{"1": {"fulltext": "", "height": "2794", "width": "1757", "jp2-path": "institutesofecon01andr_0001.jp2"}, "2": {"fulltext": "Class ^7 \u00e2\u0096\u00a0r J/y\\nBook\\nGoi\\n~f^T6\\n/o c\\nCOFk RlGKT DEPOSl\\n7^/\\n\u00e2\u0096\u00a0\u00e2\u0080\u00a2e", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0002.jp2"}, "3": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0003.jp2"}, "4": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0004.jp2"}, "5": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0005.jp2"}, "6": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0006.jp2"}, "7": {"fulltext": "INSTITUTES OF ECONOMICS\\nA SUCCINCT TEXT-BOOK OF POLITICAL ECONOMY\\nFOR THE USE OF CLASSES IN COLLEGES\\nHIGH SCHOOLS AND ACADEMIES\\nBY\\nZ-\\nELISHA BENJAMIN ANDREWS D.\\nPresident of Brown University\\nLate Professor of Political Economy and Finance in Cornell University\\noJOJc\\nBOSTON\\nSILVER, BURDETT COMPANY\\n1889\\nCcAiAV", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0007.jp2"}, "8": {"fulltext": "\u00e2\u0080\u00a2A^i- i\\nCopyright, 1888\\nBy E. benjamin ANDREWS\\nTypography by J. S. Gushing Co., Boston\\nPresswork by Berwick Smith, Boston", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0008.jp2"}, "9": {"fulltext": "TO\\nHof-Rath Dr. Joh. A. R. von HELFERICH\\nProfessor of Economics and Finance in tiie\\nUniversity of Munici)\\nBy his former pupil\\nTHE AUTHOR", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0009.jp2"}, "10": {"fulltext": "apa ye y oiKovofiia CTrio-Ti^iys nvos ovofxa eanv (naTrep rj larpiKr]\\nKol ^^aXKeVTtK^ Kol Tj TCKTOVlKTj 7] Kttl WCTTrep TOVTWV tS V\\nTe^oiv \u00e2\u0082\u00ac.\\\\oifx.ev av eiTreiv o,Tt tpyov eKtio-Tr]^ outo) kol t^s olKOvofiia s\\nSvvatfieO av eiTretv o,Ti epyov air^s cctti; Soku yovv.\\nXenophon, Oikonojnikos, I, i, 2.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0010.jp2"}, "11": {"fulltext": "PREFACE\\nTwo main motives have prompted the composition of this book,\\none concerning method, the other, doctrine. The most excellent\\nmanuals of Political Economy now in use seem to the author to\\ninvolve two serious faults of method. One is that they nearly\\neverywhere say too much, totally ignoring the instructor, and on\\nmost points leaving the pupil himself little thinking to do even\\nwhen they stop short of positively confusing his mind in its efforts\\nto construe the thought in its own way. The other is that they do\\n^ot mark for the eye, in differences of type, any distinction between\\nsubstantive and subsidiary material, their pages exhibiting prin-\\nciple and illustration, statement and amplification, clothed in equal\\ndignity of form. It is believed both on psychological grounds\\nand from much experience, that the best printed presentation of a\\nsubject for class-room purposes is the briefest which clearness will\\nallow, leaving indispensable amplifications and illustrations to notes,\\nand all fuller exposition to the teacher s wit or the student s search.\\nThis is the aim of the following pages. That the pupil, so soon as\\nmaster of the essential idea, may be able to at once enlarge and\\ntighten his grasp upon it through reading, most of the paragraphs\\nare introduced by references to the best accessible authorities, more\\nrecondite works being at the same time named for the behoof of\\nteachers. On collateral subjects of special importance the ablest\\nconvenient discussions are listed in notes. The analysis and ar-\\nrangement of topics are in many particulars new, and it is hoped\\nthat some of the changes introduced will prove welcome. As the\\nresult of careful reflection, a prominence which may at first seem\\ngrotesque has been given to the paragraph-captions. Students will\\nfind this not merely a mnemonic convenience for the purposes of\\nreview and examination, but a most efficient objective help in grasp-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0011.jp2"}, "12": {"fulltext": "Vi PREFACE\\ning the science. Touching the doctrine of this new class-book\\nthere is less to say. As Economics is now in transition many depre-\\ncate all elTort at present to summarize it afresh. This logic, strictly\\ntaken, presupposes the advent, sooner or later, of a fixedness in\\nthe science which we fervently hope will never arise, since it could\\nnot but imply stagnation in economic thought. Meantime our best\\ntexts, with all that is true, profound, and well said in them, blend\\nnot a few propositions that what may be called the general judg-\\nment of progressive economists pronounces inadequate, misleading,\\nor erroneous. Such are especially numerous in regard to the nature\\nof Wealth, the scope of Economics, and in the weighty rubrics of\\nValue, Money, Interest, Wages, and Profits. Nearly all our trea-\\ntises, besides, betray from beginning to end a deceptive air, a wry\\nensemble, springing from writers too sharp sundering of Economics\\nfrom general Sociology. Whether the volume now offered to the\\npublic contains in these respects aught of true amendment, those\\nwho read and use it must judge. They will at any rate find in it,\\nnot always adopted but at least sympathetically mentioned so far as\\nthese are sufficiently non-technical to be named in a work of this\\ncharacter, the latest views which can with any propriety pretend\\nto be settled. The book has been written during the odd moments\\nof a very busy year, and it will be a wonder if the critic s keen\\nglance shall not unearth in it some inconsistencies and errors of\\ndetail. The author will be happy to be notified of any such. He\\nis indebted to several gentlemen for their kind pains in looking over\\nthe proof sheets as they have appeared. In this, Professor J. W.\\nMoncrief, Ph.D., of Franklin College, has rendered a pecuHarly\\ngrateful service.\\nE. BENJ. ANDREWS.\\nJuly 3, 1889.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0012.jp2"}, "13": {"fulltext": "TABLE OF CONTENTS\\nINTRODUCTION\\nI Economics Defined (i)* 2 General and Private Wealth (4)\\n3 Economic Evolution (5) 4 Economics a Science (7) 5\\nModern (8) 6 Its Origin (9) 7 The Mercantile System (10)\\n\u00c2\u00a78 Progress (12) 9 Physiocracy (14) 10 Adam Smith (15)\\n\u00c2\u00a711 The Smithian School (17) 12 The Historical or Apos-\\nteriori Tendency (19) \u00c2\u00a713 Professiorial Socialism (20) \u00c2\u00a714 The\\nSocialists Proper (23) 15 Our Viev/ (25) i6 Value of the\\nStudy (28) 1 7 The Division of Economics (30)\\nPART I\\nPRODUCTION\\nExcept as Involving Exchange\\nCHAPTER I\\nTHE NATURE OF PRODUCTION\\n18 Various Views of Productivity (31) 19 Wealth-Increment\\nwhich is not Production (33) 20 Production (34) 21 Special\\nRemarks on Production (36) 22 The Conditions of Production (38)\\nCHAPTER II\\nTHE ABSOLUTE CONDITIONS OF PRODUCTION\\nNature Labor\\n23 The Materials of Nature (40) 24 The Forces of Nature (42)\\n25 Labor its Necessity (43) 26 Its Forms (44) 27 Its\\nRelation to Nature (45)\\nFigures in brackets refer to pages", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0013.jp2"}, "14": {"fulltext": "viii TABLE OF CONTENTS\\nCHAPTER III\\nTHE RELATIVELY ABSOLUTE CONDITIONS OF PRODUCTION\\nCapital Social Organization\\n28 Capital Defined (47) 29 Kinds of Capital (48) 30 The\\nPlace of Capital in Production (50) 31 Society (52) 32 The\\nState i^z)\\nCHAPTER IV\\nTHE RELATIVE CONDITIONS OF PRODUCTION\\n2)2) General View (55) 34 Diminishing Return and Increasing\\nReturn (56)\u00e2\u0080\u0094$ 35 The Labor-Force: Extent (57)\u00e2\u0080\u0094 36 The\\nLabor-Force Quality (59) 37 Socialism and Production (62)\\nCHAPTER V\\nTHE RELATIVE CONDITIONS, CONTINUED\\n38 Extraneous Aids to Labor (64) 39 Geography and Topography\\n(64) 40 Material Capital in General (66) 41 Machinery (67)\\n42 Unembodied Invention (68) 43 The Organization of Indus-\\ntry (69) 44 The Same in a Special Aspect (71) 45 Evils and\\nLimitations (72) 46 The Form of Undertaking (73)\\nCHAPTER VI\\nCOST AND CONSUMPTION IN PRODUCTION\\n47 Metaphysical Cost (76) 48 Mercantile Cost (78) 49 Con-\\nsumption (79) 50 Waste and Thrift (80)\\nPART II\\nEXCHANGE\\nExcept as Involving the Science of Money\\nCHAPTER I\\nTHE NATURE OF EXCHANGE\\n51 In Rude Societies (83)\u00e2\u0080\u0094 52 Philosophy (85)\u00e2\u0080\u0094 53 Intrinsic\\nAdvantages (86) 54 Reach of Influence (87) 55 The Per-\\nfection of Exchange (90)", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0014.jp2"}, "15": {"fulltext": "TABLE OF CONTENTS IX\\nCHAPTER II\\nINTERNATIONAL EXCHANGE\\n56 Initial View (92) \u00c2\u00a757 Common Ground (94) \u00c2\u00a758 The Theory\\nof Nutrient Restriction (96) 59 Continuation (98) 60 Impor-\\ntant Specific Points (99)\\nCHAPTER III\\nVALUE: GENERAL\\n61 Value and Value (102) 62 Value in Use (103) 63 Value\\nin Exchange (105) 64 Price (107) 65 Normal Value in Ex-\\nchange (107)\\nCHAPTER IV\\nVALUE: PECULIAR PROBLEMS\\n66 Competition and Value (no) 67 Monopoly Value (112)\\n68 Values between Non-Competing Groups (113) 69 Complex\\nCases of Value (114) 70 A Measure of Exchange-Value (115)\\n71 The Value of Futures (117)\\nPART III\\nMONEY AND CREDIT\\nCHAPTER I\\nTHE NATURAL HISTORY OF MONEY\\n72 Barter (118) 73 Primitive Money (119) 74 Money Proper\\n(120) 75 The Money Metals (121) 76 Mode of their Dis-\\ntribution (124) 77 BimetalUsm (125)\\nCHAPTER II\\nBANKS AND PAPER MONEY\\n78 Banks of Deposit (128) 79 Developed Banking (129) 80\\nGovernment Paper (130) 81 Historical (131)\\nCHAPTER III\\nTHE THEORY OF MONEY\\n82 The First Function of Money (134) \u00c2\u00a783 The Second Function\\n(135) 84 Other Offices of Money (136)\u00e2\u0080\u0094 85 The Value of\\nMoney (137) \u00c2\u00a786 Paper Money (139) 87 Ideal Money (141)", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0015.jp2"}, "16": {"fulltext": "X TABLE OF CONTENTS\\nCHAPTER IV\\nCREDIT\\n88 The Nature of Credit (143) 89 Credit and Crises (144) 90\\nFurther Abuses of Credit (145) 91 Free Banking (146) 92\\nThe John Law Theory (147) 93 Fiat Money (148)\\nCHAPTER V\\nTHE CLEARING SYSTEM\\n94 Settlements by Check (151) 95 International Payments (153)\\n\u00c2\u00a796 Special Modifiers of the Rate of Exchange (156)\\nPART IV\\nDISTRIBUTION\\nCHAPTER I\\nTHE NATURE OF DISTRIBUTION\\n\u00c2\u00a797 General Statement (158) 98 Categories and Shares (159)\\n99 Blending (161) 100 The Law of Equal Returns to Last\\nIncrements (162) loi The Other General Laws of Distribution\\n(162) 102 The Fifth Category (164)\\nCHAPTER II\\nRENT\\n103 Rent in General (165) 104 Ground Rent (166) 105 Rent\\nand Price (167) 106 Pecuhar and Nominal Rents (168) 107\\nControversy (169)\\nCHAPTER III\\nINTEREST\\n108 The Nature of Interest (171) _\u00c2\u00a7 109 Loan Interest (172)\\nno The Rate on Loans (173) in Inflation and Interest (175)\\n1X2 Usury Laws (176)", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0016.jp2"}, "17": {"fulltext": "TABLE OF CONTENTS XI\\nCHAPTER IV\\n\\\\VAGES\\n113 Definition (178)\u00e2\u0080\u0094 114 Cause and Source (179) 5 Devel-\\noped Wages (180)\u00e2\u0080\u0094 116 The General Rate of Gross Wages (181)\\n\u00c2\u00a7117 The Residual Claimant Theory (182)\u00e2\u0080\u0094 1 18 The Truth\\n(183) 119 Concluding Points (184)\\nCHAPTER V\\nPROFITS\\n120 Terminology (186) 121 Undertakers Profits (187) 122\\nUndertaker-Talents (188) 123 Profits, Prices, Wages (189)\\nPART V\\nCONSUMPTION\\nCHAPTER I\\nNEED\\n124 To Resume (190) 125 Elasticity of Need (191) 126\\nFashion and Progress (192) 127 Legitimacy of Need (193)\\nCHAPTER H\\nECONOMY IN SUPPLY\\n128 Generic Principles (195) 129 Specific Principles (195)\\n130 Prevention of Loss (196) 131 Luxury and Idle Wealth\\n(197)\\nPART VI\\nPRACTICAL TOPICS INVOLVING ECONOMIC THEORY\\nCHAPTER I\\nCOIN CURRENCY IN THE UNITED STATES\\n132 Colonial Times (200) 133 Earliest National Coinage (201)\\n134 The Dollar of the Fathers (203) \u00c2\u00a7135 Remonetization (204)\\n\u00c2\u00a7136 The Future (206)", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0017.jp2"}, "18": {"fulltext": "Xll TABLE OF CONTENTS\\nCHAPTER II\\nPAPER CURRENCY IN THE UNITED STATES\\n137 Early (208) 138 Thence to the Civil War (208) 139 Gov-\\nernment Paper (209) 140 Government Banking (210) 141\\nThe National Bank System (212)\\nCHAPTER III\\nOUR PAPER CURRENCY IN FUTURE\\n142 Present System (213) 143 Difficulties (214) 144 Proposed\\nChange of Basis (215) 145 Probable Outcome (216)\\nCHAPTER IV\\nTAXATION\\n146 General Principles (218) 147 Direct and Indirect Taxes (219)\\n148 Norms of Direct Taxation (220) 149 Taxation of Income\\n(221) \u00c2\u00a7150 Emergency Taxation (222)\\nCHAPTER V\\nPOVERTY\\n\u00c2\u00a7151 The First Class of Remedies (223) 152 The Second Class\\n(224) 153 Ultimate Help (225)", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0018.jp2"}, "19": {"fulltext": "INSTITUTES OF ECONOMICS\\no 9ic\\nINTRODUCTION\\nI Economics Defined\\nCossa, Guide, ch. i. MiH, Essays, 1829, on Method in Pol. Ec. Stdgwick, on do.,\\nFortnightly, 1879. Roscher, Grundlagen, Einl., ch. i. Cohn, Grundlegung,\\nEinl., chaps, i, ii, iv. Gamier, Traite d ecoti. po!.,()i2-$.\\nEconomics^ is that branch of learning conversant\\nabout general wealth, wealth being the collective\\nname for all those categories of things, powers,^ rela-\\ntions, and influences, which both result from conscious\\nhuman effort and directly* contribute to human wel-\\nfare in its temporal aspect. Single pieces or elements\\nof wealth may be called goods or values.*^ No-\\ntice in this definition (i) that not all wealth is of a\\nmaterial nature, and (ii) that the mark exchange,\\nthough helpful in forming the conception of Econom-\\nics, is accidental rather than fundamental thereto,\\nsince a study substantially the same might exist if\\nmen did not exchange. Economics, in discussing\\nwealth, has of course also to canvass the condi-\\ntions^ of wealth.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0019.jp2"}, "20": {"fulltext": "2 INTRODUCTION\\n1 Originally and by etymology, house-management, yet not indoor\\nmerely or mainly. oIkos meant estate, property. Macleod, Ele-\\nments, vol. i, 132. Bacon still used eco7ioniia in its classical sense. The\\ntitle Political Economy \\\\_i,co7tomie politique^ first by Montchretien de\\nWatteville, in 161 5. It is still in excellent use, but Economics is\\nclearer as well as briefer. Roscher, 16, following Uhde, who intro-\\nduced the word in 1849, prefers Oekono??iik to name economic science,\\nusing Oekonomie to mean economic life. Few if any have followed this\\ndistinction, and Cohn, p. 5, explicitly repudiates it, sticking to Oekonomie\\nas appellation for the science. Cf. 3, below.\\n2 Isolated articles may be wealth, though costing no labor, as an aerolite\\nof gold falling at your door, or a pasture-weed discovered to be a specific.\\nBut the classes of goods in which these examples belong are gotten only\\nby labor.\\n3 So far as they fall under the definition, i.e., spring from man s effort\\nand make for his welfare, powers, intellectual or physical, relations, as the\\ngood name or the custom of a business house, and influences, such as a great\\nadvocate s reputation gives, are no less truly wealth than houses, garments,\\nor bread. If the definition of wealth as always material is simpler, which is\\ncertainly the case in expounding Distribution, it is less deep and truthful.\\nWhy, e.g., term medicine wealth, yet deny the name to the skill able to\\ncure without medicine? In crucial analysis, material wealth itself becomes\\nwealth only in and through its immaterial relationships. Wheat is not\\nwealth merely because so and so constituted physically, but because it is here\\ninstead of beyond reach, adapted to our constitution, and not repugnant to\\nour taste. Now these relations are not material entities at all. Millions\\nof goods that have length, breadth, and thickness, would be turned to\\nrefuse by trifling supposable changes in the psychical side of our sensi-\\nbility. This is a most important consideration; though it is of cour-se quite\\npossible to frame a system of workable economic definitions on the material\\nbasis. So doing, we should style these powers etc. [immaterial wealth],\\nconditions of wealth [note 8] Bohm-Bawerk, Rechte und Verhaltnisse.\\nThere are high elements of character, perhaps also physical products,\\nlike unsalable keepsakes and family heirlooms, which are the creatures\\nof effort and have a certain bearing upon our well-being, yet in so remote\\na way that it is unnatural to reckon them as wealth.\\nMost German writers approach the definition of Economics from the\\nnotions of needs and need-satisfiers or goods. Cutting off non-\\ntemporal goods on the one hand and gratuitous ones on the other, they\\nfence out the same economic field which our definition covers. Thus,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0020.jp2"}, "21": {"fulltext": "INTRODUCTION\\nCO\\nE\\nnon-temporal\\nNEED-SA\\nS temporal\\nlis FloERS OR GOODS\\ngratuitous\\nIn the sense of labor-requiring utilities, but not in any meaning\\nwhich would involve the idea of exchange. Cf. note 7. For the force\\nhere assigned to value, see the Chapter on this topic in Part II. Cf.\\nRoscher, 5 and notes.\\nContrary to the catallactics-theory of Economics, held by Con-\\ndillac, Bastiat [Harmonies, ch. iv], Whately, Macleod, and Perry [Ele-\\nments, ch. iii], which builds the study entirely about the conception of\\nexchange as centre, reducing it to an investigation of exchange-value.\\nThis procedure at first attracts by the simplicity it seems to impart, but is\\ngravely unscientific. Exchange is not the substance of man s economic\\nlife, but an incident, though an important one. We can easily conceive\\na very complete set of economic phenomena, calling for investigation and\\noffering full basis for a science of Economics, exchange being totally absent.\\nSuppose a number of Robinson Crusoes [cf. Roscher, p. 5], some well off,\\nsome ill off. There would be reasons for the difference, inviting study. Pio-\\nneers in new lands exchange little, yet vary greatly in weal. So the Indians\\nbefore the whites cam6, and so, still better, the ancient Peruvians. This is\\nthe chief objection to the theory named, but far from the only one. Mill,\\nPrinciples, bk. iii, ch. i, I. Q{. post, 3, n. 9.\\nObject-phenomena of Economics, that is, is a broader conception\\nthan wealth, including things, circumstances, etc., helpful to wealth, and\\nthings, circumstances, etc., unfavorable to the same. Original fertility of\\nthe soil, with mines, water-powers, and the other natural wealth of any\\ncountry, would illustrate what is meant by conditions of wealth. So\\nwould the native endowments of the people which aid thrift and accu-\\nmulation, and also any acquired powers having the same tendency, if\\nbuilt up without conscious aim. The state is a prime condition of\\nwealth. At this point again, however, imperfect definition need not\\nprevent clear insight.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0021.jp2"}, "22": {"fulltext": "INTRODUCTION\\n2 General and Private Wealth\\nSiorck, Zur Kritik d. Begr. von NationalreicJithum [1827]. Marshall, Economics\\nof Industry, 7. Hawley, Quar. Jour. Econ., vol. ii, 365 sqq. Inaina-Sternegg,\\nVom NaiioHal-Reichikut7t, Dejitsche R^indschau, June, 1883. Neumann-Spal-\\nlart, Weltivirtschaft, Jahrg. 1883-4, pp. 8 sqq. Schmoller, Forschungen, VII.\\nGeneral, national, or cosmic wealth is not merely\\nthe summed possessions^ of individuals and mercantile\\ncorporations. Immaterial wealth and public property\\nmust be reckoned in, and either titles or the things to\\nwhich they entitle omitted.^ Valid titles held by per-\\nsons in one land to values in another are, however,\\npart of the first land s wealth but all such rights have\\nto be excluded from an inventory of the world s wealth.\\nIn estimating general wealth the test of exchange^ value\\nhas but very limited application.\\n1 The wealth of the country being the aggregated wealth of its citi-\\nzens, Gannett, in Int l Rev., vol. xii. Mulhall computes the world s\\nwealth at about 255 billion dollars: lands and forests 84^ billion, cattle\\nlOg- billion, railways 20, houses 61, furniture 30J, merchandise b\\\\, bullion\\nnearly 5, shipping 15^, other forms of material goods nearly 20. He de-\\nparts from Gannett s loose maxim so far as to reckon in public works,\\nat 15 J billion. As to the rest he probably estimates by exchange value\\n[see n. 4]. Computing as he does, and omitting public works, we may\\nplace the whole wealth of the United States in 1888 at 51 billion, the\\nyearly earnings at from 10 to 12, the yearly savings at 900 million,\\nand the daily [week-day] savings at 3 million. Such approaches to\\nfact are valuable for comparison of nation with nation and section with\\nsection, still are approaches only. The same is true of the following\\nwealth-statistics from the United States Census Reports.\\nThe Nation s\\nPercentage of\\nPercentage of\\nAverage No.\\nCensus of\\nPopulation\\nWealth: Millions\\nIncrease in\\nIncrease in\\nof Dollars\\nof Dollars\\nPopulation\\nTotal V/ealth\\nper capita\\n1800\\nS.3\u00c2\u00b0S,937\\n1,072.\\n35.02\\n43-\\n202.13\\n1810\\n7,239,814\\n1,500.\\n36.43\\n39-\\n207.20\\n1820\\n9,638,191\\n1,882.\\n33-13\\n24.4\\n195.\\n1830\\nI2,866,Q20\\n2,653-\\n33-4\u00c2\u00b0\\n41.\\n206.\\n1840\\n17,069,453\\n3.764-\\n32.67\\n41.7\\n220.\\n1850\\n23,191,876\\n7,135-8\\n35-87\\n89.6\\n307.67\\ni860\\n31,500,000\\n16,159.\\n35-59\\n126.4\\n514-\\n1870\\n38,558,000\\n30,069.\\n22.\\n86.1\\n780.\\n1880\\n50,155,783\\n43,642.\\n30.\\n45-\\n870.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0022.jp2"}, "23": {"fulltext": "INTRODUCTION 5\\n2 The immaterial variety is never referred to in listing wealth. The\\nchief reason for the omission is the indefiniteness of the thought and the\\ndifficulty of appraising immaterial riches in dollars and cents. But assuredly\\nit ought not to be ignored. Dollars cannot measure the superiority of health\\nto sickness or of satiety to hunger, yet these differences are as thinkable and\\nimportant as they are familiar.\\n3 If a mortgaged farm is put down for its whole worth and the mort-\\ngage too, evidently all the property covered by the mortgage is twice told.\\nSo of a railway and its stock or bonds. In case of a great corporation, if\\nwe are summing up the nation s wealth, a careful inventory would be a much\\nsafer index than the market value of the stock. A given patent or copy-\\nright is no increment to the national wealth, though a good system of such\\nrights might be. Certain credit-instruments are wealth 84, n. 3, 86, n. 3].\\nEven Knies, Geld, 23, takes money-exchange power as practically his\\ncriterion of wealth. But there is a vast deal of every land s wealth whose\\nproportion to the whole is not so much as indicated by its power, if it has\\nany, in exchange. How little would roads and streets sell for in compari-\\nson with the contribution they make to the community s welfare? Good\\nsewers are worth all they cost and usually much more, but could not be\\nsold at all.\\n3 Economic Evolution\\nSchaeffle, Bau u. Leben d. socialen Korpers, vol. iii, 402, sqq. Schoenherg, Hand-\\nbuck d. Pol. Oek., vol. i, ch. i. Cohn, 91-93. Hyndman Morris, Summary of\\nSocialism.\\nIn man s economic life hitherto and now the follow-\\ning more or less clearly defined stages or gradations are\\ndiscernible (i) the hunting,^ (ii) the pastoral,* (iii) the\\nagricultural, (iv) the manufacturing and commercial,\\nand (v) that of credit, free contract, and giant indus-\\ntries. In (i), man is totally dependent on nature, hard-\\nworked and poor. Industry has no diversity, war is\\nincessant and population scant and homogeneous. Com-\\nmunity of property^ prevails, and there is neither\\nexchange nor money. The succeeding stages witness\\nprogressive improvement in all these particulars. In\\nthis, to a good degree, civilization consists. Slavery^", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0023.jp2"}, "24": {"fulltext": "6 INTRODUCTION\\nand other forms of social cleavage begin with ii, also\\nexchange and the genuine unrest of life and growth.\\nIn iii, industry becomes greatly diversified/ and man,\\nno longer her slave, largely determines what nature\\nshall produce. He settles in communities. I^aw and\\nthe state develop, military system and new social\\nformations rise. Of iv, city life, the division of labor,\\nexchang-e, and metallic^ money are the chief marks.\\nSlavery now goes down and a separate wag-es-class\\nemerges. Law and the state assume higher and more\\ncomplex forms, and leisure makes possible the amass-\\ning of intellectual wealth. Stage v is that at which\\nAmerica and West Europe now are.^\\nLife as opposed to doctrine \\\\_Wirtschaft Wirtschaftslehre\\\\,\\nOf course men have always had an economic experience of some sort,\\nbut the study of this is a recent matter. Cf. 5. Sound economic doctrine\\nmust be based upon large knowledge of economic life.\\nGradations as well as stages, because certain peoples, the Esqui-\\nmaux, Bushmen, and Hottentots, e.g., do not seem to improve at all.\\n3 Fishing tribes are on substantially the same plane with hunters, both\\nthese being occupatory industries \\\\_occupare in Roman law to take\\npossession of], but fishers are usually the better off, have the denser popu-\\nlations, sometimes own slaves, and are apt, instead of becoming shepherds\\nand farmers, to grow first into pirates, then into ocean-carriers.\\nPastoral peoples are always nomadic as well, driving their herds from\\nplace to place to find the best pastures [Genesis, ch. xiii]\\nExcept perhaps in personal clothing and each man s kit of utensils for\\ntaking and skinntag animals, etc., and for war.\\nHunters could utilize slaves only by giving them arms, which would\\nrender them dangerous; but shepherds may employ them for herdsmen.\\nThat is, though agriculture forms the staple calling, the lower kinds of\\nindustry still continue. Besides, many ancillary trades are now demanded,\\nas those of smiths and wood-workers.\\nMetal money has been found among pastoral nations, gotten probably\\nin the way of exchange with those more advanced. Cattle [so pecunia, from\\npecus, Cattle and capital are originally the same word, from capui", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0024.jp2"}, "25": {"fulltext": "INTRODUCTION 7\\nthrough capiialis, are their common medium of exchange. Slaves,\\ntoo, are so used. In stage i barter prevails. For the difference between\\nbarter and money, see in Part III. Ancient society at this general level\\n(iv) differed from modern. It did not reject slavery, and its cities sprung\\nfrom commercial not from manufacturing necessities. Greece and Rome\\nhad no factories, whence to form cities like Lowell or Paterson. There\\nwere at Athens, indeed, immense workshops, where thousands of slaves\\nwrought, but apparently they did not exist to secure division of labor.\\nBlanqui, vol. i, 31.\\nThe stage on whose phenomena all the current English works in Eco-\\nnomics are based, Adam Smith, Ricardo, Mill, Senior, and the numerous\\nmanuals which have been published this side the Atlantic. Only quite\\nrecently have economists seen the need of a broader historical outlook.\\nCf. II, 12. For a graphic comparison between xivth and xixth century\\nsociety, see H. C. Adams, Outline of Lectt. upon P. E., 67 sq,\\n4 Economics a Science\\nMarshall, Ec. of Ind., 2. Mill, Logic, bk. vi, ch. iii, cf. ch. vi. Schurman, Eth.\\nImport of Darwinism, ch. i. Wagner, in Quar. Jour. Econ., vol. i, 117 sqq. Cohn,\\nEitil., ch. ii. Roscher, Einl., ch. ii. Cossa, pt. i., ch. iv, pt. ii, ch. i. Newcotnb,\\nPrinct. Rev., Nov. 1884. Cairnes, Logical Method, i, ii.\\nAs Economics canvasses phenomena in classes, and\\nascertains and expounds their underlying laws, it may,\\nhowever inexact and as yet incomplete, justly be re-\\ngarded a science.^ In this character it is partly de-\\nductive, partly inductive, the first as applying certain\\nalready admitted laws of human nature and of physics,\\nthe second, inasmuch as by the aid of observation, ex-\\nperience, statistics, and history, it sets forth the concrete\\nworking of these laws and finds out others.\\n1 See Mill, as above, ch. vi, also chaps, ii, x, xi. It has been objected\\nthat Economics cannot be a science because man s will is free. But free-\\ndom and action under law are not incompatible. The notion that there is\\nno science but exact science is as vicious as it is common {_der iiber den\\nStrang der Exactheif schlagetider Naturforscher, Schaeffle, Letters,\\n15]. A science may be called exact when the causes and laws with which\\nit deals are not only knowable but known. Pure mathematics approaches", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0025.jp2"}, "26": {"fulltext": "8 INTRODUCTION\\nthis character nearest. A potentially exact science, whose causes and laws\\nare in their nature knowable but not yet studied out, as meteorology and\\ntidology at present, might be styled incomplete. Inexact are those\\nsciences where occult causes, whose working the human mind with its\\npresent powers is unable to trace, more or less perturb the action of the\\nknowable and known causes. All the social sciences, including Econo-\\nmics, are of the last order, as, in a degree, are all those which have to do\\nwith life. Study 15 [and notes] along with this one.\\n5 Modern\\nIngram, Hist, of Pol. Ec, chaps, i, ii. Perry, Elements, ch. i.\\nThe science is of recent origin. In ancient, and\\neven in mediaeval times, while many true notions re-\\ngarding it were advanced, as by Plato, Aristotle, Xeno-\\nphon and the Roman lawyers, its facts were too little\\nobserved and reduced to order to constitute a science.\\nThe real springs of public prosperity were either un-\\nperceived or not investigated.^ Slavery was universal,\\nthe accumulation of wealth decried.^ Industry and\\nthe mechanic arts were despised, wars continual, and,\\nas to property, far more destructive than now, subju-\\ngated lands laid waste, and no means recognized of\\nenriching one country but plundering others,\\nThus Plato has these worthful aper^us gold and silver not valuable\\nin se; too much gold possible; the advantage of the division of labor [the\\nlast, shared by all the ancients above named]. Aristotle distinguishes\\nutility from value and natural wealth from artificial. Xenophon descries\\nthe true nature of wealth, of money, and of prices, Demosthenes that of\\ncapital [acpopfx t), epaj os]. D. extends the notion to cover incorporeal cap-\\nital. Ulpian neatly defines property [not wealth] as what can be bought\\nand sold: Ea enim res est quae emi et venire potest. But all these\\nwriters, to mention no more of their false ideas, believe in slavery and\\nover-value money. Is Horace consciously arguing against the bullion\\ntheory 7, n. 3] at Sat. I, i, 40-45, Unless you reduce your gold-pile\\nit has no beauty On the Roman authors of economic ideas, Ingram,\\n18 sqq.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0026.jp2"}, "27": {"fulltext": "INTRODUCTION 9\\n2 The only wealthy nations of antiquity which bred minds capable\\nof pursuing such a study were Athens and Rome, precisely the ones\\nwhose entire economic development was artificial. They became\\nrich by exploiting, one the Confederacy of Delos, the other the\\nworld.\\n8 Cicero, de officiis, i, 42, perfectly sets forth in this matter the spirit of\\nthe classical world Illiberales autem et sordidi quaestus mercenariorum\\nomnium, quorum operae, non artes emuntur. Est autem in illis ipsa\\ntnerces auctoramentum servitutis. Sordidi etiam putandi, qui mercantur\\na mercatoribus quod statim vendant, nihil eni?ti proficiant, nisi admodum\\nmentiantur. Nee vero est quidquam turpius vanitate. Opijicesque omnes\\nin sordida arte versantur nee enim quidquam ingenuutn habere potest\\nofficina. Quibus autem artibus aut prudentia tnajor inest, aut non\\nmediocris utilitas quaeritur, ut medicina, ut architectura, ut doctrina\\nrerum hottestarutn, eae sunt iis, quorum ordini conveniunt, honestae.\\nMercatura autem, si tenuis est, sordida putanda est; sin magna et copiosa,\\nmulta undique apportans, multaque sine vanitate impertiens, non est\\nadmodutn vituperanda. Omnium autem rerum, ex quibus aliquid\\nacquiritur, nihil est agrietittura melius, nihil uberius, nihil dulcius, nihil\\nhomine libera dignius.\\n6 Its Origin\\nBlanqui, chaps, xiv-xxx. Ingram, ch. iv. Laughh n, ed. of Mill, Int. Sketch.\\nThe necessary new thought was turned to economic\\nfacts mainly through i Commercial activity during and\\nafter the Crusades,^ and especially after the period of\\ndiscovery began, ii Rise of prices incident to the in-\\ncreased bulk 2 of the precious metals consequent upon\\nopening the American mines, iii Frequent debase-\\nment of monies by monarchs.^ iv New need of reve-\\nnues and the changed mode of raising these, attend-\\ning the transition from feudalism to modern states.*\\nV Questions of trade arising in the application of the\\nEuropean colonial system.^ vi Enlarged acquaintance\\nwith the economic conceptions of the Roman law.^\\nvii The development and organization of credit.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0027.jp2"}, "28": {"fulltext": "lO INTRODUCTION\\n1 The greatness of the famous merchant cities, Venice, Genoa, Pisa, and\\nAmalfi, now began. Commerce and business were henceforth reputable,\\nand men engaged in them could be raised to the nobility. The Hanseatic\\nLeague dates from about 1260, ten years before the last crusade. On this\\nsee Blanqui, ch. xvi.\\nThe general law is, the more money in circulation the less the pur-\\nchasing power of each piece, and the higher the range of prices. See the\\ndiscussions of Part III.\\nTheir regular resort for centuries so often as impecunious. The usual\\nmode was, while leaving the face of the coins unchanged, to abstract part\\nof the true metal, putting baser in its place. Not seldom they would force\\nthe money so debased into circulation at its face value, and accept it only\\nat its real value. So did Emperor Ferdinand II in Bohemia, 1620.\\nThis change involved paid armies, costly ministries and embassies and\\nthe expensive pomp and circumstance of great courts. Systematic taxa-\\ntion and fiscal machinery had to be resorted to, enforcing economic study.\\nSee Blanqui s excellent chapter [xxiii] on this. Every nation which had\\ncolonies regarded and used them simply as means for enriching the mother\\nstate. There were three different plans for accomplishing this i Spain\\nand Portugal kept colonial trade in the hands of the government, ii Hol-\\nland, Sweden, Denmark, and France till 1 720, placed it exclusively in the\\npower of a gigantic stock company, iii England [Lecky, Eur. in xviiith\\nCent., vol. ii, 8 sqq.], also France after 1720, effected a national monopoly\\nby navigation laws practically to exclude foreign vessels from visiting their\\ncolonies. Here again was necessity for study.\\nRoman law was at no moment in the middle age disused or unknown,\\nbut the discovery, at the sack of Amalfi, 1135, of the Florentine copy of\\nthe Pandects immensely stimulated the study.\\n7 The Mercantile System\\nIngram, ch. iv. Ad. Smith, Wealth of Na., bk. iv, ch. i. Roscher, Gesch. d. Nat.\\nOek. in Deutschland, 228 sqq. Perry, Elements, ch. xiv. Blanqui, chaps, xxvi-\\nxxix. Schoenberg, vol. i, 63 sqq. Cossa, Guide, 119 sqq. Cohn, 94-100.\\nWhile much vigorous economic thinking^ was done\\nin the middle age, especially by the canon lawyers, the\\nearliest serious efforts to arrange economic data as an\\norderly whole were made in France, resulting, provis-\\nionally, in the so-called Mercantile System.^ This,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0028.jp2"}, "29": {"fulltext": "INTRODUCTION 1 1\\nneglecting agriculture, magnified other businesses,\\nand commerce in particular, yet, regarding money as\\nthe most real form of wealth,^ insisted that in order to\\nprofit by trading, a nation must have the balance of\\ntrade in its favor, work mines, tax imports, subsi-\\ndize exportation, and conduct its whole policy with the\\nview of amassing the greatest possible hoard of the\\nprecious metals. To this end ubiquitous governmental\\nregulation of industries was necessary, with privileges\\nand monopolies to all inland business deemed import-\\nant, also encouragement to domestic shipping, discour-\\nagement to foreign. These notions, while more explicit\\nin France, were common to all Europe, and determined\\nthe character of economic and international politics for\\ncenturies. Not even yet are they fully overcome.^\\n1 Particularly upon money and the problem of a fair price \\\\Jtistum\\npretitini]. The latter was discussed by every great theologian from St.\\nAugustine down. This renowned doctor condemns the man who would\\nvili emere et caro vendere, and after him the whole medieval church\\ntaught that such a practice was wrong. By justum pretium was meant\\ncost, including labor and time of the salesman in getting, keeping, and sell-\\ning his ware. The principle of supply and demand as price-determinant\\nwas, so far as recognized at all, denounced as necessarily unrighteous. Far\\nclearer was mediceval thinking on the subject of money. Nicolas Oresi-\\nmus, bp. of Lisieux, 1382, has left us a sermon containing a theory of\\ncoinage almost exactly modern in its ideas. From the schoolman, Gabriel\\nBiel, we have another monetary discussion of decided worth.\\n2 Sometimes styled Colbertism, after Colbert, the distinguished min-\\nister of Louis XIV. On Colbert s views, Roscher, as above, 229, and\\nBlanqui, ch. xxvi. The latter will have it that the system was Italian in\\norigin, and brought to honor by Spain, and that in spirit Colbert was not a\\nmercantilist at all. His mercantilist views were certainly more moderate\\nand sensible than most of those advanced by his school. Cromwell was\\nthe chief, though far from the only, English ruler to push the mercantilist\\npolicy. Frederick the Great, also his father, did the same for Prussia.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0029.jp2"}, "30": {"fulltext": "12 INTRODUCTION\\n3 The bullion theory. Blanqui [i, 223, ch. xviii] dates Mercantilism\\nfrom 1303, when Philip the Fair forbade the exportation of gold and silver\\nfrom France. An English law of Edward Ill s time swears inn-keepers in\\nseaport towns to search their guests to prevent the exportation of money or\\nplate [H. Spencer, The New Toryism, 8]. Even Locke strongly advo-\\ncated the policy of piling up gold and silver in the country. All nations\\nhad laws to effect this. Yet Ad. Smith, bk. iv, ad. init., Garnier, Physi-\\nocrates, in Lalor s Cyclop., and most critics state it too strongly when\\nthey accuse the mercantilists of really identifying money with wealth.\\nNo men could ever be so foolish. They greatly overvalued it, however,\\nrelatively to other wealth, just as thoughtless people do now. For the\\nerror of this view, see 9. It arose partly from the ready serviceableness\\nof money for all purposes, partly from the need which each nation then\\nfelt of a great hoard of gold and silver for war, and partly from mistakenly\\ncomparing a nation to a manufacturing town, taking in raw material to be\\nworked up and sold for money [next note]\\nThomas Mun said The secret means to enrich the nation is to sell\\neach year to foreigners more wares than we consume of theirs, receiving\\nthe balance in money, of course. The older mercantilists believed that\\nmoney should never, under any circumstances, be permitted to go forth\\nof the realm. Mun and the newer school held differently. They re-\\ngarded its exportation sometimes profitable, as a means of getting back\\nmuch more, and likened the outgo and return to seed-time and har-\\nvest. The Emperor Charles V forbade Spain to export precious metal or\\nraw material. An imperial decree in Germany, 1500, commanded tailors\\nto work up none but domestic cloth.\\n5 Daily one may read in the newspapers expressions to the effect that\\nfortune is smiling upon us if we happen to be importing gold, frowning if\\nthe same is leaving us. As if a land could not be money-poor Or as if\\nit were possible for all our money to desert the country And Mercantil-\\nism at large is spoken of even by competent economists as, for past times,\\nrelatively justifiable.\\n8 Progress\\nIngram, 51 sqq. Gamier, Physiocrates, in Lalor. Horn, L, Econ. Pol. avant les\\nPhysiocrates. Cohn, 101-107. Cossa, pt. ii, ch. iii.\\nDuring the XVIIth and XVIIIth centuries, economic\\ntopics were discussed by many German writers, com-\\nmonly in a narrow, mercantilist spirit,^ yielding few", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0030.jp2"}, "31": {"fulltext": "INTRODUCTION I3\\nvaluable insights, and mostly without discovery of the\\nnexus between these. More advance was made in\\nEng-land. Sir William Petty,^ b. 1623, argued that\\nvalue originates in labor, and demonstrated the advan-\\ntages that flow from the division of labor. He likewise\\nanticipated Ricardo s law of rent and theory of wages.\\nSir Dudley North, 1691, affirmed that the whole world\\nis, as to trade, one nation, that laws cannot fix prices,\\nthat money is merchandise, subject to glut as well as to\\nscarcity, and that all special governmental favor to any\\none interest is an abuse, cutting off so much benefit from\\nthe public. Locke, 1690, 1695, noted the distinction\\nbetween utility and value, and denied the ability of gov-\\nernments to fix the purchasing-power of money. Hume^\\nshowed, 1752, that wealth consists not in money but in\\nthe supply of wants, and that the prosperity of one land\\nis the prosperity of all. Berkeley, in his Querist,* i/S^,\\nquestioned whether it were not wrong to suppose land\\nor gold and silver either to be wealth. While, till\\nHume, no English writer appreciated Petty and North,\\nsimilar views were championed with exceeding zeal in\\nFrance by Boisguillebert,^ Vauban, F^nelon, Montes-\\nquieu, and Cantillon.\\nZincke, 1692-1 769, was the only noteworthy exception. See Ingram, 80.\\n2 On Petty, see Wirth, in Braun s Vierteljahrschrift, 1863, pp. no sqq.\\nHe was one of the most versatile of men pedler, sailor, physician,\\ndraughtsman, inventor, scientific writer, land-surveyor, organizer of busi-\\nnesses. His education was but ordinary, gotten mainly at the grammar\\nschool of Romsey, in Hampshire, his native town, though he had studied a\\nlittle at the University of Caen, Normandy. In youth distressingly poor,\\nhe became rich, leaving an ample fortune to his son, who was created\\nBaron Shelburne, and founded the Landsdowne family. Petty, so early,\\nably discussed, and answered negatively, the question so much agitated\\nstill, whether government can establish a permanent value-relation between", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0031.jp2"}, "32": {"fulltext": "14 INTRODUCTION\\ngold and silver. This in ch. x of his Pol. Anatomy of Ireland, published\\nin 1 691 among his posthumous works.\\n3 Ad. Smith s personal friend and chief British forerunner as an\\neconomist.\\n4 First published in 1735.\\n5 On these Frenchmen, see Ingram, 57 sqq. Fenelon s Telemaque did\\nmore than anything else to popularize the new views in France. Cantillon was\\na French merchant of Irish extraction. He is hardly distinguishable from the\\nphysiocratic writers. Jevons accounted him the founder of that school and\\nso of economic science. He deserves this eminence no more than Bois-\\nguillebert. Both differ from the regular physiocrats in relative failure to\\narray their insights as a system, and in making less of the law of nature\\n[see next\\n9 Physiocracy\\nAd. Smith, bk. iv, ch. ix. Gamier, Physiocrates, in Lalor. Blanqui, ch. xxxii.\\nCossa, pt. ii, ch. iv. Batbie, Turgoi. Condorcet, do. Tissoi, do. Cokn, 101-107.\\nThis, the next system,^ also French in origin, went to\\nthe opposite extreme from Mercantilism, making land\\nthe only source of income, and agriculture alone pro-\\nductive. The physiocrats maintained that i Gold is\\nnever the end of trade, but only a means, ii A nation\\ncannot in the long run sell more than it buys, and would\\nnot be benefited if it could, iii All governmental privi-\\nleges and monopolies relating to business and com-\\nmerce are wrong, iv Trade, both domestic and foreign,\\nshould be free, state interference with business affairs\\nreduced to a minimum.^ v The sole tax should be a\\ndirect one, upon land rent.^ These principles they con-\\nnected with their doctrines of natural rights and a con-\\ndition and law of nature,* which they expounded in a\\nway to belittle the state and exhibit all conscious action\\nof society as necessarily artificial. This theory is re-\\nmarkable for its influence upon Adam Smith, and in\\nhastening the French Revolution.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0032.jp2"}, "33": {"fulltext": "INTRODUCTION 1 5\\n1 We may speak of this one as having rallied a school to its support.\\n2 The laissezfaire doctrine, which, with that of natural law, forms\\nthe heart of Physiocracy. The phrase was first used in an economic sense,\\nthough doubtless not with full physiocratic meaning, by a merchant in a\\nconversation with Louis XIV. The formula laissez nous fair e was employed\\nby Legendre, the geometrician, in i68o, disputing with Colbert. The\\nphrase laissez faire was introduced to scientific literature in 1736, by the\\nMarquis d Argenson, finance minister to the Duke of Orleans, Regent of\\nFrance after Louis XIV s death. Dr. Gournay was the earliest physiocrat\\nto utter it, which he did with the addition, et laissez passer. From him\\nthis language became the physiocrats watchword [not, however, separating\\nfaire and passer as if they meant respectively produce and ex-\\nchange See on this, Pol. Sci. Quarterly, vol. ii, 706.\\n3 At a good remove, however, from the thought of Henry George, i\\nThe physiocrats would tax improvements on land George not. ii They\\nexpected revenue mainly from country sections and from fertility of soil\\nhe has regard to unearned increment from the growth of cities, towns and\\nvillages, iii They taxed the product of labor, and because it was such he\\nsedulously exempts this.\\nThe state of nature was the reign of God. Pope, Essay on Man,\\nEpistle iii, line 149. This essay is a great piece for the doctrine of a state\\nof nature and for the ethics of the XVIIIth century. The thesis of Ep.\\niii is that the interest of one is the interest of all. Sir H. Maine, in his\\nAncient Law, traces the history of the law of nature conception. The\\ndistinction between man s condition under the minimum of society s influ-\\nence and that amid the play of fully developed social forces, is real and\\nimportant. One may, for lack of nicer descriptives, name these, as the\\nphysiocrats did, respectively the state of nature and the state of culture.\\nOnly it is senseless to account the latter as of necessity depraved or per-\\nverse. It, too, is in its way a state of nature. This admission should not,\\nhowever, carry us to the counter error of praising all past acts or states of\\nsociety as alike good simply because they have had place in history. Into\\nthis fallacy fall those 7, n. 5] who attempt to justify Mercantilism.\\n10 Adam Smith\\nhtgram, 87 sqq. Smith, Adam, in the Cyclopedias. Cossa, pt. ii, ch. v. Cohn,\\n107-115. ^;/c^/e, H. of Civilization, vol. i, 152 sqq., 602 sqq.\\nBut Economics can hardly be said to have attained\\nscientific rank till the publication, in 1776, of Adam", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0033.jp2"}, "34": {"fulltext": "l6 INTRODUCTION\\nSmith s Inquiry into the Nature and Causes of the\\nWealth of Nations, a truly epoch-making work, far\\nthe most important single treatise ever devoted to the\\nscience. The material, so rich and large, which Turgot,\\nHume, and others had gathered and partially systema-\\ntized, it at the same time utilized, purified, and arranged.\\nSmith s central thought, instead of commerce on the\\none hand or agriculture on the other, is Industry, which\\nhe makes include both. In his system labor is the one\\nsource of value and ultimate determinant of prices.\\nProductive labor, which is here, against the physiocrats,\\nextended to include manufactures and commerce, though\\nnot services, as of teachers, physicians, savans, etc.,\\nis declared to be the real creator of wealth. Smith\\nagrees with the physiocrats that, as a rule,^ industry\\nought to be unimpeded by governmental action, left to\\nfree competition under the benign spur of individual\\nself-interest. Like them, too, he continually appeals to\\nwhat is natural.* The exceeding merit of Smith s per-\\nformance lay in his exhibition of the laws governing\\neconomic phenomena, and in his facile and copious\\npresentation of historical proofs. His book also con-\\ntains a number of discussions, masterly and never yet\\nequalled, of certain weighty specific questions, as taxa-\\ntion, the advantages of the division of labor, the causes\\nof the diversity in wages, and the difference between\\nmoney and other capital. His refutation of the bul-\\nlion theory it would be as hard to improve as to\\nimpugn.\\n1 How far Smith was a creator will be debated always. He raised few\\nnew problems, and the scope of his actually fresh insight was not large.\\nBut he saw in every direction somewhat that was new, and saw clearly", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0034.jp2"}, "35": {"fulltext": "INTRODUCTION 1/\\nwhat he saw, whether at first or at second hand. Withal he knew how to\\nexpound fehcitously, keeping up interest amid the dreariest details. His\\nposition as to Economics is much like Plato s touching philosophy. Each\\nhad numerous and great forerunners, yet succeeded in making himself for-\\never the necessary point of departure for every intelligent student and\\nwriter in his line. Whole pages and chapters in the most recent treatises,\\nhowever remote the writer s standpoint from that of Smith, read as but\\ntranscripts from the old master s book.\\n2 He does not, in naming them unproductive, deny the usefulness of\\nsuch services. They may be even indispensable. Productive is labor\\nwhich creates wealth, and it is Smith s habit to restrict wealth to material\\nentities. Useful abilities, however, he designates as capital, and hence, it\\nwould seem, must have thought them wealth as well. The two lines of\\nrepresentation appear inconsistent.\\n3 He approved England s navigation policy 6, n. 5], as a means not\\nto national wealth, but to the naval power so necessary for England in\\nfacing other nations. Smith was far from going the physiocrats length in\\ndenouncing all governmental touch of industry,\\nSee preceding n. 4.\\nII The Smithian School\\nIngram, 110-195. Brentano,Die klassische Oekonomie [1888]. Lunt, Pres. Cond. of\\nPol. Econ. Cohn, 115-123. Sidgwick, Principles, Int. Bagehot, Ec. Studies, iii.\\nThe influence of the Wealth of Nations upon eco-\\nnomic thought was very great. Hundreds of keen minds\\nturned to the new science minor points of its theory-\\nwere worked out its tenets began to shape legislation.^\\nRicardo was the next noted general expositor in Eng-\\nland, J. B. Say in France. Ricardo powerfully im-\\npressed James Mill, Senior, and J. S. Mill, through\\nwhose able presentations of the subject he silently be-\\ncame for all lands its accepted interpreter. Adam Smith\\nwas still praised much, but read less and less. His nar-\\nrowness and errors were perpetuated, and his abstrac-\\ntions, untempered by his regard for history and concrete\\nfact, taken literally as universal truth. Dogmatism, apri-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0035.jp2"}, "36": {"fulltext": "1 8 INTRODUCTION\\norism, and passion for crisp formulae prevailed. No\\nside of man was studied but the economic, and this was\\nassumed to have presented itself always and every-\\nwhere as in England during the early XlXth century.^\\nLike defects marked the evolution in France,^ Italy, and\\nAmerica. Such an exhibition of Economics,* dry, eccen-\\ntric and partial, rather than in the full sense false, con-\\ntinued till yesterday the dominant one. Authors be-\\nlonging to this Orthodox School have, however, always\\ndiffered among themselves not only upon lesser but\\nupon fundamental doctrines. Such have been i the\\ndegree and location of the scientific character attach-\\ning to Economics, ii the proper limits of laissez faire,\\niii the theory of Population, Malthus and his critics,\\niv that of Rent, Ricardo and his, v that of Wages, vi\\nthat of Money.\\n1 As in England the Factory Laws and the abolition of protective duties.\\n2 The misapprehensions, it will be seen, were mainly three, those of i)\\nperpetualism, ignoring the change in human nature and society from age\\nto age, ii) cosmopolitism, ignoring the differences among various peo-\\nples at the same time, and iii) assuming an economic man, when in fact\\nno man s motives are ever solely economic. \\\\Rumelin, Red. u. Aufsaeize,\\nI, p. 13.] The first of these errors was the worst.\\n3 Only here with more originality and variety. Bastiat i, n. 7] was\\nthe ablest French writer after Say and had wide influence in France and\\noutside. His, especially, is the doctrine of economic optimism, that the\\nhighest social weal is attained when each individual follows his own inter-\\nest. English economic masters have never urged this.\\nOne sees how far just and how far unjust it is to call all this Smith-\\nian. Ricardian would be a stricter designation. German writers refer\\nindiscriminately to the English School, Manchester School, Apriorists,\\nDogmatists, CosmopoUtes, as holding these notions. J. S. Mill had\\nbefore his death, in 1873, emancipated himself at many points into a more\\ntruthful manner of viewing the science; and the other writers here re-\\nviewed were by no means so absolutely out of the way as has often been", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0036.jp2"}, "37": {"fulltext": "INTRODUCTION I9\\nrepresented. No critic has yet succeeded in judging between these and\\nthe newest writers with satisfactory impartiality and insight. Sidgwick,\\nPrinciples, does best,\\n12 The Historical or Aposteriori Tendency\\nSidgwick, Principles, Int., iii. Ingram, ch. vi. James, Pref. to Ingram. Roscher,\\n26sqq.; Prelim. Essay, in Eng. Tr. CM\u00c2\u00ab, 157-180. 5;\u00c2\u00abzVA [R. M.] and others,\\nin Science Economic Discussions.\\nInevitable reaction came, taking chiefly two shapes,\\na Socialistic and an Historical, the former attackins:\\nmore the laissez-faire doctrine, the latter the apriori\\ncharacter previously ascribed to the science. Hilde-\\nbrand,^ Knies, and Roscher were the pioneers in the\\nhistorical path, and their spirit and method have more\\nor less affected nearly every economist in the world.^\\nHence, (i) the greater insistence now on historical and\\nstatistical knowledge in interpreting and applying eco-\\nnomic laws, and (ii) the inclination in many quarters to\\nsee in Economics nothing universal or of the nature\\nof law, but only a phase of history,* a product of times,\\nlocalities, and national peculiarities, requiring different\\nmaxims for different peoples. Man and society, it is\\nurged, essentially alter with centuries and climes. Eco-\\nnomic theory itself as well as economic practice is mat-\\nter of historical evolution, growing up in living con-\\nnection with the entire organism of a period in the life\\nof humanity and of peoples, with and out of the given\\nconditions of time, space, and nationality, in fact con-\\nsisting in these, and passing on with them to new devel-\\nopments. Even the general laws of Political Economy\\nare nothing but an historical explication, an advancing\\nmanifestation, of the truth, a mere generalization of the\\nfacts recognized up to any given point, and cannot as", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0037.jp2"}, "38": {"fulltext": "20 INTRODUCTION\\nto either sum or formulation be declared unconditionally\\ncomplete.\\n1 Died in 1878.\\n2 In the liistory of Economics and in economic history the most learned\\nman living. He is commonly referred to as head of the historical school,\\nbut Knies is a far more radical opponent of the English method.\\nCf. 3, n. 9.\\nBut by no means all aposteriorists go as far as this. Roscher himself\\ndoes not, his exposition agreeing in the main rather with Adam Smith s.\\nHe decidedly alleges Economics to be a science, based on laws. So,\\nindeed, does Knies, but he minimizes more than R. the resemblance of\\nthese [social] laws to those of physics.\\nKnies, Pol. Oek., p. 24. This he opposes to the absolutism of theory\\nwhich he charges upon the apriori economists. The quotation goes on\\nThe absolutism of theory, whenever it does happen to display validity at\\na certain stage, is simply a child of that time, and characterizes but a par-\\nticular period in the development of the science. This is easily seen\\nto be the development hypothesis of general philosophy applied to\\nEconomics.\\n13 Professorial Socialism\\nCossa, Guide, 196. Laveleye, Socialism of To-day, ch. xii. Rae, Contemp. Socialism,\\nch. V. Ely, French and German Socialism, ch. xv. Held, Grundriss fur Vorle-\\nsungen, 25 sqq. Sch-inoller, Ueber einige Grundfragen, etc., 31-50, also 93 sqq.\\nMeyer, Netiere Nationalokonomie, 227 sqq.\\nThis expression names a bold and popular phase\\nwhich, since 1872, economic theorizing has assumed\\nespecially among professors of Economics, and in Ger-\\nmany. In that land this is now the ruling school, and\\nan increasing number of the foremost English and\\nAmerican economists are its adherents. The professo-\\nrial socialists,! like the aposteriorists, have little faith in\\nany natural or universally valid laws of Economics, and\\ninsist on the relativity of its doctrines to time, place,\\nand history. They indeed differ from writers like Ros-\\ncher,2 less in virtue of any strict principle than through", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0038.jp2"}, "39": {"fulltext": "INTRODUCTION 21\\npeculiar emphasis upon certain points, i They make\\nwealth distinctly subordinate to man as the central\\neconomic conception, refusing to sunder Economics\\nsharply from sociology in general.^ ii They assert a\\nvital relation between ethics and Economics, insisting\\nthat human nature is essentially altruistic, and that, so\\nfar from self-interest, in whatever sense,* being the sole\\neconomic motive, wealth is always in large part a product\\nof moral and religious factors, iii They ardently op-\\npose laissez faire as presumptive maxim,^ and deny\\nBastiat s contention that harmony of interests must\\naccompany free competition. iv Believing that eco-\\nnomic law is very much the creature of legislation,\\nthey freely recommend governmental intervention to\\nassuage inequalities of fortune^ and social ills of nearly\\nall sorts. V They rebuke the inclination of the older\\neconomists to identify Economics with the mere pro-\\nduction of wealth, and urge attention to questions of\\ndistribution as even more important.\\nThis name, Kathedersocialisten, or socialists of the [teacher s] chair,\\nwas first applied in derision, to ridicule the alleged proposal of the new\\ntheorists to settle the social question by university lectures. The move-\\nment originated in Schaeffle s Capitalismus u. Socialismus, 1870, Wagner s\\nJiede tieber die Sociale Frage, 1 87 1, and Schoenberg s treatise entitled\\nArbeitsaernter. October 6 and 7, 1872, a convention was held at Eisenach,\\nand the next year the Verein fur Socialpolitik formed in the interest of\\nthe new views. Besides the three writers named, Brentano, Held, Nasse,\\nSchmoUer, and von Scheel, have been prominent as socialists of the\\nchair. The men who share this tendency, by no means agree in details\\nor even in all the doctrines which themselves consider important. See\\nnext note.\\n2 Some of them, as Schmoller and his pupils, go very much farther\\nthan Roscher in denying to Economics the character of a science. A few\\npractically reduce it to the mere empirical knowledge of trade and industry", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0039.jp2"}, "40": {"fulltext": "22 INTRODUCTION\\n[Descriptive Economics]. Cf. Wagner, in Quar. Jour. Econ., vol. i, 113\\nsqq., and Nasse, ibid., 503 sqq.\\nThere is a cluster of subjects, e.g., the prevention of vice, the manage-\\nment of criminals, sanitation, divorce, charity, no one of which perhaps is\\nyet worthy to be regarded a science by itself, and which it is customary to\\ngroup together as departments of the general science of sociology. The\\nlatter title is also used generically, as including several branches of knowl-\\nedge recognized as sciences, law, politics, and ethics among them. It is\\nthe habit to rank Economics with these last professorial socialists incline\\nto place it rather in the less differentiated class. They mock at the assump-\\ntion of an economic man, and see danger in attempting to separate its\\neconomic elements from the rest of human nature even for analysis and\\nstudy. Schmoller makes a point of distinguishing between a natural\\norder in the economic life [such as 15, n. 4, refers to], the reality of which\\nhe fully admits, and a moral, social, or psychological order, race-customs,\\nthe spirit of times, etc.; and he complains that the Smithians ignore this\\nrealm. He expects economic reform to come largely from the building up\\nof new customs and social ideas, more favorable to the laboring classes,\\nwhich shall, when necessary, though by no means all of them, congeal into\\nlaws.\\nI.e., whether as downright selfishness or as a self-regard in accord\\nwith general warfaire. Adam Smith s most famous followers were wont\\nconsiderably to overlook or belittle man s natural regard for his kind, and\\ntheir representations need correction 15, n. i]. Their meaning on the\\npoint has, however, been in part misunderstood. Often what they affirm is\\nnot so much man s selfishness, whether in a worse or in a better sense, as it\\nis his individualism, his dependence for greatest efficiency in action, upon\\nhis own rather than upon society s initiative.\\nSee 15.\\nHere socialists of the chair approach pure socialism [next Wag-\\nner goes so far in this direction as to favor the public ownership of land in\\ncities, and the use of taxation as a means of equalizing wealth. Schmoller\\n\\\\_Einige Grwtdfragen, 97] quotes with delight an expression of Frederic\\nthe Great, to the effect that taxes have among other ends that in particular\\nof establishing a sort of equilibrium between rich and poor.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0040.jp2"}, "41": {"fulltext": "INTRODUCTION j23\\n14 The Socialists Proper\\nSchaeffle, Qiiiniessenz d. Socialismus. Laveleye, Rae, and Ely, the works men-\\ntioned at 13. Kirkitfi, Inquiry into Socialism. Os^od, Pol. Sci. Quar., vol. i,\\n564 sqq. Marx, Capital. Adler, Rodbertiis also his Gritndlagen d. Marx^schen\\nKritik. Kozak, Rodbertus-Jagetzow s A?iszcktcn. Dietzel, Karl Roubertus.\\nCohn, 133-I57- Dawson, Gertnan Socialism and Lassalle.\\nThese are the most pronounced foes of Adam Smith s\\nsystem, set especially against the principles of private\\nproperty and free competition in work and trade, re-\\ngarding them the roots of all social misery. Scientific\\nsocialism pleads for an economic regime wherein all\\nland and material capital shall be public instead of\\nprivate property, the state, not the individual capitalist,\\nbeing the employer of laborers, and production and the\\ndistribution of products not left as now, subject to specu-\\nlation and to the law of supply and demand, but regulated\\njustly and by authority, according to the wants of the\\nwhole body of consumers, so that no one need be idle,\\nuncared for, ignorant or poor. Saint-Simon, Fourier and\\nOwen 2 had each developed a kind of socialistic scheme,\\nbut Louis Blanc was the first to expound socialism as a\\nthorough-going new political order. Proudhon, his con-\\ntemporary, advanced the thesis that property is theft,\\nthough he subsequently retracted this. But no strong\\nscientific grounds for socialism were presented till Rod-\\nbertus and Karl Marx, two able German thinkers, whose\\nreasoning has commanded the attention of the economic\\nworld. From one of their favorite premises, Adam\\nSmith s doctrine of labor as the sole source of wealth,\\nthey argue that the laboring class deserves far more than\\nit gets; while from another, viz., Ricardo s iron law\\nof wages, they conclude that such injustice must iuevi-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0041.jp2"}, "42": {"fulltext": "24 INTRODUCTION\\ntably continue^ so long as the means of production\\nremain in private hands.*\\nSocialists must be distinguished from anarchists, who believe that\\ngovernment, as contrasted with administration, can and should be abolished,\\nand from communists, who wish possession and enjoyment in common, as\\nwell as production. In opposition to the anarchist, the socialist proposes\\nto continue some form of real political authority contrary to the commu-\\nnist, he does not expect or desire complete levelling in social place or eco-\\nnomic condition. Henry George is not a socialist. He indeed proposes\\nstate ownership of land, but his entire conception of the social body and its\\nmode of true growth is Smithian, at the farthest possible remove from that\\nof socialists.\\n2 Saint-Simon, 1 760-1825, wished society reorganized into a grand co-\\noperative commonwealth, under the masters of industrial science and admin-\\nistration as governors; but he gave only the vaguest hints how to accomplish\\nthis. Late in life he gathered a few brilliant enthusiasts into a school.\\nThis survived him, but perished in 1832. Fourier, 1 772-1837, and Owen,\\n1 771-1858, both devised schemes of cooperating communities, numbering\\nfrom a few hundred to a few thousand members apiece, each occupying a\\nhuge barrack [or phalanstery, to use Fourier s word], and carrying on\\nall the necessary industries with the fullest aid of cooperation and improved\\nmachinery. Owen wanted products enjoyed in common; Fourier did not\\nwish to abolish private property, but planned, after assuring a minimum to\\nthe least productive workers, to assign j^j of the rest to labor, to capital,\\nand y\\\\ to talent. Owen and Fourier, like the anarchists of to-day, hoped\\nthat all humanity would adopt this organization. Fourier started a pha-\\nlanstery, which utterly broke down. Owen began several one of them\\nat Harmony, Indiana with no better success. The chief result of these\\nideas was great stimulus to cooperation, of which system Fourier and Owen\\nmay be styled the founders.\\n3 Blanc, 1811-1882, urged that the state should open workshops for the\\nunemployed, expecting these to succeed so well as to raise the level of\\nwages and gradually come to monopolize industry. Blanc put forth his\\nfirst great work, U Organization du Travail, in 1840, and Proudhon,\\n1809-1865, uttered his famous words, la propriete c est le vol, in the same\\nyear. This thought was not original with Proudhon, but had been\\nadvanced long before by Brissot de Warville, the Girondist leader in\\nthe French Revolution. Proudhon was however the first to proclaim the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0042.jp2"}, "43": {"fulltext": "INTRODUCTION 2$\\nfeasibility of just distribution by means of labor-time wages and prices,\\nideas which Marx borrowed from him.\\nMarx, 1818-1883: Rodbertus, 1805-1875. Partly their premises,\\ntaken from Smith and Ricardo, are unsound; partly they reason from\\nthem illogically. Full discussion falls under Distribution, but see 15, 37.\\nRicardo s iron law, as interpreted by the socialists, is to the effect that\\nby the present economic order all wages necessarily tend to the starvation\\nlevel.\\n15 Our View.\\nNewcoinb, Princeton Rev., Nov., 1884. Molinari, Les Lois naturelles de Vecon.pol.\\nSidgwick, Principles. Lunt, as at 11.\\nThe Historical School merits thanks for insisting\\non what, though well known, is rarely felt in proper\\nforce, that Economics, when applied, becomes a mere\\nscience of tendencies, and that no one of its specific\\nlaws can safely be pronounced operative in any concrete\\ncase without fullest study of local and temporal condi-\\ntions. It has refuted the old notions of human nature\\nand social institutions as fixed creations, and shown\\nsociety to be an organism, subject to evolution^ no\\nless than are the other realms of biology thus inci-\\ndentally revealing, further, how meagre must be a sys-\\ntem of economic truths valid for all ages and peoples.\\nTo the Socialists, whether partial or complete, be it\\ngranted that (a) laisses faire is no absolute principle,\\n(b) its application has nowhere brought social mil-\\nlennium,^ (c) existence of thorough natural harmony\\nin interests between different social classes is not\\nproved,* (d) government can do much for the better-\\nment of economic conditions without attacking the\\nproperty right or becoming dangerously paternal, (e)\\nwithin these limits it should labor in this direction to", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0043.jp2"}, "44": {"fulltext": "26 INTRODUCTION\\nthe utmost, (f) with increase of morality and intelli-\\ngence, its sphere may in this respect possibly be en-\\nlarged. Yet we maintain that i Certain general laws of\\nabsolute and universal validity and no less natural\\nthan those of physics, underlie the science of Eco-\\nnomics, viz., those laws of the physical world and of\\nman s constitution w^hich determine man s temporal\\nweal.^ ii In all economic activity the presumption\\nis in favor of individual liberty and free competition\\n[laissez faire], rightfulness of public intervention in\\nno case admissible save after proof.^\\n1 Society an organism (i), subject to evolution (ii) these are the\\nmain insights for which we are indebted to the aposteriorists. The nomi-\\nnalistic, individualistic idea of society, making it a mere chance aggrega-\\ntion of individuals, must be surrendered. Society as such and by itself\\nhas aims, tendencies, a life entire, which are more than generalizations\\nfrom the experiences of John, Richard, and Peter. With this better view\\nof man as member of a social cosmos has naturally come a sounder\\nethics. Self-regard is seen not to be the whole duty of a moral agent\\n13, n. 4]. Neither is the self-seeking of A, B, and C that sure way\\nto the general good which Bastiat thought it 13, iii], except in the\\nsense that one best serves self by devotion to others. The second truth,\\nsocial evolution, must also be recognized. Human nature, unless the\\nnotion be made ridiculously meagre, is not the same in different genera-\\ntions but changes from age to age. On the whole matter of this note, cf.\\nWard, Dynamic Sociology.\\n2 This maxim, never authoritatively defined, has been used with great\\nlatitude of meaning. See Gamier, Laissez Faire, in Lalor. English\\nwriters have meant less by it than French. Sidgwick, Principles, 22.\\nAs usually applied it has signified that government should restrict its\\nagency to the protection of men in their natural rights, to life, liberty,\\nand property. But no government has ever yet been able to proceed upon\\nso narrow lines. Nor ought governments to attempt this. If legislation is\\noften a hindrance economically, it may be also a great, even an indispen-\\nsable help. Its work in gathering statistics is invaluable. So are its coast\\nand other surveys and its meteorological reports. Forests, fisheries, and", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0044.jp2"}, "45": {"fulltext": "INTRODUCTION 2/\\nocean and river dikes, to cite a few obvious cases, government alone can\\nsupervise in accord with the economic interest of all. For other benefits\\nfrom the state s positive intervention, see Shaw-Lefevre, opening Addr.\\nbef. the British Social Science Cong., Birmingham, Sept. 17, 1S84 [in\\nans. to H. Spencer s Man and the State]. Cf. Mill, bk. v, ch. i, and\\nSchmoller, Grundfragen, 95.\\nIn England, e.g., where industrial freedom is most complete, but\\npoverty still dire and stubborn.\\nMore nearly is it disproved. The immediate interests of different\\nmen and classes certainly clash continually. The permanent good of indi-\\nvidual or class is surer to accord with that of society; though it by no\\nmeans always does so, unless a higher than economic good is meant, or\\npermanent taken as reaching beyond time. Thus, riches are acquired\\nin the liquor trade, in gambling, and by selling obscene literature and pic-\\ntures businesses which curse humanity i8, n. 5, 21, n. 7].\\nSee Cohn, 69-78, and Senior, Pol. Econ., 26-81. That men must\\neat to live, and work in order to eat, that they prefer pleasure to pain,\\nand seek to attain their ends [whether selfish or unselfish] by the least\\nonerous processes, are specimens of such laws. The tendency of popula-\\ntion to outrun subsistence [Malthusianism] is another. De Molinari s law\\nthat the price of a commodity falls or rises in a geometrical ratio as\\nits amount increases or diminishes in an arithmetical, may be cited as still\\nanother example, valid universally so soon as exchange begins, though in\\na less definite way than his presentation would imply. We name, too, the\\nlaw by which the precious metals distribute themselves. If they are pecu-\\nliarly plenty high prices [of other things] prevail and the money flows off\\nto effect purchases at remote centres. If they are scarce the counter phe-\\nnomena have place. The law of diminishing returns, however checked\\nhere and there, is as universal as the industries, agriculture and mining, to\\nwhich it relates. Knies s scruple [Pol. Oek., 356], to call some of these\\nnatural laws, on the ground that they do not relate to things corporeal\\nand subject to sense-perception seems fanciful. Whatever objection may\\nlie against regarding as natural the purposive movements of society, the\\nunconscious play of psychical and social forces may assuredly be so styled.\\nThe idea of a world s text-book on Economics is therefore not absurd,\\nthough the principles which such a work could lay down would be few\\nand general. Cairnes, Logical Meth., i.\\nSidgwick, Principles, p. 22; Mill, bk. v, ch. xi, 7; Schmoller, Grund-\\nfragen, 47. Notice that the maxim is not announced as certainly valid for\\nall past or possible states of society.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0045.jp2"}, "46": {"fulltext": "28 INTRODUCTION\\n1 6 Value of the Study\\nLatighlzn, The Study of P. E. Cumming, Value of P. E. to Mankind, Cobden Club\\nPrize Ess. for 1880. Rose her. Prelim. Ess. to English Tr. Cossa, 23. Buckle,\\nHist, of Civilization in Eng., vol. i, 150 sqq. Tennemann, Gesch. d. Philos., I, 30.\\nIn fitness for place in an educational curriculum/\\nEconomics perhaps surpasses all other studies, through\\nthe remarkable combination which it involves of mental\\ndiscipline with practical utility Each of its proposi-\\ntions requires careful thought, while certain of its rea-\\nsonings challenge the highest powers of mind.^ On the\\nother hand, though it is a science, not an art,^ its truths\\ntouch every human life. Among a great deal else of\\nobvious importance which acquaintance with Economics\\nincidentally makes clear, may be mentioned (i) the fal-\\nlacy of many prevalent notions about wealth,^ (ii) the\\nfailure and even positive cruelty of much intended\\ncharity,^ (iii) the sure and widespread effects of waste,\\n(iv) the inevitable interdependence of individuals,\\nclasses, and nations, and (v) striking evidence of in-\\ntelligence and beneficent law as reigning in the uni-\\nverse. A time comes in the history of every cultivated\\npeople, when social comfort, to say nothing of social\\nprogress, depends absolutely upon knowledge of eco-\\nnomic principles. Europe is at this point already we\\nshall soon be.\\nWhether more liberal ox more practical. It is perverse to limit science\\nto exact science 4, n. i]. Equally so to suppose the best education\\nattainable by drill in the exact sciences alone. That is important but often\\ncarried relatively too far. Not only do action, conduct, life, all lie in the\\ndomain of inexact science, making training in this indispensable to every\\neducated person, but even looking from the point of view of an exclusively\\nliberal education, it is a higher attainment, a finer feat of mind, to be\\nexpert in the inexact than in the exact sciences.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0046.jp2"}, "47": {"fulltext": "INTRODUCTION 29\\nThe advantage of this, considering the study as a branch of hberal\\nculture, lies in the zest it imparts. It is a help, too, that the pupil is sure\\nto possess beforehand a certain familiarity with the subjects to be consid-\\nered. This, however, in spite of the best instruction, sometimes breeds\\nslovenly analysis and looseness of view. A kindred difficulty arises from\\nthe use in Economics of many ordinary words in a technical sense. Stu-\\ndents suppose themselves thinking the correct thought because they\\nattach a more or less definite meaning to the word. From the same cause\\nis also most of the economic sciolism so common among persons not stu-\\ndents at all, who yet discuss rent, profits, wages and whatever other topic\\nis named by a familiar title, with all the assurance of an Adam Smith.\\nAs those upon money and foreign exchange. Not here alone but\\nthroughout the science the data have a peculiar mutual relativity which\\nrenders them elusive. The nod cttw is for many an argument difficult to\\nfix. Premises can often be made definite only by a piece of abstraction\\nwhich the course of reasoning shows to have been incorrect. We have\\nthen to amend them and rethink our work with scrutiny to see whether,\\nand if so where and how far, the change has vitiated it. No other sort of\\nexercise will test and develop the mind like this.\\nAs Adam Smith, in the main, conceived it. We investigate its facts not\\nprimarily to use them, but to know them. Yet their character lends a\\nspecial interest to the work. Here at least it is not true, if it is or ever\\nhas been anywhere, that science cares, in the strictest sense, only for truth,\\nregardless of truth s worth in life.\\nIn reference to its nature i, n. 3], and its importance to happiness\\nand civilization. How many consider wars, fires, and floods as blessings\\nbecause they make work. Cf. n. 7, below. Read Bastiat s bright essay\\n\\\\_CEuvres, vol. v, 336 sqq.] on That which is Seen and that which is Unseen.\\nA writer in the Pop. Sci. Monthly for 1885, estimated the loss by fire in\\nUnited States during 1884, at $160,000,000.\\nMill, bk. ii, chaps, xii, xiii. By misplaced alms, not only is wealth\\nwasted which might have supported honest productive labor, whose product\\nmight in turn have gone to support labor in further production still, and so\\non indefinitely; but a vicious, lazy habit is engendered in the object.\\nCould we prevent the waste from uneconomic housekeeping alone,\\nthe fund resulting would far more than suffice to feed all the hungry.\\nWhoever can teach the masses of the people how to get five cents worth\\na day more comfort or force out of the food which each one consumes,\\nwill add to their productive power what would equal a thousand million\\ndollars a year. See 49.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0047.jp2"}, "48": {"fulltext": "30 introduction\\n17 The Division of Economics\\nCossa, pt. i, ch. ii. Gamier, Traite, 18-20.\\nOur science is most commonly presented under the\\nfour general heads of Production, Exchange, Distribu-\\ntion, and Consumption.^ This arrangement is illogical,\\nsince all Exchange and an important part of Consump-\\ntion are branches of Production. As, however, Produc-\\ntion, exhibited so in its strict integrity, forms a most\\nbulky topic, overshadowing the others and giving to the\\nparts of the discussion a very unequal size, we may con-\\nsult convenience along with logic, and lay out our\\nmatter as follows Part I, Production, except as involv-\\ning Exchange, Part II, Exchange, except as involving\\nMoney. Part III, Money. Part IV, Distribution.\\nPart V, Consumption. Part VI, Practical Topics\\ntouching upon Economic Theory.\\nSo Wayland, F. A. Walker, Mangoldt and Garnier, exactly, also most\\nother French writers [Leroy-Beaulieu, Levasseur], only placing Distribution\\nbefore Exchange \\\\_circulation Roscher, too, has the order given in the\\ntext, save that he injects after Production as coordinate with the other\\nfour, a Part [ii] on Freedom and Property. Chapin s Wayland strangely\\nalters the order to Production, Consumption, Distribution, and Exchange.\\nM Culloch, Principles of Pol. Econ., is exactly logical Production, Distri-\\nbution, Consumption. Mill and Fawcett both say Production, Distribution,\\nExchange. Laughlin and H. C. Adams have these same topics, but reverse\\nthe order of the last two. Senior divides into the Nature, Production and\\nDistribution of Wealth. Cherbuliez has Production, Circulation, Distribu-\\ntion, treating Consumption as sub-topic of Production. Except in the last\\npoint Held agrees with him \\\\_Produciion, Verkehr, Vertheilung\\\\. Quite\\noriginal is Cohn s marshalling, into the Elements, the Form-iaking \\\\_Gestal-\\ntung], and the Processes, of the Economic Life. With a similar motive, to\\nemphasize the dynamic aspect of the science, F. H. Giddings suggests\\ntreating it under the rubrics of Descriptive Economics, and Economic\\nPhysics, Politics, Biology, Psychology, and Evolution. The purpose is a\\ngood one, but can, we believe, be carried out as logically, and, for the pur-\\nposes of a treatise like the present, more profitably, by handling the mate-\\nrial as the text proposes.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0048.jp2"}, "49": {"fulltext": "Part I\\nPRODUCTION\\nEXCEPT AS INVOLVING EXCHANGE\\nCHAPTER I\\nthe nature of production\\n1 8 Various Views of Productivity\\nRoscher, 48-52. Mill, bk. i, ch. iii, 3 Essay iii on Unsettled Questions. Gamier,\\nTraite, ch. ii. Ad. Smith, bk. ii, ch. iii.\\nThe mercantilists regarded industry productive only\\nin proportion as it tended to swell the nation s stock of\\nmoney. They deemed manufactures more productive\\nthan agriculture, their finer forms more than the coarser,\\nactive^ and direct commerce more than passive and indi-\\nrect. The physiocrats identified productive toil with\\nthe extraction of useful raw material, stigmatizing\\nother occupations^ as sterile, because sustained only by\\noverplus gained through work upon the land. Adam\\nSmith and Mill styled unproductive all exertion, how-\\never useful, not taking form in some useful material\\nobject, placing in the unproductive list in fact more call-\\nings than their own definition required. Their classifi-\\ncation has been followed by most writers of the English\\nSchool. Not by the French,* who, even when disciples", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0049.jp2"}, "50": {"fulltext": "32 THE NATURE OF PRODUCTION\\nof Adam Smith, have usually reckoned as productive all\\nlabor imparting economic modifications to the immate-\\nrial nature of man. Roscher goes further still, and de-\\nfines every sort of activity as productive which society\\nis willing to pay for.^ This is now the prevalent\\ndoctrine.\\n1 Cf. 7. Active commerce preponderance of export favorable?\\nbalance of trade: passive preponderance of import unfavorabtfe\\nbalance of trade [Roscher, 48].\\n2 Cf. 9. They believed manufacturing to do nothing but change the\\nform of things, whatever value it added being just the sum of the raw ma-\\nterials consumed by the laborers in the process of manufacture. Quesnay\\nindeed saw that not all the new worth added by manufacturing could be so ex-\\nplained, but considered the rest the outcome of natural or legal monopoly.\\nTrade too the physiocrats thought sterile, merely passing wealth from\\none hand into the other. What merchants won was at cost of the nation.\\nOn all this, and the easy refutation of it, Roscher, 49, and n. 2. These\\nmen supposed, as did so clear a head as Locke, that what one party to\\na trade gained the other must lose a perfectly patent error 20, n. 4].\\nBoisguillebert made clear the productiveness of exchange, by supposing\\nthree men bound to stakes one hundred paces apart, the first with a stock\\nof victuals but naked, the second with a huge pile of fuel but no food, the\\nthird with a superfluity of clothing but no supply besides. Could they ex-\\nchange, all three would be happy: as they cannot, all die.\\n2 Not only the frivolous occupations of opera-singers and ballet-dancers,\\nbut the important ones of statesmen, judges, clergy, physicians, army and\\nnavy. I.e., violin-making productive, but violin-playing not, though the\\nsole end in making the violin is that it may be played [Garnier] Train-\\ning of swine unproductive, educating men unproductive [List] The\\nchurl who scares crows from cornfields productive, soldiers who bar out in-\\nvading armies unproductive [M Culloch] Roscher, who cites the objec-\\ntions just given, notes that the Smithians have to own certain industries as\\nproductive though affecting material objects only indirectly, and that govern-\\nment officers, physicians and the like, certainly contribute at least indirectly\\nto much material production.\\nJ. B. Say, Dunoyer, Garnier, Sismondi. The last speaks of govern-\\nment and army as guardians, v^^o produce security [Garnier, p. 34].\\nBastiat went so far as in effect to make all production immaterial, calling", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0050.jp2"}, "51": {"fulltext": "THE NATURE OF PRODUCTION 33\\ncommodities a form of services. J. B. Clark [Philos. of Wealth, ch. i]\\nprecisely reverses this, interpreting the essence of a service to be always of\\na material nature. The wealth which the orator produces in speaking, or\\nthe prima donna in singing, consists in the exhaled air vibrating so and so,\\netc.\\nSee his 52. Every business whose service is rationally sought for\\nand duly paid for. By inserting rationally he would hint at the mal-\\nproductiveness of lucrative trades which curse mankind. In 1853 there\\nwere said to be in France 3500 colporteurs of immoral literature and pic-\\ntures, selling yearly nine million copies and getting for them six million\\nfrancs [^1,200,000]. Such businesses are formally rather than really pro-\\nductive. No rational lahoT is unproductive [Gamier]. The union\\nof the word lador with the word unproductive is nonsense [Rossi] The\\nonly labor that is really unproductive is that which fails to attain its pur-\\npose [H, C. Adams].\\n19 Wealth-Increment which is not Production\\nMangoldt, Grmidriss d. Volksivirischaftslehre 12-15.\\nWhile the classes of entities making up wealth come\\nby man s deliberate exertion, certain contributions to\\nwealth are free.^ Such may spring from i Changes in\\nthe objects of wealth, as gratuitous abundance at har-\\nvest owing to propitious weather, or advance in landed\\nor other wealth by the natural growth of a commu-\\nnity.2 ii Changes in the subjects^ of wealth, as the\\nincrease of their needs in compass, kind or intensity,\\nlarger knowledge of the means for supplying them, or\\nfuller power to utilize these means, iii Changes of re-\\nlation between the subjects and the objects of wealth,\\nas by better laws or government,* or progress of the\\ncommunity in morality.\\nI, n. 2. This truth socialists ignore, a defect which vitiates Marx s\\nCapital almost entirely. While wealth, speaking generally, originates\\nin labor, the amount of wealth in a thing is usually a very inexact measure\\nof the labor bestowed on it.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0051.jp2"}, "52": {"fulltext": "34 THE NATURE OF PRODUCTION\\n2 The two cases are unlike. When a generous rain adds a million bushels\\nto the wheat-i ield for the year, no part of the gain is due to human agency.\\nRise in the amount of wealth embodied in its land and buildings by the\\ngrowth of a city is a result of what men have done, yet one not consciously\\npurposed. It therefore does not fall under our definition of wealth i].\\nIn speaking of land value here we make no reference to the original prop-\\nerties of land, or to mere place, both of course gratuities and therefore\\nconditions of wealth rather than wealth; but to improvements upon land.\\nObviously unearned increment may attach to these as well as to the un-\\ncreated, primordial qualities. It is natural to call the increment in the one\\ncase wealth, since it is an addition to wealth, and in the other for an anal-\\nogous reason, condition of wealth.\\n3 See Mangoldt, 14. Human beings are of course meant. With ad-\\nvance of culture man experiences ever new need and comes upon ever\\nnew objects for its satisfaction, both, in numberless cases, as in many\\ninventions and discoveries, accidentally, without any purposive action of his\\nown. The benign outcome of such new knowledge has sometimes very wide\\nsweep. The discovery of spinning and weaving must have greatly enhanced\\nthe value of sheep, wool, and all fibre-producing plants. As acquaintance\\nwith the earth and its products increases, insight into the useful properties\\nof things and into ways for using them becomes increasingly a matter of\\nstudy, so that discoveries occur more from purpose. Then the search, if\\nsuccessful, is genuine production.\\nMaking ownership a surer thing. But so far as the betterment in law\\nor administration proceeds from economic motive, more and more the case\\nas governments grow better, the generation of new value thereby is out\\nand out production.\\n20 Production\\nMongredien, Wealth-Creation. Roscher, 30. Mangoldt, as at 18. Mill, bk. i, ch. i.\\nProduction consists not in the creation of new\\nmaterial, a deed beyond finite power, but in the origi-\\nnation by conscious human 2S\u00c2\u00b1} of wealth or of direct\\ngratifications such as commonly proceed from wealth.\\nWe originate wealth by so shaping, combining or\\nplacing given elements or forces of the universe or of\\nman s nature as to bring forth, impart or increase util-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0052.jp2"}, "53": {"fulltext": "THE NATURE OF PRODUCTION 35\\nity. Immaterial wealth is produced by the develop-\\nment or training of intellectual power, skill, sleight, or\\nhabit, or by putting human beings into new relations\\none to another. Material wealth is produced, (i) by\\noccupying- 2 spontaneous natural elements or prod-\\nucts, (ii) by extracting minerals from the earth, (iii) by\\ngrowing vegetable or animal products through use of\\nnature s forces, (iv) by transporting things from place\\nto place, (v) by changing their mechanical or chemical\\nforms,^ or (vi) by exchanging them between different\\nowners.* All prevention of decrease or destruction, in\\nwealth may be called negative production.^\\n1 See I, and its n. 3. Relations here means not only those re-\\nferred to by this word in I, but also the influences had in mind there;\\nthese last too being relations, though of a peculiar kind. On relations as\\nwealth, see the art. Copyright, in Lalor.\\n2 Appropriating, that is. For this nice sense of occupare see 3, n. 3.\\nHunting, trapping, gathering wild fruits, and the like, taking water gratis\\nfrom springs or streams and purveying it to people in towns at a price,\\nwould illustrate.\\n3 Mechanical, cloth-making; chemical, soap-making. The pupil can\\nmultiply examples.\\nOne man owns a dray-horse but needs a roadster; another needs a\\ndray-horse but owns a roadster. They exchange and both are richer. So\\nis the world. This and the case of production by transportation excellently\\nbring out the essential idea. Roscher refers to the ice trade between Boston\\nand the W. Indies. So early as 1843 5S ooo tons were sent. Uncut it cost\\n25 cents a ton, packed in the ship, ^2.55, and brought at destination over\\n$65 a ton, an advance of more than ^3,561,250, almost entirely due to\\ntransportation alone. Carloads upon carloads of hides go from N. Y. city\\nto Chattanooga to be tanned and returned as leather. In the latter case\\ntravel is not the cause of the added value but the condition, it being neces-\\nsary in order to utilize the excellent tanning properties of the chestnut burr\\noak of Tennessee [Atkinson].\\nNo inconsiderable part of the work of clerg) judges, army and police.\\nLegitimate speculation falls here 21, n. 7. Cf. Mangoldt, 37]. Pro-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0053.jp2"}, "54": {"fulltext": "36 THE NATURE OF PRODUCTION\\nduction is not negative simply because [like washing clothes] it begets no\\nnew thing or form, or because it simply does away with obstacles. In this\\nlast, strictly, all production consists [Cannan, Elementary P, E., 7, 8].\\n21 Special Remarks on Production\\nRoscker, 50. Gamier, ch. ii. Cannan, Elementary P. E., pp. 9 sq. Clark, Philos.\\nof V/ealth, ch. i. Mangoldt, 26.\\ni The dignity of production is not determined by\\neither the duration,^ or the dispensableness of the prod-\\nuct, but by its total and final effect upon the nature of\\nman.^ ii The real product in activities like oratory,\\nmusic, and teaching is either a temporary gratification\\nor a more or less permanent addition to immaterial\\nwealth,^ the tones and words being instrumental only,\\niii Directly and indirectly productive is a purely\\nrelative distinction, as every productive process has the\\none or the other phase according to your point of view.\\nThe policeman produces security directly, the hatter\\nhats while each s work indirectly helps into existence\\nthe other s product. So in all cases.^ iv Distinguish\\ni) technical or formal production, which neither in-\\ncreases nor diminishes wealth whether general or pri-\\nvate,^ 2) production which adds to private wealtli only\\nand perhaps detracts from general, and 3) that which at\\nfirst and visibly swells general wealth alone, advancing\\nindividuals possessions merely in the ways all public\\nbenefits^ do. v Inasmuch as national and cosmic wealth,\\nlike private and general, are partially susceptible of an-\\ntagonism, we should denominate as absolutely pro-\\nductive only such industries as promote the wealth of\\nmankind. vi There can be no such thing as general\\noverproduction, viz., an all-round glut of products, be-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0054.jp2"}, "55": {"fulltext": "THE NATURE OF PRODUCTION 37\\ncause the desires of men, intrinsically satisfiable eco-\\nnomically, are unlimited in number, indefinite in degree,\\nand forever increasing.^*^\\n1 Bread may last two days, lace two centuries, yet bread-making is, if\\nwe distinguish at all, the higher service. Roscher observes that labor\\nupon persons and relations, though in compass and duration less mensur-\\nable than other, is apt to rank highest in power to multiply and propagate\\nitself.\\n2 We could get along without music or works of art better than without\\ncloth, but real civilization demands both. Roscher justly rebukes the\\nhabit of regarding any general department of industry more honorable than\\nanother on this score. Agriculture gives us tobacco, from manufacture\\ncome playing-cards, from commerce rum, while among services belong the\\nindispensable ones of educator and judge, as well as the dispensable ones of\\nrope-dancer and bear-exhibitor. Cf. Knies, Dietistleistungen d. Seldaten.\\nOften to be ascertained only by extra-economic inquiry, in esthetics\\nand ethics.\\nIn agreement with Garnier and Dunoyer, and against J. B. Say, who con-\\nsidered [in case of a teacher] the lecture the product. For Clark s notion,\\nsee i8, n. 4. He will not term any property of man economic product\\n[wealth], lest we confound wealth-creating abilities with the product re-\\nsulting from the exercise of them. But no confusion need arise by naming\\nboth wealth, any more than by applying this term to a machine, which is\\nat once wealth and wealth-producer [capital]. Exactly how we define\\nhere is hovi ever not a vital point.\\nThus a wagon is now used for pleasure, again to transport goods, and\\nmeadow serves partly for beauty, partly to grow grass.\\n8 Making things which do no one any good.\\nLike the business specified at 18, n. 5. Cf. above, n. 3. To this\\nadd the general manufacture and sale of liquors, very profitable trades to\\nmost engaged in them, 99 per cent of whose effect, however, is a palpa-\\nble impoverishment to the community, i) withdrawing capital and labor\\nfrom admittedly productive channels, ii) diminishing men s productiveness,\\npartly day by day, partly by shortening life, iii) vastly increasing public\\nexpenses by multiplying paupers and criminals, iv) breaking down char-\\nacters and swelling the misery of human life. This is not denouncing the\\nexistence of intoxicants or declaring the use of them never justifiable.\\nGambling at best ministers only to private wealth. Every cent which A\\ngains, comes from B or C. Worse than this, the habit breeds a temper", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0055.jp2"}, "56": {"fulltext": "38 THE NATURE OF PRODUCTION\\nmost deleterious to thrift and industry. Gambling in stocks, wheat, cotton,\\netc., is precisely as condemnable economically as faro or bluff. Not so\\nspeculation with genuine intention to transfer the goods. This tends to\\nsteady prices and hence is negatively productive 20, end]. Betting on\\nfutures, which a vast amount of speculation in the various exchanges essen-\\ntially is, does not have this tendency but just the reverse.\\nMany, not to say most, new railroads have caused loss to their first\\nowners; few if any of them have failed to benefit their localities. Good\\npublic works require taxes, but more than repay these, being a blessing to\\nevery citizen, whether enhancing the selling value of estates [the usual\\nresult] or not.\\nRoscher. A nation may enrich itself at the expense of the world, as\\nI at the cost of my neighborhood. This not necessarily by arms, nor even\\nby its own act at all. Great Britain has for years had cheap sugar partly\\nas a gift at the cost of the continental states, through the operation of their\\nsugar bounties. Cf. 36, n. 7.\\n1 George, Soc. Problems, 90, 164 sqq. Cannan, i. Perry, 126 sqq.\\nMill, bk. i, ch. v, 3: The limit of wealth is never deficiency of con-\\nsumers, but of producers and productive power. This truth is against\\nwriters like Malthus, Chalmers, and Sismondi, who have alleged unpro-\\nductive consumption to be a good, without which wealth would accumulate\\nbeyond needs and run to waste. Crocker, in Quar. Jour. Econ., vol. i, 362\\nsqq., essays to show the same. He of course fails, not seeing that to prove\\nactual over-production in many departments which is easy is far from\\nproving general over-production.\\n22 The Conditions of Production\\nGamier, ch. ii, IV. Roscher, bk. i. Mangoldt, bk. ii, ch. ii. Mill, bk. i. ch. i.\\nThese may be grouped in three classes, as follows i\\nThe absolute, without which no production whatever\\ncould occur. They are Nature and Labor, and their\\nformula, sine, non. ii The relatively absolute, in whose\\nabsence production, possible indeed to a very limited\\nextent, must ever be too meagre to result in civiliza-\\ntion. These are Capital and Social Organization, and\\nthe f6rmula for them is sine, minimum, iii The rela-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0056.jp2"}, "57": {"fulltext": "THE NATURE OF PRODUCTION. 39\\ntive, all those circumstances, too many to enumerate,\\nwhose presence m greater or less degree makes produc-\\ntion abundant in proportionally greater or less degree.\\nThe formula for these is quanta phis, tanto plus.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0057.jp2"}, "58": {"fulltext": "CHAPTER II\\nTHE ABSOLUTE CONDITIONS OF PRODUCTION\\nnature- labor\\n23 The Materials of Nature\\nRoscher, 31-37- Mangoldt, 19, 20. Leroy-Beaulieu, Precis, pt. i, ch. L\\nSchoenberg, Handbuch, vol. i, 194 sq.\\nThese are nature s passive contribution to produc-\\ntion, the stuff and basis with which the process begins.\\nThey are important according to i Their abundance\\nand distribution.^ ii The number and intensity of the\\nneeds which they serve and the perfection of such ser-\\nvice.^ iii The expense in labor and capital of rendering\\nthem available.* iv The durability of their products.^\\nOf these materials some are wbolly appropriable,^\\nsome partially so, some not at all. Those equally\\nappropriable, in any given degree, are appropriated the\\nmore fully the better their value becomes known, the\\nfewer they are in proportion to the need for them, and\\nthe more the use of them presupposes exclusive posses-\\nsion.\\n1 Human nature included. Materials here not matter hence\\none may speak of immaterial materials. All nature is meant so far as its\\nstatic aspect extends 24, n. l], the subject for all known forces, the\\ngroundwork for all the phenomena of the world. But for the peculiar\\noriginal endowment of man as distinguished from the brute, production\\nwould be little more than the passive reception of nature s gifts. Brutes\\ndo not to any extent utilize [external] nature to exploit nature. The use", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0058.jp2"}, "59": {"fulltext": "THE ABSOLUTE CONDITIONS OF PRODUCTION 4I\\nof a stone by a monkey to break a cocoanut is referred to as a wonder.\\nSo the bird s nest, the beaver s dam and the squirrel s supply for winter.\\n2 Iron will illustrate. Were it with all its valuable properties as scarce as\\njade-stone, or plentiful, yet only at a few mines, it could not possess the\\nsame significance for the world s work as now. The world s production\\nof iron in 1882 amounted to 9 million metric tons, in 1885 to y^ million.\\nThat of steel was in 1882 6| million, in 1885 about 6 million. That of\\ncoal was in 1882, 377,707,000, in 1884 375 million [Neumann- Spallart,\\nUebersichfen d. Weltimrtschaft\\\\.\\nSo coal is of more consequence than nickel, or even gold. Wood\\ncould be used for nearly all the services which coal performs, but many of\\nthem it would not render as well.\\nDistant or deep mines or quarries, compared with those close by and\\nnear the surface. Magnificent timber may grow so far away or so high up\\nmountains as to have little worth. A marsh may be potentially the best\\nland in all its vicinity, yet in fact good for nothing because of the cost of\\ndraining. The bronze age in pre-historic times preceded the iron age for\\nthe reason that bronze, though a compound [then of about nine parts\\ncopper to one of tin] could be extracted and fused much more easily than\\niron. On labor and capital see the following\\nLedges of granite, other things being equal, are far more a treasure\\nthan those of marble; these more than those of ordinary sandstone. Iron\\nis for the same reason giving way in many directions to steel, and wood to\\niron.\\nAs land, with its birds, animals, timber, mines and quarries, most of\\nits waterfalls and many of its waters. The edge of the ocean is appro-\\npriated, by nations to the distance of three miles seaward, and, by the indi-\\nviduals owning adjacent land, so far out as it is available for any useful pur-\\npose [oyster-beds, e.g.\\\\ Open ocean, tides, air, climate and sunlight\\ncannot be subjected to ownership. Roscher makes the possibility or im-\\npossibility of this the basis for his classification, perhaps a more natural\\none than Mangoldt s, which the text follows.\\nIt was for the last two reasons that the products of the land were\\nmade private property earlier than land itself, and the movable ones earliest\\nof all.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0059.jp2"}, "60": {"fulltext": "42 THE ABSOLUTE CONDITIONS OF PRODUCTION\\n24 The Forces of Nature\\nMangoldt, 21. Roscher and Schoenberg, as at last\\nIn these nature aids production actively They vary\\nin importance, according to abundance, availability and\\nnecessity,^ much as the materials do, the most note-\\nworthy special circumstances being a) their kinds and\\ndegrees,^ b) their stability and regularity,* and c)\\ntheir transportability.^ For economic purposes the\\nforces of nature are conveniently classed, sometimes\\n(i) as organic and inorganic, the former partly psychi-\\ncal and partly physiological, the latter partly mechanical,\\npartly chemical sometimes (ii) as spontaneous, need-\\ning only to be applied and directed by man, and non-\\nspontaneous, requiring first to be developed as well\\nand sometimes (iii) as inappropriable, because charac-\\nterizing whole districts or lands,^ and appropriable, as\\nproperties, now of fixed, now of movable objects.\\n1 Whether or not matter is at bottom anything but force, Economics\\nhas no need to inquire. Nature in her dynamic aspect 23, n. i] is here\\nour theme. Some of the items referred to in 23, 24 connect themselves\\nabout as well with the one phase of nature as with the other. Margoldt\\nmentions mineral treasures and land-fertility under forces.\\n2 See 23. As to availability we may recall that the arc principle of\\nelectric lighting was known so early as Sir Humphry Davy s experiments\\nin 181 3, but no method of generating electricity cheaply enough to make\\nthe discovery valuable was invented till about 1878, in Brush s dynamo.\\nThe incandescent principle too was understood for years previous to the\\napplication of it by Edison, which made it a commercial success. Nearly\\nevery one of men s most precious insights into nature has thus lain sterile\\nfor a longer or a shorter time.\\nMany merely do what men could at some rate do, others, the same in\\nkind, transcend in degree the utmost reach of human energy. Nature s", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0060.jp2"}, "61": {"fulltext": "THE ABSOLUTE CONDITIONS OF PRODUCTION 43\\nchemical forces, as also the propensities and many of the powers of brutes,\\nare intrinsically unlike any which unaided man could supply.\\nA brook s value as a water-power is greatly lessened if it habitually\\ndries up in summer. Wind sometimes drives sailing vessels faster than\\nsteamers can go, but it is not to be depended on. Hence windmills are\\nused only for irregular work or where trustier motors fail or are very costly.\\nWater-power has to be used in situ. Coal can be carried far, though\\nwith difficulty and expense. Suppose it were but a hundredth as heavy or\\nbulky as it is It is estimated that could the power of Niagara be trans-\\nported thither it would furnish all the light, heat and power needed by\\nNew York City. This may one day come to pass by turning the force into\\nelectricity, carrying it either stored or by means of conductors, and re-\\nconverting it as needed.\\nBelonging to human beings, lower animals, plants. Among the physi-\\nological do not overlook the reproductive forces of animals and plants, on\\nwhich the evolution of varieties depends.\\nThis difference well illustrated by a water or a wind mill on the one\\nhand and a steam mill on the other. As civilization and man s mastery of\\nnature go forward, the spontaneous forces lose in relative importance and\\nthe developed ones gain.\\n8 Winds, tides, navigable streams, the sun s heat and light,\\n25 Labor: its Necessity\\n^j7/, bk. i, ch. i. iT/ Cw/ZofA, pt. ii, ch. i. Gamier, c}a.\\\\\\\\\\\\. C/ar^, Philos. of Wealth,\\nch. ii. Schoenberg, vol. i, 196 sqq. Robinson, Thoughts on W. and its Sources.\\nLabor is the exertion of human beings directed\\ntoward productive or economic ends. It consists in\\nthe action of spirit on itself and on matter, always\\ninvolving an intellectual as well as a physical element.\\nLabor is equally with nature a fundamental requisite\\nto wealth. But for it mankind would necessarily perish\\noff the face of the globe even if all soils were fertile and\\nall climates temperate. On the other hand it is, how-\\never important, a means only,^ not an end.\\n1 Sometimes it is said to be the voluntary exertion, etc., this word\\nbeing added to exclude slaves work. But it is far more natural to call", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0061.jp2"}, "62": {"fulltext": "44 THE ABSOLUTE CONDITIONS OF PRODUCTION\\nthis labor than to rank it with the energizing of brutes. Labor is exertion,\\nand it is necessary to include in the idea not only the exertion itself but\\nall feelings of a disagreeable kind, all bodily inconvenience or mental an-\\nnoyance connected with the employment [Mill]. Not all human activity\\nis labor. Activity may have merely the aim of enjoyment. Yet sport en-\\ngaged in with the express aim of rendering one s self efficient in labor\\nmight itself be classed as labor.\\n2 Roscher. So J. B. Clark To a large and controlling extent the\\nmental element is present in the simplest operations. With the laborer\\nwho shovels in the gravel-pit the directing and controlling influence of\\nthe mind predominates to an indefinite extent over the simple foot-pounds\\nof mechanical force which he exerts. On the other hand no labor is\\npurely mental. Pen, tongue, or at least brain must be employed in\\nevery kind. Mill, after Bacon, rightly resolves all physical labor into an\\nimpartation of motion to some portion of matter.\\n3 More truly so than capital, as we shall see.\\nCannan.\\n5 This to warn against such common vagaries as that whatever makes\\nwork must be a blessing and whatever lessens it a bane. Conflagrations\\nmake work machines and inventions save work.\\n26 Its Forms\\nMill, bk. i, ch. ii. Roscher, 38. Cohn, 290-298. Clark, as at 25. Held, Grun-\\ndriss, 5.\\nThe chief forms assumed by labor are^ i Invention\\nand discovery, ii Getting in possession nature s spon-\\ntaneous gifts, either by mere occupation or by extrac-\\ntion, iii Creating raw materials by the manipulation\\nof nature s forces, as in agriculture and stock-rearing,\\niv Manufacturing the crude effects of ii and iii into\\nhigher forms, v Distributing things already formally\\nproduced, vi Exchanging the same, vii Imparting\\ninstruction, viii Securing protection, ix Directing\\nthe labor of others, x Making laws.\\n1 The classification is nearly that of Roscher, as above, only dividing\\nhis one class of services into our vii, viii and x, and inserting ix, which", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0062.jp2"}, "63": {"fulltext": "THE ABSOLUTE CONDITIONS OF PRODUCTION 45\\nhe omits. We shall find that the function of the entrepreneur, contractor,\\nundertaker, or middle-man is at bottom but a species of labor. Clark s\\narrangement of labor-products in four classes elementary utilities, form\\nutilities, place utilities, and time utilities, is good as far as it goes, but is\\nmeant to allow for material wealth alone. With this cf. 20-\\n27 Its Relation to Nature\\nMill, bk. i, ch. i, 3. Leroy-Beaulieu, Precis, pt. i, chaps, i, ii. Roscher, 37.\\nIn no form of production can one of these factors be\\nstrictly pronounced more important than the other,\\nsince each is absolutely indispensable.^ Yet if meas-\\nured by Ibulk different products display the presence of\\nthe two ingredients in very various degrees,^ the general^\\nrule being that the labor-element in wares predominates\\nin proportion to removal from their crude state. Intel-\\nlectual wealth too is built up with less or greater labor\\naccording to richness of native endowment in its subject.\\nNor if measured in dollars worths do equal amounts\\nof the different species of wealth embody labor equally,*\\nthough the correspondence is in this case much closer.\\nThe part which nature has in any work of man is indefinite and\\nincommensurable. It is impossible to decide that in any one thing nature\\ndoes more than in any other. One cannot even say that labor does less.\\nLess labor may be required, but if that which is required is absolutely\\nindispensable, the result is just as much the product of labor as of nature\\n[Mill]. He adds that when two conditions are thus equally necessary\\nto a result, the endeavor to fix their relative proportions of contribu-\\ntion is like attempting to decide which blade of a pair of scissors is the\\nmore efficient; or whether 5 or 6 is the main factor in their product, 30.\\nOn the impossibility of ascertaining with any exactness the mass of labor\\nwhich has entered into any commodity, Mill, bk. i, ch. ii, I.\\n2 A ton of steel and a ton of needles or of watches. The average pro-\\nduction of the Torrid Zone, taken bulk-wise, contains far less labor than\\nthat of the North Temperate.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0063.jp2"}, "64": {"fulltext": "46 THE ABSOLUTE CONDITIONS OF PRODUCTION\\n2 General, not by any means universal, since mere occupation is some-\\ntimes, as in the case of diamonds, an affair of much labor. A buffalo robe\\nstands for several times more labor now than in 1850. The extraction of\\nores often requires the finest appliances of mechanic art, to be had and\\nused only at immense outlay. Of different petroleum wells, costing each\\nthe same amount to bore and work, one has been known to yield, for a\\nconsiderable period, oil 2000 times beyond the average product of other\\nwells which were still pumped with more or less profit.\\nThis against the labor-value fallacy of Adam Smith, Marx and the\\nsocialists generally. Cf. Mill, as cited in n. I, above. The dollar measure\\nis of course the same as that of exchange value. The correspondence to\\namounts of labor would be no more perfect were goods to be rated accord-\\ning to their degrees of utility, or according to their values proper [oner-\\nously created utilities: i, n. 6].", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0064.jp2"}, "65": {"fulltext": "CHAPTER III\\nTHE RELATIVELY ABSOLUTE CONDITIONS OF\\nPRODUCTION\\ncapital-social organization\\n28 Capital Defined\\nAd. Smith, bk. ii. Mill, bk. i, ch. iv. Marshall, Economics of Industry, bk. i, ch. iit.\\nRoscher, 42. Sidgwick, p. 143. Clark, Cap. and its Earnings, Papers of Am. Ec.\\nAss., vol. iii. Leroy-Beaulieu, pt. i, ch. iii. Cossa, Saggi di Ecotioniia Politica,\\npt. iii, I. Siipiuo, II Cnpitale neW Organismo Economico. Schoenberg, vol. i,\\n206 sqq. Knies, Geld, I. BShm-Bawerk, Kapital u. Kap.-zins.\\nCapitaP is the name of all products, material or\\nimmaterial, which are engaged in or devoted to^ the\\nmission of helping labor to create further products.\\nIt is thus one great department of wealth. Sharply to\\nbe distinguished from it are, (i) non-capital wealth, viz.,\\nthe portion of wealth destined for immediate consump-\\ntion, and (ii) property which is not wealth at all but a\\ncondition of wealth, like land^ apart from improvements\\nthereon, and the original endowments of slaves. The\\nboundary between capital and other wealth often wavers\\nand is sometimes untraceable, an article s place on this\\nor that side of the line frequently depending on the\\nowner s varying- intention, and many things being used\\nnow for gain, now for pleasure.\\n1 There have been and still are many different conceptions of capital\\ni The classical, medioeval and mercantilist, making it the same that is now\\ncalled principal, as opposed to interest, in Greek, KecpdXaiov; in Latin,\\ncaput, or capitalis pars debiti. ii The physiocratic, by which capital", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0065.jp2"}, "66": {"fulltext": "48 THE ABSOLUTE CONDITIONS OF PRODUCTION\\nmeans massed, reserved or stored material products of any kind [not money\\nalone], whatever their destination. Knies still defines thus, iii The mod-\\nern, taking it to include all means of production vs^hatever their origin, i. e.,\\nland as well as capital, iv The most modern capital consisting only of\\nproduced means of production, land excluded therefore, and regard had to\\nboth origin and end. iii and iv afford each a still further division accord-\\ning as capital is thought of as material only or as in part immaterial also.\\nThe text gives iv in its second phase. H. George s definition [Prog, and\\nPoverty, bk. i, ch. ii, end], capital wealth in course of exchange, is practi-\\ncally equivalent to iv in its first phase.\\nProducts may be devoted to further production yet temporarily idle,\\nas in a factory or foundry during hard times. Such property may be called\\ndead capital, and in this sense alone is capital usually styled dead.\\nBut dead would not be aa inapt appellation for it when only techni-\\ncally productive 21, n. 4]. Capital is by no means dead simply because\\npassive and inert hke an instrument, instead of living and growing like\\nanimals and trees, though this distinction is worthy of notice [Prog, and\\nPov., 162 sqq. Cf. Bastiat s fable of the plane, in his pamph. on Capital et\\nRente, CEuvres, vol. v, 43 sqq.]. Things made for sale but which no one\\nwants are not capital at all nor, as a rule, are they even wealth, but waste\\nrather. H. George [bk. iii, ch. iv] speaks of spurious capital, meaning\\npartly values, like land, that are miscalled capital, partly those employed,\\nas in gambling, productively perhaps for A or B but not for society.\\n3 For ruling out land [proper], see H. George, Social Problems, 183 sq..\\nProg, and Pov., bk. iii, ch. iv; also Cossa, as above, 162.\\n29 Kinds of Capital\\nRoscher, 42. Ad. Smith, bk. ii. Schoenberg, vol. i, 212 sqq.\\nRoscher has well classified the various forms of capital\\nas follows i Improvements upon land, ii Building s,\\nstreets and roads, iii Tools, instruments and machines.^\\niv Useful domestic animals, v Materials for manu-\\nfacture which will reappear visibly in the product.^\\nvi Materials to aid manufacture which will not thus\\nreappear.^ vii Food and clothing for the support of\\nlaborers while they labor, viii Stocks of goods for sale.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0066.jp2"}, "67": {"fulltext": "THE ABSOLUTE CONDITIONS OF PRODUCTION 49\\nix Money, x Incorporeal or immaterial capital. To\\nthis list we have only to add weapons and means of\\ntransportation. Capital is often conveniently classi-\\nfied more briefly, as a) materials to work up, b) tools*\\nto work with, and c) subsistence.^ Very important is\\nthe distinction between free and specialized^ capital,\\nand still more so that between fixed and circulating.\\nAn instrument is passive in nature, a tool [perhaps from same root\\nas do active. A saw-buck is an instrument, a saw a tool. When an\\nextra-human force is joined to either or to the two combined we have a\\nmachine. Historically such motors have been applied in the order of\\ni brute strength, ii water, iii wind, iv steam, v electricity. For pulverizing\\ngrain, hammers were first used, then, in order, hand-mills, ass-power mills\\n[Matthew 18, 6], water-mills [which Roscher dates frum Cicero s time],\\nwind-mills [from 9th century] and steam-mills [since 1782].\\n2 As wool, cotton, flax, and coloring matters in cloth, leather in shoes,\\netc., also all sorts of ornamentation.\\n3 As coal, bleaching material, lubricants.\\nHere taken in the largest sense, including machinery and buildings.\\nClothing and houses as well as food being meant.\\nAccording as it is not or is so bound up with a given kind of produc-\\ntion as to be applied to another only with much difficulty and loss. De-\\nstruction of the free variety is dollar for dollar more disastrous than that of\\nthe specialized. Cf. H. C. Adams, Outline, 18, 19.\\nCapital which, e.g., mills, machinery, etc., exists a considerable time\\nin any one relatively permanent form, aiding repeated processes of pro-\\nduction, belongs in the former category; that which fulfils its entire func-\\ntion as capital of a given kind [changes its nature is used up] in a single\\nprocess of production, comes under the latter. Raw material and all goods\\nkept for sale well illustrate circulating capital. A grindstone lying in a\\nhardware store is circulating; revolving in a shop, fixed. So of all ma-\\nchinery. Money is fixed capital for society, circulating for the individual.\\nThis- distinction is relative, as no capital is absolutely fixed. Even money\\nwears out namqtie in ipso usu adsidua permutatione quodammodo extin-\\nguitur [Instt. of Justinian, II, 4]. The proportion of fixed to circulating\\ncapital in any community increases with the advance of civilization.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0067.jp2"}, "68": {"fulltext": "50 THE ABSOLUTE CONDITIONS OF PRODUCTION\\n30 The Place of Capital in Production\\nMarshall, 3LS,aX 2Z. i(/z7/, bk. i, ch. v. C^i^r^^, Prog. andPov., bk. i, ch. v. Cairties,\\nLeading Principles, 164 sqq. Senior, Pol. Ec, 58 sqq.\\nThe following propositions touching capital are funda-\\nmental and of first importance i All capital is the re-\\nsult of labor and secondary thereto,^ and all material\\ncapital the fruit of abstinence and economy, ii On\\nthe other hand all labor is dependent for its efficiency\\non capital.! iii The real support of labor consists in\\nthe capital which it employs and not in demand for the\\ncommodities or services it yields.^ iv Material capital\\nis a g-ood only as it ministers to consumption,* and it\\nis itself destined to be consumed.^\\n1 Sir William Hamilton s elucidation of the intimate relations between\\nspeech and language, by citing the operation of tunnelling through a sand-\\nbank, is to our point here. As the digging must precede the shoring of\\nplank or brick, yet can only just precede, and as thought must exist in ad-\\nvance of speech but only be a little in advance, so labor is the absolute\\nprius of capital, and still totally dependent upon capital for any considera-\\nble development.\\n2 A function quite distinct from labor, and very important. See Senior,\\nas above. This subject will emerge again when we discuss Interest, in\\nPart IV. Cf., too, 46.\\nMill, bk. i, ch. v, 9, needlessly obscures this important truth, yet is\\nclearer than Laughlin, who, in his edition, has substituted his own for\\nMill s exposition. The idea is simply that no matter how great the demand\\nfor a commodity, unless it were of an extremely simple order, labor would\\nnot be encouraged to attempt the production of it so long as no one willed\\nto supply capital to aid. Any increase to the stock of [non-specialized]\\ncapital increases the demand for labor, and [barring increase in number of\\nlaborers] elevates the level of v/ages. On the contrary, any such applica-\\ntion of wealth as merely to act on demand and not to swell the stock of\\ncapital, robs labor of so much support. Demand alone, however, [efficient\\ndemand is of course meant, i.e., wish backed by money] is competent to", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0068.jp2"}, "69": {"fulltext": "THE ABSOLUTE CONDITIONS OF PRODUCTION 5 1\\nchange the direction, the department, in which labor shall apply itself. It\\nmight conceivably, by some peculiar concourse of circumstances, set capital\\nfree in such a way as to render it more serviceable than in its previous\\nform, thus, without being increased at all, actually furthering the interests\\nof labor. Fresh production of capital will result, but only as a consequence\\nof the encouragement given to labor. Thus, suppose ^looo are spent for\\nliquors, and the money placed by the liquor-dealer in the bank, whence of\\ncourse it is at once loaned out to aid industry and so labor. Mill ignores\\nthis possibility. It would confessedly be better still for labor had the\\nmoney been applied in the first instance as supply instead of as demand,\\nwhich is all that Mill shows. But if his statement is not valid quite as\\nunqualifiedly as he supposed, this fact detracts not a whit from its impor-\\ntance. The laiu is as he declares. Nor does this admission bind us to\\naccept his theory of wages [see Wages, in Part IV]\\nNot that consumption in se is a good. It is only a means to a good,\\nviz., the gratification lying beyond. But as it is an indispensable means,\\nmen being constituted with needs which only economic consumption can\\nsupply, production becomes worthful for consumption s sake. Could the\\nend be reached without consumption, the latter would at once cease. A\\nmachine which could do its work and never wear out, would be a prize.\\nHence the search for perpetual motors. Hence, too, the more fruitful\\nquest for instruments which will do given amounts of work with the least\\nmotive power and friction.\\nWhy, then, is it so valuable? the pupil might at first ask. If it must\\nreturn to nothing, why call it into being in the first place? Because capi-\\ntal, though perishable, is still indispensable. If it perished twice as fast,\\nwere we forced to spend double the time we now do in replacing it, we\\nshould have no choice but to toil for it as at present. Material capital\\nmore than pays for itself during its brief life, and besides may be so con-\\nsumed as to reproduce itself, and more. Thus individuals die, but the race\\nlives and spreads. Far the greater part of the capital at any moment exist-\\ning is less than a year old. Almost trifling in quantity is that which is\\nover ten. But the entire bulk of capital in man s possession now was\\naided into being by that long since consumed. Every nail in England\\ncan be traced back, directly or indirectly, to savings made before the Nor-\\nman Conquest [Senior].", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0069.jp2"}, "70": {"fulltext": "52 THE ABSOLUTE CONDITIONS OF PRODUCTION\\n31 Society\\nClark, Philos. of Wealth, ch. iii. Weeden, Social Law of Labor, Int. Bastiat, Har-\\n7nonies, ch, i \\\\(Euvres, vol. vi, 24 sqq.]. Spe7icer, Principles of Sociology, pt. ii,\\nch. ii. Villey, Role de I etat dans Vordre econ.\\nTo be in the least degree copious, production requires\\nthe existence of society. Man is by nature a social\\nbeing.i The individual of himself does not form a\\ntotality. Society must complement him. Except as\\nparcel and facet of the social body he can be nothing\\nbut a fragment. Now society is an organism, its units\\nso vitally related that, as in a tree or in the animal\\nframe, each is both end and means, at once serves and\\nis served by all the rest. Not only are the productive\\npowers of the individual as such incapable of develop-\\nment without a human environment,^ but even if de-\\nveloped they would be useless, having no scope for\\naction.* Social organization, the interplay of supply\\nand demand, the right mutual relations between pro-\\nducers and consumers would be needed.\\n1 A political animal, as Aristotle calls him. Genesis, II, 18 not\\ngood for man to be alone, has the same meaning. It does not refer to\\nmarriage simply.\\n2 The rootlet of a tree shares with the remote leaf the nutriment which\\nit absorbs from the earth, and the leaf shares with the rootlet that which\\nit gathers from the sunlight and the air. This universal interdependence\\nof parts is a primary characteristic of social organisms; each member ex-\\nists and labors, not for himself but for the whole, and is dependent on the\\nwhole for remuneration. The individual man, like the rootlet, produces\\nsomething, puts it into the circulating system of the organism, and gets\\nfrom thence that which his being and growth require. Clark, as above,\\n38 sq. Cf. ante, 12, 13, 15, and notes.\\nThis side of the truth Bastiat in his fine discussion overlooks, as do\\nall the writers, like Adam Smith and his disciples, whose notion of society", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0070.jp2"}, "71": {"fulltext": "THE ABSOLUTE CONDITIONS OF PRODUCTION 53\\ncame from eighteenth century liberalism. They have been too apt to con-\\nceive the individual man as complete in himself, and society as a mere\\naggregation of such individuals, sustaining to one another, indeed, rela-\\ntions the most complicated, but not organic 15, n. i]. Rousseau s\\nSocial Contract is the classic for this theory of society.\\nBastiat, as above, computes that through social co-operation and the\\nconsequent amassing of wealth, one man may by his own efforts enjoy now\\nmore satisfactions than he could earn in ten centuries were he obliged to\\nbegin and work without such aid. If the causes of a man s economic\\nweal or misery once lay in what he himself did, now they are to be found\\nas well in what is done and experienced by those a) for whom he produces,\\nb) whose products he desires, c) who produce for others in the same line\\nas he, and d) desire from others the same product as he [Knies, Pol.\\nOek., 164 sq. Cf. Ely, Past and Pres. of P. E., p. 50]. Take an operative\\nin A s cotton factory, earning ^1.50 per diem. That wage is conditioned\\nupon the existence of: i The factory, with its owner and his capital.\\nii Builders of factories and machinery, with their respective plants and\\ngroups of workmen, insuring to A the possibility of repairing or replacing\\nhis plant were it injured by fire, storm or earthquake, each man in all\\nthese groups being bound in the same mesh-work of relationships as the\\noperative in question, iii Men working southern cotton-fields, every one\\ndependent in this same way. iv People similarly circumstanced engaged\\nin the manufacture of implements for cotton-raising, v Still others, so\\ncircumstanced, building and running steamboats and railways to transport\\nthe various wares mentioned, vi Human beings in all lands who wish\\ncotton fabrics and have means to buy them, vii Morality, customs and\\nlaws, making possessions and traffic secure, viii Teachers, writers, legis-\\nlators, judges, police and army, giving sustenance to vii, each enabled to fill\\nhis place only by a complex congeries of action and reaction like this\\nwhich we are tracing.\\n32 The State\\nWagner, Lehrl. d. Pol. Oek,, 161. James, et al., in Science Economic Discussion,\\n26-43. Schoenberg, vol. i, 197, 255 sqq. Spencer, Prin. of Sociology, pt. v.\\nEvery separate permanent human community sponta-\\nneously 1 assumes more or less authority over its mem-\\nbers, forcing each, within certain limits, to obey the\\ncollective will. This is inevitable. Such authority", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0071.jp2"}, "72": {"fulltext": "54 THE ABSOLUTE CONDITIONS OF PRODUCTION\\nalways has been exercised, and always will be,^ however\\nhigh a degree of moral, political or economic advance-\\nment may be reached. In its character as asserting and\\nexercising this eminent domain society becomes the\\nstate. Society is in principle no less indispensable\\neconomically in this aspect than in that of an organism\\nmerely. Not alone anarchy but the slightest real in-\\nsecurity to life or property will paralyze production.\\nEven among the best-meaning citizens there must be\\nsome authoritative tribunal to settle honest disputes.\\nBesides, nearly all peoples have vital interests of a\\npurely economic nature which only the state can\\nadminister.^\\n1 We see this from what occurs in mining camps and caravans, and\\namong pirates. Government does not originate in contract any more than\\nlife does, though a particular form of polity may thus arise.\\n2 Contrary to the belief of the anarchists, M^ho expect to take out of\\ngovernment the whole element of authority, reducing it to mere adminis-\\ntration 14, n. i]. This cannot be. It is not the wickedness of men,\\nwhich may in time abate, but the permanent finiteness of their knowledge,\\nthat renders anarchy impossible of realization.\\n3 See 15, n. 2; 36, n. 7. Cf. Villey, as at 31. Thus, England\\nnever had an efficient express system till Fawcett, as Post-Master General,\\nintroduced the Parcels Post. Then all the railways took up the business\\nand accommodations of this sort became good.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0072.jp2"}, "73": {"fulltext": "CHAPTER IV\\nTHE RELATIVE CONDITIONS OF PRODUCTION\\n33 General View\\nMill, bk. i, chaps, vit-xiii. Mangoldt, pp. 20-44. Gamier, pt. ii, sec. iii. Cannan,\\n5 sqq. Held, p.^%. Schoenberg,vo\\\\.\\\\,x ^Z-2(iZ. Roscker, zoy-2og. Ad. Smith,\\nbk. i, ch. i. Cossa, Elementi, sec. ii, ch. iv. Bagehot, Ec. Studies, vi.\\nAll four of the preceding conditions being given the\\nproduction of wealth will ensue, but will be more or\\nless abundant according to a multitude of further\\ncircumstances. The chief of these are now to be dis-\\ncussed. They include whatever increases the amount\\nor the efficiency of either capital or labor, viz., those\\nthings^ which somehow (i) promote man s power to\\nsave wealth, (ii) quicken his will to do the same,\\n(iii) prompt the determination to labor, (iv) better the\\nquality of labor, (v) strengthen the labor-force of the\\ncountry or countries in question, or (vi) enable men to\\nmake the most out of a given amount ot labor. The\\nprogress will take place through such an application of\\nthe free capital and labor available from time to time,\\nas shall not only make good all consumption involved\\nbut also create a surplus.^ This may occur in either of\\nthree ways i Increase of product without propor-\\ntional increase of expense. 2 Diminution of expense\\nwithout proportional diminution of product. 3 Increase\\nof product along with diminution in expense. The\\nresult, like the aim, will be a continual reduction on", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0073.jp2"}, "74": {"fulltext": "56 THE RELATIVE CONDITIONS OF PRODUCTION\\nthe whole,^ in the amount of human toil necessary for\\na unit of product. Human needs being expansive,\\nhowever, and the utmost possible supply to them limited,\\nlabor can never become unnecessary, nor decrease in\\nabsolute quantity, but only relatively to product.\\n1 The power to save depends on good government, industrial liberty,\\nthrift, etc.; the will to labor or to save, on morality, freedom, private prop-\\nerty, culture, high rate of interest, and the like; the labor force, on num-\\nbers, favorable climate, health, strength; the quality of labor, on such\\nconsiderations as intelligence, education, and practice. Chief aids to the\\nability to make most out of a given amount of labor are machinery and\\nthe organization of labor. See on all this 35 sqq.\\n2 Sir William Petty, Political Arithmetic, ch. i, names this process of\\nprogressive increase to wealth, superlucration not a bad term.\\n2 On the whole, because although, as pointed out in 34, agriculture\\nand mining follow another law, the disadvantage thus arising bids fair to\\nbe offset for an indefinite time to come by the greater and greater cheap-\\nness of manufactured articles.\\n34 Diminishing Return and Increasing Return\\nMarshall, bk. i, ch. iv. Sidgwick, 151 sqq. Walker, Wages, 89 sqq. Cairnes, Log.\\nMeth., 50, SI, n. H. C. Adams, Principles to Control State Interf. in Industries.\\nThe general rule of growth in production is the\\nmore effort applied to nature, the more product, effort\\nincluding capital also, as hoarded labor. If, however, a\\nlong period of time is considered, two important varia-\\ntions from this are perceived to hold. In agriculture\\nand, with modifications, in mining, the law of diminish-\\ning return prevails, that, in the long run, increase of\\neffort secures a less than proportional increase of\\nproduct. The operation of this law in agriculture may\\nsometimes be temporarily postponed and even dispro-\\nportionately large returns secured, by (i) increase of\\npopulation,^ (ii) improved machines and methods.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0074.jp2"}, "75": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION 5/\\n(iii) bringing, in a new country, more fertile or conven-\\nient land under cultivation. Manufactures on the\\nother hand are, as a class, subject to a law of increas-\\ning return, the creation of their products growing\\nsteadily less and less costly per unit.^ Increasing re-\\nturn characterizes in a marked manner all special\\nindustries which, while ministering to wide, regular\\nand decided needs, enjoy some sort of a monopoly,*\\nnatural, governmental, or based on vastness of capital.\\n1 This law forms the basis of Malthusianism 15, n. 5]. H. C. Carey\\nsupposed that in demonstrating [iii] above, he had refuted the law, and\\nMalthus s doctrine along with it. He did neither.\\nThere is a certain point up to which the greater the population on a\\ngiven territory the greater x Va per capita yield; and beyond which additions\\nto population will have the reverse effect. This may be called the point\\nof saturation.\\n3 Cf. 33, n. 3.\\nIn proportion to the firmness of the monopoly, cost of production\\nr\u00c2\u00a7\u00c2\u00a7 47, 48] will cease to fix prices, these rising higher and higher till\\nchecked by lessened demand. But if the products are necessaries of life\\nprices will go very high before demand will be greatly affected.\\n35 The Labor-Force: Extent\\nMangoldt, 23-44. MtU,hV.i, ch. -x.. Smith [R. M.], Statistics and Economics, pt. i\\n[pubb. of Am. Ec. Ass n, vol. iii]. Block, Statisqne, ch. xv. Cohn, I, i-iii.\\nTo the point of saturation,^ a country or community\\nis productive, other things being equal,^ according to\\nthe extent of its labor-force.^ This is great for any\\nperiod in proportion as i Population is large, ii There\\nis excess* of births over deaths, iii Such excess is\\nmaintained more by paucity of deaths than by multi-\\ntude of births.^ iv Emigration is prevented and im-\\nmigration encouraged, v The people are hardy and", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0075.jp2"}, "76": {"fulltext": "58 THE RELATIVE CONDITIONS OF PRODUCTION\\ntemperate, vi Males, yet not too greatly, outnumber\\nfemales.^ vii Working- hours per day are long and\\nholidays infrequent.^ viii Idle, helpless, and ineifi-\\ncient persons are few.^\\n1 34, n- 2.\\n2 Bear this condition carefully in mind.\\n8 Not population alone is meant, nor the number of persons who com-\\nmonly, or ever, work; but the tale of hours works, say, in a year. Quality\\nis treated in 36.\\nThis, with consideration iv, determines whether population is growing\\nor not. A decreasing population is abnormal, yet not so rare the Ameri-\\ncan Indians [Andov. Rev., Aug., 1886], the South Sea Islanders, the Irish\\nin Ireland, the French in certain districts of France. Smith, as above,\\np. 45. In Ireland the deficit is from emigration, in France from excess of\\ndeaths over births.\\nSince if by the latter, much sickness is involved, calling from work\\nnot only the patients but also their attendants. Take Norway and Bavaria.\\nB. has much the larger birth-rate, 37.3 per 1000 inhabitants yearly, to N. s\\n34.7. But it also has very much the more rapid death-rate 30.4 to N. s\\n18.9 [the lowest known] so that its yearly increase per 1000 is less than\\nhalf N. s, viz., 6.9 to 15.8. France has a very low birth-rate, 26.2; also an\\nexceedingly moderate death-rate, 23.9, only Belgium [23.7] and Norway\\n[18.9] having lower. But Belgium has a considerably better birth-rate,\\n23.7, so as to increase 7.9 per 1000 each year to France s 2.3.\\nIn the world at large 106 males are born to 100 females, and the pre-\\nponderance continues till about the age of puberty. After that, the numer-\\nical relation is reversed, and holds so through life. More work commonly\\ndone by women can be done by men, than vice versa. For women to per-\\nform tasks fit only for men, in time weakens the entire population. But\\ntoo great excess of men would mean slow, or no, numerical growth.\\nI.e., the more hours of work the greater the production, provided energy\\nis maintained 36]. But as human endurance is limited the per diem\\ntask must be, and a holiday now and then works well. The observance of\\nSunday is undoubtedly an immense aid to a people s productive power.\\nWhere the Greek or the Catholic religion prevails, on the other hand, holi-\\ndays are too numerous for utmost productiveness [Walker, Wages, 20].\\n8 Those who cannot or do not support themselves. Here are usually\\nreckoned all persons under 15 and over 70, the remainder constituting the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0076.jp2"}, "77": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION\\n59\\npopulation of productive age. In France 68.6 per cent are of this age; in\\nEngland, 61.2; in Germany, 62.7; in the U. S., 59.6. The more slowly a\\npopulation increases the larger will be its proportion of adults. Then there\\nare the defectives, constituting, of each 100,000:\\nIN\\nBlind.\\nDeaf Mutes.\\nIdiots.\\nInsane.\\nTotal.\\nItaly\\nGermany\\nGreat Britain\\nNorway\\nSweden\\nBelgium\\nFrance\\nUnited States\\n105\\n87\\n98\\n136\\n80\\n81\\n83\\n96\\n74\\n96\\n57\\n92\\n102\\n43\\n62\\n66\\n65\\n139\\n129\\n119\\n39\\n50\\n114\\n152\\n99\\n88\\n178\\ni8s\\n176\\n92\\n146\\n182\\n343\\n410\\n462\\n532\\n266\\n40s\\n496\\nTo be added are the idle aristocracy, of blood or of wealth, monks,\\nnuns, superfluous clergy, soldiers, and various classes of servants. Spain,\\nunder Philip III, had 988 nunneries and 32,000 mendicant monks. In\\n1787 it had 188,625 religious persons, 480,589 nobles, and 280,092 people\\nat service. Beggars certainly increased the number to a million, while the\\nexclusively productive classes then were under 2\\\\ million. Portugal in\\n1800 had 200,000 religious to 3 or 3^ million inhabitants [Roscher, 54].\\nSir W. Petty, Pol. Arithmetic, ch. iv, argues that France, about 1665, had\\n250,000 needless clergymen, each consuming 18 pence worth a day, which\\nhe says was triple what a laboring man required. In contrast with these\\ncases, by the U. S. census of 1880, of the 17,392,099 persons in gainful\\ncallings here [being 34.68 per cent of the entire population], only 4,074,238\\nwere engaged in personal and professional services. The others wrought\\nat agriculture [7,670,493], trade and transportation [1,810,256], and in\\nmanufacturing, mechanical and mining operations [3,837,112].\\n36 The Labor-Force Quality\\nMangoldt, as at 35. Mill, bk. i, ch. vii. Roscher, bk. ii. Cherbuliez, bk. i, ch. v,\\nsec. ii, iii. Walker, Wages, ch. iii. Brassey, Work and Wages. Marx, Capital,\\nch. XV.\\nThe efficiency of labor may vary greatly between two\\ncommunities whose hours of work per annum are equal,\\none excelling the other in the skill, spirit, and vig-or with\\nwhich the work is done. Superiority in these traits will", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0077.jp2"}, "78": {"fulltext": "60 THE RELATIVE CONDITIONS OF PRODUCTION\\nturn upon i The native strength, enterprise, and will-\\npower of the people.^ ii Their habitual diet, iii Their\\nmoral development. iv Their intellig-ence, natural and\\nacquired. Industrial and technical training are here of\\nincalculable importance, yet not more vital, on the whole,\\nthan is general education.^ v Favorable relation of\\nworkmen to product. The self-employed are usually\\nthe most diligent and earnest, co-operators next, then\\npiece-wage-workers, then time- wage.* High pay begets\\nzeal low, apathy, vi Reasonable work-hours, daily\\nand weekly, neither too few nor too many,^ fewer for\\nwomen than for men, fewest for children, vii Honora-\\nble political status^ of the laboring population. Serfs\\nwill out-toil slaves, free men do better still, those with\\nthe electoral franchise best of all. viii Good govern-\\nment, equitable and stable laws, fiscal and other, just\\nand firm administration.\\n1 In all which prevail differences so great as at first to seem incredible.\\nThus, the lifting power of a Van Dieman s Land native and that of an\\nAnglo-Australian differ as 50 to 71 [Batbie, cited by Walker]. Peoples\\nnear together too are often extraordinarily unlike in these qualities. An\\nEnglish laborer is said to do double the work of a French. Some of the\\npeculiarities are inexplicable, lost in the mystery of race-idiosyncrasies at\\nlarge; others traceable to national experiences and habits, favorable or\\nunfavorable [Mangoldt, 25].\\n2 Conscience favors (i) fidelity to appointed work, (ii) care for mate-\\nrials, (iii) obedience to law. In all these ways expense for oversight and\\npolice is obviated. Conscientiousness also implies contentment and hope,\\nindustrial qualities of first moment. To all co-operative forms of industry,\\nto all organization of labor, it is absolutely indispensable.\\n3 Not only acquired industrial abilities, a form of capital 28, 29], are\\nneeded, but large, diversified, and widely distributed intelligence whatever\\nits source. The point is not that this will tell in the level of a people s\\nenjoyment of course true; but that high productive efficiency itself is", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0078.jp2"}, "79": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION\\n6l\\nconditioned upon it. On industrial education, see Monographs of the\\nIndustrial Ed. Ass n., N. Y. City.\\nRoscher, 39. Here is a table illustrating this, adapted from H. C.\\nAdams\\nTHE WORKMAN HAS\\nCONSEQUENTLY\\nSlavery,\\nThe\\nOrdinary-Wages\\nsystem,\\nThe\\nPiece-Wages\\nsystem,\\nProfit-Sharing\\nor\\nCo-operation,\\nNo rights, civil or poli\\ntical; pay determined\\nby animal wants.\\nCivil and perhaps po-\\nlitical rights, but no\\nlegal property in pro-\\nduct; pay determined\\nbefore work is done.\\nCivil and perhaps po-\\nlitical rights, but no\\nlegal property in pro-\\nduct; pay determined\\nby work done.\\nCivil and perhaps po-\\nlitical rights; also\\nproperty in product;\\npay determined by\\nwork done.\\nNo interest in quantity\\nor quality of work\\ndone; no care for\\nmaterial.\\nNo direct interest in\\nquantity or quality\\nof work done, or in\\ncare for material.\\nInterest in quantity\\nonly; otherwise same\\nas above.\\nDirect interest in both\\nquantity and quality\\nof work done, and in\\ncare for material.\\nOnly low-grade indus-\\ntry possible.\\nHigh technical skill\\npossible, but no guar-\\nantee of continuous\\nor contented industry.\\nGreater encouragement\\nwhile work lasts oth-\\nerwise same as above.\\nAn ideal system wher-\\never applicable. Mar-\\nshall, bk. iii, ch. ix.\\nThat they are usually better paid in America is among the chief reasons\\nwhy our immigrants achieve more here than in their old homes. Not al-\\nways have they this advantage. We cannot infer it from their mere nomi-\\nnal wages. On real as distinguished from nominal w., see under Wages,\\nin Part IV.\\n6Cf. \u00c2\u00a743, n. 5.\\nCf. note 4. This too is a most powerful cause of their improved pro-\\nductivity on coming hither from the old world.\\nThe /orm of government has much effect. See notes 4 and 5. Nearly\\nor quite as important is its solidity. Witness the industrial backwardness\\nof Mexico, Central America, Peru, Turkey. Laws should be clear, certain,\\nand not changed except for good cause. They should be just to all men\\nand classes, partial to none. Judicious bankruptcy, currency and poor laws\\nare of especially vital consequence. Still more so are those touching taxa-\\ntion. The world is at this moment probably suffering more from bad tax-\\nation than from all other governmental ills together. And lastly, The true\\ntest of a good government is its aptitude and tendency to produce a good", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0079.jp2"}, "80": {"fulltext": "62 THE RELATIVE CONDITIONS OF PRODUCTION\\nadministration [Alexander Hamilton] In western continental Europe\\nfrom the 13th to the 17th century farmers could not keep sheep on account\\nof the unbridled rapacity of noblemen and their retainers. Only in England\\nwas the king s peace firm enough. Hence England became the great wool-\\nraising country, and could collect from the continent an extensive export-\\nduty [Th. Rogers, Ec. Interp. of Hist., 9].\\n37 Socialism and Production\\nGronlund, Co-operative Commonwealth. Also the works listed at 14. Cohn, II, ii.\\nSchoenberg, vol. i, 107-124. Hyjidman, Hist. Basis of Soc m in Eng.\\nPartly a priori, partly from the observed effects of\\nco-operation, socialists argue that land and material\\ncapital should be made collective property, private\\nfee simple in them being abolished. It is urged that\\nan indefinitely more copious production would thus\\nresult, making it safe heavily to bond the country, if\\nnecessary, to pay off present proprietors. The im-\\nprovement is expected to come in part from a more\\nperfect organization of industry, saving waste of\\nlabor and of capital but mainly from the fresh hope\\nand courage which would inspire the laboring masses.\\nAll wishing work might have it. Thirst for inordi-\\nnate wealth would cease. Every commodity or service\\ncould be had at precisely its cost^ in labor. Society\\nwould no longer be robbed by gambling in stocks\\nor produce, or industry palsied by fluctuations in the\\nvalue of money. Commercial crises would be un-\\nknown, and corporations passing away would render\\nimpossible the frauds of their managers. Henry George\\nand his followers deem that the essence of this benefi-\\ncent reform would follow nationalization of the land^\\nalone. It is likely that the introduction of socialism", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0080.jp2"}, "81": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION 63\\nwould to some extent quicken productive energy, though\\nby no means in the degree alleged. But we see insup-\\nerable obstacles to the launching of the system as ad-\\nvocated, and insufferable evils sure to spring from it if\\nlaunched. It would (i) dangerously concentrate power,\\n(ii) abate thrift in some while promoting it in others,\\nand (iii) repress that marvellous inventiveness, enter-\\nprise, and daring in industrial undertakings which only\\nthe hope of great personal profit will at present induce\\nin men.\\n1 This point naturally connects itself with the discussions of Chapter V.\\nCo-operation and the George reform also both have this double face they\\npropose to inspire and hence increase labor, and at the same time to organ-\\nize or apply it better, so that a given measure of it may amount to more\\nthan now.\\n2 By a system of labor-time money for the payment of wages, and of\\nlabor-time labels on commodities to show just how much time in labor each\\nrequired for its manufacture 14, n. 3]. You work, and are paid in cer-\\ntificates of labor-time, having a face value just equal to the number of hours\\nyou have wrought if at unskilled labor, or twice, thrice or ten times that\\nnumber if at skilled. Each hour of face value in these tickets purchases\\nat any of the public bazaars commodity that it has taken an hour s labor\\nto produce. Money and markets disappear. The scheme is ingenious\\nbut impracticable. See, further, under Distribution [Part IV].\\n3 14, n. I.\\nCf. 46.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0081.jp2"}, "82": {"fulltext": "CHAPTER V\\nTHE RELATIVE CONDITIONS, CONTINUED\\n38 Extraneous Aids to Labor\\nRoscher, bk. ii. Bagehot, Ec. Studies, vi. Mill, bk. i, chaps, vii-xiii. Cohn, I, i, iv,\\nV, II, III, i. M Culloch, pt. ii, sec. ii.\\nAnother immense and generic class of the conditions\\nto production touches the ways and means of getting\\nthe utmost possible out of a given amount of lalbor.^\\nThe principal circumstances which contribute to this\\nresult may be grouped in four clusters (i) physical and\\ntopographical advantages, (ii) material capital in gen-\\neral, (iii) labor-helping and labor-saving inventions in\\nparticular, and (iv) the organization of labor itself.\\n1 Those canvassed in 35-37 have to do with labor intrinsically con-\\nsidered, i.e., its quantity and its quality. We now suppose a certain quan-\\ntum of labor, its quality so or so, and notice that it avails more or less\\nabundantly according to the place and manner of its application.\\n39 Geography and Topography\\nCohn, 213-229. Roscher, 30-37. Schoenberg, vol. i, 198 sqq. Knies, II.\\nA people s habitat is a prime determinant of its eco-\\nnomic welfare. It will be helpful or the reverse accord-\\ning to i Its territorial extent.^ ii Its superficial\\naspect, as mountainous, hilly, or plain.^ iii The nature\\nof its earth-crust, as (a) soil^ well or ill rewarding cul-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0082.jp2"}, "83": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION 65\\ntivation, (b) a theatre of much or little spontaneous\\nproduction, in forests, wild birds and animals,* and\\n(c) a magazine of abundant or scanty raw materials, as\\ncoal, stone, and metals, iv The plentifulness, location\\nand character of its waters. Are springs, brooks,\\nponds, and lakes numerous and well distributed Do\\nthey furnish sufficient drink, irrigation, and water-power\\nAre rivers many and navigable far inland?^ Is sea-\\ncoast extensive, offering frequent and commodious har-\\nbors Are fisli in rich supply v The salubrity of\\nits climate and the favorableness or unfavorableness of\\nthis to production. Temperature, rainfall, humidity,\\nand the strength and regularity of winds have here\\nto be taken into account, vi Its location in relation to\\ntlie territories of other peoples, and the character and\\nresources of those peoples.\\n1 It may at any given time be too great or too small for the people.\\n2 How important, e.g., to the ease or expense of building railways and\\ncanals.\\nFertility and good drainage are the main qualities.\\nOstrich-feathers, ivory, game [including supplies for menageries and\\nzoological gardens], peltry, and guano are, in places, important sources of\\nwealth. The presence in a country of desirable beasts, birds, insects and\\nplants is of great importance, as is the absence of noxious ones. In Russia\\ntwenty-five miUion squirrels are killed yearly for their skins [Mulhall].\\nThe Eng. gov t in Cyprus expends $15,000,000 yearly in destroying locusts.\\nBlock Island has the great advantage in poultry-raising that no foxes,\\nskunks, or weasels are found there.\\ns Nor do railroads strip this item of consequence. It is also of much\\nmoment whether the land is subject to floods or not.\\n6 Note England s advantage herein over the Continent. Its harbors are\\nnot only thick, but well situated. Tides and the Gulf-stream mostly sweep\\npast them instead of straight in, which so fills up those beyond the Chan-\\nnel. The economic influence of the Gulf-stream on the Atlantic coast of\\nEurope is obvious but immeasurable.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0083.jp2"}, "84": {"fulltext": "66 THE RELATIVE CONDITIONS OF PRODUCTION\\nThe late Spencer F. Baird regarded an acre of ocean equal to six of\\nland in ability to produce food for man. Seals and porpoises as well as\\nfish might be mentioned among the valuable gifts to us from the sea.\\n40 Material Capital in General\\nMangoldt, 30, 31. Mill, bk. i, chaps, v, vi, xi. Ad. Stnith, bk. ii. Roscher, 42\\nsqq. Bagehot, Ec. Studies, vi. Rae, Prin. of P. E. [Bost., 1830], 123 sqq.\\nSpeaking broadly, production will be large in pro-\\nportion as material capital is plenty.^ Laborers must\\nhave food, clothing, shelter, working-gear and stock.\\nLabor-force not supplied with these becomes a burden,\\nand labor-force can increase only as these multiply.\\nMere abundance for present needs is not enough.\\nHealthy production requires an actual or potential sur-\\nplus against emergencies. Capital in the form of roads,\\ncanals, dikes, piers, and public buildings may aid pro-\\nduction through hundreds and thousands of years.^\\nThe proportion, in capital, of kind to kind is hardly\\nless important than bulk. Aside from cases of specific\\nover-production, either fixed or circulating capital may\\nexist in vicious disproportion to the other. Prepon-\\nderance of circulating is the lesser danger, owing to\\nthe larger possibility of adapting it to a variety of uses.*\\n1 On intellectual capital as a condition of production, see 36, iv, and\\nn. 3. The richest importation the U. S. ever made came encased in Samuel\\nSlater s head. The present is to be brought into relation with 29,\\n30, ante. In those our thought was primarily a static one. Here we\\nhave in view the dynamics of production.\\n2 Though most capital, however fixed 29, n. 7], is ephemeral. The\\naverage life of an English locomotive, costing ^^2,000, is only 15 years, no\\nsubtraction being made for repairs. The average total run is 200,000\\nmiles [Mulhall] American machines, the term being reduced according\\nto amount of repairs, average to live but 5.07 years. The cost is ^8,000.\\nA box car costs ^450, lives 9.05 years; a flat lives 8.15 years [W. C. Fisher].", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0084.jp2"}, "85": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION 6/\\n8 The main cause of the hard times in 1857 was probably the locking\\nup of too much capital in the form of new railways.\\nI.e., it is less specialized 29, n. 6j.\\n41 Machinery\\nAd. Smith, bk. i, chaps, i-iii. Ckerbuliez, bk. i, ch. vi. Roscher, Machinery,\\nin Lalor; also Ansichten, etc., vol. ii. Mangoldt, 36. Senior, 3 Lectt. on\\nWages, etc. Schoenberg, vol. i, 218 sqq. Marx, Capital, ch. xv. Cossa, Ele-\\nntenti, 31.\\nThe ability of tools and instruments to help pro-\\nduction is infinitely multiplied by harnessing to them\\nsome agent with superhuman power, as brutes,^ water,\\nsteam, or electricity. Machines then result, which\\n(i) make possible much production not so without\\nthem,^ (ii) in forms of production intrinsically possible\\nwithout,* enormously spare the health, strength, and\\nmorale^ of laborers, (iii) in other cases render products\\nbetter, cheaper, and vastly more plentiful.* Through\\nthese advantages, in spite of temporary misfortunes^\\noften occasioned by the introduction of it, machinery\\nbecomes an inestimably valuable auxiliary to labor in\\ncreating wealth.\\n1 On the difference between tools, instruments, and machines, 29, n. i.\\n2 The first cotton mills in America were driven by horses or oxen.\\nPartly by the fineness and regularity of their work, as mowers, reapers\\nand steam ploughs; partly by sheer power, as in heavy hauling, lifting and\\npumping. Sometimes their force is not beyond what united human effort\\nmight yield, but has to be applied in a place [a mine, e.g?^ where not\\nenough men can get hold. But the earth s population were insufficient\\nto do a tith J of the work which machinery now performs. The world s\\nhorse-pow ,r in steam alone aggregated [Mulhall] in 1880, 28,952,000.\\nEach ho.se-power being equal to 12 men s power, we have steam doing\\nthe work of 347,424,000 men. But engines, furnishing power alone, repre-\\nsent hjt a small part of the work of machinery. Competent estimates", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0085.jp2"}, "86": {"fulltext": "68 THE RELATIVE CONDITIONS OF PRODUCTION\\nregard machinery as doing in Great Britain alone the work of 700,000,000\\nmen, a number probably in excess of the entire laboring population of the\\nglobe. Cf. n. 4. Notice, further, that machinery, like labor 43, 44],\\ngains in efficiency by organization, piece standing in rightly complementary\\nrelations to piece.\\nA sewing-machine does the work of 12 women. A Boston boot-\\nmaker, with one workman, makes 300 pairs of boots daily. In 1880, 300\\nof these machines were at work in various countries, and turned out 150\\nmillion pairs. Glenn s California reaper will cut, thresh, winnow and bag\\nthe wheat of 60 acres in 24 hours. The Hercules ditcher removes 750\\ncubic yards of clay per hour. The Darlington borer enables one man to\\ndo the work of 7 in tunnelling, and reduces the cost by two-thirds [Mul-\\nhall]. One boy with a knitting machine does as much work as 100 per-\\nsons could 100 years ago.\\n5 It imbrutes as well as kills off men to do work which constantly tasks\\ntheir physical power to its utmost. Cf. 35, n. 6.\\nCapital suffers, as each new piece renders more or less old property\\nworthless a process continually going on. Usually, of course, the new\\ngear soon more than recoups this loss. Much sadder is the displacement\\nof labor which an important novelty in machinery always effects. Laborers\\nno longer young are ruined for life, their hard-earned skill going for noth-\\ning. Even the young suffer painfully. No state has ever yet, as Sir\\nJames Steuart advocated, sought to make good these losses. Yet after all,\\nhow mad to prohibit machinery! Nor does it on the whole advantage\\nthe capitalist more than it does the poor.\\n42 Unembodied Invention\\nM Culloch, pt. ii, sec. iv.\\nBy no means all special ideas, helpful economically,\\nthus take form in tools, instruments or machines.^ An\\nimmense proportion of the most valuable applied science\\ndoes not. We instance i Chemical information and\\nskill in washing, dyeing, tanning and the like.^ ii Geo-\\nlogical knowledge of leads, layers, etc., used to guide\\nmining operations, iii Nearly the whole science of\\nengineering in its various departments^ and bra.iches.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0086.jp2"}, "87": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION 69\\niv Science as utilized in agriculture, stock-breeding,\\nand the propagation of fishes, v That vast body of\\npractical maxiius, the growth of its whole past, which\\nexists in every department of human industry, touching\\nthe most efficient conduct thereof.\\nA weighty truth, which economic writers have too much overlooked.\\nConnaissances of this kind really form one of the main departments of\\ncapital. Observe that what we here discuss is not the same as the intelli-\\ngence mentioned in 36, iv, though the two are closely related.\\n2 Mr. Walter Weldon, chevalier of the Legion of Honor, who died in\\nEngland, Sept. 20, 1S85, was one of the five men, and the only foreigner,\\nwhom the French Societe d Encouragement has deemed worthy of its\\ngrand medal. To him we are indebted for the process by which alone\\nbleaching powder is now made. The peroxide of manganese employed to\\nliberate chlorine from the hydrochloric acid obtained in the first step of the\\nsoda manufacture was formerly thrown away. By a very simple process,\\nMr. Weldon recovered from 90 to 95 per cent of the manganese in a form\\navailable for renewed use, and thus saved nearly \u00c2\u00a3(i on every ton of bleach-\\ning powder made, quadrupled the total manufacture, made the industrial\\nworld the richer by some three-quarters of a million sterling per annum,\\nand as the French chemist, J. R. Dumas, publicly observed, cheapened\\nevery sheet of paper and every yard of calico made in the world.\\nCivil, mechanical, electrical, marine, mining. Each has its numerous\\nbranches. Cf. Annales des Fonts et Chaussces, 1887, 2, p. 389 [on org n\\nof railway train movement in U. S.]; and p. 522 [on use of certain waste\\nsalts for clearing streets from ice]\\n43 The Organization of Industry\\nMarshall, bk. i, chaps, vii, viii. Mangoldt, 28, zg. Roscher, 56; Ansichten,\\nvol. ii. Mill, bk. i, ch. viii. George, Soc. Problems, ch. i. Schoenberg, vol. i,\\n203 sqq.\\nSystem is imparted to labor in two ways I Compo-\\nsition, whereby several persons, uniting either contem-\\nporaneously^ or successively^ in the same acts, accom-\\nplish more than they could singly. II Division, which", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0087.jp2"}, "88": {"fulltext": "70 THE RELATIVE CONDITIONS OF PRODUCTION\\nsecures the same advantage by assigning to different\\nparties different portions of one and the same greater\\nor smaller task. This distribution is partly sponta-\\nneous,^ partly the result of conscious purpose. It has\\nthree phases i Local,^ each nation or vicinity engaging\\nin the industry giving it the greatest relative advan-\\ntage as to climate, raw material, markets, etc. ii Gen-\\neric, every several body of producers busied with the\\nsort of work best adapted to its powers.^ iii Personal,\\nthe division of labor in the narrower sense, each individ-\\nual doing the particular thing which he can do most\\neasily and perfectly.^\\n1 As in lifting a heavy weight, loading logs, pulling stumps, and other\\njobs for which farmers change works. In many such cases we add\\nproof-reading to the number the work could not be done at all except\\nco-operatively. In any kind of toil the union of several persons lends a\\npeculiar inspiration, which is usually worth taking into account.\\n2 As where two or three men hammer the same hot rivet, the better to\\nhead it ere it cools. Where three [even five may so combine] pound on\\nthe same drill, division of labor also comes in. The drill goes no faster\\nthan with the same number of blows from one man, but the holder of it is\\nworked to better advantage. See next\\n3 The local phase, at least so far as it pertains to nations, is mostly spon-\\ntaneous. It is only minor and specific businesses which they formally\\nadopt by legal encouragement. The establishment of quinine production\\nin India through the agency of the British government, and of beet-sugar\\nproduction in France, Germany and Austria, are examples. Subordinate\\ndistricts adopt industries much more easily, and often, now at a loss,\\nnow to their great benefit. In agriculture, experiment with this in view\\nhas yet to go much farther. It is not at all to be assumed that the crops\\ngrown from time immemorial in a given locality, are the only ones suited\\nto it.\\nThus London, Manchester, Liverpool, and the wheat section of Amer-\\nica supplement each other, forming an industrial group, much as do\\nforeman, cutters, crimpers, lasters, heelers, etc., in a shoe factory. Cf.\\nRoscher, 57. Europe and Asia co-operate in the same way. More still", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0088.jp2"}, "89": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION /I\\nthe Torrid and Temperate Zones. The importance of this international\\ndivision in labor will be shown under Exchange. Tariffville, Conn., was\\nfound to be superior to Thompsonville as a site for carpet manufacturing,\\nbecause the water there made faster dyes. The special excellence of West\\nEnglish cassimeres is said to be due to a peculiar humidity of the air, ren-\\ndering the fibre tractable while wrought.\\nHeredity of industrial tact and taste is as valuable as it is striking.\\nEnglish Avoollen spinners and weavers inherit a pronounced adaptability\\nfor their trade. So the silk workers of France, and the fishermen of Nova\\nScotia.\\nThis is the form discussed in next\\n44 The Same in a Special Aspect\\nPlato, Rep., bk. ii. Ad. Smith, bk. i, chaps, i, ii [cf. in Playfair s Ed., supp. ch. iii].\\nRoscher, 58, and the other authh. cited at last\\nThe economic benefits^ springing from the personal\\ndivision of labor are extraordinary* and have been well\\ndiscussed in nearly all the books since Adam Smith.\\nThey consist in i Laborers improved dexterity ii A\\nbetter distribution of abilities-^ among the various de-\\npartments of the work, iii Inventiveness and inven-\\ntions.* iv Economy of time, employing the least pos-\\nsible in changing tools and place, v Prevention of\\nwaste in stock,^ whether raw material or fixed capital,\\nvi Saving of interest^ and insurance.\\n1 Ad. Smith s favorite illustration [bk. i, ch. i] is pin-making. It\\ninvolved in his time about iS distinct operations, each, in the best works,\\nperformed by distinct hands. He estimated that the product by this dis-\\ntribution was from 240 to 4800 times as great as if each workman had\\nwrought separately and with no special education for the trade. Cf. Perry,\\nElements, 129.\\n2 A blacksmith not specially used to nail-making turns out 200-300 a\\nday; one used to it, yet with his hand out through other work, 8oo~looo;\\na boy, even, who has never done anything else, 2,300 [Ad. Smith]. Each\\npupil can multiply instances.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0089.jp2"}, "90": {"fulltext": "72 THE RELATIVE CONDITIONS OF PRODUCTION\\nSkilled laborers need be had only for work which they alone can do,\\nsimpler parts being left to apprentices or green hands. In making needle-\\npoints children beat adults.\\nThough Arkwright began as a barber, and Cartwright, the inventor of\\nthe power-loom, was a clergyman, far the larger part of the inventions\\nwhich have blessed the world, were worked out by mechanics. To the\\ncunning stored in the steam-engine of to-day, Watt is hardly the thousandth\\npart contributor. The rest is mainly from unknown men.\\nAs a rule, waste of material will be small in proportion to the rapidity\\nwith which it is turned into product. Buildings, machinery, tools, and all\\nfixed capital would of course better be worn out in productive use than by\\ndecay. A mill with never so few hands must have a full complement of\\ngear. This is a strong argument for long work hours, and for night work,\\nprovided orders are heavy enough.\\nThis, as a consideration separate from the preceding, relates to the\\nmaterials used in production. The shorter this process the less time is\\nmoney invested in them and the less time have they to carry insurance.\\n45 Evils and Limitations\\nRoscher, 59 sqq. Mill, bk. i, ch. viii. Ad. Smith, bk. i, ch. iii.\\nThe division of labor, carried to such an extreme in\\nthe monster undertakings of recent decades, has its\\ndark side. The workman s Hfe lacks its old diversity\\nNarrow, it cannot but be monotonous and irksome.\\nThe man is more dependent on his single art, possess-\\ning at once less ready knowledge and less ability to\\nacquire. In two ways the system favors strikes. By\\nmaking laborers clannisli it fosters union among them,\\nwhile it gives a few power to stop the work of all. For-\\ntunately there are activities which only to a limited\\nextent allow labor to be divided, the check lying for\\nsome in the nature of the business,^ for others in a\\ncontracted market.^ In all trades whatever, organi-\\nzation is repressed by lack of capital,^ and ceases to be", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0090.jp2"}, "91": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION 73\\nprofitable^ when in compass and complexity it tran-\\nscends available superintending ability.\\nAll have heard the proverb that in Lynn, Mass,, centre of the ladies\\nshoes industry for this country, not a shoemaker is to be found.\\n2 In agriculture, e.g., the work manifestly cannot be parcelled out\\namong ploughmen, herdsmen, reapers, mowers, choppers, etc., but each\\nhand has commonly to do more or less at all these. House-building and\\npainting in cold latitudes present the same difficulty. Roscher lays down\\nthe principle that the possibility of dividing labor bears exact proportion\\nto the degree in which, in the different kinds of industry, labor contributes\\nto production.\\nRead, best. Ad. Smith, as above. Cabinet-making is intrinsically sus-\\nceptible of great division, yet in a country place no one can live by this\\ncraft alone. The cabinet-worker must here be carpenter, joiner and wood-\\ncarver, too. Every country blacksmith is also copper-smith and lock-\\nsmith. Notice how cheap transportation, by turning many little markets\\ninto one of large size, makes possible much new division of labor. For-\\nmerly the furniture, coffins and wagons for every village had to be made\\nthere, usually by the same man, so meagre was the demand for each. Now\\nthose wares are carried thousands of miles, and even coffins can be gotten\\nup in such numbers under one roof as to admit of the most perfect division\\nof abilities. Frontier settlements still show the old order of things.\\nFor plant and stock. So far as thorough oversight can be secured,\\nthere is advantage in large undertakings, even in the industries referred to\\nin n. 2, above but if this condition fails, smaller establishments, though\\nmissing many of the advantages which fuller organization would give, will\\nlead [Cherbuliez, vol. i, I20 sqq.].\\nI.e., ceases to be truly productive. But a trust or ring which has a\\nmonopoly may, though far too large to be economically managed, and\\nhence not a help to general production, still, by raising prices, be very\\nprofitable for those interested. Cf. 2i, iv, (2).\\n46 The Form of Undertaking\\nCossa, Elementi, II, vi. Mill, bk. i, ch. ix. Weeden, Soc. Law of Labor, 30. Walker,\\nP. E., 244. Mangoldt, 33-3S. Schoenherg, vol. i, 220 sqq. Cohn, 447-87.\\nVery many goods are produced by the identical per-\\nsons or families who are to consume them numerous", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0091.jp2"}, "92": {"fulltext": "74 THE RELATIVE CONDITIONS OF PRODUCTION\\nothers for exchange, but in petty ways. Respecting\\nthe remainder, intended for exchange on a large scale,\\nit is important where, for any given hne or centre of\\nproduction, the sovereign directorship and risk^ are\\nlocated. Their seat may be i In the state pubHc\\nco-operation. 2 ii In isolated groups or partnerships\\nof men, working unitedly and on a level one with\\nanother private co-operation, iii In individual un-\\ndertakers or contractors the single entrepreneur sys-\\ntem, iv In joint stock companies as undertakers\\nthe collective entrepreiieitr system. Each of these is\\nuseful in special fields neither will do for the whole\\nrange of industry. There are species of production\\nwhich the state must assume, and its function in this\\nway enlarges with the growth of civilization.* Co-\\noperation works excellently where keenest oversight\\nand large, intricate combinations are not indispensable.^\\nSingle undertakers secure to the superintendence the\\nmaximum of diligence and energy, but lack capital\\nfor colossal works. For these, stock associations are\\nbest fitted, and the mammoth enterprises of the age\\nfall more and more to them. With their endless capital\\nthey can command the first quality of superintending\\ntalent, while utilizing to the utmost the division of\\nlabor. But to this Titan form of undertaking attach\\ncertain evils i Irresponsibility of managers to stock-\\nholders. 2 Baneful political influence. 3 Tendency\\nto monopoly, making their own, and denying to the\\npublic, the benefits of cheapened production.^\\n1 These being the chief elements in the function of undertaker, en-\\ntrepreneur, or middle-man the man who harnesses labor and capital\\ntogether to the work of production. We second the example of H. C.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0092.jp2"}, "93": {"fulltext": "THE RELATIVE CONDITIONS OF PRODUCTION 75\\nAdams in effort to restore the word undertaker to its good old English\\nand American use as the exact equivalent of entrepreneur, Unter7iehmer,\\nand imprenditore [Alexander Hamilton, Report on Manufactures]. Cap-\\nitalist is too indefinite, meaning also, and usually, the owner of capital,\\nwhich the undertaker, as such, is not. See, further, in Part IV.\\n2 Which, made general, would be socialism 14, 37].\\nCovering private socialistic and communistic societies, co-operator.;\\nand partnerships. A partnership is in essence nothing but a case of co-\\noperation, though the two are usually separated. Co-operation is destined\\nto enlarge its scope, greatly to the aid of production, but not to become\\nthe general form of undertaking. Even had it enough capital it might\\ncommand much it lacks the concentration of energy and the industrial\\ngeneralship required for enterprises of much magnitude. See 36, n. 4;\\nMarshall, bk. iii, ch. ix; Mill, I, viii; Holyoake, Hist, of Co-op n; Yves\\nGuyot, bk. iv, ch. ix; Walker, Wages, ch. xv; Quar. Jour. Econ., vol. ii,\\n210, 446.\\nProfessor Wagner has shown this. Lehrlnich, vol. i, 171-178,\\n6See\u00c2\u00a745, n. 5.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0093.jp2"}, "94": {"fulltext": "CHAPTER VI\\ncost and consumption in production\\n47 Metaphysical Cost\\nCairnes, Leading Principles, pt. i, ch. iii. Sidg wick, 201 sqq. Jevons, Theory, 159\\nsq. Macleod, Econ. Philos., 331. Marshall, bk. ii, ch. xiii. Bagehot, Ec. Studies,\\nvii. Macvane, Quar. Jour. Econ., vol. i, 481 sqq.\\nThe real cost of any product consists in the effort\\nor sacrifice required to obtain it. It represents what\\nman parts with in the barter between him and nature.\\nThree elements compose it i Liabor, this being im-\\nportant to the result in proportion to i) time, and\\n2) intensity, ii Abstinence, this being necessary in\\norder to the supply of capital for the support and\\nutilization of the labor. Abstinences can be compared\\nin the respects of duration and temptation, the latter\\narising from the power, as subjectively viewed, of the\\nwealth abstained from to gratify, and in this sense cor-\\nresponding to the amount^ of that wealth. Labor-\\nexertion is more an individual experience than absti-\\nnence, which is largely social.^ iii Risk, a hardship\\ninseparable from the exercise of either labor or absti-\\nnence.* The cost of a product as thus estimated is,\\nof course, a highly indefinite notion, and different costs\\nare but roughly commensurable.^ Infinite complexity\\nis added to the indefiniteness if we attempt to trace\\ncost in any case to its original elements since the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0094.jp2"}, "95": {"fulltext": "COST AND CONSUMPTION IN PRODUCTION J\\nsacrifice attending this or that piece of production de-\\npends upon the development of man and the arts at\\nthe time, which in turn depend on an unthinkable series\\nof similar sacrifices, reaching back to the beginnings\\nof human history. The ultimate cost of any particu-\\nlar item of wealth, therefore, wholly defies computation.^\\n1 Cairnes, 57. In this chapter Cairnes shows how superficially Mill\\nexpounded cost of production by resolving it into wages and profits\\n[interest]. Such an analysis is truthful enough from the business man s\\npoint of view, but does not bring to notice the final consideration which\\nsociety pays for wealth. Comparing the next with this, one sees how far,\\nand how, Cairnes and Mill may be reconciled upon the perplexing topic\\nbefore us.\\nSee 30, n. 2. Did men use at once the results of all labor, there\\nwould obviously be no capital. It is harder to see that the abstinence\\ndemands effort. Yet it does. Witness the poverty of savages, for lack\\nof the self-control which this effort requires. Very wealthy persons save\\nwith a minimum of sacrifice, sometimes, perhaps, with none at all. But in\\nsociety as a whole, wealth cannot be maintained without it.\\nMacvane, as above, thinks that Cairnes, in asserting abstinence to be\\nmeasurable [in part] by the quantity of wealth abstained from, defines\\nin a circle, since the quantity of wealth is gauged by its value, which,\\nin turn, depends on cost of production, the very thing which C. is seeking\\nto define, and on wages and profits, which, C. declares, are not elements in\\ncost. The point is ill taken, as C. means the amount of w., only as\\nsubjectively estimated. But Cairnes, unwilling to let go the conception of\\nnormal value [see this topic in Part II cf. n. i, above], does err in repre-\\nsenting the measurement which is possible here as more definite than it\\ncan in fact be made.\\nRisk is a separate thing from abstinence. Abstinence would call for\\nsome exertion even were we absolutely sure of enjoying the fruits of it by\\nand by.\\nStill, Sidgwick notwithstanding, they are commensurable. Even the\\nsocialists proposal to reduce hours of skilled labor in its various grades\\nto so many more hours of ordinary labor, treating this last as a common\\ndenominator for all labor, is not absurd in nature, though measurements of\\nthis sort would be painfully general.\\n6 27, n. 4. Mill, bk. i, ch. ii, i.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0095.jp2"}, "96": {"fulltext": "78 cost and consumption in production\\n48 Mercantile Cost\\nMill, bk. iii, chaps, iv, vi. Also same authh. as at 47.\\nCorresponding 1 in a general way to the metaphysical\\ncost of a thing, and furnishing for moderate lengths of\\ntime a tolerable measure of this, is the expense to which\\na given undertaker is put in producing that thing.\\nSuch expense may be named the mercantile cost.\\nAside from the relatively minute elements of taxation\\nand rent, its components are (i) the wages of the\\nnecessary labor, and (ii) interest on the necessary capi-\\ntal. Either of these two factors remaining constant,\\nthe mercantile cost of the production in question varies\\nclosely with the variations of the other, i For wages,\\nthe actual expense will be determined by i) tlie rate,^\\nas high or low; 2) the material^ used in payment, as\\ndear or cheap and 3) the efficiency* of the labor, as\\nsmall or great, ii For interest, the outlay will be fixed\\nby i) the rate, higher or lower; 2) the period,^ longer\\nor shorter, needed for turning the capital into product\\nand 3) the speed, greater or less, at which the capital\\ndeteriorates during this process.\\n1 The two costs must correspond, for the undertaker has no means of\\nsecuring the production but to give to the laborer on the one hand, and to\\nthe capitalist on the other, a remuneration sufficient to induce in each the\\nneeded sacrifice. For the same reason one cost vaguely measures the\\nother for any limited period. But, with less and less exactness the longer\\nthe time, since, as the industrial arts improve, the metaphysical cost is less\\nand less in proportion to the total product, while mercantile cost keeps\\npace with product [Cairnes, 49 sq.].\\n2 To see correctly the bearing of these six main factors in mercantile\\ncost, it is well to consider each by itself and suppose no change for the\\ntime in the other five. Thus, provided wage-material, efficiency of labor,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0096.jp2"}, "97": {"fulltext": "COST AND CONSUMPTION IN PRODUCTION 79\\nrate of interest, turning-period and rapidity of deterioration are the same\\nin two different establishments, but the rate of wages the higher in one,\\nproduction will be the costlier in that one. So with every other of the five\\nelements. See n. 4, below.\\n3 Depreciated paper, silver, gold, or paper at par with silver or with\\ngold. The principle holds also if payments are made barter-wise, or in\\nproducts. The pupil will learn in Part III that the standard monetary\\nunit itself, whether it be of gold or of silver, can suffer decided variations\\nin value.\\nWhat was said in note 2 does not, of course, assert that low wages\\nnecessarily imply cheap production, for the effi-cieficy of high-wage labor\\nmay be and very often is enough greater to render that the cheaper.\\nThe aging of liquors requires in this trade a long investment of capi-\\ntal. Old brandy will bring three times as much as new. Whiskey is often\\nkept seven or eight years, and is thought to improve constantly through\\neven twenty. Manufacturers esteem it a great hardship that they must pay\\nthe excise on it when three years old, since the aging is in their view part\\nof the process of production. The same question (when does production\\nend?) arises in respect to certain other articles, e.g., cigars and cheese,\\nwhich improve by mere keeping. But manufacturing in the strictest sense\\nvaries greatly in time, and that in the same line. To tan a skin is the\\nwork in France of a year, in the United States of a month. Suppose all\\nthe other components of cost the same for both countries, French tanning\\nis evidently the more expensive,\\n49 Consumption\\nMill, 2d Ess. on Unsettled Questions. Patten, in Science Economic Discussion, 123\\nsqq. Cherbuliez, bk. i, ch. x. Clark, Philos. of Wealth, ch. iii. Cossa, Ele-\\ntnenti, iv.\\ni Consumption in Economics is not the destruction\\nof matter, but an immaterial process. It relates to\\nutility, consisting either in the total or partial annihila-\\ntion of this, or in change of its form, ii Consump-\\ntion is either destructive, not yielding any advantage,\\ndirect or indirect, to any one, or economic, which is the\\nvoluntary destruction of utility for the sake of advan-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0097.jp2"}, "98": {"fulltext": "80 COST AND CONSUMPTION IN PRODUCTION\\ntage. iii Economic consumption, synonymous with\\nuse, may be unproductive, destroying utility to secure\\nimmediate satisfaction of need, or reproductive, the\\nutihty reappearing under other forms. Reproductive\\nconsumption is merely a phase of production itself,\\niv Consumption is not necessarily destructive, or even\\nunproductive, because it leaves no tangible or measura-\\nble result. The use of luxuries, intellectual or aesthetic\\nentertainment, and the like, may create wealth indi-\\nrectly, or a good that is not wealth, but better.\\n1 This and waste 50] are the only phases of consumption which it is\\nlogical to discuss in Part I. The general question of the legitimate final\\ndestination and fate of wealth we reserve for Part V.\\n50 Waste and Thrift\\nMangoldt, 31. Roscher, 45. Cherbuliez, bk. i, ch. ix, i.\\nBut a vast proportion of consumption is destructive\\nin nature, pure, unremunerative \u00e2\u0080\u00a2waste,^ the annihilation\\nof so much precious wealth, which men must dispense\\nwith, thus remaining poorer, or re-create with toil and\\npain. Such deficit mainly occurs through either (i) care-\\nlessness, or (ii) thriftlessness. To the first cause is\\ndue much deterioration of animals by overwork, ill\\nfood, and inattention, much decay of buildings and\\nmachinery, and fully half of the enormous losses each\\nyear by fire.^ The second cause, too, contributes to\\nthe above, yet is chiefly influential in other ways. Liazi-\\nness, intemperance,^ ill choice of dress, food,^ and\\nmodes of cooking, slovenly tillage, neglect of accounts\\nand of little sums,^ may illustrate. The ill results do", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0098.jp2"}, "99": {"fulltext": "COST AND CONSUMPTION IN PRODUCTION 8 1\\nnot end with the owners of the wealth that perishes.\\nAll destructive consumption tends to injure, and nearly\\nalways does actually injure, the entire public. In the\\naggregate, it is an incalculable detriment to mankind.\\nThrift is promoted less by a liigh rate of interest than\\nby (i) morality, (ii) good government, rendering sav-\\nings safe, (iii) strong family ties, prompting parents to\\nplan for their children s best, and (iv) a proper distri-\\nbution of wealth. Very poor persons cannot save, the\\nvery rich lack powerful motive for so doing. People of\\nmiddle rank are the great builders of wealth, the more\\nwhen gentle gradations among them stimulate the\\ndesire to rise.\\n1 30, n. 3. Let no one suppose this to be waste any the less because\\nit may invoke particular new applications of industry. E.g., the broken\\npane, in Bastiat s illustration, Ess. on P. E. [Putnam s Ed., 72 sq.]. The\\nglazier has more work is not the accident a blessing? Not at all. Sup-\\npose the pane had remained whole. The money which the glazier has\\nreceived would have gone [say] to the shoemaker, whose prosperity is no\\nless important to the community than the glazier s, while he who had to\\npay for the pane would be richer by a pair of shoes. Study this till per-\\nfectly clear.\\n2 Estimated to reach in the entire United States over ^100,000,000 per\\nannum, and in New York state alone ^15,000,000, the latter sum exceed-\\ning by ^6,000,000 the whole burden of taxation for state purposes, and\\nbeing considerably over one-seventh of the annual increase in the state s\\ntaxable property. It is thought feasible, through increase of precaution,\\nto reduce this destruction, national and state, by fully one-half. Fire losses\\nto factory property have already been cut down much more than this, viz.,\\n75 per cent, mainly in ways pointed out by the late Zachariah Allen,\\nof Rhode Island, and Edward Atkinson, of Boston. Insurance rates\\nhave fallen accordingly. It is uncertain whether insurance decreases or\\nincreases fire losses, but it very helpfully distributes the burden which\\nthey entail.\\n8 21, n. 7.\\n4 16, n. 7.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0099.jp2"}, "100": {"fulltext": "82 COST AND CONSUMPTION IN PRODUCTION\\nA very prevalent and unfortunate fault of farmers worse among\\nthem than among other industrial classes of like intelligence.\\ns In the savings banks of the United States are, in 1889, ^1,200,000,000\\nor ^1,400,000,000, almost or quite as much as all the other banking insti-\\ntutions of the country contain. A great part of the sum has been deposited\\nby persons of quite moderate means. Suppose the whole laboring popu-\\nlace to save as these have Thrift should be enjoined as a duty. The\\nintroduction of school savings banks is a worthful reform, and promises\\nmuch.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0100.jp2"}, "101": {"fulltext": "ART\\nII\\nEXCHANGE\\nEXCEPT AS INVOLVING THE SCIENCE OF MONEY\\nCHAPTER I\\nTHE NATURE OF EXCHANGE\\n51 In Rude Societies\\nLaveleye, Primitive Property. Maine, Anc. Law, ch. viii. Schoenberg; vol. i, 27 sqq.\\nHyndman, Hist. Basis of Socialism in Eng., 104, 109. Morgan, Montezuma s\\nDinner, N. A. Rev., Apr., 1876; Ancient Society, pt. ii, ch, vii.\\nWe have already often had occasion to advert to the\\nphenomenon of exchange: it now demands detailed\\nstudy. Exchange is not, as is sometimes taught, a\\nstrictly necessary feature of economic life.^ Among\\nprimitive men the distinction of inemn and Uium hardly\\narises. Their property is mostly common,^ their pro-\\nduction wholly for their own immediate consumption.\\nIn the village communities of India, in Polynesia, Aus-\\ntralia, and over large parts of Africa may even now be\\nseen families and groups of families producing all that\\nthey consume, and consuming all that they produce,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0101.jp2"}, "102": {"fulltext": "84 THE NATURE OF EXCHANGE\\nexchange practically unknown.^ Society in ancient\\nMexico and Peru is believed to have been communis-\\ntically organized, no exchange being had save trifling\\ntrade of tribe with tribe and village with village. In\\nEng-land, so late as the fifteenth century, exchange was,\\noutside of towns and cities, not indeed absent but\\nentirely insignificant* as an economic resource, fam-\\nilies producing for the most part what they themselves\\nconsumed and no more. It was much the same in the\\nAmerican colonies, and so continued in the remoter\\nportions of the states till the railway era opened.\\nThere remain to this day Isolated sections in the\\nWest and South where the play of exchange is ex-\\ntremely limited.\\n1 See I, n. 7. Mill, bk. iii, ch. i, i, shows that it will not do to take\\nexcha7tge as the exact correlate of wealth. It is hence both illogical and\\nconfusing to place an exposition of exchange at the threshold of a course\\nin Economics.\\n2 See 3. Maine, Laveleye, Cliffe Leslie and others have proved that\\nprivate property, in land at least, originated in comparatively recent times.\\nSo far as can be traced, land was among all peoples, at first and for long,\\ncommon property. When severalty-holdings arose they reached only to\\nhouse lots and gardens. Nor was community-property confined to land,\\nbut extended to all movables as well, with such exceptions as each family s\\nclothing and kit of utensils for hunting, fishing and the like. Even in\\nthese cases property-right was not then regarded absolute.\\nContrary to frequent representations, simple division of labor does\\nnot of necessity involve or imply exchange. Division of labor presents\\nitself in every family, exchange rarely. So in Shaker communities.\\nThis, too, in an age of prosperity for the common people as great, on\\nthe whole, as was ever known in England.\\nOur communistic societies might also be mentioned. But, though no\\nexchange goes on within each, they do traffic with the world outside, and\\nget gain.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0102.jp2"}, "103": {"fulltext": "the nature of exchange 8$\\n52 Philosophy\\nAd. Smith, bk. i, ch. ii. Mangoldt, bk. iii, ch. i. Cherbuliez, bk. ii, ch. i.\\nYet exchange is natural, in the same sense as are\\ndevelopment and civilization. i Different human\\nbeings possess tastes and aptitudes for different pur-\\nsuits, nearly every individual having a peculiar fitness\\nfor some one line of production, his efforts most avail-\\ning if confined to that single line. The talent may be\\noriginal, acquired, or partly either, ii The environ-\\nments of men are about equally various,^ fixed so in the\\nvery constitution of the earth, and these affect their\\nproducing power much as their unlike abilities do.\\niii At the same time each man has the capacity and\\ndesire to enjoy all or nearly all sorts of products, and\\nwill enjoy them if he can obtain them.^ iv From these\\nmultitudinous needs of men, coupled with the extreme\\ndiversity in the advantages which they possess rela-\\ntively to each other, springs exchange, whereby one,\\nwith his special product or kind of products, purchases\\nfor the satisfaction of his own numerous desires, the\\nvarious products of his fellows. The process extends\\nits scope* according as wealth, culture, needs, the\\ndivision of lahor, and man s mastery of the earth\\nincrease.\\n1 Adam Smith, as above, places exchange among the marks which\\nespecially differentiate man from the brute. He and others have raised\\nthe question whether or not there is innate in man a specific propensity\\nto exchange. None pertains to the race as such. The tendency is\\nacquired a growth consequent upon the great good which exchange\\nconfers on society. I.e., people would not long exchange did they not\\nfind their account in it.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0103.jp2"}, "104": {"fulltext": "S6 THE NATURE OF EXCHANGE\\n2 One man lives near a prolific gold mine, a second where cattle are\\nfattened for the tending, a third where valuable game is easily taken, a\\nfourth by fine waterfalls or rich coal beds, tempting to manufacture, a fifth\\non the seashore, catching fish enough in a day to feed a hundred people,\\na sixth owns a fertile farm, and so on.\\n3 The tendency is specialty in production, universality in consumption.\\nBut for exchange, here would be a fatal fracture in the frame of society.\\nCf. 54.\\n53 Intrinsic Advantages\\nMattgoldt, blc iii, chaps, i, ii. Cherbuliez, bk. ii, ch. vii. Perry, ch. iv.\\nSuppose that a tailor can make a coat in one day, a\\nhat only in six days, and that a hatter can make a hat\\nin one day, a coat only in six. Without exchanging,\\neach must work seven days for a hat and a coat. By\\nexchanging, each can obtain both articles for two days\\nwork, and wealth will g-ain five coats and five hats.\\nSuch saving is the tendency of all spontaneous ex-\\nchange. This illustration teaches that i There is no nec-\\nessary reason why, in any exchange, both parties should\\nnot g-ain. If the contract is intelligently and freely\\nmade, both do gain.^ ii The greater the diversity of\\nrelative advantage between the parties, the greater the\\nprofit of exchanging. Thus every man s special for-\\ntune, skill, talent, or felicity of situation is through\\nexchange a benefit to the public^ in spite of him.\\niii Any abridgment to liberty of exchange, whether\\nbetween persons, sections or nations, must, at least in\\nthe first instance, inevitably produce loss. Whether\\nthe hindrance can in this or that case prevent greater\\nloss, or set in train compensating causes, is often an\\nimportant question.^", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0104.jp2"}, "105": {"fulltext": "THE NATURE OF EXCHANGE 8/\\n1 Take the men supposed at 52, n. 2. Confine each to the direct\\nfruit of his own toil, and, however diligent they are, all suffer from poverty.\\nLet them exchange, and every one of them will better his condition a\\nhundred fold without an additional stroke of labor. They can well afford\\nto pay the merchant and the teamster who mediate the transfer.\\nEven if you are unfortunate, and in this sense compelled to buy or sell,\\nyour act is best for you under the circumstances. How is it in stock\\ngambling? Here, too, the law holds, since, in a very true sense, the con-\\ntract is blindly made.\\n2 A fine illustration of the benevolence wrought by Nature into our very\\nconstitution. Cases are meant, of course, where the advantage has not\\nbeen won at any one s expense. We may mention here the super-economic\\nblessings religious, moral, sesthetic, intellectual, which attend exchange\\nthe broadening of men s horizon, aid to Christian missions, prevention of\\nwar, national and international charity in famines and pestilences. Com-\\nmerce is the prince of civilizers.\\n3 In some instances to be answered affirmatively, in others negatively.\\n54 Reach of Influence\\nMangoldt, as at last Roscher, 8g; Nationalok. d. Ackerbaues, EM. Cher-\\nbuliez, bk. ii, ch. v.\\nWith the progress of exchange the entire face of\\nthe economic world becomes transformed, while civ-\\nilization 1 attains a loftier level and a richer diversity.\\ni A special class of merchants or middlemen arises,\\nwhose contribution to social weal consists exclusively\\nin furthering the necessary exchanges between original\\nproducers and final consumers, ii Communities and\\nclasses ascertain their fittest places in the nation s\\neconomy, nations theirs in that of the world, iii Not\\nonly is production immensely increased in the aggre-\\ngate, and still more relatively to effort, but much of\\nit takes place in mammoth establishments, correspond-\\ning to the enlarg-ed markets, entailing division of\\nlabor* with its good and its evil accompaniments.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0105.jp2"}, "106": {"fulltext": "88 THE NATURE OF EXCHANGE\\niv Increasingly vast grows the mass of goods which\\nare produced for exchange. In tendency thus to seek\\nconsumption indirectly, articles vary greatly, according\\nto, i) acquaintance of peoples with peoples and sec-\\ntions with sections, 2) the desire, both intensive and\\nextensive,^ of parties for each other s wares, 3) the\\nquality of these as preservable or perishable,^ 4) their\\nsize and weight, 5) the presence or absence of the\\nnecessary means of exchange or of transportation\\nand of social and legal restrictions thereto, v New\\nmodes of communication and transportation are\\ncalled for and developed, which radically change the\\ndistribution of manufacturing and commercial centres.\\nThe proportion of urban to rural population mightily\\nswells.^ Great cities rise, and, efhcient political admin-\\nistration being now possible on a grander scale, petty-\\nstates give way to those of the colossal order.\\n1 As a single illustration, the complicated instruments for scientific\\ninvestigation could neither be made by their users nor used by their makers.\\nThe susceptibility of a nation s wealth, as a whole, to be passed from hand\\nto hand gauges the grade of culture [England and Russia]. Species of\\nwealth vary quite remarkably in this. Cf. notes 6 and 7, below.\\n2 I.e., their work as producers, for normal exchange is an act of pro-\\nduction. See 18, n. 2, 20, vi, and n. 4. Enough of these mediators\\nis important, too many a loss. They tend to multiply unduly, an evil\\nanalogous to overproduction.\\n3 Fresh facilities for exchange quicken production, this reacts upon\\nthose, and so on, each cause ceaselessly and in ten thousand ways influenc-\\ning the other.\\nSee 43, 44, 45.\\nA person, a locality, a country, may need but little of another s com-\\nmodity, yet need that little very much [as quinine]. Or the need may\\nhave wide incidence, yet be little urgent [luxuries]. Regularity of de-\\nmand is an important consideration.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0106.jp2"}, "107": {"fulltext": "THE NATURE OF EXCHANGE\\n89\\n6 With progress in the arts of preserving and handling, many products,\\nas ice, milk, fruit, fresh fish and meat, are at present open to far exchanges,\\nwhich once were not so. There is progress in these processes year by\\nyear [strawberries, oysters, clams]. There are regular shipments of fresh\\ngame from St. Petersburg to Paris, arriving in from three to five days.\\nArticles of food as a class decay quicker than other categories of wealth.\\nRoads, docks, most buildings, also certain cumbrous pieces of machin-\\nery, have to be constructed where wanted. Heavy wares, lead, iron, cop-\\nper, are carried only with great expense. In many such cases the mobility\\nis considerable and on the increase. Houses are gotten up in parts and\\nshipped afar. So water and drive wheels of largest sizes. Pig iron, cop-\\nper and lead, steel rails, ties and beams cross oceans and continents. But\\nall this costs.\\n8 Nearly all the largest cities are still accessible to heavy shipping.\\nBerUn, however, [1,315,297 inhab.], is not, and a large and growing\\nnumber of cities of the second rank, as Manchester and Birmingham, Eng.,\\nare not.\\nIn the United States, the percentage of urban [dwellers in cities of\\n8000 or over] to total population has increased as follows\\n1790\\n3-3\\n1840\\n8.S\\nIn the 50 largest American cities in 1880,\\n1800\\n3-9\\n1850\\n12-5\\n43 per cent of the workers were en-\\nI8IO\\n4.9\\ni860\\n16.1\\ngaged in manufacturing and mechanical\\n1820\\n4.9\\n1870\\n20.9\\nindustry, 24 per cent in trade and trans-\\n1830\\n6.7\\n1880\\n22.5\\nportation.\\nIn England the percentage of people in cities of 20,000 or over was\\n51 in 1851, 54.5 in 1861, 56.8 in 1871, and 59.6 in 1881. England and\\nWales in 1881 had 66.6 per cent of their population in places contain-\\ning 3000 or more inhabitants. Further on thjs, Smith [R. M.], Statistics\\nand Economics, 28 sqq.\\nRoads gave the Roman empire such eternity as it had. It is nearly\\ncertain that but for railway and telegraph the United States could not have\\ncontinued till now a single nation. Significant that before 1870 no solid\\ngeneral government ever existed in Germany, nor, after Justinian, in Italy.\\nEvery nation of first rank has since 1850 either extended or strengthened\\nits sovereignty, or both.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0107.jp2"}, "108": {"fulltext": "90 the nature of exchange\\n55 The Perfection of Exchange\\nMangoldt, 43 sqq. Schoenherg, vol. i, VII-X.\\nExchange becomes freer and more complete in pro-\\nportion to improvements in i Means of preserving\\nperishable goods.^ ii Facilities for transporting intel-\\nligence, persons, and freight.^ iii Institutions which\\nbring would-be Ibuyers and sellers together, such as\\nfairs,^ market seasons,* market cities or towns, market\\nplaces in the same, exchanges, stores, shops, travelling\\nsalesmen, international expositions, and the like. iv\\nWeiglits and measures, wherein accuracy,^ simplicity,^\\nand universality are the foremost desiderata, v The\\nmobilizing of property, by stocks, bonds, certificates,^\\nor other titles, vi Money and the system of credit.^\\nvii Knowledge,^^ commercial legislation and adminis-\\ntration, international law and comity.\\n1 See 54, n. 6.\\n2 See 54, n. 7. Telegraph and telephone have immensely cheapened\\nproduction by rendering it unnecessary for retailers or ordinary wholesalers\\nto keep so extensive stocks as formerly.\\n3 Traffic was the original purpose of fairs, and still remains that of the\\ngreat fairs at Leipzig.\\nCertain hours of the day, certain days of the week or month. It\\nmarks an advance when any commodity, not having previously been so,\\nis regularly on sale in a given locality.\\nAbsolute accuracy is unattainable, yet modern standards are incom-\\nparably more exact than those prevalent so recently as two centuries ago.\\nSee Weights and Measures in Am. Cyclop, and in Encyc. Brit., also\\nJolly, in Schoenberg. An Act of Parliament, July 30, 1855, decreed\\nThat the straight line between the centres of the transverse lines in the\\n2 gold plugs in the bronze bar deposited in the office of the Exchequer\\nshall be the genuine standard yard at 62\u00c2\u00b0 F. The U. S. yard is supposed\\nto accord with the above, but is in fact about xoVo vach longer.\\nPractically, the metric basis, too, must vary with places. Ordinary instru-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0108.jp2"}, "109": {"fulltext": "THE NATURE OF EXCHANGE 9 1\\nments for weighing and measuring, ill made and roughly used, betray\\ngreat discrepancies.\\n\u00e2\u0080\u00a25 The metric system, with binary modifications for small dealings, is\\nfar the best yet devised. The Dutch savant, van Swinden, working for the\\nFrench Academy, originated the idea of it, and the system was incorpo-\\nrated into French law in 1795. All other civilized nations have since\\nadopted it save Great Britain and its colonies, the U. S., Russia, Denmark,\\nand Switzerland.\\nAccording to Kolb, cited by Mangoldt, there were in Europe at the\\nend of the last century, more than 400 different pounds, and in the Grand\\nDuchy of Baden alone, so late as 1S22, 112 different yards. What an\\nobstruction to trade The metric system ought to become universal.\\nBy the pipe line certificates, which are simply warrants or titles to\\nso many barrels of crude petroleum, oil is traded in, used for collateral,\\netc., as freely as bonds, stocks, or bank-notes. The system is now ex-\\ntended to pig iron, and will probably be to all other commodities durable\\nin nature and susceptible of division into permanently fi.xed amounts.\\nSee in Part III. Well-made and full-weight coins, paper at par here-\\nwith, monetary units having stable purchasing power, sound and widely-\\ndeveloped banking and clearing systems all are needed. Helpful to\\ninternational trade are established and familiar banking relations between\\ndifferent lands, the trustworthiness of stamps, labels and the like. A later\\nage will see world-money and the international currency of personal checks.\\nI Cf. 54, iv. International expositions [Philada., 1876; Paris, 1889]\\ndoubtless have vast commercial value, informing nations about each other s\\nproducts.\\n^1 Chief reference is to private international law, to the facile collection\\nby private parties of debts due abroad. The industrial importance of this\\nhas been too little observed.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0109.jp2"}, "110": {"fulltext": "CHAPTER II\\nINTERNATIONAL EXCHANGE\\n56 Initial View\\nMill, bk. ill, ch. xvii. Cairnes, Leading Principles, pt. iii, ch. iv. Perry, chaps, xiii,\\nxivi Ad. Smith, bk. iv. Bastable, Theo. of Intl. Trade. Gill, Free Trade.\\nSonters, Exchange/ in Encyc. Brit.\\n[Nations as well as individuals have diversities of\\nrelative advantage, so that, prima facie, international\\nexchange offers all the economic benefits of personal\\nand domestic/ on a far grander scale. Such an im-\\npression is confirmed by the following considerations\\ni Were there no mutual profit in international ex-\\nchange, it would cease, ii Should nations undertake\\nto produce at home the things which they import,\\neffort would obviously be wasted, iii Since the gain\\nfrom international trade depends on the relative cost\\nof the things exchanged, and not on the absolute cost\\nof either, the traffic may be profitable though the im-\\nported ware could have been produced at home more\\ncheaply.^ iv The commodity exports and imports be-\\ntween any country and the rest of the world, must, in\\nthe long run, pay for each other, gold and silver being\\nused but rarely.^ v As wealth from abroad can be\\ngotten only by the provision of a domestic surplus,\\nforeign trade enlarges domestic industry instead of les-\\nsening it. vi Yet the great advantage of this trade\\nresides not in mere extra bulk of goods produced for", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0110.jp2"}, "111": {"fulltext": "INTERNATIONAL EXCHANGE 93\\nexport, but in the nature of the imports, since in these\\neach nation reaps some of the benefits which flow from\\nthe peculiar advantages enjoyed by the nations with\\nwhich it trades. vii A nation having every incentive\\nto send abroad its cheapest products, those, namely, in\\nthe creation of which it has the greatest advantage over\\nothers, commerce is a sovereign agent in cheapening\\nproduction, viii The benefits of exchange between\\nnations cannot be confined to any class or section,^ but\\nreach all consumers, the poor, if anything, more help-\\nfully than the rich.\\n1 See 52, 53, 54, and notes. Walker, P. E., 468 [n. fr. Sumner].\\n2 No anomaly, impossible as it may seem and rarely as it may occur.\\nThe loss on the import over what it would have cost at home may be met\\nand much more by the extraordinary price realized on the export. The\\nship would return in ballast. Not necessarily. Captains often pay for\\nthe privilege of bringing iron or tin from England, as cheaper than to\\npurchase ballast, the diminution of freight thus secured sometimes out-\\nweighing the American duty.\\n3 No nation could long send money abroad in payment for imports. A\\nvery short continuance of the process would so deplete the stock of money\\nas to lower prices, inviting buyers from abroad. They would of course\\nbring money, and the former supply would reappear. Should a country\\nbegin exporting for money only, the reverse phenomena would have place.\\nFawcett, Manual, 386.\\nTrue, even when free competition in importing is not permitted. Faw-\\ncett, Manual, 379. If any given import becomes monopolized, as by an\\ninternational trust, the distribution of advantages will of course be so far\\nrendered imperfect, just as in case of domestic monopolies. The importer,\\nthat is, or the set of importers, will retain an undue share of the gain.\\nBut not all can be so kept.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0111.jp2"}, "112": {"fulltext": "94 INTERNATIONAL EXCHANGE\\n57 Common Ground\\nMill, bk. V, ch. x, i. Roberts, Government Revenue. Roscher [Eng. Tr.], App. II.\\nGeorge, Protection or F. Trade. Gill, and Bastable, as at 56.\\nNearly all economic thinkers admit/ on the one hand,\\nthat i A nation may sometimes with advantage re-\\nstrict purchases by its citizens abroad i) to diversify\\nits own industry, 2) as a provision for foreign Trar, to\\nforce the domestic creation of war material, or 3) in\\nthe way of commercial retorsion.^ ii Tariffs for reve-\\nnue* are leg-itimate and convenient, and withal as just\\nas any form of indirect taxation can be. iii Theoreti-\\ncally it may be advantageous to encourage by legisla-\\ntion a branch of industry which might be profitably\\ncarried on, which is therefore sure to be carried on\\neventually, but whose rise is prevented for the time\\nbeing by artificial or accidental causes. iv Particular\\nmen, trades, and localities often profit largely from re-\\nstrictive measures. Few will deny, on the other hand,\\nthat V Commerce, involving wide acquaintance of\\nnations Tvitli nations through their interchange of\\nservices and productions, is a prime civilizer,^ greatly\\nlessening the danger of wars and famines, and dissemi-\\nnating infinite moral and religious good, vi A policy\\nof restriction cannot possibly be entered upon, altered,\\nor given up, without visiting considerable hardship\\nupon certain individuals, classes, or sections. vii In-\\ntro-national free trade is a priceless blessing, as inter-\\nnational is destined to become in the course of time.^\\n1 Still another point on which probably all would agree is that men-\\ntioned at end of 60. Compensating duties, too, on imports the same", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0112.jp2"}, "113": {"fulltext": "INTERNATIONAL EXCHANGE 95\\nin kind with articles bearing excises [internal taxes], if not unduly high,\\nno one would condemn [Ad. Smith, bk. iv, ch. ii].\\n2 By duties on imports or by the absolute prohibition of them. This\\nputs up the prices of the things thus taxed, and induces domestic produc-\\ntion. See 58.\\nHigh duties, or prohibition, in revenge for the like by some other\\nnation to the disadvantage of yours.\\nPerry, 427. Loxu and practically inappreciable duties, on few articles,\\nnot produced at home. So-called protective duties, on the contrary, must\\nof course cover home products, while the higher they are, the better, as a\\nrule, they fulfil their office. They may easily be so elevated as to yield\\nthe government no income at all, smuggling [Blanqui, ch. xxvii], false\\ninvoices [Lond. Times, Mch. 21, 84], and other dishonesty in merchants\\nbeing among the reasons. If the revenue on articles not produced in the\\ncountry is insufficient without making rates too high, some imports the\\nsame in kind with things created at home may also be dutied, an excise\\nequal to the duty being laid on the domestic production to prevent unfair\\nfavor to home producers thereof. The system so sketched is Great Britain s\\nand New South Wales s. Ancient customs systems were for revenue, not\\nrestriction. Carthage exacted tolls both at home and at provincial ports.\\nRawlinson, Man. of Anc. Hist., 80. Athens in t. of Pericles, had a 2 per\\ncent duty on both exports and imports, besides harbor dues of I per cent,\\nlb., 178. Cf. Thucydides, II, 38. Egypt under the Ptolemies, Rawl., 232.\\nObviously, taxes thus raised are paid alone by the users of the articles\\ntaxed. In strictness this is unjust, all admit. H. George and his follow-\\ners, besides a considerable party in England, therefore repudiate revenue\\nduties along with all indirect taxes, advocating direct taxation as alone\\nadmissible. Revenues are by no means large in proportion as duties are\\nhigh. Rather does the proportion tend to be an inverse one. The rates\\nof U. S. import duties were about doubled in 1812 with no increase of\\nincome.\\nTaussig. To illustrate, Maryland, about 1670, would have done well\\nto protect cereals. Tobacco was so high that all attention was devoted to\\nit, so that some years colonists were in danger of starvation. Winsor,\\nNarr. and Grit. Hist., vol. iii, 543. But from the difficulty of securing\\nin any actual government sufficient wisdom, strength and singleness of aim\\nto withdraw protection inexorably so soon as the public interests require,\\nit is practically best for a statesman to adhere to the broad and simple rule\\nof taxation for revenue only [Sidgwick]. A good general precept at\\nleast. Cf. post, 59, n. i, also Bastable, Intl. Trade, ch. ix, Cairnes,\\nLeading Prin., 403, n, and George, Social Problems, 231.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0113.jp2"}, "114": {"fulltext": "96 INTERNATIONAL EXCHANGE\\n6 Cf. 53, n. 2. Another consideration of this moral order is the loss,\\nbeggary sometimes, which one nation s restriction inflicts upon another s\\ncitizens. On the constitutional c^esi\\\\on [in U. S.], F. Trade, in Lalor;\\nCooley, Const. Law, 57; Ihering, Geist d. r dm. Rechtes, I, 7.\\nThere must be more or less discrimination between industries, involv-\\ning them often in great mutual hostility. Ad. Smith, bk. iv, ch. ii. Any\\nbar upon commerce of course tends to destroy the business of ship-builders\\nand sailors. Wells, Our Merchant Marine.\\nEven Professor Thompson says this. The freedom will be safe, that\\nis, so soon as the same fraternity and substantial economic equality come to\\nprevail between nations which now subsist between the parts of each.\\nOnly a few advocates of perpetual trade isolation still remain. On Fichte s\\nExclusive State, Adamson s Fichte, 76. Max Wirth, on H. C. Carey s\\nProt. Theo., Vierteljahrsch. f. Volkswirtsckaft, 1863, vol. ii.\\n58 The Theory of Nutrient Restriction\\nDenslow, Prin. of Ec. Philos., chaps, xiv, xv. Thompso7i, Elements of Pol. Econ.;\\nProtection, in Encyc. Brit. [Stoddart s ed.: full restrictionist bibliog.]. Rogers,\\nFree Trade, ibid. Laitghliii, ed. of Mill, 677. Wells, Free Trade, in Lalor.\\nde Molinari, Protection, ibid. Stimuef, Protectionism. Fawcett, F. Trade and\\nProtection. Bastable, chaps, viii, ix. Patten, Prem. of P. E., vii. [Best list of\\nworks pro and con is in Rob. Clarke and Co. s Catal. of Wks. on P. E., Cinn., 1888.]\\nThere are those who believe in the legal limitation\\nof foreign commerce not merely as a prophylactic, a\\nstimulant, or a tonic, but as a highly beneficial form\\nof industrial nutriment, supposing it to give the body\\npolitic flesh and blood not indirectly alone but as an\\ninstant consequence, at the very moment of its astrin-\\ngent efficiency, and about in proportion thereto. The\\nerror of this view appears when one reflects that it is\\nabsolutely impossible for the required check on impor-\\ntation to take effect save at the public expense, by a\\nrise in price through the whole line of goods affected,\\nwhether produced at home or imported. Actual restric-\\ntion, therefore, so long as it lasts, could not but involve\\nnet loss, swelling the cost at which the nation supplied", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0114.jp2"}, "115": {"fulltext": "INTERNATIONAL EXCHANGE 97\\nits wants, and retarding production by the transfer\\nof effort from more to less efficient lines. Should\\na business previously sheltered at any time begin to\\nyield average profits without the aid from society,^ that\\nvery fact would be proof that it had oiitgi own its need\\nof legislative fostering. Nor does restriction have a\\nhappier effect on the distribution of wealth than on\\nits production.\\nJ It is well to avoid so far as possible the terms protection, protec-\\ntive, etc., because of their ambiguity. Scientific discussion with them is\\nimpossible. Besides the form of restriction canvassed in this each of\\nthe three mentioned in 57, i, is known as protection. To dub a policy\\nprotective settles nothing. The very question at issue is. What policy\\nbids fair to be on the whole most protective\\n2 Efficient restriction must raise prices. In no other way can it become\\nefficient. Nor is the loss on what a man buys made up by the higher\\nprices of what he has to sell. The result is, during the actual incidence\\nand working of the restriction, an increase in the total amount of effort\\nput forth by the nation for its total product, or else the loss of a part of\\nthat product [Cairnes, Leading Prin., pt. iv, ch. iv].\\n3 I.e., still pay, yet sell at rates as low as free foreign competition would\\nfix. The restrictive law might remain but would be a dead letter as to the\\ngiven species of goods. Notice that the mere tariff rate on an article does\\nnot show whether, or, if so, how much, the duty raises the price of the\\narticle. It may not affect the price at all, in which case it is nominal only;\\nor it may raise the price by the full amount of the rate. The continuance\\nof importations in any sort of goods proves that prices have been elevated\\nby the full figure of the actual protection. If a duty is prohibitive, the\\nelevation may fall much below the tariff figure.\\nIf it did, this fact might justify the policy even though the nation were\\npoorer thereby. Feudalists and socialists are v/ont to allege that freedom\\nof commerce would crush out the middle class, leaving only millionnaires\\nand proletaries. French Revolutionary history and policy disproved this,\\nvon Sybel, French Rev., I, 24.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0115.jp2"}, "116": {"fulltext": "98 INTERNATIONAL EXCHANGE\\n59 Continuation\\nSee the authh. at 58, esp. Sutnner. Prince-Smith, Handels/reiheit, in Rentzsch s\\nHandworterbuck.\\nThe same conclusion is reached if we consider the\\nvarious ways in which restriction has by different\\nwriters been thought to effect its end. i Liowering-\\nprices.! ii Increasing or condensing population.^\\niii Inviting- in foreign capital. Results i and ii are\\npossible at best only after loss of capital and lapse of\\ntime, which refers them to 57 iii can ensue sooner.\\nBut though in each of these cases net gain may conceiv-\\nably be realized at last, it can never in any of them be\\nproved beforehand that this will result, or afterwards\\nthat it has resulted.^ iv Raising wages. This can\\noccur, if at all, only as an incident of general industrial\\nprosperity, and will not attend even this if immigration\\nis free.* v Keeping at home exchange-profits w^hich\\nelse would go abroad. But the existence of a desire\\nto exchange abroad makes it certain that legal restraint\\ncould not but lessen the number or the profit of the\\ntotal exchanges, or both.^ vi Making foreigners pay\\npart of our taxes. This would be unjust were it pos-\\nsible, but it is not. To impose or raise duties certainly\\ndecreases foreigners profits from trade with you, but\\ndoes not force from them the slightest positive tribute.^\\n1 This may be i) temporary, a consequence of ruinous competition,\\ninvolving depletion of aggregate wealth, or ii) permanent. The latter\\nmight arise through protection to young industries 57, iii]. Or strug-\\ngling manufactories some time in existence might be enabled to cheapen\\ntheir line of product by a larger market [above, ii]. In any case loss\\nwould have to be incurred, which no one could ever so measure as to\\ncertify that it was less than the gain, though it might possibly be. Of", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0116.jp2"}, "117": {"fulltext": "INTERNATIONAL X.XCHANGE 99\\ncourse cheapness may accompany ox follow restriction without being caused\\nthereby.\\n2 In new countries population may be too thin for the utmost efficiency\\nof its total labor [Mill, bk. i, ch. viii, 3]. The thought is that it can, by\\nlegal measures, costly at first, which nurse manufacturing, be thickened\\nfrom abroad, or, without this, assembled in towns and villages, so as to\\nproduce more per capita, and presently, casting aside protection, to defy\\nforeign competition even in the articles at first imported. Free-traders too\\nmuch ignore the possibility of this, restrictionists its uncertainty, costliness\\nand practical difficulties.\\nMany chances for loss would be about certain to be overlooked,\\namong them the impoverishment of customer-nations and the limitation\\nof market for unprotected industries. Lalor, vol. ii, 303.\\nSee 60, 3. If immigration is unhindered, foreign laborers are in\\ncompetition with domestic, forcing wages down toward the lowest level\\nabroad. If it is prevented, the wages question depends for answer on\\nthe propriety of the restrictive policy at large.\\nIf you forbid a man who wishes to do so to trade across the line, it\\nis conceivable that he may effect the desired exchange with equal profit\\nat home, his home customer s gain being a clear increment to the nation s\\nwealth in consequence of the hindrance. But it is perfectly certain that\\nthis would not be the case once in a hundred times [Ad. Smith, bk. iv,\\nch. iii]. In arguing from such mere possibilities, restrictionists are often\\nworse doctrinaires than their opponents.\\nSumner, [London] Economist, Dec. I, 83; Protectionism, 149; Sidg-\\nwick, 491 sqq. Full canvass of the proposition is too long for this place.\\nOnly transitory and highly improbable conditions can be conceived in which\\nthe nation would get in revenue as much as its citizens lost in advanced\\nprices.\\n60 Important Specific Points\\ni Way land, P. E., 140. Perry, 460 sqq. Taussig, Prot. to Young Industries, 60, 64;\\nPres. Tariff, 90. Fawcett, F. Trade and Prot., chap, ii, pp. 9, 28. ii Fawcett,\\nManual, 390. Farrer, Free T. vs. Fair 85]. Giffen, Contemp. Rev., June, 85.\\nWestm. Rev. Feb., 88. Ad. Smiih,\\\\iV.\\\\\\\\,c}c\\\\.\\\\\\\\. Faivceti,Wsxi.,-i%(i. Walker,\\nWages, 44; P. E., 470. iv Andrews, Quar. Jour. Econ., Jan., 89.\\ni Bounties offer a more economical means of en-\\ncouraging industry than duties, as by them i) prices\\nare not advanced, 2) smuggling is not induced, 3) the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0117.jp2"}, "118": {"fulltext": "100 INTERNATIONAL EXCHANGE\\ncountry is burdened only for the actual production\\nsecured, and 4) all the cost is borne at home, ii Fair\\ntrade is the cry of a party in England, who spe-\\nciously plead that, while they would be quite willing to\\nforego restriction if other nations would, free trade is\\nruinous save on this condition of reciprocity. But for\\na nation to lay tariff upon imports does not remedy, it\\naggravates instead, the loss suffered in the taxation of\\nits exports by other nations. Offending peoples are\\npunished, but the chief penalty takes effect at home.\\niii Though lowering of wages may not spring from the\\nmere fact of using foreign labor, since free importation\\ndoes not employ that to the exclusion of domestic,^ may\\nit not ensue if wages abroad are lower than at home\\nNever, wages in general,* and not necessarily wages in\\nthe trades in question, since lower nominal, or even\\nlower real, wages abroad do not imply smaller cost of\\nlabor there. And even in industries where whole cost\\nof labor is less abroad, home laborers have nothing to\\nfear from foreign competition, provided this disadvan-\\ntage is offset, as is often the case, by advantages.^\\niv Contrary to free-traders usual statement, it is in\\ncertain cases possible for a trade combination in one\\ncountry to crush competitors in another so as then to\\nput up prices, or for an international trust so to con-\\ntrol prices as to render the customs laws of all coun-\\ntries nugatory. Such results bid fair to be henceforth\\nmore and more common, perhaps the rule, that regu-\\nlation of trade hitherto accomplished by nations sepa-\\nrately, through tariffs, necessarily becoming matter for\\ninternational compacts. Meantime, while free inter-\\nnational competition is commonly one valuable safe-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0118.jp2"}, "119": {"fulltext": "INTERNATIONAL EXCHANGE lOI\\nguard against these syndicates, yet where one of them\\nbelonging to a given country oppresses a foreign land,\\nthe latter may well defend itself by a tariff.\\nAlex. Hamilton in his famous Report on Manufactures, to the Ilnd\\nCongress, Dec. 25, 1791, favored bounties as against customs duties.\\nSchouler s U. S., vol. i, 187. In 1885, some 270,000,000 lbs. of sugar\\nwere produced in the U. S., about 10 per cent of the consumption.\\nAverage cost price not far from 2^ cts., average duty [encouragement]\\nnearly the same. I.e., we paid 2} cents on each of the entire 2,700,000,000\\nlbs., conferring a protection equally well secured by a bounty of the same\\nheight on one-tenth that number of lbs. a loss, so far as protection was\\nconcerned, of $60,750,000. It might, of course, have been needed for\\nrevenue, but as a matter of fact was not.\\nReciprocitarians, Giffen calls them. Even when retorsion 57, i,\\n3)] is desirable, it is a costly process.\\n3 See 56, V.\\nSave in the barely conceivable ways allowed in 59-\\ns Cf. 48, and n. 4. Roscher [Eng. tr.], vol. i, 218, n. Distinguish\\nthe 2 cases, i) high efficiency to labor, keeping pace with high wages, so\\nthat cost of labor is as low as with smaller wages, or lower and ii) high\\nlabor cost, compensated by specially favorable conditions of production in\\nother respects, so that whole cost of production is no greater. Agricul-\\ntural wages are higher in Australia and the U. S. than in Europe, owing to\\nthe advantages of rich and low-priced lands. Through cheapness of grain,\\nwhiskey is manufactured in the U. S. so as to undersell foreign distillers\\nall over the world, though labor here, no more efficient, is paid 50 per cent\\nhigher. Eng. factory hands, with their greater skill, better climate and\\nmachinery, defy competition from the protected pauper labor of the\\ncontinent. India, where the cotton spinner gets only 20 pence a week, is\\nflooded by the cottons of England, where the spinner receives 20 shillings\\n[Walker]. Thomas Hist, of Pennsylvania, 1698, p. 9, says, Poor people,\\nboth men and women, will get near 3 times more wages for their labor in\\nthis country than they can earn in either England or Wales. Of course\\nAmerica had no protection then. Hamilton s Report [n. i, above], giving\\na long list of industries already established in America, notes the then\\nexceedingly high rate of American wages, and well argues that that need\\nbe no bar to successful competition with Europe.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0119.jp2"}, "120": {"fulltext": "CHAPTER III\\nVALUE: GENERAL\\n6i Value and Value\\nRoscher, 4, 5. Clark, Philos. of Wealth, ch. v. Dttbos, Theo. de Valeur, Jour,\\ndes Econ., Mch., 1888 [cf. ib., Sep. and Nov., 82, Ap., 83]. Mill, bk. iii, ch. vi.\\nKnies, Geld, i. Rae, Contemp. Socialism, 156. Sharling, in Conrad s Jahrb.,\\nMch., 88. Martello, La Moneta, App. Wolf, in Zeitsch.f. gesam. Staaisw., 42,\\nHeft 3. Marshall, in Quar. Jour. Ecoil., vol. i, 227, 359. Cairnes, Contemp. Rev.,\\n76; Leading Prin., pt. i. Courcelle-Seneuil, four, des \u00c2\u00a3cou., Ap., 1883.\\nThe term value bears both in popular and in eco-\\nnomic speech three meanings, which must be carefully\\ndistinguished i Utility in general, the power, what-\\never its origin, of satisfying human needs.^ ii Value\\nin use, economic value proper, the useful character\\nof things which are actually utilized, however this is\\nestimated, and whether they are destined for exchange\\nor not in still other phrase, the immediate significance\\nwhich things possess for men s economic life, iii Value\\nin exchange, the ratio at which commodities and ser-\\nvices pass for one another in open market. The second\\nkind of value is nearly identical with the wealth-char-\\nacter of things usually, therefore, not originating gra-\\ntuitously, though it may also attach to entities, like land\\nproper, which are not wealth. The third form of value\\nis closely related to the second, being the resultant of\\nmore or less numerous estimates placed by human minds\\non the relative use-values of things. Values of varieties\\nii and iii hence correspond in a general way, though by", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0120.jp2"}, "121": {"fulltext": "VALUE 103\\nno means exactly. In practical exchange, we obviously\\nhave to do mainly with value in the third sense,^ but\\nthis can be properly grasped only by a patient analysis\\nof value in the second.\\n1 Air and water in general have this. It were better not to use value\\nto name the idea, but only utility. Ever since Adam Smith it has been\\ncommon to identify senses i and ii. Clearly a confusion, since the mere\\npower to serve us [potential service] is not the same as actual service, or\\nbeing in use. The portions which we [by effort] approp7 iate have\\nmore than utility, viz., value in use.\\n2 See I, and n. 6, also 62. Whatever is wealth has this value, of\\ncourse. The other things which possess it are very few 28, and n. 3].\\nIt is in this sense, and in this only, that\\nThe value of a thing.\\nIs just as much as it will bring [Butler]. Exchange-\\nvalue is manifestly in no sense intrinsic 62, n. i]. It is not a property\\nof all wealth [yet see l, and n. 7; 51, and n. i], but only of such as\\ncan be exchanged 63], and reaches beyond wealth just as value in use\\ndoes [last note].\\n62 Value in Use\\nBonar, Quar. Jour. Econ., vol. iii, 5 sqq. yevons, P. E., ch. iii. Wieser, Ursprung;\\netc., des ivirtschaftlichen Werthes. Bdhm-Bantierk, in Jahrb. f. National-\\noekouomte,\\\\o\\\\. xiii, N. F. 86] Kapital, etc., bk. iii, sec. i. Menger, Volkswirt-\\nschaftslehre, 77 sqq. Roscher, 4, 5. Marx, Capital, pt. i, ch. i.\\ni Objective or g-eueral, the ability which a kind of\\nproduct normally has to produce economic effects.\\nii Subjective or personal, the power which a given\\npiece of wealth possesses to gratify a particular human\\nbeing at this or that time. Not only men s nature at\\nlarge in its various situations has here to be allowed\\nfor, but all manner of individual peculiarities still\\nmore. Every one consciously or unconsciously groups\\nhis various wants in a certain order of importance, and\\nover against each, its satisfactions, in a regular scale of", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0121.jp2"}, "122": {"fulltext": "I04\\nVALUE\\ndegrees, always gratifying first the highest degrees of\\nhis foremost wants, though probably not all the lower\\ndegrees of these till the upper degrees of less important\\nwants are met. Retrenchment, on the other hand,\\nbegins with the lowest degrees of the least pressing\\nwants, working upward and backward, reaching last the\\nthings absolutely needful for life itself. The value\\nwhich a man attaches to any article is seen from the\\ngrade and degree of the lowest want which he uses\\nit to satisfy.^\\n1 Coal has heating power; food, nutrient power, etc. It need not\\nmislead to style objective value in use intrutsic, though it, as well as every\\nother form of value, is, strictly speaking, an affair of relaiion 6i, n. 3].\\n2 This may be easily understood by the aid of the following diagram,\\nadapted from Bohm-Bawerk and Menger\\nDegree\\nI, Food\\nII, Clothing\\nIII, Lodging\\nIV, Luxuries\\nFirst\\nSecond\\nThird\\nFourth\\nNecessary for life\\ndo for health\\nAgreeable\\nStill less keenly so\\nFirst suit, necessary\\nSecond suit, convenient\\nThird, desirable\\nAbed\\nA room\\nA plate of\\nFifth\\nStill less\\nFourth, not unacceptable\\nA suite of two\\ncream\\nTwo plates of\\nSixth\\nSatiety\\nFifth, satiety\\nor three\\nA suite of four\\nSatiety\\ncream\\nThree plates\\nSatiety\\nThe supply of wants proceeds [irregularly, and this in different ways with\\ndifferent persons] downward and to the right; retrenchment upward and\\nto the left. The difference in degree of importance between one meal\\nwhen it is the only accessible one, and one meal when it is any one of\\nfive, is not as 5 to I, but as infinity to I. When we draw near to absolute\\nnecessity, the increase in importance is geometrical rather than .^.rithmeti-\\ncal [Bonar, as above]. Even when a thing is made necessary only by\\nsome pet view or preference of the individual, its importance often\\nincreases with decrease in its quantity, in far greater than arithmetical\\nproportion [ibid.].\\nA western farmer may use corn to eat and to burn. Then its fuel\\nvalue is to him the value of the corn. Subjective value is thus disclosed,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0122.jp2"}, "123": {"fulltext": "VALUE 105\\nnot by its utility at large, but by its Imvcst [often called final] utility. Let\\nthe farmer run short of supplies in both kinds, the fuel-use of his corn will\\nbe foregone the earlier. Notice that the value of a given ivhole is not told\\nby the lowest use to which any of its parts are put, but by the lowest use\\nmade of it as a whole. Each of several interchangeable and equally\\nworthful parts reveals the estimate its owner places on it by the lowest use\\nhe makes of any. The value of an article to you is also revealed by the\\nutility to you of what you are willing to give for it.\\n63 Value in Exchange\\nThe authh. at 61, 62. Also, Pf rry, ch. iii. ^/(ic/^ij;/, Elements, ch. ii. Bagekot, E.c.\\nStudies, loi sqq. Mill, bk. iii, ch. ii. Gide, La Notion de la Valenr datis Bastuii,\\nRev. d. Eco7i.pol., Mai-Juin, 87. Marx, pt. i, ch. ii. Sidgwick, bk. ii, ch. ii.\\nFrom these variations of value in use according to\\npersons, places, and times, spring the phenomena of\\nexchange and value in exchange. To be valuable in\\nexchange, a ware or a service must of course have sus-\\nceptibility to exchange, as well as utility. A single\\ncase of value in exchange always presupposes two\\npersons and two fourfold estimates, each party sub-\\njectively valuing what he offers, and the suggested\\nreturn, at the same time surmising how both are val-\\nued by the other. These estimates are determined by\\na great variety of circumstances knowledge or beliefs\\ntouching the conditions of production, the number of\\nwould-be buyers or of would-be sellers, or the value in\\nuse of the article in question to any or all. When\\nmany potential exchangers come into vicinity, forming\\na market,^ the market rate of exchange at that given\\ntime is fixed by the estimates of the weakest actual\\nbuyers and the weakest actual sellers.\\n1 But for the different scales and degrees of value 62, n. 2] put by\\ndifferent parties upon one and the same thing, exchange would be un-\\nknown. See 52.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0123.jp2"}, "124": {"fulltext": "I06 VALUE\\n2 Our intellectual capital cannot be exchanged, though many of its\\nproducts may be. It is capital, and wealth, and has value [in use], none\\nthe less i, n. 6].\\n3 This is the most interesting case. On what forms a market, Bagehot,\\nEc. Studies, iii [Ad. Smith]; Cairnes, Leading Prin., 17-40; Thornton,\\nLabour, bk. ii, ch. i; Mill, bk. iii, ch. ii; Bonar, Quar. Jour. Econ., vol.\\niii, 15. Bonar has this diagram:\\nWOULD-\\nBE Buyers\\n(subjectively)\\nAi values\\na horse at ao\\nA2\\n56\\nA3\\n52\\nA*\\n48\\nAS\\n44\\nA6\\n42\\nA\\n40\\nA8\\n36\\nA9\\n34\\nAio\\n30\\nWould-be\\nSellers\\n(subjectively)\\nB^ values his horse at \u00c2\u00a3\u00e2\u0080\u00a220\\nB2\\n22\\nB3\\n30\\nB4\\n34\\nBS\\n40\\nB6\\n43\\nB7\\nSO\\nB8\\n52\\nThe horses are supposed to be of the same quality. The As and the Bs\\nare strong in proportion to their eagerness to buy or to sell i.e., those\\nwilling to give the highest prices are the strongest buyers, those willing to\\ntake the lowest, the strongest sellers. Assuming, what is likely to happen,\\nthat the parties on both sides effect exchanges something in the order of\\ntheir strength, 5 trades and only 5 will be made, viz., between the As^\\nand the Bs^ A^ will give but 42, which is under the figure demanded\\nfor any of the three horses remaining. B^ asks 43, too high for any\\nwould-be buyers who are left. A^ is willing to give 44 or less, B^ to take\\n40 or more the market value, till the conditions change, rests at one or\\nthe other of these figures, or between. A^ is in this case the weakest\\nbuyer, B^ the weakest seller, the two constituting the terminal pair. On\\nthe worst day of the snow blockade in N. Y. City, Mch. 6, 1888, Tiffany\\nsold only 80 cents worth of goods; a certain retail grocer, ^10,000 worth.\\nTiffany could not that day have raised his prices at all; the grocer could\\nprobably have doubled.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0124.jp2"}, "125": {"fulltext": "VALUE 107\\n64 Price\\nMarx, Capital, pt. i, ch. i, sec. 3. Mangoldt, 63-74. Gamier, Traiie, 667 sqq.\\nMarshall, Q.(yaX.e.vcvf. Rev., Mch., 1887. Lehr, Vierteljahrsch. f. Volkswirtsch.,\\nxxvi, i, 2. Roscher, icx), loi. Bohm-Bawerk, Kapital, etc., bk. iii, sec. ii.\\nWhen of any article the value is expressed in terms\\nof some other, that other may be called the value-\\nform of such article.^ The most common value-form\\nattached to goods is money, and the money value-form\\nis price. It will be seen that while general rises and\\nfalls of prices frequently occur,^ such an event mean-\\ning only a change in the purchasing power of money,\\nto speak of a general rise or fall in exchange-values\\nwould be a contradiction in terms.\\nWhen, e.g., it is said that a bushel of wheat is worth a dollar, the\\nexpression is by no means an equation, though involving the idea of one.\\nThe terms could indeed be reversed without falsehood, but not without\\naltering the meaning.\\n2 Greatly infringing justice and discouraging trade. See, later, 85, on\\nIdeal Money.\\n65 Normal Value in Exchange\\nCairnes, Leading Principles, pt. i, chaps, iii, iv. Ad. Smith, bk. i, ch. xi. Mill,\\nbk. iii, chaps, ii-iv. Maine, Village Communities, vi. Senior,-Vo\\\\. Econ., loi, 102.\\nOf the commodities producible at will in indefinite\\namounts, much the larger part of all, market values\\nand prices 1 are not fixed ultimately by the influences\\nmentioned at 63, but by cost of production, or, more\\nstrictly, that of reproduction.^ This cost may be styled\\nthe normal value of commodities. Around it market\\nvalues and prices will hover, sometimes higher, some-\\ntimes lower, according to circumstances, but never for", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0125.jp2"}, "126": {"fulltext": "I08 VALUE\\nany considerable period^ very far away. If, in the case of\\na given article, different portions of the necessary supply\\noffered in one and the same market have unlike costs\\nof production, normal value coincides with the clearest\\ncost involved.* Things like heirlooms, paintings of old\\nmasters,^ etc., which cannot be duplicated, are subject\\nto no law of normal value, but command a higher price\\nor a lower purely according to the relations between\\nsupply and demand.^\\n1 Why mention market values Why is not prices sufficient? Be-\\ncause the law would hold equally if money had never been invented\\n[\u00c2\u00a764].\\n2 See 47, 48. If classes of goods be taken, cost of reproduction and\\nof production will not vary much. The strictly ultimate determinant is the\\nmetaphysical cost 47]. Cf. Hyndman, Hist. Basis of Socialism, 105.\\nThe discussion contemplates primary sales, viz., by growers or manufact-\\nurers themselves. Cost of production at the retail stage of the process\\nincludes allowances for handling, tare and tret, interest, storage, etc. Cf.\\n69, ii.\\nThough temporarily perhaps a good deal above or below [scarcity\\nprices]. During the snow blockade, Mch. 6, 1888, milk sold in N. Y. City\\nfor ^5 and ^6 per can of 40 qts. The next day it had fallen to ^i. Henry\\nGeorge found flour at the Frazer River gold diggings, in 1858, worth ^1.50\\na lb.; bacon, $3. To Purchas s Pilgrimes [vol. i, 118, 133, 275, 417: see\\nTylor s Early H. of Mankind, 223] the natives of Madagascar were glad to\\npay a sheep for i^. silver; a cow for 3^. bd. At Saldanha Bay, on the west\\ncoast of Africa, in 1598, the natives, ignorant how to work iron, offered\\nJohn Davis fat sheep and bullocks for nails or bits of old iron. In 1604\\na huge bullock was to be bought there for a piece of iron hoop. If com-\\npetition is free [Senior, 102], variation from cost of production, in an\\narticle whose price is determined by this, always tends to annihilate itself.\\nIf prices exceed this cost, production will be the more profitable, and hence\\ncopious; if they are below it, production falls off.\\nAn important principle. See on Rent, in Part IV. All the wheat of a\\ngiven quality for sale in Chicago bears the same price, whether from poor\\nland or rich, raised with good machinery or none. Block Island poultry,\\nthough produced at less than normal expense, brings in Providence as high", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0126.jp2"}, "127": {"fulltext": "VALUE 109\\nprices as any. When demand diminishes, the costlier parts of the supply\\narc dispensed with first, and the normal value falls [of. 27, n. 3].\\nAnd some others. See 68 and 69, i. Cf. below, n, 6. On prices\\nof monopolized wealth, 66. The famous sermon preached by John Knox\\nat Edinburgh, in August, 1565, for the whiche he was inhibite preaching\\nfor a season, was sold recently for ^2,075. A few years ago a Madonna\\nby Murillo brought in Paris 615,300 francs. One Banks, in N. Y. City,\\nsold from his arm, for transfusion into the veins of an asphyxiated patient,\\n8 ounces of blood, containing 240 drops each, for 10 cents a drop ^192.\\nGen. R. B. Marcy has seen, in camp on the plains, ^10 offered for a quid\\nof tobacco. Consul L. Mummius, having conquered Corinth, 148 or 147\\nB.C., on sending the pictures and statues to Rome, told the sailors that if\\nthey lost or injured any, they must furnish others of equal value. One of\\nthe choicest works of the painter Aristides he let them use as a draught-\\nboard [Liddell, Rome, 479].\\n6 Mangoldt, 64-66. Demand differs from mere desire. It is this\\ncoupled with the necessary goods or credit. Supply, too, is more than the\\nsimple existence of commodities. Their owner must be willing, at some\\nrate, to exchange them. Cf. 63, also Cairnes, pt. i, ch. ii. The market\\nvalue of all things at times and, to an extent, of all ordinary commodities\\nat all times, is regulated by the equation between supply and demand.\\nInequality at any moment between these is equalized by readjustment\\nof value. Demand increasing, value rises; diminishing, it falls. Supply\\ndiminishing, value rises; increasing, it falls. The rise or the fall con-\\ntinues until demand and supply are again equal, and the value which a\\ncommodity will bring in any market, is no other than the value which, in\\nthat market, gives a demand just sufficient to carry off the existing or\\nexpected supply. Mill, bk. iii, ch. ii, 2, 3, 4. On de Molinari s law\\nrespecting the ratio at which change in supply acts on price, 15, n. 5.\\nThe law is as follows When the relation of the quantities of two prod-\\nucts or services offered in exchange, varies in an arithmetical ratio, the\\nrelation of the values of those two products or services varies in a geo-\\nmetrical ratio {_Jour. des icon., Feb., 1889, 188] When the N. Y. Trib-\\nune reduced the price of its copies from 4 to 3 cents, 25 per cent, its\\ncirculation increased 30 per cent, though income therefrom fell off [as\\nstated] 19 per cent. The Times reduced from 4 to 2 cents, 50 per cent,\\ngaining 130 per cent in circulation and 15 per cent in income.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0127.jp2"}, "128": {"fulltext": "CHAPTER IV\\nVALUE: PECULIAR PROBLEMS\\n66 Competition and Value\\nCaimes, Leading Principles, Harper s ed., 87 sqq. Sidgwick, bk. ii, ch. ii. Ingram,\\nHist, of P. E., 158. Clark Giddings, Mod. Distrib. Process, chaps, i, ii. Bage-\\nhot, Postulates of P. E.\\nThat market value should absolutely conform to cost\\nof production, in the way just described, would pre-\\nsuppose (i) general information touching all cases of\\nprofits,^ (ii) equality of advantage among competitors,\\nand (iii) perfect mobility of labor and capital.^ Such\\nconditions are rarely if ever realized^ save in a very\\nimperfect way. As to labor, not only do poverty,\\nignorance, their distance apart and differences of\\nspeech keep people from full competition, but not all\\nthose of a given vicinity compete for all positions. In-\\nstead, we everywhere find an arrangement of groups*\\nand sub-groups, according to occupation, ability, and\\ntraining, within each of which there is competition, be-\\ntween which, little or none. The tendency of trades-\\nunions is to check competition still more. Capital, too,\\ncrowds capital only in proportion as (i) it remains free\\nor non-specialized,^ (ii) profits are known, and (iii) mo-\\nnopoly is prevented. A monopoly may be kept up\\neither by the action of government, or by the sheer\\nmass of wealth behind it.^", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0128.jp2"}, "129": {"fulltext": "value: peculiar problems\\nIII\\n1 As sucn knowledge is rarely direct or exact, and always incomplete,\\nstatements about the proportion of national income taking the form of\\nprofits are little but guesses. Rate of interest is no guide. Thus, ignorant\\nof each other s prosperity, businesses will not uniformly so compete as to\\nkeep selling prices the closest possible to cost. Absence of (ii) and (iii)\\nwould also help prevent this.\\n2 The fundamental postulate of English Economics, which, however,\\nBagehot correctly declared only hypothetically true for much of modern Eu-\\nrope, and not true at all for primitive society. He was mistaken in sup-\\nposing that it would ever accord with facts in other than a general way.\\nUsually, therefore, all that can be said is that products tend to sell at\\ncost of production 65, n. 2]. The law is, however, little less valuable\\nbecause inexact.\\nresponsible\\nbrain workers\\nautomatic\\nbrain workers\\nresponsible\\nmanual labor\\nautomatic\\nmanual labor\\na S\\n2 S 2\\n-i4 _*\\n2 s 2\\niroi\\n1 and s\\nteel\\nore\\nThis diagram, modified from Giddings, as above, shows by way of ex-\\nample the non-competitive grouping in the iron and steel industry. Ob-\\nserve that competition is more widely possible the lower the grade of\\nlabor. Ore-diggers [unskilled] and smelters may compete with the lowest\\niron and steel workers, and both with the automatists engaged upon final\\nproducts. Higher up, work is mostly more specialized. Notwithstand-\\ning all the above, a degree of competition, defying the lines of classes\\nand industries, still persists through the supply of youthful laborers con-\\ntinually coming on to the stage, choosing this calling or that, as offers\\nbest remuneration. Machinery and education extend the scope of this\\nprocess.\\nCf. 29, notes 6, 7.\\n6 Those who deny the possibility of maintaining a monopoly in the\\nlast way named, overlook (i) the extent to which profits are concealed,\\n(ii) the progressive immunity from competition which comes with immen-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0129.jp2"}, "130": {"fulltext": "1 12 VALUE PECULIAR PROBLEMS\\nsity of resources and specialization of plant, and (iii) the temptation of\\nformal competitors not to become real ones, they sharing all the advan-\\ntages from the elevation of prices [next and its n. 4].\\n6^ Monopoly Value\\nSidgwick, bk. ii, ch. x. Marshall, Ec. of Industry, i8o sqq. Senior, Pol. Econ., 103-\\n114. Sutnner, Essays, 46. Quar. Jour. Econ., vol. iii, 143.\\nMonopolies may be natural or artificial,^ exclusive\\nor partial. A monopoly, again, whether complete or\\nnot, may be in an article whose production can be\\nswollen (i) not at all, (ii) indefinitely, but at increasing\\ncost, or (iii) indefinitely at the same or lessening cost.^\\nThe monopolist s power will vary accordingly, but it is\\nimportant to mark that he need never, in order to dic-\\ntate sale prices, control the entire production.* In\\ncase of a product so monopolized, the price is fixed not\\nby cost but by men s necessity. It goes higher and\\nhigher till demand, and hence profit, begins to fall off,\\nand then plays about the line of what the market will\\nbear, just as in other cases about that of cost. The\\nmonopolist can be more or less exacting according to\\nthe nature of the product. If it is a luxury, he\\nextorts little if a necessity, he may bleed consumers\\nto death.\\n1 Government is a monopoly, natural and exclusive. A railroad, once\\ncreated, has a natural, though incomplete, monopoly of its strictly way\\ntraffic natural in that, power once given it to be a railroad, t.ionopoly\\narises without further legislation; incomplete, since means of possible\\ncompetition remain. Land-holding, be it private or communal, naturally\\ninvolves monopoly. So the ownership of mines, water-power, and the\\nlike. The legislation granting the titles in such cases does not create, it\\nmerely assigns, the monopolies. But when, as so often under Elizabeth\\nand James I, public power grants the exclusive right to manufacture or", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0130.jp2"}, "131": {"fulltext": "value: peculiar problems 113\\nsell, the monopoly originates in the grant [artificially], not in the nature\\nof the case.\\n2 Constantia (wine) owes its peculiar flavor to the agency of a few\\nacres of ground, and would be destroyed if high cultivation were employed\\nto force from that ground a larger quantity of wine. No person but the\\nproprietor of the Constantia farm can be a producer [Senior, P. E., 104].\\nNot so a railway. If it is too extortionate, some people will use wagons.\\n3 The owner of Constantia [n. 2] illustrates (i) the proprietor of a rare\\nmine, (ii) see 34; the patentee of a manufacturing machine or pro-\\ncess, (iii).\\nImmediate mastery of a decided majority is, as regards dominating\\nthe price, the mastery of all. That is, competition with a partial monopoly\\nis formal only, and it does not become real until competitors attain power\\nto supply the entire market. The law of dearest cost 65 and n. 4] has\\nhere one of its applications. For illustrations, Quar. Jour. Econ., vol. iii,\\n142 sq. Cf. above, 66, n. 6.\\ns The price cannot, of course, fall below the cost of production, but\\nmay indefinitely exceed it. If fashion were to make it an object of\\nintense desire among the opulent, a pipe of Constantia [n. 2], costing\\nperhaps ;^20, might sell for ;^20,ooo [Senior]. Imagine a monopoly\\nover quinine in a typhoid epidemic. The parlor and sleeping-car service\\nis a monopoly in a luxury. Rates must be moderate, else people will take\\nthe ordinary coaches.\\n68 Values between Non-Competing Groups\\nMill, bk. iii, ch. xviii; Essay i, on Unsettled Questions. Cairnes, Leading Principles,\\npt. i, ch. iii, 7. Sidgwick, bk. ii, cli. iii. Cherbuliez, bk. ii, ch. viii. Nichol-\\nson, Money and Mon. Problems, ch. vii. Fawcett, Manual, 390 sqq.\\nProducts whose creators do not compete, exchange\\nnot in proportion to their costs of production but\\npurely according to the conditions of reciprocal de-\\nmand. International commerce best illustrates this.\\nAt the opening of a trade between two countries there\\nis usually a greater demand in one direction than in\\nthe other, at the prices first asked. Then the com-\\nmodity, or line of commodities, least in demand must", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0131.jp2"}, "132": {"fulltext": "114 value: peculiar problems\\nbe sold lower, or the trade cease, and this every time\\ndemand becomes slack for any commodity at the old\\nprice. If the demanded reduction still leaves a profit,\\nthe exchange will go on if not, not but so long as it\\ndoes go on, there is always a tendency toward an equa-\\ntion of international demand. The cost of ocean\\nfreightage rarely falls with equal weight on both coun-\\ntries. It is the heavier on that one the demand for\\nwhose commodity is the more diminished by it from\\nwhat such demand would be were there no charge for\\nfreightage, and in proportion to that diminution. The\\nsame principles govern among domestic groups not in\\ncompetition. Whatever increases the demand of any\\none for outside products, or its supply of things available\\nfor the purchase of them, renders less favorahle the\\nterms on which it will have to exchange, and vice versa;\\nwhile all that swells outside demand for its products,\\nor lessens its supply, meliorates for it the conditions of\\nexchange, and vice versa.\\n1 The principle of this section has ramifications difficult to follow, whose\\nexplication would be too lengthy. Mill s treatment [as above] is the best,\\nto be read with Cairnes s reminder that the essential subject is broader\\nthan Mill saw, covering much domestic traffic, as well as that which crosses\\nnational boundaries. The main point to observe is that an exchange in\\nsuch cases may profit the two parties very unequally.\\n69 Complex Cases of Value\\nMill, bk. iii, ch. xvi.\\ni Wastes utilized for purposes other than gain, also\\nthe products of labor incidental to main callings, usually\\nsell at prices which are independent of their costs,\\nii When, as often, there is for any commodity or service", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0132.jp2"}, "133": {"fulltext": "value: peculiar problems 115\\na small, though permanent clemantl, that cost of pro-\\nduction which determines prices, must be construed to\\ninclude such items as insurance, risk, interest, storage,\\nlessened economy in labor force, and the like, iii Many\\na single process of production yields a main and a by-\\nproduct, as gas and coke, or a cluster of joint products,\\nas chickens and eggs, or beef, hides, and tallow. Cost\\nof production will then, supposing competition, deter-\\nmine the value of the total product in relation to other\\nthings, but not of one of its elements in relation to\\nanother or others. Their relative values will be such\\nas to keep the relative demand for them proportionate\\nto the relative natural supply of them, iv Soil which\\ncan grow either of two grains is often the better suited\\nto one. In such cases, (i) if demand forces both on to\\nintermediate soil equally good for both, their general\\ncosts here will fix their general values, and their rela-\\ntive costs their relative values; (ii) if either has to be\\ngrown on the soil best fitted for the other, this other will\\nbecome cheaper, and the alien crop dearer, in propor-\\ntion to the stress so created.\\n1 By cheapening the one less in demand, or raising the other, or doing\\nboth. Suppose a special demand for coke. It can only -be met by pro-\\nducing more gas. To market this its price must be lowered, though the\\ncost of production of it, by itself, has not altered. Make other suppositions\\nand carry through the analysis.\\n70 A Measure of Exchange-Value^\\nMill, bk. iii, ch. xv. Marshall, Contemp. Rev., vol. 51, 354 sqq. Jevons, Money and\\nthe Mech. of Exchange, ch. xxv. Yves Guyot, Set. Economique, bk. iii, ch. ii.\\nMangold t, \u00c2\u00a7\u00c2\u00a775 sqq.\\nWhile labor, corn, money, or any other service or\\ncommodity, will serve as a measure of the relative val-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0133.jp2"}, "134": {"fulltext": "1 16 VALUE PECULIAR PROBLEMS\\nues^ of particular things at a given time and place, or of\\nthe clianges in these between different times and places,^\\nno even approximate gauge of exchange-value in gen-\\neral is furnished by nature. Art itself could not make\\nsuch a measure perfectly accurate but a compound\\nstandard,* formed by adding the values, ascertained from\\nperiod to period, of fixed amounts and qualities of the\\nworld s staple commodities, each allowed weight accord-\\ning to the quantity of it consumed, would closely meet\\nthe requirement.^ Then, by carefully expanding and\\ncontracting the currency, money could be kept in con-\\nformity with such composite standard, thus realizing a\\nmeasure of general value in one single commodity.^\\n1 The problem concerning a measure of value in use 62] is very dif-\\nferent. See Clark, Philos. of Wealth, 89. He thinks even that not in-\\nsoluble. So Friedlander, Theorie d. Werthes [1852]. Ad. Smith s idea,\\nbk. i, ch. V, vi^here he argues for labor as a measure, is not exclusively that\\nof exchange value. This theory of Smith, Franklin had stated and avowed\\nso early as 1752. To-day the socialists are its great champions. Rae,\\nContemp. Socialism, 94 sq., 152 sq. Value, says Marx, is neither v. in use\\nnor v. in exchange, but labor-quality.\\n2 If one thing is worth 2 bushels of wheat and another 3, the first is\\nobviously worth as much as the second. The same if iron, coal, or money\\nhad served as measure. But after any lapse of time you could not reckon\\nfrom mere equality in value between the first and 2 bushels of wheat, that\\nit was still worth f the second. The value of wheat itself might have\\naltered. See next n.\\n3 If a bushel of wheat would buy a day s farm labor in 1850, and only f\\nof this in 1870, we know that wages, in terms of wheat, went up during\\nthat double decade in the ratio of 2 3, or 50 per cent. But whether wages\\nrose in general purchasing power, neither wheat, gold, nor any other com-\\nmodity, left to natural fluctuations, would reveal.\\nSee Jevons, as above. He has wrought out the general idea more\\nfully in his Investigations in Currency and Finance, section ii.\\nIn denying that we can even suppose any state of circumstances in\\nwhich this would be true, Mill does not take account of the possibility", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0134.jp2"}, "135": {"fulltext": "value: peculiar problems 117\\nhere set forth. His is the common idea. See Fix, Jour, des con., 1844,\\nIX, 12. So Ricardo wrote, in Proposals for an Economic and Secure\\nCurrency, sections i, iii, against such variation there is no possible\\nremedy.\\nSee later, 85. Mill, as above, well charges us to distinguish between\\na measure of value and a regulator or determinant of value, such as cost\\nof production is. To conceive a measure of cost of production Mill [ibid.]\\nthinks not difficult, though no such is forthcoming in nature.\\n71 The Value of Futures\\nBohm-Bawerk, Kapiialn. Kap.-zins, vol. ii, bk. iii, sec. iii. Gross, Zeit in d. Volks-\\nwirisck., in Zeitsch. f. die gesam. Staatsw., 1883, 126 sqq. Jevons, Theo. of\\nP. E. Mill, bk. i, ch. xi. Menger, as at 62, 127 sqq. Sax, Grundlegung,\\n178 sqq., 313 sqq.\\ni Owing to (i) the productive power of present goods\\nmeantime, (ii) our uncertainty about future demand\\nand supply, and (iii) our undervaluation of future\\npleasures and pains, future goods, per unit of quan-\\ntity and quality, have for most men a lower subjective\\nvalue in use than present goods, ii From these sub-\\njective valuations arise corresponding objective values\\nand market prices, which, reacting upon present goods,\\nraise the subjective exchange valuations of these even\\nfor the few in whose mere personal estimation futures\\nmight have seemed superior, iii The levelling ten-\\ndencies of the market then bring it about that, barring\\nspecial causes of disturbance, futures will in the market\\nbear prices less than those of siniilar spot articles, by\\na figure proportioned to the degree of their futurity.^\\nThis is the very valuable pith of what is strictly original in Bohm-\\nBawerk s book. The thought is wrought out with great thoroughness in\\nhis section cited above, and must henceforth be regarded as an integral\\nprinciple of Economics. For his application of it to the problem of inter-\\nest, see 109.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0135.jp2"}, "136": {"fulltext": "Part III\\nMONEY AND CREDIT\\nCHAPTER I\\nTHE NATURAL HISTORY OF MONEY\\n72 Barter\\nKnies, Geld, i. y evens, Mo. and the Mech. of Exchange, ch. i. Aristotle, Politics\\nbk. i, ch. ix. Nicholson, Mo. and Mon. Problems, 17. Macleod, Elements, 120.\\nBarter is a form of traffic in which commodity passes\\nfor commodity without any use of money or other tool\\nof exchange. The infehcities of barter-exchange con-\\nfine it in the main to the societies that are the least\\ncivilized and productive.^ The chief drawbacks are\\ni Necessity of setting a price to every commodity in\\nterms of every other.^ ii Want of subdivisibility in\\nmost articles.^ iii Limited correspondence between\\nneeds and commodities or services. A special degree\\nof this evil exists in the case of the laborer, who can\\nwork only for such as have, and will spare, the things\\nneeded for his support. When money of account is\\nused to reckon in, yet no money ever passes hands, we\\nmay call the practice quasi-barter.*\\n1 Although it has nowhere ceased entirely. Swapping horses or knives,\\nchanging works or teams [among farmers], taking cows or work animals\\nfor their keep, commonly involve no thought of money. Macleod con-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0136.jp2"}, "137": {"fulltext": "THE NATURAL HISTORY OF MONEY 1 19\\nsiders the society described by Homer still in a state of barter. Iliad, ii,\\n448, vi, 234, vii, 468, xxiii, 703. It was primitive money [next rather,\\nbut the passages usefully illustrate the evil phases of barter.\\n2 Between 100 articles no less than 4950 possible ratios of exchange\\nexist, all which a retailer on the truck system would constantly have to\\nkeep run of. With money, the number reduces to 100.\\n2 Many could not be divided at all, others not without impairing or\\ndestroying their value.\\nThe line between barter and money is passed when, in trading, men\\naccept this or that as pay, with the idea of recourse i.e., intending not to\\nuse what they get, but to pass it off for the thing wanted. This transition,\\nwhen gCNcral, is a decisive step in the onward march of civilization.\\n73 Primitive Money\\nJevons, ch. iv. Chapin s Wayland, 289. Ad. Smith, bk. i, ch. iv. Roscher, 118.\\nLubbock, Early H. of Mo., Contemp. Rev., 1879.\\nIn the evolution of society upward through succeed-\\ning stages, very various commodities have served as\\nmedia of exchange. Of these may be mentioned espe-\\ncially (i) peltry in the hunting state,^ (ii) cattle and\\nslaves in the pastoral, (iii) corn and other cereals, with\\nbeans, olive oil, tol acco, etc., in the agricultural, (iv)\\nmats, pieces of cloth, nails and various other manu-\\nfactured articles, in a more civilized state, (v) cowrie\\nshells,^ wampum^ and other articles of beauty, in every\\nstate previous to the invention of regular money. Gold\\nand silver probably first obtained currency through use\\nfor personal adornmentJ\\n1 According to the Bismarck Tribune, 1885, gopher tails were then\\ncurrency in parts of Dakota.\\n2 Cattle were the main money of Homeric times 72, n. i]. Also\\namong the Hindoos in the age to which the earliest Rig-Vedic hymns\\nrelate, 3000-4000 B.C. India, in Encyc. Brit. Our word fee originally\\nmeant cattle [so the LzXin pecunia, money, z.nApeculatus, property, from\\npecus, a herd of cattle or sheep].\\n3 So. Carolina, in 1687, made come, pease, pork, beef, tobacco, an", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0137.jp2"}, "138": {"fulltext": "I20 THE NATURAL HISTORY OF MONEY\\ntars general legal tender. The role of tobacco as money in early Vir-\\nginia and Maryland is well known. Mexico, when the Spaniards arrived,\\nhad no gold money, though both gold and silver were wrought, but for\\nmoney used cacao beans in little bags holding 8000-24000 each, cotton\\nmaterials, gold dust in goose-quills with values according to size, pieces of\\ncopper 3-4 fingers wide, and little tin plates. Schoenberg, I, 38, n. [2d\\ned.]. Morgan, Anct. Society, pt. ii, ch. vii, says the Aztecs had no money,\\nbut barter only. In Thibet, cakes of salt and of tea were money and legal\\ntender till somewhat recently. La Couperie, Silver Coinage of Thibet.\\nAd. Smith [as above] had heard that nails were still in his time used\\nfor small change in parts of Scotland. There is tin money in China and\\nthe Malay Archipelago. In Senegambia iron is money, as in ancient\\nSparta, where Lycurgus s laws forbade the possession of gold. Iron was\\na precious metal among the old Turanians of Babylon. Maspero, Hist,\\nanc, 140 sqq.\\ns A beautiful shell, about an inch long, white and straw-colored without,\\nblue within, found nearly all over the world, especially in the shallow\\nwaters of the Indian Ocean. There are over lOO species. The one in\\nquestion is the cypraea moneta cypraea from the name of the mol-\\nlusk which it clothes, moneta from its wide use as money. On parts of\\nthe coast of Africa it is the regular tender, and it still enjoys great currency\\nin farther India. In Bengal, formerly, 3840 equalled a rupee [50 cents].\\nCowry, in Encyc. Brit.\\n6 On wampum as money in colonial times, Weeden, in Johns Hopkins\\nUniv. Studies, 2d ser., viii-ix.\\nBut F. A. Paley, Contemp. Rev., Aug., 1884, argues learnedly that\\ngold was first esteemed in connection with sun-worship. In Genesis,\\nch. xxiv, gold is only a commodity, bought with silver. More, Utopia,\\nch. vi, represents the Utopians as eating from earthen and glass, while\\nusing gold and silver for gyves to bind criminals, earrings to brand infa-\\nmous persons, and even for purposes namelessly vile.\\n74 Money Proper\\nMill, bk. iii, chap. vii. Sidgwick, bk. ii, ch. iv. Bastable, Money, in Encyc. Brit.\\nN icholson, Mo. and Mon. Prob., ch. iii. Roscher, vol. i, 119; vol. iii {Handel u.\\nGe werhefleiss\\\\ 40. Schoenberg, vol. i, VII. Walker, Money, ch. ii. Mangoldt,\\n50 sqq.\\nAll exchange by means of primitive currency must\\nmanifestly have labored under many of the disadvan-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0138.jp2"}, "139": {"fulltext": "THE NATURAL HISTORY OF MONEY 121\\ntages of barter itself. Exchange could not become\\nfacile or extensive until commodities were discovered\\nso uniformly desirable as to possess, by universal con-\\nsent, a universal purchasing power, in other words,\\nexchange readily everywhere for all commodities and\\nservices whatever, thus becoming money proper.^ Gold\\nand silver proved such commodities. Long current at\\nfirst by weight and test, they acquired far fuller use-\\nfulness with the invention and extension of authoritative\\ncoining.^\\n1 A universally successful tender is perhaps the best definition of\\n[full] money. Cf. 82. Other things are then money only in so far as\\nthey meet this criterion. F. A. Walker, Money, followed by Bastable,\\ncalls money that which passes freely from hand to hand throughout the\\ncommunity in final discharge of debts and full payment for conmiodities,\\nbeing accepted equally without reference to the character or credit of the\\nperson who offers it and without the intention of the person who receives\\nit to consume it or enjoy it or apply it to any other use than in turn to\\ntender it to others in discharge of debts or payment for commodities.\\nThis, of course, includes bank notes. Defining so, you are forced to sub-\\ndivide money into kinds. Sidgwick, and J. H. Walker [Mo., Trade and\\nBanking] include checks and all bankers liabilities in money. There\\nare advantages to this, also disadvantages, as to any terminology. Choice\\nof definition is less important than consistency in holding to the one chosen.\\n2 See next iii, (ii,) and n. 10.\\n75 The Money Metals\\nRoscher, vol. iii, ch. vi. Jevons, chaps, v, vi. Schoenberg, vol. i, VH, iii, iv.\\nEissUr, The Metallurgy of Gold; do. of silver. Walker, Money, chaps, v-viii.\\nBastable, Money, in Encyc. Brit.\\nGold and silver possess various attributes besides\\nuniversal currency which fit them to serve as money\\nbetter than any other known material. They are\\ni Convenient (a) divisible, (b) durable, (c) impressi-\\nble, (d) portable, ii Steadiest of all things in value,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0139.jp2"}, "140": {"fulltext": "122 THE NATURAL HISTORY OF MONEY\\nowing to, (i) size and regularity of demand,^ (ii) large-\\nness 3 of quantity in use, (iii) uniformity in cost of pro-\\nduction,* (iv) facility of transportation,^ (v) tendency of\\nevery rise or fall in value to be checked by change in,\\n(a) production^ of the metals themselves, (b) use of\\ncredit, (c) exchange power of a given amount^ of the\\nmoney, iii Relatively independent, in value, of gov-\\nernmental act. (i) Legal enactments do not make\\nthem into money. (ii) Government, though it may\\nmodify, cannot fix their value,^ coinage only attesting\\nthe quantity and quality of the metal in each piece.^*^\\n1 Diamonds, like gold and silver, present great weight in small compass,\\nbut lack qualities (a) and (c). The Regent or Pitt diamond is thought\\nworth about 2.2 tons of gold coin, as much as 40 men could carry. Gold\\nis in fact far from being the most valuable substance. It is worth per troy\\nounce ^20.67183. Rare metals are quoted by the gramme. Reducing\\nthis to troy ounces we have per troy ounce, omitting fractions, Barium\\n^124, Calcium ^311, Osmium ^93, Rubidium ^622, Zirconium ^496.\\n[Scient. American, June, 1886.] There are said to be 19 metals more\\nprecious by weight than gold, and cocaine is more so than any metal. A\\npound of steel in the form of hair springs for watches is worth [1889].\\n^140,000. Platinum, coined by Russia from 1828 to 1845, proved poor\\nmoney, being lustreless, difficult to melt, and very fluctuating in value,\\nowing to meagreness of supply. Quicksilver liquefies too easily. Copper,\\n900 times less valuable per grain than gold, is, for rich societies, not pre-\\ncious enough for full money, but lasts nobly. J. B. Say believed certain\\ncopper coins to be still current in France early in this century which had\\nnever been out of circulation since the days of the Roman empire [Blanqui,\\nvol. i, 321]. As to weight, gold [spec. grav. 19.253] is the heaviest metal\\nbut two: platinum [21.5], and iridium [22.23]. Silver has a spec. grav.\\nof 10.474; copper, one of 8.8.\\n2 The demand for money consists of all goods, services, etc., whatever,\\nwhich are offered for money.\\nOf gold the world s existing stock, coin and wares, is about 11,000\\ntons, worth ^7,700,000,000. The usual yearly loss, literal and from attri-\\ntion, etc., is 2 tons, or ^1,400,000. The mines yield yearly some ^85,000,000,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0140.jp2"}, "141": {"fulltext": "THE NATURAL HISTORY OF MONEY 1 23\\nof which, till lately, has gone into coin, the rest into wares. Now, the\\nconsumption for wares is greater, about $62,500,000 annually. The gold\\nin the world in 1884, in form of coin or of bullion covering notes, was\\n$3,700,000,000 [Del Mar.], $3,400,000,000 [Burchard], or $3,270,000,000\\n[Soetbeer]. The silver of the civilized nations in 1884, money and hoards,\\nwas estimated at $2,185,000,000, and the increase that year, not quite\\n$130,000,000. Of silver the western nations use in manufactures some\\n$22,000,000, and send to Asia about $72,000,000, hoarding or coining not\\nover $35,000,000.\\nGreater for silver than for gold, because of its wider and more equable\\ndistribution in the earth. Suess, Zukunft des Goldes.\\nSee 76. Here gold, value for value, has enormous advantage over\\nsilver: $1,000,060 in gold weighing only about if tons, in silver 26| tons.\\nFor subsidiary silver, about 6.4 per cent lighter than the dollars, the figure\\nwould be 25 tons; for nickel half dimes, 100 tons.\\nIf gold, e.g., ever becomes abnormally dear, mining it pays better, the\\noutput increases, and the extra preciousness disappears, or tends to. Also\\nvice versa. Notice, however, that, with the growth of fixed capital in\\nmining the influence described acts less promptly. Hadley, Railroad\\nTransportation, 72.\\nIn general, as money increases in value, more credit transactions take\\nplace, so far dispensing with money, and hence cheapening the same again.\\nIf it decreases in value, the reverse results appear.\\nThat $1 will now pay for as much as $1.10 would a month ago, means\\nthat so much more exchanging can now be effected with a given amount\\nof money. This possibility has little effect in practice, because, though\\nthe dearer unit could exchange more, it would not do so, owing to tendency\\nof dear money [low prices] to retard circulation. This is why the text\\ndoes not, as is common, name swifter or slower circulation as an element\\nin the automatism of money s value. Dear money, working as a brake on\\ncirculation, tends to grow dearer still: cheap money [high prices], accel-\\nerating circulation, grows ever cheaper. But should extraneous causes\\ngive quick movement to dear money, rise in its value would be checked;\\nor a slow pace to cheap money, it would tend to be less cheap.\\n3 A metal not so already, might, however, become more valuable by\\nbeing made legal currency, and it is believed that several powerful govern-\\nments could by coining upon a common ratio maintain the relative values\\nof gold and silver free from essential change [next Certain writers\\nexaggerate, others underrate, the character of money as product of state\\naction. See Horton s note. Rep. of Intl. Monetary Conf. of 1878, p. 741.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0141.jp2"}, "142": {"fulltext": "124 THE NATURAL HISTORY OF MONEY\\nThis, i.e., constitutes the political essence of coining. The embossing,\\nmilling and other artistic work are of great service against counterfeiting,\\nand may also embellish. The alloy imparts hardness. The fine bars of\\nsilver made by the U. S. mints and assay offices run 998-999 fine, usually\\n999. The U. S. and most of Europe, coin from metal 900 fine, and bars\\nof this fineness are in these lands called standard bars. Great Britain\\ncoins gold 9i6| fine, silver from her standard silver bars, 925 fine. The\\nsilver quotations in London refer to such bars. There is thus no univer-\\nsally recognized standard for bars of either metal, but x^Vo probably\\ncome in time to be recognized as such. Russian coins are j|- fine, like\\nEnglish gold.\\n76 Mode of their Distribution\\nMm, bk. iii, chaps, viii, ix, xix, xxi. Ad. Smith, bk. iv, ch. i.\\nGold and silver find their way over the earth partly\\nas commodities, partly as coin. If gold is plentiful in\\nany country, whether dug there or brought there, it is\\ncheap, prices are high, and foreign commodities throng\\nin, to be paid for by sending gold to the countries\\nwhence they come. On the other hand, every country\\nwhere gold is scarce will have low prices, and gold will\\nbe tempted in to purchase commodities for exportation.^\\n1 A fine example of the play of natural law in the social world 15,\\nn. 5]. During the potato famine of 1847 Great Britain had to import\\nenormous quantities of grain from America, sending hither therefor the\\nsum of ;i^i 6,000,000 in bullion. Prices at once rose here and fell in\\nEngland. Eng. merchants bought less in America, while Americans bought\\nlargely in England, so that, the next year, all the gold returned to Great\\nBritain. Toynbee, Industrial Revolution, 82 sq. The processes described\\nare of course more or less obstructed by tariffs, and by whatever h.nders\\ntrade 54, 55].", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0142.jp2"}, "143": {"fulltext": "THE NATURAL HISTORY OF MONEY 12$\\nyy Bimetallism\\nNicholson, Mo. and Mon. Problems, pt. ii. Walker, P. E., 406 sqq. Money, chaps.\\nxii, xiii; Mo. Trade, and Ind., chaps, vi, vii. Laugklin, ed. of Mill, 633 [good\\nbibliog.]. yevons, c\\\\\\\\. xW. Schaeffle, Fur internal. Doppehv dhrung. Arendt,\\nVertragsmdssige Doppelwahrung. Wag7ter, in Zeitsch. f. gesam. Staatsiu.,\\n1880, IV, 1881, I. Suess, Zukunft d. Goldes. Lexis, in Conrad s yahrb., 1877, n;\\n1880,1; 1882,1. Soetbeer, ibid., z?}Zo,i; Vierteljahrsch.f. l^olkswirlsc/i. ^Xll,\\nii, 2. Laveleye, La mon. bimeialliqtte. Piiiz, Graph. Darst. d. Metallpreise.\\nNasse, in Schoenberg, vol. i, VII, xi, 3. U. S. Consular Rep., Dec, 1887.\\nBimetallic money is money formed by opening gold\\nand silver both to free comage,i and making each an\\nunlimited legal tender at a certain permanent legal\\nvalue-ratio to the other. Its superiority, supposing\\nthe scheme feasible, arises from two facts i It will add\\nsteadiness to the value of the dollar or other unit of\\nvalue, since this, as we have seen,^ is complete in pro-\\nportion to the size of the whole volume of unwrought\\nmoney-metal. Gold and silver together of course form\\na far vaster reservoir than either by itself. But a\\nbimetallic money-unit will be less changeful than a\\nmonometallic, even if the whole money-metal volume\\nis the same in the two cases, as fluctuations^ in both\\nmetals at one and the same time are less probable\\nthan in one alone, ii Such a system would furnish a\\ncommon measure of value between its members and\\ngold monometallist or silver monometallist states,^ and\\nbetween these latter also. The serious question is\\nwhether the two metals can be made a single stan-\\ndard of value. We pronounce this possible^ Sufficient\\nnations may unite upon a given value-ratio to render\\nboth metals, in those nations, current together at that\\nratio, all natural tendencies to alter the rat-io, as by\\nextensive losses or new discoveries of either metal, being\\ninstantly checked by the new demand thus originated", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0143.jp2"}, "144": {"fulltext": "126 THE NATURAL HISTORY OF MONEY\\nfor the cheaper metal wherewith to make payments.^\\nThis bimetalHc scheme, never yet tried, entirely differs\\nin principle from a unigovernmental one.^\\n1 Coinage is technically known as free, even when a seigniorage is\\ncharged for coining 85, n. 4]. Full legal tender quality in both metals\\nas in U. S. since 1878, does not alone constitute bimetallism.\\n2 Either 15 parts of silver to i of gold [U. S., 1792-1834], or 15J: I\\n[the Latin Union, viz., France, Belgium, Switzerland, and Italy], or 16: i\\n[U. S., 1834-1874, and 1878]. A ratio differing from any of these might\\nof course be chosen. A grain of gold bullion is now [1889] worth nearly\\n20 of silver.\\n3 See 75, ii.\\nTaking, as yet, no account of paper money. If considerable labor\\nhas been bestowed upon gold or silver, as in case of most wares, the por-\\ntions affected no longer aid stability. They are only so much commodity.\\n5 Through extraordinary discoveries or losses, exportation, or new uses\\nor disuses in the arts.\\nAbout of the world s population uses gold only as full money [gold\\nmonometallists] between and are bimetallists, and nearly f silver\\nmonometallists. On advantage ii, Bonamy Price, Contemp. Rev., Mch.,\\n1884, Walker, P. E., 409, 411.\\nOn the basis of such considerations as, with the other writers named\\nabove. Walker [P. E., 406 sqq.] and Nicholson [228 sqq.] adduce. About\\nthe precious metal is coin or bullion accessory to coin. This part, so far\\nas present in their borders, the league of nations would monopolize, which\\nwould go far to fix the relative demand of the 2 metals, a political cause\\ndetermining the action of nature. To drive either sort of money to a\\npremium, not only must enough of the other be supplied to displace it in\\nthe circulation, but a market must be found for what is displaced. Were\\nthe league small, both infelicities might occur should the U. S., Gr.\\nBritain and Germany join the Latin Union [n. 2] and all coin both metals\\nfreely, neither would be possible. Significant, too, are (i) the monetary\\nhist, of France, which from the beginning of the century till 1874, unaided\\nby other nations, and amid the greatest changes in the relative values of\\nthe 2 metals, welcomed both to its mint; and (ii) the fact that variations\\nin the relative values of g. and s. have never imitated variations in relative\\nsupply and output, save very slowly and shghtly. The fairest plea for gold\\nmonometallism is Nasse s, in Schoenberg. His main arguments are the\\npolitical difficulties of a bimetallic league, and people s dislike of silver", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0144.jp2"}, "145": {"fulltext": "THE NATURAL HISTORY OF MONEY 12/\\nbecause of its weight. The political difficulty is great, perhaps decisive\\nthe other would mostly disappear with use of certificates.\\nReference here is to ordinary and local variations, radical and wide\\nones being prevented by the agencies specified in n. 7. Units of one coin,\\nbeing cheaper yet equally good for the purpose, would be sought [by\\ncarrying bullion to the mint] for use in payments [Walker, Mo., 253].\\nHence to show, as Laughlin, H. of Bimetallism in U. S., does, the ill\\nworking of bimetallism in one land, in no wise disproves the scientific\\nbinietallist argiunent.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0145.jp2"}, "146": {"fulltext": "CHAPTER II\\nBANKS AND PAPER MONEY\\n78 Banks of Deposit\\nyuglar, Bangues, in Say s Diet, des Finances. Courtney, Banking, in Encyc. Brit.\\nHorn, Banks, in Lalor s Cyc. Wagner, in Schoenberg, vol. i, VIII, 11. jfevons,\\nch. xvi. Ad. Smith, bk. ii, ch. ii. Bowen, American Pol. Econ., 316. Walker,\\nMoney, 409 sqq.\\nThe use of metallic currency is attended with certain\\ndisadvantages, as (i) labor and expense of counting,\\n(ii) labor, expense and risk of transportation, (iii) lia-\\nbility to rolblbery, (iv) difficulty of identification, (v)\\ndearness. All these are lessened by substituting paper\\nfor coin.i As trade multiplied, therefore, it naturally\\noccurred to merchants to deposit their specie with\\nsome responsible party and traffic with his certificates\\nof deposit, the specie for each certificate being obtain-\\nable by the holder on call,^ and, at the outset, a slight\\npremium allowed for the care of the money. Hence\\narose banks of deposit, serving to facilitate exchanges\\nnot only between individuals but also between cities\\nand nations.\\n1 Touching most of the items this is obvious. As to (iii), compare in\\nease of concealment, 1,000,000 in gold and the same in thousand-dollar\\nnotes. As to (iv), notes can be numbered and marked, which would\\ndamage coins. Ad. Smith compares gold and silver mo. to a highway on\\nthe ground, paper to a wagon way through the air. In the matter of\\ndearness, the use of subsidiary paper effects no saving. The necessary\\nexpense of keeping up our subsidiary paper circulation during and after\\nthe war was 5 per cent of its face value yearly, being equal to interest on\\nbonds enough to purchase the silver which supplanted it. The coining of", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0146.jp2"}, "147": {"fulltext": "BANKS AND PAPER MONEY 1 29\\nthis cost, indeed, 1J-2 per cent, but the part of such expense belonging to\\na single year would be slight, as few if any of the coins would show wear\\nin less than 50 years. And in paper money at large the saving occurs in\\ninterest rather than in wear. It costs Gt. Britain ^10,000 to coin a mil-\\nlion sovereigns. In 15 years they need recoining, and have lost $25,000\\nin value. Total expense for manufacturing and wear in 15 years, $35,000.\\nThe paper and printing for a million i pd. notes would cost $40,000, and\\nthey would have to be replaced three times at least, probably 4-6 times, in\\nthe 15 years. The cost for larger notes would of course be much less, and\\nfor the largest, under that of gold. On present condition of the Brit,\\ncoinage, Quarterly Rev., April, 1883, and Quar. Jour. Econ., vol. i, 225.\\nThe British gold coin taken together loses 4.16 per cent in 100 years, or\\na trifle over i per cent in 25 years. Sovereigns naturally wear better than\\nhalf sovereigns.\\n2 The identical coins deposited, that is, were at first to be given back,\\nthe loan being a commodatum [Roman law] as distinguished from a\\nmututim, in which the lender can demand again only equivalence, not\\nidentity. It was a surrogate [doUar-for-doUar reserve] note system.\\n79 Developed Banking\\nQuar. Jour. Econ., vol. ii, 482 sqq., 251 sqq. Macleod, Theo. and Prac. of Banking, vol.\\ni, ch. ix. Banks, and Banks of Issue, in Lalor. Jevons, chaps, xvi sqq. Juglar,\\nas at 78. Yves Guyot, Set. Economique, bk. v, ch. iv.\\nSuch an institution, once established, could not but\\nhave the effect of bringing together borrowers and\\nlenders. All persons having surplus money would\\ndeposit, and no objection would be raised against the\\nbanker s lending, so long as he promptly honored his\\npaper. Hence arose banks of discount and loan,i serv-\\ning to render capital more efficient. But it proved a\\nvery rare occurrence for more than one-third of the\\naverage amount on deposit ever to be called out of\\nbank, two-thirds the average being always on hand.\\nBankers, therefore, ran no appreciable risk in issuing\\npromises to pay far beyond the aggregate of their\\ndeposits, and, as they could discount with these surplus", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0147.jp2"}, "148": {"fulltext": "130 BANKS AND PAPER MONEY\\npromises no less readily than with money, the issue of\\nthem became a great source of income.^ Hence arose\\nbanks of circulation, furnishing the public with a\\ncheaper and more convenient circulating medium.\\nDiscount, subtracting the interest beforehand, is now the sole form of\\nregular bank loaning, except in cases of over-drafts.\\n2 To explain instead of using f the average deposit wherewith to\\ndiscount notes, holding as reserve, the entire average deposit might be\\nmade a reserve, and double its amount in notes used in discounting, thus\\nmultiplying the bank s gainful resources by 3. No fixed rule is observed\\ntouching the proportion of reserve, and it is rarely so much as J. Before\\nthe rise of the German empire Leipzig banks used to keep f, those of\\nBavaria only J [Walker, P. E., 1 76] The banks of issue in the German\\nempire have at present almost exactly in reserve to every 4 in circula-\\ntion, i.e., only the circulation is uncovered.\\n80 Government Paper\\nBanking, in Lalor. Perry, ch. xi. Walker, Money, chaps, xvi, xxi. Knox, United\\nStates Notes.\\nPromises to pay issued directly by a sovereign power\\ndiffer essentially from bank notes, (i) not representing\\nvalues in the same way, (ii) basing no legal claiins,^\\nand (iii) lacking elasticity^ at best in the direction of\\nexpansion, and, unless convertible, also in that of con-\\ntraction. Midway between the two kinds of paper is\\nthat of the United States national banks. On failure\\nof one of these, the nation undertakes to insure the\\npayment of its notes, yet always from the bank s own\\nassets placed beforehand in the national treasury for\\nthat purpose.*\\n1 Bank notes, though not covered dollar for dollar, are still thought of\\nas representing the reserve. The nation s promises [greenbacks] bear\\nno exactly similar relation to any monies in the treasury or other property.\\nSee next n., also 86, n. 6.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0148.jp2"}, "149": {"fulltext": "BANKS AND PAPER MONEY I3I\\n2 Greenbacks are not a legal lien on any part of the nation s wealth,\\nwhether in the treasury or out, not even when a reserve is by law kept for\\ntheir liquidation on presentation 86, n. 6].\\n8 Contraction and expansion occur more or less arbitrarily, by legislative\\nfiat, not likely to accord at all exactly with shifting monetary needs. This\\nmight, it is true, be remedied in part. We return to the subject in Part VI.\\nThe system is described somewhat fully in Part VI.\\n81 Historical\\nJuglar, and other authh., as at 77. Gartiier, Traite, ti-j sqq. Macleod, Theo. and\\nPrac. of Banking, vol. i, ch. ix. Quar. Jour. Econ., vol. ii, 251 sqq. Jevons, ch. xvi.\\nAd. Smith, bk. iv, ch. iii. Lenormant, La Monnaie dans VAntiguite. Simonin,\\nFlorentine Bankers, Rev. d. d. Mondes, Feb., 1873.\\nPieces of leather, each probably intended to represent\\na whole skin, were current money in ancient Russia.\\nThe Chinese,^ Tartars and Persians, had leather and\\npaper money as early as the fourteenth century. Bills\\nof exchange 2 were known to Assyrians, Phoenicians,\\nCarthaginians, Greeks and Romans. They seem to\\nhave been first used in modern times to pay papal\\nrevenues in the crusades, many being now known dated\\nin 1200^ and on till 1250. The first hank of deposit\\nwas erected in Venice,* 1171. The Banks of Genoa\\nand Barcelona rose in 1407. The Bank of Amsterdam\\ndates from 1609, and still exists, though radically reor-\\nganized in 1 8 14. It, like the Bank of Venice, was\\ncontrolled by the state, and had origin in trouble from\\ndepreciation of coins.^ The Bank of Hamburg was\\nfounded in 1619, on the same principles with that of\\nAmsterdam, only not controlled by the state.^ As yet\\nthere were no banks in England, but, during the civil\\nwars of the seventeenth century, goldsmiths received\\ndeposits of the precious metals, either holding them\\nsubject to check,^ or giving transferrible receipts. The", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0149.jp2"}, "150": {"fulltext": "132 BANKS AND PAPER MONEY\\nBank of England,^ established in 1694, was the first to\\ncombine the three functions of deposit, discount and\\ncirculation. It is at present the most powerful bank\\non the globe. Next stands the Bank of France, founded\\nin 1800.\\n1 Ruge, Gesch. d. Zeitalters d. Entdeckungen, beautifully reproduces\\nthe oldest piece of paper money in the world. The original is Chinese.\\n2 Lenormant, as above, 117, translates an Assyrian bill of exchange\\nbelonging to the 6th century B.C. On Gr. and Roman bankers, Courtney,\\nas at 78, also Macleod, Elements, vol. i, 279 sqq.; Banking, vol. i, ch. iv,\\nsec. I Blanqui, Hist, of P. E., ch. xv. [On the technique of the foreign\\nexchanges, see 95.] At Josephus, Antiqq., XII, iv, 7, end, one Joseph\\nfarms Egypt s revenues in Palestine. He keeps money with Arion, in\\nAlexandria, and when the taxes are due, writes an order on Arion for their\\npayment. This amounts to a bill of exchange, an international check or\\ndraft.\\nBlancard, Lettre de change h Marseille au 13 Sihle. Saladin, famous\\nin the 3d crusade, iiS^-gz, used bills of exchange. Is it not possible that\\nthis institution [like so many others] came from the Arabs, not from the\\nJews, as commonly supposed?\\nLalor, vol. i, 227 sq., N. A. Rev., Sept., 1885, 205 sq.. Gamier, 727.\\nThis bank perished with the Venetian republic, 1797.\\nThis, the Bank of St. George, was perhaps the oldest bank of issue.\\nPerry, 276, well tells the story. See, more fully. Ad. Smith, in ch. iii,\\nof bk. iv. The latter thinks all the continental banks named, and that of\\nNuremberg also, to have sprung from this motive. Amsterdam s current\\nmoney having through clipping lost 9 per cent of its face value, so tbat\\nbills of exchange on the city, destined to be paid in that money, were per-\\nsistently so much below par, a bank was established under the city s\\nguaranty, to receive coin upon deposit according to weight, and give\\ncredit therefor. This credit was known aS bank money. All bills of\\nexchange on Amsterdam, above a certain sum, were ordered to hy, paid in\\nit, whereupon [par] Amsterdam exchange speedily rose to par, and even\\nabove.\\nIt still remains, and under its original organization. Soetbeer, in\\nVierteljahrsch. fiir Volkswirtsch., Jahrg. V, vol. ii.\\nSee Macleod, as above. Ibid., vol. i, 281 sqq. [4th ed.] are several of\\nthese primitive checks, varying somewhat in form. One reads", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0150.jp2"}, "151": {"fulltext": "BANKS AND PAPER MONEY 1 33\\n1 6th Nov., 1689\\nMr. Jackson, Pray pay to the bearer hereof, Mr. Daniel Croker, five\\npounds, and place it to the accompt of\\nYour loving friend,\\nJohn Wynyarde\\nTo Mr. Roger Jackson,\\nAt Sir Francis Child s, Goldsmith,\\njust within Temple Barr\\nThese drafts vi^ere sometimes payable to bearer simply, sometimes to\\npayee or bearer, sometimes to payee or order. At first they were written\\nout fully with the pen, and might be sealed. The receipts, or promissory\\nnotes, were always issued if the depositor preferred, and these, too, passed\\nfrom hand to hand as well as the drafts.\\nNoel, Les banques d Amission en Europe, 2 vols, [noble history, from\\nthe sources, of all the greatest European banks]. On origin of Bank of\\nEng., Bancroft s U. S. [author s last rev.], vol. ii, 184; Macleod, Banking,\\nvol. i, ch. ix.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0151.jp2"}, "152": {"fulltext": "CHAPTER III\\nTHE THEORY OF MONEY\\n82 The First Function of Money\\nKnies, Geld, v. Walker, Money, ch. i; Mo., Trade and Ind., ch. i. Perry, ch. ix.\\nNicholson, Mo. and Mon. Problems, ch. ii. Nasse, in Schoenberg, vol. i, VII, i.\\nAd. Stnith, bk. ii, ch. ii. Mill, bk. iii, ch. vii. Hildebrand, Theorie des Geldes.\\nSumner, Mo. and its Laws, Internal. Rev., vol. x. Bonatny Price, How Mo.\\ndoes its Work, Contemp. Rev., Feb., 1882. Bastable, Money, in Encyc. Brit.\\nThe first 1 and on the whole the chief business of\\nmoney proper,^ or hard money, is to aid in effecting\\nexclianges, to furnish a medium of exchange. With\\nreference to it as fulfilHng this requirement, the follow-\\ning propositions are all-important i It is still essentially\\na commodity,^ only having a universal or generalized\\npurchasing power. Buyers of other things may be said\\nto sell money, sellers to buy. ii The commodity s\\nservice as money is, however, entirely different in kind\\nfrom that which it would render as an article of con-\\nsumption.* iii Money itself is but a small fraction of\\nthe value which it directly and indirectly helps to ex-\\nchange.^ iv It so powerfully stimulates production\\nby promoting exchange, that, far from being dead,\\nit may be set down as the most productive of all capital.\\n1 Both logically and [with little doubt] historically. Knies and Marx,\\nhowever, make this function secondary to that discussed in 83. Bring\\nthis and the following into relation with those of Chapter I.\\n2 Cf. 74, n. I. Whatever scope we give to money, the analysis of\\nits character must begin with metal money, there being many things predi-\\ncable of it which are not so of any form of paper. See 86, 93.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0152.jp2"}, "153": {"fulltext": "THE THEORY OF MONEY I 35\\n3 Not a mere token, or an order, as Macleod and the advocates of fiat\\nmoney vainly teach. Hovi^ far adoption by government conveys to it its\\npeculiar power in purchase cannot be confidently stated. Some exaggerate,\\nothers underrate this. Cf. 75, n. 9, and Horton, as cited at 83.\\nKnies, Geld, 2d ed., 184.\\nSee 77, n. i. Cf. Perry, 237, and Ad. Smith, as above. A dollar\\nmight effect 1000 dollar exchanges in a day. Also, money aids to transfer\\nvast quantities of goods merely through its denominations, without the\\nslightest further intervention. At the N. Y. clearing-house, $200,000,000\\nare sometimes exchanged in an hour, and as much at that in London, no\\ncoin or bank-notes being used except for balances 94, n. i].\\nAs Newcomb and many other able authors have called it, out of a\\nmistaken idea of productivity. See Walker, Mo., 22 sq., and n. 5, above.\\n83 The Second Function\\nRoscher, bk. iii, ch. iv. Marx, Capital, pt. i, ch. iii, sec. i. Knies, Geld, iv. Yves\\nGuyot, Sci. Economique, bk. iii, ch. iii. Horton, Position of Law in the Doct. of\\nMoney [a pamph.]. Perry, 246 sqq.\\nThis is that of a scale or measure of value, and is\\nentirely separate in nature from the first. The two\\nmay and often do belong to different wares.^ Of money\\nviewed in this second character we are carefully to\\nremember that i It is at best only an approximately\\ninvariable measure.^ ii It is a measure of value by\\nvirtue of being itself a value.^ iii It is a more perfect\\nmeasure the more steady and invariable it is as to its\\nown value.* iv It inevitably shrinks in value so soon,\\nand about in proportion, as it is multiplied beyond the\\nrequirements of exchange.\\n1 In the U. S., 1889, gold is the measurer, while silver, nickel, copper\\nand paper do the actual exchanging. If no gold at all existed in the form\\nof money [coin] it might still be the measure of value. Nicholson, Mo.\\nand Mon. Prob., 20.\\n2 Herein differing from most other measuring scales of units 87 and\\nn. l]. Nicholson, 299. Marshall, approved by Nicholson, 34, deems a\\nperfect measure of value unthinkable. In what sense this is so, 70.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0153.jp2"}, "154": {"fulltext": "136 THE THEORY OF MONEY\\ns Measure and the thing measured being of the same kind or nature.\\nMost measures bear this relation to the things measured. Not so the ther-\\nmometer, which consists in an arrangement for measuring heat by length.\\nSee 75, 77, 85, and notes.\\ns More strictly, perhaps, it tends to shrink, and will do so unless counter-\\ncauses are in play. Various influences, too, may and usually do interfere\\nto prevent the depreciation from following inflation [or vice versa] with\\nperfect exactness. See 85.\\n84 Other Offices of Money\\nWalker, Money, ch. i. Knies, Geld, vi, vii. Jevons [ch. iii], Nicholson, and Bastable,\\nas at preceding\\nBesides the two sovereign services just character-\\nized, it devolves on money also i To furnish a system\\nof money denominations.^ ii Legally to make pay-\\nments and liquidate indebtedness.^ iii To be a stan-\\ndard for deferred payments.^ iv To transfer values\\nin space and in time.^ v To regulate, as a totality, the\\nvalue of each unit of its mass.^\\n1 Not at all to be confounded with either of the greater functions.\\nThus, in English America before the Revolution, the money of account,\\nviz., the colonial pounds, shillings, pence, and farthings, a different system\\nfrom the English, neither exchanged nor measured values, but was a mere\\nmeans of book-keeping.\\n2 This, too, as Knies well points out, is something quite separate from\\nthe exchange-function. Governments might make corn or horses the legal\\nmeans-of-payment, instead of money.\\n3 As in case of all time contracts and transactions, and outstanding\\ndebts. This is logically and in point of time a secondary function of\\nmoney, but, in modern business, hardly so in importance. See 87.\\nWalker, Mo., 12, against Jevons, thinks this not an office of money as\\nsuch. When a commodity comes to serve as a store of value, it ceases\\nto be money. This seems arbitrary. Money is often used thus. Hoarded\\nsilver dollars [1889], for example, do not drop to their bullion value.\\nNotice that the use of money as a reservoir of value diff ers from that of iii.\\nIt is true that when gold and silver are used as the form in which to send\\nvalue abroad, they cease to be money.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0154.jp2"}, "155": {"fulltext": "THE THEORY OF MONEY 1 37\\n6 We see from 83, iv, and 87, that the total made up of money and\\nunwrought money metal actually does have this effect, whether artificially\\nmanipulated or not. It is, indeed, one of the most significant of all the\\nfacts relating to money.\\n85 The Value of Money\\nIValker, P. E., pt. iii, chaps, iii, iv. Mill, bk. iii, chaps, viii, ix. Perry, 241 sqq.\\nFawcett, Manual, 356 sqq. Dastiat, Pol. Econ., 202 sqq. McAdam, Alphabet in\\nFinance, vi. Bilgrant, Iron Law of W.iges. Wagfier, Geld u. Kredittheorie der\\nPeeVschen Bankacte; also in Zeitsch.f. gesam. Staatsw., 1881, 759 sqq. Nasse,\\nin Schoenberg, vol. i, VII, x. Sidgwick, bk. ii, ch. v. Mangoldt, 79 sqq.\\nThis, by which, observe, we do not here mean inter-\\nest, but purchasing power, is regulated as in case of\\nthose goods whose supply is limited,^ almost entirely\\nby the relation between demand and supply, cost of\\nproduction rarely coming into the account, i Money\\nbehaves like a monopolized article without being such,\\nviz., while remaining freely open to both additions and\\nlosses, ii The facts named at 75, ii,^ render money\\nmore independent than aught else of all ordinary\\nchanges in demand and supply, iii Given money\\nenough already to do all needed money-work, and the\\nvalue of a country s money-total is wholly independent\\nof its mass.^ iv The influence which bullion may exert\\nin maintaining the value-parity^ between itself and\\ncoin, is not to be explained by supposing bullion to\\nrepresent cost of production more nearly than coin,\\nsince of cost both are in equal degree independent.\\nV If different portions of the money supply have unlike\\ncosts of production, the cheaper will not displace the\\ndearer unless it is sufficiently abundant by itself to\\nanswer the demand.^ vi An alteration in the value of\\nmoney may be nothing else but phase of a change in\\nthe values of general commodities.^ vii In determin-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0155.jp2"}, "156": {"fulltext": "138 THE THEORY OF MONEY\\ning the value of money, paper money and all the other\\nso numerous instrumentalities of exchange, have,\\naccording to the amount of exchanging which they\\neffect, the same influence as money proper.\\n1 See 65, end, 67.\\n2 Most potent among those conditions is the vastness of the supply of\\nmoney, and the uniquely broad and uniform demand for it, consisting in\\nall salable commodities or services except money itself.\\n3 After the point named is reached [Cernuschi, Nomisma, 14], an\\nimportant condition, overlooked in Mill s discussion, a greater total bulk\\nof money vifill purchase no more than a smaller. Why, then, should any\\none longer produce precious metal? Because each new dollar, though\\ntheoretically less valuable than dollars vi^ere before, is worth as much as\\nany old dollar is now. And from the point of view of society s interest\\nit is well for the total to be as large as possible 75, ii, and 77].\\nI.e., seigniorage being left out of view. Since 1875 [it tad previ-\\nously been of i pr. ct.] the U. S. mint charges no seigniorage for coining,\\nbut the bringer of the metal must pay for the alloy. In England also\\nthere is no seigniorage proper, but a delay in furnishing the coins occasions,\\nthrough loss of interest, a sUght practical seigniorage, giving coin usually a\\ntrifling excess of value over the metal it contains [Mill, bk. iii, ch. ix. 2, n.].\\n5 Gresham s law [Sir Thos. Gresham, founder of the Royal Exchange,\\nLondon, d. 1579] is true only with this Umitation. See Walker, P. E.,\\n142. It is usually quoted to the effect that poorer money will always\\ndrive out better. So Aristophanes, Frogs, Frere s Tr., 893 sqq. [cited\\nby Laughlin, Bimetallism in U. S.],\\nFor your old and standard pieces, valued and approved and tried,\\nHere among the Grecian nations and in all the world beside,\\nRecognized in every realm for trusty stamp and pure assay,\\nAre rejected and abandoned for the trash of yesterday.\\nIn fact another modification of the law should be named. The people\\nmay refuse to handle the poorer, as on the Pacific coast during the civil\\nwar [H. George, Prog, and Poverty, bk. v, ch. i.]. Legal tende; paper\\nwould not circulate and gold was retained.\\n6 See 87.\\nOn different forms of paper money, see 80. The instrumentalities\\nare checks, bills of exchange, promissory notes, due bills, book accounts,\\nbarter, post-office notes and orders, express orders, telegram and telephone\\norders, etc.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0156.jp2"}, "157": {"fulltext": "the theory of money i39\\n86 Paper Money\\nWalker, Money, pts. ii, iii. Noel, Le billet de Bangue [cf., same title, in Diet, des\\nFinances]. Knies, Geld, xi. Wagner, Geld und Kredit. Mill, bk. iii, ch. xii.\\njfevons, Mo. and the Mech. of Ex., ch. xiii. Nicholson, Mo. and Mon. Problems,\\nch. vi. Mangoldt, 58, 59. Papa d Amico, Titoli di Credito surrogati della\\nMoneta. Walras, Theorie mathematique de la richesse sociale, 145 sqq.\\nTo secure simplicity, this Chapter has thus far sup-\\nposed the monetary material to be metal only. The\\nsame laws hold in the main for any system, i If, along\\nwith metal, surrogate paper bills be put in use, the\\nforegoing principles remain perfectly unmodified, con-\\nvenience and perhaps some economy in wear and loss\\nthe sole changes, ii If instantly and surely convertible\\nnotes not fully covered be introduced, the extra con-\\nvenience adds 2 somewhat to the entire number of\\ndollars in circulation, this increment costing nothing.^\\niii If there is in circulation promissory paper not con-\\nvertible, it drives out more or less metal in proportion\\nto its depreciation, the latter being great or slight\\naccording to a variety of circumstances, of which its\\namount and the issuer s credit are the chief. It will\\nbe seen that no one of these species of paper can\\nentirely take the place of coin. Hence, to be scientific,\\nwe have to call paper currency partial or imperfect\\nmoney.^ The failure to distinguish it from money\\nproper leads constantly into the gravest errors of view.\\nPaper, it is true, (a) is a medium of excliang-e, and\\n(b) has value, which (c) is not in every case merely\\nrepresentative.^ Yet, i Paper has no universal pur-\\nchasing power, since it usually passes only in the\\ncountry that utters it. ii It forms no final measure\\nof value, but must itself be constantly measured, as to\\nvalue, by coin, iii Its value is adventitious, not spring-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0157.jp2"}, "158": {"fulltext": "140 THE THEORY OF MONEY\\ning from intrinsic cost, as is ultimately the case with\\ngold or silver, but entirely from some operation of the\\nprinciple of credit.\\n1 Viz., bills covered dollar for dollar, like gold and silver certificates.\\nGold surrogates are issued not by the government alone but also by the\\nclearing-house banks of N. Y. City. On the question of saving by the use\\nof such paper, 78, n. i. On the effect of paper money to increase the\\nproportion of fixed capital, Walras, Rev. du droit internat., 1884, p. 587.\\n2 In the figure,\\na h c d\\nI i I I\\nlet the heavy line, xc, represent hard money, and the light one, ad, prom-\\nissory paper. As the paper is launched, part of the hard money, say be,\\nwill leave the circulation, some going out of the country, some into the\\nmelting pot to be turned into wares and trinkets. See J. B. Say, as cited\\nby Macleod, Elements, vol. i, 99; also Ad. Smith, bk. ii, ch. ii.\\n3 Except, of course, what the paper costs. Barring the difficulty which\\nit may occasion in a crisis, this part of the paper has in all particulars the\\nidentical effect of so much gold [Walker, P. E., 178]. Suppose it added\\njust when a larger circulation was needed to do the required money work\\n85, iii, and n. 3], it would be no less a blessing than the same amount\\nof precious metal i, n. 2]. Yet we do not deny the possibility of some\\nlocal and temporary inflation in a mixed system of this sort [see 91,\\nand notes]\\nLike U. S. greenbacks between 1862 and Jan. i, 1879. On non-\\npromissory or fiat paper money, see 93. Also see Cours force in Say s\\nici. des Finances.\\n5 Cf. 74, n. I.\\n6 Illustrated by government paper money 80; cf. Farrar, Man. of\\nthe Constitution, 339]. If a greenback represents property at all, it\\nmust be that which is to liquidate it by and by. This probably is not yet\\nin existence. Of the bank bills now at par not 40 per cent in valup could\\nbe paid were all presented to-day. What do the 60 per cent represent\\nYet Bank of England notes pass on the continent, as U. S. notes\\nmore and more do in Liverpool, London, and Paris. They are not, how-\\never, accepted strictly as money, but with the idea of swift recourse, as\\nbills of exchange.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0158.jp2"}, "159": {"fulltext": "the theory of money i4i\\n87 Ideal Money\\nKnies, Weligeld u. Weltmunzen. Nasse, in Schoenberg, vol. i, VII, v, lo.\\nAndrews, An Honest Dollar, in Am. Econ. Ass n Papers, vol. iv. Marshall,\\nRem. for Fluctuation of Gen. Prices, Contemp. Rev., vol. 51. Grosvenor, Prices,\\nvol. i. Jevons, Investigations in Currency and Finance, II. Ricardo, Proposals for\\nan Economic and Secure Currency. Wasserab, Preise und Krisen.\\nThe best monetary systems yet used are very imper-\\nfect, permitting the most unhappy fluctuations in the\\npurchase-power of their units, discouraging enterprise\\nand robbing now debtors, now creditors.^ Bimetallism\\nwould relieve, yet only temporarily. The time must\\ncome when governments will be authorized (i) to watch,\\nthrough competent commissions, for each rise or fall in\\nthe value of money (fall or rise of general prices), and\\n(ii) to correct the same by expanding or contracting the\\ncirculation. Operation (i) is feasible by the critical\\nsummation, at intervals, of the prices of definite quan-\\ntities and qualities of numerous staples,^ each having\\nprominence in the result according to the amount of it\\nconsumed. If the sum as reckoned to-day exceeds the\\nlast one, prices have risen, the power of money fallen.\\nA lessened sum will mean falling prices, dearer money.\\nOperation (ii), the necessary contraction or expansion,\\nmay be effected in either of several ways, the best of\\nwhich, it is believed, would be to inject into or withdraw\\nfrom a gold or a gold-and-paper circulation, the proper\\namounts of full legal tender silver tokens.* The gold\\nand the silver should both be represented by certifi-\\ncates. Such a system would invite if not necessitate\\ninternational agreement, and might easily extend to\\nall nations and ages. An international coinage\\nwould follow it, and cosmic money be at last realized.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0159.jp2"}, "160": {"fulltext": "142 THE THEORY OF MONEY\\n1 Nasse, in Sckoenberg, vol. i, VII, V, 9. The precious metals vary\\nenormously in value. 83, i, n. 2.] According to Jevons, gold fell 46\\nper cent between 1789 and 1809, rose 145 per cent between 1809 and\\n1849, and fell again at least 20 per cent between 1849 and 1874. Since\\n1874 it has risen once more, about 30 per cent. When money falls in\\npurchasing pow^er [prices rise], debtors on outstanding contracts are\\nwronged, receiving in the stipulated number of dollars less value than was\\ncovenanted. If money value rises [prices fall], creditors are wronged in\\nthe same way. Worse, economically, than this injustice is the disorder\\nimported into business by such changes in the power of money [viz., in\\ngeneral prices]. Rising prices are wont to breed speculation: falling\\nprices asphyxiate industry by making it profitable to hold on to, rather\\nthan employ, money and titles to money.\\n2 The practical difficulty in making and using such a value-measure\\nwould be considerable. What are staples? How ascertain the consump-\\ntion of any one? In averaging, shall we employ the arithmetical or the\\ngeometrical mean? No one of these questions has yet received final\\nanswer. But the simple addition, from time to time, of a carefully made\\nand kept price list, disregarding variations of volume between the com-\\nmodities consumed, would disclose the rise, fall or stationariness of money\\nwith a close approach to accuracy.\\nSee Marshall, as above. The equity of a composite value-standard\\n[Jevons, Mo. and the Mech. of Ex., ch. xxv] would be, by the plan sug-\\ngested, incorporated in the money system itself, the only way it can ever\\nbe utilized.\\nPieces [dollars, e.g?^ worth less than face value, yet passing at that\\nvalue, viz., at the value of gold, because limited in amount 85, v].\\nThey should never be permitted on the one hand to become of full face\\nvalue, nor on the other to be too cheap. The superiority of such subordi-\\nnate money over paper would lie in its labor-cost value. In a panic, the\\nmetal tokens, nearly as worthful as gold, could be paid out on presentation\\nof their certificates, when holders of mere uncovered paper would be\\nhelpless. Why our system would excel Ricardo s, see 93, n. i.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0160.jp2"}, "161": {"fulltext": "CHAPTER IV\\nCREDIT\\n88 The Nature of Credit\\nMill, bk. iii, chaps, xi, xii. Knies, Kredit. Schraut, Organization des Kredits.\\nMangoldt, 53 sqq. Papa d Amico, Tiioli di Credito, pts. i, ii.\\ni Credit in Economics is the power to command\\nwealth or service now in exchange for some assurance\\nof a return in future. It is, in general, the same as a\\npower to market titles or to put in use any of the\\ninstrumentalities of credit. It may be utilized or not.\\nii The main instrumentalities of credit are, (i) promises,\\nas book-accounts, deposits, stock certificates, bonds,\\npromissory notes, bank-notes, and (ii) orders, as post-\\noffice orders, bills of exchange, checks, circular letters\\nand mobilizing certificates of all kinds, iii Credit has\\nvalue,^ and may also become capital, being among the\\nmost active producers of value,^ (i) utilizing small\\nsums and savings,^ (ii) transferring capital from less\\nto more productive hands, (iii) supplying a powerful\\nmotive for the accumulation of capital, (iv) making\\npossible enterprises too great for individual resources.\\nInstrumentalities rather than instruments, to cover cases of orders\\nand promises by telegram and telephone. Titles or instruments would\\ncover only paper documents. According to one s purpose, credit may be\\nclassified as public or private, as personal or real, as mobilier [based on\\npersonal property] ox fonder [on real estate].\\n2 Pipe line [petroleum] certificates vi ell illustrate these. Each is an\\norder upon given holders of oil to deliver such or such an amount to the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0161.jp2"}, "162": {"fulltext": "\u00e2\u0080\u00a2144 CREDIT\\nbearer on demand. Pig iron, whiskey, and other bulky wares are in the\\nsame way mobilized, viz., put upon the speculative market. The certifi-\\ncates are like dock warrants, except that the latter are not intended to be\\nnegotiable [cf. 55, n. 8, 78, n. 2].\\n3 This does not mean either (i) that rights, embodied in titles, are the\\nessence of wealth [Macleod, followed by Minton, in Capital and Wages],\\nor (ii) that property and titles to the same property are both to be reckoned\\ninto the community s wealth 2] but that the fact or system of credit\\nis an economic advantage. As such it is valuable 61], however it\\noriginates, and it is ivealth i, and n. 3] and capital 28] so far as it\\ncomes under the respective definitions of these categories. With Knies\\n\\\\_Pol. Oek. 215], against Wagner, we decline to rank under capital, titles\\nas a class, but it is hard to see why the notes referred to at 86, n. 3, are\\nnot at once vs^ealth and capital. Value in exchange is of course an attri-\\nbute of all such papers, unless worthless.\\nCredit has done more, a thousand times, to enrich nations, than all\\nthe mines in the world [Webster, in speech for re-charter of U. S. Bank,\\n1834]-\\nThe savings banks of America contain ^12,000,000 or ^14,000,000,\\nnearly as much as all other banking institutions in the country. Most of\\nthis, as well as much of the capital in the hands of building and loan\\nassociations and co-operative banks, is an aggregation of trifling amounts.\\n89 Credit and Crises\\nRoscher, Zur Lehre der Absatzkrisen, in vol. ii, of Ansichten. Wirth, Gesch.\\nder Handelskrisen. Mangoldt, 61. Cairnes, Leading Principles, 179 sqq.\\nYves Guyot, Sci. Econoniigue, bk. v, ch. iii. H. C. Adams, Public Debts,\\n207 sq. McAdam, Alt;habet in Finance, xvii.\\nCredit has its disadvantages also, (i) promoting\\nindebtedness on the part of the poor, (ii) sometimes\\ntransferring wealth from more to less productive hands,i\\n(iii) sometimes unduly stimulating demand, thus rais-\\ning prices and introducing commercial panics. This\\noccurs because credit possesses the same purchasing\\npower as money itself, and people with credit purchase\\ntoo much. Demand, losing all relation to amount of\\ntrue money and permanent property, inflates prices.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0162.jp2"}, "163": {"fulltext": "CREDIT 145\\nwhich in turn stimulates exchange, creating new de-\\nmand for credit, and indefinitely multiplying all forms\\nof indebtedness, until, at length, the discreet decline to\\ngive credit further, and the crash comes.^ This, in\\ngeneral, is the course of a business crisis.\\n1 Apt to be the case in public borrowing. See the masterly discussion\\nin Adams, Public Debts, esp. pt. i, chaps, iv, v. All the great woiks on\\nFinance treat this.\\n2 How far this evil is possible in case the government and all banks of\\nissue continue to cash their notes on demand, see 91. As a matter of\\nfact, specie payments are at such times usually suspended. Besides credit-\\ncrises we have crises from mere lack of money, and crises from [specific]\\nover-production.\\n90 Further Abuses of Credit\\nRae, Natural Hist, of Credit, Contemp. Rev., vol. 50 [1886]. U. S. Consular Reports,\\nNo. 43, July, 1884.\\nFrom 70 to 90 per cent of the world s business is\\ndone on credit. In Germany, Siam, and Canada the\\nproportion is 90 per cent, in Belgium and China, 80.\\nCredit-traffic has its feeblest development in Holland,\\nits strongest in Turkey and Yucatan. Credit may be\\na necessity of life, therefore a sign of poverty, or an\\ninstrument of production and hence a mark of wealth.\\nThe difference lies mainly in the degree of its organiz-\\nation, which is higher for any nation in proportion to its\\nindustrial advancement. With progress in economic\\norganization, the sphere of credit becomes less exten-\\nsive, its operation more intensive. Cash payments,\\ngetting the mastery first in wages, in retail trade and\\nin raw products, spread gradually over other fields,\\nshutting up credit to its most helpful and least danger-\\nous functions.^ Latest to be overcome are unwise", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0163.jp2"}, "164": {"fulltext": "146 CREDIT\\nplans, stimulated by its immense undoubted advantages,\\nfor the use of credit in exchange. Of these, the three\\nwhich follow deserve the most consideration.\\n1 The assumption which so many have taken up from Bruno Hildebrand,\\nof three great periods in the world s economic evolution, viz., barter,\\nmoney, and credit, as if credit were to have its fullest development in the\\nmost perfect economic state, is now seen to be false. With nations as\\nwith individuals, those best able to get credit use it least. In all the\\nwealthiest countries the proportion of cash payments to total Volame of\\ntrade is steadily increasing.\\n91 Free Banking\\nFree Trade in Banking, Westm. Rev., Jan., 1888. Wagner, Geld und Kredittheorie\\nder Peel schen Bankacte. Walker, P. E., 178 sqq. Money, pt. iii. jfames,\\nBanks of Issue, in Lalor. Horn, Banks, ibid. Wesslau, Rational Banking.\\nMany theorists have advocated that incorporation for\\nbanking purposes be as free as for other, and that\\nevery bank, like every private individual, be permitted\\nall the credit it can secure, with the privilege of util-\\nizing the same in uttering bills for circulation, to be\\nused in discounting, leaving the receivers and holders\\nof the bills to look out for the security.^ But experi-\\nence, notably that of the United States from 1814 to\\n1863,^ has shown that such a plan is nearly certain to\\nput into circulation vast amounts of poor bills, swin-\\ndling the unwary and the poor,^ driving hard money\\nfrom circulation, raising and distracting prices, and\\nprovoking and aggravating commercial crises. It is\\nbelieved that such unhealthy inflation may occur, at\\nleast locally, even when no bills are legal tender and\\nall are instantly convertible.^\\nAs long as the bank is bound to honor its obligations just as any\\nother debtor, and redeems its notes in specie upon presentation, the public\\nwill be able to determine its solidity, and consequently measure its credit.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0164.jp2"}, "165": {"fulltext": "CREDIT 147\\nAn excessive issue of notes will cause these notes to flow back into the\\nbank and thus correct itself Horn, [as above, p. 236].\\n2 During this period probably 5 per cent of the entire circulation averaged\\nto be lost annually. Walker, P. E., 177.\\n3 The acceptance of the notes may be to a certain degree compulsory\\nalthough they are neither legal tender nor irredeemable. They may form\\nso great a part of the circulation that people have to accept them for lack\\nof other media of exchange. The poor are never in condition to refuse\\nwhat is offered them as money, even when not too ignorant to suspect it.\\nMany receivers are sure to be remote from the place of redemption. See\\nJames, as above, p. 245. The government must, he says, i) not make the\\nnotes legal tender, or anywise artificially favor their circulation, ii) forbid\\nthe issue of too small denominations, and iii) see to it that convertibility\\nis real, and not made illusory by any unfair practices. The bank notes of\\nsmall denominations are the most vicious as traps for the poor.\\nThe question how far government should supervise banking is closely\\nbound up with that between the banking principle, to the effect that, if\\nperfectly convertible, paper changes in no particular the behavior of the\\nmoney system to which it belongs from what it would be if composed of\\nmetal alone [Walker, P. E., 178. Cf. 86, ii, above], and the currency\\nprinciple [Walker, P. E., 179], according to which convertibility is no\\nsure guaranty against local and temporary inflation. Wesslau, with Wagner\\nand most European economists, favors the banking principle, Walker\\nthe currency principle [P. E., 190].\\n92 The John Law Theory\\nBilgrant, Iron Law of Wages. Perry, 292 sqq. Horn., Banks, in Lalor. White,\\nPaper Mo. Inflation in France. Sybel, French Revolution, vol. i, ch. iv. Nicholson,\\nMo. and Men. Problems, pt. ii, i. Blanqui, Hist, of P. E., ch. xxxi. Bryant and\\nGay, U. S., vol. ii, ch. xxii. Thiers, Mississippi Bubble. Whately, Kingdom of\\nChrist, 171 sqq. Alexi, John Law u. sein Systetn [cf. Vierteljahrsch. f. Volksiv.,\\nxxn, ii, 230 sqq.] Rondel, Mobilisation dii Sol ejt France.\\nThis maintains that bills may be put forth not only\\nin lieu of gold and silver, but also in lieu of all values,^\\nand hence, if called for, may be issued to the whole\\nextent of the property of the issuer, such currency\\nbeing a self-regulating machine, which, if left to itself,\\nwill adapt its volume to the public needs. But, (i) paper\\nuttered against anything else than coin or bullion, not", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0165.jp2"}, "166": {"fulltext": "148 CREDIT\\nbeing instantly convertible into coin, cannot long re-\\nmain at par, and (ii) having depreciated and raised\\nprices, ceases to toe self-regulating in volume, and\\ngoes on inviting further issues.\\n1 A predecessor of Law was Francis Cradocke, publisher, in 1 661, of\\nWealth Discovered [Quar. Jour. Econ., vol. ii, 485 sqq.]. Law said:\\n5 oz. of gold is equal in value to ;^20, and may be made money to that\\nvalue; an acre of land is equal to ^20, and may be made money equal to\\nthat value, for it has all the qualities necessary in money [Perry, 293].\\nMr. Hugo Bilgram, in the pamph. named above, presents the same theory,\\nrecommending its application as a means of economic justice. Law s\\nbank, which ran from 1716 to 1720, did not realize his principle with any\\nexactness, but [at last] printed and marketed paper money practically\\nregardless of security. Its shares, which had risen from the par, ;i^500,\\nto ;^i 8,000, and its notes, at one time better than gold, became valueless.\\nIn the final run upon the bank, 12 persons were crushed to death. Truer\\nto the theory were the assignats issued by the Revolutionary government\\nin 1790, 1,200,000,000 francs face value in all, based upon confiscated\\nchurch lands. They were legal tender, and receivable for lands at any\\npublic sale. By June, 1793, they had fallen to 83 per cent of par; by\\nAug., to 16 per cent. They finally stood at f of one per cent. The\\nmatidais,^ immediate titles to lands, were issued to redeem the assignats,\\nI in tnandats for 30 in assignats. But, though their total face value was\\nless than the value of the lands, after rising from 16 per cent of par to 40\\nand 80, they soon sank again to 5. Joined to Law s bank was the Mis-\\nsissippi Co. or Western Co., which had a monopoly over Louisiana, and\\nowned a tract of land 12 miles square on the Arkansas River. Collapse\\nof the bank did not destroy the colony, though the settlers, mostly Ger-\\nmans, came down to the Mississippi near New Orleans, peopling what is\\nstill known as the German Coast. Rondel s book defends the assignats.\\n93 Fiat Money\\nRicardo, as at 85. Knies, Geld, xi. Walker, P. E., 153 sqq., also pt. vi, ch. viii.\\nHume, Do we Need a Metallic Currency, Forum, May, 1886. McAdam, Alphabet\\nin Finance, xi. Prince-Stniih, Uneinlosbares Pap. Geld, etc., in Vierteljahrsch.\\nf. Volkswirtsch., 1864, iii.\\nA school of monetary writers, inspired by certain\\nteachings of Kicardo,i would repudiate all specie basis", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0166.jp2"}, "167": {"fulltext": "CREDIT 149\\nfor currency and make government the sole issuer of\\nit, the notes, full legal tender but strictly limited in\\nanioiint,^ to be convertible into bonds, and the bonds\\nredeemable in the notes. The plausibility of this\\nscheme to the popular mind lies in the fact that legis-\\nlative acts may and often do in some sense create\\nvalue, as when a precious metal, not so before, is de-\\nclared to be money and legal tender.^ But its logic\\nresides in the principle of limitation to the circulation,\\nand in the idea that, so long as the total money consists\\nin precisely enough dollars to do the work, additions\\nbeyond this being wholly impossible, the value of the\\ndollars has no connection with the cost of the material\\nfrom which they are made. Could the conditions be\\nstrictly fulfilled the system would probably work.*\\nWe believe this, in any society hitherto known, out of\\nthe question.^ Perception that the notes were abso-\\nlute, not promissory, must awaken distrust of them,\\nleading to depreciation and to larger use of bullion,\\nbarter and all forms of credit. This would augment\\nthe depreciation, and the new depreciation this, so by\\ndegrees deranging values beyond hope.\\n1 Ricardo, however, proposed to continue gold as the standard and\\nmeasure of value, only using paper as the medium of circulation 82,\\n83]. He would so limit the amount of paper as to conform its value-\\nfluctuations to those of gold. Most fiat money men [greenbackers] at\\npresent abjure this guaranty. Ricardo has emphasized as strongly as any\\none the indispensableness of some standard by which the value of money\\nshall be gauged. Without this the whole system is in the air. Suppose\\nwe tried to limit the circulation, by what criterion could we determine how\\nor how much? Men fail to feel this difficulty because, applying in thought\\nto their proposed fiat system the denominations of our present promissory\\none, they lose sight of the difference between the two. Let the bills not\\ncontain the word dollar but bear the mere legend This is one", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0167.jp2"}, "168": {"fulltext": "150 CREDIT\\nKehoe, This is ten Kehoes, etc., and the character of a no-standard\\nsystem becomes plainer. Even Ricardo saw no way to regulate the standard\\nitself, as suggested in 70 and 87. Variations in the value of gold he\\nconsidered wholly irremediable.\\n2 According, that is, to the soberer theorists of this class. Many little\\nregard any necessity of limitation.\\nThus, all admit that, should the commercial nations resume the free\\ncoinage of silver, this metal would advance in value. It rose somewhat\\nby the [Bland] Act of the U. S. alone [1878], ordaining the coinage of\\nat least ^2,000,000 worth and at most ^4,000,000 worth monthly. The\\ncause was simply the enlarged demand. Nearer to a creation of value by\\nfiat is the phenomenon described at 86, ii, and n. 3. Now, if value is\\nthus imparted to gold, it is asked, why not to paper, and if some value,\\nwhy not more? The answer is that the suggested parallel between gold\\nand paper is precise. Paper will, by being made money on the basis\\nproposed by this plan, appreciate in proportion to the wider market thus\\nopened for it, but no further. A fiat dollar would in time be worth\\nprecisely the [engraved] paper contained in it. See note 5. Another\\nfallacy lurks in the idea that the uttering of paper money is analogous to\\nthe coining of precious metal, and proper function of government simply\\non that account.\\nThis does not contradict the admission, at 85, that money s cost of\\nproduction is at present the ultimate regulator of its value.\\nThe necessary confidence between man and man, and in the wisdom\\nof government s action, could not be engendered. Even the fact that the\\nnotes were legal tender and receivable for customs and taxes would not\\nquiet all concern. The state itself may fall. The minutest degree of such\\ndistrust would introduce more or less of the ancillary media of exchange,\\nwhich it would be wholly beyond the state s power to prevent.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0168.jp2"}, "169": {"fulltext": "CHAPTER V\\nthe clearing system\\n94 Settlements by Check\\nLloyd, Clearing, in Lalor. Jevons, Mo. and the Mech. of Exchange, chaps, xx-xxii.\\nRauchberg, Neueste Entwickelung des Clearing U7id Giroverkehrs, Statist.\\nMonatsschr., June, 1887. Fratiqois, Clearing Houses ei Chambres de Coin-\\npetisatioft.\\nA vast majority of inland payments are made by\\nchecks, each debtor sending his creditor, however far\\naway, a check or a draft on the bank with which he,\\nthe debtor, deals. Such a check, unless happening to\\nreach the drawee bank directly, or (in a very small town)\\nits neighbor bank, finds its way back to the drawee\\nbank through some kind of a clearing institution. The\\nclearing will occur at a local clearing-house, or the\\ncheck have to pass through the national one,^ accord-\\ning to the location, banking relations, etc., of the\\nparties to the transaction.\\n1 The following diagrams illustrate all this.\\nI Single City System\\n[say] Providence\\nABCDEFGH I\\n1st Nat l 2d Nat l 3d Nat l etc.\\nProvidence\\nClearing House.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0169.jp2"}, "170": {"fulltext": "152\\nTHE CLEARING SYSTEM\\nIf Mr. A [or B, or C], who banks with the ist National, wishes to make\\na payment to Mr. I [or G, or H] whose account is with the 3d [or to D,\\nE, or F, deahng with the 2d], he draws a check upon his own bank, the\\n1st, bidding it pay to the order of Mr. I the desired sum. I turns in this\\ncheck to his bank, the 3d, which gives him credit [or cash] therefor, and,\\nat the clearing house, swaps it for a check or checks drawn on itself but\\nhanded in at the ist. If the amounts, in checks, between any two banks\\ndo not matph, the balance is paid in cash.\\nII The National System\\nPROVIDENCE\\nA B C D E F\\nistNat l 2dNat l\\nBank Bank\\nNEW ORLEANS\\nG H I J K L\\n3dNat l4t iNat l\\nBank Bank\\nMN O P Q R\\n5th Nat l 6th Nat l\\nBank Bank\\nSAN FRANCISCO\\nS T U VWX\\n7th Nat l 8th Nat l\\nBank Bank\\nNEW YORK\\nCLEARING HOUSE\\nMetropolitan\\nChemical\\nStuyvesant\\nManufacturers\\nNew York\\nClearing House\\nSuppose Mr. B [or A, or C] of Providence is indebted to Mr. X [or V,\\nor W] of San Francisco [or to any one in N. Orleans or Chicago]. B,\\nhaving a deposit with the ist National in his own city, writes a check upon\\nthat bank, requesting it to pay the sum to X or his order, and sends this\\npaper directly to X. The latter turns it over to his bank, the 8th National,\\nin San Francisco. It is credited to him, and forwarded, as a debit, not\\ndirectly to Providence, but to some bank in N. Y. This may possibly be\\nin communication with the ist National, of Providence, in which case the\\ncheck is forwarded to its destination directly. Otherwise, unless itself one\\nof the [about 60] banks of the metropolis in immediate relation with the\\nclearing house [clearing house banks], the N. Y. bank first receiving it", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0170.jp2"}, "171": {"fulltext": "THE CLEARING SYSTEM 1 53\\npasses the check to a bank which is thus connected. In the clearing house\\nit falls, through another debit and credit operation, into the hands of a\\nclearing house bank which does business with some Providence bank,\\nperhaps the ist National itself. The grand circuit completed, and the\\n1st National having debited the amount of the check to B, the latter s\\naccount with X is closed, not a dollar in cash having been used [save\\nfor clearing house balances]. The N. Y. clearings for i88l were\\n^48,565,818,212. See also the following figures, for 1884.\\nNew York Clearing House\\nClearings for the week ending May 3 $855,71 1,696\\nClearings for the week ending April 26 707)078,332\\nClearings for the week ending April 19 652,880,160\\nClearings for the week ending April 12 576,804,205\\nClearings for the week ending April 5 690,816,01 1\\nClearings for the week ending March 29 610,332,765\\nLondon Clearing House\\nReturn of Paid Clearings for the week ending April 23, 1884.\\nThursday ;ifi7,i72,ooo\\nFriday 16,920,000\\nSaturday 15,345,000\\nMonday 15,905,000\\nTuesday 13,463,000\\nWednesday i5,S33.ooo\\nTotal ;^94\u00c2\u00bb338.ooo\\nIn the corresponding week of 1883 the total was ;^98,078,ooo.\\nParis Clearing House.\\nDec, 1887 397.897.335 francs.\\nNov., 1888 448,524,956 francs.\\nDec, 1888 488,916,294 francs.\\n95 International Payments\\nGoscHEN, Theo. of the Foreign Exchanges, Ad. Stm tk, bl iv, ch. iii. Macleod, Theo.\\nand Prac. of Banking, vol. i, ch. viii. Mill, bk. iii, ch. xx. The A B C of the\\nExport Bus., Northwestern Miller, Jan., i88g.\\nImports are, as a rule, paid for not by bullion but by\\nbills of exchange 1 drawn on the importing countries", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0171.jp2"}, "172": {"fulltext": "154 THE CLEARING SYSTEM\\nand sold to brokers. There are^ (i) time and sight\\nbills, (ii) commercial and bankers bills, (iii) direct and\\nindirect bills, and (iv) accommodation and true bills.\\nIf New York is importing more from than exporting\\nto London, bills on London bear a premium in New\\nYork, and bills on New York are at a discount in\\nLondon. When this occurs, exchange and balance of\\ntrade are said to be against New York.^ If bills in\\nneither country bear either premium or discount, ex-\\nchange is said to be at par. The par will be the\\nweight-relation between the unitary coins of the two\\nnations.* If the premium attains a higher per cent\\nthan the cost of the freightage and insurance of gold,^\\ngold will be sent to pay debts but this soon cures the\\nnecessity for it, by lowering prices and increasing\\nexportations.^\\n1 International checks or drafts. Several cases may arise, i A, in N. Y.,\\nboth an importer and an exporter, owing B, in London, draws on his debtor\\nC, in London, and sends the draft to B, who collects of C. ii A, of N. Y.,\\nexports to B, of London, and C, of London, to D, of N. Y. B buys of C a\\ndraft on D, and sends it to A, who collects of D. A and C are thus both paid\\nwithout shipment of money, iii Two brokers, one in N. Y. and one in Lon-\\ndon, agree to honor each other s drafts. A, of N. Y., owing B, of London,\\nbuys of the N. Y. broker a draft on the London broker and sends it to B,\\nin London, who collects from the Londoner, iv The world s clearing\\nhouse is London. If a N. Y. merchant wishes to pay a debt in Italy he\\nbuys a draft on London and sends it to his Italian creditor, who gets the\\ncash on it from Italian brokers in correspondence with London. Thus\\nwe are not obliged to have direct exchanges with every country, but the\\nmajority of exchanges are effected through the one great centre.\\n2 Goschen, ch. iii. The time allowed for the payment of bills not\\ncashed at sight is usually 30 days, but may be 60 or 90. Time bills are\\ncheaper than sight bills, in a proportion determined by the rate of interest\\nin the drawee country. Banker s bills are simple international checks,\\nsuch as a traveller might purchase on going abroad. Commercial bills are", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0172.jp2"}, "173": {"fulltext": "THE CLEARING SYSTEM 155\\nthose which a shipper draws upon his consignee against merchandise\\nshipped, each accompanied by a bill of lading, to order, covering\\nthe property against which it is drawn. This is called documentary\\nexchange. To illustrate indirect bills from Hong Kong for tea to N. Y.\\nthe exporter draws on London instead of N. Y., and the London house\\ncharges to N. Y. This item often settles the state of exchange between\\ntwo countries [Goschen, p. 32]. One day in Aug., 1882, 3,200,000 Marks\\n[$800,000] went from Hamburg to London, to pay for wheat shipped from\\nN. Y. to Hamburg. Bremen merchants used to settle for N. Y. tobacco\\nby bills on London in favor of N. Y., and, to offset these, buy up bills on\\nLondon, from Dutch cattle and butter dealers. Bombay even now, in\\ngetting pay from Bremen, draws on London against Bremen. Accommo-\\ndation bills are like drafts on a bank when it does not owe you [Goschen,\\n37 sq., Macleod, Elem. of P. E., vol. i, 403. Cf. below 96, v, and n. 4].\\nIt seldom happens that the mutual debts of two countries exactly\\nbalance. Then, by a terminology now well understood but originating in\\na mercantilist error 7, n. 5], exchange is said to be in favor of the\\ncountry owing the less, and against the other. Speaking generally, the\\nfollowing phenomena will all arise together and be phases of one and\\nthe same state of exchanges, viz. preponderance of exports, favorable\\nbalance or exchange, tendency to import gold [or actual importation],\\ngood time to buy exchange. Also the following: preponderance of\\nimports, unfavorable balance or exchange, tendency to export gold [or\\nactual exportation], bad time to buy exchange. The expression, exchange\\nfavorable to America, does not mean that it is favorable to American bill-\\nsellers, exporters, etc., but to hiW-buyers.\\nExchange is at par between N. Y. and London, when, in one city,\\nI can buy, for a given weight and fineness of gold, the right to have, in\\nthe other so soon as communication can be had, the same weight and fine-\\nness delivered to me or my representative. The par of \u00c2\u00a31 is ^4.866; of\\nI Mark, $0.2478!; of 4 Marks, $0.9915; of I Guilder, $0.40; of i franc,\\n$0.19305^^; of 5 francs, $0.9652552^5.; of I Florin, $0.4788335^2.9^.\\nUsually, the premium can go no higher or lower than the figure neces-\\nsary to cover this cost. Not so in a great panic. When Napoleon left\\nElba 96, n. 5], continental exchange in London rose to 10 per cent,\\nmuch more than enough for transportation and even war insurance. Gold\\nnormally begins to move from London to N. Y. when London exchange\\nin N. Y. is at $4,842, and back again when it is $4.90. But see next\\n6 See 76.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0173.jp2"}, "174": {"fulltext": "156 the clearing system\\n96 Special Modifiers of the Rate of\\nExchange\\nGoschen, Foreign Exchanges, ch. iv. Macleod, as at 95.\\ni All monies of a country laid out albroad,i as by\\npurchase of ships or armaments, foreign travel, interest\\non bonds held abroad, or principal for the liquidation\\nof these, tend to turn exchange against that country.\\nii On the contrary, all foreign monies brought into\\nyour country tend to set exchange in its favor, as the\\nexpenditures of travellers from abroad, or a loan effected\\nor bonds sold there, iii Ocean carrying by the ships\\nof any country likewise turns exchange in favor of that\\ncountry in relation to the country or countries for which\\nthe carrying is done. A country like England, con-\\ntaining a great commercial entrepot, as London is, will\\nalso secure favorable exchange for itself by the receipt\\nof commissions, iv Draft on, and payment in, London,\\nof many indirect bills against New York, might set\\nEnglish exchange against New York, coincidently with\\na preponderance of American exports to England.\\nV As the balance of trade shifts from one side to the\\nother, shrewd brokers,* not to incur the double expense\\nof exporting and soon importing again, let their accounts\\nrun till naturally balanced, diminishing thus the\\naverage cost of exchange, vi Large merchants, who\\ncan readily extend the time of their transoceanic debts\\nby paying interest, if exchange is high, wait for it to\\nfall and then buy drafts. Rates are thus kept from\\ngoing either so high or so low as they otherwise would.^\\nI It is estimated that ^86,000,000 go from the U. S. to Ireland yearly,\\nin aid of distress and agitation there.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0174.jp2"}, "175": {"fulltext": "THE CLEARING SYSTEM 1 5/\\n2 Thus, in Jan., 1883, though exports from America increased, foreign\\nexchange did not go down in N. Y., because Englishmen were investing\\nvast amounts of money here.\\n3 The Cologne Gazette computes that Germany averages to pay England\\n^2c;,ooo a day in ocean freights and bank commissions. The immense\\nocean carrying trade of England, having the effect of so much exportation,\\nexplains in large part why the balance of trade is always apparently against\\nthat country. This and other items account for the fact that no country s\\nimports and exports for a given period ever appear to balance. For\\nthe 5 years, 1880-1885, exports from the U. S. exceeded imports by\\n^^623,000,000; from 1876 to 1880 the excess reached ^921,000,000. Total\\nin 10 years, ^1,544,000,000. What became of this vast balance? Net imports\\nof specie for the same years account for only about $50,000,000. Some\\nof it went to settle the balances against us of previous years, some to pay\\nfreight. Another portion was required for the interest and principal\\nof foreign-held debts. But were all these and such causes away, the\\naccount would hardly ever seem even, owing to the different scales of\\nvaluation for imports and for exports. In fact, as, in trade, we prize more\\nwhat we get than what we give, perfectly truthful figures would make\\nexchange seem against us just in proportion as it was really the reverse.\\nSee Thorold Rogers, Econ. Interp. of Hist., 97.\\nPairs of brokers, that is, one in one country, the other in the other.\\nBills on the country with an unfavorable balance would then be accommo-\\ndation bills 95, and n. 2].\\nMany more such modifiers might be named. Exchange drawn upon\\na country engaged in or threatened with war is always high, owing to the\\nrisk 95, n. 5]. If the money of any drawee country consists of depre-\\nciated paper, or of coins deficient in weight and fineness 81, n. 6],\\nexchange is below par. That is, a paper giving you the right to so many\\nunits of that country s money, can be gotten for a sum of the money of\\nyour country, which is less than an equivalent, nominally, of the sum\\ndrawn for. Degradation of your own money has an effect precisely\\nopposite. Before the adoption of our constitution, $4,444 in [Spanish]\\nAmerican money was the established custom-house equivalent of ;i^i. By\\n1S37, deductions from the value of the dollar necessitated $4,866 as the\\nequivalent of \u00c2\u00a31, an advance of just 9} per cent upon $4,444. Still it\\nlong remained habitual to reckon on the old basis of exchange, stating it\\nas at 9.} per cent premium when it was really at par Dollar, in Am.\\nCyclop., at end].", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0175.jp2"}, "176": {"fulltext": "Part IV\\nDISTRIBUTION\\nCHAPTER I\\nTHE NATURE OF DISTRIBUTION\\n97 General Statement\\nSidgwick, bk. ii, ch. i. Leroy-Beaiilieu, Essai sur la Repartition dtt rickesse.\\nMangoldt, bk. iv, chaps, i, ii. Mill, bk. ii, ch. i. Patten, Premises of P. E.; Sta-\\nbility of Prices [Am. Ec. Ass n Papers, vol. iii]. Schoenberg, vol. i, XI. H. George,\\nProg, and Poverty, esp. bk. iii. Hertzka, Gesetze d. soc. Efitwickelung. Cher-\\nbuliez, bk. iii, chaps, i, ii.\\nDistribution, as a rubric in Economics, is that sub-\\nstantive department thereof which canvasses the\\nproblems, into wliat bands the wealth created by\\nproduction proper and exchange would naturally fall,\\nand on wbat principles, also wherein and why actual\\nfortunes differ from those which strict economic causes\\nwould assign, all of them important inquiries, to which\\neconomists have given relatively too little attention.\\nIt must not be assumed^ that the shares hxed by\\nnatural or economic laws are therefore certain to be\\njust. Whether, or how far, they are so is still a\\nquestion, among the most vexing connected with the\\nscience.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0176.jp2"}, "177": {"fulltext": "THE NATURE OF DISTRIBUTION 1 59\\n1 Sidgwick, pp. 25, 31, adverts to the new attention which this part of\\nEconomics has received since Ad. Smith. Till quite recently, in fact, it has\\nbeen too much the habit of economists to treat Distribution as incidental,\\nlaying all stress on Production. The Professorial Socialists 13] have\\nnobly rebuked this.\\n2 Mill, in his distinction [bk. ii, ch. i] between production as a natural\\nprocess, and distribution as artificial, cannot mean that the latter is wholly\\ngiven up to whim and custom. This would certainly be an error. But\\nrelatively arbitrary influences confessedly play here a great part.\\n3 Sidgwick, 498 sqq. Cf. all the socialist writers. The assumption is\\nmade by orthodox economists almost to a man a source of infinite con-\\nfusion in their discussions. There is no necessary sacredness to mere\\noperations of nature. Many of them it is the work of reason and civiliza-\\ntion to correct. Progress largely consists in this. H. George, in saying\\n[Social Problems] The just distribution of wealth is manifestly the nat-\\nural distribution of wealth, and this is that which gives wealth to him who\\nmakes it, and secures wealth to him who saves it, cherishes a purely a\\npriori notion of natural. So does Giddings [Mod. Distributive Process]\\nin calling natural that rate of wages which secures the highest productive\\npower. These ideas are nevertheless very wholesome.\\n98 Categories and Shares\\nIVaiker, P. E., pt. iv, ch. i. Crehore, Quar. Jour. Econ., vol. ii, 361. Webb, ibid.,\\n188 sqq., 469 sqq. Mangoldt, 85-95.\\nThe net product of a people s industry for a given\\nnatural period, viz., the increment to wealth which\\nremains after making good the stock present at the\\noutset, finds its way into flve^ theoretically separate\\ncategories,^ determined thither by special causes.\\nI The permanent monopolist of any material neces-\\nsary to production receives rent in virtue of his pro-\\nprietorship, II The capitalist, interest, for the same\\nreason, plus abstinence, III The laborer, wages, for\\nhis toil, IV The undertaker, profits, for the use of\\nhis ability to organize and superintend,^ and V The", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0177.jp2"}, "178": {"fulltext": "l60 THE NATURE OF DISTRIBUTION\\nanomalous recipient, anomalous fortune, for a variety\\nof reasons, often excessively hard to analyze.^\\n1 The strict dividend would of course embrace, what we here omit for\\nthe sake of simplicity, the products [including services] enjoyed in the\\ncourse of the period. These seem to follow the same law as the rest.\\nNet product does not exclude all costs of production 47,48], but\\nonly the wealth used up or worn out. It includes what goes for interest,\\nwages, profits. See following Chapters. On the nature of national income,\\nMangoldt, as above, is best. It may be gotten at by summation of par-\\ntKyAdiX products or of particular incomes. With either method, much care\\nis needed to exclude error. In general, a nation s income is simply the\\ntotal proceeds of its own and its subjects industries. But it may also\\nreceive tribute, indemnity, or interest from another nation, or enjoy a per-\\nmanent net advantage over others in foreign trade.\\n2 If, in a large and developed society, we look at any single industry\\nby itself, a sixth category appears, viz., the general public, embracing the\\nbeneficiaries of all the five categories of every business aside from the one\\nin question. In other words, the people immediately interested [as win-\\nners of rent, interest, wages, or profits] in cotton manufactures [either at\\na given factory or in general] are not the only ones interested. Through\\nexchange 53, 54], it disseminates advantage everywhere, in more or\\nless perfect return for its own extra profitableness in consequence of so\\ngreat a market 31, esp. n. 4]. It is obvious, however, that when the\\nwhole round of the industries is taken together, this extra category must\\nin effect dissolve and disappear by a process of mutual cancellation.\\n3 On Method in Distribution, or the logical order of its topics, George,\\nProg, and Poverty, bk. iii, chaps, i, vii.\\nThe words express but very inadequately the real nature of the under-\\ntaker s office. See Chapter V. On the close analogy, identity even, be-\\ntween the principle of rent and that of profits, see 103, 119.\\nThe pupil must not expect satisfactorily to understand this apart\\nfrom the two following, and not exhaustively until the remaining Chapters\\nin Distribution have been studied. The subject is complex, and cannot\\nbe truthfully expounded in the cursory and apparently simple manner\\nhitherto so common. Observe, too, that upon many matters touching dis-\\ntribution authors are still divided and scientific opinion now in the process\\nof formation. Its trend we propose to indicate in our sketch, referring for\\nfuller light to the latest and best literature.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0178.jp2"}, "179": {"fulltext": "THE NATURE OF DISTRIBUTION l6l\\n99 Blending\\nSame authh. as at 97.\\nWhile these functions and categories are really dis-\\ntinct and scientific analysis demands their separation,\\ntwo or more of them are usually represented in one\\nperson, who thereby participates in the product under\\na plurality of titles.^ Thus the small farmer, owning\\nand himself working his capital and land, unites them\\nall. A socialist community, viewed as a whole, would\\ndo the same. All laborers save the lowest receive,\\nbesides wages in the narrowest sense, earnings on intel-\\nlectual capital, as well as profits or rent of ability.^\\nIn a society of low industrial organization, to a large\\nextent in America even yet, capitalists are also under-\\ntakers, and vice versa^ In England these functions\\ncoincide more with classes, which has hitherto been the\\ngeneral tendency of industrial advance everywhere.* At\\npresent, however, both capitalists and undertakers more\\nand more derive gains from monopoly.\\n1 That is, we do not here have in view so much different classes of\\nhuman beings as different industrial functions and their workings. See,\\nmore fully, \u00c2\u00a7101,\\n2 See 103, 121.\\n3 In any joint stock undertaking each participant may be regarded as\\nat once capitalist and undertaker, since the whole stockholding body is\\nboth. Every stockholder of course owns part of the capital he also, at\\nleast indirectly, by voting upon directors and policy, has weight in man-\\naging the business.\\nNow counteracted and negatived, somewhat, by the movement toward\\nSocialism. See Webb, Socialism in England, Papers of Am. Econ. Ass n,\\nvol. iv. WTiether, and if so, how far, this movement is healthy, perhaps no\\nman living is wise enough to say.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0179.jp2"}, "180": {"fulltext": "l62 the nature of distribution\\n100 The Law of Equal Returns to Last\\nIncrements\\nWebb, Rate of Interest and Laws of Distribution, Quar. Jour. Econ., vol. ii.\\nAccording to the pure theory of economic distribu-\\ntion, presupposing omniscience and the perfect mobil-\\nity of the various means of production both to prevail\\nthroughout an industrial community, competition, in its\\neffort to secure the maximum utility for given sacrifice,\\nwould so dispose and arrange capital, skill, and human\\nenergy, that the last application of any one of them at\\nany point or in any way, would evoke as great a return\\nper unit of the factor applied, as the last apphcation made\\nelsewhere or in any other way. And in actual fact,\\ncompetition, though imperfect, is sufficient to maintain\\na constant tendency to the realization of this law.^\\n1 In agriculture, e.g., the operation of the law of diminishing return\\n34] prevents all workers from concentrating at the same point, while\\neach new comer will seek to work at the most advantageous point aH things\\nconsidered. There must be theoretically, at any time, a certain arrangement\\nof labor, skill and capital upon the land, which will get from it the maximum\\nof utility. That ideal order may never be actually reached, but so far as\\nself-interest prevails, and is enlightened, there cannot but be a steady\\napproximation thereto. Skill, capital, and labor, as well as land, will be\\nput in requisition according to the same law. Webb, as above, p. 194.\\n10 1 The Other General Laws of Distribution\\nWebb, as at \u00c2\u00a798. Clark, Possibility of a Sci. Law of Wages, Am. Ec. Asp n Papers,\\nvol. iv. Patten, Stability of Prices [ibid., vol. iii]. Mangoldi, \u00c2\u00a7\u00c2\u00a7128 sqq.\\nThese are two, (i) the static and (ii) the dynamic.\\ni Supposing, at any given time, a community where\\nperfect knowledge and competition existed, with no\\nartificial hindrances to the play of economic causes", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0180.jp2"}, "181": {"fulltext": "THE NATURE OF DISTRIBUTION 163\\nin distribution, we should, partly a priori, partly from\\nexperience, expect the proceeds of its industry to be\\nclassifiable as follows. Wages proper would be the\\nreturn to the simplest form of labor,^ absolutely un-\\nhelped, or, if applied with aids, the reward of the pro-\\nportion not owing to these. All surplus gotten by labor\\nin virtue of location, native fertility or other not indi-\\nvidually created advantages connected with land, would\\nbe Rent, which would also cover the proceeds of all\\nfixed material monopolies. Excess proceeding from\\nthe use of native skill superior to that of the simplest\\nlabor, would be Profits. Whatever increase was due\\nto the employment of capital, material or immaterial,\\nwould be Interest. Gains not referrible to any of the\\nabove sources, present to some extent in the best con-\\nceivable social organization, would form a Fifth Cate-\\ngory, ii If, now, introducing the dynamic element, we\\nconsider the productive process as in movement, the\\nvarious factors in production will tend to be remunera-\\ntive in proportion to the slowness of their increase,\\ncompetition enabling the hindmost, especially by reap-\\ning the benefit of improvements, to enlarge its share\\nat the expense of the others.^\\n1 This is doubtless a somewhat indefinite conception. All labor, as we\\nhave seen 25], involves an intellectual element. The labor here meant\\nis that into which enter no training and no special native gifts.\\n2 Land resources, capital, supervising and planning ability, and simple\\nlabor.\\n3 Patten, as above [sec. iv, esp. p. 37], well develops the second law.\\nIt operates through competition. Overlooking the effects of diminishing\\nreturns 34], suppose capital to be doubling in 30 years, the labor force\\n35 36] in 20. Wages will fall, till population increases less rapidly\\nthan capital, that which is lost to wages, along with all gains from im-\\nprovements, going to capitalists through rise in the rate of interest. So,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0181.jp2"}, "182": {"fulltext": "164 THE NATURE OF DISTRIBUTION\\nif land facilities are multiplying slower than either labor or capital, land\\nrent will be swollen at the expense of both, most, however, to the loss of\\nthe one getting on the faster. Cf. carefully the following Chapters also\\nPatten.\\n102 The Fifth Category\\nWagner, Lehrbuch, vol. i, 300 sqq. George, Prog, and Poverty, bk. iii, ch. iv.\\nWalker, P. E., pt. iv, ch. vi. Hertzka, Gesetze d. soc. Eniwickelung.\\nRent, interest, wages and profits by no means ex-\\nhaust the product of industry. Non-producers may-\\nshare therein, or producers get an undue share, in\\nalmost innumeraMe ways, chief among which are the\\nfollowing i Gifts other than charitable, as to one s\\nfamily or friends, ii Charity in its endless variety of\\nforms, iii G-anibling,i in which stock and exchange\\ngambling must be included, iv Fraud, theft, and rob-\\nbery, of all sorts, v Casual nionopoly,^ whether nat-\\nural, accidental or based on legislation or on immensity\\nof financial power, vi Unfair legislation or adminis-\\ntration in other things, vii Changes in the value of\\nmoney.^\\n1 See 21, n. 7.\\n2 See 66, 67. A good illustration is the fortune amassed in London\\none day in June, 1815, by Baron Rothschild and Moses Montefiore, as sole\\npossessors of the secret that Napoleon had left Elba and landed in France\\n95, n. 5]. They bought, low, credits which appreciated immensely soon\\nas the tidings became known. Permanent monopoly gains from any sort\\nof material possession we reckon as rent 103].\\nSee 87.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0182.jp2"}, "183": {"fulltext": "CHAPTER II\\nRENT\\n103 Rent in General\\nMangoldt, 120 sqq. Schaeffle, Pol. Oek., 300; Theo. d. attsschl. Absaizverkdlt-\\nnisse, iii-vii. Wagner, Lehrbuch, vol. i, 301. George, Prog, and Poverty, bk.\\niii, ch. ii. ClierbuUez, bk. iii, ch. vi.\\nRent, in the broadest sense, is any kind of gain\\narising from monopoly, whether in land, capital,^ or\\ntalent income which falls to the possessor of any\\nproductive agency simply because of its rarity. Rent\\nforms no part of the cost of production,^ and is pay-\\nment for no service. It swells individual fortunes only\\nat the expense of society as a whole. To the total\\nrevenue of the world, or of a nation or an industrial\\ngroup not exchanging with any other, it therefore adds\\nnothing, nor does it subtract, except as dissuading from\\nindustry. On the other hand, rent does not cause high\\nprices, but is caused by them.^ It is usual and well\\nto restrict the term rent to winnings from somewhat\\npermanent monopolies, though the idea does not neces-\\nsarily presuppose such limitation.\\n1 Such cases as are mentioned at 65, notes 4 and 5, are really cases\\nof rent [on capital]. For land rent, or ground rent, see 104. Profits\\nand special wages [see Chapters III and IV] also involve the rent prin-\\nciple. English writers have usually confined the term to ground rent\\n104]. Our use of the word, which seems to us to have very much in its\\nfavor, is that of Mangoldt and Schaeffle.\\n2 See 105.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0183.jp2"}, "184": {"fulltext": "I 66 RENT\\n104 Ground Rent\\nRicardo, Prin. of P. E. and Taxation, chaps, ii, xxiv. Mill, bk. ii, ch. xvi. Roscker,\\nbk. iv, ch. ii. Maine, Village Communities, vi. Walker, Land and its Rent; P. E.\\n[either ed.], Rent. Cf. Int l Rev., vol. xii. Rossi, in Cours d Econ. pot. H.\\nGeorge, Progress and Poverty. Cairnes, Log. Meth., 29, n., 50 sqq. Wachenhu-\\nsen, Untersuchtmgen ueber Grundrente. Hertzka, Sociale Eniwickelung, ch.\\nvii. Patten, Premises of P. E., i.\\nGround rent is the advantage accruing to land-\\nowners from the use of certain uncreated or socially-\\ncreated powers and utilities connected with land,\\nincluding, besides mere fertility of soil, also mineral\\nwealth, water-privileges, location, etc. Return from\\nthe occupation of land, as the most common form of\\nground rent, furnishes the most obvious and useful\\nmatter wherewith to illustrate the doctrine.\\n1 The definition must be thus wide because the essence of rent is present\\nwhether land is owned privately or by the community. Of the spots which\\nat any time have to be occupied, some are better than others. Both socialism\\nand the mere policy of nationalizing the land would try to distribute this\\nadvantage, but nothing could abolish it. For varying and loose uses of the\\nword rent, note 3, below, and 106. Cf. Mill, bk. ii, chaps, viii-x.\\n2 Capital inwrought into land will bear rent if the land does. This is\\nstrictly not ground rent, though inseparable therefrom. It differs from the\\nnormal return on such capital, which is interest 106, iv, and n. i]. Cf.\\n19, i, n. 2. Let a considerable number of human beings settle in a new\\ncountry: special value instantly attaches to particular localities, and this\\nwith no act of creation save the act of the people in coming there. But\\nmuch land value is socially created. The Dutch purchased all Manhattan\\nIsland for 60 guilders, about $2\\\\. On the main street fronts in N.Y. City\\nthat sum would to-day not purchase a single foot. Store sites on Fifth\\nAve. cost in 1886 ^65 per sq. ft.; ^85 have been paid on Broad St., and\\n^100 and ^115 on Broadway. Shares of a land company at Birmingham,\\nAla., costing ^1,100, recently paid a yearly dividend of ^24,000. In Lon-\\ndon land has often sold for ^240 per foot, and select spots, it is said, for\\nas much as it would cost to pave them with English sovereigns laid upon\\nedge. Such dearness, springing though it does from a sort of human\\nagency, is not the product of conscious doing on the part of any one per-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0184.jp2"}, "185": {"fulltext": "RENT 167\\nson. In bringing it into being, A, B, and C were instruments, not agents.\\nSee Ground-rents in Philad., Quar. Jour. Econ., Ap. 1888.\\n105 Rent and Price\\nMill, bk. ii, ch. xvi, sec. 3 sqq. Ricardo, Principles, ch. xxiv. Walker, P. E., 243.\\nSince, as a rule, all land will be cultivated just so fast\\nand far as it pays the cost of cultivation, the rent of\\nland always tends to represent the surplus of gain arising\\nfrom cultivating better land over the gain of cultivat-\\ning the poorest that is cultivated at all,^ better and\\npoorest here referring to location as well as to quality.\\nIt follows that so long as unused land is still accessible\\nand freely resorted to, rent can never become factor in\\nthe price of agricultural produce, for this price, as\\nalways where the law of diminishing return has begun\\nto work, is fixed by the dearest cost of production,\\nwhich falls precisely upon the no-rent tracts. Capital\\nrents, in like manner, never enter into the prices of\\nproducts.\\n1 Compare with this, 34. The margin of cultivation tends to move\\noutward with the increase of population, land to-day bearing rent which\\ndid not do so years ago, etc. But new fertilizers, and new agricultural\\nmachinery and methods may hinder this. A particular new need for food\\nmight be thus entirely satisfied without extending cultivation at all. We\\nmay therefore speak of an intensive margin of cultivation, as well as an\\nextensive. Variety of appetites is a further element of irregularity in the\\ntaking up of land. Soil ill fitted for one crop may grow another; poor\\naralile may be good pasture, etc. [Patten, as at 104; also in Stability\\nof Prices, Am. Ec. Ass n Papers, vol. iii.]\\n2 Suppose no more land to be obtainable. At once begins a com-\\npetition, which did not exist before, for the poorest lands, which, under\\nprivate ownership, owners will promptly utilize by charging rent. To pay\\nthis, the produce from these tracts too must be sold higher. Under these\\ncircumstances, therefore, rent will appear in price. The statement in the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0185.jp2"}, "186": {"fulltext": "I 68 RENT\\nfirst part of this as to the measure of rent, will, however, still hold true.\\nThat, normally, rent does not appear in price, Hume saw, though Ad.\\nSmith did not [cf. Bagehot, Ec. Studies, iii]\\n1 06 Peculiar and Nominal Rents\\nWalker, P. E., pt. iv, ch. ii.\\nRents of mines, water-privileges, building-lots, etc.,\\nare determined by the same general law with, agricul-\\ntural rents. Yet notice here that i The location of\\na lot, not its fertility, usually settles its rent, though,\\nii Lowest town-rents coincide with the value of the\\nlots for tillage, iii The so-called rent of buildings\\nthemselves is usually not rent proper but interest of\\ncapital, iv The normal return for improvements on\\nland is also not rent, though often practically insepara-\\nble from it.2 V With increase of the ground rent on a\\nspot of land, capital rent often attaches to the build-\\nings situated thereon, as well as to the improvements\\nincorporated therein, vi The tendency of long work-\\ning is, in mines toward, in lands away from, the no-\\nrent condition.^\\n1 Hedges, ditches, grading, roadways, artificial fertility, etc. Cf. 104,\\nn. 2.\\n2 This fact seems to a considerable extent the occasion of the erroneous\\nview referred to in 107.\\n3 Mines often become so deep that it no longer pays to use them. Any\\ngiven piece of land, on the other hand, despite the law of diminishing\\nreturn 34], is likely, with the growth of population, to bear higher and\\nhigher rent. There is no necessity that a piece of land should be worn\\nout by cultivation, though extended through centuries.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0186.jp2"}, "187": {"fulltext": "RENT 169\\n107 Controversy\\nMill, as at 104. Schaeffle, Bau und Leben des socialen Korpers, vol. iii, 433 [also\\nas at \u00c2\u00a7103]. Wirth,\\\\\\\\\\\\ Vierteljahrsch. fur Vclksivirisch., 1863, vol. ii. H. C.\\nCarey, Prin. of P. E. Yves Gityoi, Sci. Econ., bk. v, ch. i. Patten, Premises of\\nP. E., i.\\nThis is the theory of rent first propounded at the\\nend of the last century by Dr. Anderson, and which,\\nneglected at the time, was almost simultaneously redis-\\ncovered twenty years later, by Sir Edward West, Mr.\\nMalthus, and Mr. Kicardo. Most of the leading\\neconomists^ still approve it. First challenged by Hoff-\\nman,* in 183 1, it has since been earnestly opposed by\\nthree eminent writers, Carey, Bastiat, and Max Wirth,\\nwho reduce rent to interest and maintain that no mere\\npower of nature can be made to yield a price. Their\\nappeal to facts is unsuccessful: differences of rent do\\nnot at all coincide with differences in the amounts of\\ncapital applied to different lands. Nor is their doc-\\ntrine a whit better than Ricardo s as weapon against\\nsocialism.^\\n1 The pamphlet really appeared in 1777.\\n2 Mill, as above. He adds: It is one of the cardinal doctrines of\\nP. E., and, until it was understood, no consistent explanation could be given\\nof many of the more complicated industrial phenomena.\\n2 Besides Walker, we mention Wagner, Schaeffle, de Laveleye, Roscher,\\nand Mangoldt. Mill and Hermann argued for it stoutly. Schaeffle de-\\nclares that its critics have not shaken it in the slightest. Patten s criti-\\ncisms do not touch the substance of the doctrine, and are not always just\\neven to the Ricardian exposition.\\nChief of the Prussian statistical bureau, in an address delivered in\\n1831. Next came Carey, in 1837, probably ignorant of Hoffinan s con-\\ntention. Bastiat wrote in 1848, merely repeating Carey \\\\_Harmo7ties Aeon.,\\nxiii]. Carey s view is discussed by Wirth, as above, and by Mill, bk. ii,\\nch. xvi, 5. It boots nothing to allege with Carey that improvements on", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0187.jp2"}, "188": {"fulltext": "I/O RENT\\nland [in U.S., e.g. have cost more than the land would bring. Many\\nof them have been foolishly made, and, what is more to the point, for par-\\nticular lots and localities, i/ie stateinent is not true. Equally vain is Hoff-\\nman s plea that land value always originates in labor [see above, 104,\\nn. 2]. Specially weak is it, with Yves Guyot, to think Ricardo all wrong\\nbecause of his error in assuming that the richest land is always occupied\\nfirst. But if these writers mean (which can hardly be the case) only that\\nthe product which mankind as a whole gets from the land is measured and\\ndetermined by its toil, are they correct 103] The same is true of a\\nnation having no foreign commerce, also of one which has, unless it pos-\\nsesses net advantage over those with which it trades 68 and n.] But\\nthis is no contradiction to the fact of rent.\\nWirth urges that the Ricardian theory makes rent-taking unjust, a\\nwinning which is not an earning, while his own view considers rent nothing\\nbut a form of interest. But in fact the title of the great British landlords\\n[in question] to their income is ethically no clearer on the one assumption\\nthan on the other. It was the fact of rent [as privately monopolized] that\\nled Proudhon to his famous thesis, property is robbery {la propriete,\\nc^est le vol].", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0188.jp2"}, "189": {"fulltext": "CHAPTER III\\nINTEREST\\nio8 The Nature of Interest\\nWebb, as at loo. H. George, Prog, and Poverty, bk. iii, ch. iii. Clark, Capital and\\nits Earnings, Am. Ec. Ass n Papers, vol. iii. Bohm-Batuerk, Kapital u. Kapital-\\nzins, bk. iii. Knies, Der Credit, viii. Sidgwick, bk. ii, ch. vi.\\nEconomic interest is that portion of the proceeds of\\nindustry which arises in consequence of the employ-\\nment of capital in other words, the wealth which, by\\nthe aid of capital, men with given native skill, given\\nenergy and felicity of situation, create over and above\\nwhat they could create using those same helps but\\nwithout capital. Interest varies according to the un-\\nlike advantages supplied to labor by the different forms,\\nlocations, and applications of capital, some pieces of\\ncapital assisting labor little, perhaps, temporarily, not at\\nall, while others are absolutely indispensable. Econo-\\nmic interest differs more or less from loan interest,^\\nwhether (i) at the current rate for short loans or for\\nlong,2 or (ii) at the normal rate,^ to which variations in\\ncurrent rates tend, in any community, to conform for\\nconsiderable periods of time.\\n1 It will be seen that the essential fact of interest does not presuppose\\na loan, interest upon loans being a subsidiary and incidental phenomenon,\\ngrowing out of the division of labor and the diversities of human ability\\nand circumstance. Intellectual capital of course cannot be loaned, though\\nits services may be hired 113].\\n2 Rates, i.e., always being, if other things are equal, the higher the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0189.jp2"}, "190": {"fulltext": "172 INTEREST\\nshorter the term higher at banks of discount, discounting only for days,\\nweeks and months, than at savings banks, which loan for years.\\nRate is not a happy form in which to conceive economic interest.\\nPortion of product is better. Yet to think of it as a percentage need\\nnot mislead if we bear in mind that its rate may vary widely from the\\nrate of loans, and is in fact a very different thing.\\n109 Loan Interest\\nH. George, as at 108. Atkinson, What makes the Rate of Int.? Intl. Rev., vol. xi.\\nBdhm-Bawerk, vol. i. Knies, Credit, vii.\\nNearly all theories of interest err in narrowing the\\nproblem to loan interest instead of viewing this as\\nincidental to the larger one of interest in general. But\\nof loan interest itself most accounts are very defective.\\ni One set of writers mistakenly call interest roblbery,i\\nignoring its natural source in capital and production.\\nii Others fail in merely referring it to the productivity\\nof capital,^ overlooking the elements of abstinence,\\ntime, and risk, iii Certain authors seem to conceive\\nabstinence not only correctly as indispensable to in-\\nterest, but incorrectly, as its efficient cause.^ To the\\nelements of truth contained in these three views needs\\nto be added the one first put in its true light by Bohm-\\nBawerk,* that a loan is in fact an excbang-e of present\\nagainst future goods, so that, as present commodities\\nnormally command a premium over future ones of like\\nkind and quantity, a definite sum of present wealth is\\nto be had only at the price of a greater in futures.\\nThis premium is the pure loan interest. Gross loan\\ninterest contains the further element of insurance\\nagainst risk.\\n1 Marx, and, in part, Rodbertus. See Marx, Capital, vol. i, pt. iii.\\nBohm-Bawerk criticises the view in his vol. i, ch. xi.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0190.jp2"}, "191": {"fulltext": "INTEREST 173\\n2 Closely allied with this theory are 3 variants i) the notion of James\\nMill and M CuUoch, that interest is nothing but the wages of the labor\\nstored up in capital; ii) the fructification theory, advanced by Turgot\\nand in a modified form favored by H. George, that capital at large draws\\ninterest because some of it, as land [Turgot], animals, bees, wine [George],\\nis actually or in effect live capital, bringing forth value without concur-\\nrent labor; and iii) the usufruct theory, of J. B. Say, Hermann, and\\nMenger, which derives interest from a supposed peculiarly profitable em-\\nployment of it, yielding gain over and above its natural productivity.\\nBohm-Bawerk [vol. i] keenly and at length reviews all these.\\nSenior and Bastiat are referred to, but one cannot agree with Bohm-\\nBawerk in supposing them to have meant all that many of their utterances\\nwould imply. Rees, in From Poverty to Plenty, also wrongly considers the\\ntruth of the abstinence theory to involve the falsehood of all productivity\\ntheories.\\nVol. i, 308; vol. ii, sec. iv. We must emphasize the truth that cap-\\nital, not money, is the true correlative of interest. Contrary to Bilgram s\\nthought [Iron Law of Wages], money is rarely, if ever, really the form of\\ncapital for the use of which interest is paid. Money usually only aids\\nto mediate the transfer of capital to the borrower s hands. It may (i) be\\nthe full and sole agent of this transfer, or (ii), the more frequent case,\\nonly give denomination to credit-instruments serving the same purpose.\\n1 10 The Rate on Loans\\nWalker, P. E., pt. iv, ch. iii. Mangoldt, 102 sqq. Sidgwick, bk. ii, ch. vi.\\nThe rate of loan interest is determined by the ordi-\\nnary law of supply and demand, except in this, that\\ninasmuch as desire and reluctance to borrow and to\\nlend are influenced by every circumstance that affects\\nbusiness,^ supply and demand of loans, and hence the\\nrate of interest, vary and fluctuate more than other\\nprices do. The chief modifiers are (i) the state of\\nbusiness, (ii) the abundance or scarcity of capital,\\n(iii) the risk^ or security of loans, and (iv) the strength\\nor weakness of men s motives to accumulation. Rate\\nof interest and amount of saving- are not, however, in", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0191.jp2"}, "192": {"fulltext": "174 INTEREST\\nexact correlation.* Owing to the strong conservatism\\nof certain money-lending classes, the actual market\\nminimum, as in case of consols, government bonds, and\\nbottom mortgages, is lower than either the gross or the\\npure loan interest of capital.^\\n1 The slightest panic or insecurity, caused, e.g., by the rumor of a war,\\nthough not affecting in the least men s wish to sell meat, bread, corn, or\\niron, will make many unwilling to sell the services of capital. Every finan-\\ncial crisis reveals how coy capital is at such times, and also how stupid, care-\\nless, and bold it is at others.\\n2 It is the growth of capital which causes the rate of interest continually\\nto fall in all prosperous industrial lands. Till i868 I2 per cent, or, better,\\nI per cent a month, was the lowest rate of interest paid in San Francisco.\\nIn many districts on the Pacific slope, i.]- and 2 per cent per month were\\nnot considered excessive, and throughout the Mississippi valley, except in\\na few of the great business centres, the rates of interest did not run much\\nbelow these figures. At present, on the average, interest west of the\\nAlleghany mountains costs about one-half what it cost in i868. The\\nsecurity is probably no better nov/ than then. The likelihood of an ad-\\nvance in the value of the security upon a mortgage loan was even better\\nthen than now. The change has come simply because, in proportion to\\nthe demand, there is now a much larger amount of available capital. In\\nLondon, while the official rates of discount have, in the last fifty years,\\nsometimes averaged in twelve months considerably over 6 per cent, for\\nfifteen years past the yearly average has been but once over 4 per cent.\\nDuring 1888 a large part of the British debt was refunded at 2| and 2.\\\\\\nper cent. Early in the 20th century the normal rate on loans in the richer\\ncountries vidll very likely not be over 2 per cent, the lowest point to which\\nBank of England discounts have ever yet gone. On the rate of int. in\\nGermany since 181 5, Zeitsch. f. Volkswirtsch, XXII, iii, 233. It is evident\\nthat high interest may or may not betoken financial prosperity, according\\nto cause. Rise of the rate in consequence of increase in production is a\\nfavorable symptom; if resulting from greater risk, the opposite. Con-\\nversely, reduction of the rate may be a bad sign, of stagnation in business,\\nor a good, indicating lessened risk. Save in panic, abundance of capital\\nusually works low interest; paucity, high.\\nA very influential condition. The low rate at which Gt. Britain and\\nthe U. S. can market bonds, while in part due to plentifulness of capital,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0192.jp2"}, "193": {"fulltext": "INTEREST 175\\nis largely owing also to the perfect credit of these governments. The\\nAthenians at one time allowed 60 per cent upon marine interest, while\\non land the rate was but 12.\\nThe rate will go down in proportion as accumulation increases, but\\naccumulation will not go down in proportion as the rate falls. Many\\nwould save were there no [loan] interest at all. Among the poor, in par-\\nticular, the precise rate has but the slightest effect upon economy.\\nAny large lender, placing his risks judiciously, and spreading them\\nsomewhat widely, is mathematically certain to realize a larger return from\\nhis capital through a term of years, after deducting losses, than if he had\\ninvested in the most approved securities [Walker]. The long time of\\nthese investments is part cause of this also the peculiar ease of collection.\\nWe may say that in return for these advantages lenders give back to bor-\\nrowers a part of the real loan interest. Elimination of the risk element\\nthrough multitude of loans is the principle of the English Investment\\nTrusts. What is lost in one investment is made up in another.\\nIII Inflation and Interest\\nRate of interest bears no necessary relation to the\\nquantity or the value per unit of the money in circu-\\nlation. Hence an increase of currency does not, in\\nand of itself, affect the rate of interest.^ It diminishes\\nthe power of a dollar to buy commodities, but not to\\nhire its old multiple in money of the same kind with\\nitself. Since, however, an expansion or contraction\\nof paper currency is always an expansion or contraction\\nof credit, the effects of the two are easily confounded.\\nBut the effect of paper issues on interest is not from\\ntheir character as an enlargement of the currency,\\nbut from their character as loans.^\\n1 Unless indirectly, by quickening business iio (i)].\\n2 In a state of tense credit the rate rules high because you are not\\nabsolutely safe in loaning to any one, the monetary unit being so likely to\\nfluctuate in value while the indebtedness is outstanding. Thus during the\\ncivil war all stocks rose and fell with the premium on gold.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0193.jp2"}, "194": {"fulltext": "I ]6 INTEREST\\n112 Usury Laws\\nKnies, Der Credit, vii. BShnt-Bawerk, Kapztal, etc., vol. i, i-iii. Perry, ch. x.\\nBentham., On Usury. Gamier, Traite, 722 sqq.\\nThe rate of interest determining itself naturally,\\nusury laws, as distinct from legal rates for the settle-\\nment of old debts when no rates were agreed upon, are\\npernicious. Aiming especially to protect the borrower,\\nwhich is unjust, they in fact burden him instead, rais-\\ning the rate by narrowing supply^ and by compelling\\nborrowers to resort to indirect methods.^ Such legisla-\\ntion is relic of a departed social state or of exploded\\neconomic ideas. The Mosaic code* forbade interest\\nbecause in its time only those in distress sought loans.\\nPartly the same fact, partly tradition, led the Churcli\\nfathers without exception to retain the Mosaic scruple.\\nThe G-reeks and Romans were set against interest by\\nthe further thoughts of all wealth as consisting in gold\\nand silver, and of these as barren.\\n1 These are of course appropriate and necessary.\\n2 The legal maximum is sure to be too low. Hence many try to use\\ntheir capital rather than lend. This narrows the loan market immediately.\\nIt does the same also mediately, by keeping capital in hands not the most\\nproductive possible. Both effects raise the rate.\\n8 One device often resorted to to evade usury legislation is this A\\nwishes to loan, and B to borrow, ^1,000 at 10 per cent for a year amount\\nat the end of the year, ^1,100. B deeds to A a piece of land or a building\\nfor ^1,000, at the same time signing an agreement to buy it back at the\\nend of a year for $1,100. The necessity of all this, and of breaking the\\nlaw, will make such as resort to these means charge and pay high.\\nLeviticus, ch. xxv, Deuteronomy, ch. xv. But the parable of the tal-\\nents, Matthew, ch. xxv, shows that Jesus did not share this prejudice.\\nSee Gibbon, Decline and Fall of the Rom. Empire [ed. Milman], vol.\\nV, 314, where reference is made to Barbeyrac, Moral des pires. The\\nmediaeval theologians were fond of using against the legitimacy of interest", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0194.jp2"}, "195": {"fulltext": "INTEREST 177\\nthe words of Jesus, Luke vi, 35, which read in the Vulgate, mutuunt date\\nnihil inde sperantes.\\n6 Yet the theoretical opposition did not keep the institution from being\\nlegalized. The legal rate at Athens when the Roman conquest began was\\n18 per cent. Cf. no, n. 3. The Twelve Tables of Roman law made it\\n10 per cent for twelve months, viz., 8J per cent, or an imcia to every as,\\nper year of 10 months. The latter was then the fiscal year, though the\\nRomans were already beginning to employ the 12 months year along with\\nthe 10 months or lunar year. At Babylon, in the 6th century B.C., interest\\nranged from 13 to 20 per cent, paid monthly. Here only the lunar year\\nwas used.\\nShakespeare, too, calls interest the posterity of a sterile metal.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0195.jp2"}, "196": {"fulltext": "CHAPTER IV\\nWAGES\\n113 Definition\\nWalker, Wages [cf. his P. E., pt. iv, ch. v]. Szdgwick, bk. ii, ch. viiir also in Fort-\\nnightly Rev., Sept. i, 1879. Clark, Possib. of a Sci. Law of Wages, Am. Ec. Ass n\\nPapers, vol. iv. Wood, Theo. of Wages, ibid.; also in Quar. Jour. Econ., vol. iii,\\n60 sqq. Webb, as at 100. Mangoldt, 109 sqq. Thornton, in XlXth Cent.,\\nAug., 1879.\\nWages means here (i) pure wages as distinguished\\nfrom gross, viz., the mere reward for conimon labor,\\nexcluding all high salaries and fees, and also all forms\\nof remuneration under the name of wages so far as\\nearned by special talent, education or training,^ (ii)\\nreal wages, which may in any case vary greatly from\\nnominal through differences in the value of money and\\nin the regularity, safety, and healthfulness of work, also\\nthrough extras given or allowed to be earned.^ We\\nseek, chiefly, the laws of general wages, deferring the\\nreasons for the different levels of wages within any\\ngroup of competitors, to the end of the Chapter.\\n1 Though we may stop short of Leroy-Beaulieu s avowal that the whole\\ntheory of wages must be rebuilt, little, certainly of the older teaching on\\nthe subject can be accepted without sifting. New definitions are especially\\nneeded. Rewards earned by peculiar talent are profits [see next Chapter]\\nthose bestowed in consequence of education and training are interest on\\nintellectual capital 98. Cf. Crehore, Quar. Jour. Econ., vol. ii, 361].\\nThat the several elements all go by the name of wages is unfortunate, yet\\nno nomenclature could avert the necessity for care in the mental analysis\\nof the case, as the elements of gross wages are themselves to a great extent\\ninseparable in fact. But gross and nominal wages do not usually so vary", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0196.jp2"}, "197": {"fulltext": "WAGES 179\\nfrom pure and real as to render reasonings about the one kind wholly\\nmisleading in respect to the other.\\n2 Walker, P. E., 260 sq. A common instance is the custom in stores,\\nof letting the clerks have goods at wholesale prices.\\n114 Cause and Source\\nWalker, as at 113 [his Wages is devoted to the demonstration of the view we present\\non this point]. H. George, Prog, and Poverty, bk. iii, ch. vi. Fawcett, Manual,\\nbk. ii, ch. iv. Cairnes, Leading Principles, pt. ii, ch. i. Sumner, in Princeton\\nRev., Nov., 1887 [also in his Essays, in Pol. and Soc. Sci.]. Beauregard, Theo.\\netu Salaire. Levasseur, do., Jour, des Econ., Jan., 1888. McDonnell, Hist, and\\nCriticism of Theories of Wages [prize essay, Dublin, 1887]. Marx, Capital. Mar-\\nshall, Econ. of Industry, bk. ii, chaps, vi, vii, viii, xi [cf. Quar. Jour. Econ., vol. ii,\\n218 sqq.]. Roscher, bk. iii, ch. iii. Jevons, Theo. of P. E., ist ed., 256 sqq.; 2d\\ned., 289 sqq. Thornton, Labour.\\nThe efficient cause of wages is the labor from which\\nthey spring, a truth clearly apparent from a glance at\\nprimitive industry, and in no wise altered by the com-\\nplex conditions which arise later. Equally manifest is\\nit that the source of wages is the product created by\\nthe same labor. This theory, now well-nigh universally\\naccepted, opposes that of Fawcett and Cairnes, which\\nspeaks of a fast and rigid wage-fund/ existing at any\\ngiven moment, made up of capital already produced,\\nfrom which fund wages for the next ensuing period\\nmust be paid, so that, until there has been, through\\nnew production, a new accession to capital and the\\nwage-fund, wages must depend absolutely and only upon\\nthe greater or less competition among the laborers,\\narising from their numbers.\\nBearing in mind the definitions of 98 and 113.\\n2 On this, H. George, as above, is best. Cf. Rae, Contemp. Socialism,\\n332. Cairnes, too, forgetting himself, well says, Leading Prin., 58, that\\nindustrial rev. ards consist for each producer, or, more properly, for each\\ngroup of producers, employed on a given work, in the value of the com-\\nmodities which result from their exertions. Freight the mother of", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0197.jp2"}, "198": {"fulltext": "l80 WAGES\\nwages [_i.e., no freight, no wages for sailors] is an old maxim of admiralty\\nlaw [Prog, and Pov., 50],\\n3 See Laughlin, ed. of Mill, 178 sqq., Cairnes, as above [the ablest\\npresentation of the old view], Walker, Wage-fund, in Lalor, vol. iii.\\nMill, bk. ii, chaps, xi-xiii, Fortnightly, May, 1869 [where Mill repudiates\\nthe old doctrine, taught in his Principles]. Mill was led to this by Longe s\\npamphlet, 1866, A Refutation of the Wage-fund Theo. of Modern P. E.\\nCliffe Leslie wrote, agreeing with Longe, in Fraser s Mag., July, 1868.\\nEndless has been the discussion since, not all of it sober. If the wage-\\nperiods be considered very brief, and the reckoning carried over con-\\nsiderable time, the two theories would not differ in practical effect, since\\nby both product would avail for the sustenance of labor at once after it\\nwas amassed. The wage-fund belief has wrought mischief in disseminating\\nthe false impressions that contract wages are the only wages, and that wage-\\nearners are totally dependent on capitalists. But the new and better doc-\\ntrine, while correcting these errors, leads many to the equally great mistake\\nof supposing the portion of the proceeds of industry which can issue in\\nwages to be naturally unlimited, so that, if wages are low, capitalists or\\nthe state must be to blame [cf. 119]. Further, (i) so far as wages are\\nadvanced, which is not common, they must be taken from capital, not\\nfrom product, (ii) the amount of wages promised in any given bargain is\\naccording to prospect of production, and (iii) the total of wages realized\\non the whole and in the long run is as the amount of production.\\n115 Developed Wages\\nAd. Smith, bk. i, ch. vi; bk. ii, ch. i. H. George, as at 114. Clark, Pol. Sci. Quar.,\\nvol. ii, 605. Sax, Theoretische Staatswirisch., 230, n., 39, 40.\\nAs industry advances it leans more and more on\\ncapital, which not all possess. Moreover, not only are\\nthe precise shares due to each man often no longer\\ndiscoverable, but the product is usually not divisible\\nso early or often as the needs of workmen require.\\nThose lacking capital therefore covenant with capitalists\\nto sell them their wages, in the proper sense, for certain\\nsupplies to be paid at convenient intervals, so origi-\\nnating the wage system as now familiar. The wages", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0198.jp2"}, "199": {"fulltext": "WAGES l8l\\nproper we may term noumenal^ wages,* as distin-\\nguished from the visible wages* actually received.\\nObserve that modern wages are as natural in their time\\nas primitive wages were earlier.\\n1 In a cotton factory, for instance, each weaver s true wage for a given\\nday s work is at the end of that day stored up in the web of cloth woven\\nduring the day. To save breaking bulk, the owner of the establishment\\nbuys the weaver s true wage, giving him money down. With many writers\\nthis transaction seems to be the beginning and the end of the wages-\\nphenomenon. But wages take other forms than that of contract wages.\\nWork in mills is not the sole kind of industry.\\n2 The word is borrowed from Kant s philosophy, and means that which\\nis real to thought though not to our senses.\\nii6 The General Rate of Gross Wages\\nRicardo, Prin. of P. E. and Taxation, ch. v. Clark, as at 113. Webb, as at 100.\\nCkerbuliez, bk. iii, ch. iii, sec. 2.\\nCompetition pervades the entire wage-earning world,\\nyet not at all equably, but in tracts or groups of high\\npressure, separated by ridges of low.^ Why, in the\\nworld, a nation, or a group, does the wages class as a\\nwhole divide the joint social income on such and such\\nterms with landlords, capitalists and undertakers\\nTo this most difficult question different writers give\\nthe following several answers i That the winnings of\\nthe laboring population tend to conform to the returns\\nsecured by such unskilled workmen as employ no-rent\\nlands or no-interest capital.^ ii That the natural\\nprice of labor is that price which is necessary to enable\\nthe laborers one with another to subsist and to per-\\npetuate their race without increase or diminution,\\naccording to the standard of comfort prevalent among\\nthem at the given place and time.^", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0199.jp2"}, "200": {"fulltext": "1 82 WAGES\\n1 Cf. 66 and notes.\\n2 Tend to conform, that is, to bare wages, in the strict sense 113].\\nThe view counts all gains, in any cases, beyond those gotten by such\\nunassisted labor, as interest or profits loi, 113, n. i].\\n2 Ricardo, as above. This is what Lassalle named Ricardo s iron\\nlaw. In fact it is neither iron, as the modifications show, nor Ricardo s.\\nIt originated with Turgot. He said In each species of labor it must\\ncome to this, that wages limit themselves to what is necessary for the sup-\\nport and reproduction of the laborer. But he insisted that this natural\\nprice of labor is in no wise fixed but varies greatly at different times in one\\ncountry and more greatly still in different lands. The principle is that if\\nthe ignorant poor find themselves at any time unusually prosperous, they\\nmultiply till competition has destroyed the advantage. Fawcett, Manual,\\n234, declares that in the English agricultural districts wages fluctuate\\nregularly with the price of wheat. This phenomenon Ricardo generalized\\nsomewhat too hastily, as if, which he after all denies rather than asserts,\\nextra prosperity on the part of the poor absolutely could not be permanent.\\nCf. 1 1 8. For H. George s interp. of Ricardo on wages, Social Problems,\\n201.\\n117 The Residual Claimant Theory\\nWalker, Wages, pt. ii; P. E., pt. iv, ch. v. Atkinson, The Distribution of Products;\\nThe Margin of Profit. Chevallier, Les Salaires au XlXieme Siecle. Giffen,\\nProgress of the Working Classes.\\niii That the laws of rent, interest, and profits are at\\nthe same time laws of wages, wages consisting always\\nin the total product of industry, minus what the opera-\\ntion of these laws apportions to landlord, capitalist and\\nundertaker. According to this view, among the three\\ndivisions of social income which arise through economic\\nmerit, pure profits and interest constantly decrease,\\nwhile wages increase, the wages class, not landlords,\\nundertakers, or capitalists, being the residual claimant.^\\nThat this advantage shows so slight effect upon actual\\nwage rates, is laid to (i) the increase of laborers in\\nnumbers, and (ii) the anomalous and partly illicit gains\\nconcealed in gross profits.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0200.jp2"}, "201": {"fulltext": "WAGES 183\\nWe do not accept this view. Even the considerations at the end of\\nthe do not bring it into accord with facts. Wages, both per capita and\\nas a total [the one does not necessarily involve the other], are indeed\\nincreasing, as Chevallier and Giffen show, though the advance cannot be\\nshown to keep pace with that in the means of production. The cause of the\\nincrease, however, we believe not to lie in any laws naturally limiting the\\nother shares, but in such elevation, new self-respect, and new demands on\\nthe part of laborers, and such higher regard for them on the part of the\\npublic, as recent decades have developed 118, and n. i]. In proclaim-\\ning a natural limitation to the shares other than wages, writers are too apt\\nto reckon interest by the mere rates of loans, and profits by mere statistics,\\nforgetting, meanwhile, both monopoly gains and the steady growth of\\nrents. On this, Hertzka, Soc. Entwickelung, bk. i, chaps, xi, xii.\\n118 The Truth\\nGiddings, Natural Rate of Wages, in Mod. Dist. Process. Gimton, Wealth and\\nProgress. Patten, in Am. Ec. Ass n Papers, vol. iii, 406 sqq.\\nWe take Kicardo s law, rightly understood and de-\\nveloped, as true, special emphasis being laid on the last\\npart of it, which is usually ignored. In one direction,\\nwages must sustain life, or work ceases. In the other,\\nwhatever the competition between employers, the figure\\nwill, up to the point where higher wages would begin\\nto discourage undertakings, be fixed by the laborers\\nstandard of life, their sense of what they must have.\\nIf too high wages are demanded, undertakers will quit\\nbusiness if too low are allowed, laborers will die.\\nEnforced poverty, or any other cause breaking wage-\\nwinners spirit, lowers wages all that gives them\\npride, ambition, and courage, elevates wages. Two\\nthings are to be carefully noted, however, i After all,\\ncontrary to common opinion, the portion of the pro-\\nceeds of industry which can during any limited period\\nissue in wages is, to a great extent, not arbitrary but", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0201.jp2"}, "202": {"fulltext": "184 WAGES\\nfixed,^ and fixed by the amount of capital available for\\nsupporting labor, ii No automatic action, prompted\\nby motives of self-interest, will heal the evil of degrada-\\ntion in the laboring population.^ Hence the value (i) of\\na public opinion in sympathy with labor, (ii) of labor\\nagitation, if at once well planned, temperate, and reso-\\nlute, and (iii) of education wisely to devise, and moral\\ncharacter to make possible, united action.*\\n1 Nor need this impoverish any one. Employers, to meet the demand,\\nare forced to new economies and invention, which may even have the\\neffect of increasing the total production. Gunton, as above, has well\\nwrought out the idea. Touching the possibility of a sweeping benefit to\\nwage-earners in this way he is probably too sanguine, but within con-\\nsiderably large limits his thought is correct 117, n. l].\\n2 So Walker, Wages, 410. Wages are in some sense fixed, though not\\nin the manner supposed by the wage-fund conception 114]. The sup-\\nply of capital influences them, but through its effect upon the productive-\\nness of the labor. Many who here agree with Walker too nearly overlook\\nthis, H. George does, yet see Prog, and Pov., 62.\\n3 See the noble discussion in Walker, Wages, chaps, xvi-xix. See also\\nW. s Address, in Am. Ec. Ass n Papers, vol. iii, 157 sqq. Upon this point\\nmany earlier writers of repute held notions that experience has proved\\nwholly false. Walker quotes some of these.\\nWe agree with Patten, as above, that a general advance in the incomes\\nof laborers is not the necessary consequence of enlarged social production.\\nIt presupposes moral elevation, and must be a slow process at best. The\\nready optimism which studies the vast industrial progress of our time,\\nassuming it as an axiom that all the benefits of this progress pass quickly\\ninto the possession of the laboring masses, seems to us as mistaken as it\\ncertainly is honorable to the impulses of its subjects.\\n119 Concluding Points\\nAd. Smith, bk. i, ch. x. Yves Guyot, Sci. Economique, bk. iii, ch. iv.\\nI In spite of their tendency to equality through the\\naction of supply and demand, wages within any tract", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0202.jp2"}, "203": {"fulltext": "WAGES 185\\nof competition differ in the different employments,\\naccording as these are or are not (i) agreeable, (ii)\\nalways demanding labor, (iii) dependent on high orig-\\ninal gifts, (iv) easy to learn, (v) reputable, (vi) respon-\\nsible, (vii) trammelled by restrictive laws or customs.^\\nII The amount paid for wages varies greatly, according\\nto the nature of the business, in the proportion it bears\\nto the value of fixed capital and in the proportion it\\nbears to that of circulating. Fixed capital increases\\nwith the advance of civilization, out of proportion to\\nboth wages and circulating capital. Ill Popular errors,\\ntotal or partial, are (i) that good trade makes high\\nwages, (ii) that high prices have the same effect, and\\n(iii) that wages must needs vary with the price of food.\\nThis influence sometimes raises wages above their proper level, some-\\ntimes has the reverse effect. The latter is many times the case with\\nwomen s wages, which are often, though less and less so at present, lower\\nthan men s for the same amount and quality of work. Stated fees, too,\\ntend to go unchanged through long periods, being fixed by custom.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0203.jp2"}, "204": {"fulltext": "CHAPTER V\\nPROFITS\\n120 Terminology\\nClark and Giddings, Modern Distrib. Process. Maiaj a, UnternehmergewtMn.\\nWirminghaus, Das Unternehnten. Gross, Lehre vom Unternehmergewinn.\\nSchroeder, Unternehtnen und Unternehmerge-winn.\\nAll economic writers now agree in distinguishing\\nprofits from interest,^ but another question still divides\\nthem, viz., whether, of the two elements making up\\ngross profits, the essence of profits consists in (i) re-\\nward for the exercise of some peculiar natural ability,\\nor rather in (ii) risk^ and the accompanying haphazard\\nand anomalous gains,^ analogous with those of specula-\\ntion. We prefer nomenclature (i), taking pure profits,\\nor profits proper, as the remuneration of special origi-\\nnal talent exercised in any industrial direction. Profits\\nmanifest themselves most obtrusively in connection with\\nthe management of business, yet form an immense ele-\\nment in the sums nominally paid as salaries, fees, and\\nwages.\\nAd. Smith, Ricardo, Mill, and Fawcett treat both under the one name\\nof profits, hopelessly confusing many important questions. See, for this.\\nMill s 4th Essay on Some Unsettled Problems in P. E. On Graziani s\\ntheory of profits, see in Jour, des Aeon., Oct., 1887,\\n2 Risk cannot, as is so often thought, be the reason of profits. The\\nrisk of a business by no means falls, as a rule, entirely upon its manager.\\nWhen authors so represent, they must have in mind the legal responsi-\\nbility a very different thing. The latter often protects the laborers, more\\noften it does not, according to the manager s resources.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0204.jp2"}, "205": {"fulltext": "PROFITS 187\\nMonopoly profits, conjundur winnings [as the German economists\\nexpress it], mere good luck in business, etc. Cf. Progress and Poverty,\\n172 sqq. J. B. Clark cuts the undertaker function into two parts, the\\nindustrial and the mercantile. The returns for management he likens to\\nwages, the rest, gain which arises from selling the product at more than\\nits ingredients ordinary wages, wages of direction, capital, taxes, etc.\\nhave cost, he calls pure profits. But, as a rule, it is precisely the inanage-\\nmeni which enables the gain to be made on sales. This gain, unless in\\ncase of some monopoly or peculiar feature removing the operation from\\nthe sphere of profits anyway, is brought about solely by betier management\\nthan the poorest which still continues. It is reward to management.\\nHow else can such reward appear? Does not the gain of merchants come\\nby managing wisely?\\nAcquired business ability is of course capital, and its remuneration\\ninterest 98, loS]. This, in the case of a profit-taker, would form a\\nsecond element in gross profits, along with that suggested under (ii) in\\nthe text, above.\\n121 Undertakers Profits\\nWalker, Wages, ch. xiv; P. E., pt. iv, ch. iv. Cherbuh ez, bk. iii, ch. iv. Mangoldt,\\n96 sqq.\\nThe undertaker,! as capitalizer or user of capital, ful-\\nfilling an entirely different office from that of the mere\\nlender of capital, profits, the undertaker s share in the\\nproduct, are governed by a law analogous with rent.^\\nPower to org-anize industry and apply it to capital\\nvaries with different undertakers, as fertility of land\\nwith districts. By the law of dearest cost of produc-\\ntion, the prices of manufactures, for instance, are fixed\\nby the cost of the poorest undertaker-talent which de-\\nmand forces into employment. This is no-profit under-\\ntaking. The returns of all superior undertakers are\\ntheir profits, varying mainly with ability, partly with\\nopportunity.^\\n1 On the use and meaning of this term, 46, n. i. In the economic\\nwritings of Franklin and Alexander Hamilton it frequently occurs in just", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0205.jp2"}, "206": {"fulltext": "1 88 PROFITS\\nthis sense. An early minute of the trustees of Brown University authorizes\\nthe faculty to negotiate with some undertaker for gowns to be worn by\\nspeakers at commencement. The real undertaker is often a composite\\nbody 46, iv; 99, n. 3].\\n2 But beware of following the analogy too far. There is a scarcity of\\nland relatively to need, and there is a scarcity of undertaker-ability rela-\\ntively to need. But while competition for pieces of land can never so\\nincrease the productiveness of the best as to throw the poorer out of use,\\nbut rather poorer and poorer have to be occupied with the lapse of gen-\\nerations, competition cultivates undertaker-talent to an ever more and\\nmore perfect condition, so that poorer undertakers are thrust from the\\nfield. Degrees of fertility in the land used go on multiplying degrees of\\ntalent in management go on decreasing. [Cf. Clark, Pol. Sci. Quar., vol.\\nii, 610.]\\n3 Of course, so far as the fortunate opportunity is thing of chance, of\\nfraud, or of partial legislation, the profit is gross, not pure. Cf. 117.\\nIncome of this sort might be rent, or belong in the fifth category 102,\\n103]. Hugo Bilgram finds the essence, of profits to consist simply in the\\nunfair advantage afforded by the ownership of money, the moneyless man\\nbeing at the margin of opportunity, etc. [for Bilgram too carries out the\\nrent analogy]. But the gainful chance in trade may be created by natural\\nability functioning in purely economic ways, in which case the gain is pure\\nprofits. The theory of profits here set forth was first sketched by Bagehot,\\nand then elaborated by Walker. It is now, in essence, the prevalent one.\\nIngram, Hist, of P. E., however, conceives it to be yet on trial. For good\\nremarks on it, Hadley, ist Rep. of Conn. Bureau of Lab. Stat., esp. p. 21.\\n122 Undertaker-Talents\\nClark, Profits under Modern Conditions Pol. Sci. Quar., vol. ii.\\nThe reasons for certain undertakers superiority over\\nothers are many in both number and kind. Force\\nof will and strength of mind are naturally the main\\ndeterminants. All turns sometimes upon a cool, phleg-\\nmatic temperament, sometimes upon courage or cheei*-\\nfulness. A gift for administration in general may\\ntell the story, or, in particular, the power to manage", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0206.jp2"}, "207": {"fulltext": "PROFITS 189\\nmen. So may economy, thrift, attention to business,\\nmemory, quickness at figures, accuracy, the ability\\nto hold in mind many details at once. In not a few\\ncases good health or a rugged constitution will be the\\ndecisive characteristic.\\n1 M. de Lesseps is able, it is said, to go days without sleep, and then,\\nwhen opportunity offers, to make up by sleeping all day long, in a railway\\ncarriage if need be. Let pupils suggest as many other causes of profits as\\nthey can besides the above.\\n123 Profits, Prices, Wages\\nThe authh. at 117, 118.\\nPure profits, consisting wholly of wealth created by\\nthe powers of given undertakers over and above what\\nwould have been produced by the same application of\\nlabor and capital under less efficient leadership or man-\\nagement, neither (i) enter into the prices of products,\\nnor (ii) lower or anywise antagonize wages.^ On the\\ncontrary, wise and energetic undertaking is absolutely\\nvital to the increase of wealth. Anger at the great\\ncaptains of industry on account of the pure profits\\nwhich they acquire is not only groundless but insane.\\nRather is it the stupid and unsuccessful undertakers\\nwho deserve blame, sinking capital, starving laborers.\\nThe signal importance and unique character of the\\nundertaker-function account for the present and proba-\\nble limitation of co-operation.\\n1 Gross profits may of course include illegal and immoral gains, to the\\ninjury of laborers as well as of others.\\n2 As well, remarks Bagehot, speak of the compositors as making the\\nLondon Times as of laborers in the ordinary sense being the sole creators\\nof wealth.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0207.jp2"}, "208": {"fulltext": "Part V\\nCONSUMPTION\\nCHAPTER I\\nNEED\\n124 To Resume\\nMangoldt, bk. v. Chapin s Wayland, ch. x. Gamier, Tratte, ch. xxxiv. Patten,\\nThe Consumption of Wealth [Univ. of Pa. Pubb., P. E. and Pub. Law Ser., No. 4].\\nLexis, in Schoenberg, vol. i, XII.\\nThe general nature of consumption was presented\\nin \u00c2\u00a749, where the subject received consideration so far\\nas we found it to be a phase of production. Unpro-\\nductive consumption, or consumption as an indepen-\\ndent department of Economics, is now to be studied.\\nSince man produces to live instead of living to pro-\\nduce, unproductive consumption is the ultimate end^\\nof all wealth, and hence of all production. Our\\neconomic efforts have their entire occasion and their\\nessential explanation in the needs of human beings.\\nThese may be (i) corporeal or mental, (ii) original or\\nacquired, (iii) legitimate or illegitimate.\\n1 But we do not agree with the authors who regard this fact a sufficient\\nreason for treating Consumption before Production. A canvass of man s", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0208.jp2"}, "209": {"fulltext": "NEED 191\\nneeds would certainly not be inappropriate in an introduction to Economics,\\nbut consumption is not confined to a study of needs.\\n2 It is a remark of the Italian economist, Fuoco, that man, however\\ngreat he may be, is nothing but a living need, a sum of needs \\\\jutto quanta\\nh puo chiamarsi tm bisogtio vivente, zuia somma di bisogni\\n125 Elasticity of Need\\nMangoldt, 197 sq. Patten, as at 124. Cf., above, 62 and the authh. there named.\\nClark, Philos. of Wealth, ch. iii. Lexis [as at 124], 4. F. A. Lange, Arbeiter-\\n/rage [4th ed.], 164 sqq.\\nConsumption increases and decreases with plenty,\\nbut very un symmetrically. Although each depart-\\nment of the things which we desire is susceptible of\\ngreat expansion, the food requirement has less latitude\\nthan that for clothing, this less than that for shelter.\\nKinds of food vary in the same respect. Any man s use\\nof salt nothing could much extend, but new cheapness\\nwould greatly multiply veg-etahle dishes, and meats,\\nspices, and drinks more still. In dress, each season,\\neach change of temperature, and almost every occa-\\nsion demands of such as can afford it some modifica-\\ntion. Dwelling accommodations vary from wigwam\\nto palace, while our demand for immaterial goods has\\na truly infinite range. Liking for variety develops\\nmost rapidly in food, next in dress, next in the appur-\\ntenances of home, last in the intellectual and spiritual\\nrealm. Retrenchment follows in general an order the\\nreverse of the above, but with modifications largely\\ndetermined by pride and hahit.\\nThe limitation of outlay is nearly sure to begin at points where it will\\nbe least noticed, since people do not love to advertise their poverty.\\nUsually, therefore, economy will strike food before lodging, bringing one", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0209.jp2"}, "210": {"fulltext": "192 NEED\\nto dispense with meat, e.g., in favor of vegetables, and so on. This, in fact,\\nwhen such partial luxuries as tea, coffee, and tobacco have not yet been\\ngiven up, since habit powerfully co-operates with pride for the retention of\\nthese. Retrenchment in clothing comes last, in the outer garments last\\nof all. The possible sweep of retrenchment is greatest in housing, the\\nwhole of which may be surrendered, next most complete in clothing, a part\\nof which, in temperate climates, must be retained, least complete in food\\n62, n. 2, also Mangoldt, as above].\\n126 Fashion and Progress\\nRose her, 8g, n. i. Paite?t, as at 124.\\nPresupposing considerable resources on the part\\nof consumers, the direction assumed by consumption\\nvaries enormously with class and station in life, cus-\\ntom, wMm, and accident.^ As a rule, the poorer a\\nfamily is, the greater the proportion of its total in-\\ncome which it expends for food.^ Changes in taste\\nrender millions worth of goods unmerchantable each\\nyear. In food the prime delicacies of one season may\\nhave no sale the next. The office of sugar at present\\nwas once fulfilled by honey. The middle age used\\nenormous stores of wax, the head church of Witten-\\nberg requiring, just before the Reformation, 35,000\\npounds a year. In Catholic lands the consumption of\\nfish noticeably varies with diligence in the observance\\nof fasts. The growth of civilization and culture\\nbrings with it increasing refinement of needs, atid a\\nsteady advance from coarser to nicer in the things\\nwhich men consume.\\n1 There are three ways in which wealth may cease to be such [cf. 19],\\nviz., change in (i) the objects constituting it, (ii) the subjects possessing it,\\nor (iii) the relations between subjects and objects. Consumption in the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0210.jp2"}, "211": {"fulltext": "NEED 193\\nnarrowest sense comes under (i) We have a case of (ii) whenever change\\nin need leads to the casting aside of articles previously valuable, and of\\n(iii) when war, revolution, or other cause renders possessions insecure\\n[Mangoldt, 134].\\nThe so-called Engel s law. On this, and the numerous studies besides\\nEngel s of the same problem. Lexis [as in 124], \u00c2\u00a7\u00c2\u00a721 sqq., and notes\\nvery valuable. It may be regarded as a counterpart of this law that a man\\npays for house rent a smaller proportion of his income the larger his income\\nis. It has been ascertained that in Breslau, Germany, a family with a\\nyearly income of from ^300 to ^1000 pays about of it for dwelling accom-\\nmodations, one getting from $1000 to ^1500, about one with from ^1500\\nto $3000, about one with from $3000 to $7500, about j-\\\\, one with a\\nhigher income than this about i}(j. Probably 90 per cent of the families\\nin that city pay In the U. S. the proportion is doubtless somewhat smaller\\nfor the poor and much larger for the rich.\\n127 Legitimacy of Need\\nSeneca, Epistle xxxix [moderate riches the best: useless wants]. Hutne, Essay, Of Re-\\nfinement in the Arts. The authh. at 131.\\nNeeds are not to be recklessly multiplied, but lim-\\nited to those whose existence and supply are neces-\\nsary to our best producing- power and largest life.^\\nVery often, however, the creation of new need will\\nbring with it a more than proportional productive\\nability. This may occur directly, as when the ignorant\\nand degraded acquire culture and the accompanying\\nenlargement of manhood, or indirectly, by the limita-\\ntion of population, rendering the laboring class more\\nproductive in proportion to its total need. There are\\nalso needs, religious, moral, aesthetic, whose existence\\nis a good though they may not enhance productive\\nability at all.\\nWhat this is Economics must find out from Ethics. In proportion as\\nneeds are fictitious and abnormal the gratification of them becomes destruc-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0211.jp2"}, "212": {"fulltext": "194 NEED\\ntive consumption. Economic law here agrees with ethical. Pre-eminently\\nin the department of Consumption does Economics abut upon Ethics\\n131, n. 2]. At many points the question whether an act or a process\\nis productive or the reverse is absolutely unanswerable by Economics alone.\\nHume, as above, has good thoughts on the sorts of want-creation which\\nought to be encouraged.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0212.jp2"}, "213": {"fulltext": "CHAPTER II\\neconomy in supply\\n128 Generic Principles\\nIt is possible to use up wealth (i) in placating legriti-\\nmate and proper needs,^ (ii) as dead loss, answering no\\nrequirement at all, (iii) disproportionately to the neces-\\nsities satisfied, or (iv) to meet cravings that, as base\\nand deleterious, ought to be repressed. Obviously,\\nwith given resources, society will be prosperous eco-\\nnomically in proportion as (i) expenditure is had only\\nfor legitimate needs, and (ii) all needs, these or other,\\nwhich are ministered to at all, are supplied with the\\nsmallest outlay adequate to the end.\\n1 See 127.\\n129 Specific Principles\\nMangoldt, 139. ChapMs Wayland, ch. x.\\ni In satisfying needs,^ our own or those of other\\npeople, we should prefer if equally efficient,^ (i) repro-\\nductive to unproductive* consumption, (ii) less unpro-\\nductive to more, and (iii) high and lasting gratifications\\nto low and fleeting ones, ii It is important that (i) every\\nutility connected with the consumed wealth should be\\nentirely consumed, and that (ii) they should all be\\napplied in the most advantageous manner, iii In case\\nof any proposed doubtful expenditure, we should ask,\\n(i) Will it on the whole and in the long run tend to\\nproduction or productiveness If not, (ii) will it", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0213.jp2"}, "214": {"fulltext": "196 ECONOMY IN SUPPLY\\ninure to the elevation or to the degradation of charac-\\nter If it will elevate, (iii) will the whole good attained\\nby the consumption exceed that to be expected if the\\nwealth remains unconsumed In replying to (iii), re-\\nmember that the moral effort of foregoing a benefit is\\nlikely to be itself a benefit.\\n1 J. Tucker [Two Sermons, 29 sqq. cited by Roscher, 102, n. 2], lays\\nit down that a man ought (i) not to spend beyond his income, (ii) to pro-\\nvide for himself and family, (iii) to lay by something for a rainy day,\\n(iv) to be able to aid the poor, (v) to indulge in no pleasure injurious to\\nbody or mind, and (vi) to set in his expenditure no bad example.\\n2 If the reproductive form is less efficient in the given case, then the\\nquestion must turn upon the character of the proposed unproductive form.\\nSee iii, in this also 127, 131, n. 2.\\n3 A new coat to a feast or a concert, for instance. It is true that the\\nneed addressed would not be the same in the two cases, yet to a person\\nwith limited resources precisely such an alternative is often presented.\\nA good coat to a fine one of poorer quality, for instance. Cf. n. 2.\\n130 Prevention of Loss\\nMangoldt, 135. Thomson, Waste by Fire, Forum, Sept., 1886.\\nWhile the vices specified at 50,^ causing waste,\\nare responsible for enormous destruction of wealth, it\\nis to be observed that much useless consumption is in-\\nevitable,^ due to the very nature of things. Of this\\nloss the volume can be reduced only by the progres-\\nsive mastery of matter by mind, displayed in new\\narts and inventions. Our resources are i Improved\\nmeans for preserving perishable goods.^ ii Wider\\nknowledge, through more general education and in-\\ntelligence, of such means as at any time exist, iii A\\nmore durable construction of buildings and other\\nobjects exposed to the destructive elements, iv Better-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0214.jp2"}, "215": {"fulltext": "ECONOMY IN SUPPLY I97\\nments in police,^ veterinary, and sanitary science,\\nlegislation, and administration, v A firmer grasp and\\nwider observance of the laws of life in all its spheres,\\nsocial and moral as well as physical, intensifying\\nmen s productive power, lengthening their average\\nproductive period, and diminishing the size of the\\nunproductive and dependent class.\\n1 See that and notes. In point is the incident related by J. B. Say,\\nP. E., bk. ii, ch. v. A small latch was gone from a farmyard gate. One\\nday a pig escaped into the woods, and the whole family, gardener, cook,\\nmilkmaid, etc., turned out in search. The gardener, in leaping a ditch, got\\na sprain that confined him to his bed for a fortnight. The cook found the\\nlinen burnt that she had left at the fire to dry. The milkmaid forgot, in\\nher haste, to tie up the cattle in the cowhouse, and one of the loose cows\\nbroke the leg of a colt that was kept in the same shed. Say figures at 20\\ncrowns the loss of these minutes, all for want of a bit of iron which would\\nhave cost but a few sous.\\n2 Professor Chandler Roberts, says the Engineering and Mining Jour-\\nnal, estimates the weight of the smoke cloud which daily hangs over\\nLondon at about fifty tons of solid carbon, and 250 tons of carbon in the\\nform of hydrocarbon and carbonic-oxide gases. Calculated from the average\\nresult of tests made by the smoke abatement committees, the value of coal\\nwasted in smoke from domestic grates amounts, upon the annual consump-\\ntion of 5,000,000 people, to ^12,287,500.\\nSee 54, n. 6.\\nIt was sheer neglect, nothing else, which caused the fearful Conemaugh\\ndisaster in and about Johnstown, Pennsylvania, May 31, 1889, when the\\nbursting of an ill-made dam caused the loss of perhaps 10,000 lives and\\n$10,000,000 worth of property [figures very uncertain].\\n131 Luxury and Idle Wealth\\nRoscher, Ueher den Luxus [in Anstchten, vol i]. Goldwin Smith, What is Cul-\\npable Luxury [in Lectt. and Essays]. Vierieljahrsch. f. Volkswirtsch., XXII, i,\\n24 sqq. Periii, Richesse dans les societes chretiennes. Baudrillart, Histoire\\ndu luxe. Lexis [as at 124], 11 sqq.\\nConsumption beyond the actual requirements of\\nlife may be termed luxury, luxuries, of course, vary-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0215.jp2"}, "216": {"fulltext": "198 ECONOMY IN SUPPLY\\ning in their definition as the standard of living ad-\\nvances, and the luxury of one generation becoming a\\nnecessity of the next. It is clear from the principles\\nalready laid down that while certain species of con-\\nsumption are always reprehensible, the use of luxuries\\nis in itself never so. What luxury then is culpable?\\nThe foregoing paragraphs enable us to reply, i Con-\\nsumption for luxuries is to be condemned from the\\npoint of view of one s own personal life, (i) when\\naddressed to no rational necessity, or out of propor-\\ntion to such necessity provided it exists, (ii) when\\naddressed to less pressing or important needs to the\\nneglect of those more so, and (iii) when it transcends\\none s means, ii It is an evil from the social point of\\nview, (i) unless it stimulates rather than discourages\\nlabor, and (ii) unless it elevates instead of degrading\\nthe characters of men.^ The same principles hold in\\ncases where wealth is not immediately consumed, but\\ninvested in idle forms, as needlessly costly dress,\\nhouses, equipage, jewelry or plate, works of art to\\nfeed vanity or to please the taste of a select few, etc.\\nIn all such expenditures so much capital is lost^ to\\nthe support of labor, as truly as by fire or hurricane.\\n1 Baudrillart, as above, vol. i, 98.\\n2 The view characterized in n. 10, of 20, is set forth by Bayle, Dic-\\ntionary, vol. iv, 520. Arguing on the notion of the Stoics that evil is\\nnecessary as a foil or fender over against good to make it appear as good,\\nhe says Nevertheless it must be acknowledged that they were in the\\nright in some respects, for, to give an instance of it, can anything be rnore\\nziseful than luxury for the maintenance of many families that would starve\\nif the great men and ladies spent but little. On this specious but wholly\\nuntenable theory, study 50, n. i, and the references there made. Cf. also\\nLexis [as at 124], 19, and Mill, bk. i, ch. v. For the Cleopatra who\\ndrinks pearls, the Heliogabalus who feasts on nightingales tongues, or the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0216.jp2"}, "217": {"fulltext": "ECONOMY IN SUPPLY I99\\nmodern spendthrift who gives an all-night entertainment costing thousands\\nand leaving only withered flowers, rumpled vanities, deranged stomachs,\\nand overtaxed nerves, Economics finds no more justification than for the\\nNero who burns Rome [Brown, Studies in Socialism, xii]. It will be said\\nthat all these things furnish work. So does a conflagration. An uncle of\\nJ. B. Say, the French economist, broke his wineglass after dining, remark-\\ning, the world must live. Say wondered why he did not break the rest\\nof his furniture for the benefit of the world s workmen. That a product\\nwears out prematurely, and must be replaced is no industrial benefit, and\\nno more is extravagant expenditure. It furnishes immediate employment,\\nbut it stops there [ibid.] On needless wealth causing poverty at Rome,\\nBlanqui, Hist, of P. E., ch. vii. The consideration raised in the text and\\ndwelt upon in this note should be regarded in many cases of unproductive\\nconsumption which are in themselves wholly legitimate, as building a\\nchurch, sending money to the heathen, investment in fine art though for\\npublic behoof. Outlays of this kind certainly withdraw capital from the\\nsupport of labor. The man who loves his kind will in proposing an ex-\\npenditure of this order raise the [ethical] question whether his capital is\\nlikely to effect more good on the whole and in the long run laid out as\\nproposed, or productively. More imperative still is the query if I meditate\\ngratifying a merely personal need, however noble. So far as this life is\\nconcerned, there may be an absolute conflict between my highest interest\\nand that of the laboring class 15, n. 4].", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0217.jp2"}, "218": {"fulltext": "Part VI\\nPRACTICAL TOPICS INVOLVING ECONOMIC\\nTHEORY\\nCHAPTER I\\ncoin currency in the united states\\n132 Colonial Times\\nSumner, H. of Am. Currency. Dollar, Cent, and Coin, in Am. Encyc. Bryant\\nand Gay, Hist, of U. S., vol. iii, 131 sqq.\\nThe earliest colonial coin is believed to have been\\none struck in 1612, on the Bermudas, for the Virginia\\nCompany. The first coinage upon the main land issued\\nfrom the mint howse at Boston, under act of the\\nMassachusetts general court, 1652. There were twelve\\npence, six pence, and three pence pieces. The plain-\\nness of these exposing them to washing and clipping,\\nthe *pine tree coinage was the same year ordered\\nstruck from a new die. This Massachusetts mint stood\\nabout thirty-four years, and a new one went into opera-\\ntion in 1788. Coins for America were made in Eng-\\nland, at first for Maryland alone, later for the colonies\\nat large. The execrable Wood s money, of pinch-\\nbeck, was among these. From 1778 to 1787, not only", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0218.jp2"}, "219": {"fulltext": "COIN CURRENCY IN THE UNITED STATES 201\\nCongress but several states as well issued copper\\ncoins,^ Connecticut and Vermont in 1785, New Jersey\\nin 1786 and 1787.\\nThis designation, the usual one, does not in strictness apply to the\\nwhole coinage, as part of the pieces bore the likenesses of other trees.\\nThe assumption by Mass. of the right to coin was one of the things which\\nat this period so incensed Charles II against the colony.\\n2 In 1722 George I commissioned one William Wood to coin pinchbeck\\nmoney for the colonies. A pound of the material [3 oz. zinc to 16 of\\ncopper], which somewhat resembled gold, was coined into 13 shillings.\\nLittle of the money circulated.\\nThese are now rare. The Jersey copper wore on the obverse the\\ninscription Nova CcBserea, a horse s head, and under it a plough the reverse,\\na shield and the legend, e pluribus unum. The continental copper of\\n1787 had 13 rings on one side, representing the 13 original states. Each\\nring had the initial letter of a state. Tempus Fugit, sun dial with rays,\\nand Mind Your Business were the other insignia. On the continental\\ncopper of 1 793 was a head of Liberty, with full, streaming hair.\\n133 Earliest National Coinage\\nMcMaster, U. S., vol. i, 189 sqq. Bancroft [author s last rev.], vol. vi, 119. Laugh-\\nlin. Bimetallism in U. S., pt. i, ch. ii.\\nA plan for a national decimal coinage, which Robert\\nand Gouverneiir Morris and Jefferson had devised,\\nwas approved by Congress in 1785-6, its unit a dollar,\\nvirtually the same as the Spanish, in which the Conti-\\nnental Congress kept its accounts.^ Jefferson s dollar\\ncontained 375tA grains of fine silver. Half-dollars,\\ndouble dimes, dimes, cents and half-cents were to be\\ncoined in proportion, also gold eagles and half eagles,\\nbut no value-relation between gold and silver was\\nfixed. These gold coins, with the addition of double\\nand quarter eagles and three dollar pieces, all reduced\\nto somewhat less than the original amount of gold to", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0219.jp2"}, "220": {"fulltext": "202 COIN CURRENCY IN THE UNITED STATES\\nthe dollar,^ still remain, mechanically and artistically\\namong the best in the world.\\n1 According to McMaster, vol. i, 195, the real work was done by Gou-\\nverneur Morris.\\n2 Because in Pa. and N.J., where the old Congress sat, this had come to\\nbe the most common money. The Spanish milled dollar, pillar dollar, or\\npiece of 8 Reals, Ryalls, or Royals is one of the most interesting\\npieces ever coined. It began to be used in our southern colonies by 1650,\\nand gradually worked its way before the Revolution to the extreme north.\\nNone of our histories have any adequate account of colonial metal money\\nor colonial money of account. The colonists at first used not only English\\nmoney denominations but English money itself. By 1650, however, the\\ncolonial pounds, shillings, and pence had become depreciated in compari-\\nson with sterling, so that from this time on the colonial pound was at no\\ntime or place the equal of the pound sterling. Moreover, the depreciation\\nwas different in different groups of colonies. If, about 1760, we call the\\npd. sterling loo, the Ga. pd. would equal 90; the N.E. and Va. pd., 75;\\nthe pd. of the middle colonies [N.J., Pa., Del., and Md.], 60; and the N.Y.\\nand N.C. pd., 56|. Corresponding to these various degrees of depreciation,\\nthe Spanish dollar, which was the equal of 4s. 6d. sterling, passed for 5^-. in\\nGa., for 6s. in N.E. and Va., for ys. 6d. in the middle colonies, and for 8s.\\nin N.Y. and N.C. Colonial pds., sh. and pence were nothing but money of\\naccount, there being uiider these names no corresponding coins. Very vari-\\nous coins, English, German, Dutch, French, Portuguese, and Spanish, circu-\\nlated, but far the most common by 1750 was the Spanish dollar with its\\nhalves, quarters and eighths. It was common and for legal purposes neces-\\nsary to name each of these in terms of the shillings, pence, etc., of each\\ngroup of colonies. The eighth part of the dollar [the i Real piece \\\\2\\\\\\ncents], e.g., happened in N.Y. exactly to equal the shilling. In N.E. it\\nwas very nearly 9 pence, and was so called. In the middle colonies, where\\nthe dollar contained 90 pence [7^. 6^.], it M-^as 11 pence and a fraction,\\nand was hence called the levy. Correspondingly, the half Real, or 6^\\ncent piece, was known in N.Y. as sixpence, in N.E. as fourpence or\\nfopence, and in Pa. and N.J. as the fippenny bit or fip. When nine-\\npences and levies became much worn they passed for dimes, whence the\\ndime came to be sometimes called, in N.E. a ninepence, in Pa. and N.J. a\\nlevy, names heard in country parts so late as i860.\\nFor the variations in the weight of our gold money, see next ii,\\nand Dollar, in Am. Encyc. As noted at 85, n. 4, the U. S. now takes", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0220.jp2"}, "221": {"fulltext": "COIN CURRENCY IN THE UNITED STATES 203\\nno seigniorage for coining gold, tlie change having been introduced by\\nthe act of Jan. 14, 1875 [sec. 2], for resuming specie payments [Revised\\nStat./\u00c2\u00a73524].\\n134 The Dollar of the Fathers\\nLaughlin, as at preceding pts. i, ii. Money, in Am. Encyc. Bolles, as at 139,\\nbk. ii, ch. V.\\ni By the mint law of 1792, framed under the sur-\\nveillance of Hamilton, the silver dollar was made to\\ncontain 371.25 grains of fine silver, 416 of standard,^\\nthe alloy constituting iVtrr parts of entire weight. The\\namount of pure silver in this dollar has remained un-\\nchanged ever since, but, in 1837, by the reduction of\\nthe alloy-fraction to the more convenient one of ^^o^ the\\ncoin assumed the weight which it now has, 41 2|- grains,\\n1^ fine.2 ii The law of 1792 had fixed the value-rela-\\ntion between silver and gold at 15:1, which proportion\\nof silver being too small,^ gold retired. The gold bill\\nof 1834 changed the proportion to 16 :i, over-valuing\\ngold in turn and retiring silver, iii In 1853, on account\\nof the still further appreciation of silver through the\\ndiscovery of gold in California* and Australia, not only\\nhad the silver dollar totally passed from circulation,\\nbut, to retain in the country the suhordinate silver, it\\nwas necessary to render this a token coinage by extract-\\ning a seigniorage of 6\\\\^ per cent the face-value of each\\ncoin, token silver being after this legal tender only to\\n;^5.oo. The silver dollar, however, remained full legal\\ntender till 1873, when, having in relation to gold greatly\\ndepreciated^ again through large increase in silver pro-\\nduction, lessened exportation to Asia, and the assump-\\ntion by the German Empire of the gold standard, it was\\nsilently demonetized^", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0221.jp2"}, "222": {"fulltext": "204 COIN CURRENCY IN THE UNITED STATES\\n1 Or, as figured by Perry, 330, it was 8924 fine.\\n2 Our gold coins have, also since 1837, this same fineness. They are\\nintended to contain xofo \u00c2\u00b0f copper, and xioo 01^ l\u00c2\u00b0ss of silver. If less than\\nthis silver, the lack is made up in copper, such margin being known as the\\ntolerance [see Lalor, vol. i, 509]. On fineness of Eng. coins, 75, n. 10.\\nThe Canadian coins agree in this respect with the English.\\n3 It was at the time exactly correct, but silver was already growing\\ncheaper relatively to gold, so that in the London market almost immediately\\nover 15 parts of silver were required to equal I of gold. Less and less gold\\nof course came to our mints [Gresham s law, 85, n. 5], some years hardly\\nany. After 1 834, precisely the reverse conditions prevailed, the silver which\\n-had circulated gradually hiding itself away. A lively business was done at\\nbuying up the dollars from ignorant holders and selling them as bullion.\\nCf. von Hoist, Const, and Pol. Hist, of U. S., vol. iii, 405.\\nOur subordinate silver coins [tokens] were somewhat enriched again\\nin 1873. Before that, the weight of 2 halves, 4 quarters, or 10 dimes was\\n385.8 grains, or 25 grams, and their value .93 rr that of the full weight\\ndollar. Now the value is .93|xvf of full weight, giving a seigniorage of\\nabout 6/g- per cent. Our present half dol. exactly equals in weight and\\nvalue half of a French silver 5 franc piece. There are now 65 Eng. shil-\\nlings in a Troy pound of silver. Eng. silver money consists of tokens,\\nlegal tender only to the sum of 40 shillings, each piece having a bullion\\nvalue 63^3 per cent less than its face value.\\nThis phenomenon is more truthfully characterized as an appreciation\\nof gold. The power of silver to purchase general commodities did not sen-\\nsibly, if at all, decrease, but that of gold increased. General prices, i.e. [the\\nonly sure test, see 70, 87], fell in gold countries, remained stationary in\\nsilver countries.\\nThe act was popularly but with little doubt erroneously believed at the\\ntime to have been carried through Congress in guile, that knowing parties\\nmight realize from the rise of gold.\\n135 Remonetization\\nLaughlin, Bimetallism in U. S., pt. iii. Bullion, in Encyc. Brit. Grier, The Silver\\nDollar. BoUes, as at 139, bk. ii, ch. v.\\nOn the ground that the government bonds issued\\nduring the war had been made payable in *coin i and\\nthat the demonetization of silver, if persisted in, would", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0222.jp2"}, "223": {"fulltext": "COIN CURRENCY IN THE UNITED STATES 20$\\nwork hardship to taxpayers in liquidating the national\\ndebt, Congress, in 1878,^ restored to the old silver dollar\\nits full legal tender quality, ordering, however, instead\\nof free coinage, that only a given amount, not under\\ntwo or to exceed four million dollars worth,^ be coined\\nmonthly. Although still for many years the value of\\nthe gold dollar continued to gain over that of the bul-\\nlion in the silver,* silver dollars and certificates have\\ninflexibly held to the gold par. But the position, all\\nadmit, is anomalous.\\nWhich of course at the time legally included silver as well as gold.\\n2 The act passed, over President Hayes veto, on Feb. 28.\\nNot so many dollars, but so many dollars worths, very different con-\\nceptions. If the bullion in a silver dollar cost but 75 cents, ^1,000,000\\nworth of silver would, ignoring alloy, yield i millions of dollars. The orig-\\ninal bill provided for free coinage. The limiting clause originated in the\\nSenate, with Senator Allison, and was dubbed Allison s tip.\\nMay 15, 1888, and on one or two other occasions, the London price\\nof silver fell to 421/. an ounce, corresponding to a bullion price for the silver\\ndollar of about 71.5 cents. By noting in any report of the London market\\nthe price of silver bullion there, the bullion value of the silver dollar is\\neasily figured according to the following rule. By whatever per cent silver\\nin London goes above or below 58.9S008 pence an oz., the bullion in the\\nsilver dollar is worth more or less than one hundred cents in gold. For\\nanother rule, see Rep. of Paris Monetary Conf. of 1878, early pp. The\\nrelation between the prices of pure gold and pure silver, or of gold and\\nsilver of any given fineness, provided it is the same for each metal, may be\\nfound by dividing 943 by the no. of pence per ounce which the silver costs.\\nThis rule is developed as follows Gt. Britain makes 1869 sovereigns from\\n40 pounds Troy, fine (nearly). Hence an ounce Troy of gold W fine\\nis worth 2_ \u00c2\u00a32,\\\\\\\\% or ^f 3 175. 10^. 934 W.; and the val. of the\\n40 X 12\\noz. Troy ol pure gold is 934 J X xf- -A-n oz. of pure silver at x pence per\\noz. 15 fine w d be x\\\\^ or j_f. Now to find how many times more valu-\\nable a given weight of gold is than a given weight of silver, divide\\n934i X by which ^-^^^^J^^^ or (nearly) if I", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0223.jp2"}, "224": {"fulltext": "206 COIN CURRENCY IN THE UNITED STATES\\n943\\ngold weighs 25.8 grains, i silver weighs 25.8 X grains. Also, if\\nthat weight of silver is worth but i.oo, 412.5 grains will be worth\\n943\\nproportionally less. I.e., as 25.8 X is to 100 cents, so 412.5 will be to\\nthe value of the dollar of the fathers in gold cents. French and German\\ndiscussions usually describe our coins in terms of the Metric System. A\\ngrain Troy is .0648 of a gram. Hence the gold dollar, of 25.8 grains,\\nweighs 1.67184 grams, and the silver dollar, of 412^ grains, 26.73 grams.\\nA kilogram of gold contains very nearly ^690, or \u00c2\u00a3139 los. A kilogram\\nof silver, at the ratio to gold of 15^^ to i, contains about ^43.80, or \u00c2\u00a3g.\\n136 The Future\\nLaughlin, ed. of Mill, Appendix [good bibliog. on silver qn.] Cf. our 77, above, and\\nits authh., esp. U. S. Consular Rep., Dec, 1887. W. Sylvester, Bullion Certifi-\\ncates: The Safest and Best Money Possible [a pamph., 1884]. Knox, United States\\nNotes, ch. X.\\ni The gold monometallists would at once and forever\\ndemonetize silver, ii The more pronounced friends of\\nsilver cling to the present law,^ willing, apparently,\\nthat the worst possible should come, allowing silver,\\nif need be, the monopoly which gold has enjoyed since\\n1873. iii The advocates of rated or proper bimetal-\\nlism hope that the United States will assume no\\nfinal attitude against silver as full money till effort for\\na bimetallic league of nations has been exhausted,\\niv A fourth party would realize M. Joseph Garnier s\\ntheory of unrated or formal bimetallism, further pro-\\nposing that gold bullion as well as gold coin be made\\nlegal tender and the standard of value, silver like-\\nwise legal tender but only at its market *^alue in\\ngold, calculated and published daily by government.\\nWith numerous great merits, this plan has in kind the\\ndefects of gold monometallism. International bimetal-\\nlism, of which there is little hope,* would relieve us for", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0224.jp2"}, "225": {"fulltext": "COIN CURRENCY IN THE UNITED STATES 20/\\na time, but only for a time. Wise action must look\\ntoward ideal money\\n1 Except that many wish the free coinage of silver.\\n2 See 77.\\nThis is the scheme of Sylvester s pamph. named above. It allows to\\nthe dollar all the fluctuations in value to which gold alone is subject, this\\nmetal being the only ultimate standard, but it would somewhat limit the\\nrange or sweep of these, in that a good deal of silver would be in use as\\nmedium of exchange.\\nSee the Consular Report named above, esp. Appendix D, by the\\nlearned Soetbeer. Comparable with these invaluable Materials given\\nus by Soetbeer on the Silver Question, is the memorandum by R. H. Inglis\\nPalgrave, printed as App. B to the final Report of the [1886] British Com-\\nmission on the Depression of Trade and Industry. It is based on Soet-\\nbeer, but adds much that is valuable. Germany would probably join a\\nbimetallic league but for the opposition of England, who, as the great\\ncreditor-nation, declines to take a step destined to cheapen the sort of\\ncoin in which debts are to be paid her.\\n6 See 87.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0225.jp2"}, "226": {"fulltext": "CHAPTER II\\npaper currency in the united states\\n137 Early\\nKnox, United States Notes, chaps, i, ii. Bryant and Gay, U. S., vol. iii, 1071 n. 132\\nsqq. Greene, Historical View of the American Revolution, 143, aiid Lect. v [best\\nbrief account]. Bancroft, U. S. [last revision], vol. vi, 167 sqq.\\nDown to the Revolution the paper money of Amer-\\nica consisted in various kinds of credit bills issued by\\nthe colonies, which became so depreciated that Mas-\\nsachusetts gave up, and Parliament finally forbade,\\ntheir issue. After the Declaration of Independence\\nboth Congress and the states returned to them, putting\\nforth such amounts that at the close of the Revolu-\\ntion they were 99j^ per cent below par.\\n1 The pupil must bear in mind to distinguish colonial paper money from\\ncolonial hard money 133, n. 2]. The depreciation mentioned in the\\npresent [cf. Walker, Wages, 16], was in nearly all or all cases additional\\nto that spoken of in 133, n. 2. Mass. first uttered credit bills in 1690,\\nafter the attack on Port Royal. Greene, 143, Bancroft, vol. ii, 262 sq.\\n138 Thence to the Civil War\\nMacleod, Diet, of P. E., vol. i, 170 sqq. Banking, in Lalor; do. in Encyc. Brit.\\ni From this time till 1863 banking was practically\\nfree, any banking corporation being permitted to issue\\nbills on condition of obeying certain easy requirements,\\nand promising to redeem in coin on demand. Paper\\nwas over-issued. Immense numbers of banks failed,\\nparticularly in 18 14, 18 19 and 1837. Suspensions of", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0226.jp2"}, "227": {"fulltext": "PAPER CURRENCY IN THE UNITED STATES 2O9\\nspecie payment were frequent. The loss in bills of\\nbroken banks is thought to have averaged during these\\nyears some five per cent of the circulation annually,\\nii About 1840, a plan was adopted in Jfew York State,\\nwhich became in 1863 the basis of the national bank\\nscheme.! It arranged that any person depositing with\\nthe state government good securities to the minimum\\namount of $50,000, and any corporation depositing\\n$100,000, might issue an amount of notes equal to the\\ndeposit. This plan was far preferable to the policy of\\nthe other states, yet liable to many objections. The\\nSuffolk bank system was another step in the right\\ndirection. New England banks depositing funds with\\nthe Suffolk, in Boston, for the redemption of their\\nnotes. If funds from any bank failed, notes were de-\\nclined and the state of such bank became publicly\\nknown.\\n1 See 141.\\n139 Government Paper\\nKnox, United States Notes, chaps, iv sqq. Powers, Greenback in the War, Pol. Sci.\\nQuar., vol. ii. Money in Am. Encyc. Atwater, Princeton Rev., Jan., 1882.\\nRonne, Zivangscours der Nordanierikanischen Tresorscheine, in Viertel-\\njahrsch. f. Volksw., 1863, vol. ii. Bolles, Financial H. of U. S. i86i- 8s, bk. i,\\nchaps, iv, V.\\nUnited States treasury notes had been issued in\\n1 8 12, 1837 1S57, bearing interest, but not for gen-\\neral circulation and not legal tender. In i86i, at\\nthe opening of the civil war. Congress allowed the issue\\nof fifty million in similar notes,! payable on demand,\\nwithout interest, heralds of those immense greenback\\nissues, amounting at one time to more than four hun-\\ndred million dollars, which, being made legal tender\\nfor all payments save duties on imports, did so much", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0227.jp2"}, "228": {"fulltext": "210 PAPER CURRENCY IN THE UNITED STATES\\nto place and keep our national finances, till January i,\\n1879, on a basis other than coin, thus greatly aggra-\\nvating the nation s burden.^\\n1 On the character of these old demand notes, Knox, 71 sqq.\\n2 The government made a great mistake in not, by marketing bonds at\\nany price, keeping our money at the gold par. The debt was nearly all\\ncontracted [bonds sold] in depreciated dollars, which had to be paid\\nin coin or its equivalent. Besides this the national banks 141] should\\nhave been forced to buy new bonds. Adams, Pub. Debts, 166 sqq. See\\nalso The Currency Debate of i873- 4, N. A. Rev., Jan., 1874. The green-\\nback was at one time, July 11, 1864, 65 per cent below gold par. When\\nthe national bank act was passed in 1863, ^450,000,000 in greenbacks were\\nalready authorized and ^300,000,000 out. Gold stood at ^1.70. In 16\\nmonths gold was ^2.80 due in part, it is true, to national reverses, not\\n\u00e2\u0080\u00a2wholly to greenback issues. Specie payments were first suspended in view\\nof war with England over the Trent affair, just at the end of 1861. On\\ngreenback prices of gold during the war, see chart in Bowen, Am. Pol.\\nEcon. Best brief account of government paper issues in the war down to\\n1879, is in Appleton s Annual Encyc. for 1879, where the pupil will also\\nfind an excellent history of the national debt at large to the same date.\\n140 Government Banking\\nBancroft, U. S., vol. vi, 25 sqq. Atwater, Princeton Rev., Jan., 1882. Sumner, An-\\ndrew Jackson. Royall, A. Jackson and the Bank of the U. S. Hildreth, U. S.,\\nvol. iv, ch. ii.\\nOf national banking projects there have been three.^\\ni The Bank of North America began operations in\\nPhiladelphia, June, 1782, but after a most successful\\ncareer of two years it changed its character to that of\\na state bank. This was done chiefly because of the in-\\ncompetency of the then Congress to create corpora-\\ntions. It still exists in the city of its birth, under its\\noriginal name.^ The Massachusetts National Bank, in\\nBoston, is of equal age. ii The first United States\\nBank went into operation in 1791, upon the plan of\\nAlexander Hamilton. The national and state debts, the", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0228.jp2"}, "229": {"fulltext": "PAPER CURRENCY IN THE UNITED STATES 211\\nlatter having been already assumed by Congress, were\\nfunded into six per cent bonds, and three-fourths of\\nevery private subscription to the stock of the bank\\nwere required to be in these bonds. This raised na-\\ntional credit. The bank, with its branches at various\\npoints, was also a source of great profit to stockholders,\\nand, after twenty years, ceased to exist only because\\ndenied a new charter through the hostility of the\\nnow numerous state banks.^ iii The second United\\nStates Bank was chartered in 1816, on the same prin-\\nciples as the first. It was resorted to partly on account\\nof the depreciation of national credit caused by the\\nwar of 18 12, partly by the terrible depreciation of state\\nbank bills. Bad management at first, coupled with\\nodium toward banks in consequence of the numerous\\nfailures in 18 19, rendered the bank unpopular. It was\\nparticularly obnoxious to President Jackson, who in\\n1832 vetoed a bill for the renewal of its charter, to\\nexpire in 1836, and in 1833 caused it to relinquish* all\\nthe government s deposits, amounting to $10,000,000.\\nThese blows were fatal to the bank as national, though\\nit secured a charter from Pennsylvania in 1836, and\\nexisted, languishing, till 1839. After 1836 there was\\nno national paper money in circulation till the treasury\\nnotes of December, 1861.\\n1 Not counting the national banks 141], since the banking done by\\nthem is not the government s work. Government merely supervises it.\\n2 Now again a national bank. It had been under a state charter ever\\nsince Jan. i, 1774, and so had the Mass. Nat. Bank.\\nSee Schouler, U. S., vol. ii, 316 sqq.\\nThe deposits were not removed all at once. The new policy consisted\\nin depositing no more, and gradually checking out, as needed, what was\\nthere. Sumner s Jackson has an interesting account of this controversy.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0229.jp2"}, "230": {"fulltext": "212 PAPER CURRENCY IN THE UNITED STATES\\n141 The National Bank System\\nRichardson, The National Banks [Harper s Half Ho. Ser.]. Bolles, as at 139, bk. i,\\nch. xi, bk. ii, ch. iv. McCulloch, Men and Measures of Half a Century, chaps, xv,\\nxvi, xvii. The National Bank Act, and other laws relating to Nat. Banks [Gov.\\nPrinting Office, 1889].\\nThe present system of National Banks had origin\\nin 1863, again in the interest of the national ex-\\nchequer, suffering the drain of war. It was a plan\\nfor raising money by marketing government bonds.\\nBy it i Notes of private and state banks are prohibi-\\ntively taxed, ii At least one-fourth the capital of\\neach bank must be in United States bonds deposited\\nin Washington. iii The notes constitute a uniform\\ncurrency, furnished and if necessary redeemed by\\ngovernment with the bonds in its possession. iv The\\ncirculation is limited to ninety per cent in value of\\nthe bonds, and to the same proportion of the paid-up\\ncapital stock, whatever the size of the bank. v Each\\nbank must keep a reserve of lawful money proportioned\\nin size to the amount of its circulation, viz., twenty of\\nthirty per cent of this, vi The notes are legal tender\\nfrom government except for principal and interest of\\nthe public debt and to government except for customs,\\nbut not between private parties.\\nSo that should a bank fail its notes would still be good. Notes thus\\noften circulate some time after the banks issuing them have suspended.\\nThe U. S. treasury does not in such a case surrender to the creditors of\\nthe bank the last of its bo-nds till all the notes are redeemed.\\n2 In the reserve cities, viz., those in w^hose banks the banks of smaller\\nplaces may deposit, it is 30 per cent, elsewhere 20 per cent. In all cases\\n5 per cent of the outstanding circulation has to be in the treasury at Wash-\\nington for the redemption of notes there. This is part of the reserve.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0230.jp2"}, "231": {"fulltext": "CHAPTER III\\nour paper currency in future\\n142 Present System\\nMcCulloch, Our Future Fiscal Policy, N. A. Rev., June, 1881. Allison, ibid., June,\\n1882. Scott et al., ibid., Sept., 1885. Atwater, The Fut. Paper Mo. of this Coun-\\ntry, Princeton Rev., Jan., 1882. Neill, Legal Tender Question, Pol. Sci. Quar.,\\nJune, 1886.\\nThe theoretical faults of the national bank, (i) its\\nbasis, credit^ instead of cash, (ii) temptation to over-\\nissue,2 (iii) double interest,^ (iv) admission of balances\\nand of clearing-house and United States deposit certifi-\\ncates as part of the lawful money reserve, have not\\nwrought sensible mischief in practice. On the other\\nhand, (i) the unchallenged currency of the bills all over\\nthe land, (ii) their steadfastness at gold par, (iii) the\\ndifficulty of counterfeiting- them, and (iv) the infallible\\ncertainty of their redemption,^ have inspired a very\\ngeneral wish to perpetuate the system.\\n1 Viz., in the form of bonds. See 141, ii. In the panic of May, 1884,\\nall sorts of government bonds fell several per cent, materially altering the\\nstatus of banks. But recovery was very speedy. Any political event\\nabroad which sends home our foreign-held bonds has the same effect.\\n2 No single bank can issue more than its share, but there is no legal\\nlimit to the number of banks in the country. The danger here signalized\\nmust be slight so long as the government maintains specie payments, since,\\nif too many national bank notes are at any time in circulation, they can be\\npresented for redemption, and if this takes place in greenbacks [one form\\nof legal money instead of gold, these, too, may be turned into gold.\\nWhether or not under these circumstances there can be inflation is the\\nsame question we touched at 91 and notes.\\n3 The bank draws interest on all the bonds constituting its capital", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0231.jp2"}, "232": {"fulltext": "214 OUR PAPER CURRENCY IN FUTURE\\n141, ii], and at the same time uses its notes in discounting. This was\\nat first a source of exorbitant profits, but for many years has not been so,\\nas shown by the widespread disposition of banks to surrender their bonds\\nfor cash to use in discounting, this assuring them greater gains than the\\nbonds yield.\\nBalances due from other banks, and the gold certificates mentioned at\\n86, n. I,\\nSee 141, iii.\\n143 Difficulties\\nReports of the Secretary of the Treasury, December, 1888 and 1889.\\nGrowth of national credit having advanced the value\\nof long bonds and made possible the refunding- of the\\nothers at a low rate, banks begin to prefer relinquish-\\nment of circulation to the interest of the bonds needed\\nto retain it. Several measures have been propounded\\nfor the prevention of contraction from this source,\\nand for the maintenance of the national bank circu-\\nlation till the entire debt shall have been cancelled.\\nOf these the following most deserve mention (i) to\\nremove the ninety per cent limit on circulation, fixing\\nthis at the par or perhaps at the market value of the\\nbonds deposited, (ii) to refund the fours and four and\\na halfs into two and a halfs with an equal time to run,\\nrecouping holders by the present worth in cash of the\\ninterest given up, (iii) to repeal the one-half of a per\\ncent tax on circulation, (iv) to transform the entire\\nannuities now attaching to the fours and four and a\\nhalfs into separate bonds, in accordance with their\\npresent worth, then to unite these with the present\\nfours and four and a halfs and issue new bonds to\\ncancel both the latter to be paid in series year by\\nyear, thus affording an outlet for the accumulating\\nsurplus.^", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0232.jp2"}, "233": {"fulltext": "OUR PAPER CURRENCY IN FUTURE 21 5\\n1 The McPherson bill, passed by the Senate Feb. 28, 1884, killed in the\\nHouse Jan. 15, 1885.\\n2 The Aldrich bill, brought before the Senate of both the XLVIII and\\nthe XLIX Congress, but never passed. The Potter bill, contemporane-\\nously moved in the House, proposed to exchange the 3 s [now paid ofQ\\nas well.\\n8 Plan set forth by H. C. Adams, in the Forum for Dec, 1887. Its very\\ngreat advantage over the others lies in the steadiness and regularity with\\nwhich it would utilize the government s needless revenue for the lessening\\nof the debt.\\n144 Proposed Change of Basis\\nReport of Secretary of the Treasury, December, 1886.\\nThe last of our national bonds, the fours, being call-\\nable on July I, 1907, and the bulk of the others, viz.,\\nthe four and a halfs, on September i, 1891, and it being\\nunlikely that the debt will be kept in existence merely\\nto furiiisli basis for banks, none of the above schemes\\noffer other than temporary relief. Various suggestions\\nare therefore made of possible substitutes for national\\nbonds as security to bank circulation consols, rentes\\nor other foreign public paper,^ state, county or city\\nbonds, bottom mortgages on real estate, etc. None of\\nthese could fully replace the present security. The\\nbest plan yet propounded would (i) restrict the circu-\\nlation of each bank to ninety per cent of its stock,\\n(ii) make bills a first lien on all the assets of their\\nbanks and also on other property of stockholders to\\nthe value of 100 per cent of each one s stock, (iii) force\\neach bank to keep with the United States Treasurer a\\ncoin reserve equal to 10 per cent of its circulation,\\n(iv) force the united banks to guarantee each individual\\nbank, and so (v) have bills of broken banks infallibly\\nredeemable at Washington, as now.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0233.jp2"}, "234": {"fulltext": "2l6 OUR PAPER CURRENCY IN FUTURE\\n1 Mr, John Jay Knox, formerly Comptroller of the Currency, at one time\\nfavored the acceptance of foreign securities for this office.\\n2 Drawn up by Hon. A. S. Hewitt. The essence of it was adopted by\\nPresident John Thompson of the Chase Nat. Banii, N. Y. City, in his cir-\\ncular of Jan., 1885, intended to influence public opinion and so Congress.\\n145 Probable Outcome\\nAdatns, Pub. Debts, pt. il, ch. ii. Sylvester, as at 136.\\nThis plan is ingenious, but has the defects of intri-\\ncacy and of giving government too httle real control\\nover bank assets to assure redemption in all cases.\\nPreferable to it, people more and more believe, would\\nbe some scheme for the issue of notes directly toy\\ngovernment as greenbacks are issued now, only mod-\\nelled more after the issue-department of the Bank of\\nEngland.^ The great merits of such an arrangement\\nwould be efllciency, simplicity, and profitatoleness to\\ngovernment both negative^ and positive. Objections:\\nIt would be unconstitutional. But the Supreme Court\\nhas decided otherwise.^ Inelastic. Somewhat, but\\ncould easily be made less so than our present paper\\nsystem. Facile means to inflation. It could add noth-\\ning to the povrer or to the inducement which Congress\\nhad to create the present treasury notes. Such a paper\\ncirculation could readily be made tributary to a plan\\nfor ideal money.^\\n1 Without, of course, the inelasticity of the Bank of England issues.\\nThere we find, (i) the circulation restricted to 15 million pounds above\\nspecie in vaults, otherwise free, (ii) every bill legal tender save from the\\nbank itself, and instantly convertible. It would be advisable to have no\\nabsolute maximum or minimum of circulation. The business should be\\nregulated by an able and impartial commission, a majority of them not\\nbankers, empowered to suit the volume of notes to the needs of the country", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0234.jp2"}, "235": {"fulltext": "OUR PAPER CURRENCY IN FUTURE 21J\\naccording to the principle of 87. This idea is as old as Ricardo [Pro-\\nposals for a Secure Currency], who moved to vest the power of issuing\\npaper money in commissioners appointed by the ministry but removable\\nonly on address by one or both houses of Parliament.\\nThe negative advantage would consist in relief from the expense and\\nrisk of supervising the present complicated system. For the positive, see\\n78 and n. i, 86 and notes.\\nVirtually, in Julliard vs. Greenman. See Knox, U. S. Notes, chaps,\\niii, iv, xi; James, in Pubb. of Am. Ec. Ass n, vol. iii, 49 sqq.; Bolles, as at\\n139, bk. ii, ch. i; McCulloch, as at 141, ch. xv. This case to be sure\\nrelated directly to the legal tender quality of notes redeemed and paid\\nout again under the act of 1878. It pronounced that act constitutional.\\nMore certainly so would be the notes we propose, which ought not to be\\nlegal tender at all. It is the non-observance of this which creates so much\\nprejudice against government paper money. People mistakenly conceive\\nsuch paper as necessarily a forced loan. That Mr. Goschen, Chancellor\\nof the Eng. Exchequer, intends an issue of English greenbacks, may perhaps\\nbe taken as some proof of the innocuousness of such money. See Budget\\nSpeech, Lond. Times, Ap. 19, 1889. Observe in particular that we z.Aso-\\ncate only /r(7wmory, not fiat greenbacks 93]. We need not remark\\nthat the execution of the above proposal would in no wise interfere with\\nthe regular and most profitable business of banks, viz., that of discounting.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0235.jp2"}, "236": {"fulltext": "CHAPTER IV\\ntaxation\\n146 General Principles\\nAd. Smith, bk. v. Leroy-Beaulieu, Theo. des Finances, bk. ii. Schoenlerg, Hand-\\nbuck der Pol. Oek., vol. iii. Cossa, Taxation. Cooley, Law of Taxation. Mill,\\nbk. V, ch. ii. Nicholson, Taxation, in Encyc. Brit.\\ni Taxation, as topic in Economics, relates partly to\\nDistribution, partly to Consumption, to neither exclu-\\nsively.i ii The generic principle to be followed in\\ntaxation is sufficiency of revenue in highest possible\\nconsonance with the general good. Subordinate ab-\\nstract principles of so-called right, as mortmain, cus-\\ntomary privilege, etc., are hence to be respected only\\nwithin the above limit. Also, while the equalization\\nof wealth is no part of the purpose of taxation, inci-\\ndental tendency to this in any plan of taxation should,\\nceteris paribus, give it preference over competing plans,\\niii Taxes should be, so far as is possible and consistent\\nwith their main aim, (i) definite in amount and as to\\ntime and manner of payment, (ii) levied and collected in\\nthe way most convenient to payers, (iii) made to take\\nfrom the payer as little as possible beyond what\\nreaches tlie treasury, (iv) arranged to encourage, not\\ndiscourage, industry, inventiveness, intelligence, taste,\\nand whatever ennobles national life.^\\n1 The civil, military, and naval personnel is made up, theoretically and\\nlargely in fact, of producers, who receive [gross] wages. Taxation to meet\\nthis outgo comes under Distribution. But all waste through governmental", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0236.jp2"}, "237": {"fulltext": "TAXATION 219\\nact, as well as all outlays on behalf of art and science, are referrible to\\nConsumption.\\n2 By legislators, that is. Assessors and collectors must of course proceed\\naccording to the laws, whatever they are.\\nThese are in substance the rules which have come down from Adam\\nSmith, book v, ch. ii, pt. ii, reproduced by all subsequent writers upon\\nfinance. Cf. Walker, in P. E,, ch. on Taxation, for one or two excellent\\nmodifications.\\n147 Direct and Indirect Taxes\\nMill, bk. V, chaps, iii-vi. Cossa, Taxation, pt. iii. James, Customs Duties, in Lalor.\\nTaxes are direct or indirect according as they are\\nassessed upon the very parties from whom they purport\\nto be collected, or upon other parties, as manufactur-\\ners, importers, etc., who indemnify themselves out of\\nthe consumers by adding taxes to prices. Indirect\\ntaxes, viz., customs and excises, are in favor because,\\nbeing identified in the minds of consumers with the\\nprices of commodities,^ they are easy to collect. They\\nare objectionable as unduly burdensome to the poor,^\\nparticularly if specific instead of ad valorem, since\\nthey are rated rather according to population than ac-\\ncording to property. If laid, they should bear lightly\\non necessaries, moderately on comforts, more heavily\\non luxuries.\\n1 People pay, falsely thinking them to be part of the cost-and-handling\\nprices of the articles bought, not surmising that they are settling their tax-\\naccounts with the nation.\\n2 To yield much revenue they must be placed on goods that are some-\\nwhat popularly consumed. Specific duties aggravate the evil because,\\nbeing fixed at about so much on the value of the medium quality of the\\narticle, they are of course imduly high on the poorer qualities, which alone\\npoor people can buy.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0237.jp2"}, "238": {"fulltext": "220 taxation\\n148 Norms of Direct Taxation\\n?Frt//4^r, Principles of Taxation, Princeton Rev., July, 1880. H. George, Prog, and\\nPoverty, blcs. vii sqq. Ely, Taxation in Am. States and Cities. Taxation in U. S.\\n[4 artt.], New Englander, 1884. Ford, Reform in Taxation, Int l Rev., vol. xiii.\\nFive specific principles easily suggest themselves as\\npossible bases for direct taxation, (i) property in general,\\n(ii) expenditure, (iii) productive ability, (iv) income,\\n(v) non-capital property. Taxation upon any of the\\nfirst four is either unjust, or impracticable, or both.^\\nThe main category of non-capital property is land\\nproper, viz., land aside from improvements an emi-\\nnently fit bearer of heavy taxation.^ However, (i) to\\nkeep taxation perceptible by the people,^ (ii) to avoid\\nthe inevitable injustice of any single tax,* (iii) to com-\\npass the requisite elasticity of revenue,^ and (iv) to\\ninsure disciplinary power over refractory or extortion-\\nate businesses, other taxes besides a tax on land are\\nneeded customs duties, excises, and taxes on general\\nincome.\\n1 Not to mention the injustice in principle of a general property tax,\\nwhich would in effect involve a penalty on thrift, such a tax absolutely\\ncannot be equitably assessed or collected, such is the proportion of per-\\nsonal property which can easily be, and will be, concealed. See Ely, as\\nabove, also in Rep. of the Md. Tax Commission, 1887. See, too, the 1872\\nRep. of the N. Y. State Tax Commissioners. The exact expenditure of fami-\\nlies is rarely known even to themselves. A tax on productive ability, were\\nit only feasible, would certainly involve much justice. But suppose, as is\\ntoo often the case, the ability has been unused? Much is to be said for an\\nincome tax, and it is the favorite of all the great writers on finance, some\\nof whom advocate it to the exclusion of every other form. But experience\\nin Gt. Britain shows that even this tax cannot be fairly collected, so easy\\nis the falsification of income returns.\\n2 To this extent H. George is clearly right. Land cannot be hidden,\\nwhile its true value can in most cases be determined with relative ease.\\nMoreover, all people are dependent directly or indirectly upon the land,", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0238.jp2"}, "239": {"fulltext": "TAXATION 221\\nand hence must, through the principle of repercussion [Cossa, Taxation,\\n62], help pay part of a land tax whether themselves land-owners or not.\\nA good deal of this equity obviously attaches to a real estate tax, which\\nwould be an infinite improvement over the general property tax now sought\\nto be carried out in most of our states.\\n3 That popular institutions may prevail government must be forced to\\nsolicit the people for funds, which would not be necessary so long as taxes\\nwere furnished in plenty by economic rent, as H. George and the single\\nland tax theorists propose. This principle, ably discussed by Adams, Pub.\\nDebts, 22 sqq., we have not seen appealed to in the land tax controversy.\\nNo particular tax can possibly be levied save with injustice here and\\nthere, weighting this man too heavily, the next too lightly. A single-tax\\nsystem exaggerates every such unfairness to the utmost, while by burdening\\nmany things you tend to offset losses by gains.\\nAny tax can on occasion be reduced, but few are the sorts of taxes\\nwhich can be at once suddenly and safely elevated, producing no shock.\\nLiquor taxes well answer this requirement. So do income taxes, which\\nGt. Britain has usually resorted to in such emergencies. Not, however, in\\nthe most recent case, Mr. Goschen s budget of April, 1889, introducing\\ninstead a death tax on estates of over ;i^lo,ooo,\\n149 Taxation of Income\\nCohn, Income and Property Taxes, Pol. Sci. Quar., vol. iv. Mill, bk. v, ch. ii, sees. 3, 4.\\nThe following rules should govern the incidence of\\nan income tax i Up to a given amount, income should\\nnot be taxed at all. ii The percentage should slowly\\nincrease according to the amount of income, iii In-\\ncome from capital should pay a greater percentage\\nthan salaries or wages, iv Income arising without\\nlabor and risk should pay a greater percentage than\\nother. Thus, all considerable legacies, except to near-\\nest relatives, should be well taxed, the rate increasing\\nwith prospect of their unproductiveness.\\n1 Involving the so-called progressive [or degressive principle of\\nincome taxation. Fawcett in his Manual opposes this, but on insufficient\\ngrounds.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0239.jp2"}, "240": {"fulltext": "222 taxation\\n150 Emergency Taxation\\nMill, bk. i, ch. v, sees. 8, 10. Adams, Pub. Debts, pt. i, ch. v; pt. ii, ch. i.\\nExtraordinary public expenditure should, unless very-\\ngreat, usually be covered by immediate extra taxation\\ninstead of by loans, as slight extra taxes will be to a\\ngreat extent paid out of non-capital wealth, not ab-\\nstracting from the support of labor, while loans com-\\nmonly prey upon capital. But if the projected outgo\\nis vast, resort may well be had to a loan, more particu-\\nlarly if this promises to be largely taken up abroad.^\\n1 This is not the place for full discussion. Read Adams, as above, or\\nthe proper chapters in any of the regular works on Public Finance.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0240.jp2"}, "241": {"fulltext": "CHAPTER V\\nPOVERTY\\n151 The First Class of Remedies\\nDavis, Labour and Labour Laws, in Encyc. Brit. H. George, Prog, and Poverty;\\nSocial Problems. Cherbuliez, pt. ii, bk. iii. Mill, bk. iv, ch. vii. H. Spencer,\\nMan vs. the State. Suntiier, What Social Classes Owe Each Other. Rae, Con-\\ntemp. Socialism, last 2 chaps. Charity [several artt.], in Lalor. Graham, The\\nSocial Problem. Warner, Pop. Sci. Mo., July, 1889.\\nOf the remedies popularly suggested for poverty,\\nsome are expected to raise wages, others to operate\\ndirectly. The latter are poor laws and private charity.\\nExperience, especially in England, has proved the abso-\\nlute necessity, both economic and moral, of refusing\\ncharitable aid except to prevent actual and decided\\nwant. To make sturdy paupers comfortable is to\\nput a premium on indolence, a penalty on industry.^\\nThe work of organized charity, on the other hand,\\nhunting out and shaming or punishing impostors, find-\\ning not making work for the healthy workless, and\\nprudently aiding those truly needy, is in the highest\\ndegree advantageous both economically and morally.\\n1 See 16, n. 6, H, Spencer [also Sumner], as above, vividly shows\\nthe inexpressibly baneful results of coddling worthless human beings so as\\nto enable them to propagate their kind. But society has a duty to such.\\nIt should, if possible, reform them both economically and morally. Peek,\\nin Contemp. Rev., Jan. and Feb., 1888, and Manning, ib., Mch. The\\nCharity Organization Societies in several of our largest cities are doing\\nexcellent work toward this end. On this interesting subject, Warner, as\\nabove, writes well.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0241.jp2"}, "242": {"fulltext": "224 POVERTY\\n152 The Second Class\\nMill, bk. ii, chaps, xii, xiii; Claims of Labour [in Dissertations]. Leroy-Beaulieu,\\nQuestion ouvriere au xixietne siecle. Ely, Labor Movement in America. Mc-\\nNeill, et al.. The Labor Movement. Gmitoji, Wealth and Progress.\\nHere come the measures intended to raise wages:\\n(i) strikes, (ii) trades-unions, (iii) legislative enact-\\nments upon wage-rates or hours of labor, (iv) demand\\nthat wages be paid when business can go on only with\\nloss, (v) demand that idle wealth be turned into capital.\\nStrikes and trades-unions are per se both legitimate\\nand often useful, but call for the utmost discretion and\\nself-control in management, i Strikes, unless general,\\nfail, usually fail if general unless on a rising market,^\\nand at any rate when not successful, possibly even then,\\nlimit production 2 and so wages, ii Trades-unions, so\\nfar as they endeavor to control wage-rates simply by\\nlimiting the supply of labor, hinder general prosperity,\\nand hence general wages,^ in the same way as most re-\\nstrictive tariffs do. iii The legislation referred to, im-\\nportant and desirable as it often is, may easily be so\\nframed as to prove either futile or mischievous like\\nthe above, iv Paying wages at a loss is charity, also\\nthe destruction of capital, putting farther off the day\\nwhen wages proper can be paid. But firm, temperate\\nand wise labor agitation, with or without these particu-\\nlar means, may do much to better wages, in the way\\npointed out at 118.\\n1 In March, 1888, during the greatest snow blockade ever known in\\nN. E., when 12 locomotives were stalled in New Haven and no trains passed\\nbetween that city and N. Y. for 3 days, 200 shovellers employed by the N. Y.,\\nN, H. H. R. R. at Meriden struck for an advance of from 21 1 to 50 cents\\npay an hour. It is needless to say that they were retained. How modern", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0242.jp2"}, "243": {"fulltext": "POVERTY 225\\nsystems of industry favor the success of strikes, see 45. To the considera-\\ntions there mentioned we may add this that nearly all manufacturers now\\nwork on orders, which they are under contract to fill at such and such\\ntimes, A greater proportion of strikes [38 per cent] and strikers [50 per\\ncent] succeeded in 1888 than in any preceding year [Bradstreet s, Feb. 2,\\n1889], due, however, in large measure to greater moderation in striking,\\nand the consequent greater justice of demands. From 1881 to 1886, inclu-\\nsive, strikes occurred in 22,304 establishments in the U. S., and 1,323,203\\nemployees were engaged in them. At the same time 160,823 employees\\nwere locked out. Of all these strikes 9,439, or 42 per cent, were for\\nincrease of wages, 4,344, or 19.48, for reduction of hours, 1,734, or 7.77 per\\ncent, against reduction of wages, 1,692, or 7.59 per cent, for increase of\\nwages and reduction of hours. Wages or hours had most to do with more\\nthan 77 per cent of the strikes, and nearly 4 per cent more were influenced\\nby the same causes coupled with others. Of the strikes for higher wages\\n66 per cent were successful and 8.43 per cent were partly successful. Of\\nthe strikes to secure a reduction of the hours of labor about 47 per cent\\nwere entirely or partly successful. On the responsibility of both employers\\nand employees to the public, Carl Schurz, in N. A. Rev., Jan. and Feb., 1884.\\nWhy laborers cannot compete with landowners in a strike, Prog, and Pov-\\nerty, 282 sqq.\\n2 The aggregate losses caused by the stoppage of work during the three\\nweeks of struggle in the southwestern strike of 1 866, were placed at ^30,-\\n300,000 $3,000,000 in wages which 250,000 strikers threw away, $2,500,-\\n000 sacrificed through interruption to the business of employers, $4,400,000\\nlost in deferred industrial contracts, and $20,400,000 in building contracts.\\n3 Advantaging their members at the expense of the laboring population\\nin general.\\n153 Ultimate Help\\nPatten, The Consumption of Wealth [see, above, 124]. Bilgratn, Iron Law of Wages.\\nFawcett, Manual of P. E.\\nThe capitalizing of idle wealth promises much, and\\nwould promise far more but for a sadly convincing induc-\\ntion which teaches that when material betterment does\\nchance to come to the ignorant poor, as through a rise\\nof wages or the cheapening of bread, it is instantly\\ncliecked by increased population. However great rela-", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0243.jp2"}, "244": {"fulltext": "226 POVERTY\\ntive relief 2 may be hoped from the measures named\\nabove, or from co-operation in its various forms, private\\nand public, and zealously as all should strive to multiply\\nand promote such helps, the economic elevation of the\\npoor will prove to be ultimately an ethical and an\\neducational work.* Their great wants are, (i) a moral\\none, the will to restrict population where necessary,^\\ncheck vicious appetites, and act unitedly,^ (ii). an intel-\\nlectual one, knowledge of economic and social laws,\\nthat they may assert claims wisely. Aids to these,\\nthe only final relief of indigence, are, (i) the Chris-\\ntian religion, which, rightly understood, includes all\\ntrue morality, (ii) sympathizing public opinion, and\\n(iii) compulsory education. This last is equally called\\nfor by the logic of free schools.\\n1 See 131.\\n2Cf. 118, n, 4.\\nOn co-operation, Somers, Co-operation, in Encyc. Brit.; Block, do.\\nin Lalor; Holyoake, H. of Co-op. in Eng.; Marshall, Ec. of Ind., bk. iii,\\neh. ix; Giddings, in McNeill s Labor Movement Fawcett, Man., bk. ii,\\nch. x; Cairnes, Leading Prin., 289 sqq.; Co-op. in U. S., Johns Hop. Univ,\\nStud., Vlth ser. Very much more has been written. A great deal may be\\nexpected from the co-operative movement, though probably less than many\\nthink 123, end]. Profit sharing is the most promising phase of co-op-\\neration [best treated in Oilman, Profit Sharing betvv^een Employer and\\nEmploye cf. Quar. Jour. Econ., vol. i, 232, 367] except perhaps co-opera-\\ntive banking and [virtually the same thing] co-operation in building and\\nloaning [Dexter, Co-operative Building and Loan Associations]. On the\\nexcellent working of the various sorts of Friendly Societies, as the Odd\\nFellows, etc., a sort of co-operation, see Quarterly Rev., April, 1888.\\nThe more necessary to emphasize this because the fact is so commonly\\nignored in favor of nostrums or at best partial measures. Indefinite credit\\nutilized as money is Hugo Bilgram s remedy 92, n. i].\\nThe general question of Malthusianism Population, in Lalor] we do\\nnot here touch. All apart from this, it is perfectly obvious that very many", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0244.jp2"}, "245": {"fulltext": "POVERTY 227\\nfamilies would be in every way better off with fewer members. For the\\nintelligent and well-to-do not to be celibates is, even by the principles of\\nMalthus, a duty.\\n6 How many strikes and promising labor movements fail through selfish\\nambition and treachery! While these prevail the employer will have\\nlaborers at his mercy.", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0245.jp2"}, "246": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0246.jp2"}, "247": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0247.jp2"}, "248": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0248.jp2"}, "249": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0249.jp2"}, "250": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0250.jp2"}, "251": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0251.jp2"}, "252": {"fulltext": "", "height": "2767", "width": "1676", "jp2-path": "institutesofecon01andr_0252.jp2"}}