when too sluggish, needs, Sometimes the 
struggle has this result in the United Stnles : a large pro- 
portion of iiaiive Amerieans ahandoh pursuitc invaded by 
those with a hnvci- standard of life, and attempt elsewhere 
to keep their stitndard. A part of these displaced succeed, 
and attain n much higher standaid than the old. Othen 
cannot make the ascent and be'^ome a dissatistied element in 

The Law of Distribution. — All thin is in poifect bar. 
mony with what has bepn previously said. In the ^triiggla 
for the divitiion of |ivodiicts the moat slowly increasing 
faclfir is at an advaiitigR. When the product » oneo 
given, the more oha tikes the less is left for others. If you 
take three qnurtors of the loaf, only one quarter is left for 
me, and no fine phrases can alter this fact. The struggle 
m:ide by interoBt and rent seems to be powerful — a quiet, 
regular sort of ritruggle, obeying strong tendencies— while 
the active, noisy, and at times violent struggle takes place 
when it comes to dividing what is left afier paying rent and 
interest between labor and capital. Now the standard of 
comfort means this: population will not increase beyond 
the point where the (struggle can be maintained. If the 
struggle begins to be too severe few peo]>lc will many, or 
those who do marry will be older when they marry, or on 
account of increased want the mortality of children, always 
terrific among the poor, will increase ; and thus in one 



or anotfaerche factor labor will increase nmre §Iowly, Olher- 
ni^v one- of two tilings mnsi hap)>en: either new opcuings 
for latKir must be found or the standard must fall. 

Difierences of Wa^es. — We have diffi-rent sUndar-Iii 
of life in il'iffereul o<r4:u pat ions, consequently differences of 
remuneration, whether paid as wages or salaries. WIiui 
Jetennini's differences of wages of various occujiations ? 
All sorts of fanciful replies have been given. The differ- 
ences are largely higtoricaU We most go back to a man's 
grandfather or great-grandfather. Occupations where re- 
muneration is high are so difficult to enter that few are able 
to Mirmount the difficulties. Peculiar and rare qnalitiea are 
required ; opportuniticH which come from favorable environ- 
ment; an expensive training, which few parents are able and 
at the same time willing to give. VVhat one is depends 
chiefly on one's parents, and, »s lias been often i>aid,oDe hati 
no voice in the selection of one's parents. We who have 
been blessed in this respect ought to feel that w e owe a 
spei'ial duly to hamaiiity. 

Adam Smith enumerated the following five causes for the 
differences of >vagi« in difft-renl employ nionls : First, the 
agi'oeableneas or disagreeableoess of the empinyments tliein- 
selves. Secondly, the costliness or cheapness or the diffi- 
culty and expense of teaming them. Thirdly, the constancy 
or inconstancy of emplnyment in them. Fourthly, ihq 
small or great trust which must he reposed it) those who 
exercise tliem; and fifthly, the proliability or improbability 
of HUcee^B in them. All this presupposes that grown men, 
perfectly free to select their occupations — free not 
merely ao far us the law is concerned, bnt free ao far as 
their command of resources is concerniKl — look over 
the entire induslrin! field and choose their employment. A 
recent English writer, |>ointing out that oceupatiuns are se- 
lected by pare n tit very gcnenilly, adds: "When a person is 
one of the large nnmlicr who have been in childhood baOly 
nonriflhed, badly hansed, badly clothed, badly educated, 
iml not at all trained to any particular occupation, let no 


one prate to him of bis freedom to ch"09e what flcoupation 
he thinks proper. His legal freedom lo choose mAny occu- 
pations is about as much use to him as liis legal freedom to 
fly with wings in the air." Nevertheless, with proper tjuali- 
iiealioas, what Adam Smith saya explains many differences 
in wages. It ia left as an exerutse to readers and Gtiidenl-< 
of this book to diaeover by observation, careful and long- 
tontinued, the real amount of truth in Adam Smith'it causes 
for diHeronces of wages in different employments. 

Piece-Work. — Wages are paid liy lime or by the piece. 
A day, week, or month is paid for at an agreed price, or a 
price is paid for each piece of work done, as for each hiishel 
of corn husked. Payment by the piece would seem to be 
fairer for all parties, but abuses have in manufactnreit so 
generally been connected with it that it is opposed by many 
iutelligent artisans, and careful political economists will l^e 
alow to give piece-work unqualified approval. Physicians 
testify that by producing feverish over-exertiou it has in 
certain quartcra shortened average life mutcrially, and iheie 
is a proverb in Saxony, in Gemiany, to the effect that piece- 
work is work that murders. Piece-work has fieqiientiy been 
used to break down regulations and laws limiting the time 
of work, and more frequently still to bring about a reduc- 
tion of wages. The workers strain every muscle and nerve 
to earn high wages, and after a high rale of speed has been 
secured the price per piece is reduced, sometimes time and 
time again. Peculiarly cruel and aggravating cases of this 
kind have come under the writer's observation. When not 
connected with abuses payment by piece has mauy advan- 
tairen, and is at times preferable for all parties. 

The Sliding Scale. — A sliding scale of wages has been 
introduced by a powei-ful trades-uninn, the "Amalgamated 
Association of Iron and Steel Workers," chiefly in Pennsyl- 
vania, and it appears to have given gMieral satisfaction and 
to have kept the industrial peace better than the ordinary 
wages system. Wages vary with selling price of the prod- 
uct, and thus labor shares to some extent in the prosperity 


of capital. Tlie Eliding suale is known elsewbere in this 
country and in England, and it has met with a good deal of 
favor from cuonomic writei's. 

Arbitration ajid Conciliation have aiicomplished 
much for tliti preservation of imiuslrial peace wherever thor- 
uiighly and honestly tried. Soraetimea voluntary boards are 
iippointed by employers and employed to adjust differences, 
and sometimes they are appointed by public authorities. 
New York State and ftlaasachusetta have permanent boards 
of arbitriition, and both have accomplished good. The New 
York board, however, appears to have inadequate powers, but 
the Massachusetts board, which must be summoned by local 
authorities aud has power to get at all the facts, has accom- 
plished iu a short space of time wonderful things. It is more 
effective than police or militia, and less expensive for pre- 
serving pcaci) in the excitement connected naturnlly with 
wages controversies. 

Factory Inspection. — Tjabor legislation, honestly con- 
ceived, and properly enforced by factory inspectors, has been 
productive of incalculable good. England i^ the model coun- 
try in this respect, and MuRRachusetts in our own Union is 
the banner Stat^- in labor legislation. Labor legislatioa 
should aim to keep children away from work and in schools, 
to restrict to its lowest terms the employmtiiit of women, to 
limit the working-day for married women and to give them 
a Saturday half-holiday, to shorten the length of the work- 
ing-day for youug persons under eighteen lo the length pre- 
scribed by physiology and hygiene and to give them also 
a Saturday half-holiday, to compel employers to fence in 
dangerous machinery and otherwise guard against accident, 
and to render them pecuniarily responsible for accidents ti- 
employes by craployei-s' liability acts. We have here a goal, 
and no country ever yet suffered in international competition 
by approximations lo it. England, which has come nearest to 
it, is the most dreaded eonntry on the globe in inlei-national 
competition, and MHssachusettx, which has gone farther than 
any one of our States iu this direction, is one of the richest 


in the Union. Economists say that England^s action has 
given her a stronger and better laboring population, and has 
established her industrial supremacy upon a firmer founda- 
tion than ever. 

Read Clark and Wc>od on wages, in the monograph of 
American Economic Assoc! Uion entitled Contributions to the 

Wages Question; also Patten on Stability of Prices^ the 
same publishers. Advanced students who read German 
will find the treatment of wages by Professor von Ihering, 
the distinguished jurist ot* Guttingen, unusually suggestive. 
It is found in chapter vii of the second edition of volume i 
of his Zweck im liecht. On arbitration and conciliation 
read Joseph D. Weeks's parnjihlet. Labor Differences and 

Their Settlement^ New York, 1886, Society for Political Edu- 
cation ; also the excellent work on Industrial Peace^ L. L. 
F. R. Price, with preface by Professor Marshall. Also read 
article by the author in North American Pemew for 1886. 
The best account of English factory legislation is a fasci- 
nating work, The Life and Work of the Earl oj Shaftes' 
bury^ by ilodder. 



The old mediseval guilds were organizations of all the 
factors of producti'jn. Employers and employed united in 
one body regulated production, but the control rested chiefly 
with the masters. Modern labor organizations embrace, as 
a rule, only one of the factors, the employed, and their pur- 
pose is to promote the interests of this one factor whenever 
those intercKts clash with those (»f the employers. 

Trades-Unions and Knights of Labor. — Labor or- 
ganizations may be divided into two classes, and as a mat- 
ter of fact they are so divided to-day in the United States. 
These classes are the trades-unions and the Knights of 
Labor. The trades-unions are primarily organizations of 
skilled artisans. According to the old trades-union idea 
each craft should be organized by itself. The Knights 
of Labor are, according to their original idea, organizations of 
employes both skilled and unskilled, regardless of trade. They 
aimed to break down the barriers to common action found 
in differences of occupation. The Knights of Labor have 
also taken a broader outlook upon society, and have sought to 
accomplish greater things than the trades-unions. The trades- 
unions presuppose a difference of interest between employee 
and employed. They are, as it were, a fighting body. This 
divergence of interests exists, and fighting bodies often pre- 
serve peace. ** If you would have peace, prepare for war," is 
an old maxim, and struggles between labor and capital have 
been most violent in Belgium, where no efficient organiza- 
tions have existed. But the Knights of Labor have looked 
beyond a period of conflict to a union of productive factors 
which should be peaceful. They hope in some way to see 


t:il)or and capital united in the same hnnds. They desire 
tu make c.iiiiialistB of kborei-is, ami to urganize jirodiiutlon 
on a co-operative basis. It i« doubtless on aLuoiint of thia 
ultimate aim that they admit umployerK, of whom many 
aro mcmbei-B, and also the profesaiuiial claust-s, a considerable 
number of teachers, journalista, and pivachei'^i being also 
niumbers. The Eulghls of Lal>or are iu su f;ir a retui-n tu 
the principle of the old guild organixatiun. 

Knights of Labor and trades-unions have both modified their 
original progi-ammcn. The tradea-nnionshave iioited in larger 
federal organisations, first in the central labor unions of our 
cities, and later in the national body, the American Federa- 
tion of Labor. This national body has also made pi-ovision 
for the organization of unskilled working-men, and for local 
uniona of working-men of difl'ereni trades wliei'e those engaged 
in each trade are too few lor M']iarale organization. The 
Knights of T^lior have, on the other huod, organ' zed xcpa- 
raiely a tonKidei'able of trades in u liat are often 
called "district asvemhlies," luid have ihiis recognized moi-e 
largely than they were at first inclined to do the principle 
of federation with Nepai-aic crafts as a basis. 

A biiler coniesl between the Knights of Lalxn- and trade.t- 
nnions lias been waged, but there is now some evidence of 
an effective dciire for harmonious co-operaliuit in the prose- 
Growth of Labor Organizations. — It Ilis been re- 
cently estimated thai a million working-m<'» in the United 
States are members of labor org.wizations,* The number, 
of course, varies. A period of proxperily for the organiaia- 
tions is generally followed by one of reaction, and the jircsent 
seems to he a continuation of the period of reaction which 
began early in 1880, perhaps in 1885. Reaction always 
terminates in a new advance, and thus fur iu the United 
States each new advance has carried the labor orgaid&i tions 
farther forward than ever liefore. 

* See Dr. R. W. Bcmls's valuiilila article im vnrklnir-men in Ilia I7niled 
BXMet- iJi the Amcrioitii eiTiiiun of ihe i^icyclo^iirUia Brilauhxca. 


Farmers' Organizations. — ^Two powerful organizations 
of farmers, the Patrons of Husbandry and the National 
Farmers' Alliance, are more like the old guilds in this, that 
tliey are organizations of independent producers designed to 
protect their interests against attacks from other social 
classes. Recent years have, however, witnessed an approach 
of labor organizations and farmers' organizations to each 
other for the attainment especially of common political aims. 

Labor Organizations a Natural G-rowth. — Labor 
organizations are not forced products. They have grown 
up almost spontaneously. They have arisen naturally ont 
of modern industrial conditions. Wherever capital is a 
separate factor in production, and is organized on a large 
scale, labor inevitably organizes itself sooner or later in order 
that it may stand on an equal footing and make labor con- 
tracts advantageously for itself. Let us suppose one capital- 
ist employs a tiiousand men. If these men are not organ- 
ized each man individually treats with all the capital in the 
establishment. All the capital is represented by one man, 
but one laborer represents but a thousandth part of the labor 
force, and he is not in a position of equality. The laborei-s 
therefore unite their labor, and speaking through one repre- 
sentative place all the labor against all the capital. This is 
something which so naturally suggests itself that we find 
labor organizations in all modern lands. 

Opposition to Labor Organizations. — Labor organ- 
izations met at first with violent opposition, and it cannot 
be said that in their earlier stages or even in their later 
growth this opposition is by any means groundless. How- 
ever, whatever bad traits naturally characterize labor or 
ganizations are aggravated so long as they are obliged to 
struggle for existence. Whenever the fact of their right to 
exist is frankly acknowledged, and employers, ceasing to per- 
secute them or their officials, recognize the man who treats 
in a representative capacity for the sale of the commodity 
labor as courteously as they would an agent for the sale of 
corn or wheat; finally, whenever courts cease to harass them 


with legal chicanery, as courls long did iu England, ibey tend 
lo b(«:ome strong and conservative. The fact is undoubted 
that most aeriouB abuses and outrages have atteitdfd llie prog- 
ress of labor organizations, but they have siiiiplj exliibili-d 
weaknesKes of sinful human nature and wtakuesses whiuh have 
been obHei-ved in more frightful manifestations in ihost other 
iir<;anizations, nevertheless excellent, which we call Church 
and State. The true course is to recognise the beneficence of 
the principle of organization and to contend only against 
abuses. It can scarcely be too much to say that ttiis is the 
opinion of nearly all competent observers in £ng1itnd, Ger- 
many, and the United States. The following quotation ;ibonl 
labor organizations from Work ami Wuj/es, by Professor 
Tliorold Rogers, of Oxford, not only expresses the view of 
many scholars and business men, but illustrates a common 
change of attitude on the part of many fair-minded persons 
who have seen previous prejudices against labor organizations 
displaced by a careful examination of their claims: "These 
institutions were repressed with passionate violence and 
malignant watchfulness so long a-s it was possible to do so. 
When it was necessary to relax the severities of the older 
laws, they were still persecuted by legal chicanery whenever 
oppression could on any pretext be justified. As they were 
slowly emancipated, they have constantly been the object of 
alarmist calumnies and sinister predictions. I do not speak 
of the language of newspapers and reviewers, which simply 
re-echoed the passions of the hour ; far graver were the alle- 
gations of Senior and Thornton. ... I confess to at one time 
having viewed them suspiciously; but a long study of the 
history of labor has convinced me that they are not only the 
best friends of the workman but the best agency for the em- 
ployer and the public; and that to the extension of these 
associations political economists and statesmen must look for 
the solution of sotne among the most pressing and difficult 
problems of our limes." 

It may be proper to state that while the author does not 
hope for so much as Professor Rogers seems to from labor 


AX mritoDucrioy rn political econoht. 

n bcon tho 

organizations alone his experience haa in 

Space is bio limited to permit an explanation of tlie im- 
mea)4urab1e mittap pit; hens ions of the general public in regaiil 
to labor organisations. One of them is that innocent ami 
peace-loving working-men, perfectly contented, are misletl 
by agitritorH who have been placed at the head of labor or- 
ganixationii. C'ari'ful observation will show that the intlii- 
cnce of labor leaders ia conservative on the whole, and that 
strikes originate among the niasacs and are genf^i'iilly resisted 
by the leaders so ion^ as it is possible. It will ako show 
that leaders are readier than a large proportion of the " rank 
and tile" in the organizations to terminate strikes. 

Success and Failure of Strikes. — Strikes produca 
harm, and every effort should be made to avoid them. 
They are, however, successful in more cases than is ordinarily 
Bupposed, and when occasionally a decided victory is scored 
the gain is immense. An agitation of a few weeks and a 
strike of a few days, together with an act of legislature, es- 
tablished a reduction of the hours of labor from seventeen 
to twelve fqr the hundreds of street-ear employes in Balti- 
more. This is probably an advantage permanently seenred. 
Other illustrations might be given, and nothing is gained 
by shulting our eyes to such facts. 

Violence ts disastrous, and the welfare of the masses can 
only be seirured by peaceliil measures. While condemning 
in deserved terms violence, which too often accompanies 
strikes and which reacts against working-men, it is only fair 
to recognize the fact that this violence is largely due to 
cruninal classes ia cities which improve such oppirtunities 
for disturbance^ and not wholly to the working-men. It is 
manifest, however, that, even so, it la only another argument 
against strikes wherever they can be avoided, and lor the set- 
tlement of differences between labor and capital by peaceful 

Temperance, — Nearly all labor organizations are temper- 
ance societies, and many of their otlicera are total abstainers. 



They have greatly diminished intemperance among those 
who belong to them. 

Educational Value. — Their educational value is also 
noteworthy. The debates and discussions wliic-h they foster 
stimulate the intellect and do much to counteract the deaden- 
ing effects of a widely extended division of labor. 

Labor organizations bring men and frequently also women 
together and furnish opportunities for social culture. Temp- 
tations to coarse indulgence are thereby lessened, and an im- 
portant side of human nature receives better opportunity for 

It may be hoped that labor organizations are preparing 
the way for a better civilization. Certainly one of the most 
hopeful features of the situation is the willingness of organ- 
ized working-men to listen to strong and manly words from 
those who understand their real purposes, who go among them 
and, with sympathy for their just aspirations, endeavor to 
help them to distinguish between the foolish and the wise, 
the wrong and the right, to show them how to pursue the 
good, and to inspire them with faith in that righteousness 
which alone can exalt the masses in a nation ; that is^ the 
nation as a whole. 

Read chapter viii, on " Wages as Affected by Combina- 
tions," in Clark's Philosophy of Wealth. It is an admirable 
treatment of fundamental principles. Ely's Labor Movement 
in Ainerica, is the only book which attempts to treat scientific- 
ally the subject with which it deals. See especially chapters 
iii-vi. A work edited by George E. McNeill, called The 
Labor Movementy the Problem of To-day^ is written mostly 
by those who have actively participated in the work of labor 
.organizations, and is the best presentation by working-men 
of their view of labor organizations. The student should 
not fail to study labor organizations at first-hand, as nat- 
uralists study animals, and not be satisfied with garbled 
newspaper accounts for information. The Journal of United 



Labor ^ the organ of the Knights of Labor^ and The Carpen- 
ter ^ the organ of the Brotherhood of Carpenters, both pub- 
lished in Philadelphia, the Labor Leader of Boston, the 
Furniture Worker^ s Journal^ and the Granite Cutter* 8 Jour- 
nal of New York, and any one of many other labor papers 
will be of assistance. 



Proflt-Sharing in the United States.— Labor organi- 
zations strive to secure higher wages for wi)iking-raen than 
they would otherwise obtain, and thus to increase their share 
of the products of industry. Profit-sharing goes a step 
further than labor organizations. Those wiio advocate 
profit-sharing wish laborers to secure a portion of profits in 
addition to ordinary wages. It is held that this arrangement 
promotes economical use of material and machinery by em- 
ployes and generally increases their zeal and efficiency. 
The result is a larger total product and a larger revenue for 
the wage-receivere. Profiit-sharing has been extensively tried 
in the United States, and it has been successfully introduced 
by some of the largest productive establishments in the 
country. Recent testimony of American employers who 
have tried it is almost unanimously in its favor, although 
one prominent manufacturer abandoned it, and one or two 
have not found that it quite realized their expectations. 
Some influential employers appear to be enthusiastic in their 
praise of its practical working, and a member of a firm which 
has distributed over one hundred thousand dollars of profits 
to its employes writes to the author that he and his part- 
ners consider it the best investment that they ever made. He 
thinks that they have the most loyal set of working-men in 
the world. Instances recorded in three months showed that 
at least ten thousand workini^-men had in that period been 
admitted to a share in profits in the United States. 

Profit-sharing may be extended to capital -sharing — partial 
ownership of capital by working-men and participation in 
management. The large manufacturing establishment of 


Godia, in Guise, France, serves ax the beat example which 
oui^ai-B to the author. M. Godin gradually educated a, large 
body "f worliini5-pe'>pIe to that point where they could take 
a part in the nianagement of his large busiiieas, and at 
the same tiino encouraged them to acquire a part of the 
capital. If rt'ccnt reports are ti-iist worthy, the workiiigmen 
have finally ai;q<iired and now manage the entire busiucHs. 

If we call industry, aa ordinarily organized in our great 
mercantile and rnanufacturiug cstalilishments, despotism, we 
may eall an establishment where laborers participate in cap- 
ital ownership and management, under the chief control of 
some one who is recognized as an industrial superior, a con- 
stitutional monarchy. Thc^e terms, although indicative of 
mere analogies, are, after all, instructive. The despotic pi'iii- 
ciple, the one-man power, both in pnlilics and in industry, 
is an excellent thing in ita own lime and place, and in iu- 
duatrv it has necessaHly continued longer than in the po- 
litical sphere. It is a phase of development, but It ought 
not 10 be regarded as tinal. A large part of the indus- 
trial troubles of modern society undoubtedly find their 
origin in the fact that development of the economic depart- 
ment of social life has proceeded mure slowly than the de- 
velopment of other departmenta. Elsewhere the despotio 
principle has been softened or displaced, but continuing in 
the economic sphere it ia a discordant eteracnt; yet it is diffi- 
cult for most of us to see how for a long time to come we 
can wholly dispense with the one-man principle in industry. 
It should, liowever, be softened as far as practicable, and men 
shouM be gradually trained to understand industrial repnbli- 
(■.iiiism or democracy. M. Godin has set a noble example. 

Indiialrial (hmnnraey moans self-rule, self-control, the self- 
direction of the masses in their efforts to gain a livelihood. 
Indnatrial democracy is industrial self-government, and this 
'fl found in pure co-operation. 

Co-operation is of two kinds : coercive, which means 
governmental aetion, and voluntary. We have here to do 

' b voluntary co-operation, and this is what is usually cneanb 


when c(vo|K.'nition is spoken of. Workiiig-men combine iheir 
own cajiitiil, purcbaae their own plant, iitanagu tiidr own af- 
faire \a ibeir own way, al thtir own risk, ^baring profit or losi* 
as the o:ise may be. This is oalied jtroditctivu eo-opuriiliuii. 
But we have niso what is called diitributiae eo-operalloti. 
Distributive co-operation ineane «>-oper;ilioii in tliotribution, 
not in the sense in wbicli the word ie used ordiuai'ily in 
political economy, bal in tile Hentte in wbich we might speak 
of a tnerehaiiiV activity in rliHiribntiou. liu distributes 
wares. Distributive cn-operation refers to retail aud wlmle- 
sale trade, and is only an imperfect form of co-operation. 
Purcha»ci-8 nf wares, groceries, diy goods, etc., combine to- 
gether lo piir<rliii»e what they need, and tbws »avc prolils. 
They form ii stock company, Hiil>Hcribe for shares, employ a 
manage]' and clerks who often do not even uliare in protits, 
and stait a business. Profita.are sometimes divided unty on 
shares, but the approved wuy is 10 pay a moderate inteiest 
on capital and to divide piitfits between stockholders and 
customers in proportion lo purcbaseB, the division being 
made at llie end of stated intervals. Some est.iblishments 
in Great Britain, and doubtless elsewhere, carry out the full 
programme, and give employes a share of profits. ProfitB 
are thus said to be divided among capital, custom, and labor. 
Distributive co-operation has in England and Scotland 
succeeded better than productive co-o|)erjitioi», which has, 
however, met with come suceesB. France ajipenre to have 
succeeded better than England in productive eo-o|ieraiion. 
Some instances of wuucss in ibe United Slates arc recorded, 
and many undertakings have been partially successful ; by 
which I mean that they bave succeeiled as business uitdertak- 
ings, but have abandoned wholly or in part the co-opexatiTe 
principle. This is the case with a large stove foundry started 
as a co-operative foundiy, am) in which some working-men 
or tlicip heire still own stock. Oneof the strikei-a among the 
working-men in this establishment, in s difficulty which 
arose not long since, ownerl seven thousand doUare' worth of 
stock. The managei's seemed to t:ike it much to heart that 


a.v isTiiODVcmm to political Ecoxostr. 

he sbotild etrike, but it ia hard not to feci a certKin a<liiii- 
fatlun for him, as lie plai^eil the miiou of bU feUow-pm- 
ployoa above his interests aa s, capitalist. A good example 
Df pure co-operation is afforded bj the co-operative coopers 
of MinneapoliH, who have nearly absorbed the -business of 
making flour barrels in that milling cenier. The saperiority 
of co-operation as a business principle has in this case bef n 
demonstrated. Pure co-uperation, when well-establishcbl, 
prevents stnltes by completely identifying the interests of 
labor and capital. It stimulates energy and eneourages 
thrift. The self-inteiest which usually animutcs the em- 
ployer alone animates all co-operaioiu No slighting of 
work can be tolerated, and, eye-service vanishing, mueh labor 
of supervision ia done away with. On the other hand, di- 
videiJ councils often render the movements of a business 
clumsy, and action cannot be so quick and decisive as when 
one man acts on hia own responsibilily. Failures of co- 
operation have generally been due to moral defcctu on the 
part of working-men. It has been difficult for them to act 
harmoniously togetiici', and prosperity has often produced 
disintegration. Wherever co-operation has succeeded, how- 
ever, It has produced excellent effects on character. It w s 
teal, but when the test is stood it reacts beneticially nn the 
oo-operatoi's. It makes men diligent, frugal, intelligent, 
considerate of the rights of others, as well as their own. 
Co-operation and temperance go hand in hand, as has been 
universally observed by students of co-operation. 

Dr. Albert Shaw, associate editor of the Minneapollx 
Tribune, gives this testimony in regard to the co-operative 
coopers of his city : " The coopers are emphatic in saying 
that the moral effect of their cooperative movement con- 
stitutes its highest success. It has unquestionably wrought 
a transformation in the habits of these craftsmen. They are 
no longer a drunken, disrepntahle guild, figuring in the 
police courts an! deserving' the disfavor of the community. 
They have become a respouuible and respectable class of 


It was once thoagbt that corporations could not succeed, 
but the inherent advantages of corporate industry after a 
long struggle h^ve made themselves manifest, and corpora- 
tions are crushing out the individual. It is believed by some 
that the inherent advantages of co-operation will sooner or 
later make themselves felt, and that after a period of ad- 
versity, of struggle, and of slowly increasing success co- 
operation will finally gain industrial supremacy; thus uniting 
harmoniously labor and capital and ushering in an era of 
industrial democracy. 

On profit-sharing read the work bearing that title by Rev. 
K. P. Oilman. On co-operation read Co-operation in the 
United States, a volume published by the Johns Hopkins 
University. A brief and not so recent account of co-opera- 
tion in the United States will be found in chapter vii of the 
author's Labor Movement in America. Those who read 
German will find most suggestive the argument for the ulti- 
mate triumph of co-operation in Theodor Hertzka's Qeaetze 

der Sozialen JSniwickelung. 



Those who desire indastrial democracy — ^not prematare'lj 
but in its own time — are many, and they inclode most of the 
best economists. There are, however, different ways by which 
it is proposed to attain the desired goal. One of these ways 
is voluntary co-operation for all competitive pursuits, and gov- 
ernmental activity for monopolistic undertakings. Another 
one of these ways is called socialism. Socialism means coer- 
cive co-operation not merely for undertakings of a monopo- 
listic nature, but for all productive enterprises. Socialists seek 
the establishment of industrial democracy through the instru- 
mentality of the State, which they hold to be the only way 
whereby it can be attained. Socialism contemplates an ex- 
pansion of the business functions of government until all 
business is absorbed. All business is then to be rogulati'd 
by the people in their organic capacity, each man and each 
woman having the same rights which any other man or any 
other woman has. Our political organizition is to Ixjcome 
an economic industrial organization, controlled by universal 
suffrage. Socialism will make civil service employes of ail 
citizens, and will remunerate them in such manner as shall 
in view of all the circumstances :i]>|)ear to the public author- 
ities to be just. Private property in profit- producing]; capital 
and rent-producing land is to be abolished, and private [H()i>- 
erty in income is to be retained, but with this restriction : 
that it shall not be employed in productive enterprises. 
What is desired, then, is not, as is supposed by the unin- 
formed, a division of property, but a concentration of prop- 
erty. The socialists do not complain because productive 
property is too much concentrated, but because it is not 


snf&ciently coDcentrated. Socuilista consequently rejoiue in 
the formation of trusts and go mbi nations, holding that they 
are a development in the right direction. 

There are four elements in socialism; namely, first, the 
common ownership of the means of prodiiution ; second, the 
common management of these means of production ; third, 
the distributiua of annual products of industry by common 
anthority ; fourth, private property in income. Socialists 
make no war on capital, striuCly speaking. No one but a 
fool could do such a thing. What socialists object to is not 
capital but the private capitalist. They dusire to nationalize 
capital and to abolish capitalists as a distinot class by making 
eveiy body, as a member of the community, a capitalist; 
that is, a partial owner of all the capital in the country. 

Socialists say that labor creates all wealth. Ko rational 
socialist means thereby to deny that land nnd capital are 
factors of production, but as they are passive factors they 
hold that their owners ought not to receive a share of the 
product unless they personally are useful members of the 
community. Labor is the active factor, and all production 
is carried on for the sake of man. Land and labor are sim- 
ply the tools of man. Socialists admit that the owners of 
these tools must receive a return for them when industry ia 
organized as it is now ; hence they desire that these tools 
should become common properly. They wish to make of 
universal application the command of the apostle Paul: "If 
a man will not work, neither let him eat," 

Distributive Justice. — The central aim of aocialifim, the 
pivotal point, is distributive justice. It proposes to dis- 
tribute products justly. The ideas of socialists are, how- 
ever, not harmonious as to what conslitntes justice. Some 
say equality is justice; others, distribution in proportion 
to real needs, so each may have the economic means for 
hia oomph'test development. Still others say justice means 
distribution in proportion to merit or service rendered — but 
the service of the individual, not of bis ancestors. Bequest 
and inheritance, except of articles of enjoyment, like pict- 



ores, old family plate, bonkn, household familure, possibly 
al§o the uHe of a house as a home, miiht hi- Abolished. So- 
ctalUm allows uo inberiiance which remliTs labor ueedlesa. 

It ought not to be hai-d to piecure socialiHin to ont^'s selfr 
Goverament owns the post-office ; inosl governmeiitB own the 
telegraph, Nearly all owu the wagon roads. Some own the 
oanala and railways. Many goveiTimeota own factories. 
Probably every natiotial government does at least a little 
manufacturing. Most governments uultivate forests, and 
some cultivate more or less land. We have only to imagine 
an extension of what already exists until government culti- 
vates all land, man nfac lures all goods, conducts all exehanges, 
and carries on, in sliori, every jiroductive enterprise, and we 
h.-LVe socialism piiti' and ximple. It may be eoneeivcd as 
compatible with coustitnlioiial monarchy or with republican- 
ism. Socialinm is conipaiible with a centraUaed government, 
but also, and more naturally, with a decentralized govern- 
ment. Some functions would fall to the minor civil divis- 
ions, others to States, olhere to federations of States— even 
to in tenia redorntion't. 

What is Socialistic?— Surely not every public activity, 
Properly sjjeaking, tliat only can be considered Gocialistio 
which tends to an absorption of all production by the govern- 
ment. Does a measure tend to the suppression of individual 
production and production by voluntary assiicialions of indi- 
viduals and to the absorption of production hy government ? 
Then it \* socialistia ; otherwise not. This is the only way 
to distiiigui-«h between socialistic and non-socialistic, or even 
anti-socialistic, measures. This furnishes na with a rational 
basis for judgment. If we are socialistic we will favor social- 
istic measures, but if we are opposed to socialism we will at 
least be inclined to rejcot socialistic measures. Arc compul- 
sory eduialion and free pchools socialistic? No; they nra 
decidedly anti-socialistic. They develop capacity for self- 
help, and enable those who grow u]> under their influence to 
make the best of existing iustitutijns. They are a conserv- 
ative force. Are gas-works, eloetrio lighting works, water- 


works, and tlie like, owned and operated by nimii'.npalitica 
fiocialiatic? No ; for they are m line wiih a model ii tend- 
ency to separate ebarply between the industrial functions 
of private persons and tbe industrial (uiiutions of the polit- 
ically organised community. There is a sound principle at 
the foundation of this tendency. The conviction is gradually 
being forced upon us by science and actual experience that 
natural monopolies ate best owned and operated by govern- 
ment, while competitive businesses flourish only in the atmos- 
phere of private enteiprise and free competition. If we 
separate tbus on rational principles the private from tbe pub- 
lic industrial sphere, instead of letting things drift in hap- 
hazard fashion into chaos we lay tbe strongest possible 
foundations for (be existing order. 

The Strength of Socialism. — Socialism makes per- 
haps its strongest claim's in its plea, first, for a scientific organ- 
isation of the productive forces of society, and second, for a 
just distribution of annual social income. It is said lliat the 
present production of economic goods is small in proportion 
to population, but socialism replies : " Naturally enough. 
Competition is wasteful. Two railways are built when one 
would sufHce. Two trains run parallel between two cities 
where one would serve the public equally well. Three times 
as many niiik-wagons, horses, and drivera are required to 
serve the people with milk as would suflice if the milk busi- 
ness were organized like the mail distribution business in 
cities. Look at the stores, wholesale and retail, and see 
the waste of human force. Without competition the whole 
dry goods and grocery business could be carried on with a 
third of the present economic expenditure of force. Reflect 
on all tbe idle classes in modern society. Socialism would 
set every body to work, and, making each one dependent on 
his own exertions for success, would stimulate all energies." 
The argument is oonlinuud after that fashion, and it is tell- 
ing. It docs not prove the point unless we grant two things : 
first, th.1t the present waste and idleness cannot be sujipressed 
or greatly diminished without a departure from the fuuda- 



menial principles of onr present in<1ustrial order ; second, 
that socialism is practicable. Jnstii^e is a strong plea iu the 
programnie of eocialiam, and it cannot be for one moment 
claimed that each one's income is at present in proportion to 
his services to hnmanily. Income in proportion t<i indntitrial 
merit is attractive to an ethical sentiment. But cannot we 
approximate more nearly tu that than at present by social 
reform? And by social reform is meant the improvement 
■if existing tn^ttiintions, but not their abandonniunt. No 
doubt the idle man is morally a thief. Ue receives, but 
gives notliing in return. Any man who by past services of 
his own has not earned the right of repose is a shameless 
cnralterer of the eartU,unless, Indeed, he is physically or men- 
tally incapacitated for useful employment. Would the 
world suffer if you should die? That is the test. If you 
merely clip coupons, then no one would miss you. Others 
would willingly relieve you. But your service weed not bo 
manual toil 

Dr. James Fraser, the late Bishop of Manchester, England, 
recognized the oliligations of personal service, but he did 
not in consequence favor soiialism. He arp;ued in this 
wise : "Most of US are by our necessities obliged to render 
services to our fellows. Some of us, however, have inher- 
ited or received money in some way without a return on 
our part. We are placed by God un our ln-nor. It is now 
a matter not of physical compulsion but of honor with ns to 
serve our fellows."* What is here said would apply of 
course not merely to those who receive wealth by inherit- 
ance, but to those who become wealthy by the discovery of 
valuable treasure^ like oil, natural gas, gold, minerals, etc., 
on or under soil which they own, or by ihi- mere growth 
of cities, which adds immensely to the value of land. Legally 
the wealth is mine, but morally it is simply a new opportu- 
nity for me to help forward the progress of humanity; for 
ethically 1 myself am not my own. 

* Thew nr« not tlie bishop's eiHct worila. Il has been msnf ;ean mao» 
X luvo nvul liimn. bul I bsve repn>duce<l the iilos. 


Social Reform.— We may likewise inquire whether with- 
out A departure from the institution of private property, the 
laws of bequest and inheritance may not be so clianged :ia to 
briag about a, fairer distribution of products; whether, 
also, by public ownenthip and managcmetit of natural mon- 
optiiies much of the waste of present private competition may 
not he avutiled. These and a multitude of other questional 
tiiiggeat themselves. The author holds that uocial i-eform is 
lik<^ly to accomplish more valuable results than sociah.'im. 
What is, in his opinion, needed is a free and peaceful evolu- 
tion of industriul institutions, but not a radical departure froui 
fiindameiLlal inatilution.s. 

The Weakness of Socialism.— It does not appear dear 
In the anlhoi- how socialism could be made to work in actual 
life. The danger to freedom seems a very real one. It is 
frankly admitted that up to a certain point there is a tend- 
ency on the part. of government to iroprove au its functions 
increase. But would this bold with the indefinite estenijian 
of the sphere of government ? Let us admit that as oar 
livelihood would depend on the eRictency of government all 
the force and energy which now go into private service 
would be turned into public channels. But what would hap- 
pen if, in spite of all precautions, some unscrupulous combina- 
tion should secure the control of government ? There would 
be no standing-ground for effective opposition outside of gov- 
ernment, for dismissal from the service of government would 
moan a cessatioa of opportunity to gain a livelihood. If all 
jiroduciion is to be carried on by public authority there coald 
be no private press for criticism; and it is to be feared that 
Miiweleome views, which alter all may he the true ones, would 
fare much worse than at present. 

The domination of a single industrial principle is also dan- 
gerous to civilization. It has been held that the dominaiion 
of a single social principle baa led to the downfall of older 
civiliEations, and a distinguished American* has expressed the 


fear lliat the private business priDc-i|jle, wilb what natnrally 
goes with it, called by this scbulai- " iDcrcaiitiliam," threatens 
American civilization. Now what is wanted is a co-ordina- 
tion of the two pi'JDuiples, the principle of public business and 
tliat of private basinesx. It is desirable thai some should 
serve the public in an uffiiisl capacity. Some are adapted for 
that. It is desirable that an ample field should be left for 
(hose who prefer private initiative and activity. It seL-uis to 
the author that thus only will our civilization be rendered 
rich and full. 

Socialists. — Socialism has rendered good service by call- 
ing attention to soulal problems, by forcing us to reflect od 
the condition of tho less fortunate classes, by quickening our 
conscieDces ; also by helping us to form the habit, acquired 
by few as yet, of looking at all questions fn in the stand-point 
of the public welfare and not merely of individual gain; 
finally, by calling our attention to the nature of the industrial 
functions of government, and helping us to Bej>arale ration- 
ally the pi'ivate industrial sphere from the public industrial 
Sphere. Socialism as a theory of eoviety cannot, of coartte, be 
reg:irded as in any sense morally blameworthy. It has been 
advocated by good men and by bad men also. To-day it 
numbers earnest Christians and sincere ministers of the 
Gospel among its adherents. As there are good repnb- 
licana and bad republicans, there are good socialists and 
bad socialists. If every time a republican was guilty 
of a criminal act, all the newspapers said, "That is what 
comes of being a republican," we might begin to think all re- 
publicans bad men. It i;* a mistake to suppose that sociatistn 
oelong to the criminal i*biB<e8. Those who have worked 
among the criminal cl,issi,-s and carefully studied them will 
tell us that a!mo«t no mnualisls arc found among them. At 
the same time it must be said that the socialists have been 
moat unfortunate in a large proportion of their public repre- 
sentatives, especially of their noisiest representatives, who 
have secured the largest amount of attention. Some of 
them have been vicious men, aud many of them have been 


bitter and vindiPtive. Needless animoHity lias been aroused 
and class hatred iioiii'ishod. The cause of progress has thus 
been §eriously injiived. Fiirthcrmure, a number of questions 
having no tonneclion with Kot-ialism have been, even by 
socialists, associated with it. Infidelity and fi'ee love may 
be mentioned. Of course these have niilliing to do with 
Bocialism. Sociaiinni has done harm on account of the 
manner in which it has been too frequently presented, and 
it has also accomplished good, but the best effects of social- 
ism have been its indii-ect and not Its direct consequences. 

Anarchism. — It remains only to inakea ft-w distinctions. 
Socialism has been described as industrial democracy estab- 
lished and controlled by government. ^ There are, however, 
those who hold that if all government were abolished men 
would fi'cely and spontaneously form c0'O[>eralive groups 
which, federated, would manage all production. These men 
attack government and deny tlie moral I'ight of man through 
government to exercise authority over his fellows. These 
are the anarchists, sometimes called an arc hist -socialists. The 
writer frankly confesses his inability even to imagine how 
this kind of socialism could be made to work in actual life. 
Scientific anarchy is something ho cannot picture to himself 
as any thing more substantial than a dream. When socialism 
is defined so as to include anarchy, we have two kinds of 
socialism — namely, anarchy and collectivism ; collectivism 
meaning what has been called socialism in this chapter. Col- 
lectivism is often nsed interchangeably with socialism, par- 
ticularly in France. 

Communism is an older term not now often nsed. It 
has been employed in the past to designate an extreme kind 
of socialism. Socialism when it meansalsoeqtial distribution 
of products has been called by some communism, and the 
proilnction and distribution of economic goods by the State 
was only then called socialism when unequal distribution of 
products was advocated. Sonic writers have called violent 
Si^hemes of radical social reform commnniatic. and reserved 
the term socialistic for the more conservative plans of 


reconstruction. All the existing communistic societies in the 
United States are, however, composed of peace men, who do 
not believe in war but in non-resistance. It is, perhaps, as 
well to abandon the attempt to make a distinction between 
eommunism and socialism, and to drop the word communism. 

Kirkup's Inquiry into Socialism gives the best presenta- 
tion of a very conservative kind of socialism. Kirkup, how- 
ever, includes voluntary co-operation under socialism, and 
the socialism which he describes is not, strictly speaking, 
pure socialism. It is the substitution of the co-operative 
for the competitive principle. Other works are mentioned 
in Part VIII. 

On bequest and inheritance read Mill's Political Economy^ 
Book II, chapter ii, and Book V, chapter ix. Also the 
author's Tixation in American States and Cities^ Part III, 
chapter viii. 


MoxoroLiKa ' -' 

1. Artiflclal Monopolies. — Only a wonl can be said 
about artificial monopolii'9, Busineascs are artificial motio- 
)»)lieH when they are made monopolies not by their own 
iiiliLTEtnl prupcrtiua but by legislative enactment or by the 
t'unnaiiiin of a close connection with natural raonopoliefi, 
whereby they are made to partake of the qualities of the 
latter. Kinjja and queens formerly granted excluflive huaU 
iiess privileges to favored persona, and permitted no one ex- 
cejit those named to engage in certain undertaking^. These 
early raoDopolies became so odious that aoveteigns were com- 
pelled to abandon their claims of right to grant exclusive 
ecnnomic privileges. 

It is held that our American tariff lawn create artificial 
raouopoliea, and, while their influence in this direction is un- 
doubtedly vastly exaggerated, it seems scarcely possible to 
deny that they have asalated the producers of a few articles 
to form domestio combinatinnH for the auppresaion of compe- 
tition. The remedy suggests itaelf. 

Patents, — Government creates exclusive privileges by 
copyright and patent laws, but this is done ]irol'eMed!y in 
the interest of the general public and not of any favored 
claaa. Authors and inventors are granted extrusive rights 
in their pmductions for a limited period. This monopoly is 
considered a fit reward for valuable public services. Copy- 
rights and patents have been objected to as interferences 
vith natural liberty, but they appear to have justified them- 
PflvoB iu the stimulus which they have given to authorship 
and invention. It must, however, be remembered that all in- 
telleutual effort is an hiatoriual product. The telephone, for 



examjile, diii not spring from the mind of one man, as Mi- 
nerva fruin the heml of Jupiter. The leleplione was precedeil 
by a century of sciontlSe iiiVL-ntion and discovery, most of it 
}>oor!y enough remunerated. The telegraph was, similarly, 
the result of genei-ationa of careful, plodding industry of 
scores of men. Professor Henry, of Prinieton College, 
whose services in oonneution with the completiun of the tele- 
graph were most distinguishcti, conscientiously refused to take 
out any patent. It also happens tliat several pei-sons almoHt 
eimultaneonsly and independently make the same discoveries 
and inventions. Kow if the man who makes the finishing 
touches which lead to utilJKatioii of a long line of work alone 
is rewarded, it is like paying only the workmen who put the 
roof on the hou^e. It is not generally understood how seri- 
ous an interferenue with liberty patents are. A man who 
has a patent is allowed to »ay to all the rest of the world, 
*' Bee a use 1 have first done such and such things, you must 
not do them.*' Yet there may be those who about tlie same 
time, without any knowledge of him, had found out how to do 
them. When a principle existing iu nature is allowed to be 
patented, and not merely the application of the principle, the 
interference with liberty becomes still stronger. The prac- 
tical conolusion is somewhat like this : Patents, like copy- 
rights, are benefidal. Experience seems to warrant this 
assertion. Patents do not, however, rest on so strong a basis 
as copyrights, because no two peraons could ever write pre- 
cisely the same book, and the fact that I have written a book 
in no wise keeps you from writing any book you ple.ise. 
Patents should not be granted on light and trivial grounds, 
and the period for which they are granted ought to be strictly 
limited, and subterfuges for the evasion of this limitation 
ought not to be nutfii'ed to succeed as at present. Moreover, 
owners of patents ought to receive their pateuts on conditions 
whii-'h will compel them to use them or allow tliem to lapse; 
perhaps, also, to grant t'> others the right to use the patent on 
payment of a reasonable i-oynlty. Laws ought also to be 
changed so as to prevent huJi an abuse of patents as we have 



frequently witnessed in our rural districts, where farmers 
have been induced to infringe |>ateri!8 unwittingly in order 
that dauiages might he collected from them. The Buggestion 
of the genileman who is Commissioner of Patents at the time 
ttiia is being written, that the rii;ht of purchase of a patent 
be reserved by the United Stales, is to l>e commended. Our 
patents at the present lime promote monopoly, and in some 
cases interfere senselessly, it ts to be feared, with manufact- 
ures. Tlie patent laws require to be HimpHHed and amended 
and their abuses removed. At the same time reward should 
in some way always he provided for those who make valua- 
ble inventions. 

3. Natural Monopolies.— Natural monopolies h;ive al- 
r«ady been treated in other chapters of this book. It now 
remains to sum up and ccimplete what has been said and to 
consider them with particular reference to distribution. 
Natural monopolies are ihost* businesses which become 
monopolies on account of their own inherent propertien. 
The principal ones have been enumerated. They are 
wagon-loads and streets, canals, docks, bridges and ferries, 
water-ways, harbors, light-houses, railirays, telegraphs, tele- 
jihones, the post^ofiice, electric lighting, water-wui'ks, gns- 
works, street-cars of all klndti. 

A writer of merit* has giveu the following characteris- 
tics of natural monopolies which will help the re.ider to 
understand why they mnst be monopolies: 

" 1, What they supply is a necessary. 

"2. They occupy peculiarly favored spots or lines of 

" 3, The article or convenience they supply is used at the 
place where and in connection with the plant or machinery 
by which it is supplied. 

" 4. This article or convenience can in genei-al be largely, 
if not indefinitely, increased without proportionate increase 
in plant and capital. 

■ Mr. Farrer. in liis book The Slalf in jta RelatioH to TVade, in ll>e " Ktt- 
gliali Citizen Series." 


"5. CertftiQty and barmnnious arraiigeraeut, which can 
only be mftiniaineil by nnity, are paramount considera- 


Combination and Competition. — It was loog ago said by 
a sbrewd Englisii eiigiiit'cr lljal wliere combination is posslblu 
comjictitiun is impoi^ible. Combination is always possible in 
the case of undertakings which are natural monopolies. It 
is inevitable, for it is not only cheaper to do a given amoant 
of business by a monopoly tlian by two or moi-e concerns, 
but very much cheaper. If two gas coinpuuies in a city, 
having each a capital of a million dollars, operating aepa- 
nitely are able to make ten per cent, profits, when combined 
they will make much more than ten per cent., possibly even 
fifteen or twenty per cent. There is a force continually at 
work drawing them together. It works aa constantly if not 
as uniformly as the attraction of gravitation, and in tlie 
discussion of natural monopolies we can safely predict con- 
solidation. That part of political economy which deals with 
natural monopolies more nearly resembles pliysiua or astron- 
omy than any other part of onr scicniie. 

We are not left to general pijiicipleg. -The testimony of 
experience is ample. Thefe isoievcr ^n'y"feal competition in 
the field of natural monopolies. There is war to settle the 
terms of combination, and popular language which uses the 
word war, as " gas war," " railway war," etc., is scientifically 
correct. Competition is a steady, permanent pressure, while 
war is dealructive, and seeks to damjige an enemy in order to 
make peace advanta>;eously. No dotibt it has been tried 
over a thou.'iand times to compel gas cnmpanies in a city to 
compete, but in the world's history it has never succeeded, 
ami it never can succeed. The same may be said with ref- 
erence to telegraph companies. We have had, probably, 
over a hundred different companies in the United Stales, 
England has tried competition over and over again. At 
present real competition in the telegraph business exists in no 
ooun",ry in the wi^rld. It will never exist. Railways have 
in all European countries combined, and the apparent cow 


petition in tliia country is illusory and temporary. Com- 
biualion in going forwarii with unprecedented lapidiiy. . .>^ 

WhatshaJl bo cur policy? Monopoly is inevitable. Pri- 
vate monopoly is odiuu»i. Public monopoly is a blessing, and 
the teat of experience approves it. Again and again il has 
been tried with fear and trembling, but the results have in 
the long run been gratifying. Public ownernhip and man- 
agement of riUways have in Germanv sucBeedad i^'jiyiny 
respects even better than their advob?£c3 anticipated, nnil tlie , 
opinion of experts in Germany favors them almost if not - 
quite unanimously. The writer happens to know of no ex- ' 

But shall we at once try to anbetitute public ownership 
and management of natural monoijolies for private owner-^ 
ship and management in the United States ? ^The jirivaHf^y' 
interests opposed to this step, the apathy 'lii'dliftTence, and 
prejudice to be overcome, are ho treniendons that ihere its no 
sort of danger of moving too rapidly in this mailer. What 
the writer would advocate is limitation o£ cliartera for natu- 
ral monopolies and an extension of the reserved rights of 
tlie public in order that sttch changes as shall iinally he de- 
cided to be beneficial may be easily and readily rnadt^. The 
right of purcha.<tfi of a natural monopoly witlioul paying any 
thing for the franchise itself, but only for value of capital 
actually invested, and for its value in its condition at time 
of purchase, ought always to be reserved. I.>ocal natural 
monopolies ought to pass into the hands of local authorities 
B.i soon aa possible, and no charters ought hereafter to bo 
granted for private gas, water, or electric lighting worlcs. 
Always begin reform at home. 

The Advantages Claimed. — The advantages which 
it is claimed that public ownership and management will 
bring are many, and the principal ones will be briefly enu- 

1 . Increase of Public Prosperity. — Fiist. a diffusion of 
their income among the community will take place, and 
this will tend to prevent an undue conct-ntration of wt'alth, 



while it will promote general prosperity, thj Meal of tlie 
fathers of tlio American republic How pruGtable nittural 
monopolies arc may be aceii from tbe fact tliac they are the 
Bonrce of most of tbe eiiormoiia fortimes of our eountry. 
The income from them may be diffused in two ways : First, 
charges may be plated bo low that price will siiiiply I'over 
cost. This is the method pui'sued by our post-office and by 
the English telegraph. Second, a profit may be derived 
from theae pursuits, and this used to lower tax'es or to du 
things of bcticfit to the people as a wltole, as to improve our 
loads and streets and all our schools, to encourage art and 
literature, and the like. A middle coui-se may be taken. 
Prices may be reduced and a moderate profit used for pubHo 
, purposes. 

S. Economy.— The second great advantage claimed is 
the greater economy of public ownership and management, 
whereby the products to be di.sliibuted will be increased. 
We may ihiia avoid the larger portion of th:it waste of 
which Booiali^ts complain without abandoning the funda- 
mental principles of the existing order. It is in fact the 
bad management of natural moiiopoliiM ivbich lias given to 
Bocialism a considerable part of its strength. 

How enormous the waste of attempted competition and 
war in the field of natural monopolies is may he seen on 
every side. The construction of only two needless parallel 
lines of railway in the United States, the West Shore and 
the Nickel Plate, extending together from Kew York to 
Chicago, wasted two hundred millions of dollars; a sum 
BufGcient to build two hundred thousand homes for a 
million people. Probably the waste in railway construc- 
tion and operation in the United >tates during the past 
fifty years would he amply sufficient to build comfort- 
alile homes for every man, woman, and chih] now in tbe 

Every city shows that attempted competition eats np a 
large of what might he profit. Gas can well he supplied 
for a profit in great cities, if the business is a perfect mo 



nopoly, for Beventy-five cents. English cicies 8up|ily it tor 
less. The city of Wheeling supplies gas for ninety cents a 
thousand and makei! money. The Baltimore gas company 
charges ono dollar twenty-five cents a thouBand — the priie 
fixed by the Legisiature — and apparently is not earning a 
great deal of money fur the stockholders. What is the 
reason? Simply this: that the present is a combination of 
half a dozen or more companies which have bnilt works, 
dug up the streets, put gas-mains in them, and run jiipes 
into the houses and the like. An enormous sum of money, 
miitions of dollars, has been wasted, and this waate is repre- 
sented by bonds on which interest must be paid, as well as 
by an enormously inflated capitalization. The capital has 
Biraply been wasted. No one has received the benefii, but 
the people of Baltimore have suffered the loss, inconvenience, 
and damage of uselessly torn up streets. The experience of 
Baltimore is that of nearly all American cities. 

Municipal ownership and management of natural monopo- 
lies is every-whero in Europe being substilnled for private 
ownership, ami theie the question may be regarded as prao- 
tioally settled by the test of experience. Public opinion in- 
creasingly favors public enterprise in the United Slates, 
and several cities are making moves which will sooner or 
later result in an increased number of municipal undertak- 
ings in our country. 

When services of a monopolistic nature ar« performed by 
the public, water, gas, and electric lighting services can all 
be combined, and great economies secured. A better man- 
agement is the result. It is only a popular superstition 
that private enterprise is superior to public enterpnse. 
Each is superior in its own field. The author has received 
returns from about twenty American cities owning and 
operating electric lighting plants, and finds that the average 
net cost pernight is under fourteen cents per light of two thou- 
sand candle-power, while seventy-five private companies in 
different cities examined charge on an average over forty- 
two cents for the same service — or over three limes as muuli. 


Tliia ■ iperiority of pnbtic enterprise is not eiceptionaL 
The writer has had lor three years some cods idcra bit- ez- 
pei-ience iii the use of post-ollice and express (.-ximpanies, 
unil has yet tu fiad one instance in which when a mail and 
express paekage were sent at the same time from the same 
place to the same destiaatiuu the express package reached 
its destination as soon us the malL Any one may try the 
(.■xperiment for himself. He has also found the postofltve 
incomparably more obliging and desirous of doing all that 
ho asked. It seems to make little difference how mail is 
addressed. If any sort of clue is given it re:tches its ad- 
dress. American telegraph service is nlrio inferior to foreign, 
and in its elTorta to accomniodate llie oi-dinary citizen in- 
ferior to our post-office. In other countries telegrams cau 
l>e sent for as low as nine cents for ten words, and in En- 
gland we have one uniform cliargc of twelve cents for twelve 
words. We must pay as high as one dollar for ten words in 
the United States. Of course, distance is u small matter. 
Nothing is actually carried. The j>ost-office actually carries 
things, and yet, notwithstanding our long distances, no conn- 
try carries letters for lower charges than the United States. 

Nor is it truf that private enterprise takes the initiative 
in improvements. English municipalities have gone ahead 
of |>rivate gas-works in improvcmenis. The English tele- 
graph is introducing improvements which our American tele- 
graphs are strenuously resisting. The burial of wires in 
cities is only one of these improvemenis. The American 
post>olfiee went ahead of American express companies in 
developing the money-order business. A jtrivate savings 
bank in Baltimore follows the lead of the English postal 
savings bank in the exiablishmenl of branohes and the use 
of stamps pasted on cards until a minimum sum for deposit 
is reached. Gnvemnu-nt has gone ahead of private corpo- 
ration in publicity of financial accounts, and haa shown 
many of the peenn!;iiy advantages of publicity. 

3. Purification of Politics, — The third great advan- 
tage of I he public principle for natural mono|K>liefl is the 



[I mi fixation of policiu.". Private monopoIicH must be con- 
trolled by public authority, and control means interference 
with private business, and thin begeta corruption. Wherever 
electric lighting is supplied by a private corporation the 
Btock is distributed " wIutc il will do the most good," among 
influential citizens, newspaper proprietors, and politicians, 
and we have a powerful factor arrayed against good govern- 
ment, Thid is why American citizens pay such large sums 
for the services rendered by eorjiorations, and one reason 
vhy the government of American cities is so expensive. 
When, however, we have pubhc ownership and management 
of natural monopolies public inti-rests and pi-ivate interests 
are identified, and the best citizens are on the side of good 
government. Th^iae who take pains can observe evidences 
of this on every hand. Mayors, where electric lighting is 
done by the municipality, will testify to the good political 
effects. We have here the suggestion of the true way to 
reform our civil service. It is idle to say, " Wait until our 
civil servile is belter, and then we will intro<loce the prin- 
ciple of public ownership and management of natural monop- 
olies." The iudustrial refonn must precede, for tiiat 
alone can open the door to thorough-going reform of our 

The reforms advocated will give talent a career in the 
service of the State, and private business will absorb only its 
legitimate share of the taleut of the country. The danger 
of mercantilism will thus be counteracted. 

4, Will Overthrow Artificial Monopolies. — The 
fourth advantage claimed is that the discrimination between 
public and private business here advocated will pi-eveiit the 
existence of many artificial monopolies which are oppressive. 
Certain business men have been favored by those iu conti-ol 
of natural monopolies, as, for example, in lower freight rates, 
and have built up artificial monojjolics. The just and equal 
treatment of all citizens by all natural monopolies would 
help to give all a fair chance, and would contine the concen- 
tration of business to its legitimate limits. 


The principles underlying natural monopolies deserve to 
be carefully studied, and it is suggested that they afford 
good opportunity for the exercise of whatever faculty one 
may possess or may acquire for the observation of indoslrial 

See Ely's Problems of To-day^ chapters xvii-rxxL 


There are many social problems, and they are by no 
means entirely economio in tlieir nature. Tbey all, bowever, 
have their economic side, and the province of tlie economist 
is to luok at I hem from the economic stand-point. When 
we discuKH distribution we treat social problems not merely 
from the economic stand-point, but from tlie point of view of 
distribution, recognizing, however, that they pertain as well 
to production. 

The most prominent of the present social problems which 
are chiefly economic have already been mentioned and dis- 
cussed with more or less follnesa. It now only remains to 
say a few additional words about these and to call attention 
to one or two other social problems not yet mentioned di- 
rectly; also to make some remarks on remedies for social 

Child Labor is one of the most serious evils of our day, and 
it is increasing with alarming rapidity in the United States, 
growing far more rapidly than population. It is one of those 
things which never regulate themselves, but which, unregu- 
lated, as all experience shows, go from bad to worse. Only 
laws with severe penalties for disobedience and special fac- 
tory inspectora for their enforcement can lessen this evil. 
With these laws must be coupled compulsory education, with 
adequate provision for its enforcement by means of truant 
officers and the provision of truant schools, It is thus that 
Massachusetts, the banner State of the Union in this as in all 
legislation touching the laboring classes, has greatly lessened 
the evil of child labor. Xo one under fourteen should be al- 

jfT.j -ij ^"Ti J. * 'rr":r yy y^I::T^r^ jc')2rjjrr. 

iiifn ui«L -^v^'3lIlc "jnciniiahon-rvhiHiLfr iomiid bis fazniidievi 
^r: r a *- • nip iiis-oiy irn^niinneti iur xmiu unnm 3iiiiuicr *j£ haoja^ 
jniL ±7^(11 roimfea tu -^iffsieKsu 5ir TiuraL jnd piivamLasEjual 
7nsLs»^ns^, 'Oti joiir» »f jujor -Humid. >^ iminf*! ru ^ "««^^w""t 
■It '**?! m -tr^try L17 -fxctsnc 'racnnmy. vatsn jquiuc p«rsuns 
<iai}iiiit ii-r le lilotv^i :u wrirs. liter ine T^iuek. in :iiii jfosr^ 

TTimea .n >rLt*r 'o zTanL :ai! *Jin»ris«Q» 'Jt doA hoiuL The 

rauiiil-r -.Lin ^iie rrnj^^ a jr die jUMir ^jt meiL. 

aeriitli. -»v*i"7 in^-'j^iun for iii««ii."y uid Aimpjrr jiiirot a> be 

liiihie -or urfuLenr. ioiir* izjiiwr invent ~ii 1%* -strrcrly jiniDBtl 
la Tii7«tuii«r^i»ai pmciDleiv ^^otH-'^iiiiv inrii auimrrcj : wrjrk 
ror I '}»^r:i'ti "ar^ijvT-.btf i ?y ■?Q7>i*'iii»i7 ind I'pz**^^^* in "ie in- 
vr->r'i 11 ^c nerii^ jc norliers *)ur ;t -jie rxnir jMnemdoiu 

iiia*i7. xrk in«:er z^j»in»L tad jriier t loirs* laniC'irjas* zo 
mr.n.L 17 niirat: t-j 'je vb«;LL>iie«L ^^-i .VzLe rieao:* j;iv« Ia^;£«d 
iir ^♦^•lintl E -.r- r**x:is in iJi iat»»w ^incTiirfw 

I^TiL-T7"::T7y IiIiS2j3SS :» i 'wr.ijuri social rr*>ar)ie. t ip- 

m* n-ii-i -iiu'li -rrAT. ^Jnlrr i -smLl lar: rf "ilij^ iitlents*? is iae 

~ 1 n ■ ■. • r. ' :.i - ^. JL* 31' i« ' a. -^r ; nt "f- : «i.*d *?if U--J*:ni d I'jsh^l if 
ir.-^- -:i.--i -"5 :*rf^ii!7 ve^r^ Tae r^sal*:. I3«i k« iaerf^kk^L ■fdioiifliKj' 

r.\.i- '-*' \, :.•*: ■-/.- i?: [ttti :•:■ kz-'v *2«--r •- -vf^vc :j»; i^^cr!?«l 



life if work coald be distributed regularly throughout the 
days of the year, with a few holiday:*, aud a iihort Tacation, 
but no idleness. 

Intemperance has already been discussed. It is cause 
and effect of iudiutrial uonditione, but not merely of indus- 
trial conditions, nor even of liocial conditions. It is undoubt- 
edly an individual matter, and appeals to individuals are in 
place ; but the influence of social conditions cannot safely 
l>e left out of considerution. 

Pauperism s]>inngs from social causes already mentioned 
as well as from individual causes, and the remcily must come 
both through improved industrial and social relations and 
individual reformation. Wo are beginning to hear of a sci- 
ence of charity; and it is sorely needed, for old-fashioned 
almH-giving is a curse. 

The Family is to he kept in view as the true social unit 
in .ill ecoDomio discussions, and divorce is one of the most 
serious evils connected with the family institution. The 
cances for divorces have been shown by the National De- 
partment of Labor at Washington to be largely economic. 
It is the pressure of economic wants in the lower middle 
class which is most fruitful of divorce. 

Corporations have been already treated, and trusts hava 
been alluded to. In general the writer opposes inlerferenoe 
with <-ombitiations of tabor and of capital. It has been 
productive of harm in the past. Whenever any pursuit is 
such that in that business combinations of labor and capital 
are daugewus, the legitimate eonclnsion is that it is not fit for 
private enterprise at all, but is suitable only for public man- 

Remedies in Greaeral, — The moat general remark in re- 
ganl tu reinedic-s for social troubles is that there should ba 
no needless interference of public authority with private 
business. This is the true source of corruption. If exten- 
sive interference is an inevitable part of any private busi- 
ness it is a sure sign that it should be made a public business. 

Interference in behalf of labor ia inevitable, but it should. 



he pliiefly confined to llio protection of women and children 
and lo those who are naturally unable to help themselves. 
Tlie general aim should be to educate both the bodies and 
the minds of the rising generation so thoroughly as to re- 
dace the need of interference to a minimum. 

Prevention ia always bolter than cure. The constant aim 
of public authority and private effoit should be to anticipate 
troubles and prevent their existence. It is a monstrous doc 
trine that the Stale can employ its functions and use publlo 
money freely to repress crimes, but may not spend a cent to 
prevent their existence. Some would have us think that the 
ciiy of Chicago, for example, is warranted in spending hun- 
dreds of thousands of dollars, or even millions if necessary, 
to hunt down and hang anarchiitts, but not any money at all 
to provide play-grounds for chiMren, breathing- places for 
adults, to improve the sanitary arrangements of the city, to 
provide wholesome recreation, and in general to remove, as 
far as in its power, all legitimate causes lor discontent. It is 
not necessary to show the fallacy of this. Laws ought nob 
to be merely mandatory and repressive. Legislation shonld 
hold out, so far as practicable, inducements for right conduct. 
It ought to strive, to an ever-increasing extent, to " attract " to 
right action, or lo become, as it is technically called, attract- 
ive and positive. 

Popular Suffrage.— Preparation for duties and privi- 
leges of life ia a public and a private function, but the 
Abolition of duties and privileges is exactly the wrong 
thing. Those who look at social problems from the stand- 
point of the few will desire among us, for example, to abol- 
ish universal suffrage and to restrict suffrage, while those 
who have at heart the welfare of the masses will be more 
inclined to say: '* Rather prepare every person in America 
for the duties of citiEenship. See to it that every Amencaii 
child is compelled to attend school at least six full years, 
and is taught some useful occupation. Diffuse in every way 
a knowledge of the duties and privileges of an American 
oitixcn, and not until that has been faithfully tried let us 



think of a restricted suffrage. Do not take the suffrage 
from illiterates, but abolish illiteracy; and experience has 
shown that this is feasible.'^ < 

It is seen that there is no one remedy '/or social evils. A 
multitude of agencies for good must work together. Private 
individuals and private associations of individuals must 
supply a multitude of these. Religion must furnish men 
with a motive power impelling them to see and do the 
right. Public authority must likewise do what it can for 
humanity. Men come forward from time to time with some 
one remedy, a panacea for all social evils, but they are dis- 
trusted, and the author thinks justly so. These reformers 
witli one idea often have valuable contributions to our 
knowledge to offer but they exaggerate the importance of 
their one idea. 

This part of our treatise cannot be better closed than by 
the following suggestive words from the last chapter of 
Professor de Laveleye's Primitifoe Property : " There must 
be for human affairs an order which is the best. Tliat order 
is by no means always the existing one, else why should we 
all desire change in the latter? But it is the order which 
ought to exist for the greatest happiness of the human race. 
God knows it and desires its adoption. It is for man to dis- 
cover and establish it." 




Whks the economist comes to treat of consumption lie does 
not approach an entirely new set of eoonomic phunomeiia, 
but he rather changes bis stand-point. The same familiar 
topics occur under consumption which have already met us, 
but the point of view is a differeut one. Consumption and 
production are correlates. Consumption is the end of pro- 
duction, and production cannot exceed consumption. Pro- 
duction can merely anticipate consumption. Consumption 
is the motive power of production, and production gota 
forward satisfactorily only when there is a reasonable pros- 
pect of consumptio)! for the producer. The toiler must see 
before him as a goal the consumption or the control of the 
consumption of at lea^tt a considerable portion of the fruits 
of liis exertions. Arthur Young, as often quoted, said: 
"The magic of property turns Siind into gold." The dis- 
tinguished traveler had in mind peasant jiroprietonihip, and 
consumption undoubtedly throws light on the nature and 
utility of private property. It is not, however, necessary 
that the cultivator or improver either of rnral or urban land 
should enjoy the right of property in it to induce bim to 
exert himself. English tenant farmers are among the best 
in the world, and men diligently improve real estate in 
American citie!< which they do not own. It is a prerequisite 
of a wide diffusion of economic energy that the frnits of 
the toil of one who conducts an enterprise should accrue to 
him, and that thene fruits should increase in some kind of 
proportion to augmented diligence and efficiency. Rack- 
rents, which taki! all save cnougli to suNtain life from either 
the rural or the urban tenant, oppreiision of government. 



like tfao Turkish, which Bystematicnlly robs tlio [jroducors, 
and exactions of those railway and other corporations which 
are at the same time jiowerfiii and unscrupulous — all these 
and other similar agencies which discourage the producera 
are deBtructive. Tlioy take away from men the goal of 
coHKumption, which spurs them on. 

Difficulties in Treating Consumption, — Consumption 
must ho Ircijtcd vury hriefly. Only a fi-w rnnin points can 
be touched upon. This part of political economy has not 
yet been sulliciently worked out for satisfactory treatment 
at length in an elementary work like the present, Tliere ai-e 
HGveral reasons why this part of political economy is in a 
particularly backward condition, First, one may connect it 
with a general tendency to forget the end of life in our zeal 
to discover the means of it. Many a writer discourses about 
production as if it were in itself the end, and as if consump- 
tiun were a misfortune to be reduced to its lowest terms. 
Second, cousnmption is in many respects more difficult to 
treat. Its laws arc less readily discoverable. Production 
takes place often in tlie light of day. It is frequently con- 
centrated iu large establishments visible to all, and this iB 
the case to an ever- increasing extent, A considerable pro- 
portion of consumption, on the other hand, is as widely 
diffused as the homes and dwellings of individuals and 
families. It is more or less covered up; in some cases even 
secret. Consumption now resembles In many of its as- 
pects the old household production of economic goods 
in the days which jireceded the science of political ecouomy. 
Third, political economy deals with social I'elations, and it 
must be confessed that the social element is more universally 
prominent iu the production of goods than in their con- 

Consumption Defined, — As man creates no new mat- 
ter, but only utilities, so he destroys no matter, but only 
Utilities. Consumption means the destruction of a ntiiity. 
Now, dentruclion of a utility is of two kinds; it may he sim- 
ply the destruction of a concrete ntiiity, or, more accorately. 

COySUMPTIoy. 269 

llie ulility of a aiDgle concrele economic good, but a dostmc- 
tion without loBS. The utility may pasa over into some per- 
son or thing. We may also witness the destruction not 
merely of the utility of a particular tiling but of the utility 
itself. This is the ca^e when nothing ia left to take the place 
of the ulility destroyed. If we speak of the first kind of 
consumption as the destrnctiou of mere concrete uliliti/, wp 
may call this second kind of oonsumptinn the destruction of 
pure abstract utility. 

Consumption ia one part of the productive proeeasea. 
Commodities aie destroyed. Their utility is destroyed, and 
they are no longer economic goods. Coal and lumber servo 
as iitust rations. The utility of the coal and the lumber in 
their original form departs. A ton of coal is barned up and 
a log of wood is used up. The coal is gone and the log no 
longer remains; but all the utility in them haa passed over 
into something else, and that with an increase of utility tf 
the production in which the coat and the log of wood wera 
employed has been successful. Things change their furm in 
consumption as in production, but utilities may remain and 
grow. Tliu utility docs not neoessarily pass ov«r inio a ma- 
terial thing. It may pass over into a person; and this is the 
kind of consumption which in general yields largest results. 
When consumption is attended with increase of utility we 
call it productive consumption. When we speak of the con- 
sumption of economio goods by persons we call every useliil 
consumption of a useful member of society productive, and 
every useless consumption of economic goods, as the use of 
mere luxuries even by a useful member of society, as unpro- 
ductive, and every consumption of whatever sort by a nst- 
lesa member of society is unproductive. Such a person ia a 
mere cumbercr of the ground. His consumption is mere 
waste, and he does not deserve to live, 

Consumption and Capital-Formation. — When con- 
i^iimption leaves permanent results it is saving. Saving ia 
but one form of consumption. Let us say a farmer raises 
one hundred bushels of potatties, and with his family eais 


filly, while he eschanges the other fifty for the services of 
[K-rsuns who produee luxui'tes for his table, at once kUo «at«ii. 
When the fifty buslii^U are e»ten by the family and the other 
fifty bushels by persoDs who produce luiuriea for the family, 
no pennaQeDl result i.t led. Now let us suppose ibat iustesd 
of using the fifty bushels to feeil laborers who are growing 
luxuries for him, he uses the fifty bushels to oonstract a 
needed fence on the farm. The potatoes have all been 
etjually consumed ui both cases, but hi the latter case we i<ay 
the farmer has saved fifty bushels of potatoes; by whii-h we 
mean that he has employed them so that a relatively |>erma- 
neut result of their consumption remains. The fifty bueheU 
of potatoes have been eaten, but, as the farmer ttays, he " has 
something to show" for the consumption. Lot ua take 
another illustration, A. and B, have each an income in one 
year of one hundred thousand dollars beyond what they need 
to support themselves. A. spends his hundred thousand dol- 
lars in giving a series of magnificent entertainments, and 
thoughtless people say he is a man to be praised because he 
gives employment to labor. B. epi-nds his hundred thousand 
dollars in constructing a factory. His acquaintances may not 
know what be is doing with hU income, and call him a bad 
citizen, whii gives no employment but " locks np his money," 
by which seems to be meant one who keeps from consump- 
tion commodities over wliieh he has conirol. B. has, how- 
ever, eonsumed or directed the consumption of as large s 
quantity of economic goods as A., and has Bumething left to 
tthow for it. After he has given employment during the 
year to the men who have constnicted his factory, be con- 
tinues to give a number of men employment and opportunity 
for consumption indefinitely, while A.'s consumption has 
ceased once for all. It n>ay be said tbat all truly unproduct- 
ive consumption is immoral. 

It is to be noticed goventmenta are more or less 
prominent in capital -formation. Wlien our federal govern- 
ment pays off the national debt it forms capital. The means 
to pay the debt are colkuted in eiiuiil sums from millions of 


ppople who woiiM not, liave used them for purpoeea of pro- 
duction, anfl l.hon llie aggregate is handed over to the bolder 
of a written obligation, a bond, who uses them as capital. 
These means in the pockets of the people were not capital, 
and only a amnll proportion would have been turned into oiip- 
ital. Tliere can be no doubt that debt-payment by ilie 
United Stales has increased the actual capital of the coun- 
try. A part of this new capital, it is true, simply restored 
capital that had once eiiisied and had been sacrificed years 
before. Similarly, when the United States expends its rev- 
enues for pfist-oflicc and other federal buildings, and for wi«e 
internal improvements, it increases capital. It is a consump- 
tion which is at the name time a capital -formation. When 
municipalities establish gas-works, electriu lighting works, 
and pay for them by taxes or by loans repaid by taxation, 
the capital of the country is increased. The people save a 
portion of their income through the agency of government, 
and it is the only way a large proportion of tliem can ever 
be made to save any thing. 

We have capital-formation from the consumption of 
economic goods for tlie productiuu of external material 
things, but we have wliat we may call personal capital- 
formation from the consumption of things by persons who 
are acquiring eoonomic skill and aptitudes. 

It must not be supposed that all saving is useful. Capital 
formed ia frequently employed destructively. This is the 
case with capital which is used to make an attack nn existing 
capital. Capital which is saved to build parallel lines of 
railway or rival gus-works like those which have afflicted the 
people of Baltimore is destructive. All these economic goods, 
so far aa the general public is concerned, might have been far 
better ponsuiued in pure enjoyment. 

Alleged Present Consumption of Future Prodacts. 
— We often hear of con-<uniptioii in advance of prodnetinn. 
It is said people live on the future. It is frequently argued 
that during our late war wo were consuming faster than we 
were producing. It ia alleged that the federal bonds repre- 



sentod tho coneumptlun of future eantings. Those who talk 
thus appear to have no clear notions. It in impossible to 
consumo faster wo produce unless we consiimi.- past sav 
ings. We oaimot eat to-day the wheat or potatoes of to- 
morrow, nor caa we wear ooata before they are made. 
What is alleged can only be true iu case the capital of the 
country is dim i nisi ling, whereas during our late civil war it 
increased. What really hap|iened was this : We as a nation 
became indebted to some extent to foreigners, and within the 
nation some of us gained while the rest of ns were losing. 
Bunds do not represent a present uonsuiiiption of future 
wealth, but a consumption of existing wealth for which a 
government agrees to reniuneratc its owners in tho future. If 
war can be carried on with the aid of bonds it oun — leaving out 
of consideration what foreigners send us — with a sufficiently 
perfect taxing madiinery, conceivably always and practically 
sometimes, be earned on without bonds. It is only a question 
of how to got hold of exiKting wealth. War was formerly 
carried on without bonds, because they are a comparatively 
recent contrivance. 

Prodigality and Avarice. — Luxury, which falls under 
the head of prodigality, has already been classed under mo- 
tives of economic activity. It is now necessary to add a few 
further remarks to what lias already been written in order 
to look at the subject from our new stand-point. 

" When a king makes great outlays he gives alms," was 
tho moral justitii-ation which Louis XIV. of France offered 
for royal extravagance, and even so really great a writer as 
Montes([uieu said, "When the rich diminisji their expendi- 
tures the poor die of hunger." It is to be hoped that the 
fallacy of these utterances is readily apparent to all who have 
carefully read what precedes. First, when we save wo also 
consume and we give employment, and we give more em- 
ployment when we make wise investments in productive 
enterprises.somotimeseven a hundred limes as much. Second, 
the possession of resources sim]dy means control over labor 
»nd capital. We can diroot ihcm whither wo will. We may 


give theiQ sncb diroction that we onrsEilves will enjoy their 
prodacts or that otbers will receive tliia enjoyment, as when 
we spend It for the beueGt of humaoity. 

It is said that prodigality does no barm if money is spent 
at home. Those who talk this way bave not grasped the A, 
B, C of political economy. It is not the money with whiuh 
we are concerned. Money is only a small part of our wealth. 
It is merely " small change " in great industrial centers, and 
it is conceivable that circumstances may exist under which 
it would be the best thing for us to have money leave the 
country. If prices with us are abnormally high, foreigners 
cannot purchase oar uommoditii^s, and our exporl trade will 
decline. What we bave to consider in the case of prodigality 
is the destruction of materials and the labor which has been 
used np onw fur all, whereas both materials and labor ought 
to have been wisely employed. The one who has control 
over them is guilty of wasted opportunity. 

If luxniy is a good thing for the j>eople, how does it hap- 
pen that the masses in Oiiental countries are so deplorably 
poor, whereas the few indulge in the most wanton luxury? 
Or how explain the growing poverty of Rome under the em- 
perors while luxury was continually increasing until it became 
the most outrageous in history? Pearls were dissolved in 
wine to make it expensive, and tongues of birds which had 
been taught to talk were served at dinner because they were 
costly. Waste is waste, and no sophistry can make it any 
thing else. If a large proportion of labor and capital are 
employed in the production of luxuries, precisely ho much 
less is left for the production of the necessities, comforts, 
and conveniences of life. 

We must in the discussion of luxury as elsewhere distin- 
guish between " the seen and the unseen," the unseen mean- 
ing simply what is not readily seen. The writer is acquainted 
with a university town where the "scale of living," as it is 
called, the general style of life, is set by university profeasom 
who are rich, and to whom their salaries are only one source 
among others of income. Doubtless tradesmen and thought- 

2ri AX rsTRor'T-moy ro political ecosomt. 

less «peotat<^rs praise the expensiveness of liTing^ and say, 
*• It makes tra-le g ■•>L*' Thai i« *• the seen." The " onaeen ** 
is the pain wLich it causes to other professors mnd instructors 
who mu>t live only on their salaries; especially the pun to 
their wives^ For them it is a continnal harassing straggle 
which detracts from their asefnlness and di^rnitT. As for the 
rich ppjfessi^rs, it is quite possible for them to live plainly , 
for them to set an example of ^ plain living and high think- 
in^,** and still spend all their inoome& Certainly no one is 
fit to hoM a college profess-^rship who does not see many 
ways in which all his own resources, however large, could be 
advaDtage<>asly expended in advancing the interests of hn- 
maniiv in c<>nnection with the work of his own institution. 

It has been said that Inxurv is a reserve ftmd ; that in 
times of general distress we have something with which to 
dispense. There is some truth in this, but it is quite clear 
th.i! widely diffuseil comfort, with a plentiful supply of sar- 
lU'Z irisii: 111 ions well patronized, is a better reserve fund. 
After the late Franc«>-German war it was the frugal, thrifty 
classes who live*i sirai^lv that astonished the world with 
their reserve fund. When France called for billions of 
francs, peasants, artisans, mechanics, and careful fathers of 
families came forward with their hard-earned savings and 
s*ib*cribel for m-^re b ^nds than were offered. 

At the same lime it is true that if ali should restrict them- 
selves to the bare necessities of life a srreat j<»rtion of exist- 
in:: «.apital an«l lab«>r would ]>o unemploye»l. It is possible 
in every civilize^l land to jiniHlnce more than the bare neces- 
sities for a!L It ha.s onlv been said that luxuries are not nee- 
e--nrv to irivo emi»IovraLT;t. Manv costiv thinss are desir- 
able. Macrniticent art gallerie^s. grand universities, splendid 
I :jb:ic S'-ho'il-i of every grade, tine arohitt-cture, especially in 
piihiio b:iiuiing^ and churj-hes, exien^ve pleasure-grounds 
and play-irr"iin«ls fur the j«eople in every city, and even in 
ever\- town ami viilaeo, all these are amon^r those thin«jrs on 
which unlimite«l capital and lalwr can bo expende^l. These 
things, involving large outlays, ought to be public institu- 



tions. It ia the extensive use which justifies the great ex- 
penditures. It has been characteristic of periods of national 
decay that private persons have indulged in expensive 
luxuries while publio institutions have fallen into decay. 
It is said that in the lime of Pericles, the days of the glory 
of Athenian democracy, one third of the revenues of 
the State were expended in plastic and architectural art, 
while in the time of Demosthenes comjilaint is made of the 
shabbinesB of public buildings. 

Avarice is injurious, though probably less dangerous, be- 
cause less seductive, than prodigality. The avaricious man 
sacrifices the end of life to the means and compels others to 
do 80, He may increase the wealth of the country, but he 
allows no one to enjoy it fully, and fails to put it to the 
best use. 

EKpenditm-es are justifiable which tend to the develop- 
ment of our faculties. The requirements of ethics are that 
we should develop ourselves and help to perfect the rest of 
humanity. If we neglect our own highest development 
humanity suffers. When we weigh in the balance our own 
needs and those of others we shouM have this in mind. Wa 
should also strive to vender ourselves independent, so that 
we may not become a burden to others. Our generosity is 
ill-advised if it fresults in our own impoverishment, and may 
produce more harm than good. 

Ethics requires self-sacrifice. Self-sacrifice degenerated 
becomes asceticism. Asceticism is self-denial fur its own 
sake and not for others. It is like the perversion of charity. 
Charily in one of its forms, alms-iriving, was in the best 
days exercised for the sake of the needy, but when the 
Chui'ch became degenerate it was exercised for the sake of 
the giver, and became thoughtless, inconsiderate giving, and 
a curse to the world. 

We should cultivate inexclusive pleasures rather than ex- 
clusive pleasures. A picture is an inexclusive pleasure. 
Thousands may enjoy it. Costly wines are exclusive pleas- 



CombiDation for use of things consumed increases their 
utility. A public library or a public art gallery flervusas an 
illustration. Cumbiiiationx for use of means of commuDica- 
lion and transtportation make railway service cheap. Com- 
biiiatioQS for cooking and serving food have been proposed, 
and co-operative kitchens may yet Rpare nvei'worked mothers 
much toil and help to develop the home-life of the masses in 
great cities. 

"Wasteful Consumption.— We must first notice that 
that is often called a waste which is really a productive con- 
sumption, If nothing is left tu show for what is cunsurited, 
we must call it a waste. If the consumption of an article 
like tea, however, really promotes domesticity, and clieors 
and soothes the mind, if it adds to the comfort of life of 
tliDse who have few pleasures, it is by no means a waste. 
Something is left to show for it. Expenditures for reorea- 
tiou, for wholesome enlenaiuments, for whatever promotes 
domestictly and sociability, are among the most productive. 

It does, however, often happen that nothing ia left to 
show for consumption, and then it is unproductive con- 
sumption; a destruoiion of concrete and abstract utility; a 

Every change of fashion involves waste, a partial destruc- 
tion of values created. The Society of Friends, usually 
called Quakers, in resisting changes of fashion, pursues the 
only course which can he justified ethically. 

Fires are wasteful, and any effort to diminish their fre- 
quency or to extinguish them expeditiously deserves the 
heartiest comraendation. 

Mature is continually engaged in wasteful consumption of 
economic goods, and man is obliged to wage a continual 
warfare with her. This waste goes on all the lime, but the 
most important economic waste is caused by the death of 
man. the chief agent in production. 

The use of liquors and tobacco, which, when the totality 
of their results is computed, leave less than nothing po«tive 
to show for theraselvee, is a waste already treated. 


ntiwise consumption is a |jartial waxle, Kud the American 
people is guiltier than any otlier oivilizod nation in thia 
respect. W« havo in the West ami North come to coneutne 
wheat almost alone for bread, and neglect corn and rye, and 
often the aole reason is that « heat is more expensive. Even 
with our wheat breftd we use flour so finely bulled that our 
bi'tiad tastes like wooden chips to a man with a normal taste, 
and it is difficult in small towns to purchase flour from 
which the best elements have not been removed. We use 
only few kinds of vegetables in our rural districts and too 
often only few in the cities. We use insufficient variety 
of meats, and reject some of the best parts of meat-animals 
in large svctiona of the country. Pi'ufessor Patten has 
shown that this renders food needlessly expensive. The 
variety of soils is great, and some kinds are united for cer- 
tain food products, others for a different kind, still others 
for a third kind, and so on indefinitely. When we use 
varied foods each soil can be put to the best use, but when 
we demand principally one or two kinds of food we will 
find these kinds grown on land not adapted for them, as 
whe.1t oh land suitable for maize or barley. 

Consumers and Producers not Two Distinct 
Classes. — Consumers and producers are the same people, 
drones excepted. Producers want consumers, but they only 
want those who have something to give in exchange. If 
they merely want to part with their things they can find 
beggars in abundance to relieve them. Now something to 
give in exchange means production, and production increases 
dcmaud for commodities. It is a mistake to look at economic 
life exclusively from the st.ind-point of either producers or 
consumers. The free-traders have been too inclined to con- 
sider consumers alone, the protectionists producers alone; 
and thus a tendency to one-sidedness has been fostei-ed. At 
the same time it miu<t bo frankly acknowledged there 
is more danger to be feared from an exclusive consideration 
of proiincers, because there are so many kinds of prodnc- 
tiou and their interests are so diverse. There is nut the 


same diversity of interests among men regarded as con- 
sumers. Nevertheless both extremes ought zealously to be 

Crises. — We come again to the topic of crises in 
industrial life. Crises are attended with a glut in the 
market, and it is said that they are caused by over- 
production. A French economist, M. Jean-Baptiste Say, 
however, has developed what is called a theory of the 
market, which has quite generally been accepted by 
economists. It is that there is no such thing as over- 
production, and never can be until all wants are sat- 
isfied. lie says that the remedy for apparent overproduc- 
tion is more production. Men bring commodities to the 
market. What do they desire? Not money, says Say, but 
commodities, money being a mere medium of exchange. 
Now we have already seen that a consumer is a producer. 
If there is a deticieney of consumers it must be because 
those who w^ould like to consume have not produced eco- 
nomic goods for exchange. Overproduction, so called, is 
really underproduction, according to this theory. There is 
a large measure of truth in this theory. When are we most 
troubled with a glut in the market ? Undoubtedly when 
least is produced. When is there the most ready sale for 
commodities? Undoubtedly when every body is at work, 
or when most is being produced. 

There is, however, another side to the question. It is 
quite possible to produce a larger quantity of some com- 
modities, as potatoes, cotton, cloth, etc., than people need. 
More railways are often produced than the people need at 
the time. The effect of disproportionate production is 
this : Some commodities cannot be exchanged. Those 
who have produced them do not make their normal pur- 
chases. There is a falling off in sales of some other com- 
modities, and among those engaged in producing these other 
w^ares some cease to produce. Demand again falls off, and 
still others cease to work, as already explained. There is 
disproportionate production and overproduction of some 


tilings, and finally gt^neral oviirpitxiuction, owing to under- 
cunsmnption, due in tuiu to lack uf purchasing power. 

The intervention of money is no important factor. Un- 
doubtedly commodities are in the end exclianged lor com- 
modities, but the intervention of a medium of exchange 
produces weighty consequences. CominoditieB are in the 
first instance exchanged for money, aod all liabilities must 
be met in money. Houses, lands, etc., can only indirectly 
pay debts, and at times cauuot re»c-ue one from bankruptcy. 
Changes in money-supply, especially a contraction of the 
volume of money, will render it impossible for producers to 
meet their engagements ; production will begin to diminish, 
demand will begin to decrease, and the result is apparent 
general overproduction. 

Remedies for overproduction or underconsumption, as 
one will, are many. Whatever improves industrial society 
in any respect is a partial remedy. It is especially desirable, 
however, to bring producer and consumer as near together 
as possible, because it often happens that mutually desired 
products cannot, as a matter of fact, be exchanged. Ob- 
structions to trade ahonld be reduced to a miiiiiuum where 
they cannot altogetlier be removed. It may in this coni>ec- 
tion be mentioned that toll-roads are among the worst of 
obstructions to free exchange!^, and are an anachronism 
which no enlightened conimunily should tolerate. 

CtMitrolof Conamnption. — Sumptuary laws have existed 
in the past, and have attempted to control cousuinptioti, in par- 
ticular, to prevent extravagam^e. Sumptuary laws are now 
generally considered as antiquated, but it can scarcely be 
doubted that in the past, in a time different from oui-s, they 
have done goo<l. Historical institutions generally have had 
good grounds for tbeir existence, which tbey do not have when 
they outlive the period for which they weie suitable. As a 
rule sumptuary laws are not atlapled to modern times. 

The temperance agitation is designed to control consump- 
tion of one kind, and, whatever may be thouglit of particular 
measures, it is on the whole an excellent thing. It has arisen 


out of the DGoda of the time. It does not dirainUli conaamp* 
lion as a whole, but only one kind of conaumjilioii. We 
havt in Europe and America numerotts remarkable inatanoeB 
of SB increased general consumption foUowini^ a decreased 
coDBumption of iutoxicating beverages, showiug that capital 
and labor have found more abuudanl opportunities than be- 
fore for profitable employment. 

Ohio and Maasachuaetts have attempted a partial control 
of the consumption of tobacco by making it a pnnishable 
oHense to sell cigarettes to boys, and if any way to enforce 
the law can be found their example is worthy of imitation. 

The control of consumption is so difficult that it must be 
left for tiie most part to voluntary agencies, like the Chnrch, 
and associations iormed for this and other purposes. Rulers 
and leadersof society can do much by a (iraiee worthy example 
of simplicity and frugality. The sovereigns of Prussia, the 
House of Ilohenzol lorn, deserve commendation for their exam- 
ple,which has helped to make Germany powerful, while French 
sovereigns have helped to degrade France by extravagance. 
The alleged growing extravagance at our own federal capital, 
Washington, is to be deprecated as a national calamity. 

Curiously enough, one of the worst kinds of extravagance 
in the past, as in the present, is connected with funerala. 
This evil has become su great with us that a society has 
been formed expressly to correct estravagauc© at funerals, 
and the Bishop of the Episcopal Church for the diocese of 
New York, Dr, Potter, has become its president. 

Insurance is a control of certain kinds of consumption. 
Fire insurance, insurance against hail, against accidents, etc., 
is a contrivance whereby individual losses are distributed 
among many, and the burden to any one reduced. It is s 
tine example of solidarity of the right sort. Life insurance 
is somewhat similar, although it is in some of its aspects 
more like accumulation by saving a part of one's income. 
Savings banks, building associations, mutual aid societies, 
and the like, help us to control consumption and to dis- 
tribute it advanlageouflty. 

CONSUMPTlOir. 281 

Analysis of Consumption. — An analysis of the con- 
sumption of individuals, families, and societies is most Jti- 
structive. An analysis of the expenditures of a family ia 
called a family badget. Dr. Eduard Kngei, the former 
distinguished head of the Prussian Statistical Bureau, has 
advanced the theory that it might be possible by a care- 
ful study of a sufficient number of family budgets for 
a period of years to construct a sort of social signal 
service. Hia idea is that' changes in total expenditure and 
in expenditures for various items in a sutfiuient number of 
typical families could enublo us to predict the coming of 
industrial storms. The theory has not, so far r.a the writer 
is aware, ever been fully worked out, but the thought !a 

The following tables copied from the Report of the Massa- 
chusetts Bureau of Statistics of Labor for 1865 are worthy of 
careful examination : 


If EirEimiTcni. 

u or ran CirmKirimi m 


3 = 3 


1. Siibiistonce 

a, ciotiiioft. . , 

3. LoilgiDg. 

4. Firing nnd Lifthting 

6. EdiicHtion, Public Worahip, ate 

6. Legal Protoction. 

1. CarBorHealtii 

8. L'amfort, mealal and bodily TBcrsatioi 


•Thcao flgiiTOs foot up nine instPad of ton. They ai 
the report of tbe Uasaachuaetu Bureau. 



*^ The foregoing triblc demonstrates the points upon the 
strength of which Dr. Eiigel propounds an economio law. 

"The distinct proposicions are : 

" First. That the greater the income, the smaller the rela- 
tive percentage of outlay for subsistence. 

" Second. That the percentage of outlay for clothing is 
approximately the same, whatever the income. 

** Third. That the percentage of the outlay for lodging or 
rent, and for fuel and light, is invariably the same, whatever 
the income. 

" Fourth. That as the income increases in amount the per- 
centage of outlay for sundries becomes greater." 


Items or Expit.MuiruRK. 

Mans, liihlgri'ts, 

Ji!ng«I> Pnuslan 

Mam. Bnma 

Table, 187& 















Sundry oxpenaea. . . 






100 00 





Great Britain. 



Rubsistence.. . 


















Those tables will help us to understand the social troubles 
of our time. They show that the amount which working-men 

* It i.s to bo noted that for Prussia a familj of the intermediate class is 



have for all the higher wants and for health and recreation 
is still extremely small. Civilization develops the higher 
wants, but the improvements of the distributive processes of 
industrial society have not kept pace with the development 
of these wants. 

Professor Patten's Essay on Consumption in Science Eco- 
nomic Discussion, his Premises of Political Economy^ and 
his monographs Stability of J\*ices and The Consumption of 
Wealth, Roscher's Political Economy, English translation, 
Book IV. Jt B. Say's Political Economy, American edition. 
Book I, chapter xv. On the Demand or Market for Commod- 
ities, Temperance tracts and publications, including The 
Voice, of New York, and The Union Signal, the organ of the 
National Woman's Christian Temperance Union, of Chicago. 





Eabueb economic treatises had iin special part devoted to 
finance, but iiaually inclcidcd a few itmre or less valuable 
obflervatious on taxation under some moTn general head, as 
"fuoctioiis of goverumeiit," or " oon sumption." Wlien it 
was incladed under conHumption it was implied that gov 
eminent consumed but did nut produce, and such a sage re 
mark as this embodied tbe economic wisdom of many a text- 
book : " That tai is best whicb is least in amount ! " The 
developmeut of economic science has in recent years been so 
rapid tbat now arguments ag:iinst any discussion of Giianco 
in an elementary trentLse arc likely to take this shape : 
" The subject of finance h eo truly imtncnse, and its peculiar- 
ities are so many and so far-reaching in their character, that 
it is better to make a separate science of it, at least a sepa- 
rate volume of a larger whole, and not to enter upon topics 
which cannot adequately be presented in short space." It 
ia true that the diffifulliea of one who would say any thing 
aboQt finance in ten or a dozen pages are not a light matter; 
yet it does not seem scientifically satisfactory to pass over 
one of the mort important parts of political economy with- 
out a woi-d. It is not, indeed, necessary. An im])resBioii 
of the nature and scope of finance may be presented to the 
reader without any attempt to enl?r into details, which would 
be simply confusing, and even misleading, in so short a 

■Wliat is Public Finance ? — It is often dcfin«d as the 
science which deals with the acquisition of the public reve- 
nues, with their management iind their expenditure. If we 


regard it not as a science by itself we Bhould substitnte/Mift 
of p 'lltical economy for science. It is that part of political 
econoinv, etc. 

We often, and perhaps generally, say simply finance, in- 
stead of ])ublic finance, but as private finance and private 
financiering are used, public finance may properly be employed 
as more explicit. The use of the word here given is that 
which corresponds to ihe same word in the languages of the 
Continent of Europe, and is that which is found in the most 
careful English authors. Curiously enough, a careless em- 
ployment of finance has become too common, which render.i 
it equivalent to a discussion of money and banking. Wo 
thus have popular works which profess to treat of finance and 
yet say nothing about it. Money and banking belong to an- 
other part of ]K)litical economy. 

Significance of F inan ce. — The business of government 
is the largest business in any great modern nation. A man 
died a few years ago who left to his family two hundred mill- 
ions of dollars, and his fortune was spoken of as colossaL 
Some time since the annual revenues of our various govern- 
ments in the United States, federal. State, and local, were over 
throe times that amount, and the author^s investigations lead 
him to believe that they are now quite four times as much, or 
at least eight hundred millions of dollars. The capitaliza- 
tion of the Western Union Telegraph, eighty millions or 
more, is considered enormous, but the surplus revenue of the 
United States government above necessary expenditures 
for a single year would more than purchase all the tele- 
graph lines in the United States, even at their inflated 

The Sub-Treasury System. — The business of goveni- 
ment is so large and so jjirnetrating in its character that it 
affects vitally every oilier business in the country. If onr 
governments rec(*ived a large surplus in money every year and 
kept it from circulation we woul.l shortly have a stringency 
in the money market which would produce a terrible panic. 
It is, in fact, this, among other things, which renders oui* 


surplus federal revenue so difficult a problem. Tlie United 
States alone among nations locks up its money. This is a 
feature of what is called our iiidepeiidcDt or sub-treasury sys- 
tem. The federal revenues flow into these snb- treasuries and 
can only get out in payment of claims on the United States, 
whereas other governments have some kind of connection 
nith banks, perhaps national banks, and do not take out 
of circulation the money received. It has become neeessary 
ill the past to pay interest on the federal debt, the bonds, 
before it was due, in order to restore the money to circula- 
tion, and at the present time bonds are purchased at a pre- 
mium before tliey are due in order to put the money In cir- 

Government BusineSB. — We have another range of 
considerations connected with the financial affairs of gov- 
ernment. Government is the largest employer of labor in 
tbo country, and all other employers and all employes are 
more or less affected by the manner in which it treats its 
employes. Shall govermnent as employer be influenced by 
the demands of ethics 1 Undoubtedly ; as goTcrnmeut is an 
ethical person, government ought to be the model employer, 
insisting upon justice in service and granting justice in con- 
ditions of service and in its remuneration. 

Government Expenditures. — The importance of finance 
becomes even more apparent when we become familiar with the 
magnitude of tJie revenues and expenditures of governments 
i 1 modern times. The fact la often cited that the ex- 
penditures of England from 1685 to 1841 increased forty 
times while tlio population trebled ; but this is only one of 
hundreds of facts, all etjually striking, and this increased ex- 
penditure is equally found' in every modern nation. The 
French budget, as the detailed statement of revenues and ex- 
penditures is called, exceeded one thousand m'Uionsof francs 
in 1828, for the first time, and there was general alann on 
account of tlie large expenditures ; but since that time 
no budget has called for sraatler expeniHturea, while in 
1880 tUev amounted to two thousand millions of francs, and 



since then they have never been less than that som. In 1877 
they were over two thousand six hundred millions, and, add* 
ing local expenditures, over three thousand millions; as large 
an aggregate as the expenses of the people of the United 
States. The expenditures of Great Britain decreased after 
the Napoleonic want on account of cessation of war expen- 
ditures, which are abnormal ; but we notice a steady ten- 
dency to increase since 1833, as indicated by these statistics: 
1833, £48,786,047; 1843, £66,360,611; 1869, £64,805,872; 
1874, £73,211,815, and including payment for Alabama 
award, £76,328,040; 1875, £74,328,040; 1880, £84,106,764; 
1885, £89,092,883; 1886, £92,223,844; 1887, £89,996,752; 
1888, £87,423,645. 

The local ex])enditures of Great Britain, as of all other 
countries, have been increasing more rapidly than national 
expenditures. This table shows the increase in the federal 
expenditures of the United States: 



Civil esUblishmeot 





Total expendltaree!^*^ ®!?,l"*^. ^^ 

leM Interest on the 



expenditure Indad- 
ing interest, but not 
bond parchaacs. 



The following table shows increase in expenditures of 
federal government from 1796 to 1887, and increase in ex-, 
ponditures of fourteen States of 1 796 during the same period, 
and an increase in expenditures of all our States: 

1796. 1887. 

Expenditure for civil government in States named. $1,000,000 $65,000,000 

Federal expenditure 5,700,651 267,932,180 

Kxpondituro of all the Slates 1,000,000 101,534,523 

The State taxes of Ohio increased forty.-six times from 
1826 to 1886, and thft taxes for local purposes over a hundred 
times. The local taxes of New York increased fourteen timea 
between 1827 and 1887. 


These increased ex pe ml i tares are nol iliie lu dUlioiicaty. 
Probably on the whule ad tniiiUt ration of goveriiineiit has 
improved rather than deteriorated during the present cent- 
ury, and where government is moitt undoubtedly honest we 
lind larger increase than in many olbur places. The ad- 
ministration of American cities is inefficient and too often 
corrupt, but the adniini&tralion of English and German 
cities is unquestionably pure, and that of ticrman cities, con- 
ducted by men trained for this work, is skillful. Yet the ex- 
penditures of these cities appear to have inci'eased as rapidly, 
and in many instances, in Germany at least, more rapidly, 
than those of American cities. We are dealing with world- 
wide phenomena. The t-x]ilanation is easy, and proves what 
has already been slated in this book: that while government 
activity is wiser than previously it W'as never before go ex- 
tensive and important. The functions of government are 
measured in a rough sort of way by expenditures of gov- 
ernment, and after we have made due allowance tor depre- 
dations of money and Other counteracting forces it ma>t be 
admitted that the present generation, still more the present 
century, has witnessed a marvelous and on the whole bene- 
ficial extension of the business of government, accompany- 
ing a diminution in petty interferences with individual 
action, Public schools occur to one as a new source of ex- 
penditure every-where in the civilized world. Sewerage, 
sanitation, gas, and electric lights, public parks, public hatha, 
public libraries, ail these are among new items in the budgets 
of cities. Fine State universities all over the world are being 
supported by enlightened democratic sentiment out of pub- 
lic funds, and it is probable that in a not distant future some 
of the greatest American nnivei-aities will be found among 
the beat of the State universities of our West. Expendi- 
tures for works of art are common, especially in Europe, but 
Boston and New York dosomething to keep up art galleries, 
and probably directly or indirectly, as by exemption from 
taxation, many other dties make contributions to art cult- 
ui-e. Expenditures for police have only recently become 

292 Ay lyrnoDucTioN to political economy. 

enormous, and it is a disgrace to some Amerienn cities that 
their police costs as much as their public schools, thou|;h it 
is in keeping with the superstition that government must 
only repress and not prevent wrong-doing. * It ia less than 
fifty years since Sir Robert Peel replaced in England the 
old constabulary with a regular police force, and that is why 
the police are called sometimes '* bobbies " and sometimes 
" peelers." 

We may s.iy that, with some unfortunate exceptions, these 
increased expenditures of governments are a sign of health, 
but do not, fairly considered, reveal any tendency on the part 
of governments to absorb an undue proportion of our Iq- 
d us trial life. 

Compaxisons of Expenditures and Revenues of 
Governments. — Comparisons of expenditures and revenues 
of governments are misleading unless made with care. The 
United States, Germany, and Switzerland are federal gov- 
ernments, while France, Italy, Great Britain, .nnd most coun- 
tries are single Slates. What the central government of 
France does embraces what federal and State governments 
together do in federations. But when even this is borne in 
mind many other facts require attention. What a city in 
one country does a province or a State may do in another. 
We must also ask, " What is received for what is paid out ?'* 
The mediieval custom obtains in Baltimore of compelling 
every one to sweej) the street in front of his house, a most 
expensive and wasteful proceeding, yet one which does not 
appear in municipal expenditures. It costs twenty times 
what it would if done by a well-organized municipal service, 

♦ New York city now spends more for police than for education Accord- 
ing to tli(.» li'tal folate liecord and Bw'fder^s Guide of timt city the expenditure 
of Now York for police in 1887 was $4,235,867, while that for education 
was only $3,994,088. While expenditure of tlie city for police increased 
63 per cent, tiuit for education increased only 17 per cent. Berlin is often 
called the '* model city;" and it is genentlly said that there is no better 
ciiy government. Acconlinjf to a recent article in the New York Evening 
Post, Berlin spends nearly four times as much for education as for 

IN TJi (ID UC Tlili Y. 233 

which would nevertheless incri'aso our taxes. The tiicreased 
taxation would be a Kiviiig. We must ask in comparisona 
of mnnicitial ex|iendimre8, "Are streets well paved, well 
cleaned, sprinkled withwaterinthesummer? Areampleparks 
provided, schools, libraries, art galleries, and the like?" 
We must further distinguish between expenditures and rove- 
nues from taxes because there are other sources of revenue 
than taxation, American city governments cost much in 
proportion to what tbey give, beuausc the; neglect these 
other sources of revenue, Kuropean cities instead of paying 
for wervicee like gas, electric lights, etc., make thern a source 
of revenue. It costs the tax-payers less to govern the city 
of Berlin and to provide itK magnificent schools of alt grades, 
to pave the streels as they are not paved in any American 
city, to furnish parks, and do a great many things not dreamed 
of with us, than it does those who live in Boston to govern 
their city, which is less than halt' the size. 

Revenues of Government.— There are three peima- 
nent sources of revenue. These are, first, productive do- 
liinins; second, industries; third, taxation. There is one 
chief temporary and limited source of revenue; namely, 
loans, which must be repaid out of the other three. There 
are also various minor sources of revenue, like gifts, escheats, 
or property which falls unto the State in default of heirs, " eon- 
science money," that is, money sent without name by ihoae 
who have defrauded the government, and the like. Gifts 
amount to more tlian is ordinarily supposed, although, of 
course, relatively they are a small matter. 

Fonnerly gifts were frequently made for general expendi- 
tures of government. Recently a citizen of New Jersey left 
the United States nearly a million dollars to he used in pay* 
ingthe federal debt. (lifts are now more gcnei-ally made for 
special purposes, as when Mr. Smithson left the United States 
government half a million dollars to be used in the founda- 
tion of the Smithsoninn Institution for the advancement of 
science, A Maryland cilisen has within a few months left 
one of the counties in the Slate, Ilai'foi'd, nearly a hundred 



thoiisaud dolJara for the improvement of its public roadn. 
W'liile the writer wa:< in Heidelberg a fine road wa» I)«iiig 
made in that ully from the prooee<ls of a private gift. Thp^e 
are simply illustrations. Public schools receive many gift", 
but Dot so Doany aud so important gifts in the Uuiled States 
as private foundations, hut in other countries the case ap- 
pears to be diffcient. France, and particularly F^jis, baa 
received large gifts. When our governments bccoiuo 
better, gifts will undoubteiiiy be often received by them. 

Productive Domains yield considerable sums in Ger- 
many. It is generally thought that governments should p^irt 
wiih agricultural land. Not a great deal of arable land is 
retained by governments, although there is not so strong a 
tendency to part with what remains as there was a genei'a- 
tion ago. German States began to sell off their landed 
domains some time Eint-e, forests excepted, because it was 
supposed that private parliea could manage them belter, but 
later esperienee seems to throw doubt in that country on 
this a^tsumption. I^and may be kept and leased; the title tu 
our American western domains might be kept by the United 
States or vested in our separate States and the une p.irted with 
for a period until we have further light on the best form of 
industrial organization; bnt no one would like to aee oar 
American States or federal government engage extensively 
in agriculture. Model farms, or agricultural esperiment 
stations, may be maintained, as at present. 

Industries except those of a monopolistic nature have not 
succeeded well as government undertakings as a rule. Model 
establishments may be maintained, like model farms. Some 
important industries, like the maniifacture of fine china, took 
their origin in government establish men ts. Natural monopo- 
lies ought to yield a large part, uUimntcly, perhaps half in 
great cities, of public rcveiiucs, but ordinary manufactures 
should be rejeeted. Agriculture, like manufactures and com- 
mence, is the priiper field for private enterprises. 

Public Debts. — Great debts are something com- 
paratively new in the woild's history, their origin being so 



recent as the reign of William and Mary in England. How 
iinportant they are now will become apparent by this qnota- 
tion from Professor Henry C. Adam's admirable work on 
Public Debts: "The civiliaed governmcnta of the present 
day are renting under a burden of indebtedneita computed at 
t2T,0O0,0OO,O00. This sum, which does not include local obli- 
gations of any sort, constitutes a mortgage of 1722 upon each 
B(|uare mile of territory over which the burdened governments 
extend their jurisdiction, and shows a per capiia indebted- 
ness of $23 upon their subjects. The total amount of na- 
tional obligation's is equal to seven times the aggregate annual 
rL'TCDUe oC the indebted States. At the liberal estimate of 
£l 50 per day, the payment of accruing interest computed at 
five per cent, would demand the continuous labor of three 
millions of men. Should the people of the United States 
contract to pay the principal of the world's debt, their en- 
gagement would call for the appropriation of a sum equal to 
the total gross product of their industry for three years ; or, 
if annual profits alone were devoted to this purpose, they 
would be enslaved by their contract for the greater part of a 

Alarm has been often expressed on account of these debts. 
They arc undoubtedly a misfortune, and should be paid aa 
Boon as possible. Serious apprehension does not seeiu to be 
called for so far as Germany, England, and the United States 
(ire concerned. The productive property owned by Germany 
U more than snffii-ient to piy her debts, the railways alone 
in several of the German States paying entire interest on the 
debts and leaving a surplus. England is gradually making 
headway against the burden of debt, and the author's inves- 
tigations have shown that American Stales and cities, aa 
well as the federal government, are rapidly extinguishing 
their debts. Comparatively little is owed. Many Slates owe 
nothing; in others the debt is merely nominal, all the bonds 
being owned by the Slate. A few Southern Stales abme are 
having trouble with their debtn, and these will doubtless 
soon emerge from their dithcuUies. Our cities, luo, are in 


this respect placing themselves on a solid basis. Americans 
may feel warranted in optimistic views in the main, so far 
2L» public debts are concerned. 

Constitutional Limitations.— There is a tendency, 
springing out of fright partly premature, to place undue 
constitutional restrictions upon the power to create debtti. 
This tendency ought; to be checked. It places States and 
cities at a disadvantage as compared with private corpora- 
tions. It also tends to throw into the hands of private cor- 
porations enterprises which cannot be paid for out of one 
year's revenues and yet properly belong to the public. Gas- 
works are an illustration. When great improvements, to 
last for gentTations, are to be efiPeeted it is proper that 
part of the bnnlen should be borne by tax-payers in future 
years, and this can only be effected by loans. At the 
present time excessive limitations, unworthy of a free peo- 
ple, make it impossible for s-^me States to improve their 
own property. That is the case with Maryland, which owns 
a canal for the improvement of which her constitution will 
let her borrow no money ! Provision should be made for the 
extinction of all debts within thirty-five years, or say forty 
as a niaxiniiim, that the present may not unduly burden the 
future, and especial precaution should be taken against hasty 
action. In B.iltimore no loans can be made until the people 
have by vole approved of them. One of the most distin- 
guished of the mayors of American cities has expressed the 
fear that even with universal suffrage this would tend to 
ultra-conservatism and prevent improvements really needed. 
The writer hardly thinks this fear warranted by experience. 

Land Nationalization and Municipalization. — Mr. 
Henry George has come forward with a scheme for the abo- 
lition of taxation as ordinarily understood. His scheme is 
stated thus in his own words printed in his organ, T/ie 

*'• IVie Stanrhtrd advocates the abolition of all taxes upon 
industry and the products of industry, and the taking, by 
taxation upon land values, irrespective of improvements, of 


tlie annual rental value of all those various forms of natural 
opportunities embraced under the general term, Land. 

** We hold that to tax labor or its products is to discour- 
age industry. We hold that to tax land values to their full 
amount will render it impossible for any man to exact from 
others a price for the privilege of using those bounties of 
nature in which all living men have an equal right of use; 
that it will compel every individual controlling natural op- 
portunities to utilize them by emi>loyment of labor or aban- 
don them to others; that it will thus provide opportunities 
of work for all men, and secure to each the full reward of 
his labors and that as a result involuntary poverty will be 
abolished, and the greed, intemperance, and vice that sprinj? 
from poverty and the dread of poverty will be swept away." 

He proposes tliat the State shall take the pure economic 
rent of land, and thinks that this will abolish poverty. It 
might prevent people who do not care to use the land from 
keeping land away from those who want to use it, but how 
it would bring about all the predicted blessings it is difficult 
for most people to understand. With the best will and with 
every desire to be unprejudiced the w^riter has never yet 
seen how pure economic rent of agricultural land can be 
separated from the annual value of the improvements on and 
in the land. Apart from all this, the confiscation of rent, or 
even if it be called by so gentle a name as appropriation of 
rent, by the public without compensation to present owners 
will never, in the writer's opinion, appeal to the conscience 
of the American public as a just thing. Abstract reasoning 
based on assumed natural rights will not convince a modem 
nation. It is but another illustration of the danger of rea- 
soning based on natural rights. 

It is easy in cities to separate pure economic rent from 
rent for improvements, and it is done a thousand times a 
day. The principal evils of private land-holding are seen in 
cities, and the objections to land nationalization do not 
wholly apply to land municipalization. Many will favor the 
latter who reject the former, but even in this matter one 


Bhould proceed cautiously. No confiscation or thought of 
confiHcation should for a moment be tolerated, bat if great 
and expensive changes are desired the burden should be dif- 
fused by means of inheritance and other taxes throughout 
the community equitably. Suggestions for some cautious 
steps in land municipalization are offered in the author's work, 
Taxatioji in American States and Cities, in chapter iv of 



Private Property. — As the State — ^and this word is used 
in its generic sense, including our federal government as well 
as separate commonwealths — determines what shall be private 
property, it determines the conditions of its existence, and it 
will be found, on examination, that nowhere has there ever 
existed any such thing as absolute private property. The 
rights of private individuals have always been of a more or 
less limited nature, and among the rights reserved by the 
people in their organic capacity will be found in every civil- 
ized State the right to take a portion of the wealth produced 
for such purposes as the law-making power may deem fit. 
The aim, of course, should be the promotion of the public 

It has been said that there are no limitations to the right 
of the State to take private property. Canon Fremantle says 
that as the State for its purposes can require us to give up 
our lives, it also can ask us to surrender our private property. 
John Stuart Mill holds that public utility is the only basis 
on which private property can rest, and he argues against 
socialism because he believes that the public welfare is best 
served by private property in the greater part of the instru- 
ments of production. 

Constitutions in the United States are the basis of ;the in- 
stitution of private property, and thus largely control taxa- 
tion, but constitutions themselves of course change from time 
to time and are but one kind of law ; namely, the fundamental 
law to which other laws must conform. 

We see, then, that the right to tax is a part of the right of 
private property. Both have grown up together, and both 


are defended alike by constituted authorities. It maybe 
said that to attack the one right is to attempt to invade the 
other. Curious as it may seem, Henry Oeorge, who denies 
the right of private property in land, disputes also the right 
of government to lay taxes, as ordinarily understood, and 
calls taxation robbery. 

Our conception of taxation removes a multitude of con- 
fused notions. Lawyers often say that taxation is a pay- 
ment for j)rotection, yet their law books tell them that those 
laws which apply to payments and debts arising out of fail- 
ure to make payments do not at all apply to taxes. It is 
sr)metimes attempted to defend public schools as adding to 
the value of private property, as if that were supreme, whereas, 
it is solely a question of the welfare of the land, and, of 
course, property is but a means to an end, and the end is 
man. The elements of private contracts are not present in 

O-OTemment a Partner in Production, — ^Taxes have 
been defended on another ground. It is said that govern- 
ment participates in all production, and is as much a factor 
in the creation of wealth as land, labor, or capitaL Truly 
this is so, for without government we should have anarchy 
and a return to barbarism, which would destroy all produc- 
tion. It is then held that, as government is a factor in pro- 
duction, it is entitled to a share of the wealth produced. Thif 
is a sound position, but peculiar principles regulate the share 
of government. The portions which go to land, to labor, and to 
caj)it:il are determined chiefly by voluntary agreement, where- 
as government by virtue of its own sovereignty determines 
what share it will take. It may be asked, then. What guar- 
antee have we that government will not take an undue share 
of the annual income of the country ? We have the same 
guarantee that we have that government will not abuse its 
otlier powers : the moral sense of those who govern ; also 
tlieir self -interest. Government in a republic is after all only* 
the peo])le in their organic capacity, and the question is this: 
^^'''11 the peor?e ijiiure themselves, or suffer themselves to be 


injured? Self-government rests u]K>a the hypothesis that 
they will not. 

Ah it is esBentiiil tliat any reform of taxattoa should be 
based on a clear concejition of taxation, it is farther neoes- 
Bary, if wc would aut well, that we uhould proceed with a 
correct understanding of some general propositions applica- 
ole tu taxation. 

It is lirHt of all to be renieinbere<l that taxation in itself ia 
not an evil; it \a a blessing. This sounds paradoxical; does 
it not? Kevertfaeless, it is true, as it will be found on an ex- 
amination of tlieliistorical dc'velopmenl of constitutional gov- 
ernments that taxation was the iustni mentality whereby the 
common people obtained their liberties. Monarchs needed 
revenues, and wure obliged to ask for them; as a matter 
of fact, they could not secure sufficient and regular revenues 
otherwise. These revenues have been granted condition- 
ally. " Yes," the people Maid to their eoieruigns, "we will 
grant you the revenues if you will grant us our demands." 
Thus step by step popular rights have been secured. The 
total abolition of taxation would undoubtedly be one of the 
most effective and most dangerous blows to popular govern- 
ment which it could well receive. 

Taxation Increases with Freedom. — Very generally 
increased freedom is accompanied by iuci'eased taxation. Com- 
pare despotic Russia's State expenditure for schools, thirteen 
cents per capita, with that of the enlightened and free re- 
public, the Stat« or canton of Zurich, in Switzerland, one 
dollar and twenty-five cents per capita. It may be, however, 
more correct to say that governmental expenditures ai'e large 
in all civilized nations; for expenditures are one thing and 
taxes are another, because there are other sources of revenue 
Jian taxation. 

Small expenditures mean small results, and no money we 
pay begins to yield such returns as money paid in taxation, 
provided always that it is prudently expended by a good gov- 
ernment. Let a small houw-owner in a city like Baltimore, 
who pays, say, fifty dollars a year in taxes, reflect on what he 



receives in return. lie receives, dollar for dollar, five times 
as much aa for any other expenditure. Streets, libraries, 
free schools, protection to property and person, lucludiag 
health department, pleas ure-g rounds roj'al in their magnif- 
icence — all these are placed at his service. What private 
corporation ever gave one fifth as much for the same money ? 
When we compare various countries at the present time, we 
find that expenditures of barbarous and backward countries 
are small. In some, doubtless, there is no real taxation, for the 
tribute of the East is different in its nature from taxation, it 
is more like ransom; something exacted of a subjugated people, 
not self-imposed taxes. Ho if we compare the past with the 
present we shall find large increase in expenditures with ad- 
van™ of civilization. 

Taxation Increases Production. — Another advantage 
of taxation is mentioned hy the Scotch political economist 
McCnJioch. This advantage of taxes will be described 
in his own words: They stimulate individuals to endeavor, 
by increased industry and economy, to repair the breach 
taxation has made in their fortunes, and it not infrequently 
happens that their efforts do more than this, and that, con- 
sequently, tlie national wealth is increased tlirougli increase 
of taxation. 

" But we must bo on our guard against an abuse of this 
doctrine. To render an increase of taxation productive of 
greater exertions, economy, and invention, it should be slow- 
ly and gradually brought about, and it should never be car- 
ried to such a height as to incapacitate individuals from mak- 
ing the sacrifices it imposes by such an increase of industry 
and economy as it may be in their power to make, without 
requiring any very violent change in their habits. . . . Such 
an excessive weight of taxation as it was deemed impossible 
to meet would not stimulate but destroy exertion. Instead 
of producing new efforts of ingenuity and economy, it would 
produce only despair." 

Let us consider another paradox: no country was ever ytt 
ruined by large expenttltures of' money by the pablk and for 


the pttUie. Conntries bare been ruined by evils conDeeteA 
witb taxntion. Robbery and extravagance have frequently- 
accompanied both expeDdituroe of government and taxation, 
and tbese have ruined ^eat iiiitiona, Rome may be cited 
as an instance. The case of France before the RevoliitioD 
is also instructive. Books are full of llie evils of burden- 
some Uxes in pre-revolwlionary France, but the tnUh is that 
the total amount raised by taxation in France wag ridicu- 
lously snkall as compared with ninetecntb century taxation. 
The trouble was that the burden was unjustly distributed, 
and the wealthiest olawtes shifted the taxes on the weak and 
defeuBclesB.* Fiance has since then prospered under heavier 
taxation, The taxes over which our forefathers in this 
country and in England fought, bled, and died were not 
large, and the taxes in themselves wei'e not the real griev- 
ance. It was evils connected with taxati<m against which 
they succeasfnlly struggled. 

Public PaTBimony. — Let us next turn our attention to 
Eome of the evil results of undue economy, or more properly 
speaking, niggardliness. 

JJie Vhautiniqiiaii in its issue for October, 1888, alluded 
to tiie case of Duluth, Minnesota, and Denver, Colorado. 
Typhoid fever broke out in both cities hutt fall on account 
of failure to spend suflicieut money for public health; and 
a few years ago, Memjihis, Tennessee, lost two thirds of 
her po]iniation and one fourth of her eonimcrce on account of 
a nif^:far<lly public jjolicy. " And still," says the editor of 
77fB Chinduiiqiiaii, "city councils hesitate about incurring 
the expense of sewers and water-works," 

A scandal has arisen in Brooklyn abont overcrowding in 
an insane asylum, and short-sighted parsimony In cities is 
continually leading to waste and destruction. Our greal 
cities are now failing to provide sufficient school accommoda- 
tiouB for childrCTi of school age, and large numbers are grow- 
ing up to take their place anwug the ignorant and vicious 

* VaubBn, otio at the ^realeBt of the FreniA wonomic writers of tbs 
(dgliteeuL)i century, lirioga IliU out clcsfly in his work, Dime Boj^aU. 


pnor. We can see in our national capital many results of 
the idea that thai is the best administration wbieh spends 
least. It is on that account that Congress refuses to ]iay the 
superintendent of schools In Washington a salary in pro- 
portion to the importanco of the otHue. It is on this account 
that Congress has never yet made a decent appropriation for 
the library of the Bureau of Education, which is doing so 
valuable a work. It is on this account that heads of bureaus 
will not ask for money which they know they could use for 
the public advantage. It is on this account that clerks have 
actually found it difficult to get blotting paper and pencils 
for their offices. It is on thia account that Congress reduced 
the appropriation for our national library building from tlO,- 
000,000 to 44,000,000 — a shame and humiliation to us. How 
could money be better spent than in erecting a suitable 
building for the greatest libi-ary in the country? Ought it 
not to be a grand building to symbolize the value of intel- 
lectual treasures and to impress upon the senses the nature 
of true riches ? Now the building must be stripped of all 
ornamentation. One Congressman said truly, " Ten milliona 
is, after all, only a per capita expenditure of twenty cents." 
But another Congressman replied, " Twenty cents means 
three loaves of bread." Perhaps this was a bid for labor 
votes, but could demagogism go further ? The best part of 
the press laments this unseemly parsimony, but it should re- 
member that it is a legitimate outcome of the notion that 
that is the best administration which spends least. 

We must guard against jiarsimony as well as extravagance, 
and in some respects the former is more dangerous, because 
it more readily conceals itself beneath the mask of patriot- 
ism. We praise a private individual who spends bountifully, 
when his expenditures are justified by results. The ease of 
A city is similar. We must be very careful, very prudent. 
What is needed is a more careful examination of particulars. 
We praise and we blame too much " in a lump." To citiea 
and countries, as well as to individuals, does this proverb of 
Solomon apply : " There is that scattereth and yet increas- 


eth; and there is that withholdeth more than is meet, but it 
tendeth to poverty." This is emphasized on account of the 
vast amount of nonsense talked about the large expenditures 
of States and cities. More or less is wasted, more or less 
xStolen, but, after all, comparatively little; and we observe that 
governmental expenditures have increased most rapidly where 
there is no suspicion, even, of corruption. Those are looking 
for a Utopia who seek to reduce very greatly expenditures 
of modern States and cities. We can make no headway 
against a strong current of national life like that which brings 
about increased expenditures of governments. We must 
rather put ourselves in it and try to guide and direct it. 
We have three main facts to bear in mind: 

1. We must set our faces against all extravagance, jobbery, 
and robbery. 

2. We must avoid the " too much " and the " too little.'* 
Prudent liberality will yield best results. We must look 
ahead. To conserve future interests is one of the special 
functions of government. 

3. It is a hard thing for some to live under present burdens. 
The remedies for the evils connected with taxation are in 

general of two kinds: 

1. Better adjustment of the burdens of taxation. 

2. Better utilization of public resources. 

1. Better Adjustment of the B\irdens of Taxation. 
— Our national taxes fall chiefly on commodities, and taxes 
of this kind are called indirect. They are not proportioned 
to the value either of the property or of the income of citi- 
zens, and are very generally regarded as unjust to the poorer 
classes unless counterbalanced by other taxes which bear 
more heavily on the rich than on the poor and well-to-do. 

Indirect federal taxes are of two kinds: customs duties, or 
taxes on imported commodities, and internal revenue, or ex- 
cise taxes, as they are also technically called, or taxes on ar- 
ticles produced in the United States. Internal revenue taxes 
are now confined to a few products, like oleomargarine, to- 
bacco, and intoxicating beverages, the two latter yielding 


nearly all of ihe iniemal revenues. Am mg thiakers there 
BsctDB to be a general eentiment in favor of the retention of 
taxes on article§ produced in the couiiti-y which are now 
taxed by the federal goverument. Tlie question of free 
trade and protection in not involved. When the national 
guveniineut dqwnds exclusively upon revenues from taxes 
ou imported articles the revenues arc too unoeitain and loo 
irregidar, and yield least when most is needed. The Slate 
and city revenues are largely raised by taxes on property. 
Such taxes, and taxes on incomes, are called direct taxex. 

Property in States and cities is generally valued and all 
taxed at a uniform rate. The ditiieulty is that real estate, 
that is, lands and houses, is visible and can readily lie found 
by tax assessors, while a great deal of property— say one half 
of all property— is in the form of stocks, bonds, instrumenta 
of credit, and the like, and often cannot be found at all. The 
result is that real estate generally pays an undue share of taxes. 
ComiK?tent bttsiness men in Boston, including the president 
of the Boston Merchants' AssociMion, Mr. Jonathan A. Lane, 
have estimated that iu Boston personal property is four times 
as valnahle as real estate, although it ia assessed for only one 
fourth as much. The problem is a better adjustment of the 
burdens of State and local taxes, so as to make those pay 
their share who own invisible or easily concealed property; 
also BO as to make that considerable class contribute something 
to the support of government who have little or no prop- 
erty, but enjoy, nevertheless, large incomes, sometimes larger 
tlian the accumulations of the lifc'time of the ordinary man. 

Inoome Tax. — An income tax seems the most promising 
remedy, but against this there is in many ijuarters an unrea- 
sonable prejudice. All efforts, however, to find personal 
property have so far proved unavailing, and there is no pros- 
pect that they will succeed better in the future. Space is 
too limited to treat at length of this anl>ject. It may be said 
that while general personal property taxes become worse and 
worse the longer they exist, wherever a rational kind of in- 
come tax has been laid, as in Switzerland, Prussia, and £□• 



gtariO, tile longer it lasts the belter it works, and the more 
general the pupular approval. It is the only way in which a 
targe and inducntial and even rieli elaus can be made to bear 
its fair share of taxex. Where tliia class, including jirofes- 
sioual men, in exem]>t From taxation its memlierM are apt to 
l>ecomc careless and indifferent about government — poor 
citizens. Income taxes are iu harmony with the democratic 
sentiment of popular government. 

Inheritances find Bequests can be made to yield more 
than at prewHit without any infringement of the rights of 
individual property. Collateral inheritances are taxed by 
New York, Pennsylvania, and Marjland, but why should 
collateral inheritance apart from a will be allowed at all ex- 
cept among near relatives ? Wby should thij-d cousins iti- 
Iterit from one another at all unless money is left by will ? 
Are third cousins nearer to one than the town or city in which 
one has lived, and where one has been able to acquire a fortune ? 
The extent to which intestate collateral inheritance is carried 
is a survival of the sentiment of tlie time when people lived 
in clans, and is ridiculous in our day. Right and duty should 
be co-ordinated. Am I compelled hy law to support an uncle 
who is unable by incapacity to earn a livelihood ? Then I 
should inherit from him; otherwise not, unless he leaves me 
property by will. The property should go to the State iu the 
absence of near relatives when no will is made. The enlight- 
ened English jurist, Jeremy Bentiiam, wished to restrict in- 
heritance and extend escheat, and thus abolish taxation alto- 
gether, but this is going too far. 

Several terms must be explained which readers will meet 
with in their studies in finance. Proportional taxes are 
taxes in exact proportion to the property or income taxed. 
The rate is constant: one per cent., two per cent., or three 
per cent., as the case may be, throughout. Progressive taxes 
are taxes with an increasing percentage with increasing 
property or income: as one per cent, on the first thousand 
dollars taxed, two per cent, on the second thousand, and the 
like. Progressive taxation is often called graduated taxa- 



tion. A tax is regressive when the rate per cent, increases 
as the property taxed decreases. If a man with five thou- 
sand dollars is taxed two per cent, and one with three thou- 
8«and is taxed three per cent, this is regressive taxation. 
Business-license taxes in Maryland, and generally in South- 
ern States, are regressive. Indirect taxes are said to be, in 
their effect on the citizens, regressive. When we have one 
uniform rate of taxation but unequal assessment, the wealthy 
being assesstMl relatively less than the well-to-do and the 
poor, we also have regressive taxation. 

A tax is digressive if a certain sum is exempt from taxa- 
tion, and all above that sum is taxed at one uniform rate. 

If all incomes of six hundred dollars are exempt from 
taxation and all incomes above that sum and only on that 
excess were taxed, say one per cent., it would be digressive 
taxation. Income taxes are often digressive. Digressive 
taxes are also called j)rogressional. 

2. Better Utilization of Public Resources. — By this 
is meant that public property and its use should be paid for. 
("itios and States should stop making presents to corpora- 
tions. If street-car companies use the streets they should 
pay for the j>rivilege. This is sometimes done, but too 
often the public is robbed. ITie Baltimore street -car compa- 
nies, as has already been stated, pay to the city nine dollars 
for every hundred they collect, but this is not enough. 
When five-cent fares are charged, street-car companies in 
groat cities can sometimes afford to pay as high as forty or 
fifty dollars to the city for every hundred they collect. 
Similar prinoij)les should be applied to other corporations 
using streets, like gas, electric lighting, telephone companies. 
It is, however, best for the city to manufacture its own gas 
and electric lights and to provide itself with water. This 
part of our subject has already been sufficiently discussed for 
J) resent purposes. 





The explanation already given of economic life would in 
itself lead us naturally to look for a corresponding evolution 
of economic science, and this has indeed taken place. E very- 
economic system, like every philosophical system, is to a 
greater or less extent a mirror in which is reflected the aims, 
the character, the time-spirit — in short, the entire life, na- 
tional, mental, spiritual — of the period when it arose and of 
any period in which it received support, and of the place 
where it arose and of any other place where it gained sup- 
port. A man can no more escape entirely the influence of 
his environments than he can lift himself over a fence by 
tugging at his boot-straps. One writer will reflect one part 
of the life of the people, a second another side of this life, 
and so on indefinitely. Thus we have a picture of the con- 
flicting interests of the age. Dissatisfaction with an age 
and attempts at reform are likewise products of time and 
place, and perhaps more clearly than any thing else reveal its 
true character. This must not be regarded as an expression 
of political fatalism, for the will of man is always a main 
factor to be considered. 

These considerations show us the nature of the evolution of 
economic science and reveal to us the utility of the study 
of this evolution in the history of political economy. The 
present is a product of the past. 

The history of political economy points out past errors and 

enables us to avoid a repetition of them. It trains us in 

habits of economic reasoning. Political economy can never 

give ready-made answers to all the perplexing questions of 

practical life, and that for this reason: the present is never 


quito like the past. Some new element is always involved. 
N evert holoss, old mistakes are often still mistakes when tried 
a^iin, and these can frequently be avoided by a knowledge 
of what has been. 

A study of the evolution of economic life and its proper 
science may reveal to us the course of progress. It may — 
indt»iHl it diK^s — reveal to us powerful on-moving currents 
which it were folly to attempt to turn back, but which, nev- 
ertheless, can be guided and directed within certain bounds. 

The Physiocrats. — Political economy, as a distinct sci- 
ence, began when there was first an attempt to treat system- 
atically the general facts pertaining to the entire economic 
life of society, separating them from other facts as one 
branch of knowledge. This was first done in the latter half 
of the last century by writers of a French school whom we 
call Physiocrats. Political economy is, then, little more than 
one hundred years old. 

Political economy did not, however, come at once suddenly 
into being. Economic ideas are found in all the greatest 
writers of the past on politics, philosophy, and religion, and 
these gradually grew and developed until they were separated 
out of a larger whole and constructed into a separate science. 

Tlie question is often asked, Why did not economic science, 
as a st»parate science, arise earlier in the worWs history ? 
An examination of this history gives the answer. We may 
take the Greeks. VHij did the Greeks not have a complete 
politic«al economy ? Another question will help us to answer 
why. What have always been the two most fruitful sources of 
economic inquiry ? They have been financial operations of 
ufovernments and questions concerning labor. Now, great 
Hiiancial operations of governments are modern. The rev- 
enues of Athens at the beginning of the Peloponnesian War, 
in the fifth century before the Christian era, amounted to 
something like a million of dollars; a mere bagatelle in a 
modern national budget, which runs into the hundreds of 
millions. It has already been mentioned that national debts 
are scarcely two hundred years old. Taxes like those we know 


arc also new. For over a century Romu was iintaxtil, and 
Cicero in one of hia works speaks of taxation almost as wo 
might of a reign of anarchy. But what about labor ? Labor 
was despisud. Aristotle thought that all industi-ial classes, 
employers and eniployijs alike, were unworthy of oitizen- 
Khip. Yet this is not all; political economy deals with in- 
dustrial relations, and these relations wort less numerous and 
less important tn ancient times. This subject has already 
been treated. 

Whpn we pass on from Rome to the Middle Ages, after 
the breakdown of the Roman Empire, we find an unsettled 
condition of society, wh;ch would naturally retard the devel- 
opment of political economy. As other causes for the fail- 
ure of the Middle Ages to develop a political economy may 
be mentioned the too exclusive devotion of ecbolars to relig- 
ion and metaphysics, the absorption with ancient authorities, 
and the dread of originality. The great men of the Middle 
Ages had their own work, and this was the recoast ruction uf 
a civilization on the ruins of the old world. Church and 
empire were the agencies for this reconstruction, and these 
absorbed the talent of the times. 

At the close of the fifteenth century a new world in the 
Occident was discovered, and this gave a new impulse to 
thought, and within two centuries forced new and strange eco- 
nonuc phenomena upon the attention of Enropeans. This new 
world has continued to force new i)henomena of an economio 
nature upon the old world even up to the present year, and 
has ever been a fruitful cause of economic study. The new 
course of trade to the East, which followed upon the discov- 
ery of the route to India around the Cape of Good Hope by 
Vaaco ila Gama in 1498, must be mentioned as still another 
cause of eoonoraio inquiry. 

The great Protestant Reformation in the sixteenth century 
effected radical changes in economic, polilical, and intellect- 
ual life, and gave rise to speculations which finally termi- 
nated in wliat is technically known in the history of political 
economy as the mtrc^iutilc system. 




It is not proposed to present a history of political econom v 
which would require a far larger work than the present but 
Biiiipl y to indicate in the briefest possible way the main cur- 
riMilM of eoononiio thought. 

The Orient.— Little attention is usually given by econo- 
mists to the Kast, i)artly because it is probably insufficiently 
appreciated, partly because its general life has been so im- 
perfectly investigated and materials for knowledge are still so 
imperfect and difficult of access; finally, partly because our 
young science has found more fruitful fields still unw^orked. 
The ancient Eastern nations were theocracies, and under the 
pui<la"ee of priests who prescribed duties and often methods 
of economic action, frequently going into details. The 
ethics of economics were somewhat cultivated, and such as 
thev were they were reduced to practice. They entered 
into every-day life as our higher ethical principles unfort- 
unately do not. We encounter warnings against the sins 
of wrath, pride, and arrogance, and exhortations to a kindly 
treatment of inferiors. Thrift and temperance were en- 
couraged, just weights and measures prescribed. A simple 
division of labor between economic classes took place and 
these classes sometimes became estates. Indeed, Sir Henry 
Maine says that in India to-day, with the exception of 
the two highest castes, "caste is merely a name for a 
trade or occupation."* Conservatism was held to be a 
sacred duty and radical changes were considered rebellions 
against the divine law. Progress was thus rendered im- 
* Village CommuniiieBt American edition, p. 67. 


possible. National exclusiveness was a universal policy. 
Trades, commerce, and manufactures were held in slight 
esteem, but agriculture met with more favor. The ethico- 
economic ideas of the Orient deserve especial attention. The 
economic ideas of one Oriental people, the Jews, have been 
tolerably well preserved in the Bible. These should be 
studied more carefully than they have been by economists. 
Biblical views about usury, debt, and land tenure are espe- 
cially important. 

The G-reeks. — The three writers among the Greeks most 
interesting to the economist are Plato, Aristotle, and Xeno- 
phon, but by far the most important is Aristotle. 

Plato describes a Utopia in his Republic, His aim was to 
picture an ideal society in which the ills of society were to 
be corrected by a communistic State, and he included a 
conmiunism even of wives and children, going further than 
modem communists. The communism of Plato admitted^ 
strange as it may seem, slavery, on which his social super- 
structure indeed rested as a base. The Laws of Plato is a 
more practical work. It aims to present not the best possi- 
ble state, but only the second best, and deals to a greater ex- 
tent with existing institutions. 

Aristotle's principal work for us is the Politics, and it is 
indeed one of the most remarkable books in the world's his- 
tory. Its influence is strongly felt to-day, for it was care- 
fully studied by theologians of the Middle Ages, and through 
them entered into the thought and life of their time; and the 
thought and life of their time can be seen by the careful 
student to have entered in a thousand ways into the institu- 
tions of the nineteenth century. Gladstone, the English 
statesman, says the Politics of Aristotle is one of the three 
books from which he has learned most. 

Aristotle combated the communism of Plato, and ad- 
vanced arguments in favor of private property which we 
can hear any day uttered as new and original truth. But 
Aristotle was no anarchist. He said man by nature is a 
political being, more literally a State being, and he accorded 


to the State large functions. Aristotle sabordinated strictly 
the industrial life to the higher life-spheres of society, and 
in some respects the most advanced political economy is a 
return to Aristotle. 

Aristotle, like the ancients generally, taught the sinfulness 
of interest. Money, he said, was barren. One piece of coin 
cannot beget another piece of coin; hence interest should 
not be allowed. This is only a part of his argument, but 
the space is too brief for further presentation. It should, 
however, be remembered that many of the arguments in 
favor of interest now heard would not hold for Aristotle^s 

Among the works of Xenophon there may be mentioned 
as of special importance Hierq^ the CyropcBdiay and the 
Heoenues of Athens, The first two are romances, describ- 
ing an ideal State, and the third deals with the finances of 

The Romans. — There is less to be said about the Romans 
than about the Greeks in a history of the evolution of eco- 
nomics. Their economic life was remarkable and instructive, 
exhibiting the disastrous consequences of slave labor and of 
an excessive concentration of wealth, particularly of landed 
property. Pliny said the great estates, the latifundia, caused 
the downfall of Rome. The moral degeneracy of the empire 
is fruitful of economic consequences which deserve serious 
attention, and among these have already been mentioned 
wanton luxury and wide-spread poverty. But while the eco- 
nomic institutions of the Romans and the manifestations of 
their character in their economic life will repay investigation 
they were not remarkable for independent thoughts. Their 
economic ideas, like their philosophical doctrines, were bor- 
rowed from the Greeks, and generally in the history of 
thought they occupy an inferior position. 

Cicero, Seneca, and the elder Pliny are mentioned among 
the philosophers whose economic ideas are noteworthy, and 
Cato, Varro, and Columella among the writers on agri- 



The jurists are, however, the most important of all. What^ 
ever maybe its imperfections, the -Roman law, the eorjytu 
j'tris cioilii, is the most remarkable legal system the world 
has ever seen, and fur training in careful and aucurate state- 
ment is unisurpaKsed. Probably as a. training for economio 
studies Roman law is among the most valuable branches of 
l<?aming. It gives us also invaluable information about tlie 
economic institutions and measures of Rome. 

Christianity. — The economic ideas of Christianity come 
next in point of time, but not next in the order of evolution. 
Christianity seems to be interposed here out of the logical 
order, and some will regard this as a proof of its divine ori- 
gin. Suddenly we pass from weak and imperfect ideas, many 
of which are now quite antiquated, to a sublime ideal of eco- 
nomic life which we are only beginning to try to realize. 
The most modern movement in eoonoraies, as it is in part a 
return to Aristotle, may also be regarded as in part a return 
to the teaching of Christ, although yet far from the ideal 
which he placed before men, Christianity asserts the honor- 
ableness of toil, which is the exact opposite of what thu 
Greeks and other ancients had taught. Christ and his apos- 
tles were workiug-men whom Ariat^Jtle would have deemed 
unworthy of citizenship. This bad, both directly and indi- 
rectly, tremendous economic consequences. It has, among 
other things, been a constant force pushing in the direction 
of the emancipation of labor. The doctrine of brotherhood 
is a powerful economic factor. Let us bear each other's 
burdens. Let each one bear hia own burden also. Let 
ns be sure not to bo a burden to others, and at the same 
lime help others. This tends to the conservation of human 
energy and to the development of man's physical and other 

The duty and the right of general enlightenment spring 
from Christianity- If humanity is so precious as Christianity 
teaches, all the faculties of each person should be developed 
to their utmost. Education, with its undoubted eoonomio 
value, follows necessarily. 


Benevolence, which Professor Sidgwick in his HuAory 
of Ethics says is the distinctive teaching which Chris- 
tianity added to ethics, tends to the maintenance and 
increase of efficiency of men and the general productive 
power of men. 

The prohibition of laxury implied in the command to love 
our neighbor as ourselves tends to the preservation of nations. 
Self-sacrifice and self-control in this as in other directions 
have high economic value. 

The Middle Ages. — ^Little can be added in our bird's-eye 
view to what has already been said about economic specula- 
tion in this period. The religious and moral aspects of eco- 
nomic questions were considered by the theologians, who ab- 
sorbed the learning of the time, and the canonical law, corpitts 
juris cafwniciy contains what we may regard as the Church 
doctrine of practical law in the Middle Ages. The most re- 
markable writer, from an economic stand-point, as well as 
from other stand-points, who falls within this period was 
undoubtedly Thomas Aquinas, of the thirteenth century, the 
study of whose writings has recently been urged by the 
pope. He treated chiefly two economic topics: just price, 
justum prttiunty and interest. The conception of just price 
still lingers, and the doctrine that all interest is sinful 
was in the sixteenth century modified and became the doc- 
trine that excessive interest is sinful, and usury in later times 
has meant simply excessive interest, and not any inter- 
est at all, as formerly. The teachings of Aquinas in modified 
form still exist as a force in our thoughts and in our laws. 
Aquinas wrote commentaries on Aristotle, and what he taught 
was Aristotelian ism modified by Christianity. 

Professor Roscher says that the schoolmen of the Middle 
Ages asked in their economic inquiries, What is ethically 
allowable? that in the development of political economy 
we pass on to the fiscal jurists, who asked. What is legally 
allowable? that the economic writers and teachers of the 
early modern period, that which we are about to consider, 
the mercantilists and cameralists, as the teachers of economic 


ideas to German office-holders were called, asked, What 
is useful ? and that, finally, in most modern times economists 
have arrived at the insight that real and permanent utility 
can be attained only through both the legally allowable and 
the morally allowable. In other words, law, morality, and 
utility must harmonize.* 

* Koscher's Finamunssenschaft^ sect 12 of second edition. 



W» now pass on to economic systems, which have been 
treated in the present work more or less fully. We can only 
gather together the threads and try to form a brief contin- 
uous narrative. 

The Mercantilists. — ^The mercantile system, also called 
('olbertism, restrictive system, and commercial system, ob- 
tained from the early part of the sixteenth century until late 
in the eighteenth century, and its influence is still felt. Mer- 
cantilism is not, strictly speaking, the product of a school of 
political economists, but rather the name given to that eco- 
nomic policy of statesmen and to those detached economic 
views of writers which prevailed during this period. Most 
prominent among the statesmen who were mercantilists may 
be named Colbert, of France, Frederick the Great, of Prussia, 
and Cromwell, of England. Serra, an Italian, early in the 
seventeenth century presented a moderate and systematic 
statement of their views in a work entitled, A Brief Treatise 
on Causes which make Gold and Silver Abound where there 
are no Mines. Thomas Mun, in England, a generation later, 
wrote a valuable treatise from the stand-point of the mercan- 
tilists, called, EnglanxTs Treasure by Foreign Irade, or the 
JBalance of our Trade the Rule of our Treasure, while Sir 
James Steuart's Inquiries into the Principles of Political 
Economy, published in 1767, may be regarded as closing the 
development of the theory of mercantilism. The one idea 
common to all mercantilists was this : a nation ought to 
strive to export a quantity of goods of greater value than it 
imports, in order that the difference may be imported in gold 
and silver and the home supply of the precious metals in- 


creased. Every lliiiig else was subordinated to tliis policy. 
A favorable lialancu of trade was the aim, and we call their 
policy " the balance of trade theory." Tariffs were laid with 
this in view and protectionism was encouraged ; yet it was 
something different from modem protectionism. It was the 
avowed aim of the tn^cantilists to make both agricult- 
iir.ll products and labor cheap, in order that manufactured 
articles might be cheap and a large sale of tiiem abroad 
effected. The eKporlation of raw material was of ten entirely 

The Physiocrats. — The physioci'ats were the first to pre- 
sent a rounded-out system of economic doctrine, and may thus 
he called the founders of our science. Quesnay, a physician, , 
Gouraay, a mGrehant, and Turgot, the statesman, are their 
three principal authors. The physiocrats taught the doc- 
trine of natural laws already expounded, and as a consequence 
loudly proclaimed iho maxim laUitez /aire. They taught 
furthermore that agriculture was the only pursuit which 
added to the wealth of the country, and that additions to 
wealth must come from pure economic rent. They advo- 
cated in consequence the doctrine that all other taxes should 
be abolished and ail taxes levied on rent. All taxes must, 
they thought, In the end come out of rent anyway, and it iei 
better that the landlord should pay them at once instead of 
waiting until they have passed through five or six hands and 
varioiw profits have added to Iheir amount. The physiocrats 
were .ar.Ienl champiouM of free trade. 

Adam Smith. — Adam Smith, of Scotland, published in 
1770 the most influential economic treatise ever written. It 
was called T/ie Wealth of Niithiis. Adam Smith is usually, 
tliongli perha;>s withont justice to the physiocrats, called the 
father of political economy. His writings, critically exam- 
ined, are found to be very similar to those of the physiocrats, 
but further developed and modified by his Scotch training 
and habit of mind. We find in Adam Smith free trade but 
less extremely stated; laiaaez faire, but with more careful 
limitation; and the doctrine of natnral laws and harmony of 


the working of the selfish interests, yet stated more gaardedly; 
Adam Smith, however, regards all industrial parsuits which 
are concerned with material things as truly productive, and 
does ^not propose to limit all taxes to rent, although when 
one goes through with the list of taxes which he rejects it is 
found that not many things save rent are left to be taxed. 

Malthus. — Mai thus published at the close of the last cent- 
ury his celebrated work, TTie Theory of Population^ in which 
he advocated the Malthusian theory already explained. This 
was his main contribution to the evolution of economio 

Ricardo. — Ricardo's principal work is called Principles 
of Political Economy and Txixutvm, It was published in 
1817, and in it Ricanlo elaborates, although he did not orig- 
inate, the usually received doctrine of rent, which is the one 
explained in this book, and called the Ricardian doctrine of 
rent. Rent, he said, is due to the niggardliness and not to the 
bounty of nature, and otherwise his doctrines had a pessi- 
mistic tinge, as when he teaches the natural diversity of 
interest between wage-receivers and profit-makers, and the 
antagonism between the interests of land-owners and all 
other classes of society. Personally he was a kind man, 
and undoubtedly sincerely devoted to the advancement of 
humanity, although he is considered so hard-hearted as an 
economist. Ricardo is remarkable for his extreme develop- 
ment of the abstract deductive method, and it is note- 
worthy that this development is not in the writings of a 
professional scholar but in the work of one of the most 
successful bankers and brokers of his day. Socialists claim 
that developing still further, or to their logical outcome, 
the teachings of Ricardo they arrive at socialism, and 
Ricardo ranks high among scientific socialists. Ricardo 
illustrates, in the author's opinion, the dangers of the de- 
ductive method. 

John Stiiaxt Mill. — John Stuart Mill, who lived from 
1800 to 1873, closed one period in the development of eco- 
nomic science and began another in England. He started aa 


a thorough-going follower of Ricardo, but added so much to 
the Ricardian doctrines that his treatise became largely new. 
The old and new do not harmonize, however, and the result is 
a work, one of the most valuable of modern times, and yet full 
of inconsistencies. He did the best that could be done with 
the old deductive basis on which he reared his superstructure, 
and he showed the needs of new methods. 

Bosoher, Knies, and Hildebrand. — These three young 
Germans came forward in 1850 with a new method, which 
they called the historical, and which has elsewhere been dis- 
cussed. These writers and their successors went back of the 
old premises, self-interest, private property, demand and 
supply, and analyzed and explained them. They traced his- 
torical development, and Knies challenged absolutism of 
theory and substituted the doctrine of relativism. Absolut- 
ism of theory took two forms — perpetualism, or the teaching 
that a certain policy is good for all times; and cosmopolitan- 
ism, the teaching that a policy is good for all countries. 
Knies held that policies are only relatively good and bad; 
that policies must vary with time and place. The Germans 
thus took a new attitude with respect to free trade and pro- 
tection, holding that neither was absolutely good nor abso- 
lutely bad, but that the correct policy of a country cannot be 
told without an acquaintance with the pai-ticnlar circum- 
stances of the country. 

While the doctrine of the Grermans is broad and liberal it 
is at the same time conservative, for it teaches that improved 
conditions must be a growth, and must take their root in the 
past. Socialism comes rather from the abstract English 
political economy than from the German political economy. 
As English socialists themselves claim, socialism went from 
England to Germany and has now returned again to England. 

We have now the principal elements in the evolution of 
economic science: the early French, the later English, and 
the still later German contribution. Other contributions 
have been less important. 

The. present outlook for political economy is most hopeful. 


TliL- activity is greateiit in Germany, where Roscher, Knies, 
anil Hildcbrand have had many worthy Baccessora, of whom 
Priifessor Wagner, of Berlin, is the greatest. We may also 
mention these cultivated scholars: Professors Cohn, Conrad, 
Sax, Lexis, Ramelin, Schunberg, ^asMe, Soh&fBe, Baron von 
ReitzenMteiii, Professor von Scheel, and Dr. Eduard Engel, 
long at the head of the Prassian Statistical Bureau. 

The historical view has sometimes tended to fatalism. The 
relative justification of what exists lias at times become 
almost an absolute justification, and one might think that 
whatever has been was at the time the best, and that mis- 
takes have not been made. There has been a reaction against 
such extremes. There are different tendencies among G«r- economlHtiJ, anrl, as already stated, the terra historical 
school applies to tbem only vlien taken in a very broad sense. 

tierman influence has extended every-where and has stim- 
ulated the Italians, who are now active in economics and do- 
ing some good wook. Among recent Italian economists may 
be mentioned Professors Ousumano, Lampertico, Lnzzaii, and 

England is doing some good work. Professor T. E. Cliffe 
Leslie, author of a volunie of Eiitaya in Politictil and Moral 
P/iilianphi/, introduced German ideas ten or fifteen years ago, 
and they have proved to be good yeast in old England, full as 
ever of vigor and life. Arnold Toynbee continued thisinflnence 
at Oxford, and bis work. Industrial Reeolntion, i» a valnnble 
contribution to economic thought, Toynbee died a few 
years since, scarcely thirty years of age. But it is plain that 
many yonng EngliMhmen have been touched by him, and 
they may carry forward his scientific work. Other English 
economists might he named who take a middle position be- 
tween the historical and deductive schools, like Professoi-a 
Sidgwick and Marshall, of Cambridge, and the late Professor 
Jevons, of University College, London, 

France has done almost nothing for the evolution of 
economic science since the outbreak of the French Revo- 
lution of 1780. Political economy has in France degen- 


erated into a mere tool of the powerful classes. Noth- 
ing is so calculated to fill one with despair for France 
as French political economy. Rabid socialism confronts 
cold-blooded, selfish political economy, and where is a com- 
mon standing-ground? There is so little economic liber- 
alism in no other modern nation. Happily, there are some 
indications of progress just at present, and curiously enough, 
in view of Voltaire's dictum, "Lawyers are conservators of 
ancient abuses," this refreshing breath comes from the law 
school professors. Professor Charles Gide, of the Faculty 
of Law of Montpelier, and prominent in good works, is the 
head of the movement. This new movement is one of the 
hopeful signs for France. It is connected through Professor 
Gide with organized efforts of the Protestant clergy to im- 
prove the condition of the wage-earners and to bring about 
a reconciliation of social classes. Professor Gide is the au- 
thor of an economic treatise which is now in its second 

Belgium is in a healthier condition than France, and two 
living Belgian economists have made important contributions 
to economic science. They are Professor E. de Laveleye and 
Charles Perin. Professor P6rin is the author of many works, 
and treats present political economy from the stand-point of 
the Roman Catholic. 

Next to Germany, the greatest activity in economics is 
now found in the United States, and there is every reason to 
expect valuable contributions to economic knowledge from 
Americans in the near future. Some such contributions have 
already been made. Harvard University, Columbia College, 
Cornell University, the University of Michigan, Johns Hop- 
kins University, and the University of Pennsylvania all have 
schools of political science or are specially active in political 
economy. Chautauqua University is also promoting an in- 
terest in economics in its way. It provides a great public 
for an elementary treatise like the present, and it carries on 
work in political and social sciences in its summer school 
and in its correspondence school, both a part of the Chau- 


tauqaa College of Liberal Arts. Most of the students in 
the College of 'Liberal Arts have been college graduates, but 
it is hoped hereafter to draw nearer together the more pop- 
alar and the more advanced parts of the Chautauqua work. 
Chautauqua University Extension will aid in this, and in 
this way as well as otherwise help to awaken an interest in 

Harvard University publishes a Quarterly Journal of Eco- 
nomics, and Columbia College a Political Science Quarterly^ 
both scientiiic periodicals of a high order, while the American 
Economic Association, embracing nearly all the economists 
and many of the public men in the United States, issues bi- 
montlily monographs which are now in the fourth volume. 
Americans have every reason to take a cheerful view of the 
future of political economy in this country. 

When we look back upon the evolution of economic sci- 
ence, M'e find that the most diverse elements have contributed 
to the growth of political economy. Philosophy in France, 
Germany, and England has contributed elements; practical 
statesmanship in every country has added important elements; 
shrewd business men of large affairs have been among the 
prominent economists, and in addition our science claims 
among its promoters some of the ablest scholars of the 
past hundred years. Political economy is doubtless still a 
young science, and as such is incomplete; but surely those 
M'ho sneer at it as a " mere theory " do but reveal their 
own ignorance. 

Ingram's History of Political Economy is the best outline 
in the English language of the history of our science. 





StLggestions. — The suggestions for study must be very- 
general, as they must apply to so many readers in so many 
different situations. 

It may be said to all that they should form habits of care- 
ful observation, and supplement what they have gathered from 
this book by inquiry, reading, and reflection. Those who can 
ought gradually to get together a little working library of 
economic works, and the books herein mentioned will consti- 
tute a very good economic library. Few will be able to buy 
all, but many can be picked up, one at a time, in a few years. 
Circles and schools can by co-operative effort secure a larger 
library than can ordinarily be done by the isolated reader. 
Of course, when one's means are ample the problem is a very 
simple one. 

Circles and schools should call in the assistance of business 
and professional men and practical politicians from time to 
time. When banking is discussed it will not be difficult to 
find a banker who will be able to explain more fully bank 
notes, checks, drafts, and bills of exchange, perhaps exhibit- 
ing blanks or canceled paper. 

Similarly, when taxation is being studied, local tax assess- 
ors and tax gatherers should be invited to describe the actual 
workings of the system in the administration of which they 
are practically engaged. Let readers examine the different 
kinds of money in circulation, and not rest content until they 
understand their difference. Water-works, gas-works, public 
roads are to be studied, and private compared with public 
management ; and various kinds of farming, farming on a 
large scale and on a small scale, are worthy of observation, 
and practical farmers can tell what they know about the 
merits of different systems. 


Courses of Reading. — l. The author begs to mention his 
own works first, not because they are superior to other works, 
or even equal to them, but because for those who take an 
extended course of study there is an undoubted advan- 
tage in first mastering one author and then passing on to 
others. Besides, thoughts which could not be fully elabo- 
rated in this work will be found further explained in his other 

At the same time the author will frankly confess that he 
wants no one to accept his mere ipse dixit, and that he 
would consider this work a failure if it did not kindle a 
desire to read the works of otlier authors. The author has 
written Problems of To-day, French and German Socicdisniy 
Labor Movement in America, Tuxatioii in American States 
and Cities, and if any one should care to read all he would 
reconmiend their perusal in the order named. If only one 
work is read let it be Problems of To-day ; if two, that and 
Taxation in Americaii States and Cities. If another book is 
desired as a text-book in school or college as supplementary 
to this, let it be Taxation in American States and Cities, 
if time is sufticient for so large a work, otherwise Prohlems 
of To-day. Those who are chiefly interested in labor prob- 
lems will instead take Labor Movement in AmeHca, or, if 
time is short, PVench and Germaii Socialism. 

2. If it is desired to pass from this book inmiediately to 
those of other authors, the following coui*se is recommended: 
Kirkup's Inquiry into Socialism; E. J. James's Relation of 
the Modern Municipality to the Gas Supply, II. C. Adams's 
Relation of the State to Industrial Action, H. C. Adams's 
Public Debts. 

3. Having taken 1 or 2, comparative studies in the follow- 
ing works are recommended : John Stuart Mill's Principles of 
Political Economy; F. A. Walker's Political Economy (large 
edition); J. B. Clsirk' s Philosojjhy of Wealth. Make Mill 
the basis, read his work and compare his theories with those of 
Clark and Walker. This might be extended by a comparison 
of views in Newcomb's Political Economy. 


4. Tariflf Course.— R. T. Ely's Problems of To-day; 
R. E. Thompson's Protection to Home Industry; F. W. 
Taussig's Tariff History of the United States; Frederick 
List's National System of Political Economy; S. N. Patten's 
Premises of Political Economy; Henry George's Protection 
and Free Trade. 

5. Money. — F. A. Walker's Money ; or, Money ^ Trade^ 
and Industry; Stanley Jevons's Money and the Mechanism 
of Exchange; Laughlin's History of Bimetallism in the 
United States ; S. Dana Morton's The Silver Pound. 

6. Banking. — Knox's Report as Comptroller of the Treas- 
ury in United States Finance Reports for 1875-76; J. S. Gil- 
bart's History y Principles^ and Practice of Banking ; Walter 
Bagehot's Lombard Street. For law, J. T. Morse's Banks 
and Banking. 

7. Finance.— H. C. Adams's Public Debts; R. T. Ely's 
Taication in American States and Cities; Cossa's Taxation^ 
its Principles and Methods ; A. J. Wilson's The National 
Budget^ the National Debt, Taxes and Bates ; T. H. Farrer's 
The State in its Belation to Trade ; Woodrow Wilson's Cou' 
gressio7ial Government. 

8. Socialism. — Edward Bellamy's Looking Backward; 
R. T. Ely's French and German Socialism ; Kirkup's In* 
quiry into Socialism; T. Edwin Browne's Studies in Modem 
Socialism and the Labor Problem ; Rae's Contemporary So- 
cialism ; Emile de Laveleye's Socialism of To-day ; Gron- 
lund's Co-operative Commonwealth ; Marx's Capital^ often 
called the Bible of socialism. For American Socialism see 
Ely's Labor Movement in America. 

9. Anarchism. — Proudhon's What is Property f and other 
works translated by Benjamin R. Tucker; Prince Krapot- 
kine's articles in the Nineteenth Century^ February and Au- 
gust, 1887, April and October, 1888 ; Walker's Political 
Economy; article " Socialism " in Encydopcedia Britannica; 
article " Shall We Muzzle the Anarchists," by H. C. Adams, 
in Forum^ vol. i, p. 445, September, 1886. 

10. Rent. — Henry George's Progress and Poverty and 


Social Problems ; Walker's Zand and its Rent ; J. B. Clark's 
Capital and its Earnings, 

Other works needed for a fairly good economio library: 
Publications of the American Economic Association, com- 
plete; Political Science Qtiarterli/y complete ; Quarterly 
Journal of JBkonomics, complete; Bradstreei^s current num- 
bers, published in New York; Banker* s Magazine^ published 
in New York; Walker's The Wages Question; BoUes's Jfu- 
nancial History of the United States ; Lalor's Cyclopoedia of 
Political Science ; Clark and Giddings's Tfie Modem Distrib- 
utive Process; Washington Gladden's Applied Christianity ; 
Life and Work of the Seventh Earl of Shaftesbury ^ by Hod- 
der, unabridged; Helen Campbell's Prisoners of Poverty ; 
Jieport of the Industrial Remuneration Conference^ London, 
1885; Arnold Toynbee's Ind'istrial Revolution ; Reports of 
the State Bureaus of Labor Statistics and of the National 
Department of Labor. 

G-erman Works. — Desirable for those who read Grerman: 
— SchOnberg's Ilandbuch der Politischen Oekonomie 2te Aufl. ; 
the economic treatises of Wagner, Roscher, Cohn, Knies. 
Magazines: JahrbilcJier filr National6konomie und Statis- 
tik ; Jahrbuch fiXr Gesetzgebung^ VerwaUung und Yolks- 
wirt/ischaft (Schmoller's). 

French Works. — Gide's Principes d^^onomie politique^ 
2® ed.; Baudrillart, Histoire du luxe; Leroy-Beaulieu's 
Traite de la science des finances; Emile de Laveleye's 
economio writings ; Charles Perin's economic writings ; 
Sismondi's Nouveau principes d'^economie politique. Maga- 
zines : Revue d^&conomie politique; the Journal des Econo- 
mistes is the organ of the old ultra-conservative school of 
French economists. 




DsjiNB tho following terms : Sociology ; ecoaomic life ; political econ- 
omj; the State; treedora of coiitnurt; utilities; ecoaomic goods ; wealth; 
wants; luxuries; capital; exchange: value; price; demand and supply; 
cost of production ; money; bimetallism; credit; property; interest; capi- 
talisation; rent; standard of comfort; margin of cultivation; socialism; 

What aro the departments of social life, and what is the relation of the 
economic to the other departments? 

It has been estimated that the annual production of wealth in the United 
States is about $10,000,000,000. Examine all the elements which must 
enter into such an estimate. 

What are the physical characteristics of your own locality? How have 
tliej iuflueuced its economic life ? In what ways do you think tliej will 
affect its future economic life ? In what ways have the character of the peo- 
ple in your community been slumped by their economic life ? 

What is meant by serfdom ? What is the difference between slavery and 
serfdom ? 

Is there justification in the term ** wago-slavery." Explain. 

Show the importance of studying the economic institutions of a people 
from the stand-point of their historical development 

What are the different economic stages in the life of a people, viewed 
from the stand-point of production and of transfers of goods? Describe and 
give illustrations of each. 

Describe tiio village community. 

Explain the essential difference between the economic system of the 
Middle Ages ond that of the present time. 

Describe four of tiie main features of modem economic life which give 
rise to the present economic problems. 

What two kinds of deterioration may there be in the economic condition 
of the masses ? 

What are the principal mennF proposea tor uniting labor and capital? 

What are the relations of modern economic life to freedom? In what 
important respect has the nai'ire ot restrictive laws been changed i ^haf^ 
are the advantages and disadvantages ot treedom in mdustr? / 


What has been the development of laws with respect u> tlie iDdustiy 
of agriculture? Have restrictions increased or decreased? been made 
special or general ? Illustrate. With respect to the liquor indusiry ? The 

sitipping industry? 

W liat government activities can you name wliicfa were formerly, in this 
or other countries, ancient or moderiif delegated to individuals or private 
companies, and what liave been the reasons whicii led to the adoption of the 
present system ? 

State and criticise the contract theory of government 

What are the principal reasons why government should own and manage 
forests ? 

Show how political economy is simpler tlian private economy. 

Show tlie difference between private and public interests. 

Wliy must wo liave an ethical ideal in our studies in political economy? 

Describe the three classes of detinitions of political economy ; show their 
historical development, and give examples of each. 

Into wliat main parts mi<y political economy be divided ? 

What are the different methods of economic research ? Describe ead:i. 
Wiiicli are most important? What is the origin and character of tlje hi»- 
toricul sciiool? 

What is usually meant by the term "natural law? '* 

Kxamioe tlte following: **■ The practical or unsdentifie economist is one 
who, finding the river to wind about in all directions, denies or ignores any 
special tendency in its waters to approach the sea. aiMl reprards the idea of 
tliosc waters being urged forward by anyone single force, like that of gravi- 
tation, as entirely illusory." — Kewcomh. 

What chnm has political economy to the name of Fcfence? 

To what otlier sciences is political economy closely related, and in what 

AVhat place doe/* economic science occupy with regard to tiie laws of tlio 
physical universe ? 

. Give iUustrations of the inflnenco of the religioivs life upon the economic 
life of a people. Show some economic causes and results in religious ref- 
ormations; for example, thope of Luther, Wiciif and the Lollards, Moham- 
med, and ot iK^rs. 

Wiiat are the principal oconoiiic t akdnnjya of Moses? of Isaiah? of 
Jesus ? Sliow the growth of econ^iuic civi.i7.awion aiuoug the Jews as ex- 
cmplilied by their toac!iin/s. 

Does religion become more or Ic-s im;^ort;iiit with the n^rowth of indus- 
trial civilizHtion ? Siiow how this is. Gi^o historic prcH)f8. Prools fronv 
your own ol)servalion. 

Can you mention any subjects belonging to tb*? field of poliuoai economy 
which are not also within the proper domain of leg^sUtiou ? 

What are ccouomic goods? What is wealth? 


What is the relation between production and consumption as divisions of 
political economy ? 

What are the causes for apparent overproduction ? 

Kxaraine and criticise the -following: *' Oenerally, and with one single 
exception, thai of food, tliere may be an excess of products; and univer- 
sally, or inclusive of food and of all things else, there may be an excess of 
productive effort." — CJialmers, 

What are the iliree motives of economic activity, and how do they sup- 
plement one another? Among what peoples is self-interest the only eco- 
nomic motive ? 

What are the effects of luxurious expenditures upon the rich ? on the 
working class? 

When is expenditure in luxuries justifiable ? What is the difference be- 
tween saving and hoarding ? 

Show fallacies in the statement that expenditures for liquors furnish a 
market for the farmer s produce. 

What are the different factors in production ? Give examples of indus- 
tries where tiie different factors are represented by different persons. 

Which of the four factors in production is must benetited by the extension 
of machinery and division of labor? 

What is meant by land? What services does it rer.der to production? 
What is the difference between rent and profits? Rent and interest? 

What are the checks on population among savages? Among civilized 

How does capital arise ? What defense has the capitalist for receiving 
interest? Is credit capital? Is money capital? Distinguish between eco- 
nomic goods and capital. 

Are the following things capital — social or individual : City lots, farms, 
good eyesight, a dwelling house, an actor's diamonds, a theater, bread and 
butter, railroad stock, promissory notes, Fortress Monroe, the White House, 
Lake Erie, custom house, churcli taxes, lottery ticket. United Suites green- 
backs, "good-will" of a business? 

Define fixed and circulating capital. To which class do the following be- 
long : Calico on the shelves of the merchant, a pick -ax, cash, steamboat, 
horse, iron ore? 

Describe the functions of the enirq>reneur. Show hiB relations to the 
principle of division of labor. 

What are the advantages of division of labor? Disadvantages? Why 
can not the division of labor be carried out so well in agriculture as in manu- 
factures ? 

What means can you suggest to lessen the evils of an extreme division of 

Show the way in which increasing division of labor increases the impor- 
tance of natural monopolies in the economic life of a people. 

<^i^ . .' -^T.'. ■. • ^; '/ '- '• -.T. .--L i'JLVjbSn 

- . . -■ -• -•.■■'' . . -ica i^.to.-.- ..... :. ji_ ^•;'"~ nz ZJt ' '"'**" 

■'- -■ . -■.« - >• >r**r. _'••.'. i.\»£ C TTilZlSUXC. ^i. 

. .' .-•• 4- .-. -Jr. » .ix *• •«'.•".■ •: ." _J- IL^'ji^T:^ Z±SsL h- 

..,/. ^ ^^^o gf'*,^ ..•/• ^ i.-r ■<".: . '. > •iZ.-f .■ :. J. *r I-— Akl 

/, «-.»'/.•; . ..t *-r _,^/,- - . V'- ." '■■•' i- • • f "i^-'ai.f** :> iriis > Jucx. 
/,« .^«f • /,«••• u«.«i t^^.* ^ **^.' *t*^*- b'k'^ i'^ l<i nrir^ lioo F'oiiC s Si2- 

*$ff^ iDMbk ^ it^m 7'M"* yv- v^ -'« ;*-. -'•**-.r*i«."7 v.n-ri-a fr:at "r^i 

IPHfh lU |4«M '// lit* M«?r''Ariiili«u with r#i<%ni to moi lej ? 

•i|i ^fl^^m ttf iwrtttty fury luvi-rnt'.ly m itn qii.iniiiy? 
fN fffM ifiitilliiu* of K^i'l *">'! ">lv<7r whi'rii nwikf; t(iem prc-emioentlj 
^ni^T WttWfi ffMHiliy k Lli*i rii'rxt irriif^rurit? Wlmt articles haro 

■4 Aif MMMinyT Wlii'ii U tt li rliiiiMlVfiiita«o to a couDirj to import 

lA aH Min fiffiifiN i^hiiOi fifUfiw til A (ioiititry from an increase or decrease 
fliimiMlv iif iMtiimy. 

I iilt^iiN wtiiiM r'tilliiW \f tim K<*l(l I" *■>>** HiiitH RUitcs wore doubled: 
HliiMitriiT III! liM|Niri«tni Y t»ii ImiikftmT on ftirinpfM? on wagc-oani- 

fm amniuniil, *' IM nmwy t\r\v%w out tlie k(^K** true to the fkcta? If 

WitHi MHi Urn iHihitUtiiiiM III Im oli^rrvtMl in fixing the ainouni of monej 
t\\W\\ H i>«MiMli;if ■hmiM hnvtf III oiivuUlUiiil 


What effects would follow if the national greenbacks were withdrawn 
from circulation ? 

Examine the following : " The influx of money into a progressive country 
is one of the most powerful promoters and increasers of production. To 
money (as to labor) * time is money.' Whoever possesses it must seek an 
investment for it or lose his profits. When it is plenty all sorts of productive 
work are stimulated ; labor is the master of capital, and industrial enter- 
prise gains a more than proportionally larger reium for its outlay, with 
every increase of the outlay. I^bor becomes more productive as the instru- 
ment of association is more universally accessible. Its price rises while 
that of commodities falls." — Thompson, 

Give different detiuitions of credit. What are the elements of a credit 
transaction ? Name and describe tlie different instruments ot credit 

What are the ad vanUiges of credit ? Disadvantages ? 

What is the economic value of an extension of credit ? 
. What are the different motives which have led nations to regulate inter- 
national commerce? 

During the years 1860-73 the imports of the United States exceeded the 
exports, and from 1873 to 1883 the exports exceeded the imports. What 
inferences are possible with regard to the two periods ? 

" We want a larger foreign commerce in order to afford a vent for our 
surplus produce.'* Criticise this statement. 

What are the reasons for the apparent credibility of the balance of trade 
theory ? Why do bankers look with more distrust upon shipments of gold 
to Europe than upon larger shipments to distant parts of our own 
country ? 

Examine and criticise the following : *' The ordinary means to increase our 
wealth and treasure [gold and silver] is by foreign trade ; wherein we must 
observe this rule : to sell more to strangers yearly than we consume of theirs 
in value. For suppose that when this kingdom is plentifully served with 
the doth, lead, tin, iron, flsh, and other native commodities, wo do yearly ex- 
port the surplus to foreign countries in the value of twenty-two hundred 
thousand pounds, by which means we are enabled beyond tiie seas to buy 
and bring in foreign wares for our use and conRumptiou to the value of 
twenty hundred thousand pounds. By this order duly k<^pt in our trading 
we may rest assured that the kingdom shall be enriched yearlv two hundred 
thousand pounds, which must be brought to us in so much treasure [gold 
and silver], because that part of our stock which is not returned to us in 
wares must necessarily be brought home in treasure." — Tliomas Mun, 

Examine and criticise the following quotation from Adam Smith, WeaUk 
of Nations^ Book II, chap, v : " The capital which is employed in purchas- 
ing in one part of the country, in order to sell in another the produce of 
the industry of tliat country, generally replaces, by every such operHiioii, 

two di^linct capitala, tlmt liad both been emptoved in Che ^ricultur 
ninniifactures of tliut couutry, nnd thcreliy enables Ihcm 
tliAt etD ploy men t. . . . Wheti boiii are the prodtiL'e of domeaiic induauy, 
it UQCfBsurily raplEwus, by every ijuull operation, two distinct captala, 
wliiuUliad Uilli beeu employed in supporting productive In bor, and thereby 
vunblsB tlicm to continue tlist support. . . . The capiul enifiloyed in 
purchasing roreign gpods Tor home cousumption, when this piircliase is 
mnilo witli the produce oT domestic iodustry, repliices, too, by every suob 
operation, two distinct capiluls; but one at them only is employed in sup- 
porting domestic industry. . . . Tlioiigli the returns, llierefore, of the 
(ureigu Lrude nf consumptioa should bu as quiek as those of the home 
tnul^ thu cupilHl ouipluyed in it will give but one half of the encDurag»- 
nieut to tlie iuduslry or pruductive labor of the country. . . , But llio 
returns of the foreign trade of consuniption are very seldom so quick ag 
those of tlie liome trade. The returns oT the home trade geiiemlly come in 
before the end of tlie year, and sonietiiuea three or four times iu the year. 
The returns of the turoigo triide of cousumption strldom come in before til* 
end of tiio year, and ioinotJiDea not tilt afier two or tliree years. A 
capital, therefore, employed in the liomo trade will stmttimes make 
twelve DperatioDN, or bv sent out and returned twelve times before a oapi- 
t«l employed in the foreign trade of consumption hos mode one. If the 
capitals are equiU, therefore, tlie one wiU give four-and-iwenty times more 
enuuiirugement and support to the industry of tlie country than ths 

State the mlvniitqgos to a country of foreign commerce. 

KxHmine the fullowiug, which lius been oCfered hs an argument for pro- 
tection: "After I860 the businoss of tlio country was encouruged audde. 
veloped by a protective tariff. Al the end of twenty years l he total 
property of the United Stlttes ns returned by the census of 1 8S0 amounted to 
the enormous ai^regale of |44.U0O,00(i.0CO. Thirty thounaiid millions of 
dollars had been added during these twenty years to the permuneut wealth 
of the nation." 

Deflne property. What is the meBuing of the dollnition, "jua ulendi 
vel sbntcndi re." What limitation ia there always to the right of property 7 
What two elementa enter into proporiy ? 

Show the growth of the right of privale property iLroiigh the succes- 
sive economic stages. 

What elomonU enter into interest? What detorminos the rate of in- 

"The increase of slock [capital], which raises wages, tends to lower 
profit." — Adam SmiOi. Is this correclf 

Kxplflin the diflferenoe between oipllal ami oapitalliallon. 

Wlmt inSiience npou tlie acUlug prioe of bonds and land has a fall io llm 


;e of in 

II the n 

J of in 



On what dom tlio rata of interest depend T Wh; is interest hiKlier in 

Chicagn tliaa New York ? 

II prices are liigh wilt interest be hi^liT If the nioney in tlie Unitied 
States were doubled would Lherate at interest HseT 

"Tliat iiiUresL does uoL ilopeud upon llio productiv^neES of lubor snd 
capital ia provrd bj the Keneral Cict ttist wliere Inbor snd oipitid are moat 
productive interest ia loweat. That, it docs not depend reveracly upon 
irsifFa (or llie ooat of labor), laweriDg as wages rise and increasing as irsfrea 
fall, is proved by the general fact tliat interest is higli wliea snd where 
wages are high, snd low when sad where wiigeH ure luw." U tiiia tme? 

Does a full in the rate or inleredt mean tli^l ()<u totuil interest psid has 
decreased citliar sbaoluttdy or relativelf to tliu ititsJ STiiouat produced 1 

DoeR tlie (ciidenej at profit? to a minimum depui>d uo a general taX\ in 
prippaf If ao, why? ir not, why notT 

liicardo'a law of industrial projcrnm : " In an sdvattciii^ community rent 
tniist riae, proBls full, and wages niruain ubout the mmo." Explain ibis. 

'' Intereat sod wages depend on the margin af culUvatioUi Iklliug as it 
falls and rising aa it riaes," Biiriaia tliia. 

Wliat does RIcardo meaji bj anyiDK ^''^ t'>* nig^uidlincas of nature is 
the ctmseorremT 1h tiiiit Rtitemeiit perfectly aecurataT 

DcQne rent What is tlie difference between rent and intereatT 

Would tlie land uC a country pay rent if it were all of uniform fertility f 

Wliiit Ims bceu the eOecL of railroad- building upon rents in tlie Dniled 

Does inCTease in rent cause increase in the price of IbodT 

"No reduction would take place in price of oom aithough landlords 
foreito tlie whole of their rent'' 

" Rent does not euOor at all into tliB coat of prodnction." Erplaln. 

"High wages or profits do not muke general high prices. Tiiey affect 
prices only inaamuell aa different articles hnve. aa elements of ihclr ooat, 
wages and prullLt in diOerent pruportiuns." Kxpl^ia. 

Wages of bakers in New York aversgo aeven dollara per week; in 
Chicago, twclvo dollara * week ; of cnrpentiirs in New York, fourteen 
dollars a week: in Chicago, sixteen dollars a week. Explain any c&uiea of 
these diffrrenccs with wliieli you may ba lamiiiiir. 

Distinguish bt-cwoen rate of wages and price of labor. 

DeQne the "siundard of lite," Of wliat importance is it as an economic 
principleT In wtiot ways docs a high or low price of food affect the 
general rato of wages T 

To what kinds of work ia piece-work adapted T What art the odvnntagea 
and disadvantages of piece-workT 

Wages of women are not commonly equal to those of men for the same 
work perlormed. Why is this soT Is it " faIrT" 

Why should iIk cootHimist di>vit)ia public iHluc:ilion7 



EiBmine the probable effects upon the production and diKribulkni of 
wealth of UQivoraal education. 

" Cau everj cbild by educnlion become & great man or woiaaQ?" 

What can wo hope, [rom our Htaud-poiuc, for the ordinarj mvi or 

What are the differences in orguDiznlion between tmdea-unionB and 
Knightg or Labor, and how have they inSuenced cacli other? 

What ate ilie different kindaof L-o-operaCioii ? Wbut are [ha adTantaj^ 
or productive eo-Dperation ? 

What are tho four cliaracterislic luatures of aociuliam? How do«8 
sooialism differ rrom anarcbism 7 

What IB raeant by proBt-Bliaring? CHpital-ahBrin);;? Co-<q>erfttionf 

Whut are tlie cLaracteristica of natural monophea? 

Il is BOmeLimeB said thnt State maDagemeiit of riatural monopohoa is 
eociulislic. Examine and criliciae Ihia einlemeut 

Eiamine aod criliciso the following: " There is oa mi>re reason why tlia 
goveronieul abould opernte the lelegraplj tlian run the Hour mills — lesa, hi 
fact, Tor ererj-body uses Hour, uliile it in doubtful if even three per conL of 
Iho people use tlie telegraph." 

Wbat conditiona justify the Slate in engaging in tudiictrial enlcrpriaof 

Wlial four advantflgeK are claimed fiom public ownership aud niU)ng»- 
meut of natuntl inonopoliea? 

In what ways Till the foilowing diDeivni. hinds of FX[KMi<IitHre of ineons 
aftect the wealtli of the Uiiiled Stit»i, and tUe workiiig daaaes: Furolmw 
of United Slates bonds; employment of American BBTrnnts; tmyeJing 
abroad; purchase of American picturea ; production oi' iii»nnfaPtiirod goodaf 

Oricicise the followiog atBtemeut: "Blesaed is tliu couiKry where ilia 
rich are eitmyaganl and the poor are econoinicaL" 

Eiumioe the following: There iaa "beautiful componaation, by wliioh 
the ejcoHsire lore of present enjoyment on the pirt of spendthrifts, when 
cnrried to tbe length of abridging their ra|KtaI, doea, liy ita eSeot on 
Bupply and price, call forth a coimler-aelii-e force in li.e opposite directioB 
— by inriting others, in whom the kovo of giia predoiniiiutee, tho more to 
extend their operations, whether in trade or husbandry." — Chaiiaers, 

How does the consumption of luiurios retard the industrial progreai of 
a coromunlly 7 

What ia public Hnance? 

How can motltoda of uimtlnn be improred r 

What ia the juatitication of taxatioD T 

Show how society lukes |»rt in production in jotir commutiity. 

Examine carefully and crjtidse the rolIowiriK: "Daily piircbaaea of 
Doited States Government bnnils Were commenced un the 23d of April, 
188S. By this plan bonds of tlio govemment not yet due have been pur- 



chased . . . amounting to $94,700,400, tlio premium paid theraou 
amounting to $17,508,613 08. The premium added to the principal of these 
bonds represents an investment yielding about two per cent, interest for the 
time they still liad to run; and the saving to the government represented 
by the difference between the amount of interest at two per cent upon the 
sum paid for principal and premium, and what it would have paid for in- 
terest at the rate specified in the bonds if they had run to their maturity, 
is about $27,165,000. At first sight this would seem to be a profitable and 
sensible transaction on the part of the governmeLt But . . the surplus thus 
expended for the purchase of bonds was money drawn from the people in 
excess of any actual need of the government, and was so expended rather 
than allow it to lie idle in the treasury. If this surphis under the opera- 
tions of just and equitable laws had been left in the hands of the people it 
would have been worth in their business at least six per cent, per annum. 
Deducting from the amount of interest upon the principal and premium of 
these bonds for the time tliey had to run at the rate of six per cent the 
saving of two per cent made for the people by the purchase of such 
bonds, the loss will appear to be $55,760,000.*' 




Adams, H. C— Taxation in the United Slates, 1789-1816, Johns Hopkins 
University Publicatious, Baltimore, 1884 ; Relation of the State to In- 
dustrial Action, American Economic Association, f6., 1887 ; Public 
Debts, New York, 1887 ; Outline of Lectures on Political Economy, 
2d. ed., Ann Arbor, 1888. 

Baoehot, Walter. — ^Tlie English Ck>n8titution, New York, 1876 ; Lombard 
Streot, t6., 1876; Depreciation of Silver, London, 1877; Physics and 
Politics, New York, 1880; Economic Studies, London, 1880; Postulates 
of Enjflish Political Economy, New York, 1885. 

Baudrilijlrt, Henri.— Histoire du luxe. 4 vols., Paris, 1880; Philosophie 
d'economie politique, f6., 1883 ; Les populations agricole de la France, 
i6., 1885. 

Bellamy, Edward. — Looking Backward, Boston, 1888. 

Bluntschli, J. C— Staatsworterbuch, Zurich, 1869; Greschichte der neuerea 
Staatswissensclmft, Munich, 1881; Theory of the State, translated from 
the German, New York, 1885. * 

Brown, T. Edwin. — Modern Socialism and Labor Problems, New York, 

Campbkll, Helen. — Prisoners of Poverty, New York, 1887 ; Prisoners of 
Poverty Abroad, Boston, 1889. 

Cannan, Edwin. — Elementary Political Economy, London, 1888. 

Chalmers, M. D. — Local Government, English Citizen Series. London, 1883. 

Clark, J. B. — Philosophy of Waalth, Boston, 1887 ; Earnings of Capital, 
American Economic As.sociation, Baltimore, 1888; The Modern Distrib- 
utive Process, Boston, 1888; Possibility of a Scientific Law of Wages, 
American Economic Association, Baltimore, 1889. 

COHN, GuSTAV.— die englische Eisenbahnpolitik, Leipzig, 1883; die Ent- 
wickelung der Eisenbahngesetzgebung in England, I^ipzig, 1874 ; Sys- 
tem der Nationalokonomie, Stuttgart, 1885. 

CoifTE, AuGUSTE. — Positive Philosophy, translated from the French, con- 
densed, 2 vols., London, 1875; Positive Polity, translated, »&., 1877; 
The Catechism of Positive Religion, translated, i&., 1883. 

COSSA, LuiOL — Primi element! della scienza delle flnanze, Milan, 1876; 
Guide to the Study of Political Economy, translated from the Italian, 
London, 1880; Primi elemen' i di economia politica, Milan, 1881; Tax- 
ation : Its Principles and Methods, translated. New York, 1888. 

Dbumhond, Sir Hbnrt. — Tropical Africa, New York, 1889. 

Ely, Riobard T. — French and German Socialism in Modern Times, New 
York, 1883 ; The Pnst and Present of Political Economy. Baltimore, 
Johns Hopkins University Publications, 1884; The Labor Movement in 

* [nclndlng tlie principal eoonomio works of the autbors mentlooed In tbe text. 


America, New York, 1886; Problems of To-day, New York, 1888; 

Taxation in American States and Cities, New York, 1888. 
Farrbr, T. H.— Tlie State in its Relation to Trade, London, 1883. 
Fawcktt, Henrt. — Economic Position of the English Laborer, Now York, 

1865; Pauperism : Its Cau!«es and RomedieA, New York, 1871 ; Essays 

and Lectures on Social and Political Subjects, f&., 1872 ; Free Trade and 

Protection, ib., 1878; Manual of Political Economy, ib., 1878. 
Fawcbtt, Millicbnt G. — Political Economy for Beginners. New York. 1878. 
Gborob, Henry. — Progress and Poverty, New York, 1888; Free Trade, t6., 

1888; The Land Question, ib., 1884; Social Problems. t5., 1888. 
GiDDiNGS, F. IL — Sociology and Pf>litical Economy, Baltimore, AmericaB 

Economic Association, 1888 ; with J. H. Clark, The Modem Distrib- 
utive Process, Boston, 1888. 
GiDB, CuARLsa — Principes d*economie politique. Paris, 1889. 
GiLBART, J. W. — The Logic of Banking, Ix)iidon. 1866; The History, 

Principles, and Practice of Banking, 2 vols., London, 1882. 
GiLMAN, N. P. — Profit-Sharing between Employer and Employe, Boston, 

Gladden, Washington. — Working People and their Employers, New 

York, 1885; Applied Christianity, »6., 1887; Parish Problems, tft., 1888. 
GoscHENjG. J. — Reports and Speeches on Local Taxation, New York, 1872 ; 

Theory and Practice of the Foreign Exchanges, London, 1886. 
Gboxlund, Lawrence. — The Co-operative Commonwealth, Boston, 1884; 

Ca ira. New York, 1888. 
Hertzka, Theodor. — Wahrung und Handel, Vienna, 1876; die Gesetze der 

socialeu Entwickelung, Leipzig, 1886. 
HiLDEBRAND, Bruno. — die Nationalokonomie der Gegenwart und Zukunfl, 

Frankfurt, 1848. 
HoDDER, Edwin. —The Life and Work of the Seventh Earl of Shaftesbury, 

New York, 1886. 
Holland, T.. E.— Elements of Jurisprudence, New York, 1888. 
HoRTON, S. Dana. — Silver and Gold. Cincinnati, 1877 ; Monetary Situation, 

ib., 1878; The Silver Pound and England's Monetary Policy Since the 

Restoration, London, 1888. 
Iherino, Rudolph, von. — Zwcck im Recht, 2 vols., 2d ed., Beriin, 1886. 
Ingram, J. K.— History of Political Economy, New York, 1888. 
James, E. J.— The Relntion of the M(Mlerii Municipality to the Ghts Supply, 

Americ^m Economic Association. Baltimore, 1887. 
Jevons, W. STANLET.—Principles of Science, Treatise of Logic and Scientific 

Method, New York, 1877; Political E onomy. Science Primers, ib., 

1878; Theory of Political Economy, t*., 1879'; Studies in Deductive 

Logic, ib,, 1880; The State in Relation t> Labor, ib.. 1882; Methods of 

Social Reform, ib., 1883; Money and the Mcc] nf Exchange, ib,, 

1884; Investigations in Currency and FMminco, t6., 1884; Elements of 

Logic ib., 1884. 
Jones, Rev. Riohabd. — The Diiitribution of Wealth and the Sources of 

Taxation, London, 1844. 
KiRKUP, Thomas. — An Inqu'ry into Socialism, New York. 1888. 
Knirs, Karl. — die politiscne Oekonomie vom f::«>schichtliohen Standpunkte, 

Braunschweig, 1883; Gold uud Credit, Beriin, 1886. 
Lauohlin, J. L— The Study of Political Economy, New York, 1885 ; The 

History of Bimetallism in the United States, »6., 1886 ; Elements of 

PoUucal Economy, »6., 1888. 


Latslctb, Kmilb de. — BimeUllic Monej, tnD8*.atod froos the TrfmA^ B» # 
York, 1877; PrimiUTe Fropertj, UBoAlated, I/nmIoii, 1878; ISe^ 
Tebdeocics of Politicad KoonoiDj. tnuuilated, Xev York, 1879; Im 
<\\ie%U*m fnonetaire en 1880 et eo 1881, Bnixellea, 1881 ; Le bimenlBama 
iriUritLatioDale, Par ii. 1881; E^emenU of Pf«litiod Eeouoiur. tyinnlrtHi, 
New York, 1884; Cooteiuporrfrj Socudism, tniiwlaifi. tiC 1^^^ 

LeboT'Beauliecj, Palx^ — De TEtat social et inieilectual des pc^mlmtiofis 
ouvrierefl et df s^m iufliieaoe siir le tauxdes aaUirea. Paris 1868; La 
t\nfmu<m ourri^re au XiX* siecie. ib^ 1871 ; Le introil des femiues s«u 
XIX* si^le, ib., 1873; Traill de U scietice de^s fillaoce^ 2 Tola^ ib^ 
1877 ; Kiuiai sur la repartition des nclies<«e4 et sur U teodaaoe a utie 
iTKiiridre in^»lit^ des conditions, ib^ 1880. 

Iamuv^ T. K. C'uffe.— Land Systems of Ireland, England, and tiie Conti- 
iicrit, London, 1870; Essays in Political and Moral Pbilosophj, Loudon, 
187&. • 

LlKT, Fkikdbich, National System of Political Eoouomj, translated from 
the German, Philadelphia, 18&6; I»tidon, 1885. 

LUBBTXJK, Sib Johic.— Prehistoric Time-, Nrw York, 1872; Origin of Civil- 
ization, i&., 1875; Kr.'preHontation, London. 1885. 

McNkill, Or^;K(;e K.. ed.— The Labor Hovemeut, the Problem of To-day, 
B^mton and New York, 1 887. 

Maine, Sib Hekry S.— Early History of Institutions, New York, 1875; 
Villa}(e Commimities, t6 , 1876; Ancieut Law, t6., 1877; Early Law 
and CiiHtom, ib.^ 1883; Popular Goveratnetit, t6., 1886; International 
Law, t6., 1889. 

MAi.THUri, T. R— Doflnltims in Politicjil Econora?, London, 1827; Essay 
on the Principles of PupuUtioa, London, 1878; Principles of Politicsil 

Mabhuau., a. — The Present Positifin of Economics, New York, 1885. 

MARHiiAf.u A. AND M. P. — Th ' Eonomics of Industry, London, 1881. 

Mabx, Eakl. — Das Kapital, 2 vols., Hamburg, 1885; translated by Samuel 
Mfxire and Eilwanl Avelinjc, New York, 1889. 

Mill, Joh» Stuahi'. — ileprebentaiive GovHrnment, New York, 1862; 
Syst(jm of I/>;fic, i'/a, 1874; Ant »bi >jr-aphy and Miscollaneom Works 
12 vols., ih., 1875: Essuys on Some Unsettled Questions in Political 
Economj', London, 1877; Socialism, New York, 1879; Principles of 
Political Kconomy, I/>ndon; lS8r>. 

Morgan, Lkwih H. — The League of tlio Iroquois, Rocliester, 1851; Systems 
of OonManguini y and Affinity of the Human Family, Smitlisonian In- 
stitution publicai ion, Wa-thinjctou. 18G9 ; Ancion' Society, New York, 
1877; Houses and 1 louse- Life of tlio American Aborigines, Washingp- 
ton, 1881. 

MoHHB, J. T. — Banks and Bankinjr. 2 vols., 3d od., Boston, 1888. 

M0R8KLLI, H.— Suicide, Now York, 18«2. 

MULPOKI), K.— The Nation, Boston, 1882. 

Newcomr Simon. — Principlfs of Politicjii Economr, New York, 1886. 

Paitkn, S. N.— Preniises of Polili.-al KcomMuy. Philadelphia, 1885; The 
Stability of Prices, American Ktronomic Association, Baltimore, 1880; ^ 
The Consumption of Wealth, University of Pennsylvania Publication, 
Philadelphia, 1889. 

PeRIN, Oharlks. — De la richos-'e dans Ics nooietes chretiennes, 2 vols., 
Paris, 1868} I^s lois do hi socieie chretienne, t7>., 1876; I^ scK-ialisme 
Chretien, t6., 1789; l/os doctrines economiques de|>ui8 un siecle, t6., 
1880; Melanges de politique ot d'economie, t6., 188J. 


Prick, L. L. F. R. — Industrial Peace, New York, 1888. 

Pboudhon. p. J. — L'lmpot 8ur la revenue, Paris, 1848; Id^s revolution- 
uuirbs, tfr., 1849; R^ume de la question sociale, banque d^echauge, 
t&, 1849; de la creation de I'ordre, ifr., 1849; Int^rdt et principal, ib.^ 
186U; La revolution de la XIX* siecle, tV'., 1851 ; La revoluiiou sociale, 
t&., 1853 ; Des r^formes a operer dans Texploitation des cbeniins de fer, 
t&., 1855; Du principe federuiif, i6., 1863; Les deuiocrates et les r6- 
fractaires, ih„ 186^; Du principe de Tart et de sa destination sociale, 
»&., 1865; Theorie de la propriety, t5., 1866; La justice daus la re- 
volution, i6., 1870; Les confessions d'un revolutionnaire, i&., 1876; 
What is Property? translated from the French, Princeton, Mass., 
1876; System of Economical Contraoictions, translated, Boston, 1888. 

Rab, John. — Contemporary Socialism. New York, 1884. 

RiOARDO. David. — Works, with notice of life and writings by J. R. 
McCulloch, New York, 1881. 

RoOEBs, James K. Thouold. — Historical Gleaninps, New York, 1870; 
Ck)bden and Political Opinion, t6., 1873; Social Kconomy, t6., 1874; 
Complete Collection of the Protests of ihe Lords from 1624 to 1874, ib, 
1876; Manual of Political Kconomy, i6., 1876; Six Centuries of Work 
and Wages, ib.^ 1884 ; The First Nine Years of tlie Bank of England, i6., 
1887; A History of Agriculiure and Prices in England, 6 vols., t6., 
1888; The Economic Interpreiution of HiKtory, ib., 1888. 

ROSCHER, WiLHELM. — Zur Grcschichte der Englischen Volkswirthschafts- 
lehre, Leipzig, 1852; Die deutscite Nationalokonomie an der Granz- 
scheido desl6u. 17 Jahrhunderts, t5., 1862; Geschichte der National- 
okonomie in Deutschland, Munich, 1874: Aussichien der Yolks- 
wirihschaft hus dem geschichtlichen Stnrdpunkte, Leipzig, 1878; 
System der VolkswirthJscliHft, 4 vols.. Stuttgart, 1886; Volume I, 
Principles of Poliucal Economy, translated from the German, 2 vols., 
New York, 1878. 

Sat, Jban-Bapti8te. — ^Treatise on Political Economy, translated from the 
Fi*onch, Philadelphia, 1869. 

ScHAEFFLB, ALBERT E. Fr. — Das gesellschaftliche System der mensch- 
lichen Wirthschafl, Tiibingen, 1873; Bau und Leben des Socialen 
Korpers, i&., 1878; Eucyklopadie der Staatslehre, t&., 1878; Kapi- 
tflliumus und Socialtsmus, i6.« 1878; Die aussichtslosigkeit der Social- 
demokratie, t&., 1885. 

SCHOEN'BEita, GcsTAV. — Die pittliche-religiose Bedeutung der Sozialen Fragen 
Stuttgart, 1876 ; Dhs Handbuch der Politschen Oekonomie, 2 vols. 
2d ed., Tiibingen, 1888. 

SiDGWiCK, H.— Methods of Rthics, New York, 1884; The Scope and Method 
of Economic Science, t6., 1885; HiHtory of Ethics, Ixndon, 1886; Prin- 
ciples of Political Economy, New York, 1888. 

SiMONDi DE SiSMONDL J.-C.-L. — De la richesse commerciale, Geneve, 1803; 
Nouveau Principes d'economie politique, Paris, 1827. 

Smith, Adam. — Wealth of Nations, New York, 1888; Essays on Moral Sen« 
timents, t6., ; Theory of the Monil Sentiments, ib. 

Smith, Richmond M. — Statistics and Economics, Baltimore, American Eco- 
nomic Association 1888. 

Spencer, Herbert. — First Principles, New York, 1873; Descriptive So- 
ciology, 8 vols., ib., 1873-; Social Statics, ib.. 1875; Principles of Biol- 
ogy, 2 vols., ib., 1874; Essays, Moral. PoMiical, a id -Esthetic, ib., 1877; 
Principles of P8ychoh>gy, 2 vols., ib., 1877; Principles of Sociology, 2 
Yols.,t&., 1882; The Man versus tlie Siato, i6., 1885. 

348 Ay lyraoDdCTioy to political ecokomt. 

Stepkiak. — Undei^rronnd RuMia, New York, 1883. 

Tauwio, F. W. — Protection to Young Indtistriea. New York, 1884; TlM 

History of tlie Present Tsrifl; New York, 1885; The Tariff History of 

the United States. New York, 1888. 
TBOMPSOiTt BL B. — S(X!ial Scienoesnd National Eoonomj, Philadelphia, 1876 ; 

Elements of Political Eeonomj, t&^ 1882; Proleciioii to Home Indostrj, 

New York, 1886. 
TOTVBKE, Arnold. — ^The Tndnstnnl Revolution, Lon<|on, 1884. 
Ttlor, E. B.~SiOne Ago, Past and Present, New York, 1874; Primitive 

Culture, t%., 1874; Earlj History of Mankind, t&., 1878; Anthropology, 

t»., 1888. 
Wagner, Adolph. — u. Ebwin N asbb. — ^Lehrbuch der politischen Oekooomie, 

7 Bd., Leipzig. 1886. 
Walker, F. A.— Statistical Atlas of the United States, New York, 1875 ; 

The Wages Question, t^., 1876; Money. Trade, andlndiisUy. A., 1879; 

Money, t5., 1883 ; Land and Its Rent, Boston, 1883 ; Political Economy, 

New York, 1887. 
Ward. Lkstbr P.— Dynamic Sociology, 2 vols.. New York, 1883. 
Weeks. Joseph D. — Labor Differences and Tlieir Settlement, Society for 

Political Education, New York, 1886. 
Wilson, A. J. — The National Budget: the National Debt, Taxes and 

Rates, London, 1882. 
Wilson, Daniel — Prehistoric Man, New York, 1876; Anthropology, t&y 

Wilson, Woodrow. — Congressional Government, Boston, 1885. 



Adams, H. B., on history and political 
economy, 132. 

Adams, H. C, definition of political econ- 
omy, 106 ; on public debts, 295. 

Administration, (actor in a national econ- 
omy, 9i, 

Af^icultural stafirc, described, 47. 

Amalgamated Association of Iron and 
Steel Workers, introduced sliding scale, 

American Indian, economic condition of, 

Analysis, economic method, 122. 

Anarchism, distinguished from socialism, 

Anthropology and political economy, 134. 

Aquinas, Thomas, jtutum pretium and 
interest, 318 ; on luxury, 154 ; on fair 
price, 188. 

Aristotle, subordinated economics to eth- 
ics, 85 ; on luxury, 154 ; economic ideas 
of, 815-«. 

Arbitratiou, 226 ; of exchange, 199. 

Artificial monopolies, 249-61. 

Asceticism, self-sacrifice degenerated, 275. 

Atmosphere, influence upon a national 
economy, 32. 

Ayarioe, 275. 


Banks, chief organs for credit-economy, 
51 ; an evidence of the industrial revo- 
lution, 58; national restiictlTe laws 
upon, not an Infringement of liberty, 
72; 901-2. 

B<^lgium, Latin monetary union, 192 ; 
Economists, 325. 

Bemis, on wages In Industries where 
women and children work, 221-2. 

Bentham, Jeremy, restriction of inherit- 
ances, 307. 

Bequests, taxation of, 307. 

Bible, description of pastoral stage, 45. 

Bill of exchange, described, 197. 
BimetaUism, 192-4. 

Bland bill, coinage of silver in U. S., 194. 
Bluntschll, limitations on contracts, 88; 

on tendencies of law, 136. 
Book credit, 198. 
Brotherly love, a motive o( economic 

activity, IS^ 


Gannan, Edwin, sufferings on account of 
displacements of labor and capital, 60. 

Capital, Its new importance a cause of 
economic problems, 61 ; defined by 
Marx, 68 ; freedom of, with respect to 
loans, 78; factor (»f production defined, 
164-5; fixed and circulating, 166 ; saved 
by being consumed, 166; increase of, 
166; distinguished from capitalization, 
218-19 ; formation of, and consumption, 
209-71 ; and labor, plan for uniting, 63. 

Capitalization, distinguished from Capital, 

Carey, Henry C, aiigument for protection, 

Census estimates of wealth, 147-8. 

Charity, science of, 261 ; degenerate, 275. 

Child labor, effect on earnings of the en- 
tire family, 222 ; laws for lessening evils 
of, 259-60. 

Christianity, offers the highest conception 
of society, 14 ; progress of, a cause of 
economic problems, 65; economic ideas 
of, 317-8. 

Circulating capital, 166. 

Cities, rise of, in the trades and commerce 
stage, 49. 

Civilization, depending on growth of 
higher wants, 70. 

Clearing houses, 201-2. 

Cohn, Oustav, parts of political economy, 
114 ; historical school in Germany, 824. 

Coinage. See Money. 



DeMa, public, »l-6. 

ComUuuiUiiiu. UM-ara poaslble la Oeld ot 
aUurul moaupollM. mi. 

Deducltfe mMtiod deK!m»d.ll»: Imul- 
Ocleacy ot, tm. 

Men to aevratHlea noi to luiurifs, u 

Dsmaud and nii<plr. in> lO. 

fonnerly, 5S. 

Demoaracy. laduMdal. tM. 

'■Cummon." mirvlval ol commMi onatT- 



Dtecrlpllon, part oF emuumlc inMbod, HI. 

tSDlagiB, «3; rruedum at, ind ilHiimnil 

Drierlorailuu of tbv musses, alwalulo aud 

aui] suppty, ItW; Id Ow Oi-Jd ot luilunu 

Conite. AububU!, Uw fiilher or si<!|..loj.T. 

DlatrlSullon.ilMa; division ut producM 

detwuda upon iDdiuirlal «ln.'netli, in- 

Conrad. PnifesBor. blMori™! »rBi«l III 

Sjlawot.depandson niw ot Ioctimm 

Gennany, 3^4. 

at tactora ut production, 'JSS-i. 

ducen. K7. 

CoMumplloi..!M7-8S: df meulms In trcst- 

BieDlor.»»:deOned, »fl-B;amlaip- 

IMO* and remMlea. JTi^. 

or future pruduvia, Bn-2: wasletul, 

Draft, described. 1B7. 

srfl ; raatrol or. Sr> ; lUUilT.W oI, m. 

Druntmood. on the Indlvlduallani of tba 

nul'm of tOe bean of Africa, SO. 

Co-apt^niilofl, ouurclve, oail toIudUt/, 


Oipyrtl'li'*. **- 

Ecooomtc acimiy. ninlKea ot. mi-*. 

Conwrtidom, one {wpert ot tHe Indiulrla] 

Eeonomlc BvlU. social. M. 

Konnomlcfrewlom. See nwdom. 

mmt nf. TD: vbeD lulUbla tor public 

Economic eooda. deOned. us. 

Emnouilc Inwi. m-W, 

Com, Prot«i«>r, blHlorlcal Mbnol In Ital^. 

Economic tire. Uotated and «oelal. 18 : de- 


aned.U: not tor «lf, »; ■u«»lDde- 

uid nipply. lal. 

Craddock, cbarlM Effhert, desfriptlon ot 

Crett RUlldB, ■ DHittlod ot unlUns Utnr 

Emnomlc metbodt, ItO-liS. 

and oaiiltal. <U. 

Eonnomlc praUenu. See Prabtem*. 

evlli ot, son. 

Credit Monom]' dcwrlbed. SL 


life. as. 

Emnomj. Bee Economic Ufe. 

CiLitom, InriiKrIy a powi-rritl fltctor In 


aealait child labor. asV: cauie of In- 

Cusumano. Proteaor. hr*irlc»l mHooI Id 

luly. SH. 

Cyrlop* iBlaled ewnomk life. W. 



Eiffht-honr daj, a problem growing out of 
the Industrial revolutioo, 50. 

Elementary value, 178. 

Engel, law of family expenditure, 281-2 : 
historical school in Germany, S24. 

Enjirland, comparison of agriculturul pop- 
ulation with that of France, 81 : restri.*- 
tions on labor, 75 : landed property, 78 ; 
corporation laws, 70; restrictions on 
foreign commerce abandoned, 82, bi- 
metallism, Ifti. See also Great Britain. 

Entrepreneur, functions of, 170-71 ; and 
proQis of monopolies, 210-20. See also 

Ethical aims, an essential part of eco- 
nomic activity, 101. 

Ethical standards, See Ethics. 

Ethics, higher standards of, a cause of 
dconomic problems, 65 ; and political 
economy, 67 ; and the economic life of 
nations, 85 ; and political economy, 182 ; 
and luxury, 275 ; regulated the economic 
life of the Orient, 814. 

Exchange, usual term for transfer of 
goods, 177 : arbitration of, 100. 

Excise taxes, 806. 

Expenditures, family, 281-8; govenunent, 
increase in, 280-02. 

Factory inspection, 226. 

Fair price in middle ages, 182 ; in medem 
Uwi, 18;J-3: 183. 

Family, the first social unit, 20; true 
social unit in economic discussions, 261 ; 
expenditures of, 281':2. 

Farmers' organizations, 280. 

Faweeit, Professor, ideal of economic 
progress, 86. 

Fawcett, Millicent, definition of political 
economy, 105. 

Ferguson, Adam, on luxury, 151. 

Fichte, assistance to the economist, 181. 

Finance a part of political economy, 160 ; 
defined, 287-8; 287-906 ; source of eco- 
nomic inquiry, 312. 

Fishing tribes described, 44. 

Fixed capital, 166. 

Fluctuations in volume of money, 100-2. 

Forestry, government enterprise, 00. 

Form value, 178. 

France, comparison of agricultural popu- 
lation with that of England, 83; re- 

strictions on labor, 77 ; Latin monetary 
union, 102 ; success of co-operation, 287. 

Franchises, those who receive them bound 
to render service to the public, 28. 

Eraser, Dr. James, on obligations of the 
rich to persrmal service, 244. 

Frederick the Gr^at, mercantilist, 320. 
I Fii)edom, of the uncivillMd man, illusory, 
20; relations of modem economic life 
to, 71 ; defined, 78 ; of labor, 74 ; of 
person, 74; of movement and acqui- 
sition, 74; of landed property, 77; of 
capital with respect to loans, 78; in 
the establishment of enterprises, 70 ; of 
the market, 82; of competition, and 
demand and supply, 182. 

Fremantle, Canon, on rights of private 
property, 209. 

Free Trade, 204-10. 


George, Henry, land nationalization, 806- 
7 ; private property and taxation, 800. 

Germany, restrictions on labor, 77 ; cor- 
poration laws, 70 ; restrictions on rate 
of interest, 70; demonetization of silver, 
102 ; property and public debts, 206. 

Giddings, social ideals in economic liXe, 

Gide, Professor, French economist, 825. 

Gifts, source of public revenue, 204. 

Godin, profit-sharing establishment in 
Guise, France, 286. 

Gold. See Money. 

Government regulations, increase in, 72; 
and democracy, 80 ; some of the func- 
tions of, 00 ; and forestry, 00 ; prominent 
in capital-formation, 270-1 ; should be 
a model employer, 280; expenditures, 
general increase in, 280-02; a partner 
in production, 800-1. See also State. 

Great Britain, expenditure of, 200. 

'* Greeubacks," 180. 

Greeks, reasons for having no complete 
political economy, 31^-3; economic 
ideas of, 315-6. 

Guilds, mediffival, described, 1C8-0. 

Henry, Professor, refused to take out 

patent on telegraph, 250. 
Hewitt, Hon. A. S., recognized the validity 

of the law that wages depend on stand- 

ard of Ufe, 222. 



HUdelmiKl, historical metbod, 118; in- 

ductlTe rneUiod, 823. 
Historical scliooU rise of, and deBcription, 

118-123 ; represeacatlves of« 82»-6. 
Hifltorr, necessity of its study in poUtica] 

economy, 87; and poUUeal economy, 131; 

and political economy, 311-S. 
Hunting and flahing stage, described, 42. 
Hygiene and political economy, 181. 

Ideals, for economic progress, 86; Impor- 
tance of, in study of poUUcal economy, 

Idleness, iDYOlnntary, 260-L 

ImmigratiOQ, limitations on freedom of 
mOTement, 76. 

Improvement, posslbilily of, for the mass- 
es, a cause of economic problems, 6S. 

Improvement, displacement of labor and 
capital, resistance to, 60. 

Income tax, 306-7. 

Indian. See American Indian. 

Indirect taxes, 305-6. 

Individual, economic activity of the, 32; 
enterprise of, necessary, 89; and society, 
distinction in political economy, 146. 

Individual and social capital disUn- 
guisbed, 16S. 

Individual and social cost, 182. 

Inductive method des<Tlbed, 116. 

Industrial democracy, 236. 

Industrial society, defined, 50. 

Industrial stage, described, 49. 

Industrial revolution, cause of economic 
problems, 56. 

Inflation, 188. 

Inheritances, taxation of, 807. 

Insurance, control over consumption, 280. 

Instruments of credit, 197. 

Intemperance, 261. 

I nterest, restritoions on rate of, 78; defined, 
216-17; ideas of Aristotle, 316. 

Internal revenue, taxes, 306. 

International law and political economy, 

Italy, Latin monetary union, 192; econo- 
mists, 8^ 

Knies, historical method, 118: definition 

of credit, 196 : historical method, 823. 
Knights of LAbor, 228. 

Labor, three general hJatarteal oonditiatn 
of, 85 ; and the capiralistiff mode of pro- 
ductlon, G2; and capital, plans for unit- 
ing, 68; factor of prodoction, 162; and 
protection, 907-8 ; organlsUlons, nearly 
all, temperance societies, 282 ; organi- 
zations, educational value of, 238; 
growth of, 229; natural growth, 230; 
opposition to, 230; labor problema, 
sonroe of ecooomic inquiry, 818. 
See also Child Labor and Woman 

Laisses-fUre, 106, 125 doctrine of the 
Physiocrats and Adam Smith, SSL 

Land natlonallation and munlcipalla- 
tion, 296-8. 

Landed property, freedom of transfers, 77. 

Lane, Jonathan A., va!ae of personal 
property and real estate in Boston, 

LamperMoo, Profeamr, historical school in 
Italy, 384. 

Latin monetary union, 192. 

Laveleye, on the evolution of property, 8T; 
definition of political economy, 110 ; on 
luxury, 154 ; the best order for human 
affairs, 263; Belgian economist, 925. 

Law, evolution of, 86; and political eoon* 
omy, 184-9. 

Laws, restriaive, may increase real free- 
dom, 72 ; no longer special, but general, 

Leslie, introduced German ideas into En- 
gland, 324. 

Lexis, Professor, historical school in Ger- 
many, 324. 

Legislation, a factor In a national econo- 
my, 33. 

Liquors, consumed In the United States, 

Lotze, Hermann, assistaboe to the econ- 
omist, 13L 

I/)uis XI\r., on royal expenditures, S78. 

Lowell, J. R., definition of political econ- 
omy, 94. 

Lubbock, Sir John, on the individualism 
of savages, 20 ; the true savage neither 
free nor noble, 40. 

Luxury, defined, 153; public and private, 
IM ; 27^-6. 

Luzzati, Professor, historical school in 
Italy. 334. 



Maine, Sir Henry 8., on the cbanfce in legal 
oonoepUons, 86 ; dvillsed man not con- 
scioua of legal rules, 40 ; on oommou 
property in land in pastoral stage, 46; 
on property in village comm unities, 47 ; 
** sharp practice and bard bargaining,'' 
the market law, 06 ; obedience to law in 
civilized nations, 71 ; economic inca- 
pacity of lawyers, 186; economic classes 
in India, 814. 

Maltbus, cited, 115 ; on population, ISM; 
The Theory of Population, 82i. 

Malthusianism, 168-4. 

Man, bis activity a chief factor in a na- 
tional economy, 83; original and ac- 
quired powers, 145. 

Margin of cultivation, defined, 215. 

Market, freedom of, 9i ; rheory of the, *J78. 

Marshall, Professor, position between de- 
ductive and historical school, 8s)l. 

Marx, definition of capital, 68 ; cited, 115. 

MassacbusettSf Report of Bureau of Stails- 
tics of labor on family expenditure, 2S2. 

Mercantilists, conception of political econ- 
omy, 109 ; economic Ideas of, 820-1. 

Metbods. See Economic Methods, 117. 

Middle Ages, reasons for baving no com- 
plete political economy, 818 ; eoooomic 
ideas of, 817-8. 

Mill, John Stuart, on limitations on con- 
tracts, 88 ; dted, 100 ; definition of po1i^ 
ical economy, 106: parts of political 
economy, 114; on economic incapadiy 
of biwyers, 186 ; man^s work in creating 
utilities, 143; definition of credit, 196; 
public utility the basis of private prop- 
erty, 899 ; follower of Ricardo, 828-8. 

Milling, an example of the industrial rev- 
olution, 57. 

Money, the amount needed, 189-90; ideas 
of Aristotle, 816. 

Money-economy, described, 51. 

Monometallism, 198. 

Monopolies, profits of, 819-80; artificial, 
84{>-51 : artificial will be overthrown by 
public ownership of natural monopolies, 
857 ; natural, restriction on establish- 
ment of, 80 ; natural, characteristics of, 
851-8 ; natural, advantages claimed for 
public ownership, 858-8. 

Montesquieu, cited, 186; on expenditures 
of the rich, 873. 

Mosaical Code, prohibits alienatioD of land, 
78 ; prohibits usury, 78. 

Motives of economic activity, 151-9. 

Mulford, definition of the State, 80 ; free- 
dom realized only under government, 

Mun, Thomas, mercantilist, 880. 

Munidpalizatlon of Und, 295-6. 


Nasse, Professor, historical school in Ger- 
many, 884. 

National economy, defined, 88; political 
indw'peodence the basis of, 89 ; the two 
great factors in a, 81 ; a historical prod* 
uct, 85. 

National Farmers* Alliance, 830. 

Nationalization of land, 89&-8. 

Nature, factor of production, 160-1. 

Natural biw and political economy, 106. 

Natural laws, what are they r 184. 

Natural monopolies. See Monopolies. 

New York, increase in expenditures, 890. 

Observation, part of eoonomio method, 

Ohio, Increase in expenditures, 880. 
Opium habit, 158. 

Orient, the, economic ideas of, 814-5. 
Over-production and under-consamption« 

149; really under-productlon» 278. 

Panics, 878-9. 

Paper money, 187-9 ; is it safe ? 188-0. 
PRrsimony, public, evil results of, 808-5. 
Past and present, mkleadlng oompartsons 

between, 84. 
Pastoral stage described, 44. 
Patents, 849-51. 
Patriotism, a motive of economic activity, 

Patrons of husbandry, 880. 
Pauperism, 861. 
ppel. Sir Robert, introdooed police force. 

P6rin, Professor, Belgian economist, 825. 
Philosophy and political economy, 180. 
Physiocrats, first scientific economists, 

818: economic ideas of, 881, 
Physiology and political eooDomy* 181. 



Pic** urortfSSu 

PiflfOe faJue, 178. 

FlAtn, iQbordiiMt^d eeono ml ci to i*Uifei, 
86: oa laziuT* 1M« eeooomic idamof^i, 

Plioj, eoopomie Ideas of, 310. 

Polidcml eeoouoir a pan of socioio|(7« 13 : 
tasteof otber llfe-aplMflw, 16; tbe bent 
tDtroducttoa toMxiolugy, 17; neeeMliy 
of liiatoiicalitud7,37; midway beiweeD 
natanU and meotal and moral actenoe*, 
97; baa sbown powlbllitr of Imiirore- 
meot for tbe maifa, 85 ; and ettalos 87: 
derfratfoiM of tbe term, M ; defloed, 95; 
ilmpler tbao private eoonomlea, 97; 
mt^rdt permanent inten»t«, 100 ; bocb 
a dynamic and a static adenoe, 100; li it 
a«ctence? 109; deflned,9i-110; main parts 
of, 1 1 i-1 15; a iMef ol adenoe, 12&*80; and 
pblloiiopby, 130; and pbyslology and 
by^ene, l')l; and bistory, 181: and 
eifalra, 1^ . and reliirion, 188 ; and an* 
tbropoU)fnr< 184; and law, 18t-9: and bb- 
tory, 811-12; In Germany. SSM; In Eotr- 
land, a»l ; In France, 3M-«; In Italy, SsM; 
In Belgium, 825 ; In United States, 825. 

Political freedom. Bee Freedom. 

Political Independence, tbe basis of a 
national economy, 20. 

Politics, purification of, secured by public 
owoenibip of natural monopolies, S66. 

Popular suffmge. See Suffraice, 202. 

Population, RTOwtb of, 102-4. 

Potter, Bishop, extraraeaoce connected 
with riinerals, 280. 

Price, 79. 

Private biislneas, confuidon of public and, 

Private and imbllc economy, distinction 
between, 06. 

Private and public responsibilities, 92. 

Private welfare, not Identical witb public, 

Problem of tbe working day, effect of tbe 
Industrial revolution, tyO; economic prob- 
lems, not local, 55 ; social, 250-68. 

Prodigality, 272-6. 

Producers, not different class from con- 
sumers, 277. 

Production, elements often overlooked in 
statistical estimates, 22; organiZHtion of 
factors, 168-74; and distribution not 
sharply sennrated, 213; disproportion- 
ate. cauHe of crises, 278; government a 
partner in, 80a-L 

Prodocttve douaioa, 

ment revenue. fM.' 
ProdBcUvtty, Iim nmm of, te 

Proflia, defloed, 117-18; of monopolteB, 

Proat-siiarlnff In United Statea, SK; la 

Prom asory notes des c ribed, 197. 
Pnfperty, taistorfeal cbangns In tbeooiK 

ditioos of, 80 ; freedom of laoded, 77; 

defined, 214-15 ; private, limitaiioiis on, 

Proceetkmism, 904-10; divenlfled-iiatiiraU 

indnstryanniment, 201; Inf^nuindns- 

try-argumeot, 901; stadi<lcs, 908; an 

historical growtb, 200. 
Pmssia, free tradu lu Und, 78. 
Public business confusion of private and, 

i'ublic debts, 201-6. 
P.ibllc finance. 8t« Finance. 
Public luxury, when justifiable, 274-5. 
Piibllc parsimony, evil results of, 80^-5. 
Public and pr.vate economy, distinctioo 

between, 96. 
Public and private responsibilities, 92. 
Public profipertty, increased by public 

ownerstaip of natural monopolies, 258-4. 
Public resources, better utilization of, 808. 
Public spirit, a motive of economic activ- 
ity, 152. 
Public welfare not identical witb private, 


Reform, social, 945. 

Reformation, Protestant, effect on eco- 
nomic Inquiry, 818. 

Relczenstein, Baron von, historical scJiool 
In Germany, 824. 

Religion, progress of, a cause of economic 
proble.nas, 65; and political economy, 
138: a motive of economic activity, 152. 

Remedies for evils of economic freedom, 
84 ; for evils of minute division of labor, 
174 ; for social evils. 250-63. 

Rent, defined, 216; land nationalization, 

Restrictions, on labor, 77; on the establish- 
ment of natural monopolif^, 80. 

Restrictive laws may increase real free- 
dom, 72. 



Revennn of ffOTennnent comparm^wlth 
expenditures, 292; permftoeDt lources 
of, 5»M. 

Ricardo, Dayld, economic doctrines of, 

Blcbes, sodden, cause of econonife irob- 
lem.«, 60. 

Borers, professor J. E. T., on labor or- 
ganizations in En^rland. 2ii\, 

Bomans, reasons for having no complete 
|K)lltlcal economy, 818; eounomlc ideas 
of, 816-7. 

Roman law, on property, 214; important 
Id economic studies, 817. 

Roman luxury, 273. 

Boscher, William, parts of political econ- 
omy, 112; bistoricul method, 118; defi- 
nition of credit 190; on developmeut 
of eeonomlc ideust 818-9; historical 
method, 823. 

R&mlln, Professor, historical school In 
Germany, 324. 

8bx, ProfeflBor, historical sciiool in Ger- 
many, 824. 

Say, Jean-Baptlste, the theory of the 
market, 278. 

8ch&ffle, Professor Albert, German sociolo- 
gist, 17 ; Ideal of economic progress, 86; 
historical school in Germany, 821. 

Seheel, von. Professor, deOnltlon of politl- 
eal economy, 96-7; historical school in 
Germany, SM. 

8cb5nberg, political economy developed 
for promoting the well-being of society, 
65; parts of [lolltlciil economy, 112; 
taist^rirul school in Germany, SM. 

Self-Interest, not a constant meaHorable 
force, 12.*) ; a motive of economic activ- 
ity, 151. 

Serfdom, historical condition of labor, 85. 

Senra, mercanU!ist, 320. 

Shaw, Dr. Albeit, on co-operative coopers 
of lUnueapolIs, 238. 

Sidgwlck, Professor, on tbe distinctive 
teachings of Christianity, 817-8; posi- 
tion between historical and deductive 
school, 324. 

Silver question and Mraetallisni, 192L 

Silver. See Money. 

Sismondl, deflnltlon of political economy, 

Slavery, historical condition of hibor,8\ 
Sliding scale Introduced in Iron Industry, 

Smith, Adam, uses ** manufacturers^' for 

skilled artisans, 63 ; laws of settlements 

oppressive to the poor, 75 ; elted, 77 ; on 

causes of differences of wages, 224-4 ; 

WeaUh of Nationfi, 821. 
Social and individual capital distinguished* 

Social and Individual cost, 182. 
Social evils, also economic, 84. 
Social problems. See Problems. 
Social Reform, 245. 
cSoclaUsm, 240-8; strength of, 248^? 

weakness of, ^15-6. 
Socialists, do not attack capital In itself* 

62 ; character of, 246-7. 
Society, an organism, 14; departments of 

social life, 15; society and individual* 

distinction iu political economy, 140. 
Sociology includes political economy, 1 i ; 

defined, 14; present condition of tbe 

science, 16 ; political economy tbe best 

introduction to, 17. 
Soil, Influence upon a national economy,8I. 
Spencer, Herbert. English sociologist, 17. 
Standard of Comfort, defined, 221-8. 
Standard of life defined, 221-8. 
State, defined, 80; and eeonomlc life, 87. 

Sec also Government. 
State action, otlllty the criterion of, 87. 
State ownership of natural monopolies, 

advantages of, 253-8. 
Stattetical method, 117. 
Statistics, in arguments for and against 

prcAectton, 209. 
Steuart, Sir James, definition of politfcal 

economy, 109 ; mercantilist, 320. 
Strikes, success and failure of, 282. 
Sub-treasury system, 288-9. 
Suffrage, restriction of, not a remedy for 

social evils, 262-3. 
Supply and demand, 17&-88. 
Switzerland proposes intemationaf factory 

legislation, 188 : Latin monetary union, 



Tariff, 204-10. 

Tax, direct, 806. 

Taxation, 299-8eR ; not an evfl, 891 ; In- 
creases with freedom, 801; Increases 
production, 802; better adjustment of 

nnrrieni. XH-S ; >ii>l.t«r i 

TiiiBs. IndlnicL, SB; c»dse. 305. 
TeuipersQCB, In tabor nriranlKatlons, 2B. 
TrrriCorr, ■ clilel Uclur [□ > rutluimi 

Ttiucjijldes, >ct!oD uii} nuRiInn the ex- 

jilanatlon uf blictnicsl uoFunvniMii. S3. 
Tobacco, coiuuiiied In Ue Ualtud Slalr«, 

1S8. American inuUlsennr hdiI 

dIvliluD ol labor, ]T4. 
foynbee, represenullve ot bWortiaJ 

kHooI In KbfflEDd, KM. 
" Ti*mp !awa," 76. 
Tmu^in i-I ({Doda, ot, CO; 

Truck ecaDomj deiwni<eO. SO. 
TruBla, a alepla Lbe eroli^Lloa of InduWrj, 

ta i vrbeo Ndlable lo.- tnolls nuuuRa' 

Dnder-consumptkin »nd ave)vn>du°"("'< 

roder-productloQ cause of alua, Vl!^, 
tDiM BUtn. rninptlons an Wkt, TT; 
usury laws, 70 : corporatiDi< L\ry, 79 : 
imealla trade. 83 1 LkiVHie 
eipeodlturaa. WO. 
Okutt laWB, 79, 
milltlw. deOned, 1«-B. 
UlUIty. crtWrlon o( SUte BelloQ, K ; con- 

rrepdom ot d 

ratuc deOned. ITT-S ; In use an 
vlianKe, 178; elemenlary, torm 

I'oluire, on lawren, 13S. 

T; andUie 


syatwri. BSl-T; cauB 

» ot duror 

ol. SM-a. 


Ideal. B7; 


IX: blMor- 


Smilln Gennanj. B34 

ot moDer. 


n a unulu^ Increa* 

ot money. 

Want), and the irrowUi or vlilllEsaoD. 70 i 

dHslisble *Dil unde<lr«blu. 158. 
Ward. LtHter F.. Amerloui aoclologlat, 

17; dted. IDl. 
Waileful ooQSumpUoD, 1K-7, 
Water privileges. InDueoie upon a na- 

Xenophon. ocoaomlo litew oI. 31B. 

r. on projjeny. 387. 

/c^ L6(^